Business Model Bundles: Implications for Innovation in the Circular Economy

ABSTRACT Business model (BM) innovation is essential to the transition towards a circular economy, yet customers often resist circular BMs. This study investigates how manufacturers can innovate BMs for circularity in ways that increase customer acceptance. Drawing on a multiple‐case study of four manufacturers offering 21 product‐service system BMs, we introduce a new concept, the business model bundle: a strategic offering that packages multiple BMs within one contract and gives customers flexibility to move between them over time. We identify three defining characteristics: the combination of different BMs, contractual flexibility, and temporal transition. We theorize the BM bundle as a new form of BM innovation that creates, delivers, and captures value through the configuration of existing BMs rather than the invention of new ones. Our evidence indicates that the flexibility offered by BM bundles can reduce customers' initial commitment and make previously resisted circular BMs more acceptable. However, bundles may lead towards either greater or lesser circularity and therefore require deliberate design. The study extends innovation management and BM research by introducing the BM bundle that could open a new avenue in the field of BM innovation, and by identifying flexibility as a mechanism linking BM bundles to firm‐perceived customer acceptance.