Sustainable business model innovation

 

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The capability to rapidly and successfully move into new business models is an important source of sustainable competitive advantage and a key leverage to improve the sustainability performance of organisations. This section provides an overview of the nascent field of sustainable business model innovation, based on a compilation from papers by Geissdoerfer et al. (2016, 2017, 2018). We discuss the (1) definition, (2) unit of analysis, (3) types, (4) process, (5) strategies, and (6) tools of sustainable business model innovation.

 

1. Definition

Sustainable business model innovation is the conceptualisation and implementation of sustainable business models. This can comprise the development of entirely new business models, the diversification into additional business models, the acquisition of new business models, or the transformation from one business model to another (Geissdoerfer et al., 2018). This understanding of sustainable business model innovation is based on the following definitions:

Definitions Table

Table 1: Selected definitions of sustainable business model innovation (Geissdoerfer et al. 2018)

 

2. Unit of analysis

Sustainable business model innovation aims at the sustainable business model or business model for sustainability concept. (See this post for a general definition.) As depicted in Figure 1, sustainable business models are (1) business models: simplified representations of the value proposition, value creation and delivery, and value capture elements, and the interactions between these elements within an organisational unit; that (2) incorporate pro-active multi-stakeholder management, the creation of monetary and non-monetary value for a broad range of stakeholders, and hold a long-term perspective (Geissdoerfer et al., 2018).

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Figure 2: Sustainable business model (Geissdoerfer et al., 2016)

 

3. Types

Business model innovation is a change in the configuration of either the entire business model or individual elements of it, either as a reaction to opportunities or challenges in the organisation’s environment or as a vehicle for diversification and innovation. Consequently, the concept’s main fields of application have been in corporate diversification as well as business venturing and start-up contexts. As illustrated in Figure 3, there are four types of business model innovation: (1) start-ups, (2) business model transformation, (3) business model diversification, and (4) business model acquisition (Geissdoerfer et al., 2018).

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Figure 3: Four types of business model innovation (Geissdoerfer et al., 2018)

 

4. Process

Sustainable business model innovation consists of eight iterative phases. As illustrated in Figure 4, an organisation undergoing this process can go back and forth in the process, repeating and omitting stages, and might repeat the process to react to new opportunities and threats in its ecosystem. The eight phases are:

  1. Ideation: The purpose of the business model innovation and its key stakeholders are defined, and the value proposition and first conceptual ideas are ideated.
  2. Concept design: A first rough conceptualisation of the key business model elements is developed and documented.
  3. Virtual prototyping: A range of prototypes is generated and revised to refine and communicate the business model concept. The phase also comprises benchmarking with solutions and concepts from other parties.
  4. Experimenting: Key assumptions and variables of the concept are tested in simulations and field experiments, ideally through randomised controlled trials.
  5. Detail design: An in-depth analysis and detailing of all the elements of the business model and interactions between these elements is conducted.
  6. Piloting: The entire concept is tested by running a first limited version of the business model in a subsection of the target market.
  7. Launch: The business model is rolled out across all responsible organisational units and the target market.
  8. Adjustment and diversification: The business model is revised according to initial plans, expectations, and strategic fit. Based on this evaluation, adjustments and diversifications are made and, depending on the comprehensiveness of the necessary changes, the entire business model innovation process may be repeated.
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Figure 4: Sustainable business model innovation (Geissdoerfer et al., 2017)

 

5. Archetypes

The most cited article on sustainable business model innovation is by Bocken et al. (2014). The authors propose generic strategies that can be combined to form a sustainable business model. Despite being intended as a classification for sustainable business models, these archetypes are hardly ever employed in this way. Instead subcategories like circular business models, social enterprises, or product-service systems are used, which combine different archetypical strategies. Both classification systems (business model types and business model strategies) provide valuable templates for sustainable business model innovation and are illustrated in Table 2:

Archetypes.png

Table 2: Sustainable business model types and strategies (Geissdoerfer et al. 2018)

 

6. Tools

There are a range of tools that can support the sustainable business model innovation process. Besides generic tools and techniques like the business model canvas (Osterwalder & Pigneur, 2010), Lean Startup (e.g., Ries, 2011), or Design Thinking (e.g., Plattner et al., 2010) there are a range of tools designed specifically to take sustainability performance into consideration. Examples include:

 

References

Bocken, N. M. P. et al.(2014) ‘A literature and practice review to develop sustainable business model archetypes’, Journal of Cleaner Production, 65(0), pp. 42–56. doi: 10.1016/j.jclepro.2013.11.039.

Geissdoerfer, M., Bocken, N. M. P. and Hultink, E. J. (2016) ‘Design thinking to enhance the sustainable business modelling process’, Journal of Cleaner Production, 135, pp. 1218–1232. doi: 10.1016/j.jclepro.2016.07.020.

Geissdoerfer, M., Savaget, P. and Evans, S. (2017) ‘The Cambridge Business Model Innovation Process’, Procedia Manufacturing, 8, pp. 262–269. doi: 10.1016/j.promfg.2017.02.033.

Geissdoerfer, M., Vladimirova, D. and Evans, S. (2018) ‘Sustainable Business Model Innovation: A Review’, Journal of Cleaner Production, 198, pp. 401–416. doi: 10.1016/j.jclepro.2018.06.240.

Lüdeke-Freund, F., Carroux, S., Joyce, A., Massa, L. and Breuer, H. (2018) ‘The Sustainable Business Model Pattern Taxonomy – 45 Patterns to Support Sustainability-Oriented Business Model Innovation’, Sustainable Production and Consumption, 15, pp. 145-162, doi: 10.1016/j.spc.2018.06.004.

Osterwalder, A. and Pigneur, Y. (2010) Business model generation. Hoboken: John Wiley & Sons.

Plattner, H. et al.(2011) Design Thinking: Understand – Improve – Apply. Edited by C. Meinel, L. Leifer, and H. Plattner. Berlin ; Springer (Understanding Innovation; Understanding innovation.).

Ries, E. (2011) The lean startup. London: Penguin.

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