Case 4. Spolia Construction

Spolia Construction differs from the other case companies as it does not yet have a real business, and the company has only just started identifying different options. The company aims to reduce carbon emissions, develop the circular economy in the construction industry and further develop the industry to adopt more sustainable actions. Their business idea is to develop a solution to reuse the demolition waste of construction materials. They aim to develop products which reduce the carbon footprint of buildings. The main focus is on concrete materials which have a major effect on carbon emissions.

The company was founded by two specialists from the construction industry. They both have a great deal of experience in construction project management and hence an in-depth understanding of the practices in the Finnish construction industry. The founders of Spolia Construction have a clear vision of the future trends in the industry – everything will change to become more environ-mentally sustainable. The founders want to maximize the utilization rate of recyclable materials and hope that the whole industry will develop in this direction. They have resolved issues with

Sensing: competition in the markets and opportunity to disrupt markets

regard to approving reusable building components and have attempted to innovate the new busi-ness model.

5.5.2 Case analysis

Sensing

The founders of Spolia Construction believe that technical issues are not obstacles to their idea to reuse demolition waste for new materials. They believe that intact demolition and assembling is clearly possible technically, but they have not found a proper business model to do it profitably.

They have identified markets for their idea, and traditional house buyers are the main customers.

Their idea requires understanding and managing the whole value chain, from demolition to build-ing a new house with circular economy materials. The founders also want to create their model to be energy efficient, and consider all elements of the circular economy. The idea is so pioneer-ing, that they do not have reference companies, because no one has ever done something like this.

For that reason, the starting process may be difficult. They aim to raise awareness about sustain-ability in this sector, which contributes to demand for their solutions.

‘We should prove somehow that the major part of the material which is crushed and destroyed could be totally usable. Of course, there is always some part of waste, material is in the wrong place, it is in the wrong shape or volumes are too small.’ – Founder (1) of Spolia Construction From an environmental point of view, their idea is excellent, but there is no proof that the idea has business potential. One major obstacle with their model is regulation. The firm must solve the problem of approving demolition material as new building material. Quality approval of the ma-terial may be difficult, as European product standards (CE) and construction product regulations are quite precise. Regulators such as the European Commission will have a major effect on ena-bling their business model to work as planned. There is no harmonized product standard for these kinds of materials, but some materials can be approved locally. The company believes that the approval process for materials can be an important part of their business model.

The company assumes that major construction companies are their main customers, as they are the ones making most of the new buildings. Construction companies also have the expertise on the demolition stage. Another important customer group is clients which finance and order build-ings. Especially public clients, representing green values, could be interested in the company’s offerings (e.g., Senaattikiinteistöt and Suomen Yliopistokiinteistöt). Their end customer would anyway be individual house buyers. Customers would get value in terms of eco-friendliness, sus-tainable development, reducing the carbon footprint and new high-quality houses. The founders

believe that customers are even ready to pay more for buildings which are made from these ma-terials if environmental issues are important to them.

The founders collaborate actively in circular economy events to generate knowledge about circu-larity in the construction industry. The agenda for different kinds of meetings is to map the at-mosphere and create a snapshot of the circular economy ecosystem, instead of entirely focusing on finding business partners. They have noted the need to create partnerships with companies and organizations which may offer them resources and expertise on construction, demolition, logis-tics, human resources, marketing, research, municipal planning and financing. For now, potential customers and other organizations are contacted personally. One architect company which was very interested in their ideas also contacted them directly. These organizations also want to further develop sustainable solutions for the construction industry.

Political stakeholders have a major effect on how the construction ecosystem develops to become more sustainable. Without political guidance, the founders assume that traditional construction companies will not change their operations. The use of new materials and causing emissions must cost more, so that it would drive the whole industry to reuse different materials. Marketing and changing opinions in the construction industry have been the most important challenges of the new company. The founders have identified the circular economy as the main theme for the firm, as they try to market their idea to investors – everything related to construction does not seem to interest anyone.

Seizing

The company aims to develop their business model to focus on materials as the first step. The focus is to master the supply process before managing the total chain, from demolition to con-struction. The vision is to make buildings in the long term, but the design of reusable materials may take several years. The firm wants to challenge traditional ways of doing things in the con-struction industry – instead of quantity and price, the focus is on quality and the value creation process for individual customers.

The innovative elements of the business model are related to design activities of reusable materi-als. The company has an in-depth understanding of the construction industry logics and capabili-ties to solve technical issues. The firm still needs other organizations to tell them specifics about the demolition process, and also business knowledge to turn their ideas into a profitable business model. They do not have a partner who would provide specifics about materials. The communi-cation of the firm has mostly been one-way communicommuni-cation with ecosystem participants, and the founders have told different organizations how they want to do things. The founders believe that successful communication and marketing make them more trustworthy to future customers.

‘We have quite a few linkages to others but many contacts related to this theme. We can push this forward without too many advisors.’ – Founder (1) of Spolia Construction

Reconfiguring

The founders aim to find a suitable pilot project to showcase the potential of their idea. The pilot project would be a demolished building, and they hope that one or two pilots would be enough to demonstrate that their business model is profitable. The aim of the pilot would also be to demon-strate to customers that the business model is working. But first they must prove to investors the potential of their idea. The company needs investors to enable the pilot and to provide other in-sights about business development. The pilot is also relevant for authorities and regulators, which instruct entrepreneurs in terms of certain requirements. The pilot would also demonstrate the eli-gibility of products to the authorities, as products must be valid, safe and healthy.

‘The alternative is, of course, to find suitably forward-looking financially stably partners who would be ready for pilots on the side of developing their own business.’ – Founder (1) of Spolia Construction

The entrepreneurs do not have a risk-taking capacity to implement their idea themselves, and external partners are needed. Construction projects are capital-intensive and pilot projects would be impossible to finance alone. Some advisers have criticized the idea, as the entrepreneurs aim to start from scratch and because an easier path would be to develop some part of current compa-nies. The firm tried to get support from the public funding agency (Business Finland), but they did not get any funding, because the founders had not financed the company themselves to any degree.

‘The guy who was there didn't understand our business idea. It was just a bad experience.’ – Founder (2) of Spolia Construction

Figure 12: Capability-based business model innovation framework, as summary of Spolia Con-struction’s BMI.