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Shared value is the idea that by addressing society’s needs and challenges, companies can create economic value in a way that also benefits society. Shared value seems promising, but many managers struggle to make it happen. NBS South Africa’s new report provides a better approach to pursuing shared value and business sustainability, by focusing on business models. Here, we preview research-based advice on managing business model innovation from the upcoming report and guide.

Why Business Models Matter

Business models have always been an integral part of business behaviour. However, diverse events have highlighted the role of business models as a new dimension of innovation. The Internet, post-industrial technologies such as nanomaterials, rising interest in renewable energies, and new forms of hybrid and social enterprises — all have broadened the discussion of innovation beyond product, process, or organizational innovation.

Accordingly, the 2015 IBM Global CEO report found that “four-fifths of CEOs are experimenting with alternative business models or thinking of doing so.” Figure 1 shows how business models expand the scope and reach of innovation.

Figure 1. The Four Dimensions of Innovation

Figure 1: The Four Dimensions of Innovation

Massa L., & Tucci, C. 2014. Business model innovation. In M. Dodgson, D. Gann, D., & N. Phillips. (Eds.). The Oxford handbook of innovation management: 420–441. New York: Oxford.

Today, both entrepreneurs and established businesses experiment with new business models that integrate ecological and social concerns. Justin Smith, Group Head of Sustainability, Woolworths, South Africa outlines how key this experimentation is to the firm: “Central to our Good Business Journey programme is challenging the business models we currently use, supporting  innovation across our organization and value chain, and finding ways of collaborating with expected and unexpected partners to create shared value.”

Other businesses may provide a product or service for free to one stakeholder group that is in need and make money with customers who are better off (e.g. TOMS Shoes or Wonderbag). They may also offer a free, reduced-feature version of their service to make money with a premium version (e.g. the “social freemium model” adopted by Aravind Eye Care Systems). Models such as crowdfunding or product-service-systems increasingly support sustainable technologies, e.g. renewable energies.

Interest in business models is thus not just about the pursuit of above-average returns, it is also about creating ecological and social value. Increasingly, rethinking only product technologies or processes seems inadequate to address challenges such as green and smart transportation, recycling and closed-loop production cycles, information consumption, health care, or better nutrition. These challenges require rethinking the way firms create, deliver, and capture value — the core elements of a business model.

Tap Business Models for Shared Value & Business Sustainability

NBS South Africa’s research project, Business Models for Shared Value, offers new insights into how firms can use shared value and business sustainability as creative drivers for business model innovation and transformation. Florian Lüdeke-Freund, Lorenzo Massa, Nancy Bocken, Alan Brent, and Josephine Musango have drawn on a systematic review of research and practice on the topic, gleaning insights from more than 180 articles. A main report, executive report , and primer will be available November 29, 2016.

The research describes:

  • How shared value relates to earlier concepts, such as business sustainability.
  • Why business model innovation is important for shared value and business sustainability.
  • How traditional perspectives on business models are transformed in business models for shared value and business sustainability.

The executive guide and main report feature 20 case illustrations and presents major avenues and instruments for business model innovation for shared value and business sustainability. The research also offers two new tools supporting managers and entrepreneurs in the design of business models.

In an earlier interview, Dr. Lüdeke-Freund describes the project’s origin and approach.

Sources

Boons, F., & Lüdeke-Freund, F. 2013. Business models for sustainable innovation: State-of-the-art and steps towards a research agenda. Journal of Cleaner Production, 45: 9–19.

IBM. 2015. Redefining boundaries: Insights from the global C-suite study. Somers, NY: IBM Global Business Services.

Massa, L. Tucci, C., & Afuah, A. forthcoming. A critical assessment of business model research. Academy of Management Annals.

Massa L., & Tucci, C. 2014. Business model innovation. In M. Dodgson, D. Gann, D., & N. Phillips. (Eds.). The Oxford handbook of innovation management: 420–441. New York: Oxford.

Schaltegger, S., Hansen, E., & Lüdeke-Freund, F. 2016. Business models for sustainability: Origins, present research, and future avenues. Organization & Environment, 20 3–10.

Schaltegger, S., Lüdeke-Freund, F., & Hansen, E. 2012. Business cases for sustainability: The role of business model innovation for corporate sustainability. International Journal of Innovation and Sustainable Development, 6(2): 95–119.

Zott, C., Amit, R., & Massa, L. 2011. Business models: Recent developments and future research. Journal of Management, 37: 1019–1042.