The Business Model Canvas is a great tool for entrepreneurs, yet one that is not without flaws. In order to go deeper into your business’ overall plan and identify opportunities, you need more than a single business canvas. You need three. Enter the Triple Layer Business Model Canvas, created in 2015 to encourage the creation of more sustainability-oriented innovations.
Adrien Book
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The Business Model Canvas is a great tool for entrepreneurs, yet one that is not without flaws. In order to go deeper into your business’ overall plan and identify opportunities, you need more than a single business canvas. You need three. Enter the Triple Layer Business Model Canvas, created in 2015 to encourage the creation of more sustainability-oriented innovations.
The Triple Layer Business Model Canvas, as its name indicates, relies on three user-friendly canvases: the traditional economics canvas, the environmental canvas and a social canvas.
Though its creators argue that sustainability is at the center of their work, I believe the Triple Layer Business Model Canvas is essential to any business, whether they see themselves as sustainable or not — not least because it offers the possibility of discovering new revenue streams. We’ve strayed far enough from Friedman (and his ideals which have created unknown misery) to know that Ecology and Social Value are essential parts of any and all entrepreneurial activity. Below is a quick guide to this great tool for entrepreneurs, and an explanation as to why it’s so sorely needed.
Environmental Business Model Canvas
This canvas aims to ensure that the full life cycle of a product or service is considered when a new business is launched, with an accent on environmental impacts. I hope I don’t have to tell you why this is key to our future, as well as that of our children. This model provides insights regarding where organization might wish to focus their attention when creating environmentally-oriented innovations (which might have the added bonus of bringing in additional revenues).
Note that when we talk about environmental impact, we don’t only mean CO2 emission. This your canvas should also include components such as human health, ecosystem impact, natural resource depletion, water consumption…
1. Functional value
First thing to consider when completing this framework is… well, what are customers getting out of using your product or service? What is the core offering? It’s important to start here to help you understand what you can potentially do away with, and what you have to keep; you’d be surprised how many CEOs misunderstand how their customer might be fine with waiting a week for a great product if you tell them their delivery will be more environmentally friendly.
It might seem easy at first, but filling in the model can actually be a gargantuan undertaking if not framed properly. Understanding well the functional value of a product or a service will inform the impact it has on its environment as it goes through its life-cycle. Not the most fun part of the exercise, but mandatory.
2. Materials
In order to deliver value, you need materials, whether you offer a physical product or a service. This part of the canvas refers to what is used to directly create the value defined above. Accountants use computers, restaurants use food from various parts of the world, hospitals use a wide array of machines and medicine, car manufacturers use steel and leather…
It’s obviously difficult to put all materials on one canvas but important to include the key ones, as this will also help you identify where your impact on the world is most consequent. Having done this, you might then decide to switch to greener materials, or develop services to make others in your industry benefit from your knowledge if you already believe yourself to be as green you can be (picture me puzzled if that’s the case).
3. Suppliers & Outsourcing
Once the material at the heart of your value creation is understood and recorded, we can analyse everything that’s not the core. Things that are necessary for a business to run smoothly, but aren’t generally under your full control. I’m talking about things like energy suppliers, the company used to deliver packages to customers, the consultants called to analyse new paths to growth…
Recording this gives a view of possible levers you might pull to make your business and industry more responsible. Sometimes you won’t have too much control over your suppliers and external partners, but when you do, you might be able to negotiate with them to ask them to be more sustainable. Believe it or not, this is becoming an increasingly important part of B2B contracts negotiations. So get on board or get left behind.
4. Production
Having recorded what you’re offering, as well as who and what you’re building that with, production can begin. Here too, environmental components should be taken into account. Do you really need in-house data centers? Are you using the greenest machines possible? Do your workers need to be in an air-conditioned office, or can they work from home…?
By concentrating on key production activities and their potential environmental impact, especially if that impact is high, you can take small, yet meaningful steps towards a more environmentally friendly company (and perhaps save some money on AC).
5. Distribution
You obviously have to get your products and services to customers once they’ve been produced (note that services are produced, distributed and consumed at the same time). This, too, is an opportunity to explore new revenue-making stream, while limiting your ecological impact on the world.
Maybe you transport your goods directly to consumers, or you sell them in stores. Then, transportation modes, distances, packaging and delivery logistics are key to assessing your distribution’s impact. If you offer a service, maybe you do so in a store which consumes a lot of electricity, or you do everything via phone, and might want to consider using the ones that impact the world least negatively. I’ve always been fond of picking my orders in store : less trucks on the road, cheaper for me, and the retailer gets me to the store where I might buy more. Everyone wins.
6. Use phase
This is the ecological impact of customers and/or end-users getting value out of the product or service provided by your company. Interestingly, this can far outweigh production impacts and is therefore very worthy of consideration. Take the car industry, for example : making greener vehicles with less sustainable machines might yet reduce its overall ecological impact, as cars being on the road for an extended time is much more polluting than car manufacturing.
Thinking about your company in this way might give you idea of new offers you could make to clients, many of which might be delighted to discover sustainable alternatives to what already exists.
7. End of life
Once a product has been through its life-cycle, it’s time for it to die. And How can we make this death more dignified (and by more dignified, I mean more environmentally-friendly — looking at you casket industry)? This stream helps explore ways to manage a business’ impact through extending its responsibility beyond the initially conceived value of its products. There’s a lot of money to be made there, trust me.
Rethinking this part of your business model will often mean exploring remanufacturing, repurposing, recycling, disassembly, incineration or disposal of a product. It also means considering the topic of obsolescence, whether planned or not (looking at you, Apple).
8. Environmental Impact
If you’ve done your homework, you should by now be able to pragmatically assess the environmental impact of your organisation’s actions. Knowing is half the battle, so it should be easy to come up with a plan of action from that point onwards.
9. Environmental benefit
This is the other side of the coin. It encompasses the ecological value the organization creates through environmental impact reductions and even regenerative positive ecological value. Hopefully, these actions also lead to financial benefits. And trust me, they often do.
Social Stakeholder Business model Canvas
The second canvas that’s been added to the Business Model Canvas repertoire helps entrepreneurs balance the interests of their organization’s stakeholders, rather than simply seeking to maximise gains for/from the organization itself. By completing this canvas, you’ll be able to track relationships and their impact… and possibly create a new paradigm that benefits everyone! Remember : what’s good for society is (usually) good for business.
1. Social value
This question is a bit more complex than some of the previous ones : how does your product or service create benefits for its stakeholders, and society more broadly?
The answers to this question is a great starting point for lively discussions. Sometimes, it’s core to a company’s mission. More often, it is not. Writing it down will help identify key stakeholders, both near and far your company. Having the answer handy will also help with recruiting in the long term, which should be your priority if you’re trying to make money.
2. Employees
As hinted above, your key stakeholders are your employees. Not your customers. Customers come and go; there will always be business if you know where to look for it. Great employees, however, are rare, expensive, and take a long time to train.
And good employees have demands. And their demands will be different depending on pay, gender, ethnicity, and education (to name a few). Hey, if you didn’t want all these complexities, you shouldn’t be trying to create a successful business. You need to hear them, and act upon these requests (concentrating on the key ones to start with would be wise). Not doing so would surely be your demise.
3. Governance
This stream considers the organizational structure and decision-making policies of your organization. Are you organised as a pyramid or as a matrix? Are you a cooperative, not-for profit, privately owned for-profit, or publicly traded for-profit company? Are your decisions based on transparency, consultation, non-financial criteria or profit sharing?
We rarely think about this as we like to consider all companies as being for-profit. Yet, there are other ways. Considering them might very well influence how your organisation engages stakeholders in creating social value.
4. End-users
These are the people who use your goods and services. And, as annoying as this may be, they’re all different. Age, income, ethnicity, education level… it all matters when considering how your organisation benefits or harms them. As such, by segmenting end users, you might create better products for them.
More importantly, few realise that the end-user is not always the customer as defined in the economic layer of the business model canvas. For instance, textbook publishers historically consider course instructors as customers though students are the end-users. This means that there is a world wherein additional revenue streams can be found beyond what was originally thought, hence the importance of digging deep.
5. Communities
We can now extend our analysis to the wider communities within which your company exists. They’re ever so important : by paying workers well and ensuring their safety and happiness, they can buy goods at stores, whose owners will themselves be able to pay better, driving more workers to the community, which in turns attracts more businesses, which pay more local taxes, meaning you have better roads to drive on when you go to work and can send your kids to good schools. Funnily, this concept reversed also works.
This is why mapping out key stakeholders within your community is key, as is doing right by them. A healthier community means better company. Pay your taxes.
6. Scale of outreach
As discussed above, you can start small, but you don’t have to stay that way. With that in mind, the scale of your outreach describes the depth and breadth of the relationships your organization builds with its stakeholders through its actions over time.
Is your company local, global or glocal? Have you created deep links with a wide variety of communities? Can you use these links for good, while also turning a profit? Realising that your hand reaches much further than you originally thought is a superpower. Don’t waste it.
7. Societal culture
This is the impact of your company on culture, with or without a capital C. This might sound pedantic for a small start-up, but is nevertheless important as you grow. Do you create fun, viral memes? Is your food truck considered cultural heritage in your neighbourhood? Have you recently aided and abated an attempted coup at the Capitol? By carefully considering your reach within your ecosystem, you can drive the conversation, make yourself irreplaceable (eg: you don’t Firefox a word, you Google it) and ensure that your impact is a positive one.
It’s also important to understand and respect the culture within which you’re conducting business. That way, your customers won’t turn on you, and you can make money while pandering to them. But pandering respectfully, of course.
8. Social Impacts
The social impacts stream addresses the social costs of an organization. It complements and extends the financial costs of the economic layer and the bio-physical impacts of the environmental layer. When mapping this out, remember everything we saw above : working hours, cultural heritage, health and safety, community engagement, fair competition, respect of intellectual property rights.
9. Social benefits
This is where we conclude. Do you bring a net benefit to society? If not, your business might need to change. I promise that the hard work will be worth it. It so often is.
If you’re not using these models in your strategy meetings, you’re missing out. Not only because your business will be less sustainable, but also because you might miss out on potential new and innovative revenue streams.
They are coherent both horizontally (on their own) and vertically (as a group), and will help support richer discussion and more creative exploration of sustainability-oriented innovations. For these reasons, I believe a triple bottom line approach is what we need today.
Good luck out there.
This article was originally published here.
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Introducing The Triple Layer Business Model Canvas
Source: Trends Pinoy
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