ceero – Miriam Brüne

ceero. – Business Model Innovation for a Circular Economy

Regarding the significant environmental impact of resource extraction, plastic waste and increasing amounts of E-waste, sustainable products and services are gaining importance. In addition to product & process innovation, business model innovation and the Circular Economy are considered crucial in fighting against these negative developments.

“Die interdisziplinäre Herangehensweise an das Thema, die in der Wirtschaftswissenschaft heute State of the Art ist, ist in dieser Bewerbung besonders deutlich geworden. Mit Methoden aus den Bereichen der strategischen Gestaltung, des Business Designs, dem Lean-Innovation-Ansatz und der empirischen Marktforschung liegt der Schwerpunkt natürlich auf BWL. Dazu kam hier aber noch die Präsentation der Erkenntnisse in einer hochprofessionellen Form, die wirklich preiswürdig ist.”

Willi Rugen, Präsident des Bundesverbands Deutscher Volks- und Betriebswirte e.V.

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Supermaster Final Pitch with questions by Frank Thelen (Tech Investor) and Walter Sinn (Managing Partner Bain & Company)

Business Design

Finding the
Innovation
Sweet Spot

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Challenge

In 2016 more than 44.7 Millions tons of electronic waste were generated, representing an estimated value of 55 billion Euro in raw materials. It is predicted that the amount of E-Waste will rise to 52.2 million tonnes in 2021. This increasing amount of E-Waste, as well as its improper disposal and unsafe treatment – such as open burning in landfills – pose a considerable risk to the environment and human health. This makes the achievement of the United Nations Sustainable Development Goals an urgent challenge.

Lean innovation
process

Research

In addition to well-founded secondary research in the context of the Circular Economy, methods from the fields of strategic design, business design, lean innovation and empirical market research have been incorporated into the work. Likewise, findings from eight expert interviews with designers, engineers, management consultants, business angels and investment bankers were obtained.

(Graphic on the left)
The economic concept of the Circular Economy has to be seen as an holistic approach to a qualitative transformation, in which all stages of the product life cycle are considered, from raw material extraction to reutilisation.

Comparing different business models in a self developed analysis matrix

The new Innovation
Sweet Spot

While using the model of the Innovation Sweet Spot by IDEO as a base, we soon found it to be incomplete.

We added a fourth layer to it – sustainability. In our opinion, the widespread influence and effects of an innovation should be included in all business considerations and planning – whether their impact is of ecological or social nature. A possible key question in this context could be: What positive, social and environmental effects will the product or service have?

The new Innovation
Sweet Spot

Define

How might we assert sustainable products and services through business model innovation?

‘You can‘t combine sustainability and profit!‘ – A dogma we heard continuously during the research process. We wanted to break this dogma and find an innovative solution. Instead of focusing on one sustainable product or service we wanted to create the right setting (system) for them to be successfully established on the market. To achieve this goal and the SDG Nr. 12 Responsible Consumption & Production, we discovered that an appropriate Business Model Design is key.

Buchanan's Four
Orders of Design

Our thesis is thus divided into two parts: A methodic framework and a new sustainable business model which is described through the fictional start up ceero. The Four Orders of Design by Richard Buchanan structure the design and its radius of action in symbols, products, services and systems. Our aim is to create a systemic frame for sustainable products and services.

To prove that our framework is working and to make it more understandable for the audience, the three other aspects (service, product and symbol) were also taken into account and represented by ceero.

Opportunity Area:
Business Model Innovation

A business model describes how a company creates added value for customers and secures a return on investment for the organization. Business Model Innovation is the most challenging approach to foster the Circular Economy. In contrast to process or product innovation, business model innovation also affects the way in which the product is offered and sold in the value creation process. In order to make the transition towards a Circular Business Model, companies often have to invest a lot of time and resources in educating customers and changing consumption habits that are deeply rooted – for example, renting instead of buying.

Ideate

We analyzed more than sixty different business models for their contribution towards a sustainable economy. Further we focused on E-waste as our opportunity area. We came up with the idea that a performance-based-Business-Model in combination with new technologies can change the way electronic products are designed fundamentally. Based on our analysis, the redesign of a dishwasher into a Product-Service-System offers the greatest impact in terms of reducing environmental impact.

Prototype

Based on our assumptions we developed a first Product-as-a-Service Business Model MVP for a dishwasher. We solved the problem of high upfront costs for manufacturers by offering a 10 years contract, which includes a rented dishwasher for 499 Euro. Moreover the user now pays for the performance of the dishwasher: 0.30 Euros for each washing cycle. This small fee not only includes the rinsing, but a full service package with dishwashing detergent, repair service and lifetime warranty.

Testing

To test the acceptance of the Business Model MVP, we conducted an empirical study. We therefore combined quantitative and qualitative research methods: One part of the study was an online survey which included questions about user behaviour and willingness to pay for certain offers. Besides, participants had to choose between a conventional, a rental and our MVP in an A/B testing.

250 participants completed the survey. This provided us with an excellent data base for directing our strategic decisions. We were then able to refine our business model MVP trough comprehensive calculations. 147 participants chose the classic model EVA, 72 went for our business model SOPHIA and 31 decided for MAYA.

After the survey was completed, we picked out eight people randomly to conduct personal empathy interviews. It helped us to better understand the users‘ decisions and behaviour and we were eventually able to determine our target group and its needs.

Testing

Test Results

To obtain the Van Westendorp graphic (shown below), the collected data of the survey was checked for validity and sorted with the help of a spreadsheet program. By calculating the percentual distribution of the answers, the four curves for determining the Optimal Price Point could be drawn. A Van Westendorp analysis was carried out with the answers of all respondents and one of those who chose the SOPHIA offer.

Altogether, we identified 36 user profiles, but found out, that only 6 profiles (14%) of the study’s participants cause 59% of the total environmental impact. The data evaluation finally made it possible to draw up a comprehensive financial plan and to confirm previous assumptions empirically.

Test Results

Altogether, we identified 36 user profiles, but found out, that only 6 profiles (14%) of the study’s participants cause 59% of the total environmental impact. The data evaluation finally made it possible to draw up a comprehensive financial plan and to confirm previous assumptions empirically.

An extract from our user study’s results

Implement

The result is a business model that combines economic, ecological and social interests. To communicate it appropriately, we developed our start up ceero. It specialises in the rental of large household appliances. In addition to a fixed rental price, customers pay for the performance through a pay-per-use model. The revenue generated will be used to produce radically redesigned equipment based on the principles of the Circular Economy.

Outcome

ceero. – A Start Up
for the Circular Economy

The appliances can be ordered through the ceero. website. Our products are designed for easy disassembly and remanufacturing to give them a second or even third life. ceero. takes full liability for any repairs. However, users should be encouraged to repair the appliances themselves in case of a defect. Due to the built-in sensors in the appliances and the Internet of Things, damaged components can be detected and the user can reorder them via the website or smartphone app.

All touchpoints and processes are designed in a sustainable way: Suitable dishwashing and cleaning detergents are supplied in environmentally friendly packaging and larger quantities in order to reduce the carbon footprint caused by delivery and transport.

ceero. specializes in the rental of large household appliances. In addition to a fixed rental price, customers pay for the performance through a pay-per-use model. The appliances can be ordered through the ceero. website. Our products are designed for easy disassembly and remanufacturing to give them a second or even third life. ceero. takes full liability for any repairs.

However, users should be encouraged to repair the appliances themselves in case of a defect. Due to the built-in sensors in the appliances and the Internet of Things, damaged components can be detected and the user can reorder them via the website or smartphone app.

All touchpoints and processes are designed in a sustainable way: Suitable dishwashing and cleaning detergents are supplied in environmentally friendly packaging and larger quantities in order to reduce the carbon footprint caused by delivery and transport.

Sustainable dishwashing and cleaning detergents

Spare parts can be ordered via the ceero. app

Outcome

Our Framework for sustainable
Business Model Innovation

Whilst ceero. was created on the applied level, we reflected all our insights and findings back to the meta level and developed a framework, which should enable the transfer to future sustainable products and services.

By creating this systemic framework, products and services can not only be designed in a sustainable way, but also established on the market in the long term. In conclusion, our project has to be seen as a call to designers to engage with the innovation of new business models to make an important contribution towards a Circular Economy.

While ceero. was created on the applied level, we reflected all our insights and findings back to the meta level and developed a framework, which should enable the transfer to future sustainable products and services.

By creating this systemic framework, products and services can not only be designed in a sustainable way, but also established on the market in the long term. In conclusion, our project has to be seen as a call to designers to engage with the innovation of new business models to make an important contribution towards a Circular Economy.