Human beings tend to think along simple straight lines. The relationship between variables and outcomes is conceived linearly as if driven by immovable logic.
In 'Linear Thinking in a Nonlinear World' (2017), the authors present linear thinking as a harmful cognitive bias. Here is a classic example: Driving 20 mph faster from 20 mph to 40 mph saves much more time over a given distance than from 70 mph to 90 mph. Contrary to intuition, the time saved from driving 20 mph faster does not increase linearly as any watch's tachymeter shows. Similarly, the incremental value of faster broadband speed decreases with speed. Consumers often fail to factor this in when evaluating premium subscription offers.
Non-linearity is often misappreciated in a business context, including when considering the relationship between price, volume, and profit. When relying on a linear model, pricing decisions can lead to rapidly declining profits.
In particular, individuals underestimate exponentiality. This exponential growth bias is relevant to the adoption of new technologies or fashion trends, the spread of contagious diseases (as recently experienced), the impact of compounding interests, population growth, or the stock of carbon dioxide. Change tends to happen much faster than anticipated, even when non-linearity is reckoned with.
There is an additional pitfall related to linearity. Procuring, producing, selling, and consuming have been perfected alongside a linear value chain. According to the 'Circle Economy' (2022), less than 9% of materials extracted and used are recycled back into the economy. Since the use of raw materials is driven by the exponential growth of the middle class, the future call on planetary resources is underestimated.
In the HBR article 'The Circular Business Model' (2021), three business models designed to support circularity are presented: the retention of product ownership (e.g., tires, printing, or fashion as a service), the lengthening of product life (e.g., equipment remaning); and design improvement to facilitate recycling (e.g., recycling of plastic components). The appropriate mix of circular strategies depends upon product accessibility and reprocessing ease.
A strong circularity performance can support the implementation of a differentiated sustainability strategy. The Ellen MacArthur Foundation freely provides circularity indicators and a related scoring system (alongside benchmarking analytics). It is featured in a critical analysis of 10 circularity assessment tools in this interesting analysis.
As firms move away from a linear world and implement new, circular business models, human instinct must be replaced by deliberate thinking. Fundamentally, non-linear thinking is needed to implement non-linear strategies designed to tackle non-linear challenges.