BUSINESS MODELS FOR STRATEGIC SUSTAINABLE DEVELOPMENT

 

Draft Thesis Proposal

 

Dec 21st 2007

 

 

Augusto Cuginotti

Karen Miller

Freek van der Pluijm

 

 

 

 

 

 

 

 

1. Introduction

 

 

 

 

Businesses and organizations have a unique role in society.  They create value for their customers and participate in the economic system in order to deliver that value.  Understanding these roles within a sustainability context requires an understanding of the business’ interactions with ecosystem processes as well as social systems within the larger social and economic system of society within the biosphere.   This is specific to each organization, and includes factors related to geographic location and business sector as well as business model (Blankenship et al. 2007).

 

 

The business case for sustainability is well documented as "a solution, a business strategy, and a catalyst for business transformation" (Willard 2005).  Many organizations are interested in moving in that direction. The stage is set for a shift in business towards sustainable practices and value creation.

 

 

Applying sustainability in business is a challenge for managers and for entrepreneurs.  A business model is essential to every organization, and is a tool that can help with link the strategic purpose and vision of an organization to its operational processes.  Business models are, at heart, stories that explain how enterprises work.  They answer the questions: Who is the customer?  What does the customer value? How do we make money in this business? What is the underlying economic logic that explains how we can deliver value to customers at an appropriate cost? (Magretta 2002).  The answers to these questions set the stage for the fundamental ways in which the organization or business interacts with physical ecosystems, and delivers or creates social value.  As such, it is a leverage point for shifting the ways in which the business interacts with these external systems, and the opportunity to tell a story that enables more sustainable interactions.  Innovative business models provide the opportunity to decouple the value created by the organization from material flows.

 

 

Much research has been done on the technical components of implementing this philosophy.  A team at the Blekinge Institute of Technology has developed templates for sustainable product development, (Ny 2006).  Also, researchers at the University of Grenoble have developed and tested a tool called the Repro2 that gives relevant information to designers in order to reach a successful remanufacturing situation (Gehin et al. 2008).  These researchers have identified the next steps and challenges as identifying key success factors for a business model to be adapted to these new strategies (Gehin et al. 2008).  They intend to expand their studies and propose a more complete tool to aid at a strategic level, to complement the work being done at the design level (Gehin et al. 2008).  We have identified the potential for innovation in business models, informed by a strategic sustainable development perspective, to bridge the gap between strategy and operations towards implementation of the cradle to cradle philosophy.  

 

 

The goal of our research is to aid in the implementation of FSSD and C2C philosophy through innovation in business models.  This will provide the link between strategy and operations, allowing closed loop material cycles and value creation to be implemented at all levels of an organization.  

 

 

 

 

 

 

 

2. Main Research Question

 

 

How can Strategic Sustainable Development and Cradle to Cradle concetps be integrated in a generic business model?

 

How can a business create a business model that incorporates a strategic framework for sustainable development?

 

How can a Framework for Sustainable Development be incorporated into the creation of business models?

 

What are the key ingredients of a business model for an organization acting as part of a sustainable society?

 

 

 

 

        2.1 Sub-research Questions

 

 

What tool could help entrepreneurs think through their business model from a sustainability perspective?

 

Do the business models created using this tool help to implement the Cradle to Cradle philosophy?

 

What is the function of organizations in a sustainable society?

 

What are crucial aspects of a sustainable business model?

 

 

 

        2.2 Key Terminology

 

 

FSSD (Framework for Strategic Sustainable Development)

 

Sustainability Principles

 

Backcasting from Sustainability Principles

 

ABCD process for planning in complex systems

 

Cradle to Cradle

 

Business Model

 

 

 

 

3. Theoretical Framework

 

 

 

 

 

The current neo-classical economic paradigm is fundamentally flawed. Economics are treated as the end of a process of allocation of funds rather than a means for development, both from a business and for a societal perspective (Daly et al. 2003).

 

In order to reach a sustainable society within the biosphere we need fundamental shifts in the way the economic system affects the system within which it resides (Senge et al. 2001).  “The challenge today is to develop sustainable businesses that are compatible with the current economic reality.” (Senge et al. 2001). “Focussing on eco-efficiency may distract companies from pursuing radically different products and business models – changes that require shifts in mental models.  This is unlikely to occur without mastering the human dimensions of learning and change.” (Senge et al. 2001).  New business logic emerging, begins with rethinking how firms create value and redefines the characters – customers, employees, suppliers – and ultimately the company itself (Senge et al. 2001).  In short, they enable ourselves to tell a different story.  It is fundamental to understand a customer and serve a genuine need – also, a radical shift in business models.  Decouple materials from value, allow for sustainable development.  Shifts the meaning of ‘customer’ – from consumers to co-creators of value, recognize interdependence with suppliers, distributors and customers needed to build the trust necessary to shift established mental models.

 

Our proposed conceptual framework is to look at economics as a means for sustainable development towards the creation of environmental and social value (beyond the triple bottom line) (Ny 2007).  Entrepreneurs as change agents within communities to enable sustainable development (McKay et al.).  Planning with sustainability in mind at early stages of company development may have important impacts on future business success (the business case for sustainability) and societal welfare (Blankenship et al.).

 

When adapting or developing an strategic approach in organizations, the way to operate -- translated into a business model -- is a process and tool that helps to clarify how the business operations will be consistent with the vision and core business. Which are the key things that  should be considered from a sustainability perspective when an organization is creating or adapting its business model for operating towards a sustainable society. Intervention both on the vision level and on the operational level will result in a tool/guideline/set of questions which assists entrepreneurs to develop their own sustainable business model that is ready for the 21st century.

 

 

We define three levels of action for an organizations planning to develop a business model for sustainable development:

 

 

Level 1 - Vision: We will look at a Framework for Strategic Sustainable Development and the concept of Cradle to Cradle as the key ingredients for an organizations vision. The organization has to identify its own function in the system called a sustainable society. Fulfilling its function in society is what  the company will define as its Success stage.

 

 

Level 2 - Business Model: The business model, the main focal point of our thesis, absorbs both the characteristics of the vision as well as the guidelines following from the operations processes. The "business model" level will define the strategic guidelines for a successful business within sustainability constrains and will serve as an interface between the Vision and the Operational processes to create/deliver a product or process. The core business of the organization will be structured in such a way the boundaries of acting within a sustainable society are being identified, enabling the organization to move in the right direction towards sustainability.

 

 

Level 3 - Operations: On the operations level, different practices will have to take place. From backcasting from operations within a sustainable society key characteristics can be defined. Integrating these key characteristics in a tool for developing a business model for a sustainable organization enhances the chances of an organization contributing to the shift towards a more sustainable society.

 

 

 

 

 

 

 

4. Research Methodology + Planning

 

 

 

    4.1 Research Methodologies

 

 

Research Studies - Research on a scientific theoretical or empirical business model template that shows important characteristics organizations could benefit by analyzing and backcasting from their vision of success. Apply a framework for strategic sustainable development to make sure the template includes the conditions to make the core business plan and move towards sustainable development.

 

 

 * Literature search on business models, how they interact with material flows and value creation.

 

 * Develop generic criteria for a sustainable (from an FSSD and C2C perspective) business model.

 

 * Develop a method or tool to enable entrepreneurs to create/assess their own business model from an FSSD and C2C definition of success.

 

 

 

 

 

Case Studies - Work with case studies by both creating a business model together with a start-up in partnership with a local Incubator and apply the boundaries of a Business Model within a sustainability framework in an existing organization, by creating an analogy and performing some interviews.

 

 

* Ongoing interviews through all phases of the research.  Initially to help gain understanding of the system, business models, processes of developing business models and how business models interact with the physical and value flows that an organization creates.  As we get further into our research, we will ask for feedback on the tool/criteria that we identify and identify appropriate case studies.

 

* Collaboration with incubator (aid entrepreneurs in developing business models that help their business work strategically towards sustainability).  Test the tool or set of criteria that was developed.

 

 * Additional case studies:  we will seek out and interview existing organizations and analyze their business model with respect to our criteria for a sustainable business model.  We will perform a gap analysis (their current reality vs. sustainable desired future), and assess the potential for our tool/criteria to aid them in moving strategically towards the desired future.

 

 

 

 

 

 

 

 

   4.2 Research phases + activities

 

 

 To be determined based on opportunities for partnerships and collaboration.

 

 

 

 

 

   4.3 Planning + Timeline

 

 

 

December     

                        21 - Draft Proposal 1.0

    

                              

                              

January     

                        22 or 23 - Proposal Review Sessions     

                              

                              

February         

                  4 to 8 - Shadow & Peer Group Formation     

                22 - Hand In Introduction & Methods     

                25 to 9 - Introduction & Methods Sessions

                              

                              

March     

                              

                              

                              

April     

                      18 Hand In Draft of Final Report     

                21 to 25 - Results & Discussion Sessions

                              

                              

May         

                  9 - Hand In Final Report           

                22 and 23 - Final Presentations     

                26 - Final Presentations     

                              

                              

June                           

                  7 - Submission for Publication                       

                              

 

 

 

 

 

 

 

5. Constraints and links to other research

 

 

Linked to work being done on Sustainable Product Development both at the Blenkinge Institute of Technology (BTH), Sweden and the University of Grenoble (France).

 

 

 

 

 

6. Expected Results

 

 

A business model template that is a practical tool for both start-up entrepreneurs and existing business for analyzing how their operations and business choices are aligned with their vision and values towards contributing for sustainable development.

 

 

 

Requested Advisors:

 

Henrik Ny, Pong Leung

 

 

 

Other groups to network with:

 

 

 

•    10 flowers boutique (small business implementing cradle to cradle concepts and working with MBDC) contact has been made - possible case-study.

 

•    Enviu – confirmed.  External advisor Wouter Kersten, will put us into contact with C2C certification agencies

 

•    Incubator Enviu.

 

•    Incubator in Karlskrona.

 

•    Business Schools working on this topic.

 

•    Experienced Business Models.

 

•    Ken Alston, CEO MBDC.

 

•    Kaospilots.

 

•    University of Grenoble, France : Department of Integrated Design.  Gehin et al.  have been researching end of life strategies.  Mostly from a design and technical standpoint until now, but are expanding to look at strategy and identify key success factors for a business model.

 

 

 

 

 

 

 

 

 

 

7.    Bibliography

 

 

 

Blankenship, Heidi, Viktor Kulhavý and Jonas Lagneryd. Introducing Strategic Sustainable Development in a business incubator School of Engineering Blekinge Institute of Technology (2007).  

 

 

Daly, Herman and Farley, Joshua. Ecological Economics: Principles and Applications. Island Press. (2003)

 

 

Gehin, A.*, P. Zwolinski, D. Brissaud. “A tool to implement sustainable end-of-life strategies in the product development phase.” Journal of Cleaner Production 16 (2008) 566-576

 

 

MacKay, Laura,  Ann Scheerer and Tomomi Takada. Entrepreneurs as Change Agents to Move Communities Towards Sustainability. Blekinge Institute of Technology (2005).

 

 

Magretta, John. “Why Business Models Matter.”  Harvard Business Review 80,5 (2002): 86-92.   

 

 

McDonough, William and Michael Braungart, Cradle to Cradle: Remaking the way we make things. North Point Press. (2002)

 

 

Morrisa, Michael, Minet Schindehutteb and Jeffrey Allenc.  “The entrepreneur ’s business model: toward a unified perspective.”  Journal of Business Research 58 (2005): 726 – 735.

 

 

Senge, Peter, Goran Carstedt and Patrick Porter. “Innovating our way to the next Industrial Revolution.” MIT Sloan Management Review.  42,2 (2001): 24   

 

 

Ny, Henrik. 2006. Strategic life-cycle modeling for sustainable product

 

development. Blekinge Institute of Technology licentiate dissertation series, (2006):08. Karlskrona: Blekinge Institute of Technology.  

 

 

Willard, Bob.  The Next Sustainability Wave.  New Society Publishers.  (2005)