Amidst the pandemic, businesses globally underwent rapid transformations to fortify themselves against economic uncertainties. As companies embark on the journey of recovery, the critical question arises: How can they discern which adaptations in their business models will ensure lasting resilience and sustainability? This article explores nine fundamental attributes that not only underpin successful business models but also contribute significantly to their long-term viability. Through real-world examples, we illustrate how these attributes foster resilience and sustainability.
The Nine Attributes of Successful Business Models
Examining various attributes that form the foundation of business advantage, we illustrate how they contribute to resilience and sustainability, drawing examples from companies at the forefront of sustainable business model innovations. The spider diagram in the exhibit titled "Nine Attributes to Assess Sustainable Business Advantage" outlines these attributes, each playing a vital role in positioning a company for sustained success.
1. Scales effectively without increasing risks:
A resilient business model should facilitate growth without compromising value creation and profitability. Take, for instance, Jeanologia, a pioneer in eco-friendly denim finishing technologies. Since its inception in 1993, Jeanologia has expanded its operations, providing eco-friendly solutions to an increasing number of manufacturers and brands. The company's growth has not only enhanced profitability but also positively impacted the environment, saving millions of cubic meters of water annually.
2. Increases differentiation and competitiveness:
Successful business models distinguish themselves by offering unique product features and operational advantages. Lush, an iconic cosmetics brand, stands out through its commitment to vegan, packaging-free, and ethical products. The company's business model, deeply rooted in Fair Trade-certified supply networks and handmade product processes, not only differentiates Lush from competitors but also contributes to its operational success.
3. Reduces the potential for commoditization:
A robust business model should make it challenging for competitors to replicate its products and operational processes. Schneider Electric's EcoStruxure platform exemplifies this attribute. Launched in 2007, the platform combines digital technologies, the Internet of Things (IoT), analytics, and applications to deliver a powerful energy management and automation solution. As a result, Schneider Electric has built a €27 billion business, contributing to a significant reduction in CO2 emissions.
4. Uses network effects to achieve growth:
Successful business models integrate themselves into broader industry and customer ecosystems, leveraging network effects for mutual growth. Babyl, a subsidiary of Babylon Health UK operating in Rwanda, entered into a ten-year partnership with the Government of Rwanda in 2020. By integrating its telehealth platform with the government's community-based health insurance scheme, Babyl significantly multiplied its reach. The digital-first model connects various elements of the healthcare network, facilitating over 3,000 consultations per day.
5. Harnesses business ecosystems for advantage:
Strategic partnerships and collaborations within a business ecosystem strengthen a company's position and value proposition. Jaza Duka, a collaborative initiative launched in 2017 by Unilever, Mastercard, and the Kenya Commercial Bank, serves as a compelling example. By combining their assets and capabilities, these entities digitized transactions for micro-retailers, fostering business growth and expanding financial access.
6. Remains durable against environmental and societal trends:
Adapting to environmental and societal shifts ensures the durability of a business model. Interface, a global leader in modular flooring, evolved its business model over time. Through product redesign, sustainable sourcing of inputs, and closed-loop recycling programs, Interface maintains a leading position in environmental sustainability.
7. Creates environmental and societal benefits:
Business models that contribute to broader environmental and societal benefits enhance long-term value. Primark's Sustainable Cotton Program is a noteworthy illustration. Since 2013, the program has trained cotton farmers in sustainable farming methods, reducing chemical usage and water consumption. This initiative benefits farmers, the environment, and consumers, aligning environmental benefits with business value drivers.
8. Increases returns to shareholders and stakeholders:
Balancing competitive returns with benefits for stakeholders ensures the long-term success of a business model. Royal DSM, a global science-based company, has partnered with the public sector and NGOs to establish Africa Improved Foods (AIF). By addressing nutrition challenges in Rwanda, AIF not only generates profits for Royal DSM but also contributes to the local economy and society.
9. Animates purpose:
A business model aligned with the company's purpose enhances engagement with stakeholders. Jeanologia, with its altruistic purpose of being "the best company for the world," demonstrates this attribute in action. The company's business model, focused on eco-friendly denim technologies, exemplifies how purpose-driven practices can achieve meaningful environmental impact.
A Call to Sustainable Innovation
Companies can utilize the robustness and resilience framework to evaluate the sustainability of their business models. This framework helps identify vulnerabilities, gaps, and potential innovations to enhance overall performance. As businesses reconsider their models post-pandemic, emphasis on how a business model creates environmental and societal benefits becomes pivotal.
In a forthcoming article, we delve into Sustainable Business Model Innovation, offering a structured approach to bolster the robustness and resilience of any business, aligning it with sustainable practices for long-term success.
Conclusion
In the aftermath of the pandemic, businesses are urged to reconstruct their models with resilience and sustainability in mind. Embracing sustainability is not only a strategic imperative but a societal responsibility. The nine attributes presented here provide a robust framework for businesses to evaluate their long-term viability, encouraging innovation for sustainable and resilient business models.
