A brief presentation looking at some key ideas relating to sustainability and business models.

1. Business Models for Sustainability
Gavin D. J. Harper

2. What is a Business Model?
“a conceptual tool that contains a set of
elements and their relationships and
allows to express the business logic of a
specific firm.”
(Osterwalder & Pigneur 2002)
“stories that explain how enterprises
work”
(Magretta 2002)

3. Business Models Literature
• Clarification of the „business model‟ concept;
– Alexander Osterwalder,Yves Pigneur &
Christopher L. Tucci (2005) Clarifying Business
Models: Origins, Present and the Future of the
Concept, Communications of the Association for
Information Systems
– Jonas Hedman & Thomas Kalling (2003) The
business model concept: theoretical underpinnings
and empirical illustrations European Journal of
Information Systems 12, 49–59

4. Business Models Literature
ECO-SYSTEM OFFER CUSTOMER
Partner Customer
network relationship
Core Value Value Distribution Customer
capabilities configuration proposition channel segment
Cost Revenue
Success
structure streams
FINANCE
Adapted from Osterwalder: The Business Model Ontology

5. Sustainable Business Models
• Unsustainable business models focus on
extracting value from their environment, and
from society. Profit is a nil-sum-game.
• Sustainable business models focus on adding
value to stakeholders, the environment and
society. Profit adds value.

6. Integrating Sustainable Development Into The Business Model
Investigating Internalizing Integrating Innovating
The process of improvement
Capability and Understanding
Commitment
Partnerships
Adapted from: Birkin, F, Cashman, A, Koh, S.C.L., Liu, K., (2009) New Sustainable Business Models In China Business Strategy and the Environment, 18, 64-77

7. Business Models for Sustainability
• Many sustainable innovations make economic
sense over the whole life-cycle, but high capital
costs deter early adoption.
• Business models that can amortise the higher
capital costs of sustainable innovation over the
lifecycle of the product can help bridge the
gap.

8. Business Models for Sustainability
• There are also challenges with bringing some
innovative ideas to market – crossing the
chasm.
• Business model innovation can be cheap (can
be done on a beermat) whereas technical
innovation is often expensive (extensive R&D).

9. Crossing the Chasm
Can business model
innovation help?
THE CHASM

10. Business Models Literature
• “Appropriately designed business
models are an important opportunity to
overcome some of the key barriers to
market diffusion of sustainable energy
technologies.”
(Wüstenhagen & Boehnke, 2006)

11. Business Models Literature
“A mediocre technology pursued within a great business
model may be more valuable that a great technology
exploited via a mediocre business model”
Henry Chesbrough
Great Technology + Rubbish Business Model ≠ Sustainable Innovation
There is a need for BUSINESS MODEL INNOVATION
Great Technology + Kick Ass Business Model = Clean Green Future

12. Linear Commodity Chains vs. Cyclical Commodity Chains
Extraction Production Use End of Life Disposal
Extraction Production
By creating cyclical commodity
chains where products are taken
back, remanufactured or recycled
by the original manufacturer,
materials can be kept in a “closed
loop”, not squandered as in a
Remanufacture Use
linear chain.
End of Life

13. Non-ownership business models
• Whilst we have a culture of “ownership”, is
owning physical items sustainable in a world of
scarce resources.
– Riversimple; purchase “mobility as a service”
rather than „buying a vehicle‟ – incentive for
vehicle manufacturer to make existing vehicles
more efficient.
– Chemical leasing; more efficient resource use –
benefit to chemical provider in recycling.

14. Dematerialization
• Removing the need for increased consumption
of physical assets by substituting physical
goods with „virtual goods‟, or by consuming a
„service‟ rather than a „physical product‟.
– Apple iTunes (Does away with physical CD‟s)
– Amazon Kindle (Does away with physical books)
– Interface Flooring (Selling flooring as a service)

15. New Business Models Can Provide Equity To Those At The Bottom Of The Pyramid
Mature markets: >$20,000
0.5 bn
Emerging markets: $3260 to $20000
2 billion
4 billion Survival markets: <$3260
Population Data: World Resources Institute

16. The ‘Bikini’ Business Model
• Sell less, make more.
• Can you make the
consumer pay the same
amount of money, for less
physical product, whilst
getting greater perceived
value?
Higher perceived value than
a ‘Victorian Bathing Suit’,
less physical product!

17. The ‘Qualifying’ Business Model
• Leverage relationships with customers and
suppliers to support sustainability.
• Set „key qualifying criteria‟ as a component for
determining supply chains and target
customers.
– E.g. Triodos Bank – Will only lend to economically
viable businesses that produce explicit social or
environmental benefits.

18. Open Innovation
• Less focus on keeping IP in-house.
• Sharing has benefits.
– GreenXchange virtual marketplace for
sustainability IP
– Nike‟s Environmentally Preferred Rubber
• Sharing IP relating to reduce-toxins rubber for use in
trainers, in the hope that it could be useful to other
industry sectors.

19. It is easy to get ‘stuck’ in old patterns of thinking.
• “as „best practices‟ turn into „worst practises‟ and
„core competencies‟ turn into „core rigidities‟”
(Maholtra n.d.)Knowledge Management and New Organisation Forms: A
Framework for Business Model Innovation.
Challenges – How to overcome:
• Institutional lock-in
• „Not invented here‟
• Large sunk investments in existing technologies
• Entrenched bad practices
• Preconceptions about sustainable technologies

20. Business in the service of Sustainability
FOCUS ON THE CUSTOMERS NEEDS NOT THE PUBLIC GOOD!
• “focussing the value proposition on the aspects
that create the highest (private) customer value,
rather than primarily highlighting the public
benefits of sustainable energy, is a means to
address the challenges posed by environmental
externalities.” (Wüstenhagen & Boehnke, 2006)

21. Business in the service of Sustainability
Business will drive the sustainable technology revolution...
“Some regard private enterprise as if it were a
predatory tiger to be shot. Others look upon it as
a cow that they can milk. Only a handful see it for
what it really is - the strong horse that pulls the
whole cart.”
Winston Churchill