Friday, May 17, 2013

Business Model Innovation for Sustainability

Read the working paper
INSEAD Working Paper 2013/64/TOM

Plambeck (Forthcoming) describes five “Cleantech” firms (Zeta, First Solar, Better Place, Amyris and Calera) and calls for guidelines on how the Operations Management community can stimulate invention of new business models that promote environmental sustainability. The need to systematize the study of business model innovation is central to the creation of sustainable businesses. A new business model can often make the ownership and use of existing products/technology more environmentally and socially favorable. For instance, business models that align incentives of users with the environmental impact of their use can make existing products and technologies more sustainable. Further, just as in previous disruptive technological advances like the Internet, the advancement of sustainable technology has often exceeded the development of business models needed to capture value from it (Teece 2010). Specifically, the innovative technology offerings of some Cleantech firms often come with economic characteristics (scale-cost functions, risk profiles, cash flow profiles, etc.) that are drastically different from the traditional technologies that they substitute. Thus, these firms must pair their innovative technology offerings with business models that facilitate commercialization, adoption and scaling of these innovative technologies. This article provides a brief summary of a conceptual framework that we have developed to study and cultivate new business models, as applied to understanding and developing business models for sustainable firms. The ideas presented in this manuscript are elaborated in our forthcoming book (Girotra and Netessine 2014) and the interested reader can find details of the illustrative examples in the associated references.