Rethink Sustainable Business (4 of 7) Business Models
Warm welcome my friend to this seven-part series, where we answer:
How can businesses accelerate their profits by building a better world?
In Part 3 we looked at the platforms (purpose, leadership, and talent) and the two first enablers (value proposition and strategy). This time we’ll cover the business models. Let’s explore.
Business Model 3.0: What is net-positive about your business model?
NEW WAY OF THINKING ABOUT BUSINESS MODEL: As an Industry Leader 3.0 we look far beyond existing systems and solutions when we address customer core needs by dematerialization and regeneration.
FROM GLOBAL GOALS…
In line with your long-term strategy, zoom out to 2050 in a world with 10 billion people. What in your business model will net-positively serve your customers, society, and nature?
Peter Drucker said that: Every single social and global issue of our day is a business opportunity in disguise. Companies that leverage the Global Goals as drivers of innovation will be the biggest players on the green $12 trillion playing field. The ticket to enter that field is embracing customer needs through the Global Goals lens.
…TO CUSTOMER NEEDS
Business model innovation starts from customer needs. There is no larger risk to companies than going against the needs, wants, and desires of their customers. Those who lose customers do it because they lose their focus on the customer by focusing too much on protecting their core business instead. See your company through the customers eyes. Obsess over them.
Leverage your Value Proposition 3.0 to help customers make net-positive choices. They already want to do it and are just waiting for someone to satisfy their needs in increasingly better ways. And they are happy to pay for that value.
But where do we start to think like a net-positive customer in the 21st century? Their core needs.
CORE NEEDS
The conclusions since the 1970s is that creativity requires us to think outside the box. But why is this not enough today? Because, even if we escape the mind prison of the box, we are still trapped by the idea of its existence.
People are framed in their way of thinking and when faced with complex problems default to think like all other people; trapped by existing ideas.
What is an office to you? A physical space at your company? A physical space at home? Or even a virtual meeting space, such as a laptop anywhere? Let’s reframe and expand.
EXERCISE: EXPAND YOUR THINKING
The goal of this exercise will be to avoid as much greenhouse gas emissions from combustion cars as possible. How will our three leaders handle this challenge?
INDUSTRY LEADER 1.0 APPROACH
This leader uses inside-the-box-thinking; narrowly thinking of cars plus emissions, asking: “How might we optimize the car?”
The result is a more fuel-efficient combustion car.
INDUSTRY LEADER 2.0 APPROACH
This leader uses outside-the-box-thinking and expand their innovation space by asking: “How might we rethink a car and the environment it interacts with?”
The result is an electrical car powered by batteries, charged with wind and solar. They might also rethink the surrounding ecosystem, by pushing for government action to reengineer roads to reduce the need for batteries and let the cars draw energy from the ground by induced electricity. Further, they might offer Mobility-as-a-Service offerings, such as Robotaxis, to satisfy the need for mobility. This is great, but there is one leader left.
INDUSTRY LEADER 3.0 APPROACH
This leader uses no-box-thinking to question their assumptions down to first principles and expand their imagination and innovation space infinitely by removing the car (or box) from the equation by asking: “How might we satisfy the core needs of people to move around, through net-positive solutions?”
The results are compact, complete, and connected cities, to reduce the need for cars. They might even offer e-mobility, e-health e-banking, online education, and virtual entertainment, to reduce the need for mobility and satisfy the core need of accessing value.
Some derivatives include the need for:
- Well-being: access to nutrition.
- Self-growth: access to knowledge.
- Living: access to spaces.
Thinking will take you from A to B, but imagination will take you anywhere. Take a moment, close your eyes, and imagine how a world with no-box-thinking might look like. What do you see?
ENTER THE MATRIX
In the exercise, you probably noted a big shift; going from small incremental steps to giant exponential leaps.
This way of seeing beyond existing products to include core needs and a systems perspective brings us to the impact innovation matrix; a helpful aid to find the right solution.
WHAT AM I SEEING?
The matrix explores different solutions through the eyes of market need, business models, and innovation space. The further to the right, the more the innovation space — and the more the impact. And vice versa. By amplifying the innovation space, we reach new realms of possibilities.
HOW TO USE IT?
The matrix helps you explore nine solutions at the intersections of market needs and business models. Here we are exploring the journey of a car from left to right: incremental to disruptive to exponential solutions.
INCREMENTAL SOLUTIONS
These are great for optimizing net-positive solutions. But supplying an inefficient system with renewables, for example, is not net-positive. What about not thinking of sun, wind, and water when we think of a world without fossil fuels, what solutions comes to mind then?
DISRUPTIVE SOLUTIONS
Disruption has always been present. What is different today is the velocity of it. As a leader, how radical are you in your company? What about in your industry? How do you fare against hungry startups coming from unexpected directions and decoupling your value chain? How are you capturing the overall pattern of disruption; not just responding to individual startups?
If lacking the right mindset, leaders tend to ignore disruption until it’s too late. Be resilient; embrace uncertainty and a willingness to self-disrupt. Disrupt — or be disrupted.
EXPONENTIAL SOLUTIONS
How do you rethink and transform the systems you live in? Tesla, for example, isn’t building electrical cars just to replace combustion cars but enabling a system transition to electrification: a world of sustainable energy with electric vehicles, solar and integrated renewable energy solutions for homes and businesses.
LET’S GET 1000% BETTER
Industry Leaders 3.0 are not happy with 10% year-on-year incremental improvements. They surpass their mental limits to think exponential and push towards 1000% improvements covering the entire scope 1–6.
Aiming for 1000% improvements forces leaders and innovators to abandon preconceived notions about how a problem should be solved, which opens new realms of possibility.
In this space the Global Goals provide a superb base for framing innovation challenges and shaping business models that are exponential rather than incremental in nature.
BUSINESS MODELS
Business models that connect Global Goals with customer needs are emerging at an exponential pace. New technologies tend to grab the headlines, but it is business model innovation that underpins the most successful examples of impact as stated by Thales Teixeira in his book Unlocking the Customer Value Chain.
A business model for tomorrow’s customer calls for new ways of thinking. Amazon’s founder Jeff Bezos thought: It’s not about technology, it’s about meeting customers in business models. Why make digital books like physical books, when it can instead be seen as an entirely new ecosystem?
Ecosystems are vital. How deep scientific knowledge do you have about your business ecosystem?
Amazon started out as an online bookstore but has branched out a lot since and can today even be considered a logistics company. Mining companies are slowly repositioning themselves as material stewards and carmakers like Tesla are branching out into everything electric.
New ecosystems and business models are redefining companies every day and there are hundreds of business models to be leveraged, but which ones apply to your company depends on your circumstances. Let’s explore the essence of net-positive business models to help you get started.
DEMATERIALIZATION AND REGENERATION
Where sustainability is about maintaining the current state of nature, dematerialization is about reducing resources needed from nature to provide value; reducing the footprint. Regeneration on the other hand aims to provide value while restoring the environment to its former state; increasing the handprint.
In essence, Industry Leaders 3.0 aim to achieve more with less through innovation by going circular, going servification, and going digital.
1. GO CIRCULAR
Circularity is about gradually decoupling economic activity and value creation from the use of finite natural resources until full circularity is achieved; where resources, materials, products, and services circulate indefinitely in a continuous loop.
Circularity shifts from an extractive approach (take-make-waste) to a regenerative way (take-make-regenerate).
STEP ONE: PICK UP THE TRASH
Recover and reuse usable resources and energy from waste or byproducts.
STEP TWO: MAXIMIZE PRODUCT USE
Maximize the product’s usefulness and life by maximizing its utilization and value. Dematerialize: use fewer, recyclable, and renewable resources, as well as a module-based design. It is further enhanced by sharing (multiple users), multipurpose (multiple uses), repurpose (new use), reselling, and upcycling the product — giving it a second life.
STEP THREE: REGENERATE
With the footprint taken care of, put your handprint to use by rethinking and regenerating our natural systems through the Global Goals and customer core needs.
Ecosia leverage revenues from web searches to plant trees. Every search removes 0.5kg of emissions from the atmosphere. Running on 200% renewable energy and planting millions of trees every month makes them a vastly net-positive company.
2. GO SERVIFICATION
Imagine an economy where customers don’t pay big upfront costs to own a product but instead rent, lease, or subscribe to its value. It is called the sharing economy and is built on the idea that customers don’t desire the product itself, but access to the value, experience, and expected outcomes it offers. Customers go from ownership to usership; using the product-as-a-service.
Servification shifts from maximizing product sales to maximizing product value, thus optimizing the life-cycle cost of the product. Because if you keep the ownership of the product and charge customers only for the usage, you’re incentivized to keep it valuable for longer. Not only that, but since customers benefit from not having to invest in a product, it makes the product more affordable and its value more accessible, thus increasing your customer base. With more customers and fewer products to support, you can instead invest in and charge for more high-quality services. Increase revenues further by offering life-cycle services that maintain, repair, and upgrade the product.
3. GO DIGITAL
Transforming products or services into digital variants offer benefits over physical products, such as simpler and faster distribution, and a powerful way to dematerialize physical resources.
Take a physical road as an example. What needs does it serve?
- People drive on physical roads to go to work, classes, or meet friends.
- People transport goods to stores and customers on physical roads.
Now think of a digital road. How can it satisfy the core needs in a better way?
- On a digital road, do people need to physically move to meet their needs? Can they access classes, work, and friends virtually instead?
- On a digital road, do goods need to be physically moved? Can people access what they need using a laptop and a 3D printer instead?
TAKE IT ONE STEP FURTHER
Instead of digital roads, or even digital cars and digital buildings, move up one system level in assessing business models. Think of digital mobility and access. Think of digital living and spaces. Think of digital health, personal growth, and social development. What solutions do you think of then?
With technology we are granted innovation space to imagine on whole new levels. For example, shifting from limited physical infrastructure to unlimited digital infrastructure.
Technology has the potential to accelerate all 17 Global Goals if we at the same time satisfy the customer.
BEST PRODUCTS FOR THE WORLD
Today, we are moving from a society defined by scarcity and the need for more to a society where quality matters, and companies are rethinking their role accordingly.
An Industry Leader 3.0 resiliently weathers the waves of disruption by a business model that breaks new ground and enables lasting net-positive impact in untested markets.
They have realized that the best products in the world are the best products for the world. And, instead of thinking that they are in the business to sell products, they think of ways to provide access to better value.
This comes through a series of accelerators to transform the business model into something customers can access. It’s time to look at the three accelerators, and we will start with the most popular one — technology.
See you in the next one.
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