by Antony Upward on Thu, 2012/07/26 - 2:36pm
This is the first post in the blog for the Strongly Sustainable Business Model Group (SSBMG), an applied research group within OCAD U’s Strategic Innovation Lab (sLab) in Toronto, Ontario, Canada. The SSBMG group’s convener, Dr. Nabil Harfoush, has asked me, as a cofounder of the SSBMG and the originator of the term “Strongly Sustainable Business Model”, to provide my perspective on this exciting new field of practice and research.
For the first time in the Global North since the end of the 2nd World War, we are starting conversations about the goals for society and the economy embedded within it. Ordinary people, the 99%, are beginning to ask: is this it? Is this as good as it gets for me, my family, my children, my grandchildren, for other life on the planet? Is there no alternative?[a]
Noted Industrial Ecologist John Ehrenfeld suggests, in a very positive way, that there should be a new collective goal – sustainability:
He challenges us to set our goals high, not to be satisfied to merely scrabble and scrape on a rat race of survival. He challenges us to use our understanding (albeit incomplete) to set an audacious stretch goal for ourselves and future generations: a goal of flourishing, proactively choosing to attempt to maximize happiness now and in the future.
How inspiring is that? How exciting to be part of the first generation that has the knowledge to proactively, albeit humbly, attempt such an audacious goal! What an epitaph for future generations.
“In the early 21st Century C.E.
there lived a generation of humans
who humbly chose as their goal,
the flourishing of themselves
and all other life, forever”
– Future Historian
But how to achieve this flourishing? This is the realm of economics – literarally the “management of a household”. The last time there was significant discussions in the Global North about the how to achieve flourishing was in the period starting with The Great Depression of the 1930s and ending in the years following the 2nd world war. The result was a broad consensus of economists that crossed the political spectrum: maximizing GDP growth (and hence per capita income) within a democratically regulated system of capitalism was the best approach to achieve flourishing.
What we now call neo-classical economists (i.e. the current main stream majority), still argue that this approach, based on models of the economy consisting only of firms and households, remains both necessary and sufficient. On the other hand, Ecological Economists disagree stating existing models and policies are neither necessary nor sufficient. Ecological Economists start by re-imagining the scope of the problem economics needs to address: The management[b] of the nested systems of the environment, society and the economy in order to achieve the flourishing of human and other life.
Further, to differentiate their understanding of what flourishing requires, Ecological Economists have coined the term “strong sustainability” [c]. This is defined as the impossibility of replacing natural capital with any other kind: human, manufactured, intellectual, social or financial. This is felt to be particularly true in time frames which might help mitigate the worst effects of climate change and other anthropomorphic impacts as described by the IPCC and other bio-physical science. [d].
Einstein suggested that new paradigms are required to solve problems created by old paradigms. This would suggest that following the old-paradigm advice of neo-classical economists is unlikely to get us out of our current mess which has arisen as a result of pursuing that paradigm! In other words it is unlikely that widespread flourishing will be produced by largely relying on technology (i.e. manufactured and financial capital) produced within a system with a singular goal of GDP growth[e].
But this discussion is at the macro-economic level – the level of the planet and societies. What about at the micro-economic or organizational level? We know that it is the action of humans within the organizations we construct that plays a very significant part of achieving or failing to create flourishing. And from ecological economics we now know that achieving strong sustainability implies that at the organizational level environmental, social and monetary goals must be integrated.
What evidence do we have that it is possible for our organizations to undertake this integration; taking the steps to create the conditions for strongly sustainable outcomes to emerge, and hence proactively contributing to the flourishing of human and other life?
In places with sufficient freedom of thought and action, over the last 60 years an increasing and diverse set of individuals, communities and organizations has been working hard to figure out both the necessary and sufficient steps that will enable flourishing for all of us on spaceship Earth. These leaders are attempting to create strongly sustainable outcomes at all levels: globally, nationally; in our organizations and communities, in our homes and families. And the early results are encouraging[f].
This is a good start but it leads to another challenge. How can we broaden the work of these leaders? How do we proactively ensure all our organizations are undertaking the integration of the environmental, social and monetary?
We do have a significant amount of knowledge of the conditions from which strongly sustainable outcomes emerge - although we need to humbly acknowledge that our knowledge is incomplete.
But simply amassing even the existing knowledge and continuing the relatively small scale experimentation of leaders is clearly not enough to achieve wide spread flourishing. We need to figure out how to “cross the chasm”. I believe to achieve flourishing at scale we need the knowledge of strong sustainability to be put to widespread use.
One way that has repeatedly been shown throughout human history to scale the adoption of new knowledge is to embed that knowledge in well designed tools – tools which people want to use. In this case we would be embedding the knowledge of strong sustainability in tools which help people design strongly sustainable organizations – organizations which contribute to flourishing.
So if tools are a way of helping people to create large numbers of organizations proactively attempting to produce flourishing, what should be the goals for the design of such tools?
I would suggest the following. We need tools that:
In my research I sought out such tools. But I’ve concluded that tools which meet all these goals don’t appear to exist.
However, before starting to design a new tool which meets all these goals from a blank sheet of paper, an obvious question to ask is: are there any existing tools which meet some sub-set of these goals that could be enhanced to achieve all of them?
Let’s step back for a second and look at the goals of an organizational design tool from the neo-classical economics perspective: i.e. a tool which enables the efficient design of profitable organizations of high quality - consistently, reliably and effectively producing monetary profit. The design, launch and operation of an organization which is “simply” attempting to be monetarily profitable over time is a complex task with 60% failure rate in the first 7 years in the larger OECD countries[g]. Looking at this high failure rate caused some applied researchers to ask what could be done to help business people reduce this failure rate – i.e. improve the quality of business model designs and the efficiency of their designers.
Led by the ground-breaking work of Alexander Osterwalder, and the Business Model Generation community[h], in the past 8 years there has been a concerted effort to increase the likelihood for longer term financial survival of businesses. Their approach to achieving this goal has been to embed our best knowledge of what leads to profitable business in practical tools that can improve the quality of the design of for-profit businesses, and the efficiency of those who design them[i].
The reception to Alex’s tool to help improve efficiency of the design of high quality business models has been amazing. Nearly 500 people paid up to US$250 to be involved in a community which help create the book Business Model Generation based on Alex’s 2004 PhD[j]. As of this writing (July 2012) the book has sold over 350,000 copies in 23 languages since its launch just over 2 years ago! This is one of the largest ever rate of sales for a business book.
Clearly a lot of people believe a well designed organizational design tool can help them! This is also inspiring – change at scale is possible with a well designed tool!
But, as I noted, all of these tools are intended to help more reliably create financially profitable businesses[k] As I’ve discussed this is legacy thinking. At best, the macro-economic outcomes which emerge from organizations taking this approach can only be weakly sustainable. It is highly unlikely that human flourishing, let alone planetary flourishing will arise from this approach – and certainly not in time frames which prevent a great deal of unnecessary suffering of humans and other life[l].
We urgently need our organizations to be strongly sustainable, i.e. we need them to directly create the conditions under which flourishing can emerge. The existing business model design tools aren’t up to this goal; we need tools which directly support this much wider objective. But let’s not throw the baby out with the bath water. Assuming a monetary system of some sort will remain, the generation of sufficient monetary profit will remain vital[m].
So I believe the existing organizational design tools are a good place to start; any strongly sustainable organization will still have to be concerned with its monetary performance.
I want take a moment and recognize what closing this gap implies: moving from tools which can help design profitable businesses to tools which can help design strongly sustainable organizations.
I want to be realistic and humble about this size of this gap: How many additional concepts need to be considered to design, launch and operate an organization that is simultaneously and sustainably to achieve environmental, social and financial benefits? Not least, how will success be defined and measured so it is possible to know whether or not an organization is actually strongly sustainable.
And it’s not just what needs to be considered as we design strongly sustainable organizations that is new. I believe it is also critical to consider how we do this: what new ways of designing, launching and operating organizations could improve the chance of sustainable success?
Building on the work of Alexander Osterwalder and the Business Model Generation community, my research seeks to accomplish the goals set out earlier by developing a business model design tool that:
I call this tool the “Strongly Sustainable Business Model Canvas” (SSBMC), and like Alex’s earlier work, it will be powered by a rigorously defined and academically evaluated “Strongly Sustainable Business Model Ontology” (SSBMO).
By meeting these three goals the use of the SSBMC increases the likelihood that high quality strongly sustainable business models can be more easily created, i.e. using the tool will consistently create business models that, once instantiated, will reliably and effectively produce flourishing. Further, the ease of use and reliability should enable strongly sustainable business models to be efficiently developed and implemented at scale.
Working with my colleagues in the sLab SSBMG we are undertaking a program of action research. In this research we intend to collaborate to embed the SSBMC in a Strongly Sustainable Business Model Toolkit. Ultimately it is hoped that Toolkit will include the SSBMC, a method for its effective and efficient use, along with diagnostic tools, case studies, and patterns of strongly sustainable organizational designs.
A Tool for Practitioners
For practitioners the SSBMC is designed to bridge the gap from a great idea to help achieve our transition to a more sustainable society to an organizational design to implement that idea. Today many people have ideas for products or services, for for-profit businesses, businesses with a social purpose, a mission based NGOs, community groups or charities. Other people want to help existing organizations reduce risk and transition to more sustainable future.
But all these people are faced with a common challenge. Once they have the initial idea there is little to help bring that idea to life in a way that increases the likelihood that the outcomes will be strongly sustainable: simultaneously creating meaningful environmental and social benefit while being sufficiently financially viable. The SSBMC is designed to help in these situations: guiding the process of designing strongly sustainable organizations by providing the designer with help to answer questions such as:
A Tool For Researchers
There are benefits for researchers too. As I acknowledged earlier, huge amounts of new knowledge and the practices surrounding them need to be generated through a wide variety of research methodologies: descriptive, applied or action / design. Many researchers in many disciplines see the mess we’ve created and the urgency to address it. They want to help generate theory and test new ideas that will help achieve our transition to a more sustainable society.
By collaborating to create the Strongly Sustainable Business Model Toolkit and then encouraging its use in the world, I hope that opportunities will be created across disciplines, using multiple research approaches, to increase the pace of relevant knowledge production. In turn this will help us speed up the creation of the number of strongly sustainable organizations needed to create both local and planetary flourishing.
I believe that the Strongly Sustainable Business Model concept and sLab’s SSBMG are key contributions to a new field of collaborative practice and research: strongly sustainable business models. It’s natural when attempting something new, something significant, something important, to feel overwhelmed – certainly I’ve been visited by this feeling.
But then I recall that Ehrenfeld’s challenge IS audacious: we ARE shooting for flourishing as the goal; we don’t want to do less harm, we want to do good while doing well – for ourselves, our families, communities, countries, and all life on this planet – and we want to do it for future generations too! Then I am reminded of and inspired by these words, which launched an earlier round of audacious exploration of what it means to be human:
“We choose [to do these things]
not because they are easy,
but because they are hard”
– J.F. Kennedy, September 12, 1962,
Rice University, Houston Texas, USA
Upward, A. (2012). Strongly Sustainable Business Models: A Personal Perspective on a New Field of Practice and Research. Retrieved 7/27/2012, 2012, from http://slab.ocad.ca/SSBMs_defining_the_field
This blog post is © Antony Upward / Edward James Consulting Ltd. 2012 and is licensed under an Attribution –Non-Commercial –Share-a-Like Creative Commons Attribution 2.5 Canada License. Contact for permission to use commercially.
The following are a selection of sources which helped me form these conclusions and get excited by the opportunities and possibilities. Clicking on the links in square brackets left of each note takes you back to the referring location.
[a] Margaret Thatcher famously said “There Is No Alternative” to maintain the historical approach to generating flourishing via GDP growth (usually via lowering trade barriers to international trade); this perspective is often labeled as “TINA”.
But alternative has been proposed “Local Ownership, Import Substituting”. This includes social as well as economic aspects to creating flourishing; this perspective is often labeled as “LOIS”, and used in sentences such as “The alternative to TINA is LOIS”!
[b] This is management as applied ecology (cf. engineering as applied physics, chemistry, biology, etc.) – as suggested by Allen, T. F. H. (2003). In Hoekstra T. W., Tainter J. A. (Eds.), Supply-side sustainability. New York: Columbia University Press, p393. See my summary of this work.
[c] See also Ayres, R. U., van den Bergh, J. C. J. M., & Gowdy, J. M. (1998). Viewpoint: Weak verses Strong Sustainability. Discussion paper TI, 98-103/3. Amsterdam, Netherlands: Tinbergen Institute. Retrieved from: http://dare.ubvu.vu.nl/bitstream/1871/9295/1/98103.pdf;
[d] Strong sustainability can also be defined in comparison to the “weak sustainability” as suggested by other economists. Weak sustainability is often labeled “sustainable development” (as in the famous 1987 Report of the World Commission on Environment and Development: Our Common Future – The Brundtland Commission Report)
Brundtland suggested that flourishing will result from sustainable development: i.e. development which meets the needs of the present without compromising the ability for future generations to meet their needs. John Ehrenfeld argues that the Brundtland combination of “sustainable” and “development” is oxymoronic; suggesting that putting these two words together is at best unhelpful and at worst damaging to the achievement of flourishing.
[e] A singularly technologically focused strategy (i.e. making weak sustainability is the goal) appears an even more risky approach to avoiding huge amounts of suffering created by the cumulative effects our existing profit-first paradigm when we consider population size and growth, the almost exponential increase in natural capital depletion, and the very short timeframes we have to change
Many authors have considered the unintended consequences of our existing choice to largely rely on weakly sustainability approaches. The following authors also propose positive alternatives: Amory and Hunter Lovins (Lovins, A. B., Lovins, H. L., & Hawken, P. (1999). A Road Map for Natural Capitalism. Harvard Business Review, 77(3), 145-158), Charles Handy (What is a Company For?), William McDonough and Michael Braungart (McDonough, W., & Braungart, M. (2002). Cradle to cradle: remaking the way we make things . New York: North Point Press), The Natural Step, Michael Porter (Creating Shared Value), Stuart Hart (Hart, S. L., & Sharma, S. (2004). Engaging fringe stakeholders for competitive imagination. Academy of Management Executive, 18(1), 7-18)
[f] In the U.S. notable examples include: Business Alliance for Local Living Economies (BALLE, http://www.livingeconomies.org/); crossing the boarder with both US and Canadian presence are Benefit Corporations (B-Labs) including the MaRS Centre for Impact Investing Certified B-Corporation Hub). In the Toronto region notable examples include: GreenTBiz, Canada’s largest eco-business zone Partners in Project Green, and the ground breaking and currently being revived Green Enterprise Toronto (see this video http://www.videographerservices.ca/green-enterprise-ontario/chris-lowry.html ). In Canada organizations such as LocalFoodPlus, The Centre for Social Innovation (CSI) and the huge number of organizations hosted by CSI. More generally: Impact Investing (http://giirs.org/about-giirs/what-is-impact-investing, http://www.thegiin.org/cgi-bin/iowa/aboutus/history/index.html), the various Stewardship Councils which have been created over the past 15 years, e.g. for Forests and Fisheries, The Natural Step, NetImpact, The Transition Towns Movement, Blue-Green Alliances, etc.
[g]For example OECD data suggests around 60% of firms in the manufacturing and service sectors in 6 of the larger OECD countries cease to exist within 7 years of founding. I believe anyone starting a for-profit enterprise, which from this data we can see is audacious undertaking, should be admired and empathized with. See Organization for Economic Co-operation and Development (OECD). (2001). Productivity and Firm Dynamics: Evidence from Microdata Workshop on Firm-Level Statistics, 26-27 November 2001 - Session 1: Determining the Entry and Exit of Firms. ( No. DSTI/EAS/IND/SWP/AH(2001)21). Paris, France: Organization for Economic Co-operation and Development (OECD), p.14, Figure VIII.5
[h] Examples of Osterwalder’s inspiring and ground-breaking work include:
[i] As Alex explains we wouldn’t expect the designer of a new car to start by actually building a car and trying to drive it – so why do we expect entrepreneurs and business people to attempt to do the same? But yet, when a business plan is written, funding obtained and a new business launched that’s pretty much the same as driving an untested car off the lot! For a business it usually involves spending a lot of money, and avery often this fails to create a business that becomes profitable over even fairly short periods of time. Clearly the old process wasn’t efficient at yielding business model designs of high quality.
See Osterwalder, A. (2011). The new business models: designing and testing great businesses. Lift 11, Geneva, Switzerland. 1-87. slide 19 [minute 3.00-3.30] (http://liftconference.com/lift11/program/talk/alex-osterwalder-new-business-models and http://www.slideshare.net/Alex.Osterwalder/lift11-presentation)
[j] For details of this amazing success story see http://www.slideshare.net/Alex.Osterwalder/bmgen-the-story-of-a-bestselling-management-book and http://jeffreykrames.com/2010/02/20/a-new-business-model-and-a-new-bestseller/
[k] i.e. the macro-economic assumption embedded in this tool is that profitable organizations, contributing to GDP growth, will lead via Adam Smith’s invisible hand to individual and collective flourishing!
I refer to this as the “profit first” world view. One of the strongest advocates of this world-view is Milton Friedman, who wrote “There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as its stays within the roles of the game, which is to say, engages in open and free competition without deception or fraud.” p. 133, Friedman, M. (1962). Capitalism and freedom. Chicago: University of Chicago Press.
[l] For an example that supports this analysis see Turner, G. (2008). A Comparison Of The Limits To Growth With Thirty Years Of Reality in Socio-Economics and the Environment in Discussion CSIRO Working Paper Series, 2008-09 Edition http://www.csiro.au/files/files/plje.pdf, Canberra, Australia:
[m] For example, some of our most environmentally and socially sustainable organizations are NGO’s: they generate sufficient profit ($0); they spend every dollar of revenue on achieving their social and / or environmental missions!