Circular business models in high value manufacturing: Five industry cases to bridge theory and practice

The transition to a circular economy (CE) requires companies to evaluate their resource flows, supply chains, and business models and to question the ways in which value is created. In the high value manufacturing (HVM) sector, this evaluation is critical, as HVM enables value in nonconventional forms, beyond profit, including unique production processes, brand recognition, rapid delivery times, and highly customized services. We investigate the role of value, cost, and other factors of influence in the selection of a circular business model (CBM) for HVM. Explored through five case studies using a qualitative evaluation of circularity, we then contribute to the emerging field of CBMs by modifying the CBM canvas that can capture the nontraditional value, traditional value, cost, and other influencing factors enabled via CBM adoption in HVM. Finally, the important role of digital technologies for incentivizing and enabling CBM adoption, is clarified.


| INTRODUCTION
Circular business models (CBMs) have received increasing attention from industry practitioners and academic researchers alike (as evidenced on SCOPUS and Web of Science databases), as they constitute a key enabler in the advancement of circular economy (CE) research as a way for the industry to profitably achieve a radical increase in resource productivity (Linder & Williander, 2017). In addition, CBMs are being proposed to address economic challenges originating from the dominant linear economic model (Circle Economy, 2018;Jackson, 2009;Sachs, 2015). These risks include volatile market prices, problematic ownership structures, and the availability of resources. Other issues associated with the linear economic model include environmental impacts (e.g., water, air and soil pollution, biodiversity, and land resource depletion) (Jackson, 2009;Meadows, Randers, & Meadows, 2004;Rockström et al., 2009), and societal impacts (e.g., soaring unemployment and broadening inequalities) (Prahalad, 2004). Thus, the CE, while not entirely new (Geissdoerfer, Savaget, Bocken, & Hultink, 2017), has seen a significant increase in research in recent years .
The CE concept proposes a circular system where the value of products, materials, and resources is retained in the economy for as long as possible (Merli, Preziosi, & Acampora, 2018). Although value is a key theme within CE literature, value is also an important theme within business models (BMs) literature (De Angelis, 2018).
Of key interest here is that CBMs possess qualities and characteristics that are distinct from BMs that are simply oriented toward "sustainability" outcomes (Bocken, Rana, & Short, 2015). Our review adopts a similar approach to that by Nußholz (2017), with a search strategy limited to academic studies with explicit reference to the concept of "circular business model" (Table 1).

| CBMs in HVM
This section examines the question, "what are CBMs and how are they relevant for HVM?" According to Björkdahl (2009) and Osterwalder and Pigneur (2010), the term business model (BM) refers to the conceptual logic of how a firm creates and appropriates economic value across three value dimensions: (1) value proposition, (2) value creation and delivery, and (3) value capture. Several detailed ontological frameworks exist for BMs, often organized according to the key activities and resources controlled by the firm, customer needs and segments, cost structure, and revenue model (Osterwalder, 2004). During the BM innovation process, an iterative approach is used by firms to devise, refine, test, and realize new ways to create and appropriate value after studying the relevant market conditions (Blank, 2005; McGrath, 2010) (Govindarajan & Trimble, 2010;Ries, 2011;Sarasvathy, 2001). Once key assumptions have been validated, firms typically proceed to heavily invest in scaling the innovative model (Linder & Williander, 2017).
In recent years, and through this iterative process, the related concept of "circular" BMs (hereafter CBMs) has emerged (De Angelis, 2016) as a BM innovation in the context of the CE. This paper adopts the definition of CBM from (Linder & Williander, 2017, p. 183), as a "… business model in which the conceptual logic for value creation is based on utilizing economic value retained in products after 1 Authors utilized SCOPUS and Web of Science for review of existing literature. Using CE is described as an industrial system "… that is restorative or regenerative by intention and design. It replaces the 'end-of-life' concept with restoration, shifts towards the use of renewable energy, eliminates the use of toxic chemicals, which impair reuse, and aims for the elimination of waste through the superior design of materials, products, systems, and, within this, business models" (Ellen MacArthur Foundation, 2013, p. 7). Accordingly, CBMs are derived from the main principles and elements of CE (De Angelis, 2018;Mathews & Tan, 2011;Urbinati, Chiaroni, & Chiesa, 2017;S. Yang & Feng, 2008) and are often described via the ReSOLVE framework (Ellen MacArthur Foundation, 2013, 2015, which clarifies the roles of Regenerate, Share, Optimize, Loop, Virtualize, Exchange, as CBM options. Application of the ReSOLVE framework to contemporary BMs requires consideration of circular value creation (Lewandowski, 2016;Van Renswoude, Wolde, & Joustra, 2015), normative requirements for BMs (Lüdeke-Freund & Boons, 2013), and areas of value proposition integration (Laubscher & Marinelli, 2014) as other important constituent elements of CBMs.
Given increasing concerns regarding materials scarcity, materials market uncertainties, and regulatory trends grounded in CE structures, CBMs present an increasingly important option for HVMs to consider.
Depending on the firm, CBMs utilize configurations intended to optimize product aftermarkets, ownership models, and/or shared-use opportunities that can facilitate the implementation of a circular strategy while also capitalizing on the associated value that is created (Nußholz, 2017). Thus, the successful transition to a CE requires companies, in general, to make systemic changes in the way that they create, deliver, and capture value through their business activities (Pieroni, Pigosso, & McAloone, 2018). Specifically, the evolving CE and CBM landscape requires that manufacturers shift from a firm-centric to a network-centric operational logic (Bocken, de Pauw, Bakker, & van der Grinten, 2016;Ranta, Aarikka-Stenroos, & Mäkinen, 2018 (Nußholz, 2017); slowing and closing of resource loops (Moreno, de los Rios, & Charnley, 2016); the ReSOLVE framework (Lewandowski, 2016); and sharing platforms (De los Ríos & Charnley, 2015).
In our review, we noted that BM literature tends to frame costs and value in very conventional ways that to not appropriately account for the system of stakeholders and flows that are enabled via CBMs.
Further, utilizing the conventional structure of the BM canvas format inherently subjected innovative CBMs to "fit" within conventional priorities and perceptions. Iterations of the "CBM canvas" have predominately worked within the original BM framework; this may have served to overemphasize elements of perceived cost and risk associated with the CBM and to underemphasize the nonconventional value enabled and captured by the CBM. We argue that an adjusted canvas that is able to meaningfully account for these nonconventional forms of costs, value, and FOI is needed.

| Value creation in CBMs
This section examines the question, "how is value understood in the context of BMs and CBMs, and what types of value are relevant for Keywords used for searches Authors have employed the following terms to identify the articles for appraisal in this study: Circular business model; high value manufacturing; "high value manufacturing" and "cost"; "circular business model" and "value"; "circular business model" and "cost"; "circular business model" and "high value manufacturing." Total number of articles considered in this study 323 articles were included.

| Costs factors associated with CBMs for HVMs
This section examines the question, "what are the associated costs that high value manufacturers would face in adopting circular business models?" BM ontology refers to "costs" and "cost structure" as an inclusive term generally defined as "all costs incurred to operate a business model" (Osterwalder et al., 2014). Given that costs are incurred as a necessity of value creation, delivery, and capture, there is a clear link between value and cost structure, suggesting that costs and revenue are sub-components of the value capture mechanisms (De Angelis, 2018;J. Vogtlander, Mestre, Scheepens, & Wever, 2013).
For example, Schröder, Falk, and Schmitt (2015) identify the cost factors in the adoption of additive manufacturing activities as including fixed costs (machine costs and software and hardware costs) and variable costs (production, material, labor, maintenance, and printing costs). Alternately, cost factors are identified and distinguished as "production costs" versus "product costs" for more general CBM adoption (Bressanelli, Perona, & Saccani, 2017;Giannetti, Risso, & Cinquini, 2016). A sample of cost factors identified from available literature is presented in Table 3.
From our sample of literature, it is clear that cost factors are clearly tied to the type of CBM being adopted. Thus, related to, and influencing CBM cost structure decisions, manufacturers face significant and distinct cost-related challenges that must be overcome for CBM adoption. Among these, the perceived higher investment risk, and therefore cost, of CBMs (Linder & Williander, 2017), the risk of sales cannibalization by circular product offerings (Daniel, Guide, & Li, 2010), the challenge of operating cost-efficient return flow and reverse logistics (Raci & Shankar, 2005), the inherent operational risks tied to inventory management and evolving asset ownership models (Kuo, Ma, Huang, Hu, & Huang, 2010;Linder & Williander, 2017), and tax disadvantages tied to labor-intensive CBM activities (Stahel, 2010). Often not addressed within the literature is the associated traditional and nontraditional value creation that accompanies these additional risks, uncertainties, and costs.   (2017) Combined analyses of costs, market value and eco-costs in circular business models: Eco-efficient value creation in remanufacturing

| Other FOIs
Remanufacturing is identified as a CBM, product service system.

Remanufacturing for mainstream consumer markets
Eco-efficient value creation method (J. Vogtlander, Mestre, Scheepens, & Wever, 2013) is used to identify "Ecocosts a ," a cost component that expresses the amount of environmental burden of a product on the basis of prevention of that burden.
Other costs identified include R&D costs, marketing costs, and production costs.
Lee, Suckling, Lilley, and Wilson (2016) Reshaping the washing machine industry through circular economy and product-service system business models Product service system Manufacturing (washing machine manufacturing) Material cost and connected inventory costs Giannetti, Risso, and Cinquini (2016) Managing costs by business model: issues emerging from the case of E-Car SDL, where goods are seen as merely a means or delivery mechanism for service provision E-car industry Cost structure, described as cost drivers. These includes cost of items (insurance premiums, maintenance, or materials); labor and over-head costs; scale and learning; and production costs Susarla, Barua, and Whinston (2009) A transaction cost perspective of the "software as a service" business model  The BM can be regarded as a PSS model, given its emphasis on "sale of use," rather than "sale of product" (Baines et al., 2007). This value proposition is embedded into a circular value network, that consists of a mining company, a membrane electrode assemblies   creates value that manifests in environmental (sustainability), economic (optimization), information (product-level, installed-base 6 ), and customer (service) forms .
The industry case study analysis revealed two other manifested forms of value creation: resource utilization, that is, solid waste is collected, and utilized as an energy-from-waste input; and generated data (product and system levels and analytics), that is, generated data are used to drive IoT-based CE solutions, including predictive maintenance and digital twinning used to extend product and component life cycles.

| HVM-specific CBM features
Through its HVM approach and remanufacturing CBM, which includes the maintenance of remanufactured product inventory, Company D additionally creates a time-based form of value. That is, Company D is able to significantly reduce the lead time for providing HVM replacement vehicle parts to its customers (  Year founded: 2013 Operations: Global

| CBM/evidence of circularity
The "performance economy" model (Stahel, 2008) emphasizes the importance of selling services rather products, and inspired Company E decision to develop the bespoke "pay-per-lux" intelligent lighting system. This CBM incorporates the design of the "pay-per-lux" system to fits the requirement of the customer's space (installed location) and budget while also ensuring design for durability and ease of maintenance and repair. As a circular design strategy of the "light-as-a-service" model, Company E retains ownership and responsibility for the lighting installation, including any necessary maintenance and repair during the life of the arrangement, and the customer pays for the light that is actually used (e.g., per lumen). By enabling the optimized dimming or brightening of the lighting system in response to motion, or the presence of daylight, a combined sensor and controller system helps to keep energy consumption at a minimum. Thus, the value created, delivered, and captured in the "pay-per-lux" model is the full life-cycle management of energy-efficient lighting, including preventive maintenance and system optimization (Mendoza, Gallego-Schmid, & Azapagic, 2019). For Company E, the intentional design for longevity and recyclability into their products leads to nontraditional forms of value-creation (Schulte, 2013). Overall, this CBM enables value to manifest in environmental and economic value for the customer and for Philips (Table 9).   (Rosa, Sassanelli, & Terzi, 2019b). Further, there is evidence of CBMs tending toward "supplying service solutions rather than products," or "service based manufacturing," particularly in the context of HVM (MacBryde, Paton, & Clegg, 2013). Given the nature of HVM, it is reasonable to expect that "service" should be a component of the overall value proposition made to customers.
Through the integration of "looping" and "optimizing" CBMs, such as remanufacturing, refurbishment, and data-driven predictive maintenance, firms can deliver value through a broadened range of activities, that offers a more balanced and complementary value proposition package (MacBryde, Paton, & Clegg, 2013;Martinez, Neely, Ren, & Smart, 2008). Although each industry case differed in terms of the product offering, size, geographic location, and industries, we noted that there were recurring themes of value considerations for CBM adoption that emerged across these HVMs.
As identified previously, the currently proposed CBM canvas options in the literature may not adequately reflect the unique opportunities for reframed value, cost, and other FOI associated with HVM.
Further, the CBM canvas, as predominately evaluated in the literature may not provide sufficient insight or context to support HVM organizations as they attempt to transition from linear to circular BMs.
Given this, we integrate and model a summary of elements possible via the implementation of CBMs for HVM using a modified canvas tool, the Circular and Sustainable Business Model Canvas (CSBMC) ( Figure 3). This clarifies some of the unique perspectives and forms of value and cost that may be present in a CBM for HVM, as well as the importance of different FOI, which affect each dimension of the CBM canvas in specific ways.

| Value and cost element analysis
There were observed differences between value and cost components of BMs and CBMs, across HVM industries (Tables 5-9), and these were modeled using the CSBMC (Figure 3).

| Value creation
In accordance with the original BM canvas (Osterwalder & Pigneur, 2010), dimensions of value creation typically include key partners and/or stakeholders, key activities, and key resources of the CBM (Bocken, Short, Rana, & Evans, 2014). Although a number of reviewed papers suggest that value creation is fully captured within these three categories, it is also clear that the collaborative and networked nature of innovation for CBMs can lead to many new concepts, value, and uncertainties that are affected by key FOI (Antikainen & Valkokari, 2016). In the context of HVM, value drivers such as commoditization, specialization, globalization, sustainability, and the use of digital technology (Martinez, Neely, Ren, & Smart, 2008) can be integrated to deliver new forms of value for stakeholders. Some value creation components identified across the CBM case studies stood-out as distinct; for example, the value created through research and development (R&D) related to a PaaS model by Company E differs meaningfully from the value that R&D creates in non-HVM models. Thus, for HVMs with CBMs, in particular, R&D is very important and can provide a competitive advantage. This aligns with the resource-based theory of the firm (RBT) in which the organization as is framed as a "bundle of value" embedded in resources (Bowman & Ambrosini, 2000;Wernerfelt, 1984). As Richardson (2008) argues, value creation and delivery describe the firm's sources competitive advantage states. In contrast to linear BMs, CBMs require a systems view of the product and product-system (Bakker et al., 2014).

| Value proposition
Based on the five industry case studies, we also posit that CBMs enable an expanded scope for the value proposition for HVMs, that includes the amplified value created for a broad set of stakeholders (e.g., society and the environment), in addition to the firm and its customers. Thus, the value proposition may explicitly include environmentally and socially oriented outcomes that appeal to the target customer and/or other stakeholders as a central driver of the CBM.
Value proposition components of CBMs for HVMs thus include, but are not limited to the following: • Economic value: Financial, cost reduction, risk reduction, and other monetary benefits that can accrue to the company and its stakeholders (Schenkel, Caniëls, Krikke, & Van Der Laan, 2015;Subramoniam, Huisingh, & Chinnam, 2010) • Social responsibility value: Pursing environmental sustainability and CE BMs, such as value retention processes (VRPs) , can enhance environmental performance and social well-being.
• Educational/research value: HVMs can engage in collaboration with universities and research councils, enabling the advancement of qualitative and quantitative data.
• Organizational value: Value in the form of institutional knowledge and improving work conditions that can be gained via the process of developing and scaling CBM solutions (e.g., Company A's localized approach, and options for flexible working conditions) (Bocken, Short, Rana, & Evans, 2014).
• Dematerialization and material-use offsets: The inherent value, beyond cost avoidance, of the product's physical form and materials which are retained via use of VRPs, such as refurbishment and remanufacturing.
• Generated data: Product-and systems-level (predictive) data that can be generated via the use of digital technology within HVMs, and which can inform optimized product maintenance and end-oflife management decisions.
• Information value: Value of asset information and process knowledge that can be used to improve product design/quality/safety, life cycle information, and/or improved reverse supply chain (Ferrer & Whybark, 2000;Frank, 2000;Schenkel, Caniëls, Krikke, & Van Der Laan, 2015) • Circular value: The value that is generated through use of a network model that accrues to the HVMs, their parts suppliers, their raw material providers, and their customers.
These industry case studies demonstrate that the scope of value  relative to the other case studies, whereas Company A's is noted for the flexibility 10 achieved through its use of crowdfunding. As for any business, HVMs adopting CBMs must manage and balance their specific set of cost components and revenue streams, that is, Company D must manage "core deposits" as both a revenue and cost component within their unique remanufacturing CBM. A strategic approach to value capture within CBMs can enable the reduction and/or prioritizing of costs and activities, that is, the development of a corporate CE procurement strategy can reduce costs of "maintenance, waste management, energy and carbon emission tax" (Mendoza, Gallego-Schmid, & Azapagic, 2019). Our findings from CBM practice in HVM are analyzed with respect to CBM theory in an effort to further clarify areas of alignment and disparity and identify opportunities for enhanced value in HVMs interested in adopting CBMs. Using a framework to integrate CBM theory and CBM practice, per the example populated in CBMs, and how that relates to revenue potential in the same CBM context. Useful to this future research, will be a deeper investigation into measurement metrics for CBMs in HVM. This will be crucial in assessing the success or otherwise of CBMs implementation in HVM.

| FOIs analysis
increase from 2016. LED-based sales represented 65% of Company E Lighting overall sales. In 2016, this figure was 55%. 10 Company A has recently had and closed its third crowdfunding campaign in its series of campaigns. They also have an online form where the public are allowed to invest after registering the details online.