The Circular Economy: From a Linear to a Circular Economy
Performance
The Netherlands' performance in the Global Innovation Index varies: 8th position in 2010, 10th in 2011, rising to 4th in 2015, and up to 3rd in 2017. We have a high score on output, online e-parThe Netherlands' performance in the Global Innovation Index varies: 8th position in 2010, 10th in 2011, rising to 4th in 2015, and up to 3rd in 2017. We have a high score on output, online e-participation, and efficiency in innovation. We do not perform that well on innovation climate and investment climate, the drivers of innovation. More important, however, are scores for service and sustainability, whereby sustainability refers to 'energy' as well as 'cooperation with partners'.
| High Performance in 2014 Delivering knowledge-intensive services (number of people employed): 8th (Germany 14th) Cooperation between education and industry = 11th (Germany 9th) |
Low Performance in 2014 Cooperation in alliances: 42th (Germany 59th, Middle East in top 5, Luxemburg, Greece, and Ireland in top 15, Switzerland 17th) Use of sustainable energy, including 'ecological footprint' low |
The Netherlands is in 8th position worldwide when it comes to delivering knowledge-intensive services. This is particularly relevant for service provision, the main growth factor in our economy. We rank 11th on 'cooperation between industry and universities and higher education colleges'. This in particular is an element of open innovation. It is striking that we rank 42nd on cooperation in alliances, specifically if taking into account that Luxemburg, Greece, and Ireland are in the top 15. We also rank very low on 'use of sustainable energy'.
If cooperation is of such importance, then the GII report rightly states: 'The need to gather more knowledge of, and a better understanding of, the role that the human factor – along with technology and capital – plays in innovation is critical. Adequate education, training, and motivation in schools, universities, business, civil society, and the government itself is a challenge.' This challenge especially concerns countries with higher incomes such as The Netherlands.
From Technical Innovation Via Services To Multiple Value Innovation
Authors predominantly distinguish between product, process, and service innovation. In practice we mainly see an increasing importance in service innovation. This is not just because the customer tends to be forgotten in product innovation (see the Lego case study).
Blind Innovation By So Called 'Creatives'
In 2013 'The Gelderlander' reported that 'creatives' had brought Lego to the brink of the abyss through their urge for innovation. But, reading on, one notes that 'Lego has a solid foundation again.' Turnover of below 1 billion Euro in 2004 increased to 3.14 billion Euro in 2012. The loss of 752 million Euro in 2004 was turned round to a profit of 752 million Euro in 2012. Lego is now the world's second-largest and most successful toy manufacturer.
What happened in 2004? There were many innovations and product launches during that period. In itself that is not a problem because that befits the product leader in the sector. But it also included many 'alien' products/projects, such as Lego theme parks, clothing, video games, and jewelery, that had little connection with the foundations Lego is based on. The creative minds, always Lego's strength, were driven by the blind urge to innovate. Products and projects were often not particularly successful and failed to sell. Lego lost a major part of its market to the games sector, which did grow and saw its profits increase.
Why? Lego stopped communicating with its customers. The image of the customer was replaced by the images of the creative product and project developers.
What did Lego do between 2004 and the present to break this downward spiral? The company started to communicate with children and immersed itself in their experiences. Children and their parents started to actively contribute ideas about products. For example, the Friends product was assessed by 3,800 girls and their mothers before its hugely successful launch in 2012.
The basic product (the building blocks) was a product that helped children all over the world to play together. Connections to existing trends like Star Wars were made around this and new worlds were developed. The company distanced itself from theme parks, products, and experiences that were not connected to Lego's basic product, building blocks.
In retrospect, we see that Lego stopped researching. The company no longer knew what children (and their parents) wanted. Lego did not communicate or discuss things with them. That is harmful, because product experience innovation must be based on what customers, in this case children, want.
Communicating with your stakeholders and researching their needs is the basis for innovation.
The majority of our economic sectors and the innovation in them concerns services. It therefore makes sense that about two-thirds of our economic growth comes from new services.
Communities of well-informed consumers are gaining influence; they are no longer a passive audience. 'Innovation' becomes 'innovation of experimental environments' where consumers (communities) and (networks of) companies cooperate to create personal experiences for individual customers. Open innovation, a definition introduced by Henry W. Chesbrough, matches this. Consumers' and companies' roles are becoming increasingly similar. Innovation is thus enabling customers, together with (networks of) companies, to create a personal and unique experience.
Service innovation may flourish but innovation research is still mainly based on a sector where physical goods and industry are dominant. As a consequence, innovation is too often limited to technological innovation. Because of this, various researchers into innovation, like Den Hertog, argue in favor of paying more attention to service innovation. Service innovation is often multidimensional and appears in many ways: the introduction of a new service concept, for example a new shop formula, new ways of interacting with buyers, combinations of elements that jointly bring a new service to the market, the introduction of new business models.
Service Innovation
Den Hertog defines service innovation as 'new service experiences' or 'new service solutions'. Hartley deepens the definition of 'services'. He distinguishes between:
- Position innovation, aimed at finding new contexts and clients;
- Strategic innovation, aimed at finding new goals and strategies;
- Governance innovation, aimed at finding new ways to involve civilians and public organizations in innovation;
- Rhetorical innovation, aimed at finding new concepts and ways of communication.
This concerns social challenges, where often the definition of 'social innovation' is used: 'The development of new management capabilities (dynamic management), flexible organization principles (flexible organizing) and realizing high value oriented form/ shape ('work smarter') to increase competitiveness and productivity.' Social innovation is also often defined as a means by which one stimulates or creates stronger entrepreneurship. Cooperation (smarter) and co-creation or innovation is then used as a driver.
Technology, developed and used by services, is (too) often not sustainable. The increasing need of consumers and businesses for technology which is manufactured in a sustainable way demands further developments. Lecturers at the Avans of Center Expertise for Sustainable Business call for a paradigm shift in innovation such as service concepts, realized in a sustainable way, as a driver for necessary, sustainable, technical innovations. Product innovation will be achieved increasingly as a result of the requirements of service innovation (concept) - not ' driven by technology' but 'driven by needs'.
Figure 5: Value creation
Expertise for Sustainable Business call for a paradigm shift in innovation such as service concepts, realized in a sustainable way, as a driver for necessary, sustainable, technical innovations. Product innovation will be achieved increasingly as a result of the requirements of service innovation (concept) - not ' driven by technology' but 'driven by needs'.
Value thinking is an emerging phenomenon in the innovation field. Value creation concerns multiple value outcomes. Various agents play a role in this. They work together strategically (not limited to the customer–supplier relationship) and are not focused on a transaction. The foundation is: exchange/swap against a number of currencies (money and other things) and appreciation based on each individual's self-interest.
Values That Matter
- Transcendental (from spiritual to intellectual);
- Social (from relationships between people to collegiality)
- Personal (from development to consciousness)
- Communal (from society in general via equality to sustainability)
In other words, creating multiple values. Arjo Klamer broadly describes values (see box below). He identifies a large number of values that vary from spiritual and aesthetic to communal. It is a clear extension of the focus on financial values. Luijendijk describes the discussion about values in the banking community in London, in particular the fact that one viewed moral values as moral, immoral, or amoral. The latter value was the starting point for bankers: comply with the rules but not out of a moral conscience. This was judged to be 'out of line' by society as a whole.
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Figure 6: New perspectives on values
This outline of value thinking is a major change from thinking and operating in companies and 'communities'. Jonker gave Klamer's values more substance and compared them to current outdated values. He describes this transition (see figure 6) and gives a new perspective of which the main terminology is value, circularity, networking, and reciprocity.