Exploring How Usage-Focused Business Models Enable Circular Economy through Digital Technologies

Abstract

Recent studies advocate that digital technologies are key enabling factors for the introduction of servitized business models. At the same time, these technologies support the implementation of the circular economy (CE) paradigm into businesses. Despite this general agreement, the literature still overlooks how digital technologies enable such a CE transition. To fill the gap, this paper develops a conceptual framework, based on the literature and a case study of a company implementing a usage-focused servitized business model in the household appliance industry. This study focuses on the Internet of Things (IoT), Big Data, and analytics, and identifies eight specific functionalities enabled by such technologies (improving product design, attracting target customers, monitoring and tracking product activity, providing technical support, providing preventive and predictive maintenance, optimizing the product usage, upgrading the product, enhancing renovation and end-of-life activities). By investigating how these functionalities affect three CE value drivers (increasing resource efficiency, extending lifespan, and closing the loop), the conceptual framework developed in this paper advances knowledge about the role of digital technologies as an enabler of the CE within usage-focused business models. Finally, this study shows how digital technologies help overcome the drawback of usage-focused business models for the adoption of CE pointed out by previous literature.