Circular Economy and Business Process Modeling

**Please check an updated version of this article on my LinkedIn Pule page here

In the past years we have seen many changes in how organizations moderate their business models to cope with the constantly changing market needs, powered by the evolution of technology and quality management.

As a result of that, some concepts have been dramatically changed in the modern business. In marketing for instance, the standard concept of “specific stable target segment” has entirely changed, main reason behind that is the advancement in marketing tools and data analysis that can multiply any business reach with more depth factors than never before! so we saw mass segmented marketing transformed to advanced intellegnt markteing where each customer is an independent segment. And the norm of specific target segments of customers who share some common traits swapped with N-matrix segments and single consumer segments.

This changed traditional go-to market strategies and took it to new areas; Just recalling how our Facebook home pages ads are mostly related to our past purchases or online activities can make it clearer to see how deep marketing and sales approaches have become in modern days

Thus, the increase in data volumes and analysis drove all industries to new areas where competition stands only with whom who have more intelligence to reach customers in best and most convenient ways, or manufacture goods at most acceptable standards. it shifted as well the way of how advanced macro economy works, it became entirely technology dependant relying on more advanced revenue generation patterns along all business cycles to achieve higher profits at less waste possible

This nourished the idea of circular economy, the concept itself is not new, however it has recently passed through various updates, circular economy is based on retaining value along all stages of manufacturing or business in a more efficient way than the traditional linear economy or regular business models

Traditional linear economy is based on retaining one direction value chain along manufacturing stages: source, design, produce and consume, which still results large amounts of material waste and missed business opportunities despite of all traditional efficiency optimization methodologies used till now

What circular economy tries to achieve is to reuse all processes outputs along with production, a common misunderstanding here is that many people might think circular economy is only about recycling products to raw materials, which is not correct. Recycling is actually one of the least values of circular economy, circular economy retains its larger value from looping manufacturing along all industry stages like parts harvesting, refurbishing, reusing or recreating…

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On consumption level, the product can be circulated on multiple consumers among different markets, locations and segments. On manufacturing level, the product is produced from series of recursive production stages, and at any stage all spare parts can go into new processes to be reused and be part of another re-manufacturing processes/products. For example a manufacturer will lease out a TV for 2 years instead of selling it, then sell the same product to a different customer, along all that, the TV components can be reused, refurbished or re-harvested for another production cycles

Adopting a circular economy is one of the most interesting methods we see nowadays, as it opens doors for entering completely new markets where original products usually can’t reach (as emerging markets)

linear-to-circular-economy

Example on Circular business model

A simple example is what we saw in the past days in the US mobile phones market, after the release of iPhone 7, almost all service providers (T mobile, Verizon, Sprint and AT&T) offered a special program to its customers. The program gives customers the opportunity to exchange (trade-in) their older iPhones (5, 6 and 6S) with new locked iPhone 7 provided that they should commit to a two years contract plan, this program was extremely successful and the benefits were great for all parties (customers, service providers, Apple and others) how is that? could be explained below…

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Whenever a customer exchanges his or her old phone, the old phone is sent to Apple by the service provider, part of the monthly contract subscription fees goes to Apple as well (depends on the agreement between Apple and the service provider), Apple takes the old phone and sells it to partners who refurbish it then resell it to another consumer in the US or outside the US

So the benefit to the consumer: He/She will have a new phone model at apparently no cost

Benefit to service provider: Higher customer satisfction, customer retention and securing stable consumer revenue over 2 years

Benefit to Apple: Selling new models, reaching out to other markets by selling the refurbished phones there and reusing of spare parts in various production stages

Benefit to Apple partners: Selling refurbished models with good profit margins for different customers in other markets, Apple itself may bypass this partner sales stage and sell directly refurbished phones

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Introducing the circular business process

As seen from the example above, the idea of Circular business/economy generates totally new revenue streams which is an interesting approach for any executive to review and analyze. As a matter of fact, adopting new circular business models will involve a lot of transformations and changes in the existing models

I am introducing a new process representation to be used in any circular business modeling. That is the circular business process. A circular business process is simply a process that repeats itself with slightly different changes in inputs/outputs depending on which circle, loop or state the process is in

Circular process have iterative production circles; where first circle represents the first time input/output, then this process can go through another cycle (circle #2) with different 2 versions of input/outputs are generated, this can go to N times and so on…

In order to simplify this and to avoid making huge changes in the current linear process representation, the box that represents a circular process can be drawn with a circle inside it.

The circle can contain a number to represent the process cycle number, where a circle number tells us in which circular state the process is at (1st, 2nd and so on)

This can be represented in the figure below

linear-vs-circular-proess

I think this representation provides an easy way to model a circular process without changing much the existing linear process representation

Conclusion

Adding to the huge environmental benefits, Circular economy definitely generates new streams of profits, multiply any brand reach and leverage businesses development. Business Process modeling must be changed to represent this type of new modeling, this should be simple and easy to represent without affecting much the current linear representation as demonstrated in this article

All rights are reserved to the author Moe Nada

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