This is part 2 of 8 from the 2012 Sustainability & Innovation Global Executive Study and Research Project.
Business model innovation is the bottom line of Sustainability-Driven Innovator success. In stark contrast to managers who say sustainability is not adding to profits, those who say that it is are more than twice as likely to report that sustainability is driving business-model innovation. As Michael Bremans, Chairman of Ecover, a manufacturer of eco-friendly cleaning products, puts it: “Sustainability means that you are continuously looking at innovation and improvement. You shouldn’t think of it as a best or finished solution. It’s a process that requires constant attention and commitment.”
Business-model innovation looks beyond product, service or technology advances. This dimension of innovation explicitly addresses the fundamental choices a company makes about what it is offering to whom — its value proposition — and how it leverages its value chain, cost models and organization to deliver that value (see “A Framework for Analyzing Business Models”).2
A Framework for Analyzing Business Models
A clear business case helps ensure that innovations deliver value. Overall, the percentage of respondents who say their companies have developed sustainability business cases has grown over the years. With Sustainability-Driven Innovators, the number is pronounced: 54% have developed a business case versus 38% overall. Developing a business case avoids what Paul Murphy, chief executive of Valid Nutrition, the social enterprise food production arm of VALID Group, cites as a dangerous pitfall. “Too many companies see sustainability as an insurance policy and just tick off the boxes,” he says. “They often spend significant amounts of money that, from a strategic and business development standpoint, leads to a dead end.”
To avoid that dead end, Sustainability-Driven Innovators see the opportunity differently than do companies that haven’t gleaned sustainability’s financial rewards. They don’t dwell on it as a cost issue. They focus on how their efforts can increase market share, boost energy efficiency and build competitive advantage. Sustainability-Driven Innovators bring a strong execution focus to their efforts. These companies are much more likely to place customers at the center and work closely with many stakeholders. They also drive sustainability objectives through skillful organizational change.
In the remainder of this report, we look at these specific hallmarks in detail.