The Orbital Circular Economy Framework: Emblematic Evidence from the Space Industry
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Kindai Management Review Vol. 8, 2020 (ISSN: 2186-6961) The Orbital Circular Economy Framework: Emblematic Evidence from the Space Industry Louis Brennan Trinity Business School, Trinity College, Ireland Alessandra Vecchi Department of Management, University of Bologna, Italy Abstract A means of shifting society to becoming resource-efficient and creating a much-needed “resource revolution” is the so-called Circular Economy. It is intended as an alternative to the traditional linear economy (make, use, dispose) in which resources are kept in use for as long as possible, while extracting the maximum value from their use and then recovering and regenerating prod- ucts and materials at the end of each service life. However, its implementation as a business strategy has tended to be at a very superficial level. By drawing on the principles of the Circular Economy and on the resource-based view and dynamic capabilities including ambidexterity and business model innovation, we develop a novel framework for scoping and managing the Circular Economy that encapsulates the key stages of progression to sustainable competitive advantage. We then vali- date this novel framework by examining the experiences of private actors in the Space Sector to assess their engagement with the Circular Economy. We identify key lessons for managers that have broad applicability to other industrial sectors. Keywords: new space actors, resource-based view, dynamic capabilities, ambidexterity, business model innovation, managerial lessons matches a compelling business rationale with the INTRODUCTION need to decouple wealth creation from the con- The term Circular Economy (CE) has a long his- sumption of limited resources. Moving towards a tory, multiple definitions, and distinctive develop- more CE is indeed desirable as it could deliver ments in different global contexts. In Europe and benefits such as reducing pressure on the environ- increasingly worldwide, a CE framework, originally ment, improving the security of the supply of raw devised and developed in the UK by the Ellen materials, increasing competitiveness, stimulating MacArthur Foundation has been a catalyst at policy innovation, boosting economic growth as well as level and has become a prominent theme in the creating jobs. The space sector has always been business arena (2013). A key reason for the wide- regarded as a cutting-edge field, futuristic and at spread popularity of this framework is that it the forefront of innovation. As such, the sector and The Institute for Creative Management and Innovation, Kindai University 81 Louis Brennan and Alessandra Vecchi its recent dynamics with the advent of reusable for a new economic model based on systems- launch systems are particularly prolific as a source thinking grows louder, an unprecedented favour- of inspiration and valuable insights into the broader able alignment of technological and social factors applicability of the CE to other industries. today can enable the transition to the CE. Circular The rest of the paper is as follows. By drawing economic activity includes reuse, repair, recycling, on the relevant literature on the resource-based eco-design, sustainable supply, and responsible view and dynamic capabilities including ambidex- consumption. This profusion of concepts demon- terity and business model innovation we develop a strates that the definition of a circular economy is novel dynamic framework—the Orbital Circular not set in stone (Esposito et al., 2018). Nonetheless, Economy Framework (OCEF)—for the application a baseline level of understanding can be reached of the CE. By relying on our extensive work on the through the available literature. Research by the space industry (Brennan et al., 2018; Vecchi and Ellen MacArthur Foundation focuses on designing Brennan, 2015a; Vecchi and Brennan, 2015b; with circular economy principles from the begin- Brennan and Vecchi, 2011; Vecchi & Ricci, 2016), ning, in the ideation phase (2013). While their work we describe first some distinctive feature of the offers much in the way of creating a CE, it could do space economy and we then validate the OCEF by more on pathways for firms to transition a linear assessing the experiences of some case examples of economy production line to a circular economy the CE in action in the space sector. We describe model. To enable firms and institutions to develop the benefits that stem from its application and we a model that allows for leveraging the use of under- provide a number of managerial implications. utilized resources, Lacy and Rutqvist (2015) pro- Finally, we offer some concluding remarks. pose a three-phase model development guideline that uses three key drivers—resource constraints, technological development, and socioeconomic THE CIRCULAR ECONOMY opportunity—to create regenerative business mod- Since the industrial revolution, we have been living els by design that involve the creation of a new in a linear economy. Our consumer and “single use” breed of services that leverage long-term use and lifestyles have made the planet a “take, make, dis- maintenance. They conclude that by following such pose” world. This linear economy model of mass an approach, business models will be based on production and mass consumption is testing the reincarnation and efficiencies in product design, physical limits of the globe. It is, therefore, unsus- systems design, and the use of new materials. tainable and a shift toward a CE is becoming inevi- Esposito and colleagues (Esposito et al., 2018) fur- table (Esposito et al., 2018). Within this context, ther claim that adopting the CE model requires that the CE is intended as an alternative to a traditional firms initiate and develop disruptive technology linear economy (make, use, dispose) in which and business models that are based on longevity, resources are kept in use for as long as possible, renewability, reuse, repair, upgrade, refurbishment, while extracting the maximum value from their use servitization, capacity sharing, and dematerializa- and then recovering and regenerating products and tion. Noting that firms often struggle to change materials at the end of each service life (Hopkinson their existing linear business models to circular et al., 2018). models, Frishammer and Parida (2019) have pro- The CE is one that is restorative and regenera- posed a roadmap for circular business model trans- tive by design and aims to keep products, compo- formation. The pace at which companies are nents, and materials at their highest utility and adopting the CE has been accelerating for the last value always. This new economic model seeks to two decades and it has evolved from a specialist ultimately decouple global economic development concept to a mainstream business strategy. Accen- from finite resource consumption. The CE addresses ture Strategy recently surveyed more than 500 mounting resource-related challenges for business manufacturing companies with revenues greater and economies, and could generate growth, create than $1 billion and found that more than 90% said jobs and reduce environmental impacts. As the call they are implementing circular business models 82 The Orbital Circular Economy Framework: Emblematic Evidence from the Space Industry (Accenture Strategy, 2019). Nearly all larger manu- “defined as the ability to continuously create, extend, facturing companies say they have established cir- upgrade, protect, and keep relevant an enterprise’s cular supply chains for material recovery and unique asset base” (Teece, 2007). Many industries recycling. However, often programs remain “skin are subject to rapid technological change, market deep” When it comes to the elements of circular entry from global innovators, and volatility in mar- supply chains that companies are prioritizing, recy- ket demand. Companies that cannot anticipate or cling comes as one of their first priorities. While respond to external disruption are unlikely to sur- recycling wasted materials across a company’s vive. In volatile industries, firms need strategies, operations is certainly a step in the right direction, structures, and processes that enable organizational it is a modest one that only scratches the surface agility and responsiveness in a shifting competitive when it comes to fully capturing the value of the landscape. In volatile markets, the functional and CE. While nearly all companies report products are operational capabilities that drive competitive suc- returned for reuse or refurbishing, 75% ultimately cess in stable conditions become subject to rapid destroy 45–75% of the recaptured products and obsolescence (Teppo and Powell, 2016). Even if a therefore losing the embedded value. Additionally, company’s advantages are inimitable, disruptive while 92% of companies surveyed say they are technologies and business models can undermine geared up for product life extension, only 30% to the underlying drivers of competitive advantage, by 40% are actually doing it. When looking at the thus making conventional advantages irrelevant or adoption of deeper circular economy strategies, misaligned with market conditions and customer there is significant room for improvement. Within requirements. In line with Teece’s taxonomy (i.e. this context, the space industry is paving the way sensing, seizing and reconfiguring), the dynamic toward a new industrial paradigm where the CE capabilities view of competitive advantage argues can be fully embraced. that success in volatile industries requires higher- order capabilities