The Dual Transition of Digital and Circular Economies - Megatrends
Dr. Saman Sarbazvatan
COO & Vice Dean of école des Ponts Business School - Founding Director of ReTech Center - Senior Advisor & Professor of Digital & Responsible Transformation, Innovation, Strategy, Competitiveness
Context
There are two megatrends that are restructuring the fabric of our scientific, industrial, social, environmental, and economic landscapes globally, at the micro, meso, and macro levels:
1- The transition to the Digital Economy, driven by many factors including the accelerating pace of
2- The transition to the Circular Economy, driven by many factors including the growing
These megatrends are driving omni-faceted paradigm shifts and giving rise to enabling and disrupting forces omnidirectional. Broadly and to various degrees, we’re relatively familiar with Digital Transformation and the implications of the Economy, but less so with those of the transition to the Circular Economy and how it invigorates Sustainable Competitiveness, facilitates achieving efficiency, and reinforces collaborative initiatives. The environmental benefits of the transition to the Circular Economy are more obvious and easier to understand, whereas comprehending the economic and, mostly, the social aspects of this transition requires a deeper understanding of the Circular Economy from an ecosystemic perspective. I'll try to cover some of these aspects in further posts.
Regenerative Multidirectional Relationship of the Digital & Circular Transitions
In addition to the combinatorial effect of the dual transition, both transitions can theoretically and should practically impact the trajectory of one another, providing even more innovation opportunities with magnified enabling and disrupting forces:
Digital infrastructures and platforms facilitate communication, collaboration, and multistakeholder engagement solutions which are essential for an efficient transition to the Circular Economy. Moreover, digital enablers such as AI, Internet of Things, Digital Twins, Extended Reality, and Blockchain are among the prominent drivers of the transition to the Circular Economy, to various degrees. Providing stronger data procurement, simulations, and prescriptive, preventive, and predictive analytics for more accurate data-informed decision-making and policy-making processes, enabling more efficient use of resources, facilitating the development of more sustainable materials and processes, and bringing transparency, trust, and accountability across value and supply chains are among various ways through which these technologies promote the transition to the Circular Economy.
Technology is a prominent enabler of the transition to the Circular Economy, and digital advancements considerably foster this transition.
I have explored the Dual Transition and the Digitally Empowered Circular Economy in my three chapters in the Circular Economy Body of Knowledge that we have developed at the Circular Economy Alliance and the Circular Economy Research Center of école des Ponts Business School, where I take the following four groups of technologies and their applications in driving Operational, Economic, and Industrial and Business Model Innovation:
The evolution of technologies and the trajectory of digital innovations will be heavily impacted by the emerging needs, opportunities, market dynamics, and policy initiatives and strategies promoting the transition to the Circular Economy.
An efficient transition to the Circular Economy calls for adapted, scalable, and transferrable technologies and digital infrastructures in order to procure data from and within the globally intertwined supply and value chains, not only for nurturing the tools and solutions but also to empower decision-making and policy-making processes to support the circular transition. The historically developed data-gathering mechanisms and procurement algorithms do not necessarily conform to Circular Economy requirements, measures, and metrics. In addition, despite the fact that enabling technologies significantly promote resource efficiency, developing, implementing, and maintaining some of them such as AI, are not organically eco-friendly from several perspectives. For example, although AI can significantly drive sustainability and circularity, some research highlights the resource intensity of machine learning and algorithm training, which could increase the carbon footprint of AI if sustainable measures are not considered and the technology is not aggressively leveraged to enable radically sustainable solutions down the road. In other words, if the applications of technologies remain isolated, limited, and unexplored across contexts, the environmental cost of developing them could overshadow their benefits. To this end, a significant amount of work is being undertaken by enterprise solution providers, major technology developers, technical consortia, and international policy, regulatory, and standardization organizations such as the United Nations , OECD - OCDE , the European Commission , the National Institute of Standards and Technology (NIST) , ASTM International , and notably, ISO - International Organization for Standardization , to provide guidance to
The accelerating rate of Digital Transformation and the mass integration of Industry 4.0 technologies are giving rise to increased focus on Sustainability and Circularity of digitalization processes, and simultaneously, the transition to the Circular Economy is giving rise to increased focus on developing and leveraging digital enablers for Circularity and Sustainability.
Divergence, Convergence, and Emergence of Technologies & Combinatorial Innovations
From a high-level ecosystemic viewpoint, Digitally Empowered Industries, Solutions, and Business Models are prominent examples of the convergence of technologies and combinatorial innovations that expand across, engage with, and impact several industries, sectors, and disciplines. Considered among the major drivers of the Dual Transition of the Digital and Circular Economies, they provide immense facilitation and innovation opportunities for entrepreneurs, companies, policymakers, and public and private investors and institutions:
In order to keep this post short, I'll try to cover more on how each of the above can promote the transition to the Circular Economy and drive sustainability in further posts.
Implications
In addition to enabling Innovation across sectors, industries, disciplines, and contexts, the Dual Transition has broad leadership, strategic, and operational implications across the public and private sectors due to the fundamental restructuring forces it triggers within the complex, hyperconnected, and intertwined value chains, infrastructures, and resources.
The convergence of Digital and Circular Economies is groundbreaking, with notable transversal implications across sectors, and is increasingly impactful due to a myriad of interdependencies. Beyond the omnidirectional structural changes that each of these transitions separately drives, the confluence of this Dual Transition evokes considerably more significant enabling and disrupting forces that restructure industries, societies, economies, and the built and natural environments.
The Dual Transition of Digital and Circular Economies drives prominent enabling and disrupting innovations that translate into risks and opportunities in the micro, meso, and macro levels.
In addition to the rise and fall of companies, industries, and markets, the upcoming microtrends and megatrends are shaped within and around the enabling and disrupting forces of the Dual Transition, as a continuous process. For example, the emerging megatrend of market dynamics shift and its impact on competitiveness at the micro and macro levels is explained below.
The Dual Transition & Competitiveness through the lens of an Emerging Megatrend
The Digitally Empowered Circular Economy drives the evolution of the value systems at the macro and micro levels. For example, the pressure from investors, consumers, producers, and policy initiatives and strategies for transparency and accountability are driving the shift of dynamics in the markets and industries from operations, strategy, and stakeholder relationships to growth strategies, strategic alliances, and partnerships. This shift, comprehended in an ecosystemic dimension, by itself is a megatrend as an aftermath of the two megatrends of the Digital and the Circular transitions.
The competitiveness of companies, industries, markets, clusters, nations, and regions is being redefined at the early stages of the Dual Transition. For example, for big organizations it is often complicated, or not as quick and efficient as startups, to design, develop, and implement the proper tools, measures, and metrics to highlight the competitive real socioenvironmental costs of their operations. This means either they don't have anything of value to share in terms of the positive socioenvironmental impact of their operations, or they don't have the statistics, or even worse, they don't have the measures, tools, and metrics. Increasingly, multinational organizations, across public and private sectors, are cutting their longstanding strategic alliances with their partners, for example with distribution or transportation providers, some of which are leaders in their industry, due to the lack of visibility in terms of resource efficiency and pollution, or due the absence of or insufficiency in the strategic plan of the partners to reduce the carbon footprint of their operations.
领英推荐
Forward-looking investors, intrapreneurs, and entrepreneurs are leveraging the emerging opportunities in the Dual Transition to gain Competitive Edge and innovate where the incumbents are losing competitiveness. This opportunity is not only due to the power of technology in leapfrogging and getting a headstart, some of them are inherently strategic, agility, and leadership challenges.
On the other hand, Digitally Empowered Industries (xTech), Solutions/Infrastructures (SmartX), and Business Models (XaaS) are being developed increasingly in recent years as intrapreneurial and entrepreneurial projects, to specifically address the challenges of, for example, value chain visibility. These initiatives diverge into numerous directions such as Analytics as a Service, and Smart Manufacturing, among others, with several strategies. Some of these initiatives target being integrated as an enterprise solution across industries, such as IBM Blockchain or Finstra Fusion Fabric, and some keep the core strength and offer their Solution as a Service, such as Cloud as a Service, as a Service, or as a Service, etc.
Going back to the megatrend of the market dynamics shift and the ensuing restructuring of competitiveness metrics at company, industry, market, cluster, nation, and region scopes, with the increasing demand on transparency and accountability mentioned above, (from policy, producers, consumers, etc.), and the redefinition of the value of strategic alliances and partnerships, these Digitally Empowered Industries, Solutions/infrastructures, and Business Models stand out with more relevant and competitive value propositions.
With the right knowledge and skill set, the enabling and disrupting forces of the Dual Transition can be strategically leveraged as Competitive Edge.
The Role of Adaptive and Transformational Leadership
In the context of the Dual Transition, adaptive and transformational leadership can help organizations and nations efficiently and effectively leverage the combinatorial effects of Digitally Empowered Circular Economy initiatives, strategies, and practices to foster innovation capacity building and hone competitiveness, resilience, and positive impact on stakeholders, society, the economy, and the environment. From a high-level approach, the primary objectives of digital transformation have historically been mainly focused on increased productivity without adequate attention to sustainability measures, unfortunately. However, with the increasing concerns about change and the exacerbating social, economic, and environmental repercussions globally, increased general awareness, and regulatory pressures, among other factors, the context of digital transformation is significantly evolving to drive more meaningful changes through and as a part of digitization and digitalization processes. The heavy focus on technologically enhanced SDGs and driving the digitally empowered Circular Economy are good examples of the convergence of technology and impact.
Consequently, the need to foster purpose-driven and impact-oriented innovation as a part of digital transformation is increasingly pronounced and the significance of adaptive and transformational leadership in identifying the challenges and leveraging the opportunities of the Dual Transition of Digital and Circular Economies is exponentially growing as a . Obviously, adaptive and transformational leadership is not limited to leaders' responsibilities, and individuals and professionals at all levels are required to be effective leaders of purpose-driven changes at all scopes. The latter has a growing significance in driving innovation for competitiveness and resilience, the fight against inequity, and addressing the reverberations of climate change.
Individuals, organizations, and nations need to proactively exercise and deliberately and consciously develop adaptive and transformational leadership initiatives, strategies, practices, and skillsets.
The Role of Education, Upskilling, and Reskilling
On the top of the list of the challenges of the transition from the Linear to Circular Economy, the role of education, upskilling, and reskilling is increasingly highlighted across all sectors, both in research and practice.?We need to unlearn unsustainable sourcing, production, and consumption practices, and learn how to cut waste, emissions, and pollution. and at the same time increase social, economic, and environmental prosperity, inclusion, and welfare, by adopting the culture of smart and efficient resource utilization.
Luckily, and rightfully, there are considerable investment flows from public and private institutions and significant efforts from academia and the industry toward leveraging technology for the transition to the Circular Economy. But there is a prominent gap we cannot afford to neglect:
The Skillset Gap!
1- The Dual Transition of Digital and Circular Economies encompasses Cultural, Social, Psychological, Behavioral, Industrial, and Economic transformations,
2- We better know that we cannot expect to succeed in driving the urgent transition to the Circular Economy effectively and efficiently with the same mindset and that we have inherited from the Linear Economic Model, aggravated by consumerism and prioritizing financial gains of the shareholders over socioeconomic, environmental, and stakeholder benefits. The Digitally Empowered Circular Economy requires a new set of skills both in Digital and Circular pillars.
3- The transition to the Circular Economy requires multistakeholder engagement to succeed. We need to provide the workforce of the upcoming economy with a new set of knowledge and skillsets so that not only can they proactively contribute to but also efficiently lead this major multifaceted transformation at all levels. We need to train the next generation of leaders, and to do so, the workforce of today needs to master the concepts, contexts, and principles of the Circular Economy and Technology as its prominent driver.
The urgent need to reinforce the workforce concerns organizations of all sizes at all levels and across sectors, without which the efficiency of invested resources would naturally be jeopardized drastically. Upskilling, Reskilling, Executive Education, and Corporate Learning on Digital & Circular skillset are among the top priority strategies of forward-looking leaders and institutions.
Actionable Insights
The Dual Transition of Digital and Circular Economies, the subsequent social, environmental, economic, scientific, and industrial paradigm shifts, and the ensuing innovation opportunities can enable or disrupt institutions and nations, depending upon the quality and the degree of their preparedness, the choice of reactive-versus-proactive strategic responses, the nature of the undertaken action plans, and the efficiency and effectiveness of their execution. The Dual Transition drastically redefines the competitiveness landscape and metrics at the micro, meso, and macro perspectives across industries, sectors, and geographies, with substantial implications in socioeconomic, geopolitics, and political economics dimensions.
Policymakers, governing and regulatory bodies, industry leaders, decision-makers, executives, entrepreneurs, investors, and board members need to foster adaptive and transformational leadership strategies and upskilling and reskilling initiatives to stimulate innovation capacity building, competitiveness, resilience, and agility in driving the Digital and Circular transitions. Developing symbiotic sustainability models, NGO-corporate alliances, distributed and interoperable value cycles, and ecosystemic integration initiatives are among the major strategies that can both facilitate and leverage the emerging opportunities from the dual transition of digital and circular economies.
Comprehending the implications of Technology and the Digital Economy in promoting Sustainable Competitiveness and the transition to the Circular Economy can provide invaluable innovation opportunities to individuals, institutions, and nations.
Capitalizing on the enabling forces and innovation opportunities in the Dual Transition of Digital and Circular Economies not only is a prominent means for gaining competitive edge, it also is a strategic hedge against the forceful omnidirectional disrupting forces across industries, globally.
Collectively, we need to harness the accelerating pace of Digital Transformation to deliberately, consciously, and responsibly lead the development of our technologies to implement scalable, secure, compatible, interoperable, and coherent digital infrastructure to foster purpose-driven innovation capacity building. The forthcoming digitally enhanced societies, industries, markets, and economies need to be empowering, equitable, inclusive, and sustainable, designed to enable circularity and sustainable competitiveness. In the following posts, we will cover more about the significance of these characteristics in driving impactful innovations, sustainable competitiveness, and circularity.
Forward-looking entrepreneurs and companies, researchers, investors, policymakers, decision-makers, and executives in the public and private sectors can strategically leverage this Dual Transition for leading impact-oriented and responsible innovations to address the aggravating social, economic, and environmental challenges with utmost urgency.
Get Engaged
Views in this post are personal reflections based on my takeaways from more than 22 years of experience in innovation, transformation, and integration. Please do not hesitate to challenge the ideas, comment, and share your viewpoints. The concepts covered in this post at best scratch the surface of the implications of the Dual Transition of Digital and Circular Economies. I'll try to elaborate more on the drivers, enablers, challenges, and opportunities of the dual transition in my following posts. If you’re interested in receiving updates on upcoming posts and relevant content and events, please add your email to my mailing list .
Acknowledgments
Parts of this post and ideas expressed here have been previously presented in some of my sessions at the #Harvard Institute for Strategy and Competitiveness at HBS and The Economist series and events. This post includes a brief introduction to some of my previously published work in the "Circular Economy Body of Knowledge" and some of my online courses as a part of the Circular Economy Expert and Specialized Certificate Programs delivered by the Circular Economy Alliance , CERC - Circular Economy Research Center and école des Ponts Business School of école nationale des ponts et chaussées .
Brilliant food for thought reading Dr. Saman Sarbazvatan!