The Circular Business Model: A Solution for a Sustainable Business Ecosystem

Introduction

The term “ecosystem” was coined by British botanist Arthur Tansley to indicate the interaction of living organisms with each other and their natural habitat of air, water, soil etc., drawing the analogy between James Moore imported the concept to the business ecosystem. He wrote in a Harvard Business article in 1993 that “Successful businesses are those that evolve rapidly and effectively.” Yet innovative businesses can’t evolve in a vacuum. They must attract resources of all sorts, drawing in capital, partners, suppliers, and customers to create cooperative networks. It is advisable that company be viewed not as a member of a single industry but as part of a business ecosystem that crosses a variety of industries. In a business ecosystem, companies co-evolve capabilities around a new innovation. They work cooperatively and competitively to support new products, satisfy customer needs, and eventually incorporate the next round of innovations. Moore’s concept of business ecosystem has garnered immense attention in the present times where we see organisations like Apple, Facebook, Maruti Suzuki, Tata Motors, Reliance Industries etc. increasingly conceiving their products and services as part of an ecosystem and not just confined to the narrow concept of self-contained organizations. Incremental value creation has become an ongoing activity for most of the new age firms, and this can be achieved only by way of inter-connection, collaboration, and integration with various members of the ecosystem, viz., suppliers, channel partners, financers, technology support providers, government bodies, and even competitors. A strong business ecosystem is quickly emerging as an effective competitive edge for organizations, as evidenced by the CXOs of SoftBank and Nokia, who have emphasized the importance of creating a strong ecosystem that competitors will not be able to easily replicate (Canning & Eamonn, 2015).

Recently, Delhi and Kolkata featured as the two most polluted cities in the world by PM2.5 level according to a research conducted by US based Health Effects Institute (Mohan, 2022). Such developments have led to the increased concern towards environment and social safety, the element of sustainability is progressively being embedded in the eco systems of agile businesses. Concept of Circular economy, that reward consumers for reusing things rather than throwing them away and requiring fresh resources has emerged as an effective tool to embrace sustainability. In a circular economy, all kinds of garbage are recycled or repurposed, including textiles, scrap metal, and outdated gadgets. As a result, the environment may be protected while new industries, jobs, and capabilities can be created, and old products get regenerated or repurposed. The mantra for Circular Economy is “at today's resource costs, we have today's goods and tomorrow's resources.”

Figure 1.

Cultural economy benefits

Source- https://unctad.org/

Background

In the words of Moore Business Ecosystem may be defined as network of suppliers, manufacturers, channel partners, competitors, customers, and other stakeholders. This economic community leverages the services of its members to offer value to customers. Over time, they co-evolve their capabilities and roles and tend to align themselves with the directions set by one or more central companies. The vitality of such business ecosystem can be understood from the anthropological analogy of co evolution cited by Gregory Bateson in the book Mind and Nature, He has defined Co evolution as a process in which interdependent species evolve in an endless reciprocal cycle.

There are several benefits of an efficient business ecosystem, to cite a few, strong entry barriers for new competitors as it’s not very easy to replicate such strong network of stakeholders, it enables organizations to excel in research and competency, accomplish better collaboration, lowering cost of production, novel ways to address human needs etc.