The 5 Cs of Business Model Innovation for Sustainability
Which business model innovations have the most promise for sustainability? How are leading companies exploring them? What role can companies play in advancing more sustainable business models?
These are a few of the questions posed by SustainAbility’s latest think tank work, Model Behavior: 20 Business Model Innovations for Sustainability. In March, we held roundtable events in London and New York with representatives from Barclays, Cisco, Estée Lauder, Ikea, L’Oréal, Mitsubishi and Vodafone, among other organisations. Below are a few of the ideas we discussed. (As we held the discussions under Chatham House Rule, quotes from the discussion included below are edited to provide anonymity.)
- Consumers and Customers are key: Business model innovation does not happen in a vacuum, and the element of customer and consumer desirability is paramount. In the words of one participant, “Consumers won’t sacrifice and they shouldn’t be asked to.” How far are consumers willing to go in a performance- and service-based, rather than product-based, economy? Companies feel the challenge of locking-in customers whilst offering them something fundamentally different. Dragon Rouge suggests visualisation is especially important for consumers. Their Brand Futures work, presented at Sustainable Brands in London in late 2013, sought to radically re-imagine high-profile UK businesses Argos, Bupa, easyJet, Morrisons, Primark and Rio Tinto. For instance, they painted pictures of catalogue merchant Argos repositioning itself to offer affordable leasing of all its products, and extractives company Rio Tinto pioneering the application of traditional mining technology to reclaim valuable metals, minerals and plastics from landfill.
- Culture and Capabilities shouldn’t lock you in but set you free: Do some company cultures isolate them from or serve as obstacles to innovation? Some participants noted that many companies have social innovation or similar side funds, but that it is not enough: “How do we democratise social innovation inside the organisation?” There is consensus that enabling innovation requires both a mind-set and skill set internally embedded throughout the organisation. Many participants felt that great ideas exist within their companies, but that the company may need to change its culture or capabilities to unlock the innovation.
- We can Collaborate: It’s difficult for a consumer-facing brand to collaborate with a competitor in a global marketplace. However, exploring the role that collaboration plays in supporting new business models for sustainability is essential. Participants recognised that working closely with others is crucial to the closed loop model, in particular. For instance, the London Sustainable Industries Park in East London was cited for its success in integrating the activities of complementary activities with a plastics recycling centre requiring water working with the neighbouring anaerobic digestion centre that produces water. The park’s success is seen in sharing energy, by-products, services and knowledge across industries. One participant also suggested that there are more opportunities for collaboration to be seized. For example, could companies – such as those in the footwear and apparel or IT sectors – work with peers and logistics companies –such as UPS and DHL – to develop a common approach to investing in product take-back, thereby scaling up closed loop systems currently undertaken only at the level of individual companies?
What also struck us was the value of drawing upon the experiences of other companies and applying the lessons learned to guide innovation elsewhere, such as realising the benefit of a senior internal champion, as was the case in the early development stages of M-PESA at Vodafone. One participant asked, “What sort of leadership and systems do we need to get to these 20 business models?”
Model Behavior is the first step in the development of a larger practice area on business model innovation at SustainAbility. As such, we are actively considering plausible future areas of research. The next phase may focus on gaining a better understanding of the internal culture and conditions that enable business model innovation and/or take a step back and look across sectors at the kind of change that needs to happen in particularly unsustainable industries. We are interested in exploring these topics in concert with partners and sponsors and welcome exploratory conversations with potential collaborators in the coming weeks.
If you are interested in exploring further research on business model innovation, please contact report co-author Lindsay Clinton.
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