Business model innovation (BMI) research typically focuses on measuring “the wrong thing”: mainly economic performance of business
Sustainable business model innovation (SBMI) research is often quite action-oriented and does describe potential positive impact of innovations on society and the planet, but is highly qualitative with few studies focusing on actual measurement of positive impacts.
This was based on an analysis of the most cited empirical BMI and SBMI papers. In the paper, we suggest a focus on understanding how new business models impact ecosystems, society and the natural environment.
We suggest the following research directions (and more!):
Value destruction impact of (S)BMI
What types of social or environmental value might be destroyed because of BMI and how can this be measured or mitigated?
How can the positive societal and ecosystemimpact of SBMI be retainedwhen scaling and how can the negative impacts or rebound effects be avoided?
Dynamics of (S)BMI
How can unsustainable vicious cycles of BMI (e.g., volume over value, addictive consumption, environmental or human resource exploitation) be broken down in favour of sustainable alternatives?
Who or what are the catalysers of virtuous cycles of SBMI impacts on business ecosystems, society, and planet?
How can businesses map their position in an ecosystem to better understand how to make an environmental or social impact?
Luckily we see that recent studies have picked up measurement of societal and environmental impacts of (sustainable) business models, so hopefully we can shift the focus to researching and measuring what matters. You can find some recent examples of papers assessing the environmental impacts of new circular business models in the Introduction section of this paper.
“Today’s economy is highly destructive of natural and social capital, and is characterized by large and growing gaps between rich and poor” (Elkington, 2013, pp. 10).
Vallue creation and appropriation are much-studied processes in business and management, but research and practice has focused mainly on how economic value is created and appropriated by businesses. This over-emphasis on the economic logic has created institutionalised asymmetries in the relationship between business, society and the natural environment.
In this paper, co-authored with Prof. Paavo Ritala and Dr Laura Albareda, we ask ourselves the following question: what are the main asymmetries involved in the economic, environmental and social domains for specific types of goods, and what are the most promising solutions to those asymmetries from the viewpoint of business?
We answer this question by addressing:
(1) the type of economic goods used to create value (private and club goods, public goods and common goods)
(2) value creation and appropriation domains (economic, social, and environmental)
Based on Samuelson (1954) we define the types of goods as follows:
Private and club goodssuch as cars (private) and cinemas (club goods) are those that are excludable from others and are therefore subject to rivalry by private consumption. While private goods are privately owned, club goods include private but shared systems, such as cinemas and sport clubs.
Public goods such as public defence and education, are those of which the use of them does not exclude others; in other words, they cause no rivalry as their individual use does not typically reduce the availability to others
Common goods like forests and the ocean are those typically available to everyone and are defined as non-excludable because while it is impossible to exclude a person from their consumption, they do involve rivalry as their (mis)use precludes their future use by others.
The main domains are:
Economic domain: market-based activities, such as production, distribution and consumption of goods and services.
Social domain: human activities, including issues around social equity and justice, health, education, culture etc.
Environmental domain: the natural environment and its longterm sustainability.
Building on the framework that brings the types of goods and domains together, we argue that there are several institutionalised asymmetries, between the goods used to create value and the domains in which the value is eventually appropriated. The table below shows an overview of the problems or assymetries and potential solutions.
Table. Overview of problems or asymmetries across the domains and examples of solutions
Private & club goods
Problems: Overproduction, planned obsolescence, overconsumption, bargaining power and information asymmetry Solutions: Business creating private goods that individuals desire or need and capturing financial value by sales Example: long-lasting functional products, classic design
Problems: Business fostering the regeneration and maintenance of common goods, improving the environmental outcomes Solutions: Business creating private goods that contribute positively to society Example: business providing language services
Problems: Negative environmental externalities promoted by the production of private goods or services Solutions: Business creating private goods that do not contribute negatively, or contribute positively, to natural environment Example: frugal innovations
Problems: Abuse and overexploitation of a public good for private self-interest; Teamwork and free-riding problem Solutions: Business contributing their knowledge and capabilities to the generation of improved public goods Example: companies supporting health, former initiative Google Health
Problems: Corruption; Privatisation of public goods Solutions: Business contributing and partnering and using their knowledge and capabilities to build improved public goods and social welfare Example: public-private partnerships; B corporations in education and health systems
Problems: Negative environmental externalities promoted by the production of public goods Solutions: Business contributing to the positive environmental impacts of public goods Example: Net positive initiatives
Problems: Tragedy of the commons Solutions: Business participating in the management of common goods, improving collective economic outcomes Example: soil remediation services, sustainable forestry initiatives
Problems: Collective action and policy failures Solutions: Business adopting collective action to manage common goods, improving social outcomes Example: businesses involving underprivileged members ofsociety in value chain
Problems: The (mostly hypothetical) case of overprotection of natural resources Solutions: Business fostering the regeneration and maintenance of common goods, improving the environmental outcomes Example: Sustainable agriculture; regenerative agriculture