Future-ready innovation. More than “just” sustainable

Sustainable Business Models: Expanding on the Business Model Canvas

Finding good ideas and then getting them on the road as innovations… you probably know from your day-to-day work that this aspiration sounds much easier than it is. Just developing really good ideas is hard work. Making them commercially viable is even more so. Alexander Osterwalder and Yves Pigneur created the Business Model Canvas, a design tool that should simplify both and that works great in practice. However, the Business Model Canvas is reaching its limits in today’s world.
 

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Limitations of the Business Model Canvas

What is “value?”

With the Business Model Canvas, we can formulate a concise value proposition and embed it within an economic context. We can check whether and how it works and where there is potential for improvement. Thus, it gives us a platform on which we can present business models in a simple, tangible way. In turn, this enables very different people to understand the mechanics of the model as well as to talk and exchange ideas about them in a structured way. Hence, we can bring new, often surprising ideas into a discussion that is otherwise shaped by expert knowledge and technical terms. Thus, it is not surprise at all that this is such a popular method today.

Nevertheless, there are substantial points of criticism when it comes to using this method. And we should take it seriously, as it is raised by Yves Pigneur, one of the Business Model Canvas’s inventors. Together with Raymond Paquin and Alexandre Joyce, Pigneur published a paper based on findings by Antony Upward that objects to the concept of value that underlies the BMC. They argue that the method follows a “profit first” philosophy and that it defines value in a purely economical way. In the authors’ view, this view is no longer sustainable in today’s context, and I agree. A good business model should improve the lives of everyone involved – including clients and partners – across the entire value chain. With this attitude as a basis, Pigneur et al. added two new dimensions to the Business Model Canvas: a social and an economic one. Interestingly, with this concept we can do more than just examine a business model’s sustainability: it can also function as a framework for the systematic generation of new ideas for innovation. You can read more on these findings in a paper published by Pigneur et al.

The Triple Bottom Line and the expansion of the Business Model Canvas

Creating a tool for sustainable innovation

The further development of the Canvas is fundamentally based on the idea of sustainability. Inspired by the 17 Sustainable Development Goals of the United Nations and the concept of the Triple Bottom Line, Pigneur and his colleagues added a social and an ecological component to it. However, instead of just adding sustainability indicators to the bottom line and, thus, focusing purely on results, they use a more exciting approach. They developed two new canvasses that mirror the logic of the BMC, but look at different dimensions of value: the Environmental Life Cycle Business Model Canvas and the Social Stakeholder Business Model Canvas. Both allow for the creation of further levels of value that are just as important as economic viability.

 

Testing the Triple-layered Business Model Canvas

At this point you may ask yourself how it might be possible to present the ecological or social impacts of a business model in a “simple” way. There are many different aspects to consider, after all. Let’s get straight to the point: it isn’t actually *that* simple, and Pigneur et al. were not able to provide a final answer to this question. To be sure, they utilized standardized and proven methods to measure, say, ecological impact. However, those are only able to compile meta indicators that stay multifaceted under the hood. Thus, the complexity remains.

In practice, however, this is not a problem at all, but an advantage. Because business models are also very multi-faceted. Let’s take our agency life as an example: the company that provides our printing services probably has a different view of ecology than the Italian restaurant where Iconstorm used to eat on Thursdays – pre Covid. For both, very different aspects of the topic may be relevant. And that’s exactly why the open approachto may prove practical when working with the two canvasses: everyone can ask the appropriate questions from their own perspective and thus develop relevant ideas for themselves. A creative process for developing ideas for innovation takes place here in the same way as with the economic business model canvas.

Future-ready business model innovation

True innovation instead of damage control!

As you can see, the new layers are a great approach to consider how to make your processes more environmentally or socially friendly. And you can actually use them to scrutinise any business model. However, that alone would probably not be worth mentioning, because there are already other assessment tools for that. (Namely those on which the Canvas is based.)

This reveals a very fundamental problem: the term “sustainability” is in itself completely neutral. It is about preserving the status quo. The debate about this, however, is strongly influenced by the fact that for a long time we did not operate sustainably at all. Economic value was produced by consuming finite resources: Wood became furniture and crude oil became plastic. Simply because it was more economically viable than the alternatives. Thus, forcing today’s conventional economy to rethink its approach for the sake of damage control, without the prospect of any additional benefits, is obviously not an attractive value proposition. For this, we need the prospect of real innovation. In our opinion, the field of regenerative economic processes is a fantastic starting point, and the new BMC layers provide a framework to innovate in this area.

The exciting thing about the new layers is their perspective on social and environmental issues. Because they enable us to not only find hidden costs, but to also find opportunities to actively create social and environmental value. The tool adds new types of growth to the method, and thus combines economic growth with regenerative value that benefits all stakeholders (including nature) and actors along the value chain. External costs are thus contrasted with external benefits and suddenly completely new potential opens up for value creation. This is precisely where truly sustainable business models emerge: models that will generate value in the long-term.

At the moment we are (still) in the process of gathering practical experience with the Triple-layered Business Model Canvas. In principle, however, we find the idea so convincing that we have included it in our toolbox.
 

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Author

As a business design expert, Yara Dobra is responsible for everything to do with team processes, collaboration and organisational development at Iconstorm. She currently teaches, among other things, the application of the Triple-layered Business Model Canvas in the MBA programme Future Trends and Sustainable Management at Nürtingen University together with Michael Geiss.