RESTART sustainable business model innovation
In August 2018, we sat down with the top executives in one of Norway’s largest retail chains. “Challenge us”, they said. “How can we design business models that are both sustainable and profitable? How can we turn our business model circular within 2025? Is it possible to give our corporation a RESTART?”
For almost 15 years, we have studied how companies can align sustainability and profitability in new business models, but we have recently experienced a grand shift. When we embarked on this journey, sustainability and corporate responsibility managers were often communication advisors with little power. Today, however, these issues have risen to the top of the corporate agenda, and we are invited to perform experimental research on sustainable business model innovation in close collaboration with companies in a wide array of sectors.
Generally, our experience is that there is a lack of competence about how to design sustainable business models. Therefore, we often meet managers who want to integrate sustainability into their core strategy, as with the top executives described above. However, they openly admit that they do not know how to do it in practice. Profitability is still the number one issue in these companies, but at the same time these managers express a desire to make a difference. They clearly also recognize the risk of being out-competed if they do not actively contribute to the shift from a “brown” towards a “green” economy.
As our contribution to such a shift, we recently published the free, Open Access book RESTART Sustainable Business Model Innovation. It was published on August 1st of this year as part of the Palgrave Studies in Sustainable Business In Association with Future Earth series, which is edited by two of the foremost thinkers in this field, Paul Shrivastava and Laszlo Zsolnai.
not a day we should celebrate, it is rather a depressing date, because it is represents the day on which all humanity’s resource consumption for the year exceeds Earth’s capacity to regenerate those resources that year. That is, it is the day when we move into unsustainability - for the remainder of the year, we borrow resources from future generations. Four decades ago, Earth Overshoot Day took place in November, which means that in our lifetime, humanity’s ecological and social footprint on Earth has increased substantially.
Business has played an important role in creating this problem. At the same time, we depend on business for the solutions that can help us come even close to solving it. We argue that this requires what we call a RESTART of our current business models. During the last 15 years, we have worked closely with managers in many different industries to whom we provide research-based advice on how to design sustainable and profitable business models. Our book RESTART Sustainable Business Model Innovation is based on this research, and in the book we argue that three major trends indicate the need for major changes in current business models.
First, as posed above, we are facing a massive sustainability problem. Second, we are currently in the middle of a technological revolution which renders old business models obsolete, and which creates huge possibilities for creating value in new ways. Finally, changing consumer preferences and consumption patterns help to make new types of value creation possible – for example, through sharing-economic business models, access-based services, and so on.
When we make the case for a RESTART, it is with reference to these three trends. RESTART is an acronym of seven letters that correspond with seven steps to sustainable business models. We have developed the framework to provide decision-makers in various industries with a framework for conducting sustainable business model innovation. This means that we designed it to deal with questions like what the company will deliver and to whom; how to do this in practice; and – not at least – how the company can profit from minimizing negative and maximizing its positive externalities. We have developed and used the RESTART framework for a period of many years, and we based the framework on seven changes in the ways companies create, deliver and capture value:
Redesign rather than standstill
Experimentation rather than turnaround
Service-logic rather than product-logic
The circular rather than the linear economy
Alliances rather than solo-runs
Results rather than indulgences
Three-dimensionality rather than one-dimensionality
New business models are emerging across all sectors, and redesign of business models reflects new ways to create, deliver and capture value, by taking into consideration sustainability issues and technological capabilities as drivers for business model innovation. To successfully redesign business models, it is necessary to conduct controlled experiments to identify and analyze what works and what does not. Rather than putting all eggs in the same basket, one should rather experiment on the way to a new business model.
In many cases, sustainable business can be promoted by a service-logic, in which value creation and value delivery are oriented towards giving the customer access to what he or she needs, rather than offering it in the form of a product based on ownership. There is no company in the world that does not use energy, water and other natural resources, or that do not generate to some extent excess resources and waste from their operations. To become more sustainable in a way that is compatible with financial performance, it can be helpful to think in terms of the circular economy in designing the way resources are acquired, processed, used and ultimately reused.
Solutions of the type that promotes circulation and service thinking will often require that businesses enter into alliances with other organizations that may enable them to create and deliver value in this way. This enables exploitation of the complementarity between companies, and even facilitates manufacturing, logistics or other processes that involves smarter use of resources than if companies do not cooperate. In order to set the right goals and to prioritize the right efforts that can promote sustainability and profitability, it is essential to emphasize the right results. This involves identifying key externalities and material sustainability concerns that are critical for corporate strategy and operations. To succeed in achieving these goals, the entire organization must be designed in a way that reflects three-dimensionality. This means reflecting social, environmental and economic objectives in organizational design, leadership and management control systems.
If we are to solve the sustainability problem collectively, and to do so in a manner that allows for continued profitable growth, we need a comprehensive set of big and small RESTARTs across all industries. While the specific solutions in each industry will be different, we believe that the seven components of the RESTART framework to various degrees can inform new ways of creating, delivering and capturing value in all sorts of organizations. We certainly need it, and we need it to happen at a higher speed than is currently the case.
Sveinung Jørgensen is Associate Professor at Inland Norway University of Applied Sciences, Norway. He holds a PhD degree from Karlstad University. He does research on the design and innovation of sustainable business models and field experiments on socially and/or environmentally beneficial behaviours. He serves on numerous boards, acts as a strategic business advisor and is an active public speaker.