Sustainable Product- & Business Model Innovation

Sustainable Product-&

Business Model Innovation

Robert Gerlach

Lecture Notes

Steinbeis University Berlin, 2017

Module: Integrative General Management

Sustainable Product-& Business Model Innovation

Robert Gerlach, Steinbeis University Berlin, 2017

Contents

2

1. Learning Objectives

2. Introduction to Sustainable Innovation

3. Tools & Methods for Sustainable Innovation

4. Deep Dive, 38 Business Models & Examples

5. Conclusion & Further Reading



Contents

3








1. Understand the economic & ecological

opportunity of sustainable product- & business

model innovation

2. Know about and be able to apply a wide range of

tools and best practices for sustainable product- &

business model innovation

3. Have gained insights into a large number of

successful sustainable business models

By the end of this course you will:



4. You should be keen to make a positive impact in

organisations, startups or with your own business

Most importantly:



Contents

6








Why Sustainable Innovation?



Sustainability is an urgent need

8

It now takes the Earth one

1.6 years to regenerate the

resources we use in 1 year.



But sustainability is also a business opportunity

9



Overview of sustainability opportunity: push & pull

10

Pressure from government & society

Tightening governmental regulation

Positive government incentives

Pressure through social activism

Emerging business Opportunities

Customer demand

Technological advance

Process optimisation

Risk reduction

Transformation of business mission

Drive towards circular economy models

Digital transformation

‘Green’ supply chain partnerships

Market pressure

Rising & extremely volatile commodity prices (energy, raw materials)

Pull from investors

Threat of disruption

Source: “Connected Business as a Driver for Sustainable Innovation”, mm1, 2015

Sustainable Innovation is a powerful enabler to

grow profits and de-risk your business



Positive business impact of sustainable business practice

12

Higher Margin Higher Revenue

Improved business case drivers and increased return for shareholders

Costs Employees Brand ProductSpeed &

RisksInvestment

• Optimised use

of energy and

resources

• Optimised

processes &

supply chain

• Lower taxes

• Improved ability

to attract, retain

& motivate

employees

• Improved

employee

productivity

• Stronger brand

and greater

pricing power

• Improved

customer loyalty

• Lower churn rate

• Opportunities to

seize the

innovative high

ground via

disruptive

sustainable

innovation

• Pre-empting

regulations via

proactive

innovation, Risk

Management

• Greater access

to investment

capital

• Lower cost of

capital

Higher ValuationIncreased Profits


Most importantly:

sustainability drives innovation



Sustainability recognised as strong driver for innovation

Additional

boundary

conditions

stimulate thinking

about new

approaches to

solving known

problems

New Boundary

conditions

New

perspective

New

Focus

Helps companies

approach

situations

differently,

enabling them to

see situations

from a different

point of view

Can help

companies to

focus on new

areas for product

development with

previously

untapped market

potential

Companies who are leaders in sustainability are

more than 400% more likely to be innovation leaders

Innovation is a key driver for economic growth




Current state of sustainability

in the corporate world



69 of global CEOs

believe that investor

interest in sustainability

will become an

increasingly important

factor for securing

business finance

Sustainability recognised as important by many CEOs….

16

76 of global CEOs believe

embedding sustainability into core

business will drive revenue growth

and opportunities.

63 of CEOs expect

sustainability to

transform their

industry within five

years

84 of global CEOs report that they

are actively investing in and employing

connected and digital technologies to

advance sustainability.

93 of global CEOs view

sustainability as important for

the future of their companies

54 of companies’ sustainability

heads anticipate that they will see

“significant” or “transformational”

change in their firms’ sustainability

management practices by 2015

69%

93%

54%76%

84%

63%

*Source: The UN Global Compact-Accenture CEO Study on Sustainability



…and almost every company now has CSR department

In the traditional

understanding of corporate

social responsibility (CSR), a

business reacts to and

complies with laws, ethical

standards and national or

international norms.



But there are limits to a reactive CSR model

Corporate Social Responsibility in the traditional sense is only a

partial solution

…

One that can be misused to create an illusion of responsibility

18



We need a fundamental shift in our thinking…

19

Let’s compensate

for the unsustainable

things we do

Let’s fundamentally

change the way we

do businesstowards

Let’s make financial

sacrifices to be

more sustainable

Let’s capture new

business opportunities

to become more

innovative

towards



Reduce CO2 footprint of your own company

Design innovative products and services to reduce CO2 footprint and promote sustainability during product use

And broaden our horizons

Horizon 1 Horizon 2

Reasonable

progress &

strong existing

incentives

Work to do

& focus for

this course

„It’s more important to offer

sustainable products &

services than to look green“



The Goals of Sustainable

Product & Business Model

Innovation




Sustainable Product- & Business Model Innovation refers to

the design of products, services and business practices that

maximize sustainability effects whilst at the same time

being profitable.

Whilst CSR is often reactive, Sustainable Product- & Business Model

Innovation is proactive and a strong driver for business growth!



Key to 21st century sustainability: resource decoupling

Time

Business activity

Resource Use /

Environmental

Impact

Resource decoupling

Inte

nsi

ty

1970 2017

Business activity growth

needs to be decoupled from

resource usage and – by

extension – environmental

impact.




1. Reduce resource & energy consumption

2. Maximise societal & environmental benefit

3. Promote a closed-loop system where nothing is wasted

4. Promote delivery of functionality / experience over

ownership

5. Encourage a system built on collaboration & sharing.

In order to make a positive long-term impact, we need to …

All of this whilst remaining profitable and competitive!!!



It can be done - profitably!

26

Pre-empted government banon lead solders in electronics products by experimenting with alternatives for 10 years. By time of ban, HP complied with regulations before other companies were able to do so.

Raised fraction of recycled equipment from 5% in 2004 to 45% in 2008, reduced recycling costs by 40%. Recycling became profit centre and contributed $100M to Cisco’s bottom 4 years later.Charges 15 to 30 % more

for sustainable products because its customers are able to generate increased product margins through green products.

Green Products line, stablished 2004, by 2010 already accounted for 37.5% of overall sales, with the target for 2015 to reach 50%.

Sustainable product line yields significantly higher growth rates and margins than standard product lines.




4 Trends Driving Sustainable

Product & Business Model

Innovation

Circular is

Natural



The Circular Economy – The problem with waste

Source: Waste to Wealth – The Circular Economy Advantage, 201529

• Wasted resources are energy and materials that

cannot be continually regenerated and are gone

forever when used

• Products with wasted lifecycles have artificially

shortened life cycles (in-built obsolescence)

• Products with wasted capability sit idle for much of

their lives (e.g. cars)

• Wasted embedded values are components, materials

& energy that are not recovered from disposed

products



The Circular Economy - more than just recycling

Source: Ellen MacArthur Foundation circular / Braungart & McDonough and Cradle to Cradle (C2C) 30

1 Hunting and fishing

2 Can take both postharvest and postconsumer waste as an input



Sources of value creation in the Circular Economy

Source: Ellen MacArthur Foundation circular economy team31



Potential economic impact of circular economy Europe only

32Source: Ellen MacArthur Foundation circular economy team

3% of additional annual

productivity growth

€ 0,6 trillion per year benefit by 2030 to

Europe's economies

€ 1,2 trillion additional non-resource and

externality benefits

7 % GDP increase

relative to current development

scenario

High Tech is a

Sustainability

Enabler



Example: Internet of Things as a catalyst for sustainability

Autonomous Driving

Smart City

Smart Home

Industry 4.0

Agriculture 4.0

IT-for-Green

Wireless Networks

Real Time Traffic

Cloud Computing

Smart

Grid

Ecosystem

Society

Economy

Car Sharing

From optimised processes to improved decision making – connected technologies are a

driver for sustainability. They also offer high potential scalability of sustainability effects.




Internet of Things and ICT offer high return on invest

*Source: GeSI, SMARTer 2030, 2015

35

0

10

20

30

40

50

60

70

2030 with Business as

usual

2030 with ICT enabled

abatement

GtC

O2

em

issi

on

s

ICT Footprint All other GHG emissions

-20 %

The savings potential of ICT

amounts to 12 GtCO2 – more than

the total emissions of China today

Currently, ICT has a carbon footprint

comparable to the complete global air

traffic (~2%). At the same time ICT has

the potential to reduce greenhouse gas

emissions by the year 2020 by 20%! *

ICT Savings

Potential

High return on sustainability investment: 20% CO2 savings potential vs 2% energy use

At the same time, ICT could generate $11 trillion in economic benefits by 2030*



Substitution Optimisation Incentivation Other (i.e. Decision

Making, Life Cycle, Waste)

Transportation Car Sharing, Virtual

Mobility

P2P Parking, Inter-

modal transp.

EcoDriving, Pay-

How-You-Drive

ITS, intelligent POI,

C2C/C2X

Telco, IT, Entertain Cloud Infrastructure,

ePaper, VoD

Energy efficient

devices, Green IT

HW-SW Life Cycle Mgmt.

Modularisation

Production & Eng. Automation Robotics, Industry

4.0, stand-by oper.

Production Process

Mgmt., 3D Printing

Energy & Construction Grid-Decentralisation Smart Home, Smart

Grid

Supply Mgmt., Demand

Mgmt.

Health Care Tele health Quantified Self,

Health Applications

Big Data driven Smart

Health

Goods & Services Virtual goods, E

business

Green material selection

via CAD* plus LCA**

Public Sector E-Governance, E-

Bureaucracy

Agent Based Policy &

Service Models, Big Data

Raw Materials, Agric. Agriculture 4.0 Supply Chain Mgmt. &

Life Cycle Mgmt.

36

Sustainability LeverIndustry

High business potential across all major industries

*Computer Aided Design, ** Life Cycle Analysis


Sharing is

Profitable



The Collaborative & Sharing Economy is on the rise

38

Peer 2 Peer

Transportation

Peer 2 Peer

Accommodation

Industrial

Symbioses

On demand

household

services

On demand

business services

Collaborative

finance

By 2025, many areas of the sharing economy predicted to rival the size of traditional

counterparts, with platforms in 5 main sectors generating revenues over €80 BN and

enabling nearly €570 BN of transactions in Europe alone.*

*Source: PwC, 2016

The Great Unbundling



Established industries are increasingly threatened by

innovative startups – example recycling industry

40Source: “Digital Business Innovation in the Recycling Industry”, mm1, 2017



Logistics optimization

Logistics support and optimization of processes within the recycle value network

Re-Commerce Platforms

Broker activity between waste providers & resource processors; allows for comparison of offers of valuable resources

and therefore increase transparency in the market

Waste usage

Transformation of waste into valuable

resources or consumer products

Waste sorting

Smart sorting of waste &

assortment of resources

Waste acquisition

Collection of a defined set of waste

and extraction of valuable resources

Startups are threatening complete recycling value chain

and accelerate the unbundling process of the industry

Source: “Digital Business Innovation in the Recycling Industry”, mm1, 201741



Manufacturing companies

buy valuable materials from

haulers

Materials are reused and

recycled

Example: Rubicon Global – a cloud-based platform

connecting businesses and independent haulers

0

Recycling Companies

Rubicon supports businesses of all sizes to get out of existing waste disposal contracts

Businesses can arrange for trash pick up within one hour via Rubicon‘s app

Disposal job auctioned on the Rubicon platform

Producers of waste

On demand pick-ups

Cost reduction (~30%)

Customized reports

CSR management

+

+

+

+

Haulers acquire their

business by bidding on the

disposal job

The app helps haulers to

optimize their routes and get

real-time information on

their truck fleet

Independent haulers

Low-cost acquisition of

new customers

Increase route efficiency

Customized reports

+

+

+

Cost-efficient acquisition

of valuable resources

Diversion of waste from

landfills

+

+

Leonardo Di Caprio

- Hollywood actor –

Marc Benioff

- Founder & CEO of –

Investors

Current valuation

500+ Mio. $

Source: “Digital Business Innovation in the Recycling Industry”, mm1, 2017



Contents

43








Introduction

Let’s be realistic:

there are a lot of

challenges standing

in the way of

sustainable

innovation



Challenges to Corporate Sustainable Innovation

Lack of tools and methods for systematic sustainable product innovation

Lack of or wrong KPIs and lack of data and sufficient information on impact

of current initiatives

Sustainability is seen as a cost creator, not a business driver

Disconnected from core business strategy, often reactive

Sustainability seen as primarily a marketing tool

Disconnect between pubic claims to action & organisational practice

Lack of resources

Lack of accountability & incentivisation /performance measurement

Insufficient regulation, i.e. to internalise external costs

Sustainability addressed in silos (CSR department, with little influence)

Value of short term gains over long term benefits (short termism)

46



What do we need to do?



We need tools which

• Clarify the link between sustainability, business

opportunities and risk

• Translate sustainability targets into specific product

design / daily activities

• Script simple guidelines that are specific, measurable

and achievable

• Are applicable at different levels of hierarchy (from CFOs

to product designers)

• Accurately measure the right Sustainability KPIs



We need an organizational and employee mindset where

• Every employee recognises his ability to actually make a

difference by developing solutions to address one of the

most important issues of our time

• Sustainability is not seen as a mere PR tool, but walking

the talk becomes the goal

• Integrated thinking predominates the organisation:

Sustainability cannot be managed from a silo

• Short term and long term interests are balanced



We need processes which

• Can be realistically incorporated into day-to-day practice

& become part of governance processes

• Incentivise collaboration with other stakeholders, such as

regulators, competitors and those within the supply

chain

• Address the ‘why are we doing this’ question and explain

the importance of sustainability in everyday terms,

rather than abstract notions



We need targets & incentives to

• Link overall sustainability goals to individual business

unit ambition

• Link the achievement of sustainability impact by

employees to his or her targets & performance

measurement



We regulation which

• More aggressively incentivises companies to internalise

external costs to the environment

• Incentivises companies to shift the balance from short

term to long term strategies, i.e. via financial regulation



Key challenges addressed in this lecture

Lack of tools and methods for systematic sustainable product innovation

Lack of or wrong KPIs and lack of data and sufficient information on impact

of current initiatives

Sustainability is seen as a cost creator, not a business driver

Disconnected from core business strategy, often reactive

Sustainability seen as primarily a marketing tool

Disconnect between pubic claims to action & organisational practice

Lack of resources

Lack of accountability & incentivisation /performance measurement

Insufficient regulation, i.e. to internalise external costs

Sustainability addressed in silos (CSR department, with little influence)

Value of short term gains over long term benefits (short termism)

53

Directly addressed in this course

Indirectly addressed



How to start

Step by step is

the key to

success



• None by definition

None

low

high

Positive

• Low investment costs

Positive

• Increasing Market share by being

early adopter

Positive

• Increasing innovation capability

• Improving perception of product

quality

• Reducing risk (environmental, LtO)

• Increasing attractiveness for new

talent

Acti

on

sIm

pli

cati

on

s

Negative

• Missed opportunity to innovate &

grow

• Abandoning sustainability-sensitive

customer segments

• Jeopardizing License to Operate (LtO)

• Increased challenge to attract top

talent

Negative

• Medium investment volume required

Negative

• Extensive amount of resources

needed

• High investment costs

• Increasing Risk

medium

medium

low

high

high

high

1) Business as Usual 2) Pragmatic Approach 3) Radical Turnaround

Be realistic not idealistic – take sustainability step by step

Investment

Opportunity

Risk

• Anticipating regulations

• Successive improvement of

sustainable efficiency & portfolio

• Opportunistic PDP & BMDP–

Sustainable and cost-sensitive

• Organisational transformation

• Complete transformation towards

sustainable business & portfolio

• Preempting and shaping regulations

• Fully sustainable PDP & BMDP




Sustainable Innovation as a kick starter


Sustainable Product- & Business Model Innovation is not

sufficient, but can be a key enabler for the pragmatic

approach, kick starting the sustainable transformation of a

company



Tools, Methods & Best

Practices for Sustainable

Product Innovation

We need to change the

product design process



Incorporate Sustainability from the very beginning

$

Psychology

Technology

Commercial

Sustainability Holistic product design

It is much easier to design a product sustainably from the start than to change it later on



How to incorporate Sustainability into the design process

Conception Concept Validation Test & LearnBuilding

Product & Business Model Innovation Themes (all iterative & non-linear)

Selection of useful tools & methods (no dogma, but suggestions)

• Empathise with

user

• Identify problem

• Create idea for

solution &

business model

• Define hypotheses

• Validate

Hypotheses

• Define (rapid)

prototypes, paper

prototypes and

MVPs

• Build, test & learn

Design Thinking

Sustainable Business Model Canvas

Lean Startup Method

Value Proposition Canvas

Sustainability-SWOT Analysis

Sustainability Balanced Score Card (S-BSC)

Sustainability Levers Framework

Sustainability Best Practices

Sustainable Product Development Script

• Definition of

metrics & KPIs

• Test functionality,

process, usability,

customer

acceptance

(Post) Launch

• Launch if

deficiency free

• Marketing &

growth

• Continuous

improvement

Iterate

Tailored Tools & Methods for

Sustainable Product Development

Standard Tools

and Methods

Life Cycle Assessment



Design Thinking






62




Selection of useful tools & methods (no dogma/rule – but suggestions)

• Empathise with

user


• Create idea for

solution &

business model


• Validate

Hypotheses

• Define (rapid)

prototypes, paper

prototypes and

MVPs


Lean Startup Method



• Definition of

metrics & KPIs


process, usability,

customer

acceptance

(Post) Launch

• Launch if

deficiency free

• Marketing &

growth

• Continuous

improvement

Iterate

Tailored Tools and

Methods

Standard Tools

and Methods


Think

green

from the

start!



Anchor: Consider all aspects of product life cycle from start

Product

Value & LT

ExtensionEnergy

Efficiency

Substance

& Material

Emissions

BatteriesPackaging

& Packing

End of Life

treatment

Design for

Manufact-

uring

Smart

Usage

• Take into account complex and

interacting aspects of the complete

product life cycle, considering

economy, ecosystem and society

• Each major aspect, i.e. Smart

Usage, is treated along an

integrated sustainability approach

and according to the latest industry

consensus and standards

Sustainable Product Development

Script

S-PDP

$$$




Lean Startup Method

https://www.slideshare.net/mm1-connected-business/mm1-design-thinking-poster




GAINS

PAINS

CUSTOMER

JOBS

PAIN

RELIEVERS

GAIN

CREATORS

PRODUCTS

&

SERVICES

Value Proposition Customer Segments



The mm1 Sustainable Business Model Canvas

Sustainable

PartnersSustainable

Value Creation

Sustainable Value

Proposition

Sustainable

Customer Relation

Responsible

customers

Sust. ChannelsSustainable Tech

& Resources

Who are possible partners in

becoming more sustainable?

How can we make the whole

supply chain sustainable,

transparent and circular?

Can we cooperate with

partners form other industries

to form an industrial

symbiosis?

Can we shape anticipated

environmental regulations by

partnering and cooperating

with relevant regulatory

bodies?

Which are our key activities?

How can we adjust them (e.g.

manufacturing) to ensure

sustainability?

Which enabling sustainable

technologies can be used?

Which 1) natural, 2) energy

and 3) technical resources do

we need?

Can we substitute any for

more sustainable resources?

How can we make our

distribution channel more

sustainable and circular?

How do we best communicate

the sustainable aspect of our

product / service?

Which problem do we solve,

which value do we create?

What are function & form

of our product or service?

Can we solve our customers‘

problems more sustainably?

Can we transform sustain-

ability into customer value?

Is ownership necessary or is

the product as a service

model applicable?

Can we extend the product

life cycle?

Which customer relationships

satisfy customer expectations

and are sustainable?

How can we make current

relationships more

sustainable?

Who are our customers?

How can we enable them to

act sustainably?

Which target customers may

help to promote our

sustainable solution?

End of Life

What happens at the end of

the product life cycle?

Can the product be

profitably recycled,

upcycled, reused, refurbished?

Cost Structure & Additional Costs

Subsidisation

What are the required costs and investments for my endeavour?

Which resources / activities are the least sustainable? Do sustainable

alternatives exist? Is switching economically reasonable?

Do tax bonuses & subsidies or 3rd party funding exist for my endeavour?

Revenue & Sustainability Premium

Which are existing and possible revenue sources?

Are customers willing to pay a premium for sustainability?

Can we create a unique advantage due to sustainable proposition elements?

Do price structures exist that incentivize sustainable customer behaviour?

Negative Impacts (Minimise)

What are negative 1st, 2nd and 3rd order impacts, and how can these be

minimised? Is harmful waste generated that requires expensive disposal? Are

there rebound & induction effects or new technological risks?

Positive Impacts (Maximise)

What are positive 2nd and 3rd order impacts of your product on planet,

society, the economy or your organisation (e.g. brand)? How can these impacts

be maximised along the complete product life cycle?



Technology

Application

Behaviour and

structural

change

• None by definition

• Substitution (e.g. of paper

through digitalisation)

• Optimisation (e.g. of

energy usage & processes)

• Rebound effects (e.g. via

additional consumption)

• New risks (e.g. via rising

network vulnerability)

• Life cycle Impact

(Production, Use, Disposal)

• Induction (of resource

consumption, e.g. energy)

• Obsolescence (e.g. via

shorter product life cycles)

• Incentivisation (e.g. of fuel

saving drive styles)

• Decision making (e.g. via

agent based models)

1st

ord

er

eff

ect

s

2n

do

rder

eff

ect

s

3rd

ord

er

eff

ect

s

Maximise Minimise

The ICT sustainability impact framework

Positive Effects Negative Effects

Source: Hilty, L.M.: Information

Technology and Sustainability, 2008

3 2

5 4

1

Input for

S-BMC



Minimise Life Cycle Impact of technology

Focus: enabling technology only, e.g. HW, Software etc.

Main Principles

• Design for longevity and resilience, i.e. via

modularity

• Design for timeless product appeal

• Identify and utilise product as a service strategies

• Use low eco-impact raw materials

• Optimise production processes

• Decarbonise distribution processes

Benefits for provider and consumer

• Preempting of tightening regulations

• Higher customer appeal for eco-aware customers

• Energy and material savings

• Lower manufacturing costs

• Independence of volatile commodity prices

Risks

• LCA time and cost extensive,

long-term performance of

materials may be unknown

• Set up costs of recycling system

• Increased durability as threat to

future sales

Examples:

• Modular phone (Fairphone)

• Pre-emptive replacement of lead

solders ahead of law banning the

use of lead solders (HP)

• Electronics recycling as profit

centre (Cisco)

1



Minimise in built obsolescence and induction

Focus: application only, e.g. household equipped with smart home

Main Principles

• Induction

• Identify and minimize previously non

existent forms of resource consumption

• Obsolescence

• Match real software life cycles to HW life

cycles


• Lower energy and resource usage

• Lower obsolescence induced replacement costs

Risks

• Challenge to internalize

external costs

• Difficulty to adapt life cycles of

products of different providers

Examples:

• Rising paper consumption due to

cloud connected printers

• Shorter product life cycle of STBs

due to faster SW development

cycles

• Shorter Smartphone life cycles

though rising App performance

2



Maximise Optimisation and Substitution Potential

Focus: application only, e.g. household equipped with smart home

Main Principles

• Optimisation

• Improve technology to optimise energy, fuel

or capacity usage

• Substitution

• Identify potential disruptive qualities of

application

• Digitalise, virtualize, dematerialise


• Higher customer value

• Higher market potential

Risks

• Rebound effects

• Difficulty to assess impact of

substitutive processes

Examples:

• Reduced passenger car fuel

consumption (Smart Drive)

• Reduced home energy

consumption (Qivicon)

• Paperless billing, Virtual meetings

• Managed service (sharing

economy)

3



Minimise rebound effects and new risks

Main Principles

• Rebound effects

• Take into account increasing resource

consumption on aggregated scale (Jevons

paradox)

• Risks

• Prevent over-optimized processes at expense

of resilience

• Take into account rising complexity of

systems


• Reliable products and services

Risks

• Challenge to internalize costs

of rebound effects

• Difficulty to assess complexity

related risks

Examples:

• Smart Vending machine with

reduced energy consumption

increases aggregated vending

machine spread and energy use

• Over optimised processes for

vehicle management prone to

complete blackout

4



Jevons paradox: improvements in product efficiency

may lead to higher overall energy use due to higher sales

73

Dramatically reducing power

consumption of individual vending

machine

VS

Dramatically increasing total power

consumption of combined number of

vending machines

4



Maximise incentivisation and improved decision making

Focus: 3rd order effects only, e.g. societal and structural change

Main Principles

• Incentivisation

• Use gamification elements (personification,

virtual incentives and rewards, community

challenges) to ‘nudge’ users towards

sustainable behavior patterns

• Decision making

• Create improved management tools to

enable user directed optimization through

better decisions


• Soft mentoring (‘nudging’) of user towards

beneficial behavior

• More efficient decision processes

Risks

• Importance to not patronize

users with excessively high

‘nudge’ frequency

• Complexity of decision

processes

Examples:

• Driving behaviour tips and

incentives to save fuel (Smart

Drive) or insurance (PHYD)

• Improved policy decision making

via Agent Based Models

5



Deep Dive: Behaviour Science & Nudging

Nudging: A concept of behavior

science arguing that positive

reinforcement and indirect

suggestions to achieve behavior

change can be more effective than

direct instruction.

High potential for sustainability

related behaviour change

5



Example of Nudging in Gamification Context

76

Target user behavior:

• High retention

• High, continuous and

increasing engagement

• Lowering of energy and

heating consumption

• Implicit support for

product marketing

Challenges:

• Gamification cannot replace

high quality UX – it is only a

tool

• Points and badges alone

insufficient (‚Pointsification‘),

the goal is a holistic gamified

app App UX (‚Ludification‘)

• Short term excitement is easy,

but not sufficient – long term

engagement is goal, but hard

• Need to find balance between

intrinsic and extrinsic

motivation

• Need for continually

increasing challenges

Rules for Success:

• Base gamification

concept on “Start with

why” principle: big

picture story first!

• Find a balance

between short-term

and long term

incentives

• Less is more

• Avoid to build a

“Super Nanny”

• If based on HMI, aim

for self-ironic

personified character

Goal if Gamification:

Behaviour change of user

via intelligent incentivization

(‘Nudging’).

5



Marketing of Sustainability Related Product FeaturesKeeping up with the Joneses:

social comparison as an

effective nudge

5



Release 2 Further ReleasesRelease 1

Example of Smart Home App Gamification Concept.

78

Points

Streak

Comparison w. neighbors

Accumulated savings

Accumulated consumption

Reminder

Goals

Compare demographics

Custom Savings Plan

Compare by location

Friends

Community Challenge

Individual challenge

Bets

Virtual Currency

Personification (Charme, Self irony, Humor), Big Picture and Quantified Self Character

Source: mm1

5



Environmental

Challenges & TrendsSte

ps Opportunities &

Threats

• Natural resource scarcity

• Water availability

• Waste & hazards

• Global warming

• Climate variability and

extremes

Challenges

What do you and others see

changing? What are the

sustainability relevant big

trends?Key q

uest

ion

• Innovation & technology

advances

• Demographic & social shifts

• Global economic dynamics

• Political & regulatory

requirements

Trends

Where are environmental

challenges threatening future

business value, and how can

you address these threats?

The Sustainability SWOT Analysis (S-SWOT)

How can our strengths

address environmental

challenges? Who has similar

weaknesses or faces similar

risks?

Which insights will influence

senior company

stakeholders most? What

can be a short/mid/long

term strategy?

Strengths & weaknesses

Action

Deta

ils

• Consider both direct threats

as well as threats to partners

in the value chain

• Look upstream and

downstream and identify

opportunities for joint action

T Threats

• Look at threats that currently

are not addressed

• Consider the business value

that can be created with new

products, services and

business practices

O Opportunities

• Start with traditional list of

your companies’ strengths,

extend the list to the

partners in your value chain

• Consider core & transferable

strengths (i.e. R&D, Eng.)

S Strengths

• Start with risks resulting from

environmental challenges

impacting markets (e.g.

operations, regulation,

commodity prices)

• Include partners in list,

W Weaknesses

• Prioritise according to

company vision and strategy

• Identify strong messengers

• Emphasise findings that

would resonate with CEO

and senior management

Prioritise

• Categorise generated

insights according to where

and when you can act

• If needed, consider

gathering more insights

before planning action

Act

*Source: mm1 & Metzger et al., 2012







• Empathise with

user


• Create idea for

solution &

business model


• Validate

Hypotheses

• Define (rapid)

prototypes, paper

prototypes and

MVPs


Design Thinking


Lean Startup Method







• Definition of

metrics & KPIs


process, usability,

customer

acceptance

(Post) Launch

• Launch if

deficiency free

• Marketing &

growth

• Continuous

improvement

Tailored Tools and

Methods

Standard Tools

and Methods




Validation

Validation

is King(Especially for sustainable

business models which are

under double scrutiny)



The #1 reason product initiatives fail: confirmation bias

82

“The first principle is that you must not fool yourself - and you’re the easiest person to fool.” ~ Richard Feynman

3 largest risks:

1. Problem does not exist

2. People do not care about

solution

3. There is no business case

Formulate your

hypotheses:

“Which assumptions,

if proven wrong,

invalidates concept?”

Design

Experiments to

test hypotheses:

What is the fastest & cheapest technology/method to test my hypothesis?



Methods for hypotheses validation

83

• Do similar initiatives

exist?

• Are they successful?

• What are the

numbers?

• Do their customers

like product? Why?

• Who are their

customers?

• If they failed, why?

How:

• Talking to users

• Structured user

interviews

• Over the shoulder

testing

• Focus groups

• Web analytics

• A/B Tests

• Customer development

What:

• Individual

hypotheses

• Product idea

• Concept

• Paper prototype

• Landing page

• Concierge MVPs

• MVPs

• (Product)

User Testing:Competitor Research:

#1 rule: be courageous and try to falsify, rather than confirm



Deep dive: Customer development

84

Problem interview: ask 10-20 users:

• 3 largest problems in your business

today?

• Most difficult part about X? Walk me

through the last time it happened?

• How much does this problem cost

you?

• Magic wand question.

Solution interview: 10 – 20 diff. users:

• Walk user through a “a day in their

life without your product”

(pausing/prompting)

• Walk user through “a day with your

product” (pausing/prompting)

• How does it compare? (gauge

emotional response)

Important rules:

Do not try to sell

Ask objective measurable questions

Use mom test

Pauses are important



Design Thinking






85





• Empathise with

user


• Create idea for

solution &

business model


• Validate

Hypotheses

• Define (rapid)

prototypes, paper

prototypes and

MVPs


Lean Startup Method



• Definition of

metrics & KPIs


process, usability,

customer

acceptance

(Post) Launch

• Launch if

deficiency free

• Marketing &

growth

• Continuous

improvement

Tailored Tools and

Methods

Standard Tools

and Methods




Design Thinking

https://www.slideshare.net/mm1-connected-business/mm1-lean-startuppostera0en



Design Thinking






87





• Empathise with

user


• Create idea for

solution &

business model


• Validate

Hypotheses

• Define (rapid)

prototypes, paper

prototypes and

MVPs


Lean Startup Method



• Definition of

metrics & KPIs


process, usability,

customer

acceptance

Launch & after

• Launch if

deficiency free

• Marketing &

growth

• Continuous

improvement

Tailored Tools and

Methods

Standard Tools

and Methods




Your Narrative Matters

Lets save the

environment

Let’s have some fun

and be cheeky smartChange of story

“A good story and a well-formed argument are different natural kinds. Both can be used as means for convincing another. Yet what they convince others of is fundamentally different: arguments convince one of their truth, stories of their lifelikeness.” ~ Jerome Bruner

“Sustainability is dead. Or at least the entire

language we use to talk about it should be

buried.” ~ JUCCCE Chairwoman Peggy Liu,



For an effective narrative, start with Why

Why

How

What

Anchor your

narrative here



Design Thinking






90





• Empathise with

user


• Create idea for

solution &

business model


• Validate

Hypotheses

• Define (rapid)

prototypes, paper

prototypes and

MVPs


Lean Startup Method



• Definition of

metrics & KPIs


process, usability,

customer

acceptance

Launch & after

• Launch if

deficiency free

• Marketing &

growth

• Continuous

improvement

Tailored Tools and

Methods

Standard Tools

and Methods




Life Cycle Assessment (LCA) / Cradle to Cradle Analysis

LCA is a technique to assess the eco impact linked to all stages of

a product or service

1 Goal & Scope Definition

2 Inventory Analysis

3 Impact Assessment

Interpretation

Mining Primary Mfg Distribution Use Disposition



The Sustainability Balanced Score Card (S-BSC)

• Definition of financial targets

• Direct or indirect reference

for perspectives 2-5

• Low relevance for

environmental and social

perspectives

1 Financial Perspective

Ob

j.M

eas.

Targ

.In

itia

t.

• Definition of target customer

group to achieve econ. Goals

• High env. & social relevance,

i.e. health aspects., demand

for green products, pressure

from NGOs & via regulation

2 Customer Perspective

Ob

j.M

eas.

Targ

.In

itia

t.

• Definition of processes req.

to achieve perspectives 1-2

• Innovation, Operation, Serv.


i.e. production processes &

material usage, supply chain.

3 Internal Business Proc.

Ob

j.M

eas.

Targ

.In

itia

t.

• Optionally, a 5th perspective

can be introduced if necess.

• Examples: legality and

legitimacy, i.e. proactive

compliance with future

regulation), child labour

5 Non Market Perspective

Ob

j.M

eas.

Targ

.In

itia

t.

• Definition of necessary

competencies, information,

motivation & organ. struct.


i.e. purpose/vision as ‘green

company, working conditions

4 Learning & Growth

Ob

j.M

eas.

Targ

.In

itia

t.

0 Analysis & Strategy Fit In order to implement

a sustainable business

strategy and to measure

+ monitor sustainability

performance, the S-BSC

method can be used

along the 4 to 5 main

business perspectives

Vision

& Strategy

Top down generation of

input for 1-5, taking

the Analysis (0)

into account

1. Define all environmental/social

aspects related to the business,

irrespective of strategic relevance

2. Define strategic relevance of

these identified environmental

aspects for the company strategy

The mm1 S-BSC is derived from the work of

Schaltegger & Lüdeke-Freund, 2011



Lastly: Best practices for successful sustainable innovation

Look ahead - Don‘t start from the

present, but envisage the future (e.g. anticipate future regulation, consider enabling trends)

1

Be open to change - Understand

that sustainability is a business

opportunity, not just marketing

2

Question the status quo - Ask

yourself how you can make your value

proposition more sustainable

3

Be lean and green - Start small,

learn, pivot & scale

4

Keep efficiency in mind and

prioritise - Change what you can

change now most efficiently

5

Anchor sustainability in strategy

and processes, allocate resources and

ensure accountability

6

Team up - Form alliances with

stakeholders (e.g. suppliers, NGOs)

including regulatory bodies

7

Look at the roots - implement

sustainability-related activities and goals

into the entire supply chain

8

You cannot control what you

cannot measure - Quantify sustainable

activities using the S-BSC

9

Stay Flexible - Pursue

sustainability consistently but stay

flexible to be able to react to new trends

10




Contents

94








Lets take a closer look

at the (familiar) star of

the business model

innovation tools

95



The Sustainable Business Model Canvas (S-BMC) in practice

Sustainable

PartnersSustainable

Value Creation

Sustainable Value

Proposition

Sustainable

Customer Relation

Responsible

customers


& Resources

Who are possible partners in

becoming more sustainable?

How can we make the whole

supply chain sustainable,

transparent and circular?

Can we cooperate with

partners form other industries

to form an industrial

symbiosis?

Can we shape anticipated

environmental regulations by

partnering and cooperating

with relevant regulatory

bodies?

Which are our key activities?

How can we adjust them (e.g.

manufacturing) to ensure

sustainability?

Which enabling sustainable

technologies can be used?

Which 1) natural, 2) energy

and 3) technical resources do

we need?

Can we substitute any for

more sustainable resources?

How can we make our

distribution channel more

sustainable and circular?

How do we best communicate

the sustainable aspect of our

product / service?

Which problem do we solve,

which value do we create?

What are function & form

of our product or service?

Can we solve our customers‘

problems more sustainably?

Can we transform sustain-

ability into customer value?

Is ownership necessary or is

the product as a service

model applicable?

Can we extend the product

life cycle?

Which customer relationships

satisfy customer expectations

and are sustainable?

How can we make current

relationships more

sustainable?

Who are our customers?

How can we enable them to

act sustainably?

Which target customers may

help to promote our

sustainable solution?

End of Life

What happens at the end of

the product life cycle?

Can the product be

profitably recycled,

upcycled, reused, refurbished?


Subsidisation

What are the required costs and investments for my endeavour?

Which resources / activities are the least sustainable? Do sustainable

alternatives exist? Is switching economically reasonable?

Do tax bonuses & subsidies or 3rd party funding exist for my endeavour?


Which are existing and possible revenue sources?

Are customers willing to pay a premium for sustainability?

Can we create a unique advantage due to sustainable proposition elements?

Do price structures exist that incentivize sustainable customer behaviour?

Negative Impacts (Minimise)

What are negative 1st, 2nd and 3rd order impacts, and how can these be

minimised? Is harmful waste generated that requires expensive disposal? Are

there rebound & induction effects or new technological risks?

Positive Impacts (Maximise)

What are positive 2nd and 3rd order impacts of your product on planet,

society, the economy or your organisation (e.g. brand)? How can these impacts

be maximised along the complete product life cycle?



One of several ways to use the S-BMC in practice is to

organize a team innovation session and jointly complete the

S-BMC with business model templates



3

2

6

5

8

741

98

Step 1: Number the principle fields in the S-BMC

Sustainable

PartnersSustainable

Value Creation

Sustainable Value

Proposition

Sustainable

Customer Relation

Responsible

customers


& Resources

End of Life


Subsidisation


Negative Impacts (Minimise)Positive Impacts (Maximise)



Step 2: Provide your team with business model templates

These numbers help your team

locate the relevant fields in the

S-BMC

The benefits and risks section

helps your team to complete

the positive & negative

impacts section in the S-BMC

The description and example

section help your team to

quickly understand the

concept of the business model



Step 3: Distribute the templates and complete the S-BMC

Is this

relevant

for 2 or 5?

Run through all business

model templates and see if any

are relevant for your product



Step 4: Challenge the final result with S-SWOT & SLF

Sustainability SWOT


Discuss and challenge the completed

canvas with your whole team.

Optionally, use additional methods to

enhance your S-BMC and improve

your decision making process.



To help you get started:

Here are 38 Sustainable Business

Model Templates for you



Example Application:

Benefits:

Risks:

Theme:

SBMC*

Ideation

Anchors:

Method

* Sustainable Business Model Canvas

Model:

! ! !

Product as a Service

103

Customers pay for the functionality of a product, without the responsibility of

repairing, replacing or disposing it.

Across its lighting business, Philips

utilizes a Product as a Service

model—where customers Lock-In

and pay for light, while Philips

installs, maintains, and both

recovers and recycles lighting units

at the end of life, generating

additional revenues and lowering

resource costs.

Circular Economy

4

5

8

Longer product life cycles, end to

'in built obsolescence‘, reduced

waste, improved differentiation

Induction of additional

consumption, rebound effects




Benefits:

Risks:

Theme:

SBMC*

Ideation

Anchors:

Method


Model:

! ! !

Product Refurbishing

104

Refurbishing old or used products with the intent of reselling them

Dell refurbishes its old products and

makes money on it. Dell Certified

Refurbished PCs are laptops and

desktops that have been returned to

Dell, put again through the

production process, and then again

retested to ensure they meet all

original factory specifications.

Circular Economy

2

3

4

8

Additional revenue from returned

products, reduced resource

consumption

No significant risks




Benefits:

Risks:

Theme:

SBMC*

Ideation

Anchors:

Method


Model:

! ! !

Rematerialisation

105

ResQ Club

Sourcing materials from recovered waste to create entirely new products

ResQ Club – This Finland-based

startup has developed an app to

reduce food waste by providing

restaurants with a way to turn

leftovers into revenue. Similar to the

‘Too Good to Go’ app launched in

the UK earlier this year, ResQ Club’s

app allows customers to purchase

leftover food in their neighborhood

for a lower price.

Circular Economy

3

Additional revenue, reduced

waste, less resources used





Benefits:

Risks:

Theme:

SBMC*

Ideation

Anchors:

Method


Model:

! ! !

Industrial Symbiosis

106

Sharing of services, utility, and by-product resources among industries to improve

resource efficiency.

The City of Kalundborg has

created a genuine ‘industrial

ecosystem’ where each company

uses the waste of another. The

Kalundborg Symbiosis is an

industrial ecosystem, where the

residual product of one enterprise is

used as a resource by another

enterprise, in a closed cycle.

Circular Economy, Sharing Economy

1

8

Reduced costs, consumed

resources and waste

Increased network vulnerability




Benefits:

Risks:

Theme:

SBMC*

Ideation

Anchors:

Method


Model:

! ! !

Behavior Change

107

Stimulating customers to embrace new behaviors, such as reducing consumption or

modifying daily habits.

Using Dash's smartphone app, car

drivers are able to connect their car

to their phone, and analyze their

driving behaviors. The information

gathered is used to help the driver

improve their driving, making the

roads safer and greener whilst at the

same time making driving more

affordable and more social.

IoT, Nudging, Quantified Self

4

5 6

Reducing resource consumption

of consumers, improving safety &

other relevant metrics

Unintended consequences,

rebound effects




Benefits:

Risks:

Theme:

SBMC*

Ideation

Anchors:

Method


Model:

! ! !

Collection Service

108

Providing a service to collect old or used products from customers in a convenient

manner.

The food company Cirkle has

optimised its logistics fleet of vans

and drivers - who personally deliver

Circles main product, seasonal

produce - with a return logistics

service including the collection of

recyclables, dry cleaning and charity

collections.

Circular Economy

4

5

8

Optimisation of logistics,

additional revenue

Possible rebound effects of

additional consumption




Benefits:

Risks:

Theme:

SBMC*

Ideation

Anchors:

Method


Model:

! ! !

De-Materialisation

109

Reduction in the amount of materials used in the production of products.

In 1995, the carpet manufacturer

Interface began experimenting with

decreasing the amount of plastic

used in their carpet backing.

Reducing the plastic in the backing

by a single ounce (per square yard)

saved the company $1 million in

materials that year.

Miniaturisation

2

3


resources, environmental

footprint

Possible rebound effects




Benefits:

Risks:

Theme:

SBMC*

Ideation

Anchors:

Method


Model:

! ! !

Digitisation

110

Turning existing products or services into digital versions of themselves, offering

advantages such as more rapid distribution.

Number 26, a fin tech startup in

Berlin, has completely digitized its

customer acquisition process.

Customers now validate their

personal details via a video interface

with a Number 26 employee,

avoiding resource intensive paper

based processes.

Physical to Virtual

2 5

Reduced operating cost, market

differentialisation, improved

customer relationship

Induction of additional energy





Benefits:

Risks:

Theme:

SBMC*

Ideation

Anchors:

Method


Model:

! ! !

Local Loop

111

Co-locating of production processes in countries or regions where the businesses’

main markets are.

The Belgian company Umicore has

decided to source its raw materials

from local urban mines rather than

exploit African mines for the

recovery of gold and other precious

metals.

Circular Economy

1

2

3 6

Reduced costs and environmental

footprint, optimised logistics,

support of the local economy

Local rebound effects




Benefits:

Risks:

Theme:

SBMC*

Ideation

Anchors:

Method


Model:

! ! !

Modularity

112

Designing a product based on smaller component parts that can be independently

created, purchased, used and replaced.

Fairphone offers a mobile phone

using modular design and spare

parts make it easy to repair, whilst

at the same time offering improved

protection to extend product life.

Fairphone offers optimised and

regular software updates limit

asymmetries in HW and SW product

life cycles.

Circular Economy, Customisation

4

5 7

8

Reduced waste, increased product

life cycles, improved customer

relationship, differentiation





Benefits:

Risks:

Theme:

SBMC*

Ideation

Anchors:

Method


Model:

! ! !

Trash to Cash

113

Used products are collected and either sold or transformed into new products.

Resource costs for the company are practically eliminated.

Adidas has developed a premium

shoe largely made from ocean

plastic waste scoped from the Indian

Ocean near the Maldives. Each pair

of shoes contains 11 plastic bottles,

and most of the rest of the sneaker

(including the heel, lining, and laces)

is also made from recycled material.

Circular Economy

3

Additional recycling, reduced

waste and consumed resources,

positive impact on brand





Benefits:

Risks:

Theme:

SBMC*

Ideation

Anchors:

Method


Model:

! ! !

Consumer Product Sharing

114

Consumers share typically single owner a product with many other consumers.

Mercedes offers the car sharing

service Car2Go, where

predominantly urban customers can

access shared cars on demand.

IoT, Sharing Economy

4

5

Reduced need for product

ownership, use of access capacity

Potentially strong rebound effects

of additional consumption




Benefits:

Risks:

Theme:

SBMC*

Ideation

Anchors:

Method


Model:

! ! !

Upcycling

115

Using waste material as it is to create a more valuable material or ressource from it

Meldgaard takes back the cutting

sand it has sold to customers for

their water jet cutting machines.

50% of the used cutting sand is

reusable and even offers a higher

quality than new cutting sand. By

doing so, Meldgaard reduces its

dependency on suppliers, builds

stronger customer ties and avoids

depleting resources.

Circular Economy

3

4

8

Additional revenue, reduced

waste, less resources used,

improved customer relationship





Benefits:

Risks:

Theme:

SBMC*

Ideation

Anchors:

Method


Model:

! ! !

Remanufacturing

116

Reintroducing products into the manufacturing process for a major overhaul

Autocraft Drivetrain Solutions

provide remanufacturing services on

a wide range of engines and

components for the automotive

industry. Autocraft recovers up to 85

percent of the core engine through

innovative methods, and works in

partnership with OEMs when they

design new engines, to design with

remanufacturing in mind.

Circular Economy

2

3

4

8

Additional revenue from returned

products, reduced resource

consumption





Benefits:

Risks:

Theme:

SBMC*

Ideation

Anchors:

Method


Model:

! ! !

Product Deconstruction

117

Removing resources from a product offering that have to be added by the end

consumer after he purchased the product

The cleaning product company

Splosh sells customers a one-off

‘starter box’, containing a range of

simply designed bottles. A sachet of

concentrated liquid is added to the

bottle with warm tap water to create

cleaning products. Bottles can be

used repeatedly, with refill sachets

delivered in boxes through the post.

Do it Yourself

2

3

4

6

Reduced production costs,

improved value proposition,

logistics and storage processes

Induction of resource





Benefits:

Risks:

Theme:

SBMC*

Ideation

Anchors:

Method


Model:

! ! !

Closed-Loop Production

118

Directly recycling the material used to create a product back into the production

system.

In 2011, General Motors decided to

greatly reduce its waste footprint,

committing to cut total waste

(including manufacturing) by 40 %

by 2020, from 2010. Four years

ahead of schedule, GM has 100 of its

manufacturing sites, along with 50

non-manufacturing sites, landfill-

free. Over 150 of GM’s global

facilities send zero waste to landfill.

Circular Economy

2

3 8

Reduced production costs, waste

and energy usage, improved

processes





Benefits:

Risks:

Theme:

SBMC*

Ideation

Anchors:

Method


Model:

! ! !

Crowdsourcing

119

Solutions to tasks or problems are generated via an anonymous crowd, with

contributors receiving some incentives

Unilevers Foundry IDEAS platform

acts as a hub for consumers and

entrepreneurs to work together to

tackle sustainability challenges. The

platform provides a place for

individuals to create and collaborate

on solutions to “grand challenges”

relating to sustainability. Unilever

regularly upload challenges to the

platform for users to submit ideas.

Wisdom of Crowds

Improved innovativeness,

improved brand perception and

customer engagement





Benefits:

Risks:

Theme:

SBMC*

Ideation

Anchors:

Method


Model:

! ! !

Differential Pricing

120

Charging more to those able to afford, and subsidizing those who cannot

The pharmaceutical company Novo

Nordisk introduced a Differential

Pricing Policy for Least Developed

Countries in 2001. Under this policy

the company has offered human

insulin in LDCs at a price that does

not exceed 20% of the average

realised price for Europe, the US,

Canada and Japan.

Bottom of the Pyramid

5

Social inclusion, growth of market

share, improved brand perception

Depending on product: rebound

effects of additional consumption




Benefits:

Risks:

Theme:

SBMC*

Ideation

Anchors:

Method


Model:

! ! !

Virtualisation

121

Hardware virtualization or platform virtualization refers to the creation of a virtual

machine that acts like a real computer with an operating system

Amazon's Elastic Compute Cloud

(EC2) solution enables Amazons

clients to reduce their own HW

requirements by outsourcing HW

heavy services to Amazons cloud,

where they can be run more

efficiently.

Physical to virtual

3

4

5

Optimised energy consumption,

improved availability, lean

corporate footprint

Rebound effects




Benefits:

Risks:

Theme:

SBMC*

Ideation

Anchors:

Method


Model:

! ! !

Fractional Ownership

122

Sharing of a certain asset class among a group of owners

NetJets offers its clients to buy

"NetJets Shares", enabling the

customer to own a "fraction" of an

aircraft from the NetJets fleet. A

NetJets Share costs a fraction of the

price of owning a whole aircraft and

provides greater flexibility than

owning a single aircraft.

Sharing Economy

5

Increased market share, reduction

of carbon footprint for individual

consumer

Strong possible rebound effects

due to additional consumption




Benefits:

Risks:

Theme:

SBMC*

Ideation

Anchors:

Method


Model:

! ! !

Lean Production

123

The elimination of waste within a manufacturing system, or the creation of more

value for customers with fewer resources

Lean manufacturing is a philosophy

of management originating in part

from the Toyota Production System

(TPS). TPS aims to design out stress

(overburden) and inconsistency and

to eliminate waste, e.g. by

introducing flexibility. Waste also

refers to consumer time waiting for

a product or assistance and waste of

movement.

Lean


resources and environmental

footprint

Rebound effects




Benefits:

Risks:

Theme:

SBMC*

Ideation

Anchors:

Method


Model:

! ! !

Open Source

124

The source code or patent of a product is made freely accessible for anyone

IBM is one of the founding members

of the Eco-Patent Commons

Initiative EPC, which brings together

a collection of patents covering new

technologies, processes and ideas to

address a range of environmental

problems. By opening these patents

to the public, the companies hope to

spur innovation, as well as create

new business opportunities.

Open Innovation

1

3

1st order benefit of spreading a

technology, 2nd order benefits via

industry symbiosis & collaboration

Risks related to competitors using

own IP




Benefits:

Risks:

Theme:

SBMC*

Ideation

Anchors:

Method


Model:

! ! !

Pay Per Use

125

Actual usage of a service or product is metered, and customers pay for what is

effectively consumed.

The Dutch laundry company

Bundles offers clean clothes on a

pay-per-wash basis. Applying

Internet of Things technology

enables product monitoring, while

maintenance and refurbishment of

higher quality machines preserves

the product integrity for multiple

cycles.

IoT, Nudging

4

5 7

Competitive advantage in certain

scenarios, incentivisation reduced

consumption

Possibility of induction and

rebound effects




Benefits:

Risks:

Theme:

SBMC*

Ideation

Anchors:

Method


Model:

! ! !

Rent Instead of Buy

126

Customers rent the product, reducing the capital typically needed to access it

Rent the runway rents out high-

end designer dresses to its

customers. The company uses big

data enabled customer analytics to

predict customer behavior and

manage the logistics of moving

around thousands of dresses and

jewellery amongst the United States.

Circular Economy

5 7

Extended product life cycle,

creation of regular customer

touch point

Possibility of induction and

rebound effects




Benefits:

Risks:

Theme:

SBMC*

Ideation

Anchors:

Method


Model:

! ! !

Predictive Maintenance

127

Enable equipment to notify operators when in use of maintenance to extend

product life cycles.

The ball bearing manufacturer SKF

offers SKF Insight, an intelligent IoT

wireless technologies that is

integrated into SKF bearings. SKF

developments in various smart

technologies now enable bearings to

communicate their operating

conditions continuously.

IoT

4

5

8

Extended product life cycle,

creation of regular customer

touch point

Risk of rebound effects if costs for

maintenance carried by customer




Benefits:

Risks:

Theme:

SBMC*

Ideation

Anchors:

Method


Model:

! ! !

Remote Maintenance & Services

128

Experts are enabled to perform machine maintenance remotely via life instructions

of local unskilled labour

Th augmented reality company

Ubimax offers industrial clients

solutions that enable even unskilled

workers to repair technical

equipment in the field. They can be

guided via real time remote

assistance with video & audio

transmission, document exchange &

remote augmented reality.

IoT

4

5

6 8

Reduced travel costs, extended

product life cycle, creation of

regular customer touch point

Risk of rebound effects if costs for

maintenance carried by customer




Benefits:

Risks:

Theme:

SBMC*

Ideation

Anchors:

Method


Model:

! ! !

Circular Supplies

129

Using renewable, bio-based or fully recyclable materials to replace single-lifecycle

inputs

AkzoNobel collaborates with the

biochemical company Photanol to

replace its current fossil based raw

chemical base compounds with bio-

based chemical building blocks.

Circular Economy

2

3

Reduced eco foot print of

production due to use of

renewable raw materials

Possibility of significant induced

consumption of raw bio materials




Benefits:

Risks:

Theme:

SBMC*

Ideation

Anchors:

Method


Model:

! ! !

Grow and Sell

130

Farming food products directly at the point of sales

The Berlin based company Infarm is

offering on-demand farming

services for supermarkets. Using the

Infarm solution, supermarkets can

grow and sell herbs and vegetables

directly in the supermarket, which

enables them to reduce food waste

and the resulting environmental

impact.

Local Production

2

3 6

Reduced food waste, improved

product quality, optimised

logistics processes

Induction of energy consumption




Benefits:

Risks:

Theme:

SBMC*

Ideation

Anchors:

Method


Model:

! ! !

Unlimited warranty

131

Offering free product repair services and unlimited full warranty for a product

The fashion company Nudie Jeans

offers free denim repair at twenty of

their shops, encouraging customers

to renew their jeans instead of.

throwing them away Nudie Jeans

also provides mail-order repair kits

and online videos, so that customers

can learn how to fix a pair of jeans

at home, improving product

longevity and value proposition.

Circular Economy

4

8

Improved value proposition,

reduced waste





Benefits:

Risks:

Theme:

SBMC*

Ideation

Anchors:

Method


Model:

! ! !

Waste to storage

132

Storing waste or toxics permanently or temporarily whilst creating value and

revenue

Part advertising panel, part living,

air-cleaning installation, the City

Tree of the company Green City

Solutions can absorb 100kg of

carbon dioxide annually – the

equivalent of about 275 regular

trees. The tree is autonomously

powered by photovoltaics, rainwater,

and IoT technology.

IoT, Carbon Capture

2

8

Reduced pollution,

decarbonisation

Induction of energy consumption




Benefits:

Risks:

Theme:

SBMC*

Ideation

Anchors:

Method


Model:

! ! !

Consumer Resource Sharing

133

Sharing resources between private households to limit household waste

The company Restado has created a

digital platform that supports the

consumer DIY trend by allowing

even small amounts of materials to

find buyers. Users can buy and sell

residual, unneeded materials, rather

than throwing them away or storing

them.

Sharing Economy

4

7

Reduced consumption, reduced

waste

Possible induction and rebound

effects




Benefits:

Risks:

Theme:

SBMC*

Ideation

Anchors:

Method


Model:

! ! !

Consumer Extended Value Chain

134

Relying on the consumer to optimise a value creation process

DHL decided to include citizens into

the last mile delivery of parcels by

enabling them via App to accept

parcels for neighbours and gain

points for that. Instead of putting

more delivery vehicles on the road,

the app matches supply with

demand and improves logistics

efficiency.

Sharing Economy

4

5

6

7

More efficient logistics, improved

customer access

Possible rebound effects




Benefits:

Risks:

Theme:

SBMC*

Ideation

Anchors:

Method


Model:

! ! !

Inclusive Sourcing

135

Shifting the focus of sourcing from volume and price, to supporting the farmer or

producer

The fashion brand ANN Inc. Made

progress towards a more inclusive

supply chain by committing to

provide 100,000 women in its global

supply chain with health and

financial literacy training.

Stewardship Model

3 6

Social inclusion, improved brand

perception





Benefits:

Risks:

Theme:

SBMC*

Ideation

Anchors:

Method


Model:

! ! !

Innovative Product Financing

136

Leasing or renting products to customers

The tire manufacturer Michelin

offers its customers to lease rather

than buy tires. These customized tire

lease programs save fuel and reduce

costs. Michelin offers effective tire

fleet solutions for a full range of

applications, including transit, motor

coach, refuse and all types of

trucking fleets.

Circular Economy

4

5

8

Reduced waste & consumption,

extended product life cycles,

end to 'in built obsolescence'

Induction and rebound effects




Benefits:

Risks:

Theme:

SBMC*

Ideation

Anchors:

Method


Model:

! ! !

Repurposing of Excess Capacity

137

Excess capacity is mobilized in new ways, or with new customers

By seamlessly connecting shippers

and carriers through web and

mobile apps, Cargomatic is helping

truckers to unlock under-utilized

capacity and shippers to track their

freight in real time.

Sharing Economy

1

2

3

Optimisation of capacity usage

and system performance

Rebound effects, network

vulnerability




Benefits:

Risks:

Theme:

SBMC*

Ideation

Anchors:

Method


Model:

! ! !

Produce on Demand

138

Producing a product only when a customer order has been received

Amazon offers the Amazon Print on

Demand Service, which enables

authors to offer physical books on

the Amazon website without having

to print a first edition. Customers

ordering books from Amazon receive

these printed upon their orders with

next day delivery.

On Demand Economy

3

4

6

Reduced costs due to no need to

forecast demand, no shipping,

returns or inventory costs

Induction and rebound effects




Benefits:

Risks:

Theme:

SBMC*

Ideation

Anchors:

Method


Model:

! ! !

No Frills

139

Focusing on the necessary minimum to deliver the core value proposition, where

cost savings are shared with the customer

Tata Motors developed the Nano,

an extremely simple, fuel efficient

and basic car that is affordable for

many Indians who currently ride

motorcycles. The price of this no

frills auto was brought down by

dispensing with most nonessential

features, reducing the amount of

steel used in its construction, and

relying on low cost local labour.

Frugal Innovation

1 4

5

Social inclusion, reduced resource

consumption per product and

during individual product use

High risk of induction of resource

consumption and rebound effects




Benefits:

Risks:

Theme:

SBMC*

Ideation

Anchors:

Method


Model:

! ! !

Make More of It / Corporate Asset Sharing

140

Know-how and other assets in a company are offered to other companies, creating

additional revenue using slack resources

FLOOW2 is a platform that

facilitates the sharing of

overcapacity of business equipment

and the skills & knowledge of

personnel that are under-utilised for

half of the time, by making it

transparent and tradable on their

platform. The platform is currently

operational worldwide with a rapid

global expansion plan envisaged.

Open Innovation

1

2

3

Optimisation of resource and

labour usage, freeing of resources

for higher value activities

Rebound effects, network

vulnerability



Examples from real world

projects by the consulting

company mm1



Solution: Smart STB replaces HTML5 STB

Life cycle extension of Set Top Boxes

142

Challenge: Large legacy STB base impacts performance & market growth

• Legacy STB cannot deploy modern UIs less customer satisfaction &

market growth

• STB life cycle (LC) much longer than UI application life cycle

• Constantly upgrading STBs to enable modern UIs is expensive

• Less environmental impact, less land fill

via longer STB life cycle (increased from

2-3 to 5-7 years)

• Higher margin via longer STB life cycles &

lower customer churn.

• Higher customer satisfaction through high

quality UX without need to upgrade

legacy STBs.

Results:

• Decision to abandon traditional layered software

architecture in STB HTML5 clients

• Mid term strategy: use of SmartSTB strategy where

client directly connects app & STB HW using a

‘virtual animation machine’

• Long term strategy: Virtual STB, moves app

execution and rendering into the cloud and streams

video data directly to the STB

A client in the TELCO

industry




Solution: The connected washing machine

143

• SIM card based connectivity of washing machine,

digitalised washing assistant

• Digital and optimised two component based

dosage system for washing agent

• Smart phone enabled control of washing machine

• Remote and atomised reordering of washing agent

• Up to 70% savings of washing agent

• Increased water efficiency

• Differentiating product feature

• Direct customer contact, knowledge about

customer & usage behaviour over whole

product life cycle

• Increased customer retention via

automated reordering system

Results:

Challenge: Increase consumer retention and improve washing machine efficiency• Few customer touch points with washing machine customer after initial sales of

washing machine, lack of upselling opportunities

• Lack of influence on customers choice of washing agent

• Inefficient usage of water and washing agent (e.g. 30-40% over dosage of

washing agent common)

The connected washing machine A client in the home

appliance industry




Solution: QIVICON– Smart Home Solution

144

• Integrated Smart Home Solution connectable to a

wide range of devices

• Allows monitoring and controlling energy

consumption, lighting, heating, AC, etc.

• Easy to control via smartphone, tablet & computer

• Renowned suppliers of compatible products, e.g.

EnWB, Miele, Philips

• Reduction in energy consumption

• Reduced risk of mould-related health

issues

• Improvement of fire prevention via

connection with smoke-/CO2-detectors

Results:

Challenge: Satisfying the increasing demand for an integrated SH solution

• Global demand for resources drives up energy prices (+33% until 2030)

• Increasing consumer interest in energy-saving Smart Home solutions

• High demand for increased convenience

Integrated Smart Home Solution A client in the conn.

home industry




Solution: Product Re-Launch

145

• Replacement of legacy search engine with new

open-source technology

• Switch from high performance physical servers to

cloud infrastructure

• Modularisation of the search engine, elimination of

redundant systems

• Consolidation of several interfaces for various

consumers into one full-featured interface serving

all customers

• Hardware setup reduced by 50%

• Overall performance significantly

increased (up to 2,000%)

• Lead time for change requests has been

reduced by around 3 weeks

• Modularization helped reducing

complexity such that only 1 interface

needs to be maintained instead of >10

before

Results:

Challenge: Provide efficient and service-friendly search solution

• Need for a solution to provide a search engine allowing for a near-to-realtime

processing of TV metadata

• New solution required to be more cost-efficient, flexible and powerful than the

current proprietary system

• Support for current solution is cancelled by vendor

Optimisation of a metadata search platform A client in the TELCO

industry




Solution: Multifunctional Application

146

• B2C2B Product that aggregates several consumer

services in a single product

• Services include EcoDrive, PHYD, parking,

Maintenance Mgmt. and more

• Intelligent push instead of pull App layout based

on recommendation engine

• Gamification and community functionality to

incentivise active use

• Less environmental impact as consumers

and fleets save up to 15% fuel

• Less accidents due to incentivised save

driving

• Less urban congestion and CO2

emissions due to parking space finder

Results:

Challenge: Achieving high connected car market penetration with B2B partners

• Players in the connected car eco system (OEMs, workshops, insurers) are

looking for products to achieve high consumer market penetration

• Stand alone products often not sufficiently attractive to consumers and not

conducive to frequent App use

Fuel efficient and safe driving solution A client in

automotive industry




Solution: Sustainable Dev. Process

147

• Establishment of a Stage-Gate Process in

Product development

• Codification of process and quality mgmt.

in the quality management handbook

according to the ISO norm

• Establishment of check points at every

product development gate including the

check points ‘reusability material’,

‘reduction material usage’ and

‘optimisation energy efficiency

Results:

Challenge: Reducing cost and time required to manufacture Telco consumer prod.

• Quality problems during development and manufacturing of Telco products

• Need to optimise product development and quality management processes

• Need for lean and fast product development with minimized use of resources (i.e.

reduced materials usage and improved energy efficiency)

Optimised product development process

• Certification ‘Blauer Engel’ awarded

• Sustainability of router considered and increased

energy savings generated, e.g. via sleep mode in

IP-Telephones

• Development of a mass market router in 50%

shorter time span and less use of personnel and

material resources

• Product meeting higher customer demand and in

line with strategic objectives, incl. sustainability

strategy, of client

A client in the TELCO

industry




Contents

148







Robert Gerlach, Steinbeis University Berlin, 2017149Connected Business as a Driver for Sustainable Innovation

Now we got the right tools.

So let’s get going!



A few more points: what else you need as a practitioner

High tolerance to frustration

Persistence

Being able to speak different languages; of engineers,

management, marketers etc.

Deep knowledge of company processes

Ability to communicate complex issues simply & in non

patronising way

150



Circular Economy

• Towards the Circular Economy, Ellen MacArthur Foundation (Link)

• Growth within: a circular economy vision for a competitive Europe,

Ellen MacArthur Foundation (Link)

Internet of Things and ICT

• ICT Solutions for 21st Century Challenges, GeSI (Link)

Sharing Economy

• Assessing the size and presence of the collaborative economy in

Europe, PWC (Link)

Additional resources and worthwhile reads – Part 1/3:

https://www.ellenmacarthurfoundation.org/assets/downloads/publications/Ellen-MacArthur-Foundation-Towards-the-Circular-Economy-vol.1.pdf

https://www.mckinsey.de/files/growth_within_report_circular_economy_in_europe.pdf

http://smarter2030.gesi.org/downloads/Full_report.pdf



Product and Business Model Innovation

• How to Build a Startup, Y Combinator (Link)

• Sustainability Driven Innovation – Sustainability's ability to spark

innovation, Deloitte (Link)

• Nudging - A tool for sustainable behaviour? SEPA (Link)

• Gamification and Sustainable Consumption, Huber & Hilty (Link)

• A sustainability SWOT analysis, World Resources Institute (Link)

• Design Thinking and Lean Startup according to mm1


http://startupclass.samaltman.com/

http://www.greenprof.org/wp-content/uploads/2013/12/Sustainability_Driven_Innovation_102513.pdf

https://www.naturvardsverket.se/Documents/publikationer6400/978-91-620-6643-7.pdf?pid=14232

http://www.ifi.uzh.ch/rerg/people/kolpondinos/2014_Huber_Hilty_Gamification_and_Sustainable_Consumption_AAM.pdf

https://www.wri.org/sites/default/files/pdf/sustainability_swot_user_guide.pdf

https://www.slideshare.net/mm1-connected-business/mm1-design-thinking-poster

https://www.slideshare.net/mm1-connected-business/mm1-lean-startuppostera0en



Other

• How businesses value natural capital, Global Nature Fund (Link)

• The Sustainably Balanced Scorecard, University of Lüneburg (Link)

• Towards a Unifying Narrative for Climate Change, Imperial College

London (Link)

• Introduction to Life Cycle Assessment (LCA), Gutowski (Link)


http://www.business-biodiversity.eu/global/download/SYYFGQIDSY-6242014124559-MRIRELADKC.pdf

http://www.ecnc.org/uploads/documents/the-sustainably-balanced-scorecard-theory-and-application-of-a-tool-for-value-based-sustainability-management.pdf

https://www.imperial.ac.uk/media/imperial-college/grantham-institute/public/publications/briefing-papers/Towards-a-unifying-narrative-for-climate-change-Grantham-BP18.pdf

http://web.mit.edu/2.813/www/ClassSlides2014/LCA.pdf



Robert Gerlach is head of the Sustainable Innovation Practice at mm1. He has a

background in product- and business model innovation within the automotive, telco,

insurance, aerospace and manufacturing industries, focusing on connected mobility,

Smart Home, AR/VR and robotics. He previously worked in aerospace R&D and

obtained a PhD in engineering science from the University of Oxford.

The concepts presented here are based on industry best practices and new methods

developed at the consulting company mm1. mm1 supports large companies in digital

transformation and designing products and processes for an increasingly digital

world. The mm1 consulting services range from developing connected business

strategies and business models to ensuring an efficient operational implementation.

About

https://mm1.com/methods/sustainable-innovation/

https://www.slideshare.net/mm1-connected-business/connected-business-as-a-driver-for-sustainable-innovation-48720146

https://mm1.com/



Sustainable Product-&

Business Model InnovationBy Robert Gerlach

Questions? Ideas? Get in touch:

LinkedIn

mm1.com

https://www.linkedin.com/in/drrobertgerlach/

Sustainable Product- & Business Model Innovation

Education

Transcript of Sustainable Product- & Business Model Innovation