Organizational transition management of circular business model innovations

Hofmann, Florian; Jaeger‐Erben, Melanie Article — Published Version Organizational transition management of circular business model innovations Business Strategy and the Environment Provided in Cooperation with: John Wiley & Sons Suggested Citation: Hofmann, Florian; Jaeger‐Erben, Melanie (2020) : Organizational transition management of circular business model innovations, Business Strategy and the Environment, ISSN 1099-0836, Wiley, Hoboken, NJ, Vol. 29, Iss. 6, pp. 2770-2788, https://doi.org/10.1002/bse.2542 This Version is available at: https://hdl.handle.net/10419/230167 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. http://creativecommons.org/licenses/by/4.0/ RESEARCH ARTICLE Organizational transition management of circular business model innovations Florian Hofmann 1,2 | Melanie Jaeger-Erben 3 1 Faculty of Economics and Management, Department Strategic Leadership and Global Management, Technical University of Berlin, Berlin, Germany 2 Department Environmental and Reliability Engineering, Fraunhofer-Institute for Reliability and Microintegration, Berlin, Germany 3 Faculty of Electrical Engineering and Computer Science, Transdisciplinary Sustainability Science in Electronics, Technical University of Berlin, Berlin, Germany Correspondence Florian Hofmann, Fraunhofer-Institute for Reliability and Microintegration, Department Environmental and Reliability Engineering, Gustav-Meyer-Allee 25, Berlin 13355, Germany. Email: [email protected] Abstract Scholars and practitioners across fields increasingly recognize that business models for the circular economy may be an effective lever for solving ecological persistent problems such as climate change, biodiversity loss, and growing natural resource scarcity. Despite a growing interest in the potential of circular business models, interconnections between the organizational dimensions of firms and their business model innovation processes remain underexplored. Based on problem-centered expert interviews with business consultants experienced in circular business development, this study creates a conceptual model that offers structured knowledge about why firms steadily reproduce linear BMs and how incumbents manifest themselves as a constant linear-oriented value creation system. The model also demonstrates organizational conditions and management strategies that frustrate the reproduction of linear BMs and, thus, enable initial moves towards CBM innovation. Building on this, the article provides a set of propositions on how an organizational transition management may be configured and what incumbents require to successfully navigate circular business model innovation. The findings provide a foundation for a contemporary understanding of circular business model transition management, which simultaneously serve as impulses for future research investigations. KEYWORDS business model innovation, circular business model, circular economy, sustainability innovation, sustainable business model sustainability transition management 1|INTRODUCTION Against the current backdrop of persistent ecological problems such as climate change, massive biodiversity loss, and growing resource scarcity (Rotmans & Loorbach, 2009; Schuitmaker, 2012) profound societal change seems a necessary condition to achieve intraand intergenerational justice and create a sustainable future (Intergovernmental Panel on Climate Change [IPCC], 2014; United Nations [UN], 2015). In particular, the unidirectional arranged system of production and consumption, known as the “take-make-dispose” model and based upon a vision of continued economic expansion and perpetual raw material extraction, has put tremendous pressure on nature. It has become evident that the current economic approach cannot be sustained on a planet with finite resources and limited emission absorption capacities (Steffen et al., 2015). The concept of a circular economy (CE) as a potential economic transition model has gained growing popularity among corporate representatives, politicians, and scientists (Boulding, 1966; Ghisellini et al., 2016; Kirchherr et al., 2017; Korhonen et al., 2018; Murray et al., 2017; Pearce & Tuner, 1989; Su et al., 2013). The CE is Received: 29 September 2019 Revised: 28 April 2020 Accepted: 12 May 2020 DOI: 10.1002/bse.2542 This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited. © 2020 The Authors. Business Strategy and The Environment published by ERP Environment and John Wiley & Sons Ltd 2770 Bus Strat Env. 2020;29:2770–2788.wileyonlinelibrary.com/journal/bse characterized by closing and slowing down resource flows, traits that reflect a difference from linear thinking and practice (Bocken et al., 2016; McDonough & Braungart, 2002; Stahel & Reday-Mulvey, 1981). Thus, the CE can be distinguished from current linear models production and consumption according to, first, how the flows of materials are organized (i.e., closing resource flows), and second, the speed at which they circle within the prevailing economic order (i.e., slowing down resource flows). The CE connects post-use and process waste with production through processes such as recycling and repurposing of by-products, and attempts to preserve the inherent value of products and product components by maximizing the number of consecutive use phases and use time in each of these phases via repair, maintenance, upgrade, resale, refurbishment, remanufacturing. CE advocates argue that the imperative of continuous economic growth can thus be perpetuated by decoupling expansion from ecological burdens (European Commission [EC], 2016; Ellen MacArthur Foundation [EMF], 2013; Rubel et al., 2018). Whether this target horizon, articulated from an ecological modernization position, is legitimate and justified to accomplish the transition from the contemporary “cowboy economy”(Boulding, 1966: 9) towards an economic system that flourish within planetary boundaries (O’Neill et al., 2018; Steffen et al., 2015) should not be discussed here, but some authors propose first tentative ideas to overcome the growth dictate in order to diversify CE conceptualizations (e.g. Hofmann, 2019; Hobson & Lynch, 2016; Millar et al., 2019; Zink & Geyer, 2017; Zwiers et al., 2020). The study presented here adopts an agnostic attitude to economic growth (Raworth, 2018), and rather emphasizes to reduce the absolute depletion of nature between the dialectic of consumption and production. Scholars and practitioners have stressed the importance of innovative business models (BMs) in accelerating the shift to a CE, perceiving such BMs as levers and instruments to the “process of industrial mutation”(Schumpeter, 1976: 83). Novel BMs have the potential to trigger market irritations, and, by extension, the restructuring of the organizational processes of entire societies, as they couple multiple social actors and mediate between the spheres of production and consumption (Bidmon & Knab, 2017; Evans et al., 2017). Corporations with circular business models (CBMs), in particular, are said to disrupt the unidirectional and linear industrial economic system from within (Schaltegger et al., 2016). One critical question that remains unanswered by extant CBM literature is how firms can successfully navigate corporate transitions to circularity? CE research at the corporate level has typically concentrated on two types of research questions. First, such research has considered justifications for companies embracing modes of circular value creation and offerings, focusing on motivational aspects, drivers, and opportunities of CBM innovation (such as enhancing competitiveness by increasing cost efficiency due to lower demand for energy and physical resource inputs; attracting new environmental-conscious customer segments; or becoming more autonomous and independence from volatile commodity markets, (Gusmerotti et al., 2019; Planing, 2018; Rizos et al., 2016; Rubel et al., 2018; Whalen et al., 2017) and the financial, organizational, market, and institutional risks and barriers of integrating CE principles into daily business routines (Linder & Williander, 2015; Sousa-Zomer et al., 2018; Tura, Hanski, Ahola, Stahle, Piiparinen, & Valkokari, 2019; Vermunt et al., 2019). Second, existing CE studies have explored the contours of CBMs, describing the constitutive elements of CBMs and their strategic design that can be summarized as conceptual debates (e.g. Bocken et al., 2016; Hofmann, 2019; Lewandowski, 2016; Lüdeke-Freund et al., 2018; Rosa et al., 2019). However, with a few exceptions (Bocken et al., 2018; Chen et al., 2020; Heyes et al., 2018; Khan et al., 2020), there is a lack of investigations of how firm management can initiate and navigate CBM innovation while taking organizational dynamics and restructuring processes into account. As such, the organizational dimension of CBM innovation remains uncharted territory. Contrary to the predominant view of firms in existing CBM literature as static entities, firms are social systems that are simultaneously stable and dynamic in their emergence, thereby characterized by a constant state of flux. They are composed of a multitude of events and occurrences that actually cease at the moment of their emergence if they are unable to generate an impact over time (Luhmann, 2009; Weick, 1979). Thus, the development of a firm is continuously uncertain, subject to a myriad of opportunities and shaped by creative moments, which unfold their dynamics through the reciprocal interplay of decision patterns, communication structures, and series of acts (Rüegg-Stürm & Grand, 2016). The rotational searching, experimenting, and learning to stimulate BM innovation can only be successfully evaluated if these dynamic organizational dimensions of the firm are taken into account (Foss & Saebi, 2015). But current CBM literature has mostly overlooked this research domain, and offers a rather static view of a complex and constantly changing corporate reality. This study attempts to fill this gap in the literature by pursuing the question of “how”firms can navigate transitions to CBMs. Drawing on problem-centered expert interviews with business consultants who offer advisory services for circular business development, the study provides a set of propositions on how an organizational transition management may be configured and how to assist incumbents in navigating CBM innovation. Section 2 introduces circular business model innovation as a type of radical corporate change and renewal. Section 3 describes the study’s research design, while Section 4 aggregates the main findings in a conceptual model. Finally, Section 5 discusses three propositions on the organizational conditions and management recipes that advance CBM innovation in incumbents. These propositions reflect starting points for a contemporary understanding of firm transitions towards circularity and serve as impulses for future research directions. 2|CIRCULAR BUSINESS MODEL INNOVATION AS A FORM OF RADICAL CORPORATE RENEWAL Objectively, BMs consist of interlaced interpersonal acts and communications among internal and external stakeholders as well as humanobject interactions (e.g., human-artifact, human-computer, humanmachine, human-robot) that configure the specific value creation HOFMANN AND JAEGER-ERBEN 2771 system of firms. From these perspectives, BMs reflect the empirically observable functions of firms that distinguish them from other market actors (Massa et al., 2017). Thus, they articulate a firm’s unique central mode for creating and capturing value, which can be understood both in terms of processes (i.e., dynamics of activities, resources, and networks of social actor groups) and results (i.e., products and services that appear as vehicles of values) (Casadesus-Masanell & Ricart, 2010; Demil & Lecocq, 2010; Massa et al., 2017; Osterwalder et al., 2005). From a subjective perspective, BMs are images of firm representatives and persons who are directly and/or indirectly influenced by the company and how such individuals construe the company’s value creation system. Hence, BMs are mental models or cognitive schemas of individuals who subjectively construct their own representations of the boundaries between the firm and its environment, its procedures for social interaction, and potential trajectories for future development (Aspara et al., 2013; Doz & Kosonen, 2010; Magretta, 2002; Massa et al., 2017; Rüegg-Stürm & Grand, 2016; Velu & Stiles, 2013). In the face of climate change, the increasing devastation of nature, and growing resource scarcity, companies need to transform their BMs more rapidly and more extensively than ever before. One possible response to these socio-ecological megatrends is the CBM. This approach connects business configurations focusing on resultand performance-oriented product-service-systems; manufacturing and offering durable, reliable, recyclable, modular, and repairable products; and/or practicing conscious sales (slow fashion etc.) (based on Bocken & Short, 2016; Bocken et al., 2016; Dyllick & Hockerts, 2002; Young & Tilley, 2006) with the consumption side of business that involves (non-)consume decisions such as repairing, maintaining, upgrading instead of buying new products; second-hand purchases; sharing; or the use of corresponding services that can be summarized as “sufficiency”. CBMs are concerned with downscaling overall enduser consumption and reducing the tangible products necessary to fulfill user needs (Freudenreich & Schaltegger, 2020). CBM innovations are assumed to contribute more or less intentionally to the deceleration of natural resource consumption by restraining demand by educating and empowering consumers, prolonging product lifetimes, dematerializing value propositions, and adopting a modified attitude of marketing. CBMs are diametrically opposed to dominant business approaches of the last decades, which mostly tend to incorporate principles of acceleration, such as raising the frequency of product innovation and boosting the number of products sold within a time period, to increase competitiveness (Boutellier et al., 2008; Krajewski et al., 2016). Burdened by their own linear aligned traces of the past and cultural fixation on the “take-make-dispose”paradigm, firms are embedded within financial, institutional, legislative, infrastructural arrangements that are shaped by path dependencies of linearity and that proactively encourage and support the design and development of linear BMs (Tura et al., 2019; Vermunt et al., 2019). These structures may contribute to a broader environment in which such a profound change in value creation modes appears unviable. Since CBMs are accompanied by extraordinarily high risks and uncertainties, CBMs may be considered economically irrational under contemporary market and social conditions. However, CBMs appear to be effective instruments for an ecological-oriented process of “creative destruction”(Schumpeter, 1934) that replace linear production and consumption styles with styles that incorporate principles of dematerialization and decarbonization. CBMs may erode and provoke existing industry arrangements, restructure entire supply chains, or even create new markets. To be a driver for solutions that ensure the future viability of the modern civilization and to secure their own long-term existence as an organization in a world of changing socio-ecological parameters, and thus also shifting economic circumstances, firms must navigate into unexplored arenas, where previous experiences, knowledge stocks, and loyal customer bases are not survival variables. Incumbents that manage and organize CBM innovation need strategies that differ from those designed to handle circular dyed BM adjustments or adaptations. Saebi’s (2015) research provides a foundation for comparing the different types of BM reconfigurations in the context of the CE (Table 1). 2.1 |CBM Adjustment CBM adjustment refers to the reproduction and stabilization of the existing BM(s) to maintain linearity. Change processes are focused on gradual adjustments in the firm’s existing mesh of activities and resources, such as reducing production waste and making incremental alterations in operating routines to increase energy efficiency. Business resources, networks, and offered products and services remain the same. The scope of change is limited to a few efforts; adjustment causes neither a shift in standard value creation processes nor a modification of linear-oriented value creation modes. Principles of acceleration are still pursued. 2.2 |CBM Adaptation Matching the demands and expectations of the social environment is the core motive of CBM adaptation. This reconfiguration represents continuous sequences of incremental improvement to adapt to the changing social environment. Value creation activities, resources, networks, and their outcomes can be affected simultaneously, with varying degree of change imposed. Examples of CBM adaption include beginning to repurpose by-products and use recycled instead of raw materials. The scope of change may involve a degree of novelty to the firm, causing shifts in routine standard value creation processes and slightly altering the value creation mode from linearity to the closing of resource flows. Principles of acceleration are still pursued. 2.3 |CBM Innovation The main goal of CBM innovation is to shape markets, industries, and society by creating new and sustainable linkages between production and consumption systems. CBM innovation involves “the discovery of 2772 HOFMANN AND JAEGER-ERBEN a fundamentally different BM in an existing business”(Markides 2006, 20). Thus, the process of change requires shifting value creation activities, resources, networks, and their outcomes from an existing BM to CBM. The scope of change involves novelty to the firm that results in entirely new value creation processes, which must be tested, learned, and re-stabilized. Such change comprehensively alters the value creation mode from linearity to closed and slow resource flows, with principles of acceleration no longer pursued. 3|RESEARCH DESIGN This study attempts to identify management recipes that facilitate the interruption of the structurally entrenched inertia of linearity plaguing many firms and foster organizational transitions towards CBMs innovation. How might an organizational transition be managed? What conditions must be created to assist incumbent firms in navigating CBM innovation? To answer these questions, this study adopted a qualitative approach that allows for the exploration of CBM innovation’s complexity. Firms are social systems that are stabilized through continuous mutual interactions between people. Due to the non-causality and unpredictability of social systems resulting from their own open decisiveness, firms are controllable only to a limited extent. As a result, they are not unambiguously determinable (Baecker, 1999; Luhmann, 2011; Rüegg-Stürm & Grand, 2016). Furthermore, firms, as heterogeneous organizations, are connected to and influence the environment in which they are embedded (Dougherty, 2002). Qualitative research methods such as problem-centered interviews enable the exploration of such complex systems through the reconstruction of systemic patterns. Since qualitative research strives to characterize the dynamics of observed social phenomena, a qualitative approach helps shed light on why and how structures solidify and acts become routines, the conditions that may elicit organizational reinventions, and the temporal and emergent contextual circumstances and constraints of such reinvention (Dougherty, 2002). Consequently, the epistemological interest of this study was not to reconstruct subjective perceptions of the world, but to reveal its underlying social phenomena. 3.1 |Data Collection and Sample Selection Problem-centered interviews (Witzel, 2000) were conducted to examine the organizational management of CBM innovation. Problemcentered interviews represent a theory-generating method that integrates inductive and deductive thinking to increase knowledge of a certain phenomenon. In total, 12 representatives of nine business consultancies were interviewed over the course of two phases (April 2019 –May 2019; February 2020 –April 2020). A high-level representative of each consulting firm was interviewed. For the three relatively new and small consultancies, this representative was the founder or CEO. For the six medium-to-large consultancies, the interviewees were associates, senior consultants or department heads. The interviews, which lasted between 55 and 90 minutes, were carried out in German. Six interviews were conducted face-to-face and six interviews were conducted by phone, with the latter method used due to contact restrictions related to the COVID-19-Pandemic. The business consultancies were identified through extensive web searches and personal expert recommendations. Selection criteria focused on ensuring representatives had a high level of knowledge on the subject. Firms were selected only if advisory services for circular organizational transition processes constituted either the core competence or a substantial part of the consultancy’s value proposition. The representative must have had several years of experience in the field. Firms of varying size were selected, with the sample including small business consultancies that focus solely on circular organizational change to large consultancies offering a wide spectrum of advisory services (e.g., building and supporting coalitions, venture capital assessments, strategic planning, product development, and public affairs). Geographic representativeness was also sought, with firms in Europe, particularly in Germany selected. TABLE 1 Circular business model adjustment, circular business model adaptation, circular business model innovation, adapted from Saebi (2015) Circular business model adjustment Circular business model adaptation Circular business model innovation Planned outcome Minor adjustments Align with the social environment Shape markets, industries, and the society Scope of change (activities, resources, networks, value propositions affected) Narrow (activities) Narrow-wide (activities, resources, networks, value propositions) Wide (activities, resources, networks, value propositions) Frequency of change Continuous Periodically Infrequently Degree of radicalness Incremental Incremental Radical Degree of novelty Not applicable Novelty is not a requirement for the social environment Novelty is a requirement for the social environment Degree of linear detachment Not applicable Low High Mode of circularity Not applicable Close resource flows Close and slow down resource flows HOFMANN AND JAEGER-ERBEN 2773 Business consultants were chosen as subjects because they act as advisors who use their expertise, networks, and abilities to advise firms, therefore contributing to arrangements of and developments in markets and industrial sectors. As mediators of factual and experiential knowledge, they supervise and observe organizational transitions as “experienced events”in their everyday business life. Consequently, they are relevant to social negotiation processes as economic authorities, with the ability to affect the thinking and actions of corporate leaders. As consultants have a certain degree of interpretive sovereignty over socio-economic developments, examining their experiences and insights on circular-oriented business changes assists in drawing conclusions about contemporary and future CBM formations and dynamics. Additionally, to date, no research on corporate-level circular change has relied on business consultants as a source of knowledge generation. The problem-centered interview procedure and the semistructured interview guide were conducted to be “as open as necessary and as structured as possible”. The intention was to arrange an interview setting and a communication process during the interview in such a way that the systems of meaning and the situational subjective truths of the interviewees could unfold. Nevertheless, a certain structure was imposed to ensure comparison across interviews. The interview guide was structured using six topic clusters: (1) personal experiences with CBM innovation; (2) experiments with circularoriented organizational transitions; (3) irritations and triggers; (4) risks associated with CBM innovation processes; (5) the functional rationality of CBMs; and (6) organizational capabilities and competencies. In a first step, the interviewees had the opportunity and space to narrate their own stories about the defined research object (topic cluster 1). The opening of the interview was therefore conceptualized to spontaneously address as many interesting and pertinent facets as possible. In a second step, passages of the shared insights, which appeared to be conspicuous and relevant for the topic clusters, were deepened by further inquiries using the pre-formulated cluster sub-questions. All interviews were recorded and then transcribed. 3.2 |Data analysis The obtained data in the form of written communication was processed and interpreted with the use of the Grounded Theory (Glaser & Strauss, 1967; Strauss & Corbin, 1990). This approach to data analysis allows the development of theoretical concepts grounded in the phenomenon of interest rather than relying on preexisting models and theories[1]. Grounded theory, thus, prevents the premature narrowing of the researcher’s perspective while simultaneously promoting the concise description of the observed phenomenon. Open, axial, and selective coding were used to interpret interview transcripts (Strauss, 1987). While the first coding type is often situated at the beginning of a study, with the third type situated closer to the end (Dougherty, 2002), separating these coding phases into three chronologically successive analysis phases was therefore neither appropriate nor practicable, as Grounded Theory is recursive in nature. Using open coding, we sequentially examined text blocks to open up new dimensions of meaning behind the obviously perceived surface of the text. That is, we broke down the manuscripts into subtextual interpretive codes, looking to generate as many codes as possible to ensure accurate analysis of the text. Next, the codes were categorized according to the addressed phenomenon and its relevant characteristics, contexts, and actors. Open coding procedure resulted in a list of codes placed in provisional categories alongside including comments and explanations of each code. Next, we identified several axial categories for which further elaboration seemed worthwhile. This axial coding aimed to refine and differentiate the categories and TABLE 2 Coding paradigm, adopted from Strauss and Corbin (1990) Components of the coding family Explanation Phenomenon The real-world incident described, interpreted, and elaborated by the axial categories. What does the data ultimately address? Causes The term refers to conditions that contribute to the occurrence and development of the phenomenon. What leads to the investigated phenomenon? Context Causes usually emerge in a specific setting that facilitate or restrict the options for interfering actions of individuals and social groups. What are the circumstances for potential interfering actions? Interfering actions Interfering actions are processes and have therefore a temporal course. They are purposeful and often done for identifiable reasons. How do the actors stimulate or handle the phenomenon? Consequences Interfering actions that are focused on the phenomenon lead to certain effects. Those are not necessarily predictable and intended. What do the interfering actions lead to? Intervening conditions Intervening conditions refer to the overall social, cultural, technological, and ecological developments that affect directly or/and indirectly the phenomenon. What are the general circumstances that influence the phenomenon? 2774 HOFMANN AND JAEGER-ERBEN identify relationships between them. To establish linkages between categories, we examined passages where categories appeared in conjunction with other categories. We used the coding paradigm according to Strauss and Corbin (1990), which consists of (1) phenomenon; (2) causes, (3) context, (4) interfering actions, (5) consequences, and (6) intervening conditions to generate cumulative knowledge about the relationships between the categories as well as between the categories and the researched phenomena (Table 2). Selective coding was then employed to create a conceptual model. We identified the main attributes, interactions, circumstances, and settings of the research object to offer a condensed view of the data. Finally, to formulate propositions about the organizational transition management of CBM innovation, we constantly assessed the coding categories in light of two types of processes: “stabilization of linear business models”and “transition tendencies towards CBMs.”Organizational transitions are occurrences that proceed over a certain period of time, in which something gradually emerge. Therefore, the procedural contrast of two differently evolving phenomena is of empirical value. Hence, the conceptual model reveals the central story about the phenomena that is conserved in the analyzed data. As with all conceptual models, the final model presented in this paper necessarily abstracts social life by creating a simplified picture of reality. However, a complete depiction is not intended at all. Rather, we sought to identify the main influencing parameters that appear to be important for the observed phenomena. 4|RESULTS Instead of presenting the results following the chronological order of the coding process, we describe them aggregated in the conceptual model “Frustrate linearity: Venturing transition towards circular business models”(Fig. 1). It depicts the main output of data analysis, displaying the main dimensions and categories related to the stabilization of linear BMs and, conversely, transition tendencies towards CBMs. Table 3 provides a glossary of the categories identified during coding and representative quotes from interview data. This conceptual model offers structured knowledge about why firms steadily reproduce linear BMs and how incumbents manifest themselves as a constant linear-oriented value creation system. The model also demonstrates organizational conditions and management strategies that frustrate the reproduction of linear BMs and, thus, enable initial moves towards CBM innovation. Analysis reveals mutual interdependencies between the categories identified during coding, which are discussed in the following subsections. Thus, they are not to be interpreted as clearly separated, but as continuously evolving and interrelated entities. 4.1 |Stabilization of linear BMs The data collected and analyzed in this study indicate that the initiation of radical BM innovation, as they are embodied in CBMs, can be metaphorically described as a black box. A black box is a simplified representation of a complex system processing specific stimuli to FIGURE 1 Frustrate linearity: Venturing transition towards circular business models HOFMANN AND JAEGER-ERBEN 2775 TABLE 3 Glossary of the conceptual model “Frustrate linearity: Venturing transition towards circular business models” Causes I Explanation Quotation from interviews Tentativeness Tentativeness is an organizational attitude that is characterized by a lack of resoluteness and a reactive behavior. It refers to a relatively stable mindset of the company to assess a wide range of environmental developments as potentially threatening. Tentativeness is the consequence of a loss of confidence to anticipate future pathways, triggered by uncertainty and perceived heteronomy. “They (companies) do not know how to approach it (CE in business). . . . Even then we have problems to find companies who would like to do this with us. The companies are a bit overstrained and overwhelmed.”—Interviewee D “And we usually did a second workshop and the idea (CBM) was followed up, deepened again and we took into account the feedback that came from the company. Most of the time there were many barriers that were identified. . . . ‘Yes, we try to change the thinking in the company and communicate the topic, but we are not doing a new project now.’So this was often the conclusion. We spread it within the company, but it does not have to be immediately.”—Interviewee E Intra-organizational separation Structuring the organization into strictly segmented corporate divisions. Rewards for individual or departmental success instead of incentives for joint success across divisions. Interdisciplinary teamwork is rarely practiced. Lack of a holistic and systemic perspective on the own company and its social environment. “In the classical pyramid I am actually trapped in my box as an employee. I have a job description, it says right in there: This is my job task, but please do not look left and right. This leads to silo thinking in companies. . . . The interesting aspect is that it can be observed that thinking sustainability in these boxes is incredibly difficult.”—Interviewee G Inter-organizational separation Dividing the units of a value chain network into specialized and highly differentiated firms. Focus on core competencies. The resulting highly fragmented value chains lead to cooperation with directly connected upstream (suppliers) and downstream (customers) actors. Lack of a holistic and systemic perspective on the value creation network. “I believe that economic activities have so far been more concerned with sealing themselves off. To protect intellectual properts, etc. And if you really want to implement it (CBM), then you have to go completely new ways.”—Interviewee F “The value chains are highly fragmented today.”—Interviewee B 2776 HOFMANN AND JAEGER-ERBEN TABLE 3 (Continued) Causes I Explanation Quotation from interviews Heteronomy Heteronomy means “other-directed”and therefore is in contrast to autonomy. Since Immanuel Kant (1974) it has been understood as a partial restriction of the free will. However, heteronomy does not leave opportunities for self-initiated schemes and projects. It is rather a voluntarily chosen dependency on external impacts and influences to hand over the responsibility to other social actors. “They fight with their backs to the wall.”— Interviewee B “They are often not as fast as changes in society are happening at the moment.”— Interviewee C "They prefer to stick to what they can do as long as the shoe does not squeeze hard enough.”—Interviewee D “There are three main pressure points why companies are looking at Circular Economy.”-Interviewee B Causes II Explanation Quotation from interviews Ecological performativity The own societal efficacy (negative as well as positive) is consciously perceived, reflected, and utilized to face the ecological persistent problems of the 21st century. Future-oriented and strategic thinking does not merely strive to strengthen competitive advantages and expand market shares but simultaneously to contribute effectively to the reduction of the systemic nonsustainability. Performativity does not imply adapting to stakeholder needs in a reactive sense, as proclaimed in the stakeholder approach, Freeman & McVea, 2001), it rather means changing proactively social conditions, rules, and practices in the light of sustainability transitions. The term performativity derives from the theory of speech acts, which was developed by the philosopher of language John L. Austin (1962). He uses performativity to refer to the action dimension of speaking, that is, to do what is mentioned in the act of speaking and not merely to designate it. “How can we as a firm not just operate by launching products on the market, but how can we actually become an enabler of a sustainable lifestyle? How can we optimize our solutions to ensure a good life?”— Interviewee D “Indeed, a holistic design of our solutions and caring for the society”— Interviewee F “My findings of the last years are: Everyone is tending to blame the others first. Always. And we are all in the waiting position. . . . Waiting for the perfect solution. Companies, they do it by the same logic. It's always the blame game. ...Iknow X, they say: ‘Hey, that's cool. Climate change is crucial for us, let us give it a try!’Let us give that a try. That's what is missing.”-Interviewee G Ambidexterity Ambidexterity includes the management of contradictions, polarities, and incompatibilities (O'Reilly & Tushman, 2004, 2008; Simsek, 2009). It is the prerequisite to compose conflicting business approaches—exploitation and exploration—that allow both to coexist simultaneously. While exploitation focuses on designing mainstream linear operations more efficient (such as using less material per product or reducing production process waste), exploration aims at searching for, playing with and discovering of new CBM opportunities. Ensuring an appropriate balance between exploitation and exploration is a primary condition for long-term organizational survival (March, 1991). Nevertheless, the strategic intention is to irritate, provoke, and finally abandon the current linear and unidirectional BM through circular value creation modes. “Circular Economy is one of our core topics”We want to do something with it, and now we are setting up a team that thinking about how we can put this into practice.”—Interview A “I think they have to initiate experiments, like in the case of digitalisation. After all, there are quite a few companies that are realizing how this topic will replace their current business model in ten years at the latest. And they realize that the people they have sitting here, they are not skilled and prepared for this develoment, and they are not agile enough. And they do not know how to take the company into this new age. And what are they doing? They are often spinning off digital units.”— Interviewee G “Based on my experience, in order to be successful they (CBM experiments) always have to be structural divided in some way. It does not necessarily have to be an independent company, which has a completely different ownership structure, but i think it is almost impossible to create a disruptive model within the existing business, because the experiment will always depend on the resource allocation from the core business.”—Interviewee B (Continues) HOFMANN AND JAEGER-ERBEN 2777 and practical knowledge about CBM innovation processes reinforces organizational rigidity and structural inertia, which, in turn, limits a firm’s strategic ability to navigate CBM innovation. To reduce such inflexibility and to be capable to operate despite the diffuse openness of evolution pathways, constructing and prioritizing options for action is necessary to absorb uncertainty (March & Simon, 1958). Not all firms have the ability to develop adequate solutions under high levels of fragility across multiple dimensions, lacking the organizational foundation to commence substantial transitions towards circularity. Some firms may be more capable due to their structural features and context or other organizational design factors such as dynamic capabilities (Teece, 2007), strategic agility, leadership styles, resource fluidity (Doz & Kosonen, 2010), strategic flexibility (Bock et al., 2012), and critical capabilities (Achtenhagen et al., 2013), or moderating factors like power constellations (Stieglitz & Foss, 2015). However, it is erroneous to assume that firms that have already successfully initiated radical BM innovations will be able to also do so in the future. Those that have continued to survive using a linear BM have proven that their “fitness”for linearity thus far. Nonetheless, it is a logical fallacy to infer future viability from past achievements, especially against the background of the ecological challenges to which firms must find answers. There is a broad consensus among the experts interviewed that the challenges of managing CBM adjustment or CBM adaptation, reconfigurations that emphasize production efficiency efforts and new product material compositions, are quite distinct from those associated with radical CBM innovation designed to test entirely new types of value creation modes in a setting with a long-term orientation (O’Connor, 2008; O’Reilly & Tushmann, 2008; Smith & Tushman, 2005). This study’s results indicate that launching CBM innovation requires new spaces for organizational realignment. In a sense, a prepared value creation space for experimentation, in which the future of the incumbent is tested, negotiated, and evaluated, is needed. Fundamental organizational restructuring from within is too risky, since farreaching changes destabilize the organization to such an extent that it may slide into an existential crisis. Based on the concept of organizational ambidexterity (Tushman and O’Reilly, 1997), there is a need for a polycentric structure that allows conflicting approaches –linear BMs (organize the existing linear mainstream operations more ecological efficient through CBM adjustment and CBM adaption measures) and CBMs (investigating the unknown) - to simultaneously coexist, with the goal of transferring the knowledge assets gained and capabilities learned through a newly established interdisciplinary team of circularity and, by extension, abandoning the linear value creation mode of the incumbent firm gradually. This type of polycentric structural design implies separate but interconnected value creation systems - an oxymoron - that serves contemporary markets while simultaneously attempting to create and enter new CE markets. The primary goal of this structural design is to stabilize the overarching firm in the process of circular self-dynamization in which resource flows are slowed and closed. The challenge of ambidexterity is to ensure suitable structural demarcation between the conflicting value creation systems without separating them completely (Birkinshaw & Gibson, 2004). Management must enable spaces for creative freedom and establish transmission channels that facilitate reciprocal learning processes in order to foster positive spill-over-effects from circularity. This may lead to a broader, circular-oriented organizational transition over time (Leifer et al., 2000). The strategic direction must legitimize, internally, a coupled autonomous and risk-tolerant space for CBM innovation (Rotenberg & Saloner, 2000). Clear coordination and transparent transition management seem to be vital to decrease the likelihood of disagreements, acts of sabotage, and infighting between the different value creation systems that can nip organizational transitions in the bud (O’Connor, 2008). The results of this study lend themselves to the following first proposition about organizational conditions that facilitate firms’transition towards CBMs: Proposition 1: CBM innovation requires an intra-organizational but autonomous experimental space that is segregated but nevertheless coupled with the incumbents’broader setting to test, negotiate, reflect, and evaluate new game rules for circularity. In contrast to individuals, organizations can perform simultaneous and spatially divided activities that contradict each other. Structural differentiation enables the incumbents to avoid deciding between logically antagonistic value creations systems (Simon, 2018). It allows firms to process linear and circular BMs simultaneously. The incumbent, as an aggregated organizational ensemble, is capable of operating, despite the conflicting core modes for creating and capture value that characterize its autonomous but coupled value creation systems. The advantage of this polycentric structure is that these conflicting value creation systems can each operate unambiguously and coherently, despite all the paradoxes and ambivalences the superordinate overall incumbent organization is exposed to. Accordingly, a structural conglomerate of old and new is emerging, one in which linear BMs may be declared obsolete and antiquated in the foreseeable future that will be characterized by increasingly restricted access to natural resources, more volatile resource markets, and more stringent laws for environmental protection. Therefore, the long-term mission of an experimental space for circularity must be to develop circular-oriented business solutions that cannibalize the existing and currently successful linear BM(s) (Christensen, 2016; O’Reilly & Tushman, 2008). Ultimately, in addition to the operational processing of antagonistically functioning value creation systems, another paradox of organizational transition management of CBMs is reflected in vital need for the incumbent to cannibalize itself, and the markets in which the firm operates, to ensure its own future. That is, firms must secure their futures through creative self-dissolution (Schumpeter, 1934). The ‘linear old’creates the ‘circular new’out of itself, and that is the paradox (zu Knyphausen-Aufseß, 1992). Proposition 2: Organizational transition management of circular business model innovations requires the management of paradoxes. The development of CBM innovations usually fails due to a lack of imagination of circular value creation modes, since the traditional knowledge assets of how to manage, structure, and organize 2784 HOFMANN AND JAEGER-ERBEN companies prevent the successful design and implementation of CBMs. To transform the hitherto unimaginable into a range of potential economically viable CBM reconfigurations, any newly established experimental spaces for circularity requires a management triad consisting of (1) the adoption of the zooming-in/zooming-out approach (Kanter, 2011); (2) an effective moderation of heterogeneity; and (3) decision-making procedures based on the normative reference frame of ecological performativity. Zooming-in/zooming-out The zooming-in/zooming-out approach attempts to prevent breaking systems into constituent parts, focusing instead on complex interrelations and interactions within and between systems. This approach structures BM(s) by reference to the social and ecological environment. Furthermore, zooming-in/zoomingout covers the operative and effective coordination of the value creation system in the here and now (Kanter, 2011). Zooming-out helps draw a holistic picture of the reality instead of separating it into different fragments. It promotes the ability to adopt an “outside-in” observer position that illuminates and contextualizes problem situations and potential solutions from as many different perspectives as possible. The practice of zooming-out is a prerequisite for thinking in complex circular and cross-sectoral value creation business networks as well as in new forms of long-term collaboration across different branches, and is, therefore, of great importance to elaborating and testing CBM variations. Zooming-in comprises flexible handling and further development of expertise, competencies, and knowledge assets in everyday business. It is concerned with creating an environment in which ideas, problems, and solutions are communicatively processed and explored with internal and external stakeholder groups. In other words, zooming-in refers to the palpable and intuitive testing of circular value creation activities and processes with new technologies in the light of limited organizational resource capacities. Here, it is crucial to understand that systematically sharpening and scanning the big-circular picture (i.e., zooming-out) and cautiously spotting and testing new circular value creation modes in concrete terms (i.e., zooming-in) are processes that should be rotated and interlinked at any given time. As such, the success of CBM innovation management depends on the situational oscillation between (1) keep tracking of the vision of proactively contributing to a transformation towards a circular society (Jaeger-Erben et al., 2019) through ecological performativity and (2) mobilizing resources to overcome the operational challenges of translating the principles of CBMs into day-to-day business practices. Effective moderation of heterogeneity To avoid unidimensional silo mentality and simultaneously encourage cross-functional and cross-disciplinary thinking among the members of an interdisciplinary CBM exploration team, the team –in addition to management - also needs to master the zooming-in/zooming-out approach. The team must constantly oscillate between members’own disciplines, the organizational value creation system, and the social and ecological environment. If the bundle of different individual mental models (i.e., images about the functioning and dysfunctioning of potential CBM variations) among the team members is to result in a fruitful choreography, then management is needed that effectively moderates the emerging cognitive diversity in order to trigger mutual learning processes. Successful consolidation of heterogeneity creates an organizational breeding ground for the joint modeling of and initiating of CBM prototype(s) that steadily refer back to the dynamic reciprocal positive and negative linkages with the social and ecological environment. The purpose of heterogeneity moderation is to unite multiperspectivity and enable collective testing, observing, questioning, and sharing of ideas about how novel networks of intraand inter-organizational value creation activities and processes can emerge and culminate in innovative CBMs. The normative reference frame of ecological performativity Within newly constituted experimental spaces of circularity, a multitude of communications, decisions and series of acts are performed parallel to one another. These must be meaningfully interlinked, so that despite a volatile, uncertain, complex, and ambiguous world (Bennis & Nanus, 1985), experiments with, testing of, and work towards CBM prototype(s) are promoted and pushed forward. The reference frame of ecological performativity functions as a collectively relevant schema of meaning and orientation, directing operative and strategic decision-making procedures on CBM-related themes such as value creation activities and the setting-up of collaborative value creation networks. The firm’s societal efficacy (negative as well as positive) is consciously perceived, reflected, and utilized by the members to face the persistent ecological problems of the 21st century. Futureoriented business thinking does not merely strive to strengthen competitive advantages and expand market shares but contribute effectively to the reduction of systemic non-sustainability as well. Ecological performativity does not imply reactive and opportunistic adaptations to stakeholder needs, as suggested by the stakeholder approach (Freeman & McVea, 2001). Rather, it means proactively changing, adopting self-paced social conditions, rules and practices oriented towards fostering a sustainable reciprocity between the production and consumption spheres. Proposition 3: The successful balanced nexus of (1) the adoption of the zooming-in/zooming-out approach; (2) an effective moderation of heterogeneity; and (3) decision-making procedures based on the normative reference frame of ecological performativity enables the emergence of viable long-term CBMs. In spite of growing attention being paid to CBM innovation, linkages between the organizational dimensions of transitions remain a decisive gap in the literature. This study attempts to fill this gap by identifying influencing mechanisms that foster or hinder the selection of CBM configurations, and formulates a set of three propositions on organizational conditions and management recipes that encourage the dynamic stabilization of CBMs. It tentatively contributes to the development of a new theory of CBM innovation but requires further scientific knowledge production for conceptual advancement. One area for further research is the investigation of how an autonomous and collaborative-oriented experimental space for circularity interacts with the superordinate firm most effectively and how interrelations should be structured to create compatible HOFMANN AND JAEGER-ERBEN 2785 and fruitful outcomes. Is it sufficient to organize a four-hour CBM forum every two weeks or do successful CBM transitions require a new department, spin-off, or joint venture? How can coordination between the superordinate firm and the interdisciplinary CBM exploration team be managed, who is responsible for such coordination, and which communication structures are the most effective at this task? Does the concept of organizational ambidexterity differ between radical linear BM innovation and CBM innovation? What collective competencies and capabilities does a company need in order to manage the paradox between circular exploration and linear optimization? Furthermore, future CBM research should address the challenges of appraising the ecological impacts of CBMs at the system level. As Manninen et al. (2018) argued, scientific work should concentrate on developing environmental performance metrics for firms implementing CBMs. Another objective of future transdisciplinary research should be the investigation of different facets of inter-organizational relationships amongst firm units that initiate CBMs and associated stakeholder groups in order to deepen the understanding of collaborative value creation networks within market-based environments. How can they be cultivated during the development of CBMs from seizing of opportunities to market launch and monitoring? Finally, it must be noted that this study uses the process of data analysis method of Ground Theory to formulate propositions, which, in a next research phase, need to be empirically tested, specified, and further developed. Against the backdrop of theoretical sampling of the Grounded Theory, further heterogeneous cases and case groups (e.g., corporate case studies from different industrial sectors) need to be investigated in order to create a robust and differentiated theoretical framework that explains organizational transition management of CBM innovation. ACKNOWLEDGEMENTS Florian Hofmann is supported and funded by Heinrich Böll Stiftung—The Green Political Foundation, Germany. Furthermore, the authors are members of the interdisciplinary junior researcher group “Obsolescence as a challenge for sustainability”which is funded from July 2016 to June 2021 by the German Federal Ministry of Education and Research in the frame of the Research for Sustainability program (Social-Ecological Research/SOEF). We would like to thank Dodo zu Knyphausen-Aufseß and two anonymous reviewers for their constructive comments on this research. 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