(Palgrave Studies in Sustainable Business In Association with Future Earth) Sveinung Jørgensen, Lars Jacob Tynes Pedersen - RESTART Sustainable Business Model Innovation-Springer International Publish.pdf
(Palgrave Studies in Sustainable Business In Association with Future Earth) Sveinung Jørgensen, Lars Jacob Tynes Pedersen - RESTART Sustainable Business Model Innovation-Springer International Publish.pdf
(Palgrave Studies in Sustainable Business In Association with Future Earth) Sveinung Jørgensen, Lars Jacob Tynes Pedersen - RESTART Sustainable Business Model Innovation-Springer International Publish.pdf
SUSTAINABLE
BUSINESS MODEL
INNOVATION
Sveinung Jørgensen and
Lars Jacob Tynes Pedersen
PA L G R AV E S T U D I E S I N S U S TA I N A B L E B U S I N E S S
In Association with Futur e Earth
Palgrave Studies in Sustainable Business In
Association with Future Earth
Series Editors
Paul Shrivastava
Pennsylvania State University
University Park, PA, USA
László Zsolnai
Corvinus University Budapest
Budapest, Hungary
“This is a very practical framework that executives will find quite useful in guid-
ing their thinking to develop a truly sustainable business model. It should be
read by all who are deeply concerned with sustainable business.”
—R. Edward Freeman, University Professor,
The Darden School, University of Virginia
business model innovation, and RESTART fills this vital need. The case studies
illustrate the framework in illuminating ways that senior executives can readily
understand and use.”
—Ram Nidumolu, CEO, Academy for Innovation &
Management, award-winning HBR author
“In the effort to solve the big sustainability challenges of our time, innovative
business models are essential. In this book, Jørgensen and Pedersen show how
companies can turn problems into solutions by giving their business models a
RESTART. This book gives managers the tools for contributing to build a sus-
tainable future.”
—David Katz, Founder and CEO, The Plastic Bank
RESTART Sustainable
Business Model
Innovation
Sveinung Jørgensen Lars Jacob Tynes Pedersen
Inland Norway University of Applied NHH Norwegian School of Economics
Sciences Bergen, Norway
Lillehammer, Norway
© The Editor(s) (if applicable) and The Author(s) 2018 This book is an open access publication.
Open Access This book is licensed under the terms of the Creative Commons Attribution-
NonCommercial-NoDerivatives 4.0 International License (http://creativecommons.org/licenses/by-nc-
nd/4.0/), which permits any noncommercial use, sharing, distribution and reproduction in any medium
or format, as long as you give appropriate credit to the original author(s) and the source, provide a link
to the Creative Commons license and indicate if you modified the licensed material. You do not have
permission under this license to share adapted material derived from this book or parts of it.
The images or other third party material in this book are included in the book’s Creative Commons
license, unless indicated otherwise in a credit line to the material. If material is not included in the book’s
Creative Commons license and your intended use is not permitted by statutory regulation or exceeds the
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or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations,
recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or
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The publisher, the authors and the editors are safe to assume that the advice and information in this book
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This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG
The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland
To Endre and Rannei Johanne,
Marie and Ada
Foreword
Our world now appears to be gripped once more by zero-sum thinking and
an intensifying “winner-takes-all” approach in a range of sectors. For com-
panies choosing between sustainability and profitability, or economic
growth and social equity, are artificially limiting the choices at our disposal.
This is the case that Jorgensen and Pedersen make in this book—for com-
panies to see that their viability and profitability are not threatened, but
rather can be enhanced, by embracing sustainable practices.
The World Economic Forum recognizes the importance of changing
this mind-set. This is why it has been working since its founding in 1971
to convene diverse stakeholders from government, business and civil soci-
ety around a common agenda, to create win-win solutions and to trans-
form false dichotomies into real synergies. It means being able to consider,
as the authors do, the short- and long-term challenges and opportunities
facing companies as they navigate conflicting interests and constituencies
to balance growth, prosperity, sustainability and profitability.
For this reason, and in a world that is to an increasing extent divided
and dominated by echo-chambers, this book could not be more timely.
By showing how to reconcile the bottom line and environmental sus-
tainability, it points the way forward for any entrepreneur that has the
best interest of its shareholders—as well as the planet—in mind.
“Dear passengers. We remind those of you who will be leaving the plane at
Kigali International Airport that all plastic bags must be left on board. It is
not allowed to bring bags into Rwanda.”
We looked at each other, and then we looked around. Quite right: the
passengers took items out of their plastic bags and carried the contents
out in their hands. We were not disembarking the plane in Rwanda—it
was a stopover on the way to Kampala in Uganda. We went there to
advise a delegation of the Ugandan authorities, led by the Minister of
Water and Environment, Ephraim Kamuntu, as well as companies from
the Eastern African countries, in their preparation for the United Nations
Climate Change Conference in Paris in 2015, also known as COP21.
The plastic problem that was the reason for the surprising message on the
plane was a hot topic in Uganda and the other East African countries too.
In the Indian Ocean off the coast of East Africa, there is an area full of
plastic garbage—the Indian Ocean Garbage Patch, which is larger than
South Africa and Ethiopia added together. There are five such patches in
the world oceans—they have become symbols of pollution and ecosys-
tem destruction, and they are increasing in size.
Therefore, Sveinung was not surprised when only six months later he
stood on the grounds of The Plastic Bank in Port-Au-Prince, Haiti, along
with one of the managers in the company. Sveinung was there doing
ix
x Preface
research for this book, and together, they looked at the huge amounts of
plastic garbage the company had collected by creating jobs for the poor
people on the island. The Plastic Bank had simply realized that it could
do two things at once: it could do business in a way that prevented plastic
from reaching the sea. At the same time, it could become profitable and
create jobs exactly by “turning trash into cash” and by collaborating with
companies that use recycled plastic in their products. The Plastic Bank
realized that plastic is not just waste, and it is not just a problem: it also
represents a misuse of resources that have great economic value if brought
back to productive use.
Today, we have all started getting used to companies, customers and
authorities putting sustainability on the agenda—whether this relates to
plastic or water, CO2 emissions or additives in food production, human
rights or gender equality, corruption or poverty. It has even come to the
point where more and more companies are realizing that it is possible to
be both sustainable and profitable. In our work, we meet small and large
companies that find new and innovative ways of doing business that are
less harmful to society and the environment. Not only that—many of the
companies even aim to have a net positive footprint, for instance, by
integrating United Nations’ Sustainable Development Goals (SDGs)
into their strategies.
It has not always been like this. Quite a few years ago, we found our-
selves in the Baltics, where we were working with a financial institution.
The company was aiming to ensure that it conducted its banking prac-
tices in the region responsibly, even in a difficult market with corruption,
money laundering and environmental criminality. At lunch with the
company, one of the older managers in the company leaned over to Lars
Jacob and said with a sly smile, We try to make this work—we really do. But
remember: Until recently, the business model of our industry was “steal-and-
run”. Since then, we have discussed sustainable business model innova-
tion with everything from private equity firms in Oslo to investment
banks in London, and there are indications that sustainability has become
mainstream even in the financial industry (e.g., Jeucken 2010; Eurosif
2014; Eccles et al. 2011).
In our work as researchers and advisors for companies, we see how this
happens across all industries—to an increasing extent and with increasing
Preface
xi
pace. In the years of research involved in writing this book, we have dis-
cussed alternative business models with the oil industry; had workshops
with social entrepreneurs; brainstormed with fish-farming companies
about the possibilities of green growth at sea; sparred with the automo-
tive industry about the implications of the electric car revolution for its
service market; discussed with logistics companies what the green trans-
port system of the future could look like and worked with Norwegian
entrepreneurs from various industries on the opportunities and chal-
lenges of bringing a sustainable business model to the global market. We
work with an increasingly varied set of companies all over the world that
have similar challenges: they all influence society and the environment,
for better or worse, but how can they succeed in doing business in a way
that allows them to align sustainability and profitability—both in the
short and long term?
Questions like this are also at the core of our discussions with current and
future managers at the master’s and executive courses in sustainable business
model innovation that we teach in Norway and abroad: why has Apple
taken the trouble to develop a robot that can dismantle old cell phones?
What lies behind Renault’s decision to enter into a long-term relationship
with a company that recycles steel? Why does Refettorio Gastromotiva in
Rio de Janeiro collect soon-to-be-discarded food from grocery stores and
have top Brazilian chefs cook three-course dinners for the homeless, while
simultaneously offering cooking education to the poor? Why is it that
LEGO will use one billion Danish kroner to find an alternative to the plas-
tic used in the LEGO blocks? Why does Equinor (formerly Statoil) capture
large amounts of CO2 and give it to scientists at the company CO2BIO,
which cultivates algae for making nutritious fish feed? What makes compa-
nies such as Bright Products develop solar energy solutions for impover-
ished people in the African market? Why does the Norwegian consumer
products company Orkla develop an organic and vegan alternative to its
personal hygiene and laundry detergents and deliver these products in recy-
cled plastic bottles? And what makes the aquaculture industry move its fish
farms on land and collaborate with partners who can collect, rinse and dry
the wastewater from the farms and turn it into fertilizer and energy?
We argue that these companies are doing what they are designed to do:
they find problems that can be solved in profitable ways, and the natural
xii Preface
thing is to start with the problems that matter. But which problems are
important enough so that customers are willing to pay to get them fixed?
Many of the biggest problems we face as a society today relate to social
and environmental sustainability. Contemporary business leaders face a
sustainability problem of enormous dimensions. Research indicates that
we already have to prepare for significant climate change, while overcon-
sumption and population growth leads to depletion of key resources for
both business and society. Simultaneously, the problem of poverty per-
sists and causes distress, social unrest, corruption and an unstable society.
These developments cause the ground to tremble under businesses that
are now beginning to realize that “business as usual” may be going “out
of business”. This is precisely why there are so many indications that in
the coming decades, sustainability problems may be among the biggest
sources of profitable business opportunities for the companies that
embrace them (cf. Nidumolu et al. 2009; Porter and Kramer 2011). At
the same time, of course, sustainability may be a source of major prob-
lems for companies that are not able to deal with these developments
(e.g., Hofmann et al. 2014; Weber et al. 2010; Richardson et al. 2009).
Companies have played a big role in creating the problems we cur-
rently face around the world. This has severe consequences for the future
of our planet and our societies. Moreover, it affects companies’ legitimacy
in society and it matters for how regulators will choose to act in the face
of growing social and environmental problems. This situation will greatly
affect the conditions of doing business. There are expectations that states
as well as international agreements will use both carrots and sticks in the
wake of the COP21 climate summit in Paris and the development of the
SDGs. In addition, not at least, the depletion of important natural
resources that companies depend on will determine what production,
logistics and consumption will look like in the future.
In this book, we argue that companies can be, and are becoming, an
important part of the solution and that the problems we are talking about
here are and will likely remain a source of business opportunities and
competitive advantage. There are already plentiful examples of compa-
nies that change their business models in ways that allow them to
contribute to a more sustainable world—either by improving their own
footprint or by helping others to improve theirs (see, e.g., Jørgensen and
Preface
xiii
For videos and materials based on this book and more information
about us and our work, please visit our website www.JorgensenPedersen.
no. We would love to hear from you, whether you are a manager,
researcher, politician, student or simply a fellow citizen of this planet who
also wants to engage in a RESTART. On our website, you can share your
stories, insights and examples with us, and you can find out how to join
the discussion on social media.
References
Eccles, R. G., Feiner, A., & Verheyden, T. (2016). Sustainability and financial
performance of Scandinavian companies. Unpublished manuscript, Harvard
Business School.
Eurosif. (2014). European SRI study 2014. Paris: Eurosif.
Hofmann, H., Busse, C., Bode, C., & Henke, M. (2014). Sustainability-related
supply chain risks: Conceptualization and management. Business Strategy and
the Environment, 23(3), 160–172.
Jeucken, M. (2010). Sustainable finance and banking: The financial sector and the
future of the planet. London: Routledge.
Jørgensen, S., & Pedersen, L. J. T. (2017a). Designing sustainable business mod-
els. In T. W. Andreassen, S. Clatworthy, M. Lüders, & T. Hillestad (Eds.),
Innovating for trust. Cheltenham, UK: Edward Elgar Publishing.
Nidumolu, R., Prahalad, C. K., & Rangaswami, M. R. (2009). Why sustain-
ability is now the key driver of innovation. Harvard Business Review, 87(9),
56–64.
Porter, M. E., & Kramer, M. R. (2011). Creating shared value: How to reinvent
capitalism—And unleash a wave of innovation and growth. Harvard Business
Review, 89(1–2), 62–77.
Richardson, K., Steffen, W., Schellnhuber, H. J., Alcamo, J., Barker, T.,
Kammen, D. M., & Stern, N. (2009). Climate change-global risks, challenges
& decisions: Synthesis report. Copenhagen: Museum Tusculanum.
Weber, O., Scholz, R. W., & Michalik, G. (2010). Incorporating sustainability
criteria into credit risk management. Business Strategy and the Environment,
19(1), 39–50.
Acknowledgments
Any book is the product of the sum of efforts, contributions and support
of many different people, and this manuscript is no exception. The pres-
ent work is the outcome of our joint research efforts since 2006, and we
are grateful to all our collaborators who have inspired and informed us
during this time and who have contributed directly and indirectly to this
work.
We are grateful to our editor, Madeleine Holder at Palgrave Macmillan,
who expertly and efficiently led us through the process toward publica-
tion. We also thank Gabriel Everington for his work in helping us prepare
the manuscript for publication. We are highly grateful to the blind
reviewers whose valuable comments allowed us to improve the manu-
script substantially. We owe considerable gratitude to Professors László
Zsolnai and Paul Shrivastava, who are editors of the Palgrave Studies in
Sustainable Business In Association with Future Earth series, in which this
book is included. We consider it a privilege that our book is published as
part of this important and inspiring series.
We are grateful to our Norwegian editor Cappelen Damm Akademisk
(CDA), which published an earlier and shorter version of the present
work as RESTART: 7 veier til bærekraftig business [RESTART: 7 Steps to
Sustainable Business] in Norwegian in 2017. Thank you Dorte Østreng,
Lisbeth Opøien, Åsne Lund Godbolt and Wegard Kyoo Bergli and the
rest of the editorial team at CDA. We are also immensely grateful to our
xv
xvi Acknowledgments
former editors at CDA, Tor Paulson and Erlend Aas Gulbrandsen, who
have since joined us in academia. Tor and Erlend were “midwives” for the
present work when stimulating us to write the book Ansvarlig og lønnsom
[Responsible and Profitable] almost a decade ago, thus sending us on a
journey that has culminated in this book.
We are very thankful for the support—financial and otherwise—from
our respective institutions Inland Norway University of Applied Sciences
and NHH Norwegian School of Economics. They have given us freedom to
pursue the exciting adventures that have led to this book, and more gen-
erally allowed us to play entrepreneurial—or, rather, intrapreneurial—
roles in our work with research, teaching and communication. In
particular, we thank the Center for Service Innovation, the Centre for
Ethics and Economics and NHH Executive at NHH. We moreover
thank the research boards at both institutions for providing financial sup-
port that allowed us to publish the book as open access.
We are grateful to friends, colleagues, executive and master students
and collaborators at academic institutions, companies and other organi-
zations at home and abroad who have given us ideas, input, feedback and
energy. In particular, we are grateful to the managers of companies with
whom we conduct research, many of whom are covered in this book, for
their willingness and enthusiasm to share knowledge and insights from
their companies’ operations. We appreciate the efforts of students of all
ages who have read, participated in the testing of the material and pro-
vided feedback. A big thank you to our eminent designer Ingrid Bygjordet
Vaterland, who designed logos, figures and illustrations inside the book.
Finally, we are grateful to the Norwegian Non-Fiction Writers and
Translators Organization for a project grant in the early stage of writing
this book.
Above all, we are grateful to family and friends for the many ways they
contribute to everything we do. A special thank you to Ingrid and Kjersti.
Contents
xvii
xviii Contents
4 Roadmap to a RESTART 49
References 52
References 231
Index 249
List of Figures
xxi
xxii List of Figures
xxiii
Part I
In this part of the book, we outline the purpose and scope of the book.
We begin by discussing the urgent need for sustainable business model
innovations, which are necessary in order for more business models to
become both sustainable and profitable. In doing so, we explore three key
trends and developments that are pushing us in that direction, namely
(1) the sustainability problem, (2) digitalization and the technological
opportunity space and (3) changing consumer preferences and lifestyles.
We also briefly introduce the seven components of the RESTART frame-
work that we develop and discuss in the remainder of the book.
1
Why Sustainable Business Model
Innovation?
“Just a few years ago, nobody questioned the footprint of our products.
The fact that our house insulation products decreased customers’ energy
consumption was more than good enough. Today, however, we must
redesign our business model completely, for instance by no longer using
coal as the main energy source in our many factories. We are expected to
make our products recyclable and reusable, and we are even faced by a
need to make them smarter, by using sensors that connect them to the
Internet. Not at least, we need to find new ways of interacting with our
customers and other players in collaboration with competitors and
different platform-based networks. In order to do that, we need to rethink
the whole idea of who we are, what we deliver to whom and how, and
how we are going to make a profit.”
The CEO of the big, international corporation was excited and uncom-
fortable at the same time. He had been in the insulation business his
whole career. We met him at a roundtable discussion that we facilitated
with executives from key companies in the construction industry. During
the conversation, he told us that his company was searching for innova-
tive and more sustainable solutions along its entire value chain, including
designing new products and services, developing new ways of sourcing,
manufacturing and prolonging the life of its products and finding new
ways of distributing and monitoring them by means of new technology
and new alliances.
This is not the only CEO or top-level manager currently experiencing
such challenges. During the 15 years we have studied corporate sustain-
ability, we have experienced firsthand that the business landscape has
changed tremendously. When we started researching corporate sustain-
ability, the people in charge of corporate social responsibility (CSR) and
sustainability issues were typically powerless communication managers
with low budgets, who were unwillingly tasked with managing such
issues as a small part of their job description. Neither corporate responsi-
bility nor sustainability issues were anchored at the top of the organiza-
tion. Furthermore, the relatively few stakeholders within the companies
who cared about these issues were mostly activists pushing this agenda.
Today, however, we get to discuss sustainable business model innovation
in boardrooms and executive offices, and sustainability and its implica-
tions for business models have become a strategic priority across all
industries—sometimes as a threat, but more and more often as an
opportunity.
This does not mean that designing innovative and sustainable business
models is a walk in the park. We propose that it is possible, and as we will
show you throughout this book, there is a growing body of research
within the field of corporate sustainability indicating that companies can
be both sustainable and profitable at the same time. There is, however,
still a long way to go, and the path toward sustainable business is a rocky
and risky one. We argue that sustainable business model innovation
requires hard work and even a solid dose of bravery. We also argue that
we still lack research-based insights that can guide practitioners who want
to embark on the sustainability journey, such as the CEO described
above. Our purpose with this book is thus to develop a research-based
framework or a map that can empower leaders in their quest for sustain-
able and profitable business models and that can pave the way for more
research on such business model innovation in the near future.
Why Sustainable Business Model Innovation? 5
1.1 A
RESTART of Business Models
for a Brighter Future Earth
We have coined our framework for sustainable business model innova-
tion RESTART. We introduce this framework briefly in the next chapter,
and we develop and discuss it in detail in the second part of the book.
Before we introduce the framework, we will shortly discuss three inter-
woven trends that we argue drive the development of new business mod-
els and that drive the need for sustainable business model innovations: (1)
the sustainability problem, (2) digitalization and the technological
opportunity space and (3) changing consumer preferences and lifestyles
(Fig. 1.1).
The comprehensive sustainability problem with which we are faced
comprises numerous social and environmental challenges that need to be
solved. In this age of digitalization, however, companies at the same time
find themselves in the midst of an ocean of technological opportunities
that allow for new and smarter business models, and societal trends
enable companies to deliver their products and services in new ways that
are attractive to a new generation of consumers. Taken together, this is
fertile ground for business model innovation. Taken together, however,
these ongoing trends and drivers also represent many unknown factors
that managers need to take into consideration when developing and
implementing their strategies.
Managers often ask us how they are supposed to achieve sustainable
and profitable business models in practice in this new business landscape.
In our talks and strategy seminars, we often use “the dark room” as a
Fig. 1.1 Three trends driving the development of new business models
6 S. Jørgensen and L. J. T. Pedersen
prepared when entering the darkness. This involves conducting the search
for new business models based on knowledge and insights that can lead
to asking better questions and being more precise in the search for the
answers to those questions. The research-based framework RESTART
that we develop in this book can support managers in their attempt to
rethink, reinvent and reorganize the ways in which they create, deliver and
capture value through their business models.
Such innovative efforts are necessary for companies that want to take
part in the ongoing movement from a brown to a green economy, from
an analog to a digital economy and from an old-fashioned to a modern
economy. This book addresses this transition. It discusses why such a
transition is needed, how new and smarter business models can be
designed and how researchers can study such innovation processes. We
argue that there are massive changes going on that require new lenses
through which we can understand business. The business landscape has
changed comprehensively, and new maps are needed to maneuver in this
rapidly changing territory.
The managers of contemporary companies need to identify and step
into their dark rooms, and not only that: they also need to inspire their
coworkers to join them in the search for the light switch. We propose that
many companies have failed to design sustainable business models
because they have not yet asked the right questions. This book thus
attempts to provide knowledge and insight that can be helpful for asking
the questions that can spark the necessary transition toward business
models that are fit for the future—whether you are a researcher, a man-
ager, a student, a regulator or a legislator, or just a citizen interested in
business, society and the environment.
1.2 T
he Methodological Approach of This
Book
This book outlines the RESTART framework, which is a conceptual
framework that is intended to capture the characteristics of new business
models that can be sustainable and profitable at the same time. We
8 S. Jørgensen and L. J. T. Pedersen
References
Døskeland, T., & Pedersen, L. J. T. (2015). Investing with brain or heart? A field
experiment on responsible investment. Management Science, 62(6),
1632–1644.
Døskeland, T., & Pedersen, L. J. T. (2017). Does the wealth of investors matter?
Evidence from a field experiment on responsible investment. Working paper,
NHH Norwegian School of Economics.
Gulbrandsen, E. A., Jørgensen, S., Kaarbøe, K., & Pedersen, L. J. T. (2015).
Developing management control systems for sustainable business models.
Beta: Scandinavian Journal of Business Research, 29(1), 10–25.
Why Sustainable Business Model Innovation? 11
Open Access This chapter is licensed under the terms of the Creative Commons
Attribution-NonCommercial-NoDerivatives 4.0 International License (http://
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cial use, sharing, distribution and reproduction in any medium or format, as
long as you give appropriate credit to the original author(s) and the source,
provide a link to the Creative Commons license and indicate if you modified the
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The images or other third party material in this chapter are included in the
chapter’s Creative Commons license, unless indicated otherwise in a credit line
to the material. If material is not included in the chapter’s Creative Commons
license and your intended use is not permitted by statutory regulation or exceeds
the permitted use, you will need to obtain permission directly from the copy-
right holder.
2
The Seven Steps of the RESTART
Framework
2.1 A
RESTART for Business Models
of the Future
In the expectations of future business models articulated by managers,
academics and other pundits, we are already seeing the contours of how
these three trends may shape the ways value will be created, delivered
and captured in the future. How many years will it, for instance, take
before we no longer own our own car, but rather subscribe to a shuttle
service based on a fleet of driverless cars? How long will it take until we
The Seven Steps of the RESTART Framework 15
rent a drill whenever we need one and get it delivered at home within
minutes by the same driverless cars? And how should the car industry
prepare itself for this transition, or any other industry for that matter?
At which point will we be sitting at home browsing Facebook with our
Virtual Reality (VR) goggles, looking at clothes that are digitally gener-
ated, customized to us, and we will simply say: “Order the shirt. Charge
my Bitcoin account”. Will the shirt be 3D printed and flown to our
homes by a drone that picks up the shirt from a warehouse with no peo-
ple involved, while payment is executed automatically? When will we put
our laundry in the washing machine and the clothes will have sensors that
tell the machine the garments’ washing instructions? And how long will
it be until we get smart light bulbs, clothes, carpets and other products
for “free” because they are linked to the Internet and are financed by gen-
erating valuable data about us for energy companies and others who ben-
efit from this information?
When will we scan products in the grocery store with our smartphones
or augmented reality devices, upon which we are instantly told in detail
how the products were made, from where their components originate,
how far the products have traveled, what impacts they will have on our
bodies and the environment, and so on? This extreme traceability and
transparency are expected to become a reality in the not very distant
future, due to the combination of increased consumer expectations, tech-
nological opportunities related to IoT sensors, blockchain-based and
other information systems and digital interfaces that allow consumers
access to the right information at the right time. Again, we see how such
a future is simultaneously driven by the sustainability problem, the tech-
nological opportunity space and changing consumer preferences.
In recent years, we have seen that what a few years ago almost appeared
as science fiction is becoming more science and less fiction. Just look at
how quickly companies like Alibaba and Amazon have built their gigan-
tic ecosystems online, through which they offer more products and ser-
vices than what we thought possible only a short time ago. For instance,
Amazon and Fiat Chrysler recently began working together to sell cars
online at heavily discounted prices, and Amazon has purchased Whole
Foods, thus making a move to enter the food industry. Another example
is Apple’s new wireless headphones, which according to the World
16 S. Jørgensen and L. J. T. Pedersen
Economic Forum constitute the first step toward integrating our mobile
phones in our bodies. When you speak, the wireless earpiece can “hear”
you, and it has software that removes noise and makes your voice clear.
This makes it possible for you to ask Siri to send a message to a colleague
or to order goods for you on Amazon, or you can ask your thermostat
from Nest to turn down the heat in the room or turn on the alarm system
in selected parts of your house. That is, of course, if you need it, with the
recent developments in artificial intelligence and machine learning, the
different bots in our surroundings will know who you are, if you want the
alarm off or on and what temperature you like in which parts of the
house at different times of the day.
The same kinds of developments are taking place with production pro-
cesses that allow companies to reduce their footprints. Think about how
3D printing has quickly enabled companies to produce in ways that sig-
nificantly reduce excess materials from manufacturing, since more and
more products are 3D printed “from scratch”, rather than carved out of a
piece of metal, wood or other materials. In addition, this allows for print-
ing on demand, which makes it unnecessary to keep large inventories of
products that can be printed when needed. Similarly, virtual reality and
augmented reality technologies are allowing health care providers to treat
stroke patients in rehabilitation through Virtual Reality (VR) where they
reside, thus eliminating the need for comprehensive transportation ser-
vices of those patients to and from health care facilities. The list of such
solutions that allow for product and service delivery of high quality, but
with very significant reduction of footprints, is growing steadily.
These technological changes are occurring at record speed, and conse-
quently current business models must change rapidly (Teece 2010). Had
we written this book a few years ago, for instance, we had not been famil-
iar with Tesla’s new strategy. The company’s new cars will have an app
that allows car rental by neighbors or others without the car owner being
involved. Allegedly, the new Tesla cars already have hardware to enable
self-driving functionality when legislation allows the implementation
thereof. Both Google and Apple are expected to produce such cars in the
not too distant future. These cars are almost like rolling smartphones,
and given that we will continue to buy our own cars, we will likely not
pay much in advance. Instead, we will pay per kilometer and perhaps for
The Seven Steps of the RESTART Framework 17
different services we access while being driven around by our cars. In this
way, we can reduce the “structural waste” that surrounds us everywhere;
that is, the overcapacity in all the things we already possess (e.g., Morlet
et al. 2016). Why build new cars, when most existing cars stand idle
most of the day (and have available seating most of the time while they
are in motion)? By simple app-based sharing models, we can instead
exploit the capacity of the cars we already have. The same is true for
office space, agricultural equipment like tractors, slalom skis and drills in
our houses and so on.
These radical technological changes, which can help mitigate the sus-
tainability problem, imply that the fourth industrial revolution is already
ongoing (Schwab 2016). This concept refers to the almost all-encom-
passing transformation characterized by new technologies like artificial
intelligence, robotics, the IoT, 3D printing and advanced materials. It
further comprises the emergence of autonomous vehicles, new forms of
energy, genetic engineering, nanotechnology and drones (see, e.g., Kelly
2016). In parallel with these technological developments, online solu-
tions and platforms that bring together suppliers and demanders of
goods, services and social capital also challenge traditional business
model (Choudary et al. 2016). Moreover, new sharing-economic and
circular-economic business models are deviating from conventional
business thinking (see, e.g., Botsman and Rogers 2010; McDonough
and Braungart 2010). Overall, these trends point toward a comprehen-
sive transformation of current business models that imply new ways of
producing, transporting, consuming and reusing materials, components
and products (e.g., Bocken et al. 2014; Boons and Lüdeke-Freund 2013;
Jørgensen and Pedersen 2015). These smarter business models will enable
more efficient resource use and customization of products and services in
a way that can improve the offering to customers while reducing the
footprint thereof.
In this book, we investigate such developments in business models. We
shed light on changes that have already taken place, we illuminate business
model innovations that are ongoing at the time of writing and we even
attempt to “look into the crystal ball”. Thereby, we offer some indications
of what the business models of the future might look like if we take the
three developments outlined above and their implications into account.
18 S. Jørgensen and L. J. T. Pedersen
2.2 A
Brief Introduction to the RESTART
Framework for Sustainable Business
Model Innovation
In Part II of the book, we will dig deeper into the RESTART framework.
Briefly put, RESTART is an acronym of seven letters that correspond with
seven features of more sustainable business models. They can meaningfully
be categorized into three groups of features (“RE”, “STA” and “RT”,
respectively), and the framework was designed with these three in mind.
The first category, “RE”—redesign and experimentation—relates to the
development that companies are increasingly faced with the need to rede-
sign their business models (see, e.g., Johnson et al. 2008), which in turn
necessitates controlled experimentation (Andries et al. 2013; McGrath
2010). The second category, “STA”—service-logic, the circular economy
and alliances—reflects three central developments in contemporary busi-
ness modeling for sustainability: the emphasis on services rather than
products (or functionality rather than ownership; cf. Bocken et al. 2014),
on circular business models rather than linear ones (see, e.g., Bocken
et al. 2016; Linder and Williander 2017) and on alliances and collabora-
tion rather than single companies competing in isolation (e.g., Kiron
et al. 2015). The third category, “RT”—results and three-dimensional-
ity—relates to the governance and control challenges associated with
implementing a sustainable business model, which are crucial for its suc-
cess (e.g., Eccles et al. 2014; Perrini and Tencati 2006).
We contrast each of the seven features with their opposites, all of which
are arguably characteristics of business-as-usual. In this way, the frame-
work highlights seven main changes that can make business models
smarter and more sustainable:
More and more companies are trying to make the world more sustain-
able. But not only that: they are trying to make money while doing so. If
companies embrace these opportunities and take on this responsibility, we
might be able to achieve the so-called green growth: economic growth
while reducing the use of resources and thus the emissions that contribute
to a worsening climate (e.g., Ekins 2002; Popp 2012). There will arguably
still be a need for solutions that go beyond what companies can achieve on
their own since not all problems can be solved in a manner that is consis-
tent with profitability and some problems arguably need regulation and
other solutions. The opportunity space for solutions by companies is still
immense, but it is not going to be a walk in the park. It will require major
transformation of corporate activities, and hence our way of life—as cus-
tomers, employees and contributors to the economic engine. We need
smarter manufacturing, logistics and transport, packaging, consumption
and reuse. We argue that this requires a RESTART.
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20 S. Jørgensen and L. J. T. Pedersen
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The Seven Steps of the RESTART Framework 21
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3
RESTART: What, Why, How
and So What?
this way, Interface could sell more services to its customers, while at the
same time driving down the cost of input factors for its carpets (see, e.g.,
Botsman and Rogers 2010; Jørgensen and Pedersen 2017). Interface is
still working toward these goals today—even after Anderson’s death—
and the company has made good progress toward realizing its environ-
mental vision, while at the same time remaining a market leader in its
industrial segment.
These two companies, Newlight and Interface, both actively address
the environmental and social issues facing the world, and they have devel-
oped business models that strive to be both sustainable and profitable.
While Ray Anderson experienced an epiphany that led him to take
responsibility for the sustainability issues of his company, we can say that
Newlight has based its business model on the opportunity the sustain-
ability issue provides for businesses to find profitable solutions to these
pressing problems. This book revolves around both of these approaches:
responsibilities and opportunities for creating more sustainable econo-
mies. Most importantly, however, it addresses how these companies aim
to align sustainability and profitability.
Through their operations, companies shed light and cast shadow. Put
simply, companies shed light when they solve problems that are caused
by others, and they cast shadows when they cause problems for others
through their operations. NG strives to minimize the shadowy side of
their operations, which includes corruption, pollution and much more.
Moreover, the company aims to shed light by helping other businesses to
become more sustainable. This is really the essence of the company’s busi-
ness model—it deals with excess resources and waste and brings them
back into productive purposes, and at the same time, the company advises
other companies on how to reduce their footprints (Serafeim and Gombos
2015). Among other things, NG collaborates with Norsk Hydro and
Nespresso to create systems for recycling aluminum containers used for
Nespresso coffee machines. Aluminum containers represent a big shadow
of Nespresso’s products and Norsk Hydro uses large amounts of energy to
produce new aluminum but only five percent of its energy usage to recy-
cle aluminum. Working together, all three players have found a market-
based solution that improves the total footprint of the companies’
operations.
All organizations cast shadows and all businesses can shed more light.
This applies not only to oil companies or to industry giants. Even a char-
ity like the Red Cross has negative externalities, while it of course could
have done even more to solve the world’s problems. All organizations will
necessarily to a greater or lesser extent cast shadows that would not have
been there if they did not exist. Yet how extensive the shadows of the
individual organization are will depend on the design of its business
model—hence, it has an opportunity to design more sustainable business
models. In the same way, all organizations also create some positive exter-
nalities that would not have been there if they did not exist, and we can
therefore think in terms of “net impact” on society and the environment
from any organization’s operations.
NG want to contribute to what its managers call “real sustainabil-
ity”—that is, not only implement measures to become more sustainable
but also to attain the state of actually being in harmony with society and
the environment. Therefore, the company aims to develop a business
model that operates within planetary and societal boundaries. Interface
has a stated goal of attaining a zero footprint by 2020, and Newlight has
32 S. Jørgensen and L. J. T. Pedersen
Fig. 3.2 The net effect of sustainability efforts (based on McDonough and
Braungart 2010)
RESTART: What, Why, How and So What? 33
3.3 T
he Next Step: Aligning Financial, Social
and Environmental Bottom Lines
In 2011, the sports equipment manufacturer PUMA, under the leader-
ship of CEO Jochen Zeitz, published the company’s first sustainability
report. In this report, PUMA disclosed that the cost of its negative impact
on the environment was 145 million euros, while its profits in the same
year were 202 million euros.
If the company should have paid the cost of these negative externali-
ties, its profits would thus have been reduced by 72 percent. In reality,
PUMA’s profits were largely borrowed from the resources of future gen-
erations. When presenting the sustainability report, Zeitz stated that we
are overexploiting the resources and services that the environment pro-
vides and added, “The world has changed, and sustainable business can-
not be expected or achieved without radical changes in our economic
models. It’s as simple as that.”
When PUMA published its report, it also implemented a number of
measures to reduce its shadow. However, the environmental data shows
that PUMA is still in “debt” to Earth, although it is trying to become
more sustainable. With few exceptions—such as CO2 emissions within
the EU—a price has still not been put on the use of resources such as
clean air, fresh water and topsoil. This means that the environmental
costs PUMA refers to are not actual costs for companies—they do not
have to be paid. In contrast, the consumption of these resources is a very
real cost to the Earth, not at least for those who will live here after us (cf.
Zeitz 2011).
What, then, is sustainable business? Simply put, it is about creating a
harmonious and sustainable interaction between economy, society and
the environment in which economic activity strengthens the social and
environmental systems they exist within, rather than breaking them
down (Lozano 2008; O’Higgins and Zsolnai 2017). Our perspective is a
business-economic one, which implies that we look at the world from the
point of view of companies. We are particularly concerned with the char-
acteristics of companies that aim to attain both financial and non-finan-
cial objectives, both in the short and long term. However, as the example
RESTART: What, Why, How and So What? 35
A Sustainable Interplay
are simply not fit for the future. Perhaps there are products, services—
even entire industries that we will get rid of in a more sustainable future.
Another related, and important, point is that there are probably also lim-
its to the problems that can be solved on the part of companies them-
selves. Regulations are clearly needed and perhaps other means of
facilitating greener lifestyles, consumption patterns and solutions will
also be necessary. The point of departure of this book is to investigate the
solutions that can be offered by companies. And while they may lead to
considerable business opportunities, attaining them will not be a simple
feat.
According to the SRC, several of these areas are already under consid-
erable pressure. The degree of pressure on each area varies, but the center
also points out that due to unsafe methods of measurement, we do not
yet have sufficient knowledge of the magnitude of the negative impact for
many of these areas (cf. Steffen et al. 2015).
Societal Boundaries
In the same way that the planet has limits to what it can withstand, the
societal fabric can also be stretched too far. However, we can obviously
RESTART: What, Why, How and So What? 41
PUMA realized that it really owed three-quarters of its profits to the planet
because it was extracting more resources than it provided and because it
polluted the planet and the atmosphere. In recent years, PUMA and many
other companies have taken steps to contribute to more sustainable devel-
opment. They are becoming “more sustainable” and over time, they will
perhaps become “truly sustainable”, which is the stated objective of Norsk
Gjenvinning. Given the overall sustainability problems we have outlined
above, however, it is easy to become both pessimistic and paralyzed. The
warning lights are flashing in the measurements of the Stockholm
Resilience Center. Even for the indicators where we are currently within
the limits of the Earth’s carrying capacity, such as the use of fresh water, the
analysis shows that these resources are also under pressure. And there are
problems seemingly not addressed by any companies because they do not
perceive them as being important for their business performance.
The response from the global community is strikingly passive in the
face of such dramatic developments. Moreover, while there are plenty of
RESTART: What, Why, How and So What? 43
examples of companies that make large and small steps to become more
sustainable—or at least appear to be—there are still relatively few of the
kinds of business models of which we have sketched the contours above.
The treasure chest of business models that make the world greener rather
than browner therefore needs replenishing. We need more truly sustain-
able business models that can give us a RESTART.
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Part II
Although significant changes are necessary, they will not be done over-
night and companies cannot risk everything on one endeavor. Instead,
they should move forward in a controlled manner and with an experi-
mental mindset in order to find out what works and how new business
models can function over time. Rather than doing a sudden turnaround,
experimentation is therefore necessary (e.g., List and Gneezy 2014;
Andries et al. 2013). In Chap. 6, Experimentation rather than turnaround,
we show the importance of experimentation for the success of business
model innovations in general and for sustainable business model innova-
tions in particular.
An important step toward more efficient use of resources is to move
beyond the notion that the customer needs ownership of products. Such
a product-logic has dominated companies’ offerings to customers, but
companies are instead increasingly embracing a service-logic to promote
sustainable business. This involves thinking in terms of access and func-
tionality rather than ownership and designing services that are equally
attractive to the customer as a product that can be bought and owned
(e.g., Bocken et al. 2014; Baines et al. 2009). In Chap. 7, Service-logic
rather than product-logic, we show how applying service-logic can con-
tribute to smarter and more resource-efficient consumption that can
reduce waste and pollution.
One of the most important changes needed to achieve a sustainable
future is the smarter use of the scarce resources we have available. This
means that we have to move away from the linear “take, make and dis-
pose” approach upon which traditional business economics is based.
Instead, companies should build circular business models based on reuse,
resource efficiency and closed loops (e.g., Bocken et al. 2016; McDonough
and Braungart 2009; Webster 2015). The circular economy is thus a key
for greener and more efficient business. In Chap. 8, The circular rather
than the linear economy, we look at how circular business models are cen-
tral to the transition to a greener, smarter economy.
Being successful with changes of this magnitude requires collabora-
tion. When considering the sustainability of companies’ business models,
it is too limiting to look solely at what goes on within the walls of the
individual company. Achievements of this kind are difficult to reach
through solo-runs, but rather requires appropriate alliances between
Roadmap to a RESTART 51
companies, which together can solve problems they would not be suc-
cessful in resolving alone (e.g., Kiron et al. 2015; Tencati and Zsolnai
2009; Chesbrough 2006). In Chap. 9, Alliances rather than solo-runs, we
discuss the role alliances play in enabling sustainable innovations that
span across organizations.
Implementing the comprehensive changes that lead to sustainable
business requires prioritization. This implies that one cannot do
everything and that it is more important to do the right thing than to
do what looks good. For a sustainable future to be possible, it is not
sufficient that companies conduct indulgences. Instead, companies
should deliver results, that is, succeeding in making sustainability
improvements that actually make a difference and that solve the
important problems (e.g., Khan et al. 2016; Eccles and Serafeim
2013). In Chap. 10, Results rather than indulgences, we look at how
sustainability performance can be achieved and how it can be aligned
with financial performance.
To succeed with a transition of this caliber, the entire organization
must be designed in a way that makes all organizational members pull
in the right direction. Sustainable business models involve an inti-
mate interplay between social, environmental and financial perfor-
mance, and this must be reflected in goal structures, measurements
and indicators, incentives, rewards and organization design in general
(e.g., Jørgensen and Pedersen 2015; Schaltegger 2011; Gond et al.
2012; Figge et al. 2002). It involves moving from a one-dimensional
emphasis on financial performance toward designing the entire orga-
nization for three-dimensionality. In Chap. 11, Three-dimensionality
rather than one-dimensionality, we show how objectives, priorities,
measurement and reporting are key elements to achieve sustainability
and profitability.
We have now drawn up the roadmap for a RESTART. In the next
seven chapters, we discuss each of the seven components of the
RESTART framework in order to shed light on the types of business
model innovation it proposes (Fig. 4.1).
52 S. Jørgensen and L. J. T. Pedersen
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vitization of manufacturing: A review of literature and reflection on future
challenges. Journal of Manufacturing Technology Management, 20(5),
547–567.
Roadmap to a RESTART 53
Bocken, N. M., de Pauw, I., Bakker, C., & van der Grinten, B. (2016). Product
design and business model strategies for a circular economy. Journal of
Industrial and Production Engineering, 33(5), 308–320.
Bocken, N. M. P., 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.
Chesbrough, H. W. (2006). Open innovation: The new imperative for creating
and profiting from technology. Cambridge, MA: Harvard Business Press.
Eccles, R. G., & Serafeim, G. (2013). The performance frontier. Harvard
Business Review, 91(5), 50–60.
Figge, F., Hahn, T., Schaltegger, S., & Wagner, M. (2002). The sustainability
balanced scorecard–linking sustainability management to business strategy.
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Gond, J. P., Grubnic, S., Herzig, C., & Moon, J. (2012). Configuring manage-
ment control systems: Theorizing the integration of strategy and sustainabil-
ity. Management Accounting Research, 23(3), 205–223.
Johnson, M. W., Christensen, C. M., & Kagermann, H. (2008). Reinventing
your business model. Harvard Business Review, 86(12), 57–68.
Jørgensen, S., & Pedersen, L. J. T. (2015). Responsible and profitable: Strategies
for sustainable business models. Oslo: Cappelen Damm Akademisk.
Khan, M., Serafeim, G., & Yoon, A. (2016). Corporate sustainability: First evi-
dence on materiality. Accounting Review, 91(6), 1697–1724.
Kiron, D., Kruschwitz, N., Haanaes, K., Reeves, M., Fuisz-Kehrbach, S. K., &
Kell, G. (2015). Joining forces: Collaboration and leadership for sustainabil-
ity. MIT Sloan Management Review, 56(3), 1–31.
List, J., & Gneezy, U. (2014). The why axis: Hidden motives and the undiscovered
economics of everyday life. New York, NY: Random House.
McDonough, W., & Braungart, M. (2009). Cradle to cradle: Remaking the way
we make things. North Point Press.
Mitchell, D., & Coles, C. (2003). The ultimate competitive advantage of con-
tinuing business model innovation. Journal of Business Strategy, 24(5), 15–21.
Schaltegger, S. (2011). Sustainability as a driver for corporate economic success:
Consequences for the development of sustainability management control.
Society and Economy, 33(1), 15–28.
Tencati, A., & Zsolnai, L. (2009). The collaborative enterprise. Journal of
Business Ethics, 85(3), 367–376.
Webster, K. (2015). The circular economy: A wealth of flows. Coew, UK: Ellen
MacArthur Foundation Publishing.
54 S. Jørgensen and L. J. T. Pedersen
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5
Redesign Rather than Standstill
Companies that aim to be both sustainable and profitable must redesign their
business models. It implies changing how companies create, deliver and
capture value in a manner that reduces the shadow they cast on society and
the environment, doing it in such a way that the companies shed more light
on their surroundings, and doing it in a way that promotes their ability to be
competitive in the markets in which they operate.
5.1 T
he Business Model as the Story of How
the Company Works
“Those were the days my friend, we thought they’d never end”, Mary Hopkin
sang in 1968. It is easy to imagine that the record industry meets annu-
ally and sings this refrain because the music industry has been through
many and violent upheavals ever since Hopkin’s song was released
(Fig. 5.1).
For a long time, most of us bought music in physical formats. Even
before that, people mostly went to concerts in order to experience music.
Not too many years ago, the common consumption of music was buying
CDs and other formats in physical stores like Virgin Megastore and
HMV. Throughout the 2000s, as more and more people gained access to
faster computers and broadband Internet connections, music became
digitized and an increasing number of people downloaded music illegally
through services like Napster and The Pirate Bay. The music industry
stuck its head in the sand and argued that customers would not want files
with inferior sound quality, but that they would rather prefer having the
CDs on their bookshelves, being able to touch the album covers and to
display their great music tastes through a well-stocked record collection.
They were wrong.
Digitization of music and the development of business models that
capitalized on new forms of music consumption showed that customers
did not require owning the physical music product. Admittedly, vinyl
records have received a sales boost in recent years, but they still have a
market share of less than ten percent. More and more people are instead
willing to access and play music digitally, without having the ability to
hold the physical album cover in their hands. Indeed, the value of the
album in its conventional sense has gradually decreased in the digital age.
The music industry’s reaction was first an attempt to prevent this devel-
opment. Through copy protection technology, lawsuits against file-
sharers and so on, they tried to stop a development that seemed
unstoppable. Many musicians were also skeptical about the development.
Of course, illegal file sharing went directly at the expense of record sales,
and musicians were forced to think in new ways about where their
Redesign Rather than Standstill 57
r evenues would come from. The entire industry thus needed to adapt to
find new ways to create, deliver and capture value.
In 2001, Apple launched the music service iTunes, through which
users could buy digital audio files that could be played on their MP3
players, iPods and computers, and eventually also on iPhones, iPads and
other devices. This business model was striking, not at least because it
managed to challenge the illegal downloading of music, even if it required
payment by customers. Its success was perhaps especially due to iTunes
making it easy to buy the products, through a simple user interface on an
attractive platform. In addition, Apple’s comprehensive contracts with
suppliers made sure they had a very rich catalog of music. It is important
to remember, however, that Apple’s business model was still based on the
customer owning the product—the music—albeit as a digital file instead
of as a physical product (see, e.g., Johnson et al. 2008; Osterwalder and
Pigneur 2010).
A strong competitor to the iTunes business model emerged in 2006
when the Swedish company Spotify launched its service. Spotify had a
new hypothesis about what the customer wanted and instead offered
music through a subscription-based streaming service. Instead of buying
individual files or albums, customers were now able to stream all the
music in the Spotify catalog whenever they wanted and as much as they
wanted. Spotify thus changed the consumption of music from providing
customers with ownership of the product to providing them with mere
access to the music (see, e.g., Stampfl et al. 2013; Gassmann et al. 2014).
The situation today is that the physical format (CDs, vinyl records, etc.),
digital audio files for purchase (iTunes, Amazon, etc.) and digital audio
files for streaming (Spotify, Tidal, etc.) all coexist, but the digital business
models increasingly dominate the landscape.
The golden age of the music industry will perhaps never return, and
streaming services like Spotify will likely not be the last revolution in this
industry. And to keep track with this development, Spotify has recently
started hiring research scientists who can work on leveraging the com-
pany’s data to deliver better services in an uncertain competitive future.
Over time, the story of how music is distributed and consumed has been
retold many times. The entire industry can perhaps best be described as
58 S. Jørgensen and L. J. T. Pedersen
Companies as Stories
• What is Spotify?
• For whom does Spotify exist?
• How does Spotify create value for itself and for others?
• Which markets does Spotify operate in, and how does it differ from its
competitors in these markets?
• How do Spotify’s customers pay?
• How does Spotify ensure that its revenues are greater than its costs so
that it remains profitable?
• What ambitions for growth and scope does Spotify have over time?
Fig. 5.2 The business model: creating, delivering and capturing value from busi-
ness opportunities
There are several ways to define the business model, and one can think
of business models as consisting of a set of interrelated components that
can be conceptualized in various ways. However, as pointed out by Foss
and Saebi (2017) in their review of business model innovation, most defi-
nitions seem to converge around the notion that business models com-
prise the “design or architecture of the value creation, delivery, and
capture mechanisms” of a company (cf. Teece 2010). In this book, we
similarly build on a conceptualization of the business model that consists
of three parts (Jørgensen and Pedersen 2015):
1. Value creation: How the company helps customers to solve a problem
or perform a job-to-be-done at a given price (often referred to as the
value proposition).
2. Value delivery: The key resources, activities and partners that are needed
for the company to carry out what the value proposition requires.
3. Value capture: How the company makes money by means of a given
revenue model and a given cost structure.
60 S. Jørgensen and L. J. T. Pedersen
The first and most fundamental part of the business model is the value
proposition, which reflects how the company creates value. It refers to the
company’s offering that helps the customer solve a problem or perform a
job-to-be-done at a given price (Osterwalder et al. 2014). The “job” met-
aphor introduced by Christensen et al. (2007) conceives of transactions
as customers “hiring” products to do a “job”. Then, it is crucial to under-
stand what type of job the customers need done. And by extension, what
does the company offer, and how does it offer it, so that customers are
willing to “hire” them again and again?
You use Spotify to solve the problem of how to listen to music in one
way, while a physical CD or vinyl record purchased in a record store
solves the problem in a different way. Common to both the value propo-
sition of Spotify and of the record store is that they allow you to listen to
the music. However, they clearly do it in different ways. Spotify streams
the music online and its service gives you access to an endless supply of
artists and songs, while you can buy physical records in stores whether
they are big or large and whether they are physical stores or online stores.
Or you can even stream the music on YouTube and enjoy the music video
at the same time—another feature of music services that do different jobs
for its users.
Such basic choices are captured in the company’s value proposition,
and they are indicative of different solutions to the same basic prob-
lem. Successful value propositions have a coherence between what the
Redesign Rather than Standstill 61
company offers and what job the customers would like done, as illus-
trated in Fig. 5.3.
Theodore Levitt once said that managers might think that they are sell-
ing a drill to the customer. However, it is not a drill the customers want
to buy, argues Levitt: It is the hole in the wall customers want (Levitt
1972). The hole in the wall is an example of a job the customer wants
done. This reflects the company’s business opportunity: It is an opportu-
nity to create value for the customer at a given price by offering a solution
in the form of a product (such as a drill) or a service (such as carpentry).
Different customers have different needs. Therefore, they really have dif-
ferent jobs they want done (Christensen 2012). If they feel that other
products or services can do the same job, customers will rather choose
those products or services. This is particularly true if the substitutes can
do an equally good or better job at the same price or at a lower price than
what is already offered (Johnson et al. 2008).
It is important to remember that the costs of the customer are not just
a matter of money. It is also about time and effort costs (e.g., Christensen
2012). Therein lies another possibility of a business model innovation:
new or existing companies can identify problems that are not at present
resolved in a satisfactory manner. For example, mobile phones have
largely taken over the job done by digital cameras when it comes to pho-
tography in everyday life, and a major reason is that they give the user a
simple and accessible solution. Even if your company has a value proposi-
tion that solves the customer’s problem, there is still a long way to go
before both the customer and the company are happy. The next question
is how to deliver that value to the customer reliably and over time, and
there can be considerable differences between the ways in which compa-
nies do so.
62 S. Jørgensen and L. J. T. Pedersen
value, they need suppliers and partners, whether to provide resources the
company itself does not possess or to perform activities it cannot carry
out on its own (e.g., Dyer and Singh 1998). In this way, partners can
unlock new modes of value delivery for the company. In other words,
there are costs to delivering value to the customer. Therefore, in order to
be profitable, the solution offered to customers must cost less to produce
than the customer is willing to pay for it. This necessitates, however, that
the company manages to capture value through an effective logic of
profitability.
We have seen above that the value proposition is the offering that helps
the customer to solve a problem at a given price. It does not take much
imagination to understand that it is costly for companies to obtain the
necessary resources and to use them to perform value-adding activities.
The story of how the company works must therefore also include a logic
of profitability (Johnson et al. 2008). How does the company generate
profitability by means of a given revenue model and a given cost struc-
ture? What is the relationship between the price of the offering and the
volume sold to customers? The logic of profitability will also include
more specific measures, such as how much the company must make on
each transaction and how quickly resources and inventory must be turned
over to achieve the desired level of profitability.
How companies capture value has become such a central topic that the
various payment models have gotten their own names. Spotify’s main
payment model is a subscription service, while the model advertising-
funded version Spotify uses is often called the “free model” (or just “free”).
The media companies have offered online newspapers for a long time,
but we now see that several online newspapers are beginning to charge in
different ways. These models are given names like “total payment”, in
which customers have to pay for everything; the “metered model”, in
which customers receive a number of free articles in a given period; and
“freemium”, in which customers are offered a combination of free and
paid content.
64 S. Jørgensen and L. J. T. Pedersen
Note that these names reveal only a little about how the company
actually creates value and how it is delivered to its users. Two newspapers
that use the total payment model can address very different segments
with very different content, and they can deliver their value propositions
in a variety of ways, based on dissimilar resources and activities. It is
therefore important to be aware that value capture is an important part of
the story of how the company works, even though it may not always be
the most telling part of the business model.
Many companies, such as Würth, Volvo and Rolls Royce, have tradi-
tionally generated revenues by producing and selling products. In recent
years, however, it has become more common that they also offer services
by leasing their products to customers. Consequently, they have devel-
oped a business model using the so-called servitization, product service
systems or product-as-service, by which companies lease products rather
than selling them (see, e.g., Jørgensen and Pedersen 2017; Scholl 2006).
This implies that the customer is still paying for the physical product, but
as a service (i.e., functionality) rather than as a product of which the cus-
tomer takes ownership (cf. Bocken et al. 2016). Moreover, the customer
therefore also pays in other ways than when purchasing the product in a
conventional way, which implies that the profitability logic is changed
because of the change in the value proposition.
It is obvious that the arrival of iTunes and Spotify turned the music
industry upside-down. Any business model is based on a value proposi-
tion, which in turn reflects a hypothesis about what the customer wants.
This hypothesis can of course be right or wrong. A successful business
model is able to offer what the customer actually wants at a price the
customer can accept, and successful business models both create and
deliver value in a way that enables the company to capture value for itself
and its owners (Kaplan 2012).
The business models of the music industry, which we have used as
examples, have reflected three somewhat different hypotheses about what
kind of problem customers want to have solved (Table 5.1). In addition,
Redesign Rather than Standstill 65
through their intense growth, the new digital music services have made
life difficult for the more traditional players in completely different indus-
tries since they actually also solve some of the problems of customers who
have previously used the products or services of firms in those industries.
For instance, when more and more people use Spotify’s services on their
office laptops or through their mobile phones connected to the car stereo,
it means that they are also making life more difficult for radio stations
competing for the same customer attention. Similarly, social media like
Facebook and Twitter are trying to outcompete the traditional hypothesis
that “the customer wants a newspaper that presents the most important
news from the past day”, or for that matter the more recent hypothesis
that “the customer wants the website of a newspaper to update with news
in real time”.
66 S. Jørgensen and L. J. T. Pedersen
From time to time, new business models emerge based on new hypoth-
eses about what the customer really wants (Christensen 2012). In such
situations, established players quickly lose their customer base. It is
enough to recall what happened to the market for relatively inexpensive
digital cameras: after Apple, other producers began to integrate good
camera features in the iPhone and other smartphones. Companies like
Canon and Kodak became “victims” of such business model innovation.
This involves a new hypothesis about what the customer wants, a new
way to deliver value or new ways to charge the customer for the value, for
instance, via a new payment model. In such a situation, standing still
might be a recipe for disaster for many companies. In other words, it
might be necessary to redesign the company’s business model in order to
meet the competition. Here, the case of Fujifilm—as a contrast to the
plight of Canon—can be instructive. When realizing that digitalization
would transform the photography (camera and film) industry, Fujifilm
redefined its business as being related to imaging more broadly and suc-
cessfully entered new markets in medical imaging, information technol-
ogy and so on (see, e.g., Inagaki and Osawa 2012). In this way, the
company steered clear of the downfall that some of its competitors faced.
We have not yet heard the swan song of the music industry. However,
the many innovations in the industry imply that old giants might be
about to fall and that new players will enter the stage and outperform
existing solutions with new products and services, new technologies and
new payment models. The challenge for companies in the music industry
and in many other industries is to reinvent themselves before someone
else makes them redundant.
against climate change, and she has said that the business model innova-
tion of StormGeo has been motivated in part by a desire to take
responsibility for contributing to climate solutions, while at the same
time embracing the opportunities inherent in the climate problem.
and more advanced digital cameras. The first mobile cameras had signifi-
cantly poorer quality, but their quality was sufficient and customers
found it easier to use them. Hence, as their quality gradually improved,
they completely overtook the mass market for photography.
When talking about business model innovations, one often immedi-
ately thinks of such radical changes by which new or established busi-
nesses change the rules of the game in an industry by changing the way
value is created, delivered and captured. Spotify’s entry into the music
industry is a good example of this. Spotify’s hypothesis about what the
customer wanted differed significantly from the existing hypothesis.
Importantly, the new hypothesis was based on the assumption that
ownership was not important. Customers could access the streaming
service either by paying a monthly subscription fee or by choosing an
advertisement-funded version. Therefore, Spotify also had to show that
it could solve a problem for advertisers: after all, ad revenue was sup-
posed to finance part of its operations.
Spotify’s value proposition was a novelty, and it required that the com-
pany managed to convince several different stakeholders—customers,
record companies and artists—that its solution was attractive and useful.
Spotify also needed to acquire completely different types of resources and
perform completely different types of value-adding activities compared
with what previous distributors of music had done. Not at least, their
business model had a new way of capturing value—a payment model
that made it likely that customers would use it. Overall, Spotify’s business
model innovation resulted in an entirely new way of thinking that chal-
lenged the rules of the game in the industry.
Disrupt or Die?
Companies that do not innovate and change when needed are in danger
of becoming “netflixed”, to use Saul Kaplan’s (2012) phrase. Similarly,
there is often speak of the “uberification” of various markets. The radical
shifts that have characterized, for instance, the entertainment industry
and the taxi industry seem to have created a concern across all industries
that the next radical innovation is waiting around the next corner.
70 S. Jørgensen and L. J. T. Pedersen
Netflix, which today is best known for its offering of TV and movie
streaming, started in the late 1990s as a company that offered customers
DVD rentals online. At the time, it was common to go to the rental kiosk
and rent movies, and Netflix was established as a response to one of the
founders having to pay a late delivery fee. Later, Netflix also introduced
the service we know today, which is based on the streaming of movies and
TV shows online.
One consequence of the success of Netflix was that the rental giant
Blockbuster went bankrupt. Blockbuster was unable to renew itself, and
thus became a victim of Netflix’s innovative services. For companies to
survive and grow, they sometimes need to change the story of how they
function, and they do this through changes in how they create, deliver
and capture value. Blockbuster was not able to adapt—first from a tradi-
tional rental store to a provider of online rentals, and thereafter to online
streaming. An interesting part of the story is that Blockbuster was invited
to buy Netflix for 50 million USD in the early 2000s. At the time, how-
ever, it did not realize the potential of Netflix’s new business model and
therefore declined the offer. Ten years later, the market value of Netflix
was nearly 20 billion dollars.
The innovation researcher Clayton Christensen argues that established
companies are best at doing incremental innovations, which often
involves making a product as sophisticated and as good as possible
(Christensen 2012). The problem is that such products often become so
advanced that almost only the most ardent and wealthy clients can afford
or need them. That creates an opportunity for newcomers that have the
opportunity to enter the market with cheaper and simpler products or
services able to reach new customer groups. A classic example is the com-
puter industry, in which clear patterns emerged over time. The big players
competed to get better storage, and PCs became bigger, stronger and
better. Surprisingly, however, new players emerged in the market with
small, laptop computers with less storage capacity. These new products
initially addressed very different customer segments, and the established
companies had not been able to see these opportunities. Instead, they
were very fixated on more incremental innovations through which they
were creating improved versions of what already existed.
Redesign Rather than Standstill 71
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Attribution-NonCommercial-NoDerivatives 4.0 International License (http://
creativecommons.org/licenses/by-nc-nd/4.0/), which permits any noncommer-
cial use, sharing, distribution and reproduction in any medium or format, as
long as you give appropriate credit to the original author(s) and the source,
provide a link to the Creative Commons license and indicate if you modified the
licensed material. You do not have permission under this license to share adapted
material derived from this book or parts of it.
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license and your intended use is not permitted by statutory regulation or exceeds
the permitted use, you will need to obtain permission directly from the copy-
right holder.
6
Experimentation Rather than
Turnaround
Redesigning a business model is not done overnight, and it is wise not to risk
everything on one endeavor. To succeed with business model innovations,
companies need to conduct controlled experiments on their business models,
in order to uncover what works and why. In that way, they can increase the
likelihood that the business model will be successful when it is finally
implemented in the entire market.
made in what is offered to the customer, which inputs are used, how
products and services are delivered to the customer, how to reduce costs,
and so on. An important type of business model experimentation thus
relates to conducting controlled trials that make it possible to assess the
impact of planned changes.
An Italian finance professor had asked the question, after being told
about the large field experiment Lars Jacob and his colleague Trond
Døskeland had carried out during the launch of the Norwegian bank
Skandiabanken’s implementation of an ethical labeling system for mutual
funds. Skandiabanken (since renamed Sbanken) had developed the sys-
tem in an attempt to provide the individual investors for whom the sys-
tem was designed with actionable non-financial information about their
investment opportunities. As part of the implementation, the two
researchers conducted a large-scale experiment in collaboration with the
bank, in order to examine how the labeling system influenced the invest-
ment behavior of individual investors.
The labeling system was launched in 2011 and involved a classification
of the bank’s mutual funds into four categories: “Red funds” are funds
containing investments a significant proportion of customers are expected
to find problematic. Examples include weapon-producing companies
and companies operating in highly corrupt markets. “Neutral funds” are
funds that neither contain investments that are considered ethically
problematic nor stand out positively in terms of ethicality. “Green funds”
were categorized into two levels and contained funds that actively avoid
investing in ethically problematic enterprises and funds that actively seek
Experimentation Rather than Turnaround 83
Experimentation in Practice
Business model experimentation can take many forms, ranging from the
design and testing of new product and service prototypes to experimenta-
tion with new business models in new markets (Chesbrough 2007). This
implies that experimentation may be linked to each of the three compo-
nents of the business model that we have previously introduced. As illus-
trated below, a series of questions can be asked as a point of departure for
developing experiments relating to each of them.
Regarding value propositions, there are at least three basic questions
that must be answered and that can provide ground for experimentation.
Who will our customer be, and what kind of market segments will we
aim for? What is our hypothesis about what these customers want? And
what does that mean for the design of products and/or services that we
will offer in order to create value for these customers (Morris et al. 2005)?
When Skandiabanken developed its ethical labeling system, it was still
unclear whether this was something the average individual investor would
benefit from or if a specific niche of ethically conscious investors were the
real target group. The research that was carried out showed that the sys-
tem did in fact change the investment behavior of its customers, which
implies that the service may have been more useful than expected among
the customers. However, how a service of this type is designed and com-
municated to customers is central to how it is used. Therefore, controlled
trials of how the service works and is used are necessary.
We can explore value delivery using similar questions: Which resources
are needed to deliver in line with the value proposition, and how can
those resources alternatively be used to solve other problems? Which
activities are key to successful value delivery, and what other kinds of
problems can be solved by means of comparable activities? Which part-
ners are central for enabling the value delivery the company must carry
out, and what other possibilities are there to create value based on the
same alliances (cf. Chesbrough 2010; Adner 2006)? There are several
examples of companies that have experimented with developing new ser-
vices based on existing resources. We have previously shown how
StormGeo used existing knowledge and meteorological data to develop
Experimentation Rather than Turnaround 85
back to the drawing board and start with questions of the kind we have
outlined here (Fig. 6.2).
On the road to sustainable business, many of our current solutions,
technologies and production and consumption patterns will likely disap-
pear and be replaced by new ones. It remains to be seen what kind of
products and services that will solve our problems, how they will be
offered to us from companies and how they will make them, not to men-
tion how we are going to pay for them. However, when all four wheels on
the car may need to be replaced while it is still in motion, it means that
companies will have to experiment their way forward, systematically. We
see this when Levis experiments with the very first 100 percent recycled
denim jeans. We see it when aquaculture giants such as Marine Harvest
invest in fish farming in closed tanks or in facilities on land. And we see
it when companies like Otovo Solar cover the cost of adding solar panels
on people’s houses, who in turn pay for access to the electricity that is
generated, while they can offer excess energy production for sale to their
neighbors. Thus, households may get lower costs related to the purchase
Experimentation Rather than Turnaround 87
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creativecommons.org/licenses/by-nc-nd/4.0/), which permits any noncommer-
cial use, sharing, distribution and reproduction in any medium or format, as
long as you give appropriate credit to the original author(s) and the source,
provide a link to the Creative Commons license and indicate if you modified the
licensed material. You do not have permission under this license to share adapted
material derived from this book or parts of it.
The images or other third party material in this chapter are included in the
chapter’s Creative Commons license, unless indicated otherwise in a credit line
to the material. If material is not included in the chapter’s Creative Commons
license and your intended use is not permitted by statutory regulation or exceeds
the permitted use, you will need to obtain permission directly from the copy-
right holder.
7
Service-Logic Rather than Product-Logic
In doing so, Apple has turned the product iPhone into a service: paying
for access to the latest iPhone model at any time. Apple may in turn capi-
talize on its “harvested” old devices by leasing them again to new custom-
ers, refurbishing them or reusing their components.
The new iPhone models are, unlike previous generations of iPhones,
designed in such a way that they can be dismantled for reuse relatively
easily. Apple has even developed robots that can dismantle used devices
easily and effectively. Such devices contain several valuable resources like
gold, lead and platinum. In 2014, Apple harvested a total of 40,000 tons
of electronic waste, and the scope of its harvesting is on the increase.
Apple’s new business model is obviously inspired by the so-called circular
economy, which is the topic of the next chapter, and it builds such a cir-
cular model in part by moving from a product-logic to a service-logic
(see, e.g., Bocken et al. 2014, 2016).
In recent years, academics and business managers alike have opened their
eyes to the service economy. Services largely dominate economic value
creation in industrialized countries, to such an extent, in fact, that these
countries should perhaps rather be called service economies than indus-
trialized economies (cf. World Bank 2015). In addition, there is an
increasing recognition that knowledge is scarce on how to build profit-
able, service-based business models (e.g., Kastalli and Van Looy 2013;
Baines et al. 2009). We use the concept to denote not only services as
service providers, in the traditional sense, offer them. It also comprises
how products like smartphones, cars and clothes can be understood as
services. This implies emphasizing that whatever is delivered to the
customer acts as a service that solves a problem for the customer, even
when it is done by means of a physical product to which the customer
gets access (Lusch and Vargo 2012; Bocken et al. 2014).
There are many examples of products made into services, such as the
iPhone Upgrade Program and Filippa K’s sharing-economic model for
the rental of fashion wear that customers would otherwise have had to
92 S. Jørgensen and L. J. T. Pedersen
its lifetime; our cars stand still on average 23 hours a day and when they
are used, they are less than half full; and many people have houses,
apartments and rooms available all or part of the time. These drills, cars
and rooms, and similar excess resources, are often referred to as “struc-
tural waste”. This is of course not waste in the traditional sense, but it
constitutes a form of waste in the sense that these are idle, yet valuable,
resources. Therefore, the energy, resources and waste resulting from the
production of even more similar objects could have been avoided
if we had utilized the objects that already exist more efficiently
(cf. McDonough and Braungart 2002).
This is the point of departure for the sharing economy, which has
taken the world by storm in recent years (Belk 2014; Botsman and Rogers
2010). There is of course nothing new in people sharing their resources,
or in people renting out items they do not use—whether houses, cars or
smaller products. Especially in the United States, car sharing has long
been commonplace. In recent years, however, the supply of such services
has exploded in line with new technological solutions making them pos-
sible (e.g., Sundararajan 2013). Numerous technological platforms, or
apps, have emerged and challenged the established players in the indus-
try. The most famous services are perhaps Uber, which competes with
taxis; Airbnb, which competes with hotels; and eBay, which sells all con-
ceivable new and used products in an online marketplace.
The defining characteristic of these sharing-economic services is that
they effectively bring together people who have excess resources and
those who have a need for using those resources and a willingness to pay
for it (Gansky 2010; Stephany 2015). An important prerequisite for an
efficient sharing economy is trust between the parties in the transaction
(Walter 2017). This is most often solved by the functionality of giving
transaction partners a score or assessment after the transaction. Such
assessment allows users to know whom they can trust and whom they
should avoid. The transaction costs of using such services are decreasing,
and as more people use the services, their peers are more likely to adopt
the services as well. Sharing services thus serve as third-party entities
linking together those who have resources to spare and those who would
like to access them. Thereby, such services create a marketplace where
94 S. Jørgensen and L. J. T. Pedersen
though they spend two to three dollars each day on such products and
services, they still do not have enough money to buy quality products that
can cost anywhere from 50 to up to 200 dollars. This is despite the fact
that the products would have paid off for them in a relatively short time.
Bright Products, then, is in the midst of a redesign of its business
model, and it experiments with various services and payment models in
these markets. The company is also making improvements in environ-
mental performance, for instance, by making changes to product design,
production processes and waste management, and it might also be pos-
sible to develop business models based on leasing rather than selling.
Bright cannot succeed with such changes on its own, and there are a
number of alliance partners in these efforts, such as microfinance institu-
tions, distributors, suppliers of technological solutions and designers. A
key driver behind this is the service-logic that involves moving from
thinking about the company through the lens of the products it offers,
and instead emphasize how its offering increases the experienced value
for the customer. This implies that Bright goes from being a company
that sells solar-powered lamps and mobile chargers to become a company
offering services related to energy and beyond.
Profit from Services
around the world to develop so-called smart cities. The concept refers to
cities that are designed in such a way that essential services are intercon-
nected and can be coordinated automatically and in real time by means
of sensors, big data and digital decision support systems. Such systems
can allow public transportation to be planned in real time based on
information about who is where and their movements at any given time.
Similarly, it can allow for full control over water and energy consump-
tion, waste disposal systems and so on. In this way, the various services
in the city are becoming increasingly connected and will be able to auto-
matically adapt to each other. Such planning has an obvious potential
for successfully managing resources in smarter ways, thereby reducing
overall resource consumption.
An important aspect of IoT is that it takes us from a world wherein
products are static to a world wherein they serve as dynamic services that
can be changed, upgraded and improved on as they are used. It also
enables automatic customization of services through the application’s
learning of the user’s preferences. Previously, when we bought products,
we had to bring them to the manufacturer or other companies if we
wanted to modify them. IoT provides infrastructure that enables the
improvement of products in real time, as in the Tesla example. Thus,
products and services can do a better and better job of solving our prob-
lems over time. An “intelligent refrigerator” that tells us when milk turns
sour, and which maybe even orders new milk from the online store with-
out asking us first, resembles a service more than a product.
Both Apple’s iPhone Upgrade Program and Bright Products’ new busi-
ness model are stories of companies that move from being providers of
products to become service providers aiming to solve the problems of its
customers. As we have seen, the value propositions of these companies
typically look different from those of their previous business models, and
usually it necessitates other types of payment models for making their
business models profitable. One important characteristic of such business
models, however, is that they enable smarter use of resources. In this way,
they play an important role in changing business from being linear to
being more circular.
100 S. Jørgensen and L. J. T. Pedersen
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102 S. Jørgensen and L. J. T. Pedersen
Open Access This chapter is licensed under the terms of the Creative Commons
Attribution-NonCommercial-NoDerivatives 4.0 International License (http://
creativecommons.org/licenses/by-nc-nd/4.0/), which permits any noncommer-
cial use, sharing, distribution and reproduction in any medium or format, as
long as you give appropriate credit to the original author(s) and the source,
provide a link to the Creative Commons license and indicate if you modified the
licensed material. You do not have permission under this license to share adapted
material derived from this book or parts of it.
The images or other third party material in this chapter are included in the
chapter’s Creative Commons license, unless indicated otherwise in a credit line
to the material. If material is not included in the chapter’s Creative Commons
license and your intended use is not permitted by statutory regulation or exceeds
the permitted use, you will need to obtain permission directly from the copy-
right holder.
8
The Circular Rather than the Linear
Economy
over time so that they can be reused many times. This phenomenon is
referred to as upcycling, rather than recycling, which emphasizes the
attempt to retain high value of materials, components and products,
rather than allowing them to deteriorate downwards in the value hierar-
chy (McDonough and Braungart 2013).
This transition can have large effects on economy, society and the envi-
ronment alike. A study of seven European countries concluded that a
transition to a circular economy has the potential of reducing each
nation’s greenhouse gas emissions by 70 percent and increasing employ-
ment by 4 percent (Ellen MacArthur Foundation 2015). Both the con-
sultancy firm McKinsey and the think tank the Club of Rome have
estimated that there is an enormous profit potential for companies that
develop circular business models. However, it will require very significant
changes and breaking with one of the most fundamental characteristics
of the production of products and services: it requires moving from a
linear to a circular economy.
the environment further. Much of this waste is even toxic and harmful in
other ways, so that it is not possible to reuse it (Fig. 8.2).
The circular-economic paradigm suggests that there are at least three
necessary responses to the problem. First, we need to use resources in a
way and to an extent that does not exhaust resource stocks. Many
resources are exploited at such a rate that they will ultimately be com-
pletely depleted. This includes many metals, minerals and fossil fuels, not
to mention various fish stocks. A circular-economic model requires bal-
ancing the use of these resources, while facilitating the regeneration of
such renewable resources (see, e.g., McDonough and Braungart 2010).
Second, companies must design products, services and processes in
ways that lead to less use of scarce resources and facilitate the reuse
thereof. Specifically, this means designing away externalities, for example,
by creating products that are possible to disassemble and reuse at the end
of life (see, e.g., Bocken et al. 2016).
Third, all products and materials must be maintained at as high a qual-
ity level as possible, so that they can actually be reused. Circulation econ-
omists argue that we must “upcycle” resources (McDonough and
Braungart 2013). Traditional recycling is really “downcycling”, which
means that resources are gradually degraded until eventually becoming
unusable. When a plastic bottle is recycled into a fleece sweater, the plastic
resource is still on its way to the landfill. If the sweater is burned when it
is worn out, it generates energy, but it can happen only once.
Upcycling, on the other hand, implies maintaining the value of the
resource so that it can be used repeatedly. Could one, for example, make
a plastic bottle that is possible to use many more times? Alternatively,
could one make a bottle in which the plastic does not deteriorate in
The Circular Rather than the Linear Economy 107
Fig. 8.4 The two basic cycles (based on McDonough and Braungart 2013)
Values at Stake
companies are now starting to rent rather than sell products, which
implies that they regain access to the products after customers are done
with them (see, e.g., Lacy and Rutqvist 2015). In that way, they can rent
them out again or harvest their parts and thus get access to valuable
resources. Big companies such as Apple, Renault and H&M, for instance,
operate in this way.
Not all companies are big enough to conduct all activities that are
necessary to succeed with a circular, closed-loop value chain. This opens
for a variety of business models that can offer services along the value
chain to help other organizations become more circular (cf. Bocken et al.
2016). For example, there are design agencies with expertise on circular
product design, waste management companies that sell recycled materials
as inputs into new products, technology companies that offer digital plat-
forms for sharing and other types of consumption, companies that can
facilitate the sale of used products on the secondary market and R&D
organizations that can provide knowledge on how to recycle materials
optimally to avoid excess energy and resource use. In other words, there
are numerous business opportunities in facilitating the circular economy,
for small and large companies alike. Many of the companies we use as
examples in this book have done just this: Newlight Technologies recycles
CO2 to produce biodegradable plastic that Dell and other big companies
use in their products. Interface redesigned its entire business model in a
manner that included reusing waste as inputs in their carpets. Similarly,
Norsk Gjenvinning provides services related to waste management and
the smarter use of resources along the entire circular value chain.
It should be noted that not all sustainability challenges are necessarily
best solved by means of circular solutions. Circular business models are
particularly well suited to solve challenges related to product life cycles
and resource scarcity more broadly. There are of course many other types
of sustainability challenges that can be solved by means of other
approaches that are not explicitly circular. However, generally speaking,
the solutions offered by circular thinking imply increased cycling of
materials, components and products, which is beneficial from a sustain-
ability standpoint and which can reduce the footprint of products and
services in many different industries. The three approaches outlined
above—closing, slowing and narrowing the loop—together form a set of
114 S. Jørgensen and L. J. T. Pedersen
Inspired by Nature
A prominent part of the circular economy is the idea that business should
be in harmony with, and even reinforce, nature’s own processes. A related
development that is the basis for many exciting technologies and business
models is products and production processes that imitate or copy mecha-
nisms and elements from nature. This phenomenon is called biomimicry
(see, e.g., Harman 2013). An example is the British company Skipping
Rocks Lab, which has developed an alternative to plastic bottles. The
company found inspiration in nature, after studying how plants collect
liquid by means of membranes. This led to the design of Ooho!—a liquid
packaging that is made from seagrass and other naturally occurring input
factors. It looks like a small, spherical bottle, and it is not only an afford-
able alternative to traditional bottles, but it is also supremely biodegrad-
able: It is actually edible!
The materials of which the bottle is made are reminiscent of an orange
peel. When made thicker, the material can also be used to transport and
store large quantities of other liquids. Such technologies thus have signifi-
cant potential to be put to use for solving very different kinds of prob-
lems over time.
A comparable example is the US design and technology company
Ecovative, which employs fungi to create a biological alternative to poly-
styrene. The world is flooded with polystyrene, which has significant
adverse effects on the environment. The young founders of the company
started experimenting with various forms of fungi and grew fungi in
molds that made it possible to create packaging that is strikingly similar
to polystyrene but biodegradable instead of environmentally harmful.
After many years of experimenting with the technology, Ecovative has
managed to make the product competitive on price, and it has companies
like IKEA, Dell and Stanhope on its list of clients. The company also
extended its product line with other products that use mushrooms as
inputs such as insulation and floating docks.
The Circular Rather than the Linear Economy 115
Ecoalf is just one of many companies that embrace the new, circular real-
ity, and which has developed an ecosystem of partners that together offer
products, services and jobs. Both research and anecdotal knowledge sug-
gest that companies increasingly collaborate on green innovation proj-
ects, both with suppliers, NGOs, industrial networks, authorities and
competitors. In this way, they try to find more sustainable solutions. One
reason for this is that sustainability issues are complex and global in
nature, and most companies realize that they cannot solve these problems
on their own. Collaboration does not only happen among businesses—
also consumers see that collaborative efforts can solve problems and lead
to smarter consumption. Although we are slowly circling toward a more
sustainable economy, much still remains before we have completely cir-
cular business models in place.
Not at least, many companies that aim to build circular and service-
based business models using digital and knowledge-intensive technolo-
gies require a high degree of collaboration with stakeholders who can
help with this expertise. The importance of such alliances to promote
sustainable business is the topic of the next chapter.
The Circular Rather than the Linear Economy 119
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Open Access This chapter is licensed under the terms of the Creative Commons
Attribution-NonCommercial-NoDerivatives 4.0 International License (http://
creativecommons.org/licenses/by-nc-nd/4.0/), which permits any noncommer-
cial use, sharing, distribution and reproduction in any medium or format, as
long as you give appropriate credit to the original author(s) and the source,
provide a link to the Creative Commons license and indicate if you modified the
licensed material. You do not have permission under this license to share adapted
material derived from this book or parts of it.
The images or other third party material in this chapter are included in the
chapter’s Creative Commons license, unless indicated otherwise in a credit line
to the material. If material is not included in the chapter’s Creative Commons
license and your intended use is not permitted by statutory regulation or exceeds
the permitted use, you will need to obtain permission directly from the copy-
right holder.
9
Alliances Rather than Solo-runs
Researchers from MIT and a team from the Boston Consulting Group
conduct an annual global survey in which they ask executives worldwide
questions about sustainability-related issues. In 2015, the survey exam-
ined the role of collaboration in companies’ sustainability efforts (see
Kiron et al. 2015). While 90 percent of respondents believed that col-
laboration is necessary to become more sustainable, still less than 50 per-
cent of companies say that they are actually engaging in such
collaboration. This is perhaps embedded in the DNA of companies—
they are intended to compete rather than to cooperate. Interestingly,
there is increasing collaboration even between companies that are usu-
ally competitors (Brandenburger and Nalebuff 2011). Arguably, devel-
oping such collaborative willingness and competence will be important
in trying to design more sustainable business models (see, e.g., Peloza
and Falkenberg 2009).
As we have seen, Renault has made major changes in its business
model to improve its sustainability performance and to attain the ben-
efits of a circular economy. Not at least, the company has made changes
in its organizational ecosystem, that is, its network of affiliated compa-
nies, including suppliers, distributors, customers, competitors, govern-
ment agencies and so on. Successful alliances require investments, and
such risky investments are not costless, even though the rewards can be
big for those who succeed (cf. Das and Teng 2001). The challenge of
collaboration is that it requires that different players with different
objectives must come together and find mutually beneficial solutions.
Collaboration also typically requires opening up the business model of
the company and providing potential competitors with access to inter-
nal processes (see, e.g., Drechsler and Natter 2012). This is particularly
true since such innovation projects often imply collaboration with
companies that can simultaneously compete with the company in other
markets.
It is naive to believe that such changes will take place without big and
conscious efforts by the parties involved, especially since some of them
will typically benefit more from the collaboration than will others. While
124 S. Jørgensen and L. J. T. Pedersen
flows in the tubes, and the tubes are illuminated from all sides at all
times, while water and CO2 circulate in the pipes. In this way, algae grow
and thus form the basis for the resulting fish feed that is rich in Omega-3.
CO2BIO’s business model helps solve two major problems at once: it
reduces harmful greenhouse gases in the atmosphere while contributing
nutritious fish feed for the aquaculture industry.
The technology used by CO2BIO is a type of biomimicry based on
natural processes (see, e.g., Harman 2013). Currently, the project is still
in the pilot stage. In other words, it is still an experimentation with new
technology and a new business model. If CO2BIO manages to commer-
cialize the product successfully, it can build a unique and advantageous
business model. One of its main resources, CO2, the company (for now)
gets free of charge from Equinor’s Mongstad operations. In the future,
will perhaps companies with excess CO2 emissions even pay CO2BIO to
get rid of their emissions? On the customer side, the company may sell its
product to companies in need of fish feed of high quality, which is an
industry that is expected to grow significantly in the coming years. At the
same time, however, various competitors using many different technolo-
gies are trying to capture this market with novel fish feed products.
CO2BIO would not have been able to implement this project on its
own. Through cooperation and alliances with entities from the private
and as public sectors as well as from academia and research institutions,
the company has gained access to potential customers, knowledge, raw
materials and capital. Interestingly, the parties in the alliance are also
competitors in other markets. For instance, fish-farming companies like
Marine Harvest, EWOS, Lerøy Seafood and Grieg Seafood are among
the partners and shareholders of the project. In addition, various aca-
demic institutions such as the University of Bergen and UniResearch are
central to the project.
There are several interesting characteristics of the CO2BIO business
model related to how it aims to solve sustainability issues. Firstly, the
business model is a collaborative model in which several organizations
join forces to solve a problem that each of them could not successfully
solve on their own. Secondly, one of the partners—Equinor, which pro-
vides the “raw material” of CO2—helps to create parts of the problem
that CO2BIO aims to solve. The project, after all, makes use of Equinor’s
128 S. Jørgensen and L. J. T. Pedersen
built. In sum, this is about finding new ways to create, deliver and cap-
ture value, both alone and in collaboration with others. In doing so, com-
panies can achieve results they would not have achieved on their own. In
the next topic, we turn to the challenge of prioritizing the right kinds of
results.
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Alliances Rather than Solo-runs 133
Open Access This chapter is licensed under the terms of the Creative Commons
Attribution-NonCommercial-NoDerivatives 4.0 International License (http://
creativecommons.org/licenses/by-nc-nd/4.0/), which permits any noncommer-
cial use, sharing, distribution and reproduction in any medium or format, as
long as you give appropriate credit to the original author(s) and the source,
provide a link to the Creative Commons license and indicate if you modified the
licensed material. You do not have permission under this license to share adapted
material derived from this book or parts of it.
The images or other third party material in this chapter are included in the
chapter’s Creative Commons license, unless indicated otherwise in a credit line
to the material. If material is not included in the chapter’s Creative Commons
license and your intended use is not permitted by statutory regulation or exceeds
the permitted use, you will need to obtain permission directly from the copy-
right holder.
10
Results Rather than Indulgences
confidence among its key stakeholders, which in turn may translate into
better performance. Sustainability efforts can influence the indirect
downside by potentially reducing the company’s risk, which can lead
investors or lenders to give favorable financing conditions. This can, for
instance, be due to a more circular business model that reduces the com-
pany’s supply risk for key resources and input factors.
These four effects—higher revenues, lower costs, increased access to
intellectual resources and reduced risk—may perhaps not belong in distinct
categories. A better reputation can influence customers’ inclinations posi-
tively and reduced risk could lead to lower interest rates on loans, thereby
reducing costs in the short term. However, by differentiating between
upside and downside effects, and between direct and indirect effects, it
becomes easier for decision makers to see how investments in sustainability
may also have effects beyond direct influence in the short term. Presumably,
the most important effects will emerge over time—for example, increased
trust could in turn make a company more attractive to collaborators,
employees, investors and other stakeholders (Jørgensen et al. 2018).
140 S. Jørgensen and L. J. T. Pedersen
Fig. 10.3 Which issues are material—for the company and for its stakeholders?
Results Rather than Indulgences 143
• End hunger, achieve food security and improved nutrition and pro-
mote sustainable agriculture
• Ensure healthy lives and promote well-being for all at all ages
• Ensure sustainable consumption and production patterns
• Conserve and sustainably use the oceans, seas and marine resources for
sustainable development
The selection of these goals as strategic priorities thus gave the com-
pany, and its sustainability director Cilia Holmes Indahl, further direc-
tion in the assessment of material sustainability concerns that allowed for
integrating appropriate sustainability efforts into the business model of
the company, in a way that aligned financial and sustainability-related
objectives.
new and valuable resources or partners. Fourth, the company can take
advantage of opportunities in product markets that otherwise would have
been inaccessible, for example, by attaining a position in the market or a
reputation that makes the company more competitive. This all involves
expanding the opportunity space of the company to the extent that well-
designed sustainability efforts can lead to the company to exploit new
business opportunities or enhance its position for exploiting existing
business opportunities.
There are numerous scientific studies that support such mechanisms
and that suggest that more sustainable companies can achieve unique
competitive advantages. First, highly qualified employees are increasingly
attracted to companies they perceive to be more sustainable, and they are
often even willing to work for relatively lower wages (see, e.g., Koys 2001;
Harter et al. 2002; Frank 2004; Turban and Greening 1997). Other stud-
ies show that the responsible companies have fewer capital constraints
(Cheng et al. 2014). This is interesting in the context of how financial
markets are developing, for instance, as one of China’s largest banks is
now screening all corporate loan applications for climate risk. Furthermore,
there is research showing that customers—whether they are companies or
individuals—are more trusting toward companies they deem responsible,
which in turn may promote economic activity and reduce transaction
costs (Zsolnai 2004; Jørgensen et al. 2018; see also Bartling et al. 2013).
In some product and service categories, customers prefer companies they
perceive as being responsible, and under some circumstances may be
more loyal to these companies (see, e.g., Sen and Bhattacharya 2001;
McWilliams and Siegel 2000; Bollen 2007). A stronger stakeholder ori-
entation is moreover associated with being more innovative (Flammer
and Kacperczyk 2015).
In addition to this, companies that are in extensive contact with its
stakeholders may develop greater capacity to absorb market changes at an
early stage. This may in turn help promote their ability to innovate, and
recent research suggests that there is a positive correlation between stake-
holder engagement and innovation (Flammer and Kacperczyk 2016). A
final driver for investment in sustainability is the expectation of future
regulations. For companies that proactively and voluntarily reduce their
shadows, there may be a first-mover advantage in the event of future
Results Rather than Indulgences 147
regulations (cf. Nehrt 1998). These are all mechanisms through which
sustainability efforts directly or indirectly may promote companies’
financial performance. It should be noted that there are also several stud-
ies that indicate that these effects are smaller and even negligible. However,
the conclusions depend highly on what is measured and what time hori-
zon is assumed.
Whether you make an optimistic or more moderate estimate of the
potential positive effects of sustainability efforts for companies, emphasiz-
ing results rather than indulgences and prioritizing material issues are both
essential for companies that take sustainability seriously. What the knowl-
edge about sustainability efforts and the consequences thereof also sug-
gests is that companies should better adapt their efforts in line with what
they are trying to achieve and for whom. This begs the question: What do
the drivers of sustainability efforts imply for how to design the efforts?
To answer this question, it may be useful to distinguish between “push”
and “pull” factors for companies’ investments in sustainability efforts.
These factors, respectively, reflect the negative aspects of the current busi-
ness model, which “push” the company toward more sustainable solu-
tions, and the positive aspects of an alternative, more sustainable business
model, which are attractive enough to “pull” the company toward change.
In Table 10.1, we distinguish between these two types of factors that can
act as drivers of sustainability efforts. In addition, we provide examples of
such forces, respectively, associated with product markets, factor markets,
capital markets, the regulatory environment and the socio-cultural envi-
ronment (see also Horbach et al. 2012).
As the overview shows, there may be many factors driving the com-
pany toward becoming more sustainable. How a company prioritizes in
order to achieve desired results will be a function of the kind of company
it is. For example, some companies will be more influenced by trends for
sustainable lifestyles, as is the case within the food industry and in mobil-
ity services. Similarly, some companies, such as financial institutions and
aquaculture companies, are significantly more exposed to regulations. In
addition, some companies will benefit more from technological innova-
tions that make it easier to make their business model more sustainable,
such as companies that can use 3D printers to reduce the need for trans-
portation in their supply chains.
148 S. Jørgensen and L. J. T. Pedersen
Table 10.1 “Push” and “pull” factors in sustainable business model innovations
“Push” factors “Pull” factors
The product Competitors offer Customers demand more
market attractive products and sustainable solutions.
services that are more Opportunity to differentiate.
sustainable.
The factor market Key inputs become scarcer Highly qualified employees
and thus more expensive. are attracted by the more
Demands from partners. sustainable companies.
New technologies make it
easier and less costly to
become more sustainable.
The capital Requirements of owners Attracting long-term investors
market and lenders. with an aversion to
sustainability risk.
The regulatory Threat of stricter Achieving first-mover
environment regulations or taxation. advantage by setting the
sustainability standard in the
industry.
The socio-cultural Pressure from key Trends for more sustainable
environment stakeholder groups, lifestyles.
thought leaders, and so on.
Unilever is present worldwide, and the same is true for its sustainabil-
ity efforts. The company provides poor customers in Southeast Asia with
access to hygiene products using decentralized sales networks in coopera-
tion with local entrepreneurs. Unilever also initiates large water conserva-
tion and reuse measures, which it attempts to scale throughout its entire
value chain. Moreover, the company transitions toward more sustainable
forms of soy production in Latin America, where such production has
been very ecologically harmful for a long time. Common to all the major
and minor efforts implemented by Unilever, along its many value chains
worldwide, is that the company has assessed the sustainability issues with
regard to their materiality. Based on this, the company prioritizes the
initiatives that have the greatest possible value along three dimensions:
economic, social and environmental performance (cf. Elkington 1997).
By doing so, the company strengthens its ability to be sustainable and
profitable over time.
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Open Access This chapter is licensed under the terms of the Creative Commons
Attribution-NonCommercial-NoDerivatives 4.0 International License (http://
creativecommons.org/licenses/by-nc-nd/4.0/), which permits any noncommer-
cial use, sharing, distribution and reproduction in any medium or format, as
long as you give appropriate credit to the original author(s) and the source,
provide a link to the Creative Commons license and indicate if you modified the
licensed material. You do not have permission under this license to share adapted
material derived from this book or parts of it.
The images or other third party material in this chapter are included in the
chapter’s Creative Commons license, unless indicated otherwise in a credit line
to the material. If material is not included in the chapter’s Creative Commons
license and your intended use is not permitted by statutory regulation or exceeds
the permitted use, you will need to obtain permission directly from the copy-
right holder.
11
Three-Dimensionality Rather than
One-Dimensionality
Organizing for Sustainability
LEGO’s new organizational design stems from a new goal and a new
vision for the company. Both the owners and the management want to
make the company sustainable. The company has put in place many
measures already, and now it is being implemented with regard to the
core product and the way it is produced. LEGO has assessed its own
practices with regard to environmental sustainability, and the company
understands that it must set new goals to align its own interests with
planetary and societal boundaries. The company’s organizational design
is changed, a new department is created with a new manager who becomes
part of executive management, employees are hired and the company
engages with stakeholders inside and outside the organization, all of
which is part of the efforts toward achieving LEGO’s ambitious sustain-
ability goals. In this way, LEGO builds an organization that is equipped
to strive for social, environmental and financial objectives simultane-
ously, and thus it moves in the direction of aligning sustainability and
profitability.
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Open Access This chapter is licensed under the terms of the Creative Commons
Attribution-NonCommercial-NoDerivatives 4.0 International License (http://
creativecommons.org/licenses/by-nc-nd/4.0/), which permits any noncommer-
cial use, sharing, distribution and reproduction in any medium or format, as
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licensed material. You do not have permission under this license to share adapted
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license and your intended use is not permitted by statutory regulation or exceeds
the permitted use, you will need to obtain permission directly from the copy-
right holder.
12
RESTART Before It is Too Late
sat in a car with dark-tinted windows and sped up toward The Plastic
Bank’s headquarters on the island. This company, which we have dis-
cussed earlier in the book, had become widely known for its innovative
business model that made plastic into a currency for poor collectors of
plastic. On an invitation from the founder, David Katz, Sveinung trav-
eled to Haiti to study the company’s business model up close. Not at
least, he wanted to understand more about how such a business model
could work in the unstable and chaotic context of Haiti in the year 2016.
We started the book with the story of our stopover in Rwanda, where
it is forbidden to bring plastic into the country. Prohibition of some
kinds of plastic has since been introduced in many other countries, and
the plastic problem that The Plastic Bank is trying to solve has wors-
ened worldwide. This has also resulted in increased attention to the
problem. It is extremely hot in Haiti, and people have to buy water in
bottles or in bags. Every day, five million small plastic bags of water are
consumed in the country and most of the bags are discarded on the
ground. The renovation system does not work, and streets, rivers and
canals are therefore inundated with plastic bottles, plastic bags, polysty-
rene and other waste. People burn waste on the streets, and from the
mountains around the city, one can see many small and large bonfires
at any time. In Haiti, The Plastic Bank has developed 30 recycling sta-
tions where people can trade plastic for cash, charging of their cell
phones or other services. Approximately 3500 people currently collect
plastic, and the goal of The Plastic Bank is to establish 200 such recy-
cling stations in various locations in Haiti—also beyond the metropolis
of Port-au-Prince.
People in Haiti are entrepreneurial—they get up early and walk a long
way to work and feed their families. Early in the morning, people get
together on the streets to sell bananas, used shoes, car parts and all other
imaginable products and services. By turning plastic into a currency and
making it possible for people to trade plastic for money and other ser-
vices, The Plastic Bank is creating value for many people. Moreover, the
company thus helps plastic from ending up in the sea every time it rains.
The vision is to establish this business model in many countries, with Asia
as the next stop, where the problems related to plastic and poverty are
RESTART Before It is Too Late 171
substantial. In preparation for its entry into the Asian market, The Plastic
Bank is also collaborating with IBM in order to build a blockchain-based
bank for the poor—thus getting one step closer to become an actual
“bank”, as indicated by the company’s name.
One of the challenges to succeed is to get the major companies in
the world to buy and use recycled—or rather upcycled—plastic. The
current low oil prices imply that the production of virgin plastic is
cheap, which in turn reduces the demand for recycled plastic.
Companies therefore need customers to pay more for shampoo bottles,
sunglasses and clothing that are made by Social Plastic. For the time
being, companies rely on customers and other stakeholders agreeing to
pay a premium for Social Plastic, while The Plastic Bank continues to
reduce its costs and create economies of scale in order to be cost-effec-
tive. Still, The Plastic Bank is driving down the costs associated with its
production and has managed to secure many large contracts in recent
years. For instance, in late 2017, the company entered into a compre-
hensive contract with the German chemical and consumer goods com-
pany Henkel, which intends to use Social Plastic-branded materials in
its products.
In order to make its operations more efficient, The Plastic Bank is try-
ing to make plastic collectors in Haiti cooperate. As a pilot project, the
company has just established three cooperatives in which eight collectors
work together. In this way, the collectors are able to collect more plastic,
and they may get better bargaining power vis-à-vis those who buy the
plastic. Sveinung and Rannei Johanne went to meet two of these coop-
eratives to see how they worked. In blazing sunshine, in an environment
still characterized by the major earthquake that killed over 200,000 peo-
ple in 2010, a group of collectors worked in the shadow of ragged blan-
kets that they had hung as protection. A woman with a large pipe in her
mouth removed the labels on the bottles, while another washed the bot-
tles. A third person sorted the different types of plastic in big bags, while
four others were out collecting bottles.
All of them lived in the same area, where children played and slept
between large sacks of plastic. Few people can read, write or do simple
mathematics. Therefore, each cooperative has an accountant who keeps
172 S. Jørgensen and L. J. T. Pedersen
track of how much each member contributes, not to mention how much
the cooperative will get when delivering the plastic to the recycling sta-
tions. The Plastic Bank runs an intensive training program and empower-
ment is a key consideration. There was consequently particular support
and encouragement for the young accountants to complete high school.
They were on job rotation so that they shared the tasks of the team, and
Sephora and her colleagues worked with training the members of the
cooperative as well as the rest of the collectors.
The Plastic Bank collaborates with companies that tear up the bottles
mechanically and distributes plastic to customers all around the world.
There is hard work at all levels in the organization, from the collectors on
the ground to the executives who engage with the major companies that
are buyers of its plastic. When Sveinung and Rannei Johanne experienced
the operations of the company up close, the pollution problem and the
extreme poverty in Haiti seemed overwhelming. At the same time, busi-
ness models of this kind provide hope that companies can make a differ-
ence, both locally and globally. However, that requires many RESTARTs
of business models—at the top, the middle and the bottom of the
pyramid.
Reference
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Kammen, D. M., & Stern, N. (2009). Climate change-global risks, challenges
& decisions: Synthesis report. Copenhagen: Museum Tusculanum.
Open Access This chapter is licensed under the terms of the Creative Commons
Attribution-NonCommercial-NoDerivatives 4.0 International License (http://
creativecommons.org/licenses/by-nc-nd/4.0/), which permits any noncommer-
cial use, sharing, distribution and reproduction in any medium or format, as
long as you give appropriate credit to the original author(s) and the source,
provide a link to the Creative Commons license and indicate if you modified the
licensed material. You do not have permission under this license to share adapted
material derived from this book or parts of it.
The images or other third party material in this chapter are included in the
chapter’s Creative Commons license, unless indicated otherwise in a credit line
to the material. If material is not included in the chapter’s Creative Commons
license and your intended use is not permitted by statutory regulation or exceeds
the permitted use, you will need to obtain permission directly from the copy-
right holder.
Part III
In the last part of the book, we outline implications for practical applica-
tion and for future research. We first summarize the RESTART frame-
work, before we present The Business Model RESTARTer—a process
model for working with sustainable business model innovation in prac-
tice. We discuss avenues for future research based on the RESTART
framework. Finally, we explore two case studies—one of the company
Scanship and the other of the alliance between the companies Orkla and
BIR. Thereby, we both apply the process model and explore further
research opportunities in the extension of the framework.
13
A Recap of the RESTART Framework
At first glance, it might seem that not all seven components are, or will
be, equally relevant for all companies. However, all companies will to a
greater or lesser extent need to change their business model and will need
the tools to think, articulate and act with regard to redesign of its business
model going forward. To succeed, it is necessary to conduct controlled
experimentation to identify and analyze what works and what does not. In
many cases, sustainable business can be promoted by a service-logic, in
which value creation and value delivery are oriented toward giving the
customer access to what he or she needs, rather than offering it in the
form of a product based on ownership. There is no company in the world
that does not use energy, water and other natural resources or that does
not generate to some extent excess resources and waste from their opera-
tions. To become more sustainable in a way that is compatible with finan-
cial performance, it can be helpful to think in terms of the circular economy
in designing the way resources are acquired, processed, used and ulti-
mately reused. Solutions of the type that promote service-logic and circu-
lation will often require that businesses enter into alliances with other
entities that may enable them to create and deliver value in this way. In
order to set the right objectives and to prioritize efforts that can both
promote real sustainability and align this with profitable growth, it is
essential to emphasize results, in the sense of addressing the right exter-
nalities and the material sustainability issues, which are related to core
business and critical for corporate strategy and performance. To succeed
in achieving these goals, the entire organization must be designed in a
way that reflects three-dimensionality, which implies that social, environ-
mental and financial objectives are reflected in organizational design,
leadership and management control systems (Fig. 13.1).
In the following chapters, we outline implications of this framework,
both for practical application and for future research. First, we account
A Recap of the RESTART Framework 181
for The Business Model RESTARTer—a process model for working with
sustainable business model innovation in practice. Thereafter, we outline
implications for future research based on each of the seven components
of the framework. Finally, we present two case studies that build on the
framework, of the company Scanship and the alliance between the two
companies BIR and Orkla, respectively.
182 S. Jørgensen and L. J. T. Pedersen
Open Access This chapter is licensed under the terms of the Creative Commons
Attribution-NonCommercial-NoDerivatives 4.0 International License (http://
creativecommons.org/licenses/by-nc-nd/4.0/), which permits any noncommer-
cial use, sharing, distribution and reproduction in any medium or format, as
long as you give appropriate credit to the original author(s) and the source,
provide a link to the Creative Commons license and indicate if you modified the
licensed material. You do not have permission under this license to share adapted
material derived from this book or parts of it.
The images or other third party material in this chapter are included in the
chapter’s Creative Commons license, unless indicated otherwise in a credit line
to the material. If material is not included in the chapter’s Creative Commons
license and your intended use is not permitted by statutory regulation or exceeds
the permitted use, you will need to obtain permission directly from the copy-
right holder.
14
A Process Model for Sustainable
Business Model Innovation
In this chapter, we take one step further toward exploring how to build on
the insights from the RESTART framework when attempting to conduct
a sustainable business model innovation in practice. Like any innovation
process, this will require considerable change in the organization, which
implies that there are considerable management and leadership challenges
involved. It requires a willingness to enter “the dark room of innovation”,
and an ability to ask the right questions once you are inside the dark
room, which may allow you to find the light switch. For this purpose, we
have developed “The Business Model RESTARTer”, a process model that
can serve as inspiration and guidance in such a change process.
We have argued that in the future, companies will have to redesign
their business models more often. This book’s point of departure was that
three major trends drive this need for continuous business model innova-
tion: first, the comprehensive sustainability problem, which is both a
threat and an opportunity for companies; second, the technological
opportunity space related to digitalization and the fourth industrial revo-
lution, which renders old business models obsolete and opens up for
completely novel business models, and third, ongoing changes in
Fig. 14.1 Three trends driving the development of new business models
Fig. 14.2 The business model RESTARTer for sustainable business model
innovation
the middle of the model. This is illustrated by the three gray circles that
represent how companies create, deliver and capture value. The four
phases, recognizing, rethinking, reinventing and reorganizing the business
model, are illustrated in the quadripartite and cyclical arrow surrounding
the business model. All four phases are related to the business model, and
as we will discuss below, elements from the RESTART framework serve as
important building blocks in the whole process from recognizing the cur-
rent business model to reorganizing in order to facilitate the new one.
We propose that any innovation process needs to start with a recogni-
tion of the current business model and an identification of its shortcom-
ings—its negative and positive externalities. The next phase is to rethink
the business model. This includes an examination of the threats from
novel business models from new and existing competitors and a thorough
exploration of the current business model’s failure to exploit the opportu-
186 S. Jørgensen and L. J. T. Pedersen
Table 14.1 Questions to guide the four phases of the sustainable business model
innovation process
(1) Recognize your • Who are your target customers, what problems do
business model they have, what products and services do you offer
them and what is your value proposition to these
customers?
• How do you deliver value, that is, what are the key
resources, activities and partners that allow you to
deliver on your value proposition reliably over time?
• How do you capture value, that is, what are your
most important sources for revenue and cost?
• What are your current ambitions? And what scope
and time horizon do you have for growth?
• What are the main negative and positive externalities
of your business model?
(2) Rethink your • Which jobs do customers really want to have done?
business model • Which technological and societal trends and drivers
influence your business model?
• Who are the main players in your industry?
• How can elements from the RESTART framework be an
inspiration for sustainable business model innovation?
• Is there a platform for change and a culture for a
RESTART in your organization? If not: What are the
main obstacles and how can you overcome them?
(3) Reinvent your • What are your new ambitions? And what time
business model horizons and scope for growth do you have now?
• Who should your customers be?
• What should your new value proposition(s) be, and
how can value be delivered and captured in new ways?
• What needs to be true for the new business model(s)
to go to market?
• How can you test and experiment with new business
models?
(4) Reorganize • Is there a strong relationship between the new ways
your business of creating, delivering and capturing value in your
model business model?
• Are you organized to leverage your resources and
facilitate value-creating activities?
• Are you counting, incentivizing and communicating
the things that really matter?
• How are you preparing your business for a new
RESTART?
A Process Model for Sustainable Business Model Innovation 187
14.1 A
Closer Look at the Four Phases
of the Sustainable Business Model
Innovation Process
The Business Model RESTARTer is inspired by the business model innova-
tion literature (e.g., Osterwalder and Pigneur 2010; Kaplan 2012;
Gassmann et al. 2014; Morris et al. 2005; see also Foss and Saebi 2017;
Zott et al. 2011) and the organizational change literature (in particular,
Lewin 1947). Lewin’s well-known model suggests that change processes
have three phases, popularly summarized as unfreeze—change—freeze. By
unfreeze, Lewin refers to making the organization ready to change, while
change refers to the actual implementation of novel solutions and freeze
(or refreeze) is ultimately about making the new features of the organiza-
tion stick. In order to make impactful and lasting change, all three are
necessary.
The first phase of a RESTART is to recognize the current business model,
which is illustrated at the top left of Fig. 14.2. Such a recognition involves
understanding how the company creates, delivers and captures value
today. Moreover, this implicates examining the negative and positive
externalities of the current business model. We have discussed these shad-
owy and sunny sides of the business model in the first part of the book,
but it has also been a returning theme throughout the book—not at least
in the discussion of what constitutes material sustainability concerns.
Many of the managers we work with have an implicit understanding of
their business models, and when we use this framework we put quite a lot
188 S. Jørgensen and L. J. T. Pedersen
ond part of the book, there are different pull and push factors that can
drive a sustainable business model innovation process (see Table 10.1 in
Chap. 10 on Results rather than indulgences).
One starting point for a company can be that it needs to become more
circular due to new regulations or motivated by the possibility to reduce
cost. If so, the discussions and analysis often start with understanding
what a circular business model is, what embracing such a model would
imply for the company, with which partners the company would need to
collaborate or how it can use insights from service-logic to turn its prod-
ucts into services. Another starting point can be that the company’s board
or its investors demand materiality assessments, risk assessments or new
KPIs that reflect the sustainability performance of the company.
Increasingly, we see that such pressures meet managers in companies across
all industries. The outcome of a materiality assessment might be that the
managers understand that they need to redesign the company’s business
model to address stakeholder expectations, while new KPIs might simi-
larly lead to a redesign of how the company delivers and captures value.
Other starting points for a RESTART can be new technologies, com-
petition from new players in the market, new regulations, price increases
or increased supply risks for important resources, and so on. Whatever
the motivation for a sustainable business model might be, we propose
that managers need to understand their current business model and the
threats and opportunities related to it, which is the point of departure for
how it can be changed in ways that improve both sustainability perfor-
mance and business performance more broadly. The Business Model
RESTARTer can be used as a way to structure such an innovation process,
asking the right kinds of questions in pursuit of the right answers.
Visit our website www.JorgensenPedersen.no for more tips, videos and
materials to use—either as a facilitator of a RESTART in your own com-
pany, as a consultant for others, as an entrepreneur mapping out existing
business models in the market or a fellow researcher like us who needs a
toolbox for working with companies in order to carve out researchable
hypotheses that can be tested empirically. We will discuss such research
projects in the following chapters, starting with a general discussion of
avenues for future research, before we dig deeper into two business cases
based on the RESTART framework.
192 S. Jørgensen and L. J. T. Pedersen
References
Foss, N. J., & Saebi, T. (2017). Fifteen years of research on business model inno-
vation: How far have we come, and where should we go? Journal of
Management, 43(1), 200–227.
Gassmann, O., Frankenberger, K., & Csik, M. (2014). The business model navi-
gator: 55 models that will revolutionise your business. Harlow, UK: Pearson
UK.
Kaplan, S. (2012). The business model innovation factory: How to stay relevant
when the world is changing. London: John Wiley & Sons.
Lewin, K. (1947). Group decision and social change. Readings in Social
Psychology, 3, 197–211.
Morris, M., Schindehutte, M., & Allen, J. (2005). The entrepreneur’s business
model: Toward a unified perspective. Journal of Business Research, 58(6),
726–735.
Osterwalder, A., & Pigneur, Y. (2010). Business model generation: A handbook for
visionaries, game changers, and challengers. London: John Wiley & Sons.
Zott, C., Amit, R., & Massa, L. (2011). The business model: Recent develop-
ments and future research. Journal of Management, 37(4), 1019–1042.
Open Access This chapter is licensed under the terms of the Creative Commons
Attribution-NonCommercial-NoDerivatives 4.0 International License (http://
creativecommons.org/licenses/by-nc-nd/4.0/), which permits any noncommer-
cial use, sharing, distribution and reproduction in any medium or format, as
long as you give appropriate credit to the original author(s) and the source,
provide a link to the Creative Commons license and indicate if you modified the
licensed material. You do not have permission under this license to share adapted
material derived from this book or parts of it.
The images or other third party material in this chapter are included in the
chapter’s Creative Commons license, unless indicated otherwise in a credit line
to the material. If material is not included in the chapter’s Creative Commons
license and your intended use is not permitted by statutory regulation or exceeds
the permitted use, you will need to obtain permission directly from the copy-
right holder.
15
Avenues for Future Research
The point of departure for this book is the need for business model inno-
vation that can lead to more business models that are both sustainable
and profitable. In the first part of the book, we argued why such business
models are needed, we discussed the overarching goal of aligning sustain-
ability performance and financial performance and we illuminated the
challenges related to succeeding with such business model innovations.
In the second part of the book, we developed the RESTART framework
that sheds light on seven characteristics that we propose will be important
in the transition toward more sustainable business models. However, in
order to enable such a green transition, much more knowledge is needed
on the nature and characteristics of these kinds of business models.
Moreover, we need knowledge of the mechanisms through which they
may create value for stakeholders while ensuring that they restore and
regenerate, rather than break down, societal and natural capital. Finally,
we need empirical insight into the managerial, leadership-related and
organizational capabilities and governance structures that can support
the implementation of such business models.
In this chapter, we discuss avenues for future research on these issues.
This book aims to contribute to the research agenda for sustainable
economy. The need for take-back of old products, materials and compo-
nents, as well as the need for package-reducing solutions, such as “refiller-
ies”, are central to make the infrastructure of circular business model
function (cf. Bocken et al. 2016). A central research question in this
regard is what types of distribution channels are more and less attractive
to customers and users and which are the barriers for adoption of such
distribution channels.
A second, and highly important, topic for research in relation to circu-
lar business models relates to payment models. Anecdotal evidence sug-
gests that one of the challenges for many circular business models thus far
is to generate sufficient revenue over time, which, for instance, some
leasing-based apparel business models (e.g., Filippa K) have experienced.
Payment models are foundational to business models, and they need to
be adapted to the characteristics of customers, markets and the competi-
tive landscape. Thus, investigating various forms of payment models for
different circular business models is likely to yield valuable insights for
companies trying to unlock the profit potential in such business models.
A final promising research topic related to circular business models is
to investigate the contingencies between different types of circular busi-
ness models and the industries in which they are used. For instance, are
there systematic differences in the viability of different circular business
models—as an example, a leasing-based model versus a refurbishing-
oriented model versus a sharing model—depending on the industry?
Insights into the fit between business model design and industry charac-
teristics seem a promising, although challenging, avenue for research.
With regard to alliances, there is also plenty of fertile ground for
empirical investigation. As discussed by Kiron et al. (2015), CEOs all
over the world state that collaboration for sustainability has become
increasingly important for their companies, but at the same time, very
few of them perceive their collaborative efforts to improve sustainability-
related outcomes as being successful. As pointed out by Selsky and Parker
(2005), cross-sector collaborations for social (and, one would add, envi-
ronmental) purposes are increasingly widespread but pose particular
challenges with regard to partnership design and implementation.
One promising avenue for research on this issue relates to the challenge
of developing collaborative cross-sector business models at the bottom of
202 S. Jørgensen and L. J. T. Pedersen
the pyramid—a topic we have discussed previously in the book. Such a col-
laborative process involves the alignment of objectives across organizations,
the leveraging of resources and capabilities of the different partners of the
collaboration and the attempt to build a distribution channel for products
and services in a market with considerable needs, but where infrastructural,
human capital and financial conditions render distribution challenging. All
of these issues are ripe for empirical exploration, and the knowledge gap
with regard to business models for the bottom of the pyramid, and the col-
laboration that can enable such business models, is considerable. Moreover,
the interrelated set of topics listed above is not only relevant in the specific
case of business models at the bottom of the pyramid. The attempts to align
the objectives of alliance partners in a collaboration for sustainability or the
leveraging of resources across organizational boundaries in such alliances
are more generally important topics for empirical investigation.
The latter two components of the RESTART framework—results and
three-dimensionality—offer very interesting and potentially impactful
research. As demonstrated by, for example, Eccles et al. (2015), organiza-
tional and governance characteristics related to management control sys-
tems are highly important for successful design and implementation of
sustainability efforts. Not at least, the research on materiality assessments
and strategic prioritization, which is steadily growing, has shown great
promise (cf. Khan et al. 2016). In prior work, we have empirically inves-
tigated such characteristics of companies in the Norwegian setting
(Gulbrandsen et al. 2015, 2017), and our findings reveal that, thus far,
the systematic use of key performance indicators, incentives for sustain-
ability performance and so on are quite limited.
With regard to results, future studies should continue the important
work being done on materiality assessments. One interesting approach
would be to investigate further the relationship between stakeholder
management as conducted by means of materiality assessments on the
one hand and the development and use of key performance indicators
related to material concerns on the other. A related topic of potentially
high value is the role played by chief sustainability officers and similar
organizational roles in such work (see, e.g., Strand 2013), which could
contribute to the understanding of organizational microprocesses under-
lying successful stakeholder management.
Avenues for Future Research 203
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Open Access This chapter is licensed under the terms of the Creative Commons
Attribution-NonCommercial-NoDerivatives 4.0 International License (http://
creativecommons.org/licenses/by-nc-nd/4.0/), which permits any noncommer-
cial use, sharing, distribution and reproduction in any medium or format, as
long as you give appropriate credit to the original author(s) and the source,
provide a link to the Creative Commons license and indicate if you modified the
licensed material. You do not have permission under this license to share adapted
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to the material. If material is not included in the chapter’s Creative Commons
license and your intended use is not permitted by statutory regulation or exceeds
the permitted use, you will need to obtain permission directly from the copy-
right holder.
16
Case Study: A RESTART for Scanship
“Maybe the company name is the ‘red herring’ holding you back from
discovering business opportunities in other industries?”, Lars Jacob asked
rhetorically at a strategy seminar with the executive team in Scanship
Holding ASA (henceforth referred to as Scanship).
16.1 B
usiness Opportunities on the Floating
City
Did you know that a cruise ship carrying 5000 people has the same foot-
print as a land-based town with a population of 30,000, and that by
turning the food waste, garbage and sludge from the wastewater purifica-
tion process from these ships into fuel, each ship can reduce their fuel
costs by about 1 million USD a year? And did you know that wastewater
from the fishery industry can be rinsed and dried and sold as organic
fertilizer instead of polluting the ocean? This was news to us when we first
met Henrik Badin and Narve Reiten, the CEO and Chairman of the
board of Scanship, respectively. Enthusiastically, they told us about the
shadowy sides of the cruise industry and of aquaculture and how Scanship
was working to turn these problems into business opportunities.
212 S. Jørgensen and L. J. T. Pedersen
a supplier to most major cruise liners, and the business opportunity upon
which the company’s business model is based is the fact that modern
cruise ships generate substantial amounts of wet and dry waste that need
to be properly treated. Scanship’s technology processes this waste into
recyclables, clean flue gas and treated wastewater. The company’s head-
quarter is in Lysaker, Norway, and the group has offices in Tønsberg,
Norway, Davie, Florida and Gdynia, Poland.
Reiten and his partner Bård Ingerø bought approximately one-third of
the company’s stock in 2017, and Reiten soon became the Chairman of
the board. When we first met Badin, he had already read our Norwegian
practitioner-oriented book RESTART. He said that Scanship was already
in the middle of “restarting” its business and that the company was look-
ing for ways to redefine what the company was and by exploring different
kinds of environmental problems it could solve. However, he added that
this was not Scanship’s first big change. Ever since they established the
company, the managers had redesigned its business model several times.
Badin explained how the biggest challenge they had faced from a business
model standpoint perhaps was to convince the cruise industry of the
value of its technology. In order to unlock this door, several changes had
been necessary in how the company created and delivered value for its
(potential) customers.
In recent years, there has been a shift, as the different ship-owners are
starting to compete on environmental initiatives driven by increased
focus on corporate responsibility, more media attention and public
awareness. This has been driving demand for shipboard environmental
technology. Today, Scanship serves more than a third of the approxi-
mately 400 cruise ships in the world, and new contracts are lined up.
“Our challenge now”, Badin and Reiten said, “is to increase the pull from
this industry and to develop technologies like the MAP that can do an
even better job for the customers”. At the same time, the company was
trying to design business models that could do similar jobs in other mar-
kets Scanship is now targeting such as aquaculture.
One important barrier for Scanship is regulation, and therefore the
company relies on influencing lawmakers. With some exceptions, it is
still legal to dump wastewater and food waste in the so-called territorial
waters, that is, 12 nautical miles from the shore. An example of a pro-
tected area is the shore of Alaska, which is protected by environmental
regulation, but there is still a long way to go before regulation facilitates
full-scale adoption of greener solutions. One of the drivers for change in
the cruise ship industry has been the growing pressure from other stake-
holders, not at least local communities, the media and NGOs. One
example is a report published by Friends of the Earth (FoE) in 2012,
which revealed the following figures for the amount of waste generated
by a large cruise ship on a one-week voyage (cf. Friends of the Earth
2012):
Keep in mind that this is in addition to the solid waste that each ship
generates, including leftovers from about 25,000 meals a day, given that
the cruise ship has 5000 people on board. Excess food is typically
grounded up and discharged as a slurry into the ocean, often together
Case Study: A RESTART for Scanship 215
with plastic and other forms of litter. Food waste discharged in this man-
ner lowers oxygen and creates acid and a nutrient imbalance in ocean
waters.
FoE also regularly publishes a sustainability report card for cruise ships.
In such report cards, it ranks the 17 major cruise lines and their initiatives
in sewage treatment, air pollution control, water treatment and other
criteria. In the 2016 report, Disney Cruise Line is the top scorer with an
A-, while Cunard, Holland America, Norwegian and Princess Cruises
share the second place with a C. Yet, it is unclear to what degree the
scores in such ratings translate into stakeholder action—customers choos-
ing whether or not to buy a cruise, investors choosing whether or not to
invest in the company, regulators assessing the need for regulation, and so
on. However, it seems clear that negative attention toward the cruise
industry is on the increase, which makes it likely that companies will act
in ways that can improve this image.
16.4 R
estarting Scanship: Practical Challenges
and Research Opportunities
The many examples outlined in the preceding paragraphs are illustrations
of the ways in which Scanship attempts to develop new business models
that are complements to its main business model in the cruise industry,
while simultaneously “tweaking” the existing business model to function
even better. As summarized after presenting the RESTART framework,
one could argue that, in practice, a RESTART should perhaps rather be
structured in the opposite direction—as a TRATSER. In many ways, one
could argue that Scanship has gone through such a process. Scanship is
trying to make cruise line companies take three-dimensionality seriously—
to consider their footprints, but at the same time realize how reducing the
footprints is possible to align with financial objectives. The value proposi-
tion of the company is based on a thorough understanding of what are
the material concerns in the industries it aims to serve—food waste,
energy usage and other forms of pollution on cruise ships, as well as
sludge in the fish farming industry. In this way, it can identify the results
managers in these companies aim for—or at least should be aiming for.
Scanship’s core value offerings are based on the circular economy since they
build on upcycling various forms of waste and they employ service-logic
in their attempt to turn their technologies into convenient bundles of
services for their customers. And, in particular in the case of aquaculture,
Case Study: A RESTART for Scanship 217
the company enters into alliances. These alliances allows it to deliver value
in ways it could likely not have done on its own. Finally, based on these
characteristics and the company’s identification of new market opportu-
nities, it aims to conduct systematic business experimentation in pursuit
of these market opportunities. This was in fact partly why Scanship first
contacted us. The company wanted us to take part in the design of such
experiments that could eventually contribute to a redesign of the compa-
ny’s business model, as well as the development of new business models
in new markets.
This journey is far from complete, and even though Scanship has
achieved a lot to move the company—and its customers—in a greener
direction, the company is still navigating difficult waters. Among the
challenges it faces is achieving profitability in the experimental business
models in new markets, especially since the “burning platform” for adopt-
ing such solutions is still not as clear in, for instance, aquaculture as in the
cruise industry. In addition, the relative inertia of regulators when it
comes to imposing regulations that would be drivers of adoption for
technologies offered by Scanship is also a challenge for the company’s
growth in these markets.
In collaboration with the managers of the company, we are currently
in the process of planning empirical studies that can provide knowledge-
based input for addressing some of the challenges the company—and
companies offering similar solutions—is facing. At the time of writing,
this work is very much in progress, and we are still to decide what are the
most important issues to be studied empirically, both with regard to
being crucial for the success of the company’s business model and provid-
ing valuable insights to the scientific literature. We therefore end this
chapter as a “cliffhanger”, by outlining two of our concrete research ideas
here. This is an illustration of how we are approaching these issues
empirically.
One of the potential research projects is tied to the end consumer in
the cruise industry, who in an indirect sense can exert important influ-
ence on the competitiveness of Scanship’s technologies. An important
question in this regard is whether waste management and pollution issues
are at all material from the point of view of consumers. That is, do these
issues at all influence the consumer’s choice of cruise? Part of the problem
218 S. Jørgensen and L. J. T. Pedersen
in this regard is that consumers have little knowledge about, and ability
to envision, the environmental impact of the cruise ships, beyond the
evident emissions from the funnels atop the ships. Inspired by recent
“artefactual” field experiments (cf. Harrison and List 2004) using virtual
reality (VR) technology to visualize and make salient various aspects of a
product or service, we are exploring the possibility to carry out such VR
experiments on cruise travelers. Prior to a cruise or during the cruise,
consumers could be exposed to the green technologies aboard the ship
and how they lead to the avoidance of waste and pollution in the waters.
By comparing consumers subject to such an intervention to consumers in
a control condition who are instead shown VR videos of the cruise with-
out such emphasis on environmental dimensions, we could in turn inves-
tigate a potential influence on important outcomes such as attitudes,
willingness to buy, willingness to pay or experiential dimensions of the
actual cruise. It could be added here that a similar design could be used
in the setting of fish farming as well, and it would even be possible to
conduct comparative analyses across the two sectors. Such research
designs would provide important insight into how sustainability improve-
ments in value delivery that are not necessarily possible for consumers to
observe can influence consumers’ experience and thus the relative attrac-
tiveness of the offering.
A second research opportunity relates to the strategic alliances Scanship
has entered into, for instance with Skretting, IVAR and HØST for the
aquaculture project. As discussed in the chapter on avenues for future
research, there is a need for further research on such cross-sector collabo-
rations that include both sustainability-related and financial objectives
for all alliance partners. There are several possibilities for empirical inves-
tigation in such an alliance, but we are particularly intrigued by the ques-
tion of how to design a value capture model that allows for successful
business modeling on the part of all business partners. This is a main
challenge in strategic collaborations—how to design an alliance that ben-
efits all partners and that—as far as possible—aligns their different objec-
tives and priorities. Several different research designs could be applicable
in such a project, including a case study combining qualitative and quan-
titative data sources as well as simple experiments comparing various
payoff structures under different versions of the value capture model.
Case Study: A RESTART for Scanship 219
References
Friends of the Earth. (2012). Cruise ship report card. Washington, DC: Friends
of the Earth.
Harrison, G. W., & List, J. A. (2004). Field experiments. Journal of Economic
Literature, 42(4), 1009–1055.
Open Access This chapter is licensed under the terms of the Creative Commons
Attribution-NonCommercial-NoDerivatives 4.0 International License (http://
creativecommons.org/licenses/by-nc-nd/4.0/), which permits any noncommer-
cial use, sharing, distribution and reproduction in any medium or format, as
long as you give appropriate credit to the original author(s) and the source,
provide a link to the Creative Commons license and indicate if you modified the
licensed material. You do not have permission under this license to share adapted
material derived from this book or parts of it.
The images or other third party material in this chapter are included in the
chapter’s Creative Commons license, unless indicated otherwise in a credit line
to the material. If material is not included in the chapter’s Creative Commons
license and your intended use is not permitted by statutory regulation or exceeds
the permitted use, you will need to obtain permission directly from the copy-
right holder.
17
Case Study: A Circular Business Model
for Orkla and BIR?
Orkla Home & Personal Care is a part of Orkla Care, one of the big-
gest business units in Orkla. Orkla Home & Care holds a leading posi-
tion within home detergents and personal care products and competes
with international corporations such as Unilever, Procter & Gamble and
Colgate-Palmolive. Unilever is perhaps the corporation in this industry
that has been most successful in branding itself as sustainable, but in
January 2018, Orkla’s efforts to become more sustainable were also
noticed. At the World Economic Forum annual event, Orkla was
unveiled as one of the 100 companies included in the Corporate Knights
Global 100 list of the world’s most sustainable companies. However, nei-
ther Unilever nor Orkla have solved all the problems related to their
substantial shadowy sides. One of the most important negative externali-
ties in these industries is related to the use of plastic in product design
and packaging, which is turning into a big headache for companies and
consumers alike.
In Norway, one incident in particular fueled the public conversation
about the environmental consequences of plastic usage. It happened early
in 2017, when a whale was found stranded off the coast of Norway—its
stomach full of 30 different types of plastic bags. According to a recent
report from the World Economic Forum, at least 8 million tons of plastic
already ends up in the ocean annually. It is the equivalent of a full truck
of waste every minute. Many of the plastic items in the oceans are branded
with famous brand names, and according to Terje Lislevand, a zoologist
who examined the stranded whale in Norway, many of the labels were in
224 S. Jørgensen and L. J. T. Pedersen
Danish and English print. He added that the whale’s intestines were
probably blocked up by plastic, which would cause severe pain. This inci-
dent and the attention it received in Norwegian media put pressure on all
companies that are seen as part of the plastic problem. Also, from a con-
sumer point of view, this incident also seemed to make everyone more
aware how consumption translates into concrete environmental prob-
lems that we collectively need to address.
When we met Svensen, he said that Orkla had been aware of the nega-
tive effects of the use of plastic for a long time and that they had been
working on finding solutions to reduce these effects and related externali-
ties in Orkla’s business model for a long time. Svensen still had many
questions regarding the way forward for Orkla Home & Personal Care’s
business model. Sustainability was a large part of the problem, but at the
same time, Svensen explained that factors such as increased competition
from international brands and ongoing and expected changes in the retail
industry because of the fourth industrial revolution were also central to
their concerns. To make matters worse, the younger generations of con-
sumers are generally less brand loyal and more willing to switch than
their parents and grandparents. This implies that Orkla constantly needs
to reposition itself to stay competitive. “We’re not just becoming more
circular, more sustainable”, said Svensen. “This is also a matter of main-
taining our profitability—now and in the future”.
17.2 B
IR: From Waste Manager to Circular
Business Partner?
When we received the phone call from Nævdal—CEO of the BIR Group
(BIR)—it was because he, his management team and the board had
decided that BIR should take on a leading role in the transition from a
linear to a circular economy. As a municipal entity, BIR is responsible for
collecting, transporting and handling household waste, as well as indus-
trial and hazardous waste in the regional municipalities. However, it also
offers waste solutions for business. The BIR Group is Norway’s second
largest company in this industry with 417 employees, and in 2016, it had
a turnover of NOK 736.7 million.
Case Study: A Circular Business Model for Orkla and BIR? 225
17.3 Recognize—Rethink—Reinvent—
Reorganize
Together, we embarked on a problem formulation process about the
future of circular business models, with Orkla as the main case. As it
happened, Orkla had recently launched a new brand and product
226 S. Jørgensen and L. J. T. Pedersen
portfolio series that would in part cannibalize on its well-known soap and
detergent products. The series is called KLAR—a word that in Norwegian
can mean “clear”, “transparent”, as well as “ready”. The product line is
vegan, its formulations are sustainable, of course free from microplastics,
and packaged in 100 percent recycled plastic. The KLAR concept was
chosen as an initial case for our research project, which implied that the
manager responsible for the development of the brand and the product
portfolio, Anne Marheim Støren, became an important part of our
research project.
The case of sustainable cleaning products is particularly interesting for
many reasons. First, it is a product category most, if not all, households
rely on. Importantly, however, there had scarcely been any sustainable
products in this category and to the extent that there had been, customers
generally did not seem to trust their quality. Since these products consti-
tute a low involvement and habit-based product category, we were par-
ticularly intrigued by the challenge of working with a company like Orkla
to investigate how consumer behavior and habits could be changed to
embrace more sustainable solutions. This made it necessary to under-
stand several aspects of consumer behavior related to such products: the
barriers and drivers of adoption, the beliefs about effectiveness and the
preferences for or against such products and the decisive characteristics
and messages that could drive consumers to change from less sustainable
to more sustainable products.
We based our work process on the three phases in the Business Model
Restarter, and at the time of writing, we are still somewhere in between
rethinking and reinventing. In the early phases of the process, we ran
workshops with the two companies and crowdsourced the viewpoints
and ideas of a group of innovators at the Innovation Festival 2017 in
Åndalsnes, Norway. There, we hosted an interactive workshop wherein
participants generated and discussed ideas for the future distribution of
home care products. At a workshop with BIR and Orkla at the end of
2017, however, a shortlist of sub-projects to be pursued further was
developed. We facilitated this work in close collaboration with business
developer Tore Totland and Anders Waage Nilsen, two freethinking indi-
viduals whose help BIR had also enlisted when embarking on this jour-
Case Study: A Circular Business Model for Orkla and BIR? 227
Orkla’s business model might change. But what about BIR? What are the
characteristics of a successful outcome for such a company in a process
like this? Will BIR need to change its business model in a way that
involves differentiated payment from companies that either would like to
purchase generic recycled materials versus, for instance, recycled materi-
als that are in fact based on its own prior goods being returned and recy-
cled? Or should BIR be paid not for waste management but for waste
avoidance, as the company Norsk Gjenvinning also asked itself, as
detailed in the case in Part II of the book?
It is too soon to tell where the project with Orkla and BIR will end up,
and what will be the outcomes for the partners involved. The preceding
description, however, attempts to account for a messy innovation process
in which there are explicit desires from all partners to run scientific stud-
ies, in general, and experiments, in particular, in order to reveal some of
the factors that can help companies achieve more circular business mod-
els. The remainder of the story will have to be told another day.
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Case Study: A Circular Business Model for Orkla and BIR? 229
Open Access This chapter is licensed under the terms of the Creative Commons
Attribution-NonCommercial-NoDerivatives 4.0 International License (http://
creativecommons.org/licenses/by-nc-nd/4.0/), which permits any noncommer-
cial use, sharing, distribution and reproduction in any medium or format, as
long as you give appropriate credit to the original author(s) and the source,
provide a link to the Creative Commons license and indicate if you modified the
licensed material. You do not have permission under this license to share adapted
material derived from this book or parts of it.
The images or other third party material in this chapter are included in the
chapter’s Creative Commons license, unless indicated otherwise in a credit line
to the material. If material is not included in the chapter’s Creative Commons
license and your intended use is not permitted by statutory regulation or exceeds
the permitted use, you will need to obtain permission directly from the copy-
right holder.
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Index
E H
Economics, 50 Harmful, 115
Ecosystems, ix, 115, 123, 222–224 Human, 115
Efficiency, 50, 112 Human rights, x
Efficient, 50, 93 Hypothesis, 57, 64–66
Index
251
I Leasing, 64
Impact, 31, 141 Linear, 18, 104
Implementation, 29, 122, 161, 201 Logistics, 19
Incentives, 38, 160, 165, 202
Incremental, 68
Industrial, 105 M
Industry, 56 Management, 30, 156, 183
Inequality, 41 Management control, 8, 155
Infrastructure, 201 Manufacturing, 19
Innovations, xiii, 7, 68, 183 Market, 85
Innovativeness, 4, 7, 68, 195 Market share, 155
Innovators, 6 Marketplace, 93
Input factors, 26, 139 Materiality, 141
Institutions, 36 Materials, 90, 104, 144,
Interests, 140 159
Internet of Things (IoT), 98 Measurement, 40, 165
Intrapreneurs, 72 Mechanisms, 195
Intrapreneurship, 72 Money, 61
Investments, 82, 123, 148
Investors, 82, 129
N
Natural, 105, 109, 180
J Natural resources, xii
Job-to-be-done, 59 Non-governmental organizations
Joint ventures, 122 (NGOs), 130
Justice, 41
O
K Objectives, 166
Key performance indicators (KPIs), Offering, 17, 63
163, 164 Online, 85
Knowledge, 29, 84 Operations, 31, 180
Opportunity, 27–28, 61, 140
Organizational, 62, 165
L Organizational design, 51, 155
Labor, 41 Organizations, 51
Laws, 130 Organize, 131
Leadership, 155 Ownership, 18, 50, 92
252 Index
T
Technical, 105 W
Technological, xiii Waste, x, 104
Technologies, 14, 29