It is time to restart business
We are facing a sustainability problem of massive proportions. There is widespread agreement that the business models of the future need to be transformed considerably to mitigate and adapt to climate change, manage resource scarcity and address systemic environmental risks.
Simultaneously, rapid and broad technological change is opening up a brand new solution space for how companies can create and deliver value, while at the same time threatening the “old ways” of doing business. Finally, consumer and community lifestyles seem to be changing – from ownership to access, towards more awareness of individual footprints on society and the environment, and so on.
We argue that these three developments suggest that the time is ripe for a RESTART. In our new book RESTART: 7 Paths to Sustainable Business (Cappelen Damm, 2017), we explore seven characteristics that are representative of more sustainable business models. We have developed the RESTART framework through many years of research and close collaboration with businesses both in Norway and abroad. RESTART is an acronym of seven changes that we argue are necessary in order to design more sustainable business models.
In the following, we present the seven components of the RESTART framework:
- 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 dimensions rather than one
When the conditions for business are changing, standing still is no option, and it is widely held that sustainable business will require massive redesign of business models. Across all industries, we are seeing new ways of creating, delivering and capturing value, and the ability to change the business model(s) of the company is crucial in changing business landscapes.
However, while innovative business models are necessary for change to take place, this will not happen overnight, and companies cannot place all their eggs in one basket. Instead, controlled and experimental approaches to business model design and innovation are crucial in order to reveal what works and how a new business model can be successful over time. Rather than a quick turnaround, then – business model experimentation is key.
A sustainable future will require smarter consumption of the scarce resources at our disposal. This implies a shift from the linear, “take, make and dispose” approach that traditional business models upon which have been built. Instead, businesses are shifting towards circular business models based on reuse, resource efficiency and closed-loop value chains. The circular economy is thus a key concept in the transition to greener, leaner business.
An important step towards more efficient resource usage is to move beyond the idea that consumers require ownership of products. Such product-logic has traditionally dominated business offerings and value propositions, but sustainable business can be promoted by companies embracing a service-logic. This implies emphasizing access over ownership, and developing services that are equally or more attractive than products for purchase and ownership. It can thus lead to smarter and more resource efficient consumption.
In order to succeed with changes on this scale, cooperation is necessary. When considering the sustainability of business models, it is too narrow to focus on what happens in the single company. High sustainability performance is difficult to achieve through “solo-runs”. It can however be promoted through alliances between companies that can solve problems together. Such alliances can render sustainable innovations across organizational boundaries possible.
Succeeding with comprehensive sustainable innovation requires prioritization. Not everything can be achieved, and it is more important to do the things that have impact than what looks good. Indulgences will not lead us to a sustainable future – what matters is that companies achieve results: that they succeed in making substantial improvements with regard to their most pressing sustainability concerns. This implies prioritizing the right kinds of issues and understanding what drives sustainability performance.
Finally in sustainable business models, there is an intimate relationship between social, environmental and financial performance dimensions. To enable the types of performance outlined above, this needs to be reflected in organizational design, and in the design of objectives, measurements, incentives and organizational design more broadly. It implies moving from one dimensional emphasis on financials towards rigging the entire organization for performance along three dimensions.
The good news is that the developments captured in the RESTART framework are already being integrated in companies in Norway and abroad. In our current research, we are investigating these phenomena empirically in our quest to gain deeper understanding of business model characteristics that are compatible with a sustainable and profitable future.