New Paper Showcases Need for Breakthrough Business Models

A new paper from Volans for the Business and Sustainable Development Commission offers a practical guide to create new forms of financial and extra-financial value for healthier, safer, and better-educated populations. It argues that the Sustainable Development Goals (SDGs) are a much more radical agenda than most business leaders have yet realised. The Breakthrough Business Models paper describes the SDGs as “a purchase order from the future,” aimed at global business leaders to understand the potential the SDGs present. The authors argue the SDGs are “probably our best guide to what the world of 2030 needs us to invest in and vote for today.”

According to report co-author John Elkington, this has profound implications for the way businesses think and act. “Incremental approaches are no longer sufficient. To get to zero poverty and zero hunger in less than fifteen years, we have to think exponential. We need to adopt what Silicon Valley people would call a ‘moonshot’ level of ambition.”

The paper argues that the sustainability focus needs to shift from the business case for action to new types of business model that can enable novel forms of financial and extra-financial value creation. It identifies four key characteristics of breakthrough business models: They should be social, lean, integrated and circular. Crucially, the paper urges companies to apply an exponential mindset to each of these four characteristics—to aim not simply for a 1% or even 10% improvement but for 10-fold or greater.

But why should business leaders listen? Because industry after industry is facing unprecedented market disruption from a new breed of insurgents, enabled by digitalisation, argue the authors. Change as usual, let alone business as usual, is no longer an option.

Consider the energy industry. Leading power utilities in the EU lost over half their value—more than €500 billion—in just five years. Why? In part, because of regulatory and political pressures squeezing coal and nuclear. And in part, because of an exponential growth in the availability of renewable energy—coupled with plummeting production prices.

A senior executive from one European energy firm put his company’s predicament particularly candidly: “Our business model’s toast!” Reinvention, in other words, is the only way to stay in business.

Another example is the car industry. Two years ago, at the Los Angeles Auto Show, Lyft president and co-founder John Zimmer delivered an ultimatum to industry incumbents: “You can fight [the end of car ownership],” he warned, “and that will probably not turn out well. Or you can acknowledge that this is happening. This is real, serious, and going to change your world.” His message was met with stunned silence, followed by a slow hand-clap, a mark of strong disapproval.

But just two years later, attitudes have shifted dramatically. GM has made major strategic investments in both Lyft and Cruise, a start-up building software for autonomous vehicles. Meanwhile, Uber, founded just eight years ago, now has a market valuation higher than major incumbents like Ford, Honda and GM.

“What’s happening to the car industry is a striking example of the way disruption happens,” says Elkington. “What seemed impossible two or three years ago now seems virtually inevitable. Many other industries are facing a similar imperative to reinvent themselves. And business models are key to whether or not all of this proves to be sustainable.”

For companies to succeed in tomorrow’s world, mindsets, technologies and business models all need to embrace exponential dynamics.

Download the full report below.