Transformation towards circular business models: A SME-focused dynamic framework approach

Abstract

Developing business models with a holistic perspective on product life cycles that aspire to close the material loop is of paramount importance in today's global context. They offer alongside other aspects a strategic response to challenges posed by resource scarcity, environmental degradation and waste generation. This research introduces an innovative concept intended for small and medium-sized enterprises for the development of circular products, services and business models, underscoring the significance of systematic process models. The iterative multi-phase model encompasses, among other phases, a current state analysis, a business model conceptualization, a validation and an implementation phase. This model aims to effectively transition towards circular economy, thereby ensuring sustainable resource utilization and enhanced value creation. The desirable outcome may cover the emergence of pioneering business models, the establishment of value networks, or combined approaches. Furthermore, the model supports the development of novel products, services or delivers updates to existing ones

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This paper was presented at ISPIM Connects Salzburg – The Sound of Innovation, on 11-13
December 2023. Event Proceedings: LUT Scientific and Expertise Publications: ISBN 978-952-
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1
Transformation towards circular business models: A
SME-focused dynamic framework approach
Jonas Mohnke*
WI Institute at htw saar – Saarland University of Applied Sciences,
Waldhausweg 14, 66123 Saarbrücken, Germany.
E-mail: jonas.mohnke@htwsaar.de
Martin Michel
WI Institute at htw saar – Saarland University of Applied Sciences,
Waldhausweg 14, 66123 Saarbrücken, Germany.
E-mail: martin.michel@htwsaar.de
Tobias Mahl
WI Institute at htw saar – Saarland University of Applied Sciences,
Waldhausweg 14, 66123 Saarbrücken, Germany.
E-mail: tobias.mahl@htwsaar.de
Christian Köhler
WI Institute at htw saar – Saarland University of Applied Sciences,
Waldhausweg 14, 66123 Saarbrücken, Germany.
E-mail: christian.koehler@htwsaar.de
* Corresponding author
Abstract: Developing business models with a holistic perspective on product life cycles
that aspire to close the material loop is of paramount importance in today's global context.
They offer alongside other aspects a strategic response to challenges posed by resource
scarcity, environmental degradation and waste generation. This research introduces an
innovative concept intended for small and medium-sized enterprises for the development
of circular products, services and business models, underscoring the significance of
systematic process models. The iterative multi-phase model encompasses, among other
phases, a current state analysis, a business model conceptualization, a validation and an
implementation phase. This model aims to effectively transition towards circular economy,
thereby ensuring sustainable resource utilization and enhanced value creation. The
desirable outcome may cover the emergence of pioneering business models, the
establishment of value networks, or combined approaches. Furthermore, the model
supports the development of novel products, services or delivers updates to existing ones.
Keywords: Business model, circular economy, framework, sustainability, Product-Service
Systems, PSS, Business model design, Business model innovation, resource efficiency

This paper was presented at ISPIM Connects Salzburg – The Sound of Innovation, on 11-13
December 2023. Event Proceedings: LUT Scientific and Expertise Publications: ISBN 978-952-
65069-4-4
2
1 Introduction
In today’s dynamic economic landscape, marked by continuous evolution and challenges,
companies of all sizes, with a particular focus on small and medium-sized enterprises
(SME), encounter significant hurdles. Notably, the management of raw materials and
resources is progressively posing difficulties for SMEs due to escalating energy costs,
supply shortages, disruptions in supply chains and various other factors (Grzybowska et
al., 2022). The ever-increasing demand for materials is predicted to exceed the natural
resource capacity of two Earths by 2030 (Esposito et al., 2018), presenting a critical threat
to the ecosystem. This urgency is further compounded by the recent directives from the
European Commission aimed at achieving climate neutrality within the framework of the
European Green Deal. As a result, companies are compelled to adopt transformative
measures to align with impending legal targets.
The adoption of a circular economy (CE) approach, specifically through the utilization
of Product Service Systems (PSS) in conjunction with complementary business models,
represents a viable solution to bridge the gap in the value chain. According to Kühl et al.
(2018) PSS business models offer a suitable strategy for the implementation of sustainable
business practices. Despite the existing approaches in this domain, there is a notable
absence of integrated methods that enable companies to establish such sustainable PSS
business models with a focus on circular economy.
For this reason, this contribution seeks to address this shortfall and simultaneously
endeavors to facilitate the implementation of circular business models and PSS.
Consequently, it is imperative to devise a methodological framework that supports
businesses, particularly SMEs, in creating such business models. Based on this assumption,
this contribution addresses the question of: “How should a phase model for the transition
of circular business models and value networks be designed to comprehensively
incorporate effective sustainability aspects holistically from concept design to
implementation?”
2 Theoretical Foundations
Product Service System
The Product Service System approach encompasses various components, including
products, services, supportive networks, and the related infrastructure. In the context of
use- and result-oriented PSS, the product typically remains under the ownership of the
manufacturer, thus altering the conventional ownership dynamic from the customer to the
manufacturer. The manufacturer assumes responsibility for the product's maintenance,
repair, and recycling, with the aim of extending the product's lifecycle while endeavoring
to preserve its original value and functionality (Baines et al., 2007).
Moreover, the manufacturer's retention of ownership of its product also entails a
heightened commitment to ensuring their continued availability (Mont, 2008). This
commitment serves as a catalyst for ongoing product improvement and an enhanced
understanding of failure modes. This encouragement could lead, among other promising
aspects, to more preventable and more resolve-efficient failure modes. Additionally, the
manufacturer can utilize more reliable resources since these assets can be recovered at the
end of life. (Annarelli et al., 2020)

Circular design strategies
To facilitate the development or transition toward a robust circular business model, it is
imperative that the product is precisely engineered to align with the principles and
requirements of the circular economy. The main reason for this is the strong synergy
between business models and products which influence each other in both ways. (Pieroni
et al., 2018) In this regard it is indispensable to incorporate circular design strategies when
utilizing the framework. Regarding circularity strategies, in addition to the well-known
retention options (RO's) proposed by Reike et al. (2017), three primary approaches can be
discerned. These identified approaches are categorized within three distinct stages of the
product life cycle: "Beginning of Life" (BoL), "Middle of Life" (MoL), and "End of Life"
(EoL), see Figure 1. The constant material consumption can thus, with the help of these
strategies, be reduced and depending on the case be even fully compensated by
recirculation.
Figure 1 Circular strategies corresponding to different life cycle stages, based on
(Moreno et al., 2016)
The first identified strategy is subordinate to approaches that facilitate the initiation of the
circular loop, primarily applied during the BoL-stage. Examples of this approach include
strategies such as Re-mine and design for reversible assembly. (Mestre & Cooper, 2017)
During the middle of life, the primary objective is to significantly prolong the
product's life cycle before it reaches the end of its use phase. In alignment with this
objective, the second identified strategy focuses on slowing the loop. Exemplary methods
within this approach are the design for durability design philosophy as well as the retention
options of reuse, resell, and repurpose. (Moreno et al., 2016)
When it comes to the end of life, the predominant approach centers on the closure of
the circular loop. This strategy is designed to prepare the product for a renewed life cycle,
enabling a seamless reintegration into either the original or a different product life cycle.
Based on this premise, it works to prevent premature disposal, thus maintaining the value
of the materials up to a certain point. Notable approaches within this domain are the design

This paper was presented at ISPIM Connects Salzburg – The Sound of Innovation, on 11-13
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for recyclability and minimal waste, both of which contribute to achieving circularity goals.
(Moreno et al., 2016)
Circular business models
Business models that incorporate these circularity strategies and involve a business
approach to enhance the circularity of its products, services and value networks are
classified as circular business models. (Das et al., 2023) To establish a circular business
model, companies must incorporate distinct management practices tailored to each facet of
the business model, specifically concerning value creation, value transfer, and value
capture, as proposed by Centobelli et al. (2020). To ensure the success of a circular business
model, Ranta et al. (2018) identified five pivotal factors derived from the literature. These
include cost efficiency within circular businesses, the introduction of take-back services to
acquire specific waste materials as resources, incentivized by reducing overall waste
management costs for customers. Additionally, circular business models necessitate
meticulous management of multiple elements within the value chain. The implementation
of a take-back system to generate economic value through CE can be approached in various
ways, with recycling being a more straightforward option compared to the option of
reduction or reusing due to its relatively lower influence on the business model.
Business models that holistically incorporate the mentioned circularity strategies and
adopt their business model effectively have not been widely adopted as potential solutions
within numerous companies. This lack of adoption can be attributed, in part, to the
uncertainties associated with these novel and sophisticated business models. Furthermore,
the development and integration of such business models present methodological
challenges, particularly for small and medium-sized enterprises, given their market
position and limited resources (Massis et al., 2018).
Therefore, the need for a holistic framework, which aims at incorporating circular
business models, while being both simple and easily comprehensible is evident for SMEs.
To address this need, a flexible overall strategy appears to be the most suitable approach.
3 Motivation – Research Background
Kirchherr et al. (2017) have identified the economic prosperity as the primary goal of the
circular economy, with the environmental impact following closely behind. The social
sustainability aspect is given relatively little emphasis. Moreover, the implementation of
the circular economy requires a number of conditions that will constantly improve the level
of maturity as the level of economic development increases. Firms embracing circularity
principles have to innovate not only products and processes, but primarily models
(Zucchella & Urban, 2020). Furthermore, the effective implementation of circular
economy concepts requires not only the right incentives but also the necessary
infrastructure. (Helm, 2016) In order to develop and confirm simultaneously the need of a
holistic framework for SMEs, that fulfills the aforementioned requirements while also
complementing the research of Kirchherr et al. (2017), an extensive survey has been carried
out in the state of Saarland. This survey targeted over 900 companies, predominantly
SMEs, and encompassed a total of 26 questions covering various topics. A response rate
of 15,6% was achieved, yielding valuable insights. (Michel et al., 2023)
The conducted survey as well as the research by Lins et al. (2021a), highlight
substantial disparities between SMEs and large corporations. Notably, the disparity in the
availability of temporal, human, and financial resources emerges as a prominent distinction

(Rizos et al., 2016). Furthermore, these influencing factors exhibit interdependencies,
thereby culminating in a heightened complexity in the implementation process.
Additionally, it was observed during a series of own workshops, in the course of the
development process of the transition framework, that numerous SMEs face challenges in
adhering to all legal regulations, as they often lack the necessary time and expertise in this
domain. Moreover, SMEs deal with an overwhelming focus on day-to-day operational
demands, which leaves insufficient room for the adoption of novel and complex strategic
approaches. This challenge is intensified by the fact that many job positions within SMEs
are often occupied in a rudimentary manner, compounding the resource constraints. The
lack of academically inclined personnel further underscores the impracticality of deploying
sophisticated methodologies within these enterprises. Frequently, information acquisition
or the search for support occurs mainly in response to impending official penalties. Given
the potential for the European Union to further tighten monetary fines in various domains
in the future, it is plausible to anticipate a continued escalation in the demand for
information and guidance. This trend will likely heighten the challenges faced by small
and medium-sized enterprises concerning documentation, compliance with legal
requirements, and research activities.
The findings from this survey revealed that enterprises were mainly motivated to
engage with the circular economy due to the following aspects: their environmental
consciousness, cost-efficiency considerations, business activities, industry mandates, and
concerns about future supply uncertainties. (Michel et al., 2023)
The survey results underscore the pressing need for assistance, particularly among
SMEs, in their transition towards a circular economy. These companies face various
barriers, many of which were identified through the survey. The lack of time, insufficient
knowledge, limited workforce, scarcity of innovative approaches, resistance to the circular
economy concept, compliance with legal requirements, and overreliance on suppliers,
represent some of these barriers. Furthermore, the risk aversion of decision-makers plays
a pivotal role in implementing CE practices, since the observations of Rizos et al. (2016)
show that high risk aversion can hinder the adoption of CE initiatives fundamentally.
In response to these barriers, from which desirable measures can already be
derived, companies could state concrete support measures in the survey. These companies
expressed their need for specific support measures, highlighting the importance of
guidance on the practical implementation of circular economy, consultation through
workshops and seminars, and access to best practice examples for establishing circular
business models. (Michel et al., 2023)
On top of the survey, several phase models as well as the ISO 59010 (2023) have
been sighted. To comprehend the disparities and critical aspects, the literature is compared
based on specific criteria. These criteria are structured around the phases and aspects
included in the frameworks. Consequently, the preparation, idea generation, design,
evaluation, implementation, and sustainment stages form the foundation for this
comparison. Regarding the assessed aspects, the comparison is primarily focused on
sustainability, circularity, and the orientation towards SMEs. The ISO 59010 (2023)
describes a generic framework for the transition to circular business models, making it a
highly suitable addition for the comparison. In the study by Lins et al. (2021a), various pre-
identified and promising phase models that adopt a similar approach were documented. It
is notable that most of the identified models do not explicitly address the topic of
sustainability, with the exception of Bucherer (2010), signifying a gap in these phase
models, see table 1. None of the reviewed literature, except the ISO 59010 considers the
concept of the circular economy, which therefore also represents a research gap.
Furthermore, except for Lins et al. (2021a), none of the reviewed phase models

This paper was presented at ISPIM Connects Salzburg – The Sound of Innovation, on 11-13
December 2023. Event Proceedings: LUT Scientific and Expertise Publications: ISBN 978-952-
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encompassed the interplay among SMEs. To underscore the contribution delineated in this
paper, the transition framework for circular business models (TFCBM) was also
incorporated into the comparison and subjected to analysis within the same parameters. It
is evident that the framework presented in this contribution encompasses all the evaluated
aspects and stages, see table 1, thereby appearing as a promising approach. However, it is
noteworthy that no sensitivity analysis has been conducted in the comparison, and there is
a lack of information regarding the extent to which the compared phase models address
individual aspects and stages.
Table 1 Comparison of various frameworks based on the research by (Lins et al., 2021)
Implemented
stages & aspects
Preparation
Idea generation
Design
Evaluation & selection
Implementation
Sustainment
Sustainability
Circular
Economy
Focus on SME
Bucherer (2010)
x
x
x
x
x
x
x
-
-
Wirtz (2010)
x
x
x
x
x
x
-
-
-
Osterwalder & Pigneur
(2011)
x x x x x x - - -
Peitz (2015) x x x x x - - - -
Frankenberger (2017) x x x - x - - - -
Echterhoff (2018)
-
-
x
x
x
-
-
-
-
Wirtz & Daiser (2018)
x
x
x
x
x
x
-
-
-
Lins et al. (20212)
x
x
x
x
x
x
-
-
x
DIN EN ISO 59010
(2023)
x - x x x x - x -
TFCBM (2023)
x
x
x
x
x
x
x
x
x
Consequently, a dynamic and flexible approach appears to be the most effective means of
successfully integrating the circular economy into SME operations. In summary,
strengthening the role of SMEs in the circular economy requires providing them with
access to financial resources, training, and expert guidance. To further support this
transition and to overcome the "we've always done it this way" mentality, government
bodies and other stakeholders should develop programs, frameworks, and applications that
facilitate sustainable and circular practices. Building networks and partnerships between
SMEs and other stakeholders in the circular economy can also create synergies, enabling
more efficient resource utilization and enhancing competitiveness.

4 TFCBM – The transition framework for circular business models
Figure 2 Overview of the TFCBM
Overall framework procedure
The TFCBM serves as a methodology for guiding enterprises in the development of
circular solutions. Its development is rooted in the Design Research Methodology (DRM)
as proposed by Blessing & Chakrabarti (2009). Consequently, the presented framework is
characterized by both descriptive and prescriptive studies that emanate from a research
clarification, including problem and potential analyses. While the framework orientates
itself from the ISO 59010 (2023), which outlines a transition model for the circular
economy, there are notable distinctions. The ISO model is primarily perceived as a generic
framework, characterized by a lack of specific measures and methods. In contrast, the
TFCBM is significantly more pragmatic, offering concrete instructions and actionable
methods. Beyond the mere framework, the included toolbox plays a core element of this
contribution. Its inclusion of diverse methodologies, design strategies, and other circular
and sustainable input imparts a heightened level of versatility to the approach, thus
distinguishing it from rudimentary procedural models.
A similar objective is presented in the work of Lins et al. (2021b), as their
developed phase model focuses on the systematic development of business models with
PSS. While initially bearing similarities, the two contributions diverge in their core aspects,
particularly concerning sustainability, the circular economy, and their primary focus. The
phase model proposed by Lins et al. (2021b) lacks a dedicated focus on sustainability and
the circular economy, therefore necessitating adjustments to align with these requirements.
Moreover, the phase model developed by Lins et al. (2021b) exhibits a deficiency in
strategic design, rendering it primarily suited for short-term measures.
Compared to the phase model introduced by Lins et al. (2021b), the TFCBM is
intentionally designed to be flexible and user-friendly, allowing decision-making with
limited data. Importantly, it maintains a strong focus on circularity and sustainability. This

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flexibility is a crucial aspect, especially for SMEs, given the substantial variations among
them. This specific organization of the SMEs could result in unsuitable solutions without
an adaptable framework. A high degree of flexibility enables the framework to better
conform to the unique structures and needs of individual companies. It's important to
emphasize that a delicate trade-off between flexibility and predefined action steps must be
carefully considered within the numerous methodologies. In this context, the framework
aims to guide the user towards adopting circular practices while providing essential
information on how to proceed further without imposing strict action statements over the
next steps. Given the considerable regional disparities among SMEs, this contribution
primarily emphasizes European SMEs, and the collection of instances is primarily oriented
toward this region.
The tool is structured into seven primary steps, with the middle phases (three to
five) displaying a strong interconnection and therefore being subordinated within a single
large hexagon, see figure 2. The large hexagonal component, denominated as the “circular
innovation loop”, represents the pinnacle of innovation within the framework. In light of
this, the significance of this loop, along with its individual constituent steps, is underscored.
Consequently, the execution of these steps demands particular attention, with an emphasis
on optimizing the resource allocation to this juncture. The potential for diverse outcomes
is illustrated through the multiple layers of the circular innovation loop. Moreover,
interplay between these layers is feasible, considering specific use cases. In this regard, the
framework is for example capable of transitioning a mere business model into a PSS or
vice versa, therefore interacting between two disparate layers of the loop, see figure 3. The
inherent dynamism within the beginning of this loop predominantly adheres to a clockwise
trajectory, entailing at least one creativity and pre-selection iteration prior to the
development of ideas. However, it may also proceed counterclockwise in cases where the
generated ideas seamlessly align with the predefined requirements, as depicted in figure 3.
In such scenarios, an early assessment following the creative stage can be circumvented,
allowing for the immediate progression of the generated concepts. This holds true when all
generated ideas exhibit significant promise. Typically, two validation phases are
conducted, characterized by differing intensities: one pre-selection phase with a lower time
requirement and one final validation phase with a higher complexity and time
consumption. Following the development of the ideas, the final validation becomes an
indispensable step. If the ideas successfully pass this stage, the circular innovation loop
concludes, and the subsequent stage commences. Conversely, in cases where the ideas
necessitate revision or, in some instances, complete rejection, it becomes evident that this
phase can be highly time-consuming and necessitates precise execution.

Figure 3 Overview of the circular innovation loop
Each of the other large hexagons represents a key process step within the framework. The
framework is ideally progressing unidirectionally from top to bottom. A bidirectional
process between the contact sites occurs when a process step cannot be successfully
completed and requires adjustments based on insights from a prior phase. In specific
scenarios, regression to earlier stages, even those in the distant past, becomes a viable
option. Such a recourse may arise due to the occurrence of a critical error within a singular
phase. In particular the framework anticipates a bidirectional and even multi-iterational
progression within the circular innovation loop, mainly because these phases exhibit a high
degree of interdependence. The more iterations are being carried out in the loop, the more
mature the outcome of the framework is anticipated.
Meanwhile, the small hexagons symbolize the methods and techniques employed
in the respective phase. By this meaning, each phase contains a collection of methods,
designed to assist the user in executing the framework and the corresponding phase
effectively. These collections of methods prevent a unified one-size-fits all approach and
emphasize a high level of flexibility. Each method is specifically tailored for application
by SMEs, ensuring a good comprehensibility. The methods employed within this context
are also not exclusively crafted by a singular research group; they are drawn from the
existing body of literature and various contributions in the domains of circular economy
and sustainability. However, some of the drawn methods are slightly adjusted in order to
fulfill the identified SME requirements. It should be noted that some of the methods are
experimental and have not yet been fully validated within the framework context. A portion
of these methods will be presented in forthcoming contributions. Given the evolving nature
of this field, a dynamic enhancement of these diverse methods is desirable, which is why
these collections are regularly updated.
Each process step comes with a predefined set of inputs, which are then
supplemented with variable inputs derived from the preceding steps. These inputs serve
the purpose of guiding the output towards the development of a circular solution. It's worth

This paper was presented at ISPIM Connects Salzburg – The Sound of Innovation, on 11-13
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noting that the resulting output from the framework can vary significantly and is not limited
to the creation or transitioning of business models alone. As a result, the outcome may
include various possibilities, such as a business model, a product design, a service
structure, a value network, or a combined approach, like a product-service system, see
figure 2. However, it is imperative to emphasize that the presented framework is not
designed to function as a replacement for a comprehensive product development process.
Its primary purpose is to establish a robust foundation to facilitate and optimize the
initiation of such a process, through business models, product ideas or similar outcomes.
Company and environment analysis
In the initial phase, if existent, an examination of the current business model of the target
enterprise is undertaken and documented using an appropriate canvas. These canvases are
integral components of the method compendium. This compendium encompasses various
canvases, including the well-known Business Model Canvas (BMC) introduced by
Osterwalder & Pigneur (2005), the Triple-Layered Business Model Canvas (TLBMC)
devised by Joyce and Paguin (2016), the Magical Triangle by Gassmann et al. (2013), and
the Product-Service-System-Business-Model-Eye (PSSBME) developed by Mahl et al.
(2022). The selection of the most suitable capture method depends on the specific
enterprise under investigation and its objectives. For instance, the TLBMC is well-suited
for enterprises pursuing ambitious and comprehensive sustainability principles. The
PSSBME, on the other hand, is primarily designed to capture business models with a hybrid
value creation approach, whereas the traditional BMC is applicable to a wide array of
business model types. In addition with the employment of these canvases, conducting an
extensive industry research is a highly recommended undertaking in this stage of the
framework. Only if both assessments are carried out, a valid enterprise and environment
dissection can be performed.
Target setting
Following the capture of the business model, a prospective evaluation ensues, where
predetermined trends and competencies are assessed in conjunction with the existing
business model, aiming to formulate a plan for future potential. To ensure a comprehensive
and well-informed assessment, the framework's aims are set up. These targets can
encompass overarching goals such as expansion or optimization, while subsidiary
objectives may include targets such as reducing carbon emissions or enhancing material
recovery. In addition general framework conditions, such as the scope of investigation and
the cut-off criteria, is also determined. Furthermore, the prior extensive research is an
indispensable tool for this stage, as the primary objective is to identify the areas within the
current business model with the highest potential for realizing the established goals. This
identification may lead to the recognition of certain domains within the business model as
areas in need of improvement, serving as a direct input for the upcoming phase, and
therefore warranting careful selection. Particularly for SMEs, the identification of worst-
case scenarios holds significance. Therefore, evaluating all identified areas of weakness
could prove an overly extensive project for SMEs. To identify high-risk areas, a SWOT
analysis, as described by Stewart (1971), can be executed as a potential support measure.
Additionally, a variety of other methods like the well-known turtle diagram are available
within the toolbox. If the requisite resources for a more comprehensive analysis are
available, more elaborate techniques, such as the Failure Mode and Effect Analysis

(FMEA), can also be employed at this stage of the framework. When all the targets are set
up and the weakness areas are identified the next framework stage can be initiated.
Creativity stage
The creativity stage is dedicated to the generation of valuable ideas from the predetermined
potential areas. In this context, the primary goal is to devise novel solutions for the business
model that align with the established objectives. To facilitate this, creativity methods must
incorporate an input that guides the outcomes of this stage. These creativity techniques,
which can generally be categorized as intuitive, discursive, or intuitive-discursive, as
outlined by Shah et al. (2000), should predominantly emphasize strategies with a
substantial discursive component. Methods with a strong discursive share provide users
with clear guidance while still being able to maintain an intuitive approach to problem-
solving and thereby avoiding overly specific constraints. Therefore, purely intuitive
creativity techniques are only suitable to a limited extent and require an input adaptation.
An example of an intuitive-discursive approach is the Six Thinking Hats method developed
by De Bono (1985). Although not originally designed for circular ideas, this method
requires users to assume six distinct roles to develop and deliberate ideas and the problem
itself. In the context of this framework, some adjustments may be necessary to align this
method with the demanded circular principles. This modification applies to all methods
employed within the framework that lack inherent circular or sustainable compatibility. To
harness the advantages of a variety of established creativity techniques and prevent the
redundancy of inventing numerous new methods, these techniques are augmented with a
circular input. The nature of this input may vary, ranging from concise instructions to
comprehensive guidelines, depending upon the specific creativity technique used. The
primary aim of this phase is to generate promising ideas, which subsequently undergo a
pre-selection, further development, and validation in following stages. Depending on the
case, the ideas can be initially assessed and validated, or they may proceed directly to the
development phase, as mentioned in the circular innovation loop.
Development of the ideas
The ideas generated in the preceding phase, which have undergone preliminary evaluation,
serve as a direct input for the development stage. To align with the intended progression
of the circular innovation loop, these ideas will undergo further refinement. In this process,
a desirable business model is crafted. It's worth noting that this need not entail a complete
overhaul of the original business model but may involve modifying specific elements such
as the value proposition, revenue stream, or more subordinated aspects like product-
specific characteristics. Accordingly, the enterprise endeavors to integrate the generated
approaches into business models during the development phase. When setting up these
business models, the identified weaknesses are rectified and replaced by the novel solution.
Drawing insights from best-practice examples can aid in addressing the identified
weaknesses within the current business model and generate new service offerings. Hence,
the toolbox provides numerous business models as examples, thereby offering valuable
insights for SMEs.
Validation
To efficiently advance the ideas, it is imperative to conduct a selection process to identify
the most promising candidates before proceeding with elaborate development. This
preselection phase aims to streamline the idea pool to a manageable quantity. In this

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context, the initial evaluation iteration employs straightforward methods rather than
complex methods to ensure an efficient process and minimize unnecessary time
consumption. This preselection is especially for SMEs a crucial step to reduce unnecessary
time consumption. Methods with this characteristic include the unweighted decision
matrix, expert choice, or various checklists on the base of Meinders (1997), modified for
this selection. A more detailed evaluation of the refined ideas occurs subsequent to the
development phase. Therefore, more time-intensive techniques are employed, such as the
Analytical Hierarchy Process (AHP) as described by Riedl (2006), a weighted decision
matrix, and even in some instances the Life Cycle Sustainability Assessment (LCSA).
Given the necessity to validate the feasibility of the ideas, the toolbox also includes
methods for this purpose. Among these tools, the feasibility dashboard, specifically tailored
for circular PSS by Mahl et al. (2023), stands as a notable example. Given the resource-
intensive nature of these methods, they are reserved for the final validation stage.
Consequently, a bidirectional approach within the innovation loop proves to be
indispensable.
Implementation
When the selected and validated ideas are ready for implementation, it becomes crucial to
tailor this phase to the unique requirements of each enterprise, ensuring maximum
flexibility. To assist businesses, particularly SMEs, in this complex endeavor, a dedicated
toolbox for this phase is made available, comprising a set of guidelines and best practice
examples. While consulting opportunities prove to be highly effective for SMEs at this
stage of the framework, they fall short of achieving the ultimate objective of enabling
independent utilization by SMEs. For this reason resorting to this approach should be
avoided as much as possible. Besides this support the implementation of an open-source
platform could be a potential future aid in this context. By setting up such a platform, SMEs
could support each other without the utilization of consulting measures. Since this
approach is very vague and pure theoretical, the effectiveness has yet to be proven and
further examined.
Maintain
Given the necessity for regular updates to the generated outcome, the final phase is
dedicated to the continuous maintenance of the outcome to ensure its ongoing
functionality. In instances where the existing functionality no longer aligns with the
specified requirements, a return to the initial phase of the framework is intended, allowing
a reevaluation of the current status. Subsequent to this assessment, a determination is made
regarding whether substantial alterations to the outcome are required or if minor
adjustments suffice. This iterative process not only yields more satisfactory results but also
serves to validate the efficacy of previously implemented and applied solutions. In the case
of SMEs, regular examinations should be carried out. In this specific phase, no
supplementary methods are provided, as the assessment methods employed from either the
'potential assessment' or 'validation' adequately address the requirements.

5 Conclusion
This paper underscores the significance of a framework designed for the transition of
circular business models. This work strives to offer enterprises, with a particular focus on
SMEs, an avenue for moving away from the linear economy and harnessing the potential
of the CE. The presented multiphase model, which comprises stages such as a current state
analysis, idea generation, development, validation and implementation, emphasizes that
the transition towards circular business models necessitates a considerable temporal
investment, deep strategic planning and is fraught with a multitude of inherent challenges
and barriers. To address these challenges associated with navigating the framework, a
toolbox of stage-specific methods designed to offer optimal guidance throughout the
process was presented and partially illustrated. These stage-specific methods provided for
this purpose encompass a spectrum from well-established approaches to novel techniques
that have been tailored specifically for SMEs. Additionally, in order to validate the
functionality of the framework, it has been tested in various workshops with industry
partners.
6 Limitations and further research
Although the framework has already demonstrated its efficacy in multiple workshops and
enterprise settings, it is imperative to continue its development, as the ultimate objective is
for enterprises to autonomously utilize the framework outside of a guided workshop. To
this end, the framework must undergo testing by enterprises without the direct assistance
of researchers who are already well-versed in the methods encompassed within it.
Moreover, the procedure itself requires further testing to ascertain the framework's
comprehensiveness. This entails further conducting comparisons with existing industry
standards and similarly designed frameworks. Nevertheless, preliminary yet illuminating
insights could be made, which expand the possibilities for refining the framework.
As already mentioned the goal of the framework is to update the provided methods
on a regular basis and therefore the development of novel sub methods is a mandatory part
of this framework. Research into such methods also remains a priority. By keeping these
methods up to date, an obsolescence of the methods is prevented. As a research question
that arose during the course of this contribution, the development of a circular business
model visualization tool turned out to be a desirable outcome and a current main research
objective. Having said this, other methods in different process stages are also relevant and
present a great research potential. By this meaning, methods in the implementation stage
are accorded special attention, particularly due to the minor portion of established methods
in this domain. To approve the framework and its sub methods even further, another series
of workshops with industry partners in the region of Saarland is already planned. Based on
these workshops, the included methods will be further developed or simplified for the use
of SMEs. The main objective of this is to enable SMEs to apply the methods independently,
without the help of others. In addition, the question of the extent to which SMEs can
optimize the existing business model during its day-to-day business will be clarified in later
publications.
Another point which should be addressed is that the framework, including all
methods and sub methods is planned to be implemented in a website, which is designed to
help SMEs on specific topics. By this, the enterprises will have the opportunity to filter
between methods, so that methods for an appropriate objective and the right process step

This paper was presented at ISPIM Connects Salzburg – The Sound of Innovation, on 11-13
December 2023. Event Proceedings: LUT Scientific and Expertise Publications: ISBN 978-952-
65069-4-4
14
are being displayed. This approach allows SMEs to help themselves without the need of
an outside consulting and contributes to the development of the CE.
Acknowledgment
This contribution is funded and encouraged by the European fond for regional development
and the ministry for economic affairs, innovation, digital affairs and energy of Saarland.
The framework and the methods involved in it are originated in the research project
“PSS4CE”, which runs until July 2025.
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