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The Circular Economy Model: Developing Environmental and Organizational Long-term Value

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A hundred billion tons of materials enter the global economy every year. Only 8.6% of the total amount of the materials are cycled back into the economy. This is the result of  the linear economic model. In a case study written by Thibaut Wautelet, he refers to the linear economic model as a production and consumption model based on the “take-make-waste” scheme. He explained that raw materials are collected, then transformed into goods that are used and finally discarded in landfills or incinerated as waste. This approach turned out to be broken, enabling overconsumption to the detriment of planetary health.  

Governments and businesses are looking to adopt the circular economy model and start repairing the damage created by unsustainable production and consumption. According to a published research in “Cleaner Environmental Systems Journal”, authors define circular economy as a catalyst for sustainable business. Moreover, the circular model  promotes “…the use of resources within closed-loop systems, reducing pollution or avoiding resource leakage while sustaining economic growth.” 

The pressure to adopt sustainability compels companies to implement the “reduce, reuse, and recycle” practices from the design stage to post-sales activities. Based on the same research, “Circular economy as a driver to sustainable businesses”, the influence of the circular economy can be seen in many business areas:

  • Cost management – The circular model leads to the transformation of products at the end-of-life cycles into resources for new products. Integrating material recycling into new components production can close the loop, reducing waste and the usage of more expensive raw materials.
  • Supply chain – The circular management of the supply chain is based on the coordination across the different members in closing, slowing, or narrowing energy and material flows. Additionally, the packaging system is an important aspect of the distribution process circularity. 
  • Process management – The business processes are rebuilt to make them more circular, facilitating the reusing and recycling out of the desire to extend product life and reduce environmental impact.
  • Service management – The Product-Service system is considered an enabler of the circular economy by offering services instead of products aiming at pro-environmental outcomes.
  • Research and development – The achievement of circular goals relies heavily on design, which determines the circular potential. The life-cycle-based research and development allows the selection of the type and quantity of materials and determining how they are combined – a process that affects the product life and the possibility of repairing and recycling it.  

Figure 1. Product Lifecycle in Circular Economy Model | News European Parliament

Companies Leading  the Change

Companies embrace the concept of circularity in response to the growing interest of customers in green practices and concerns about the global waste problem. Philips is one of the companies that are successfully paving the way toward the circular economy in their industry.

Philips was one of the largest electronics companies in the world. But it has changed its focus on health technology, looking to improve people’s health and well-being. Its products include large-scale and small medical equipment and home care products. The company developed new business models to adapt to the circular principles organized on seven strategic pillars:

  1. Close the loop with current products through take-back, refurbishment, and recycling
  2. Further circular practices across Philips sites, including zero waste to landfill policy
  3. The circular design of products and business models
  4. Technical competence building
  5. Driving change with external coalitions and supply chain
  6. Embedding in the Philips Business System

In 2016, the company set goals to generate 15% of revenues from circular products and services and send zero waste to landfills in internal operations. At the end of 2020, Philips achieved their circular goals. Therefore, they set three greater targets for 2025: to generate 25% of revenue from circular solutions, send no waste to landfills, and  close the loop by offering a trade-in on all professional medical equipment.

The Benefits of Adopting the Circular Model

The Circular Model and its principles are still new to the business ecosystem, and the market penetration of circular business models remains limited. But the potential to scale up the model is considerable in many industries. 

Besides the environmental impact that the circular model creates through the reduction of greenhouse gas emissions or the use of fewer nonrenewable resources, or achieving zero waste, shifting toward circularity can help companies secure a competitive advantage and create long-term value.

The circular model enables new revenue streams by accessing new markets or cutting off costs from waste generation. It reduces the dependency on raw material suppliers and increases the resilience in the face of supply chain disruption.

Additionally, by implementing a circular model, businesses can attract new clients and improve the retention of old ones, as sustainable practices are becoming an influencing factor in customers’ buying decisions. Also, customer loyalty is favored due to servitization, product-as-a-service offerings or take-back programs.

Based on the survey conducted by Deloitte, more consumers this year are pursuing a better sustainable lifestyle. Results show that 40% of the consumers choose brands that promote sustainable values and practices, which increased by six points compared to 2021. The number of consumers who stopped purchasing from a specific brand due to their ethical or sustainable issues and concerns towards the company has also increased by six points in 2022, which is 34%.

Going in circles is the way forward. It is time for companies to rethink how they do business, considering the industrialization’s impact on the environment, relevant international initiatives, such as the UN Sustainable Development Goals and the EU Circular Economy Action Plan, and  the increasing importance of sustainability to everyday customers. The change may be difficult for organizations used to operating in the linear economy but not impossible as seen in the above examples. In order to thrive in the market, companies must establish circular business models and adapt their strategies to the circular economy.

To advance your knowledge in establishing an effective strategy and planning for organization, enroll in The KPI Institute’s Certified Strategy and Business Planning Professional course. Invite your colleagues and sign up now! 

How Can Competency-based Education Improve Employee Performance?

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Competency-based education (CBE), according to the non-profit organization EDUCAUSE, enables students to advance their development based on their learning capacity, skills acquisition, or competency improvement at their own pace. This learning journey could happen in almost all types of environments.

CBE creates opportunities for learners and employees to nurture integrated performance-oriented capacities that can help them handle different challenges. This strategy is designed to accommodate various learning styles and can result in more efficient learner outcomes.

CBE would not work well without high-quality trainer’s training. Trainer’s preparation is a critical component of successful CBE deployment. Trainers must learn how to assess learners and tailor learning experiences to their needs. They must have a thorough understanding of the CBE process, techniques for tailoring learning experiences, mastery-based assessment, and the critical role of technology in learning customization.

Developing competencies standards is a crucial part of CBE. It helps sustain skills at the enterprise level by defining an ideal competent performance to measure a worker’s actual performance. The competency criteria can be tailored to a specific country’s setting and confirmed through a local method. The ILO (2021) recommends considering the following factors when creating a local validation strategy:

  • The industry’s size and geographic dispersion (so representative businesses can participate)
  • The industry’s diversity (i.e., the technology utilized and the products produced)
  • The worker’s profile (to guarantee that all competencies are included)
  • Validation costs and validation time

They must be aware of the differences between CBE and traditional education (TE) while developing competency maps, assessment goals, learning speed, grading, and promotion. They must also understand the importance of assessment in adapting training.

CBE in Healthcare

Healthcare institutions and organizations are being confronted with a number of challenges, including developing clinical approaches and a scarcity of resources. On the other hand, healthcare providers are expected to use care skills effectively and put theoretical knowledge into practice (Eijkenaar et al., 2013; Goudreau et al., 2015). However, a growing amount of research from several countries demonstrates that the clinical performance of healthcare systems is not up to par (Eijkenaar et al., 2013).

Below is a case study demonstrating how CBE works, its effectiveness, and its application to professional practice. It includes a population of physicians, nurses, medical students (residents or interns), and nursing students. CBE courses were offered to improve the clinical performance of medical and nursing students, physicians, and nurses. Traditional education was provided to the control group, and the clinical performance of the study population was the outcome.

The study “The effect of competency-based education on clinical performance of health-care providers: A systematic review and meta-analysis” aimed to evaluate the influence of competency-based education on the clinical performance of healthcare providers. The study takes into consideration the need to develop an intervention to improve the clinical performance of healthcare providers.

The criteria for inclusion were clinical or quasi-experimental trials; physician/nurse or medical/nurse participants; an age range of 18–65 years; adoption of the CBE approach; measurement of clinical performance of the participants using concrete tools of performance assessment; presentation of the results quantitative scoring; and the use of traditional teaching methods for the control group. The exclusion criteria are the use of a combination of CBE and other educational modalities, the lack of a control group, and the measuring of the participants’ theoretical knowledge or non-clinical abilities.

The study used six international electronic databases: PubMed, Ovid, Cochrane Library, Web of Science, ProQuest, Scopus, and Google Scholar. The national electronic databases IranMedex and SID were also used to conduct a systematic review and meta-analysis. In addition, the study comprised other studies that were related to the research goals. The Cochrane Collaboration’s Risk of Bias Tool was applied to assess the studies’ quality.

According to the random-effects model, CBE could improve the clinical performance of health care professionals in the intervention group compared to the control group (SMD = 2.717, 95 percent CI: 3.722 to 1.712). 

Competency-based education can help health care practitioners improve their clinical performance. Meanwhile, high turnover rates, decreased job satisfaction, increased presenteeism, poor patient safety, and increased medical errors are consequences of a lack of clinical skills and competencies

Leading Change and Teamwork | Part 3

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Editor’s Note: This article is the second part of the series titled “How To Succeed at Leading People Through Change.”

Catalyzing teamwork and supporting people to work towards the company’s vision is very important. Having a common belief among people inside the company is what needs to be established first. The beliefs of people refer to their values. 

Values serve as the guiding principles of the organization. They need to be set not only by managements’ input but also by employees who will need to comply. IBM CEO Sam Palmisano has done this when he was leading a change from a mainframe maker to a robust provider of integrated hardware, networking, and software solutions back in 2002. 

Sam proposed three (3) value statements: commitment to the customer, excellence through innovation, and integrity that earns trust, which then changed as per input from the workforce and after being shared with employees to comment on. However, this is not the end of the story. Collaborative effort to set the values is one side of the coin. Believing in them and steering the company forward through these values is the second side that compliments the first side. The new agreed-upon values are dedication to every client’s success, an innovation that matters for our company and for the world, and trust and personal responsibility in all relationships (Paul Hemp and Thomas A. Stewart 2004). 

Teamwork is always a key to change. Creating the right team that evolves and gets bigger along the process of change is important. Putting together the ideal team creates the needed collaboration and energy to change. It can start with a few numbers of people and eventually gets bigger. While there are tools that can create harmony between team members, ensuring they all follow the same direction to the desired change is crucial to success.

Creating harmony among teams and team members involved in the change is important to minimize resistance. Resistors are everywhere and can be created at any time. They exist due to the fear of change, not understanding the big picture, and how they will fit in. This is where leaders of companies and leaders of change teams need to create the urgency to continue. Even if achievement was gained, it still needs to be reflected in other areas of the organization. Change needs to be absorbed by the culture to maintain and sustain its outcome. Sustainability can’t be achieved in short periods. It requires continuous efforts to build harmony among organizations on any achievement and to introduce sustainable practices gradually into the surrounding environment.  (John P. Kotter 1995). 

Attitude and behaviors of employees are important to keep at high levels during any change. To steer this positively, employees need to be the ones who acknowledge the small changes related to a big change in place. They need to share their perceptions of how things are being led and how this is resulting in new consequences that can relate to a big change. 

Employees are the ones who are executing the change. To acknowledge this and empower it, leaders need to listen to employees and use their perceptions and insights as valuable input to make any modifications to the plan for change (Ron Carucci 2019). Getting the buy-in from employees means that they need to be part of setting the actions forward and developing the change plan. Asking “how can we do this?” and “how they can contribute to this?” or “how they can support us in this?” is crucial to bring people into one group feeling empowered, cared for, and letting employees be convinced that their leaders truly believe in them. No change can happen without such an important asset which is the employees (Harvard Management Update 2008).

Creating a common purpose for employees and driving them forward with hope is essential for value-based management. Motivating them to realize the need to change leads to more agility and the achievement of objectives (Paul Hemp and Thomas A. Stewart 2004). Motivating employees to be part of a change is not easy, especially if there were previous attempts for change that have either stopped or failed. Failed attempts at change can cause employees not to trust any new change or choose not to be part of it. Employees can even not put forward all their potential during a change if they are not motivated. Therefore, it’s important to build employees’ resilience to change and maintain it along the way. Keep them part of the developments and achievements and share successes with them (Ron Carucci 2019).

Conclusion

Change is part of any business now. Leading it efficiently and effectively is needed to sustain the business. Proper leadership enables organizations to tackle the external factors affecting business anywhere in the world while building on internal capabilities, assets, and employees. Leading change requires leaders to work hand in hand with their employees. Working as a team is a game-changer to handle the different details and aspects of the change and transformation in their businesses. This can be done by strengthening the teamwork between employees, team members of the change team, and departments to eliminate silos. Working as a team also develops a collaborative environment between everyone. 

Leading change is always aligned with value creation. We always look at the value of what is being delivered to customers. We also need to understand that value goes through different stages to be created. This chain of stages needs to be supported by having a clear guiding principle shared among all employees and having leaders talk the walk and walk the talk to be the role models for their teams.

Communication is another aspect that is very important for leading change. It needs to be well managed and executed to ensure it is done properly. Effective communication in leading change gets the needed buy-in from everyone while also keeping them all in the loop of achievements, success, and progress. This will support building the needed motivation among employees who are executing the change. While employees know they will not be put aside but referred to and considered by their leaders, organizations should empower their members to share perceptions and ideas continuously to ensure the success of the change journey.

They say excellence and changes are also a journey that does not end by achieving the result of a new change. But they will require continuous efforts to embed this change in the business’ working environment and daily operations to ensure sustainability and reflection on customers and financial numbers. 

To widen your knowledge about defining your organization’s strategy in times of change, establishing appropriate customer trust, and creating the right balance between team members, visit The KPI Institute’s website and sign up for Certified Strategy and Business Planning Professional Live Online Course.

How To Know Your Strategy Is a Winner

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Often than not, several executives take strategy as a routine task or a series of frameworks instead of a mode of visualizing and solving problems. Furthermore, taking on the newest strategy trends or following a successful entrepreneur’s guidelines is not an ideal way to win. Companies need to take their strategies through a series of tests to determine their validity.

There are three tests that identify the success of strategies. These assessments help executive teams to answer some of their burning question, such as: 

          a) Does your company strategy respond to uncertainty and trends? 

          b) Does your strategy exploit legitimate sources of advantage?

          c) Is your strategy aligned and cascaded throughout your organization? 

Three Winning Strategy Tests 

There are three types of tests companies can apply to determine whether their strategies are viable or not. The first one is the Fit Test. This type of test measures the level of fitness of a company’s strategy along with its business condition. When conducting the Fit Test, there are three fit dimensions that need to be assessed: internal fit, external fit, and dynamic fit. 

Internal fit and external fit are the keys to securing a company’s survival (Tyge Payne et al., 2015). Internal fit is described as a multi-dimensional matching of strategy with structure. It is undertaken to ensure that the strategy matches the company’s resources as well as competitive capabilities. Winning strategies display an internal fit and must be compatible with the ability of a company to implement the strategy in a competent mode. 

External fit refers to the congruence between an entity’s strategy and composition and its task environment. Testing external fit will exhibit how a strategy matches significantly with the external conditions, such as industry dynamics, competition, and market opportunities. Therefore, a strategy will only work well if it has an excellent external fit against the external environment. 

The last type of fit test is dynamic fit. It is a fundamental measurement that assesses if strategies are changing over time. Dynamic fit is used to synchronize and align the current state of the business with market conditions. 

According to Jonathan Trevor and Barry Varcoe, retaining a good strategic alignment relies on the ability of a company’s structure, procedures, and culture to evolve with strategy changes. The signs of misalignments are always evident to employees and customers who fail to receive the type of service they expect. 

The second type of test is called the Competitive Advantage Test. This type of test measures the lasting competitive advantages of businesses in the market space. The Competitive Advantage Test also enlightens managers on strategies that often fail to keep up a constant competitive advantage with rivals. Failed approaches to maintain a competitive advantage over competitors usually lead to inferior performance in the long run. 

As winning strategies enable competitive advantage to be durable and larger, the research of competitive advantages in the tech industry by (Huang et al., 2015) sheds light on the outcome differences between Temporary Competitive Advantage (TCA) and Sustainable Competitive Advantage (SCA). 

The paper suggests that companies can achieve higher outcomes through SCA by amassing assets, resources, and capabilities. However, TCA created through strengthening market positions can assist firms with capital to accumulate resources that will develop a sustainable competitive advantage.

The Performance Test is the third form of measurement to differentiate a winning or losing strategy. A performance test is vital for organizations as companies usually mark their success based on performance. There are two types of indicators that a company looks at to understand the standard of this strategy test: 

          a) Competitive strength and market positioning and

          b) Profitability and financial strength. 

One of the performance measurements tools that businesses can use to effectively manage organizational performance is the balanced scorecard. It provides a holistic strategy implementation framework comprising five elements: desired state of evolution, strategy map, performance scorecard, performance dashboard, and portfolio of initiatives.

To sum it up, a company’s strategy needs to excel in all tests to succeed. Failing in even one of the tests could spell problems for business ventures and lead to negative performance. A company can introduce new practices only if they match or erase both internal and external conditions. On the other side, existing strategies should always be evaluated thoroughly to affirm that they are fit and contribute to good performances and competitive advantage. Incorporate fast changes to current strategies if companies fail at least one of the three tests. 

Take a look at The KPI Institute’s website and find out more about the Certified Balanced Scorecard Management System Professional course. Discover new approaches on how to create a performance management system based on the balanced scorecard technique and how to implement it at all levels of the organization. 

Leading Change and Value Creation | Part 2

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Editor’s Note: This article is the second part of the series titled “How To Succeed at Leading People Through Change.”

It’s a matter of differentiation. Leaders focusing on differentiation should not only link it with brands. But with the customer experience driven by salespeople who will need to add value to it; thus building the right trust with customers. This includes the customers of the customers along the value chain of the sales. So, adding value will always be important to enrich the experience of customers throughout the chain. Leaders making changes in business models are not only about aligning them with the brand and what is being delivered to customers. But aligning them with employees and what they believe in; this is what matters and what supports efficient alignment across the company. It will drive the change forward and deliver the right value to customers (Paul Hemp and Thomas A. Stewart 2004).

IBM realized that to continue to create value and manage their company in 170 countries, they have to do this through their people by empowering them to make the right decisions aligned with their direction and mission. This could be done by ensuring they identify the gaps between; what values they call for and what is being practiced on the ground. This is where leaders are continuously striving to live the values and ensure everyone does this to lead the changes forced by the external environment. Also, to meet the needs of their internal environment that are based on their human resources (Paul Hemp and Thomas A. Stewart 2004). 

Building the right value along the new change in any organization needs to be aligned with the right culture for change. It includes eliminating the blame culture and admitting mistakes by all, especially leaders. Leaders need to set the example that everyone is a human being and humans always make mistakes. But what’s more important is to admit these mistakes. Allow other people to tell you if you did something wrong and do your best to learn from it and transform it into a success afterward (Harvard Management Update 2008). 

Value is always created through a journey of developments and improvements. Then, get reflected into whatever services or products are offered to customers. Managing value creation in any change or transformation requires managing efforts in a modeled way. All aspects are interrelated like a red thread and intersect in a way that they push each other forward and affect each other positively towards the result of the change needed. A model can include multiple criteria like an organizational chart which needs to be analyzed and reshaped to support the change and drive it forward. Plus, the workplace, in a way where leaders need to identify how people involved in the change can interact with each other, do their work, and add the needed inputs. This can involve physical workplaces, virtual or even hybrid where leaders embed flexibility in accordance with the organizational structure and ensure more agility are in place.

Other important criteria of the model are people skills and competencies which are considered an important asset in any organization and enablers for change. If needed skills and competencies are missing or not at the required levels, they need to be built internally or acquired from external sources.

Rewards and penalties are other criteria in a model which play a vital part. Rewards are the sparks needed along the way to celebrate successes, even small ones, to motivate employees, and to bring in a sense of recognition. On the other hand, penalties are also important, not to punish employees or to demotivate them. But they can be used as the red lines that leaders don’t need to cross. It is not because leaders want to limit creativity and innovation. However, crossing these lines has proven negatively in past experiences and based on setting expectations for the future and this takes to the fifth criterion which is tasks.

Tasks refer to the existing processes that manage work and ensure inputs, operations, outputs, and outcomes are well defined, understood by everyone, and linked properly to the objectives of the change. The alignment between change objectives, processes, and tasks is very important to support that more efficient work is being conducted with the most possible utilization of resources, thus more efficient operations driving the change.

The sixth criterion of the model is information distribution. It refers to the flow of information among the change team and inside the whole organization. When any information is shared with the receiver, the receiver becomes responsible for sharing the information.

The seventh criterion is decision allocation. It refers to the governance structure in the change team and how it is aligned with the organization’s governance structure. Decision allocation is mainly related to identifying who makes decisions, how, when, and based on what. 

Measurements are one of the criteria; if you can’t measure it, you can’t improve it (Peter Drucker). Measurements are collected after setting the right key performance indicators (KPIs) that will measure the performance associated with the change from all aspects (Gregory Shea and Cassie Solomon 2013). KPIs can measure; risk, outputs, outcomes, impact, efficiency, effectiveness, quantities, quality, and other aspects depending on the change being led. Such measurements will be associated with targets to help identify where we stand compared to our planned results and what we achieve from them (The KPI Institute 2020).

Leading change in a demanding industry will always be affected with communication directed to customers from the different channels like TV, Radio, word of mouth, etc. since this will trigger the need to have more accurate and on-the-spot information about the products. But this is where trust is built between customers and salespeople. Those customers will rely more on the right and well-equipped salespeople to enrich their knowledge whenever and wherever needed (Thomas A. Stewart and David Champion 2006). 

In addition, leading change wants intensive communication internally conducted among all levels and a continuous basis to ensure everyone realizes the need to change and to understand clearly where they are going, how, when, and through what means. Buy-in from everyone is important, and it’s the spark for any change. This is where leaders should play their role by embedding but not forcing the change; by convincing people with the need for change but not under-communicating the related details; by opening channels with people to express their opinions and support them to digest the need to change (John P. Kotter 1995).

Leading a change and managing communication internally with change teams and employees move hand in hand. It includes using all means of communication like emails, newsletters, executive meetings with employees, inviting experts from outside the company to explain the change, one-to-one meetings with employees, and many more; all of this requires efforts from leaders. But it is highly needed to ensure change is understood and enough buy-in is granted from people inside the organization (Harvard Management Update 2008).

To learn more about creating a better value in an organization and building the right trust with your customers, sign up for The KPI Institute’s Certified Strategy and Business Planning Professional Live Online Course.

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