Circular economy

Strategic innovation in fashion: Master students enhance H&M group’s sustainability path and competitive edge

Business strategy, Circular economy, Sustainability, Technology /

Disclaimer: This article is based on case studies chosen by Catherine Schoendorff during her July 2024 class at Harbour Space University Barcelona. The insights presented are derived from analyzing H&M Group’s 2023 annual and sustainability report. The students did not engage directly with H&M or its representatives. The course aimed to foster entrepreneurial thinking, understand CEO decision-making, lead change, and highlight pathways for business model innovation that meshes sustainability and digital business transformation. In a world where fashion trends come and go, the need to blend digital business transformation with sustainability remains constant. Imagine a group of visionary Master’s students stepping into the shoes of industry giants like H&M, armed with fresh ideas and innovative strategies to revolutionize fashion. This isn’t just an academic exercise—it’s a blueprint for a regenerative, more circular future. Figure 1: H&M Group’s Circular Customer Journey (Source: Annual and Sustainability Report 2023, page 22) Sustainability is a critical priority for several reasons. It is essential for regulatory compliance, which serves as a business’s license to operate. Mostly compliance drove sustainability efforts. However, it’s time for senior leaders to embed sustainability as a core element of entrepreneurial thinking and business vision. This ensures regulatory compliance, propels the company to its next exciting chapters, and shields against business models that exploit resources without regard for social and environmental impact. The challenge – reimagining a fashion giant H&M Group, a global fashion powerhouse with over 5,000 stores in 70 countries, has set an ambitious goal to become 100% circular and climate-positive by 2040. For instance, H&M collaborates with Canvaloop, an India-based startup that converts agricultural waste into eco-friendly fibers. This collaboration exemplifies H&M’s commitment to reducing carbon emissions and promoting sustainability in the fashion industry. Figure 2: www.canvaloop.com/fibres  H&M’s 80% stake in Sellpy, a second-hand fashion leader, demonstrates a commitment to circular fashion, with over 20 million items resold across 24 markets. While this aligns with H&M’s sustainability goals, it contrasts with the ongoing promotion of hyper-fast fashion. The challenge ahead lies in reconciling these efforts—ensuring that circular initiatives aren’t overshadowed by the pace of fast fashion, but rather integrated to build a truly sustainable business model. But how does a company of this scale transform its operations to accelerate its 2040 target and create a unique competitive edge, especially with pressure from competitors like SHEIN? The students were tasked with reimagining H&M’s sustainability strategy, focusing on denim jeans—one of fashion’s most iconic items. They aimed to augment H&M’s strategy with fresh, innovative ideas and conceive new revenue streams using restorative and regenerative models. A structured approach to transformation: innovating through circular efficiency For this purpose, a comprehensive playbook was designed to enhance sustainability while uncovering new revenue streams and collaborative opportunities. This approach addresses current sustainability challenges and paves the way for innovative business models. The playbook ensures a seamless transition from the normative-strategic layer to the strategic-operational layer and back, enabling a new company vision, mission, and purpose: Comprehensive report analysis: Examine the company’s latest annual and sustainability reports with multiple AI tools to establish a baseline for current practices, goals, and areas for improvement. Product line focus: Select a specific product line as a starting point. The students concentrated on denim jeans, creating scalable solutions for quick implementation. Business Model Canvas mapping: Capture existing key activities, resources, and partners for the chosen product line (value proposition). Circular economy integration: Apply circular economy principles to key activities and resources, focusing on the 7Rs framework (Reduce, Reuse, Recycle, Recover, Redesign, Remanufacture, and Repurpose) and reverse logistics. Propose changes to the existing business model, such as increasing the use of recycled materials and implementing take-back schemes. Business model adaptation: Work on changing and adopting new key activities, resources, and partners for the changed value proposition. The aim is to identify areas where sustainability leads to groundbreaking solutions through collaborative innovation and create additional revenue streams. Strategic alignment: Use tools like e.g. the Ecosystemizer strategy map to ensure proposed innovations align with the company’s broader market strategies and long-term goals. Figure 3: Adapted Degenerative – Regenerative Spectrum 7. Impact assessment: During the entire playbook process, evaluate the restorative and regenerative process on the degenerative – regenerative spectrum. 8. Implementation planning: Evaluate ERP solutions that integrate circular business models. 9. Scalability planning: In the next step, develop a roadmap for scaling successful initiatives across other product lines or the entire business This playbook challenged students to see where they truly are on the degenerative – regenerative spectrum to propose transformative changes for H&M’s sustainability strategy. Innovative collaborations: pioneering sustainable solutions A key element in H&M’s case was the analysis of a potential collaboration between H&M, IKEA, and a startup called FAB.Brick. This partnership would take the concept of textile recycling a step further by repurposing unsold products into bricks for furniture, creating a closed-loop system that benefits multiple companies while reducing waste.  Figure 4: FAB.Brick offers a range of innovative products made from recycled textile waste. Pictures publicly available by FAB.Brick. FAB.Brick is recognized for its innovative approach to transforming textile waste into durable construction materials. By partnering with this startup, H&M and IKEA could leverage their existing collaboration focused on recycled textiles, which has already led to significant advancements in understanding the chemical content of post-consumer textiles. This approach goes beyond a joint industry study, initiated in 2019 (Textile Exchange Sustainability Conference), that aims to increase the utilization of recycled materials while ensuring safety and compliance with environmental standards The collaboration with FAB.Brick aligns seamlessly with H&M and IKEA’s commitment to sustainability and their goal of using 100% recycled or sustainably sourced materials by 2030. By integrating FAB.Brick’s expertise in waste transformation, the partnership could not only address the issue of unsold inventory but also contribute to the development of sustainable furniture products, which could be also used by H&M and IKEA for some of their store concepts. While SHEIN’s model is based on speed, variety, and low costs, H&M’s strategy emphasizes integrating sustainability with strategic growth, while raising

Strategic innovation in fashion: Master students enhance H&M group’s sustainability path and competitive edge Read More »

Stop Talking, Start Listening: Connect with your clients

Business strategy, Propositions, Technology, Value proposition /

How well do you know your clients? How often do you reconsider your understanding of your clients’ changing needs, pain points, and preferences? In today’s dynamic and client-centric business landscape, understanding your clients crucial for achieving success. By understanding what frustrates and energizes clients, you can leverage these insights to enhance the quality of your products, effectively addressing their needs and solving their problems. Without a deep understanding of clients’ needs, and desires, and how you can genuinely serve them, your products will face an uphill battle. Building on our March blog post about how to Build a Robust Product Proposition and Strategy, in this article, we delve into the importance of understanding and connecting with your clients in a B2B context, exploring practical strategies for strengthening these vital relationships. Gauge how well you already know your clients The journey to understanding your clients begins with self-assessment. Ask yourself, how well do I currently understand my clients? What do I know about their needs and pain points? What about their preferences and buying or using behaviors? How do I understand their decision-making? What are their long-term goals and aspirations? How do I communicate with them? And so on… Reflect on these experiences and see what you already know and where the gaps lie. Talk to colleagues or team members who have direct client contact. Ask for their insights and findings based on their experience of client needs, wants, and pain points. Consider the most common questions, concerns, or requests clients have. The knowledge you have accumulated is your starting point; now it’s time to go further. Harness the Power of Research Research is a powerful tool that can offer you invaluable insights into who your clients are and how you can connect with them. Here are some different types of research you should be conducting: Persona research Persona research dives into qualitative aspects such as a client’s attitudes, values, interests, and lifestyle. This information helps you to build an extensive profile to better reach your client and improve your offering based on their needs. Look for patterns in your client data to understand the traits and behaviors that define your clients. Build detailed personas based on these common traits. This will help you visualize who your clients are, what they want, and how they make decisions (and whether they have decision-making authority). Use these personas when making decisions about product development, marketing strategies, and customer service. Here’s a short guide to conducting persona research: Collect client data from surveys, interviews, and feedback. Identify common traits and behaviors among your clients. Group clients into segments based on similarities. Create detailed profiles for each segment, including demographics and preferences. Validate personas with client insights through interviews or surveys. Use personas to inform sales, marketing, or project decisions. Regularly update personas as client preferences evolve. Experience research Immerse yourself in your client’s shoes by observing their habits, routines, and interactions with your product or service in their natural environment. This real-time qualitative approach provides deeper insights into their experiences, pain points, and preferences. Make sure to leverage feedback and reviews. Different types of client feedback and reviews are a goldmine of information that can help you understand your clients on a deeper level. Actively encourage clients to provide feedback through, for example, surveys or post-purchase emails. Pay attention to both positive and negative feedback, as they can highlight areas for improvement or reinforce what you’re doing well. Analyzing client sentiment and identifying common themes in feedback will allow you to make informed decisions about your product offerings and marketing messages.   Online community research Monitor social media platforms to grasp how clients perceive your brand. By actively reviewing and reading client conversations and analyzing their opinions, you gain valuable insights into their satisfaction levels and identify opportunities for improvement or engagement. But also, don’t be afraid to truly engage with online communities that are relevant to your industry or target clients. Participate in discussions, share valuable insights, and listen to what clients are saying. This will give you a unique perspective on their needs and preferences, helping you create a more authentic connection. And if you don’t have an online community yet, create one! Embrace Co-Creation and Co-Design Involving your clients in the creation and design process can be an incredibly valuable and unique way to understand their needs and desires by validating your offering. By seeking input from your clients and incorporating their ideas, you make them active participants in shaping the final product or service. This approach deepens your understanding of client preferences and fosters a sense of ownership and loyalty among your clients. Consider conducting focus groups, beta testing, or even inviting customers to collaborate on product development through crowdsourcing platforms. Utilize Artificial Intelligence and Big Data Advancements in technology have given businesses access to vast amounts of data that can provide valuable client insights. Artificial Intelligence (AI) and Big Data analytics tools can help analyze client behavior patterns, preferences, and purchasing habits on a large scale. By leveraging these technologies, you can uncover hidden trends and correlations that may not be apparent through traditional research methods. For example, AI-powered algorithms can identify purchase patterns and recommend personalized product suggestions to individual clients, enhancing their experience and strengthening your relationship with them. Other examples include personalization, sentiment analyses, and predictive analytics. Continuously monitor and adapt Client expectations are always evolving. Stay up to date with the latest trends and be ready to adjust your strategies, as necessary. Combine external trends with direct client engagement to truly understand their evolving needs and expectations. A proactive approach to understanding your clients is key. And remember that assumptions can lead to costly mistakes. To truly differentiate your business, it’s important to not only understand your client but also create a client-centric culture within your organization. More on this topic in future blog posts. Engage with your clients directly, ask questions, send out surveys, organize focus groups, and, most importantly, listen intently to

Stop Talking, Start Listening: Connect with your clients Read More »

“Waste + Information = Resource” How digital technologies like blockchain fuel the circular economy

Blockchain, Business models, Circular economy, Sustainability, Technology /

In a world increasingly conscious of its environmental footprint, the potential of digital technologies in driving the circular economy is a topic of great interest at The Value Department. This topic was the focus of a presentation delivered by Fleur Boos and Bob Gravestijn at #TheNTWKSummit23. Let’s first give some meaning to the buzzwords! View our presentation here! What is the circular economy and what do we mean by a sustainable approach? A circular economy is centered on the idea of resources being kept as long as possible within the economic system. Materials that have undergone an entire lifecycle, from production to end-stage, are returned to the economic system as an input.   A sustainable approach that focuses on minimizing waste and maximizing resource efficiency through a closed-loop ecosystem How can blockchain help the circular economy? Digital technologies can play a significant role in promoting this circular economy. For instance, Blockchain enables a central, immutable ledger of transactions, bringing higher levels of transparency across the supply chain, ensuring traceability, ethical sourcing, and more effective material flows. The technology is composed of several layers, including the application layer, aggregation layer, asset layer, and consensus layer, each playing a crucial role in its functionality. Combining those: Waste + information = Resource.  And this is not only theory or future dreaming, several organizations are already leveraging blockchain to support the circular economy. For instance, Lockheed Martin enhances supply chain management and aerospace manufacturing processes using blockchain technology. Similarly, Tex-Tracer with Fujitsu technology utilizes blockchain technology to enhance the traceability and transparency of textile supply chains, promoting sustainability and ethical practices in the textile industry. In addition, IBM Food Trust leverages blockchain for transparency and traceability in the food supply chain to improve food safety and reduce waste.   Other examples include Plastic Bank, which incentivizes plastic waste collection using digital tokens and blockchain technology for recycling and job creation, and Circulor, which uses blockchain technology to track materials and products’ lifecycles, improving social and environmental standards. Or Gainforest.app employs blockchain technology to monitor, report, and verify reforestation and conservation efforts for sustainable land management. And many more examples are out there – contact us to get introductions! What are the potential barriers to integrating blockchain in the circular economy? While promising, Blockchain technology comes with its own set of challenges. Blockchain’s impact on power consumption is a critical aspect to consider. The energy consumption varies depending on the consensus algorithm used, such as proof of work, proof of activity, proof of elapsed time, proof of capability, proof of burn, proof of authority, proof of stake, and proof of history. Understanding these algorithms and their energy footprints can help in optimizing the use of blockchain for sustainability. Other challenges include scalability, interoperability, integration with legacy systems, and protection of sensitive and confidential data.   Working toward how we can overcome these challenges is crucial to maximizing the potential of blockchain in the circular economy.   If you’re interested in learning more, send us a message and we’ll be happy to share the full presentation filled with more examples – we believe you’ll find it insightful! In the meantime check out a preview by clicking the button below. Don’t hesitate to reach out to us via message if you’d like to learn more about this interesting topic. View our presentation here!

“Waste + Information = Resource” How digital technologies like blockchain fuel the circular economy Read More »