Keywords

The triple transition that we are facing requires different models of entrepreneurship and organization combined with a different attitude towards value creation. The scale of the challenges facing society in the coming decade(s) necessitates business models that are based on collaboration and on value being co-created between parties in chains and networks.

Collaboration becomes mutually beneficial and is necessary for a business to thrive. Of course, organizing together is not something new in and of itself. The difference now is that parties need to look for ways they can differentiate themselves by creating new forms of value creation collaboratively, based on several shared principles and for longer durations.

Consequently, time becomes more critical in the process of value creation. Multiple customer engagements and transactions based on optimizing the value embedded in the same resources, materials, or (refurbished) products will become the norm, with partners creating value through the provision of additional services. This contrasts with the mainstream linear economic model, in which it is often only a single transaction that is important for value creation, and the producer’s responsibility for the embedded resources in the product ends immediately after the transaction.

This concerted organization of value creation and retention demands both social and organizational innovation. The meaning of value creation is also extended from being purely monetary to including multiple values. Organizational models and business models become much more closely intertwined. When we start creating value with each other and among each other across the boundaries of an organization, the rules of the economic–organizational game will change. It is no longer the exclusive responsibility of the organization to create value(s), but rather the network, society, and community. We move from organization-centred to network-centred or loop-centred value creation, retention, and capture, which leads to a fundamental revision of the logic of value creation.

Sustainability values are predominantly considered as externalities in the current dominant generation of linear business models. All kinds of social and ecological costs are therefore passed on to society or nature. This is because damage or risk, immediate or over time, both in the social and ecological domains, is, in principle, not included in the cost–benefit analysis. A transition from a linear economy to a more sustainable and circular economy therefore requires different business models. It is useful to look at the nature and logic of business models. Against this background, we propose three basic or archetypal business models: the platform, community, and circular economy models which are explained in Chapter 6—Business Model Archetypes.

2.1 A Short History of Business Modelling

Value creation is the core of a business model and is the shared task of the actors involved in the delivery of a business model. In essence, a business model is a description of how value creation between parties or partners—based on certain principles—is organized, at a particular moment, in a specific context, and given available resources. There is an unlimited number of combinations of factors that influence the design and functioning of a business model within a particular natural and institutional context, so it is inevitable that entrepreneurs and intrapreneurs make choices. Collectively, these choices reflect a certain logic.

As has already been said, the BMT is not the first template that has been created for business modelling, nor will it be the last. Therefore, before we dive into the BMT we will first briefly review existing templates.

The best known is the Business Model Canvas (BMC; Osterwalder et al., 2010), which has been widely adopted since its publication by both entrepreneurs and innovation training courses which describe, categorize, and develop business model innovations. There are many workshops and online tutorials on how to use the BMC which has become the go to framework for exploring business models. The BMC has been so widely used due to its straightforward depiction of the key building blocks of a mainstream business model. Its strengths include the fact that it can be used quickly without much prior knowledge, and because it enables the user to communicate business models efficiently with its clear visual representation. We used these strengths to shape and inform the design and usability of the BMT presented here.

However, despite the wide acceptance of the BMC, there has also been quite a bit of criticism (King, 2017; Koen, 2017; Murphy, 2014; Verrue, 2014). This criticism can be divided into three areas: criticism of the purpose of the model, criticism of the model itself, and criticism of the use of the model. Next, we summarize the main critiques of the BMC and compare it with the BMT.

  1. 1.

    The purpose of the BMC is to clarify how an organization creates value to make the core building blocks of a business model visible (Osterwalder et al., 2010). It is inherent in any framework or tool that seeks to simplify complexity that certain factors will fall outside the model, such as the implementation of the business model, the external environment, competitors, and preconditions. Therefore, the biggest advantage, its simplicity, is at the same time the biggest limitation of the model. In a sense, this critique can also be applied to the design of the BMT. However, with the BMT we pay more attention to the cause and context: an external test has been included, and you are invited to assess the impact of the model. The BMT aims to keep functionality as broad as possible without sacrificing simplicity.

  2. 2.

    The BMC model itself has been critiqued by various authors who draw attention to the building blocks’ different levels of abstraction (some of which are more detailed than others) and contest the overlap between the different building blocks (Verrue, 2014). Additionally, the link between the categories is not always clear, and thus how the building blocks in the BMC influence each other is unclear. Moreover, the BMC is not suitable for not-for-profit organizations and other forms of social organization, largely due to the emphasis on financial returns (whereas, in principle, the value proposition could allow multiple value creation). There are also different levels of abstraction within the BMT. However, this is addressed by how these building blocks are grouped in the three stages of the model (Definition, Design, and Result Stages). In the BMT, creating multiple values as well as the impact of doing so is explicitly included in its DNA.

  3. 3.

    Regarding the use of the BMC, there is the argument that it results in insufficient attention being paid to strategy, long-term thinking, and time—a completed BMC model is a snapshot without the time component. In contrast, in the BMT, strategy and long-term thinking have been explicitly included in the form of the Dream (Building Block #2) and the Strategy (Building Block #6) building blocks. The BMT also recognizes that the time component is important when considering and developing an accurate business model, and this becomes visible through the iterative process of business model innovation advocated for in the BMT method.

Additional criticisms of the BMC are that it is oriented towards existing companies rather than towards start-ups. In contrast, the BMT is specifically designed to apply to both new and existing companies. Another critique is that the BMC limits creativity by forcing the user to think in the described categories (boxes) and then fill them in. To a certain extent the BMT also has this limitation; however, we have formulated the building blocks so broadly, without compromising applicability, that they do not limit the creativity of the user. Lastly, the BMC does not offer any tools for comparing any value creation or costs other than monetized costs and revenues. In contrast, the BMT overcomes this by explicitly addressing the social and environmental impact of a business model in the Result Stage.

There are, of course, many more developments in the field of business models. Some of the adaptations to the BMC as well as alternative canvasses and models are discussed below:

  • The Lean Canvas Model: Here the focus is explicitly on start-ups (Nidagundi & Novickis, 2017).

  • The Circular Business Model Canvas: Here the focus is specifically on circular economy (Ellen MacArthur Foundation, 2016: www.circulardesignguide.com/post/circular-business-model-canvas).

  • The Triple Bottom Line Canvas: Here both social and ecological values are included (Joyce & Paquin, 2016).

  • The Value Proposition Canvas: Here competitor analysis is also considered (Pokorná et al., 2015).

  • The Business Model Innovation Canvas: Here the BMC has been applied to Blitzscaling’s business model with an emphasis on creativity and business innovation (Cuofano, 2018).

  • The Social Enterprise Canvas: Here, as the name indicates, the focus is on social enterprises (Qastharin, 2015).

  • The Social Impact Canvas: Here the focus is on the impact of a social enterprise in terms of creating both social and financial impact (traditional, economic growth) (TapToo, n.d.).

  • The Business Model Cube: Here the network that a business model is situated in is given a central position (Lindgren & Rasmussen, 2013).

  • The e3-value approach: Here the focus is on how value creation could be organized within a network (Gordijn et al., 2006).

  • The STOF model: Here the focus is on developing the value proposition rather than the organization of value delivery and capture (Bouwman et al., 2008).

Organizations need entrepreneurs who dare to challenge the complex quests of our world. We desperately need talents with a mindset to drive innovation and change with sustainable impact. Free translation of Benjo van den Bogaard, consulted on LinkedIn on 1 December 2019.

2.1.1 Why Conventional Business Model Toolkits Are No Longer Fit for Purpose

Thanks to the work of Osterwalder (2004) and others, over the last two decades, thinking in terms of business models has helped many organizations to make their value propositions explicit, to think about how they organize value delivery and capture, and ultimately helped businesses to reflect on whether their business model is optimized to deliver competitive advantage. But at the same time, conventional business modelling approaches have several weaknesses. The main point of criticism is that traditional business model frameworks focus almost exclusively on the perspective of one organization, with the emphasis on creating financial value. The consequence is that this method of approaching value creation and the associated business models reinforces binary profit-and-loss-account thinking. Indeed, some variants of mainstream business model toolkits now exist but they still remain a minority.

In reality, organizations are rarely, if at all, able to organize value creation, delivery, and capture on their own. Without exception, organizations work in a chain of suppliers, buyers, and partners. This applies to both the so-called operational activities (e.g. electricity, housing, mobility) and the core activities (see also Chapter 7—Parties and Chapter 9—Core Activities). However, the role of customers in a traditional business model often consists solely of generating revenue for the organization. Here a successful business model is one that makes explicit how an organization realizes its value proposition. In return, customers express their appreciation for the organization’s proposition with a monetary transaction. This view on the value chain is rather limited and many authors (e.g. Teece, 2010; Vanhaverbeke & Cloodt, 2006; Zott & Amit, 2010) agree that the basis for value creation lies in what is usually called the architecture of the organization and the network of parties. Working together on value creation is a collective organizational task which occurs in value chains and/or networks. It follows that describing a business model for only one component of such a chain or network is of limited use.

Moreover, the type of value described in a conventional business model and associated toolkits is far from complete. Traditionally, the emphasis is on describing how financial value is created for the organization itself (explaining why the terms business model and revenue model are often confused). But just as you cannot run a business with only financial input, an enterprise can create more types of value than just financial. Starting up and maintaining an organization requires people, as well as raw materials, technology, tools, and knowledge. In the same way, an organization can also create social and ecological values. Here this is called multiple value creation.

2.1.2 Towards a Business Modelling Approach for a Sustainable Economy

The criticism of traditional business models and associated toolkits has resulted in all kinds of adjustments and extensions being proposed, but these lead to existing business or value propositions being greened. This approach fits in well with the ideas underlying conventional business modelling because it aims to develop products and services that are better, faster, more economical, and preferably also cheaper than those of the competitors. Here, greening becomes a matter of product innovation. The greening of a business model, in turn, leads to strategies that often go for less (less water, oil, energy, …) which we know as eco-efficiency.

Similarly, including non-financial values in the business model often only leads to incremental improvements, with the core focus on balancing financial costs and benefits remaining unchanged. Greening a traditional business model means working within the boundaries of one’s (own) organization or existing value chain. The underlying paradigm of a linear economy is hardly, if at all, open to discussion, the business model remains intact, and the underlying organizational logic remains unchanged. At best, these cosmetic adjustments can lead to fragmented solutions: a tokenistic touch of sustainability is added to an existing mainstream model.

Example

Developing a business model for a community centre

A community centre in the town of Tenderlo in Belgium has a workshop for bike repairs and a restaurant using vegetables that are past their sell-by date. This project is seen as important in the context of fighting poverty but it is run by volunteers which limits its scalability and could threaten its long-term viability and continuity. Moreover, there is no revenue for the volunteers, making it hard to reward their time, nor are the people who collect the vegetables compensated for their modest travel costs. To make this initiative viable into the future they need a model that can create value for the volunteers either financially or in some other way. The originators of this project lack the knowledge and tools to make a business model for this case—can you take this example and explore what incentives and values could be created? For inspiration see also the case study on Cargonomia, a cooperative initiative in Budapest: www.climate-kic.org/insights/cargo-bikes-conviviality-and-conscious-food-creative-partnerships-and-the-circular-economy.

2.2 The Modelling Process

With the BMT, we try to resolve most of the criticisms of current business model toolkits. The greatest benefit of a template or a model lies in working with a common language which enables people within and between organizations to communicate unambiguously and work on organizing value creation. In this respect, the BMT is designed to help you to make clear choices that lead to a form of sustainable value creation . Traditionally the formulation of a business model sticks to a rather tight logic based on three key business model elements or building blocks: (1) making explicit the logic underpinning value creation, for example the value proposition, (2) clarifying the way the value proposition is organized, and (3) describing the earning capacity and costs from organizing the value proposition.

Key points

  1. 1.

    Logic of value creation: The first element describes the logic of value creation or the value proposition, answering the question What value is created for whom? The implicit outcome of this—certainly with conventional business models—is almost always the dominant pursuit of positive financial results. Although social and environmental values are increasingly important for organizations, these values in the business model rarely receive the attention they deserve.

  2. 2.

    Organizational model: The second element describes the way in which the value proposition is organized. Most often the point of departure is that this occurs within an organization in collaboration with other parties. But the organization-centred perspective is not the only perspective—this is also possible in loops and networks. Different building blocks such as customers, channels, costs, and activities must be connected logically, so that the aim, the production, or the organization of a certain product or service can be carried out in such a way that financial profit is achieved.

  3. 3.

    Revenue model: The third element describes the earning capacity that the organization of the value proposition entails compared with the revenues that are realized. This leads to a revenue model: the logic of realizing monetary revenues and other benefits. When organizations describe this, a large number of fiscal, accounting, and auditing conventions and rules must be taken into account. This cost–benefit analysis is usually only organization-centred reflecting how the current institutional and fiscal structures work. All kinds of secondary social or ecological effects (both short- and long-term) are excluded from the cost–benefit comparison. In contrast, earning capacity in the BMT refers to creating multiple values, with revenue being one form of value creation.

In the BMT, we maintain these three elements from the conventional business model: value creation, organization, and earning capacity. But we define them differently, extending their meaning. This is possible because we have introduced three principles that help to make clear choices: being more sustainable, circular, and inclusive. Moreover, in the BMT, we add a fourth element to the traditional business model framework: impact, which refers to the impact the business model has on ecology and ecosystems, society, inclusivity, and the economy (Fig. 2.1).

Fig. 2.1
figure 1

Key elements of a conventional business model

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2.3 Key Business Model Archetypes

In the BMT we make a distinction between three basic or archetypal business models. A brief description of each is outlined below—these will be discussed in more detail in Chapter 6—Business Model Archetypes.

Important

  • Platform model. The first business model archetype is a platform model which aims to make better and more efficient use of what we have through asset or performance management enabled by datafication and digitalization. At its essence this archetype is about better functional utilization—to sit on a chair more often, smarter and longer, for example; to use a car more efficiently; or to lease lighting. This is possible due to developments such as the Internet of Things (IoT), in which everyday devices are linked to the internet, so that usage can be registered and optimized. For instance, a smart refrigerator in a cafeteria can keep track of exactly what goes out per week, so that purchases are made more accurately, and waste is prevented. This datafication and digitalization of materials and objects leads to the development of new services delivered via digital platforms which we refer to as the Internet of Services (IoS) . The platform business model archetype is also often labelled a functional or sharing economy. Once you start to look around there are plenty of examples: energy cooperatives are popping up like mushrooms, so-called bread fundsFootnote 1 are showing unprecedented growth in the Netherlands, and now you don’t need to buy your children’s bikes but instead can access the different bikes as your children grow—see, for example thebikeclub.co.uk.

  • Community model. The second business model archetype refers to business models that are created around a community . Often a community is taken to refer solely to the municipality or the society that we live in, but this does not cover the full meaning from our perspective. In the BMT, the community business model archetype refers to the creation of multi-stakeholder thematic communities by citizens and/or public entities, together with companies related to health care, food, insurance, mobility, or energy, for example. Working together as a community—a group of people either physically or thematically connected—leads to what we have started calling community-based business models.

  • Circular model. The third business model archetype is based on the idea of designing raw materials, components, and products in such a way that they can be kept in circulation indefinitely (within the constraints of thermodynamics). The main aim of this model is to achieve value retention in and through organizing loops which require circular business and organization models. [Open questions, which we will return to in Chapter 6—do business model archetypes relate to whether the circular economy is only driven by a raw material dimension? Or are there also social and ecological dimensions to circularity?]

Introducing the three business model archetypes at the heart of the BMT is essential here because they provide a clear and fundamental logic for developing sustainable business models. To sum up, the platform business model archetype is about better functional utilization, the community business model archetype is about forming thematic multi-stakeholder communities, and the commons and the circular business model archetype is about organizing value retention through closing material loops. And of course, it’s important to remember that these archetypes are not strictly separable or mutually exclusive, but the clearer the logic you want to apply, the better the result.

2.4 Horizontal and Vertical Organization

Realizing the triple transition towards sustainable development—meaning a sustainable society and supportive economy—requires the generation of new business models. In fact, business models seem to play a crucial role in shaping these transitions (Bidmon & Knab, 2018). It is not enough to simply modify conventional business models, because then the underlying logic remains unchanged. Instead, a much more radical approach is needed, in which the core of value creation—anything that is of value or multiple values—is included in the costs and benefits in new, integral ways.

New business models that are future-proof are not organization-centred, but inter-organizational: dependent on a joint approach by different parties. It may be that one party takes the initiative or that several do, but in the end, there will always be a configuration of parties around a value proposition. New business models in this book refer to how those different parties (citizens, companies, and government) work together to organize a specific need or functionality. The focus is on configurations of parties that are composed in different ways from citizens, organizations, companies, or governments and that simultaneously pursue the creation of multiple value(s). The consequence is that value creation becomes collective, and the resulting value created is distributed and shared between parties.

Working on and with these new business models will result in different organizational relationships: more horizontal, in networks, and digitally facilitated. Suddenly we are simultaneously not only citizens, but also entrepreneurs and self-investors. You might call this DIY (do-it-yourself) entrepreneurship. Digitalization (for example the IoT) also strengthens the networks and interactions between parties enabling these new organizational relationships. We refer to this as the horizontal organization and see it emerging alongside the conventional vertical organization of the industrial model.

However, the horizontal method of organization cannot completely replace the vertical , industrial model. The hundreds of products and services we use every day are mainly the result of an industrial organization model that has been developed to perfection. One of the major challenges that we are facing today is to make this vertical model radically more sustainable while maintaining the power of industrial efficiency. New business models emerge at the very cutting edge of the horizontal and vertical organization described here.

2.5 Summary: Engaging with the Business Model Template

After this brief introduction to a number of the key elements of this book, it is time to advise on how to engage with the book and use the BMT. The BMT is an instrument that works best when you work on it iteratively with others. This makes it easier to make choices, to continue working out the next building block, and also to go back to review the implications of the choices made in previous building blocks. Every business model is created and evolves (by trial and error) through multiple iterations. At the crux of designing any business model, as well as when using the BMT, is the discussion and coordination of the choices made within each building block. The ultimate goal is to arrive at a well-defined set of decisions. Bearing the above in mind, it is of course feasible for individuals to use the BMT to test their business model ideas.

In Chapters 3–12 which follow, each of the ten individual building blocks is explained in greater detail (including the underlying theory) and illustrated with practical examples to support the business model innovation process. The ten building blocks are also grouped into three stages or phases described below and illustrated in an example of a completed BMT depicted in Fig. 2.2.

Fig. 2.2
figure 2

Filled-in business model template

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Key points

Definition Stage

  • Building Block #1: Motive and Context

    Your motive is in response to something that has such an impact on you that you are driven to contribute to a sustainable solution to address it. The context concerns the actual social and economic situation in which your business-model-to-be has to function.

  • Building Block #2: Dream

    The Dream indicates what will change as a result of your business model if you achieve everything you intend to.

  • Building Block #3: Proposition

    A proposition is a promise that an organization or collaboration makes and that clarifies for the user what can be expected from the value of the resulting product or service or product–service system (PSS).

Design Stage

  • Building Block #4: Business Model Archetypes

    Here you choose from the three basic types of business models: (1) platform, (2) community, and (3) circular, or a novel combination of the three.

  • Building Block #5: Parties

    This is about identifying parties (such as citizens, companies, or government) that need to cooperate to realize the proposition.

  • Building Block #6: Strategy

    A strategy is a plan that you use to make your dream come true and explains which choices are made to realize the value proposition.

  • Building Block #7: Core Activities

    A core activity is what an organization or collaboration is primarily working on, what it is good at, and what gives it its right to exist.

  • Building Block #8: External Test

    The external test is used to check the added value and the feasibility of the business model in the world around you.

Result Stage

  • Building Block #9: Impact

    Here you describe, explain, and determine the impact that your business model will have, based on indicators.

  • Building Block #10: Value(s) Creation

    The ambition of every sustainable business model is the simultaneous creation of multiple values, expressed in a mix of, but not limited to, money, time, energy, and inclusivity.