Building Future-Proof Business Through Sustainability

Creating competitiveness by changing the game
Building Future-Proof Business Through Sustainability
Publ. date 8 Apr 2014
The idea of business model innovation is an appealing concept that is assembling passionate business leaders. Leading academics focused on the topic, like Porter and Prahalad, discussed the qualities of disruption and, its value creating opportunities by shifting business models. However many C-suite managers are hesitant to change their current model, since change seems a synonym for risk. But is that still the case in a context of shifting powers, needs and challenges? Norbert Reithofer, CEO of BMW Group presented an opposing view when asked why BMW started the risky e-car project: "Because doing nothing was even a bigger risk," he claimed.

Sustainable business, good business

"You'll know you achieved real innovation when folks look at the final solution and say: 'That's not sustainability, it's just good business," said Kevin Hagen, former director of corporate social responsibility at Recreational Equipment, Inc (REI). Innovation is one of the topics forever featured in business school reviews, classrooms and business magazines. The link to sustainability, though, is rather recent and is replacing the idea that corporate responsibility was a means to defend a company's reputation. Many companies are challenged by embedding sustainability into the business, thinking about sustainable innovation as new competitive advantage at three possible levels: products, processes, and business models. 

Sustainable alternatives based upon a customer or societal need, result in opportunities to adapt products and services. Examples of successful products are ample in different industries such as cars, baby foods and detergents (for instance Method cleaning products), where very often the first mover was followed by the competitors in the industry. Companies that have redesigned their processes tend to be focussing on improving the entire operation instead of improving individual products, e.g. Nike by embracing the Natural Step approach. What counts for these types of innovation is the relative modest strain on the organization’s ability to change, its culture and its core competencies.

The relevance of Business Model Innovation

Sustainable Business Model Innovation on the other hand will significantly impact the manner business is conducted and, the company’s ability to act aligned with the new business philosophy. Since the concept might appear to be both exciting and intimidating, sustainability experts have a long-lasting interest in the concept of business model innovation.

Alexander Osterwalder and Yves Pigneur offer in their 2010 work, Business Model Generation, a pragmatic approach to business model innovation based upon an inclusive and compact definition. They define business models as the “fundamental structures for how companies create, deliver and capture value.” In their work, they introduce the  “Business Model Canvas” that unites all essential business drivers in one single page. The book that has been a bestseller since it was published sold over a million copies and has been translated in 30 languages and, was co-created by 470 strategy practitioners.

Disruptive or future-proof?

To convince an organization to change its business model based on threats or opportunities that are not yet materialized, is hard to do. Without a sense of urgency, innovation often remains incremental, rather than fundamental and organization-wide. But as social and environmental issues continue to shift the essentials of our existing business models, incremental innovation will become less effective in enabling companies, sectors and economies to successfully adapt and ‘survive’. The sense of urgency is rising and with it the call for fundamentally different approaches to create value from sustainability, along with it. Research amongst 1.847 managers of companies worldwide indicates that nearly half of them had “changed their business models as a result of sustainability opportunities”. One of the keys for sustainable innovation is opening up the process of product, process, and business model design to the most important stakeholders such as Creating Shared Value is already actively practising.

Sustainable Business Model Generation in practice

Based upon the Business Model Canvas Finch & Beak has created a sustainable version GLOBE-US which has been endorsed by Alexander Osterwalder. Is your company struggling with sustainability challenges and looking for ways to drive innovation? Please contact Josée van der Hoek at josee@finchandbeak.com or call +31 6 28 02 18 80.

Image: Method, cleaning products 
Sources: Boston Consultancy Group and MIT 2013, Autoweek Magazine, edition 41 - 2013. 
About Josée van der Hoek

Experienced strategic issues management specialist with expertise in strategy development, food waste and DJSI. | josee@finchandbeak.com

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