A hundred billion tons of materials enter the global economy every year. Only 8.6% of the total amount of the materials are cycled back into the economy. This is the result of the linear economic model. In a case study written by Thibaut Wautelet, he refers to the linear economic model as a production and consumption model based on the “take-make-waste” scheme. He explained that raw materials are collected, then transformed into goods that are used and finally discarded in landfills or incinerated as waste. This approach turned out to be broken, enabling overconsumption to the detriment of planetary health.
Governments and businesses are looking to adopt the circular economy model and start repairing the damage created by unsustainable production and consumption. According to published research in “Cleaner Environmental Systems Journal”, authors define the circular economy as a catalyst for sustainable business. Moreover, the circular model promotes “…the use of resources within closed-loop systems, reducing pollution or avoiding resource leakage while sustaining economic growth.”
The pressure to adopt sustainability compels companies to implement the “reduce, reuse, and recycle” practices from the design stage to post-sales activities. Based on the same research, “Circular economy as a driver to sustainable businesses”, the influence of the circular economy can be seen in many business areas:
Cost management – The circular model leads to the transformation of products at the end-of-life cycles into resources for new products. Integrating material recycling into new component production can close the loop, reducing waste and the usage of more expensive raw materials.
Supply chain – The circular management of the supply chain is based on the coordination across the different members in closing, slowing, or narrowing energy and material flows. Additionally, the packaging system is an important aspect of the distribution process circularity.
Process management – The business processes are rebuilt to make them more circular, facilitating the reusing and recycling out of the desire to extend product life and reduce environmental impact.
Service management – The Product-Service system is considered an enabler of the circular economy by offering services instead of products aiming at pro-environmental outcomes.
Research and development – The achievement of circular goals relies heavily on design, which determines the circular potential. The life-cycle-based research and development allows the selection of the type and quantity of materials and determining how they are combined – a process that affects the product’s life and the possibility of repairing and recycling it.
Figure 1. Product Lifecycle in Circular Economy Model | News European Parliament
Companies embrace the concept of circularity in response to the growing interest of customers in green practices and concerns about the global waste problem. Philips is one of the companies that are successfully paving the way toward the circular economy in their industry.
Philipswas one of the largest electronics companies in the world. But it has changed its focus on health technology, looking to improve people’s health and well-being. Its products include large-scale and small medical equipment and home care products. The company developed new business models to adapt to the circular principles organized on seven strategic pillars:
Close the loop with current products through take-back, refurbishment, and recycling
Further circular practices across Philips sites, including zero waste to landfill policy
The circular design of products and business models
Technical competence building
Driving change with external coalitions and supply chain
Embedding in the Philips Business System
In 2016, the company set goals to generate 15% of revenues from circular products and services and send zero waste to landfills in internal operations. At the end of 2020, Philips achieved their circular goals. Therefore, they set three greater targets for 2025: to generate 25% of revenue from circular solutions, send no waste to landfills, and close the loop by offering a trade-in on all professional medical equipment.
The Benefits of Adopting the Circular Model
The Circular Model and its principles are still new to the business ecosystem, and the market penetration of circular business models remains limited. However, the potential to scale up the model is considerable in many industries.
Besides the environmental impact that the circular model creates through the reduction of greenhouse gas emissions or the use of fewer nonrenewable resources, or achieving zero waste, shifting toward circularity can help companies secure a competitive advantage and create long-term value.
The circular model enables new revenue streams by accessing new markets or cutting off costs from waste generation. It reduces the dependency on raw material suppliers and increases resilience in the face of supply chain disruption.
Additionally, by implementing a circular model, businesses can attract new clients and improve the retention of old ones, as sustainable practices are becoming an influencing factor in customers’ buying decisions. Also, customer loyalty is favored due to servitization, product-as-a-service offerings, or take-back programs.
Based on the survey conducted by Deloitte, more consumers this year are pursuing a better sustainable lifestyle. Results show that 40% of consumers choose brands that promote sustainable values and practices, which increased by six points compared to 2021. The number of consumers who stopped purchasing from a specific brand due to their ethical or sustainable issues and concerns towards the company has also increased by six points in 2022, which is 34%.
Going in circles is the way forward. It is time for companies to rethink how they do business, considering industrialization’s impact on the environment, relevant international initiatives, such as the UN Sustainable Development Goals and the EU Circular Economy Action Plan, and the increasing importance of sustainability to everyday customers. The change may be difficult for organizations used to operating in the linear economy but not impossible as seen in the above examples. In order to thrive in the market, companies must establish circular business models and adapt their strategies to the circular economy.
To widen your expertise in establishing effective strategies and organizational planning, read more comprehensive articles here.
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Editor’s Note: This article was first published on May 26, 2022 and last updated on September 16, 2024.
Democratizing strategy planning refers to the process of involving various stakeholders of all organizational levels in the strategy formulation process. In the traditional approach, strategy planning is a top-down process formulated by selected stakeholders like the senior management and key decision makers. So, to make the process more inclusive and participatory, democratizing strategy planning comes into account.
One of the main advantages of democratizing strategy planning is that it increases employee engagement. Thomas, K. W. (2009) discussed in his paper “Intrinsic Motivation at Work: What drives employee engagement” that when employees feel that their voice is heard within the organization, they are more likely to feel connected and invested in the organizational success, which increases their motivation, commitment, and job satisfaction, and that means a lot for them as they feel more valued in the organization.
Another advantage of democratizing strategy planning is that it enhances ownership and accountability, which will be reflected in improved employee engagement, as employees who participate in the strategy planning feel a stronger sense of ownership and responsibility, which leads to extra accountability and willingness to go the extra mile in achieving the organizational objectives as per the psychological ownership theory, which emphasizes on the role of psychological ownership in influencing employee attitude and behavior which lead them to be more engaged, motivated and committed to their organization.
To implement democratized strategy planning, having and securing the leadership buy-in is crucial to its success, so it is necessary to present the benefits and potential of increasing employee engagement and fostering innovation in the organization.
After getting leadership buy-in, we need to define a clear scope of where employee inputs would be more valuable, which is recommended to be initiative-specific in the beginning to avoid any potential analysis paralysis. In addition, it is vital to develop a precise feedback mechanism to capture different stakeholders’ diverse perspectives and ideas and recognize and reward participation.
This process will take time to be implemented correctly without any issues, so it is essential to mention that continuous improvement is critical to reach a practical approach. To read more comprehensive articles on strategy, click HERE.
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Editor’s Note: This article was originally published on November 30, 2023 and last updated on September 17, 2024.
One of the greatest human inventions is the magnetic compass, a device that uses the magnetic fields produced by the Earth’s poles for direction. This invention made navigation around the world easier than ever and it has evolved and been integrated into more complex and advanced systems to provide more accurate navigation.
Analogously, organizational strategy is the compass used by organizations to navigate the journey to their strategic objectives, long-term goals, and vision. If the strategy is not well communicated and understood by all employees, navigation toward the vision is difficult. To achieve strategic alignment, transformation, and growth, the strategy must be conceived and acknowledged by all employees. Therefore, the Strategy Management Office (SMO) should emphasize the importance of internal strategy communication and education while developing and executing the strategy to ensure overall organizational strategic alignment.
First, the success of a strategic alignment is underlain by how far employees at the departmental level—the gears and the beating heart of the organization—understand and support the strategy. According to Robert S. Kaplan and David P. Norton in their book “The Execution Premium: Linking Strategy to Operations for Competitive Advantage,” the organization’s strategy can be visually and quantitatively explained using global strategy maps and scorecards. This can be cascaded to each unit in the organization by applying the top-down approach, ensuring strategic alignment. The benefit of this process is to give each department the opportunity to derive their own strategy maps and scorecards to develop their skills and knowledge that fit the corporate strategy.
For this process to be implemented professionally, each department should produce a “service-level agreement” that shows how their department’s strategic goals support the strategy along with measurable metrics to be checked periodically by the SMO. Employees play an important role in implementing the strategy at a personal level. This triggers the need for a well-designed communication plan that consistently provides guidance and support to ensure that the strategic goals are always remembered and acknowledged by each employee, how the organization is achieving said goals, and who needs support to do so. The SMO should provide this communication plan to each department and provide training on how to use its channels.
Second, understanding the distinction in management levels as well as how to deliver the strategy to the targeted audiences and guide them in following it ensures professional implementation of strategic alignment. As discussed in The KPI Institute’s Certified Performance Management Professional course, there are three levels of management. The highest level is Top-Level Management, which uses a strategic management style that involves adopting long-term views and ensuring that tasks are performed in such a way as to achieve strategic goals. C-suite executives such as the chief executive officer (CEO), chief financial officer (CFO), chief operating officer (COO), and chief information officer (CIO) are examples from this level who need to digest long-term goals to better deliver them to the other management levels. Hence, the SMO should support each chief officer to have a clear understanding and implementation of long-term goals.
Middle-Level Management is the next level, and it includes general, regional, and divisional managers who deliver results by planning and setting objectives for their respective divisions. SMO should facilitate training sessions in performance measurement and management for this management level in order to ensure strategic goals are well measured, managed, and aligned with the mission.
The last level of management is called Operational-Level Management, and it consists of first-line managers, department managers, and team leaders. These managers aim to develop a high-performance culture and high-performance work systems. Additionally, they manage teams and individual performance to meet organizational goals. Thus, the SMO should identify the core process that represents the organization’s strategic goal and that gives value propositions to its identity and then, work together with the operational managers to build the culture and the system of the organization based on this process.
Finally, clear corporate values enforce strategy implementation and guide employees’ behavioral aspects, priorities, and attitudes toward achieving organizational goals and aligning them with the corporate strategy. Corporate Values enforce principles that employees use to make decisions in day-to-day business activities, and they also solidify organizational culture. According to a survey carried out by employee engagement specialists Reward Gateway, employers with high Employee Net Promoter Scores (eNPS) have a workforce where over 80% of employees feel that they are recognized by their employer when they demonstrate corporate values. Therefore, a values-driven organization creates a work environment that fosters organizational strategic alignment.
To succeed at achieving strategic alignment, employees at the departmental level should understand and support the corporate strategy. Moreover, understanding how to deliver and support corporate strategy according to management levels, helps in professional strategy implementation. Finally, creating a values-driven workforce encourages employees to drive their behaviors and attitudes toward achieving organizational strategic goals.
If you are interested in reading more insightful articles about strategy and communication, click here.
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This article is written by Engr. Hussien Abdullah Alkhalifah, a strategy and business planning professional who specializes in corporate performance, agile project management, business process improvement, performance management, KPI implementation, quality control, and strategic planning, among others. Connect with him on LinkedIn.
Editor’s Note: This article was first published on May 14, 2024 and was last updated on September 16, 2024.
Traditionally, an ecosystem is considered a community of organisms co-working in a special physical environment. Ecosystem dynamics, in this context, would be the network of interacting and interrelated relationships within the system that form a complex and integrated whole. What differentiates this “new” view of business ecosystems (although James Moore in 2006 was already presenting the concept back in 2006, so it can hardly be called new) from systems theory is the holism of the concept. While in system thinking, a system has its boundaries, in ecosystem thinking, the system is boundless—it’s always part of a larger network of systems.
Ecosystems theory draws inspiration from the natural world, which makes sense since we’re all part of that. Giles Hutchins in his book The Nature of Business describes several key principles that guide interactions in an ecosystem, some of them, as follows:
Networks: Living systems are interconnected, they communicate with other systems without strict boundaries. As the book Realizing Community Futures states, “Life did not take over the planet by combat, but by cooperation, partnership and networking.”
Cycles: Matter and energy are in a continuous flow, both being consumed and created by parts of the system. As a whole, an ecosystem generates no net waste.
Diversity: The higher the biodiversity within the ecosystem, the more capable it is of withstanding challenges.
Dynamic balance: Nature works not through the maximization of certain variables but through responsive adaptations and feedback loops.
In business, an ecosystem is a complex network of interdependent entities and relationships that co-evolve and co-create to produce value that offers exponentially greater benefits than the sum of the network’s parts. In the absence of these benefits, there would be little reason to be in the system at all. Inherently, ecosystems are expansive, crossing many geographies and sectors, and they include a mix of public and private entities as well as consumers.
Here’s just one example of how the benefits manifest in the business world: In a technology ecosystem, companies can develop platforms jointly, integrate their services, or develop solutions jointly. This approach enables tech companies to promptly respond to changes in the market.
How Can We Apply Nature’s Principles to the Business World?
This is a tough question, as it implies going through the eye of the needle, as Otto Scharmer from U-Lab phrased it. This means we need to let go of our desire to continuously grow, get more, achieve more, and understand how slowing down is a necessity of long-termism. Here are a few principles of the new age of business. Consider this hard-to-swallow, but necessary medicine.
Synergy
The concept of synergy is based on maximizing collective potential. Simply put: Individual parts in an ecosystem possess distinct properties, which, when combined, create new and exponentially better characteristics. Synergy, the maximization of collective potential, means that co-creation achieves results that creation never could.
Emergence
An emergent strategy, as opposed to a deliberate strategy, stems from unplanned actions of individual contributors as a response to change or unexpected events, often resulting in spontaneous innovation. While deliberate strategies are all about planning, an emergent strategy is based on trust and shared values. There’s a reason that deliberate strategies are becoming harder and harder to implement, and emergent strategies are becoming more popular: change, disruption, and pressure have become the new normal.
However, emergence only works with a joint purpose. Therefore, companies will have to do better when it comes to inspiring employees with a common belief system, values, and purpose. This is not just marketing, but a prerequisite for synergy and better outcomes.
Holism
Holism in ecosystem thinking emphasizes comprehensive consideration of business challenges and opportunities, recognizing the interconnectedness of environmental, social, and economic factors. For example, a company adopting the triple bottom line approach—which involves evaluating environmental and social impacts alongside profitability—demonstrates holistic thinking by prioritizing sustainability and societal well-being alongside financial success, leading to more resilient and responsible business practices.
Proactivity
Proactivity in ecosystem thinking involves anticipating future challenges and opportunities rather than simply reacting to current situations. A practical example of this is a company investing in renewable energy solutions before regulatory changes mandate reductions in carbon emissions, positioning the company as a leader in sustainability. In this paradigm shift, our very survival hinges on our ability to embrace proactive strategies that prioritize sustainability, resilience, and responsible growth.
William Gibson’s words, “The future is already here, it is just not very evenly distributed,” highlight the uneven spread of progress. Ecosystem thinking encourages co-evolution and a shift from an ego- to an eco-mindset, reminding us to transcend self-centeredness and recognize our role as parts of a larger whole to avoid self-destruction.
If you missed the first part of this article, click here to catch up.
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About the Author
Bori Péntek is a management consultant specializing in organizational development and human resource management. She helps businesses align their strategies, processes, and practices with their core values, focusing on human and social well-being. With experience in recruitment, HR, and operations management across sectors like sustainable construction, research, and instructional design, Bori emphasizes improving employee well-being, fostering inclusive cultures, and ensuring that organizations are resilient and socially responsible. She develops solutions that address systemic challenges and support long-term success.
The word “ecosystem” has been used more often in modern times, along with buzzwords such as corporate social responsibility (CSR) and sustainability. We use these concepts but currently, as a society, we still think that we stand apart from the ecosystem in which we live and create. We’re very reactive, that’s why concepts enter our mainstream vocabulary—but years later, we still don’t understand their relevance.
Today’s organizations are urged to rethink their strategies in response to disruptions in their business ecosystem, which are more significant than ever before. Our society faces a multitude of systemic issues that severely impact both the environment and the socio-economic fabric. However, the current ways of management and operations were built for a much slower era, when change was not constant, and risks were less pervasive and global.
The volatility of global markets, growing societal demands, and the scary way information expands every year force business leaders to innovate not just in technology, but in purpose. Understanding the status quo within the business ecosystem allows us to determine weaknesses and gaps, explore our potential as a society, and find solutions tailored to current needs.
Our Current Business Ecosystem
Resource Depletion
Our current business models based on overexploitation lead to scarcity, increased costs, and long-term supply chain vulnerabilities. For instance, the fishing industry has faced challenges due to overfishing, which depletes fish stocks faster than they can regenerate, threatening marine ecosystems and the fishing industry itself. In the same way that the scarcity of human resources gave rise to the first industrial revolution, the current scarcity of natural resources will hopefully give rise to the next paradigm shift. This change is not merely about survival but about thriving in a future where the interconnectedness of global systems can no longer be ignored.
Invasive Practices
Business operations are characterized by a range of invasive practices that permeate everyday operations, impacting environments, societies, and individual well-being. For instance, excessive packaging in retail and takeaway services contributes to daily waste and environmental strain. The normalization of after-hours communication pressures employees to extend their workdays, blurring the boundaries between personal and professional life and impacting mental health and job satisfaction. Another environmental example of how unsustainable many of our industries is: It takes about 1800 gallons of water to produce a pair of jeans. Such practices often go unnoticed but cumulatively contribute to significant ecological damage and social injustices, undermining the quality of life and happiness of affected populations.
Our infrastructure is fundamentally designed to support market-driven and hierarchical systems, making it incredibly difficult to shift directions and unsuitable for modern demands. This setup deeply embeds short-term profitability and centralized decision-making into the fabric of our organizations and society. As a result, initiatives prioritizing sustainability and inclusivity face resistance, as they challenge established norms.
Polarization
Polarization, the deep division of opinions and beliefs, disrupts teamwork and collaboration in businesses. It creates an individualistic culture that makes it hard for employees to work together effectively and slows down progress on important tasks. Instead of working like a well-functioning ecosystem, businesses struggle to unite diverse talents and develop inclusive strategies for success.
Unpredictable Disruptions
Unexpected disruptions worsen challenges, adding to the fragility of our societal landscape and jeopardizing sustainability. Events like natural disasters or conflicts can disrupt supply chains and markets, exacerbating resource scarcity. These occurrences underscore the vulnerability of our systems and emphasize the need for proactive and flexible measures.
Isolation and Competition
Competing in isolation refers to a company’s strategy of acting independently without engaging in significant cooperation or information-sharing with other entities, such as partners, competitors, or even internal stakeholders. It is a strategy focused on self-reliance and keeping strategic information and practices secret with the intention of gaining a competitive advantage by limiting external involvements and partnerships that could potentially expose business vulnerabilities or strategic intentions. This sometimes leads to myopic observations of the broader market dynamics and reduction of business agility to new challenges or even the harnessing of collective strengths within the company’s industry or ecosystem.
Streaming platforms like Netflix and HBO Max have faced challenges due to their secretive practices regarding viewership data. These companies choose not to disclose detailed statistics about how many people watch specific shows or movies, aiming to protect their competitive edge and prevent rivals from identifying their strengths and weaknesses. However, this secrecy can lead to issues such as distrust between content creators and the platforms and also affects advertisers and industry partners who rely on accurate data to make informed decisions.
We don’t have the luxury of continuing to operate this way. The age of short-termism has to end. It’s not unprecedented for the business landscape to radically adapt to global challenges: we have already transitioned from commanding hierarchy to incentives, from top-down management to collaboration. That transition to see businesses as part of a larger ecosystem (even larger than the “business ecosystem”) is imperative not only because of increasing resource scarcity but also because of increased demand from consumers, employees, and governments for sustainable and ethical business practices. This also means that businesses need to adapt not just due to CSR—although that should be reason enough—but in order to enhance creativity, innovation, and resilience, and make themselves viable long term.
Stay tuned for Part 2 of this article to explore how ecosystem thinking can be implemented to strategically enhance your organization.
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About the Author
Bori Péntek is a management consultant specializing in organizational development and human resource management. She helps businesses align their strategies, processes, and practices with their core values, focusing on human and social well-being. With experience in recruitment, HR, and operations management across sectors like sustainable construction, research, and instructional design, Bori emphasizes improving employee well-being, fostering inclusive cultures, and ensuring that organizations are resilient and socially responsible. She develops solutions that address systemic challenges and support long-term success.
