[Note: This post is the first in our new “Papers in Brief” series. Posts published in this series provide a special service as they explain the core ideas of chosen research papers in a nutshell.]
Papers in Brief (I) by Erik Hansen
Hansen, E.; Große-Dunker, F. & Reichwald, R. (2009): Sustainability Innovation Cube – A Framework to Evaluate Sustainability-Oriented Innovations, International Journal of Innovation Management, Vol. 13, No. 4, pp. 683-713.
DOI | Download from SSRN
It is a pleasure for me to participate in the collaborative endeavour of the sustainable business model blog, not only because Florian – with whom I have collaborated for several years now – asked me to do it, but also because I am absolutely certain that the business model construct is crucial for advancing the sustainability agenda in research and, more important, in practice.
I stumbled over the business model construct as part of my research in sustainability-oriented innovation in early 2009, sometime before the construct had started to spread rapidly through the sustainability community. Against this background, let me take the opportunity to talk about the “business model” as my former student Friedrich Große-Dunker and I used it in our 2009 article on “Sustainability Oriented Innovation” in the International Journal of Innovation Management (the paper’s history goes back to XXth ISPIM Conference on “The Future of Innovation” in 2009 in Vienna where it won the Student Best Paper Award – yes, this was in the last stage of my PhD process).
Let me now talk more in-depth about the role of the business model in our 2009 article. In a nutshell, the article says that business model innovation is one important lever for the broader aim of sustainability-oriented innovation (SOI) – a term which we borrowed from Fichter and Paech (2004; see also Paech 2007) and we think is very important (see our article for an explanation of the meaning of “sustainability-oriented”). In essence, our 2009 model understands SOI as a three-dimensional heuristic consisting of the sustainability sphere, the life-cycle phase, and the innovation type dimensions (see figure; consider that I updated the figure to better represent my today’s understanding of the model):
Figure: A heuristic for Sustainability-Oriented Innovation (based on Hansen et al. 2009, p. 695)
1. Sustainability dimension: Sustainability covers economic, social, and environmental dimensions (while we related to the triple bottom line in the article, today, I would rather emphasize an embedded understanding of sustainability dimensions in the sense that the economy is embedded in the social/society, which itself is embedded in the natural environment and limited by the so called “planetary boundaries”; see e.g. Marcus et al. 2010).
2. Life-cycle: From a product innovation perspective –which was the intention of the article – sustainability must be integrated along the life cycle of the physical product (or the physical components in services) spanning from supply, manufacture, use to end-of-life (or better post-use).
In fact the first two dimensions are not new at all, as they simply represent a matrix known from life-cycle analysis (LCA) and related approaches. We should not forget however, that in 2009 these dimensions were still rather unknown in conventional innovation management (as represented by the International Journal of Innovation Management). Still, the more innovative part of our model was clearly the third dimension:
3. Innovation type: The third dimension emphasizes that sustainability solutions, and thus innovation, are not and cannot always be of technical nature. For example, the fuel efficiency of a car engine can be improved but, due to the rebound effect, this will never fully solve sustainability challenges represented by individual car-based mobility. We therefore thought of non-technological solutions – as represented by the body of literature on product-service systems (PSS) – as a higher level innovation type with potentially more significant impacts on sustainability. It should be mentioned, that product-service systems can also be a means to more successfully diffuse radical technological innovations. For example, think of electric vehicles and the difficulty in diffusing them into markets because sales mechanisms based on (full) car ownership suffered from high battery costs. With product-service systems these cost hurdles can be overcome as the examples of battery leasing (as offered by Volvo for some time) or, more interestingly, car sharing systems based on electric vehicles (e.g. Citroën Multicity Carsharing Berlin) demonstrate.
Interestingly, in our 2009 article we didn’t really consider the product-service-system level to be a business model innovation, even though it clearly is. This is one of the main blind spots, if you like, in the model which needs attention in a revised version (see Hansen and Große-Dunker 2013 for a better conceptualization of innovation types). In contrast, in our 2009 article we reserved the term “business model” for the third level of the innovation type dimension. This level, I have to admit, was the one least specified, even fuzzy – which is maybe the reason why it so far has only been partly recognized as a “business model article” – though, I would like to argue, it clearly is.
We thought of the business model as a construct to even more radically deviate from existing technologies, products, and product-based services (consider, for example, that car sharing – though a new business model – still represents mobility based on cars). Being inspired by the sufficiency agenda of Paech (2004, 2007), we thought of means for companies to develop radically different and more sustainable solutions for given needs – which of course cannot be done without radically changing the business model. It was intended as a means to explore entirely different products – and but more likely services – with radically superior sustainability characteristics satisfying true or genuine ‘needs’ instead of those ‘wants’ superimposed on consumers by marketing mechanisms. For example, how can the need for ‘togetherness’ and ‘communication’ be satisfied with other means than travel (including car-based mobility), for instance, with telecommunication services? How can the want for long-distance holidays to the Caribbean or related destinations in remote countries be dismantled so that the genuine need for recreation and nature could be served by more local, and climate friendly travel offerings? Hence, our original understanding of the business model represented the most ambitious innovation type linked to most radical deviations from companies’ established business units and is probably close to what my fellow blogger Nancy Bocken and her colleagues called “Encourage sufficiency”). This innovation type is probably a bit utopian in our today’s capitalist societies, and, as Paech (2004) states, it can even be contradictory to innovation in the sense it is (still) widely perceived today.
Overall, I see the key contribution of our 2009 article in positioning the “business model” (which should be understood as covering the product-service systems as well) as a key construct in the broader corporate sustainability and sustainability-oriented innovation literature. It emphasises that sustainability-oriented innovation can only be holistically understood by recognizing its technological AND non-technological levers with the business model as a vehicle to allow for more radical (non-technological) sustainability-oriented innovations. This is a more narrow understanding of the business model than, for example, Bocken, Short, Rana and Evans (2014) recently put forward – as they also consider technological improvements (e.g. “maximize material and energy efficiency”) as a business model domain. In fact, in our article the business model is restricted to certain archetypes.
I have to admit that most of these thoughts were not new when published. Our research was heavily influenced by unorthodox innovation literature by German researchers – most importantly by Niko Paech (a German sufficiency pioneer) and Klaus Fichter (one of the most published authors in German language on the interface of Innovation and Sustainability). I hope our publication has helped to make this research more widely known and hopefully to push the boundary a bit further.
Bocken, N., Short, S. W., Rana, P., & Evans, S. (2014). A literature and practice review to develop sustainable business model archetypes. Journal of Cleaner Production, 65, 42–56, doi: 10.1016/j.jclepro.2013.11.039.
Fichter, K., & Paech, N. (2004). Nachhaltigkeitsorientiertes Innovationsmanagement. Prozessgestaltung unter besonderer Berücksichtigung von Internet-Nutzungen: Endbericht der Basisstudie 4 des Vorhabens “Sustainable Markets Emerge” (SUMMER) (Schriftenreihe Unternehmensführung und Marketing, 40/2004). Berlin/Oldenburg, Germany: Univ. Lehrstuhl für Allg. Betriebswirtschaftslehre Unternehmensführung und Betriebliche Umweltpolitik.
Hansen, E. G., & Große-Dunker, F. (2013). Sustainability-oriented innovation. In S. O. Idowu, N. Capaldi, L. Zu, & A. Das Gupta (Eds.), Encyclopedia of Corporate Social Responsibility (Vol. 4). Heidelberg, Germany, New York: Springer, 2407–2417.
Hansen, E. G., Große-Dunker, F., & Reichwald, R. (2009). Sustainability Innovation Cube – A Framework to Evaluate Sustainability-Oriented Innovations. International Journal of Innovation Management, 13(4), 683–713, doi: 10.1142/S1363919609002479 [http://www.worldscientific.com/doi/abs/10.1142/S1363919609002479].
Marcus, J., Kurucz, E. C., & Colbert, B. A. (2010). Conceptions of the Business-Society-Nature Interface: Implications for Management Scholarship. Business & Society, 49(3), 402–438, doi: 10.1177/0007650310368827.
Paech, N. (2004). Nachhaltigkeitsinnovation – ein Widerspruch in sich? In D. Dietzfelbinger (Ed.), Nachhaltige Entwicklung: Grundlage einer neuen Wirtschaftsethik (DNWE-Schriftenreihe, Vol. 12). München, Mering: Hampp, 155–171.
Paech, N. (2007). Directional Certainty in Sustainability-Oriented Innovation Management. In M. Lehmann-Waffenschmidt (Ed.), Innovations Towards Sustainability: Conditions and Consequences. Heidelberg, New York: Physica, 121–140.