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Innovate or die: learning from new sustainable business models

 

Think new

“I can’t understand why people are frightened of new ideas. I’m frightened of the old ones” – these words, from composer John Cage, ring especially true to me when considering the gulf between businesses that are glued to outmoded approaches, and others that are breaking in new, innovative models.

It’s a topic WWF have delved into in our latest Green Game Changers report 2013 PDF. The report outlines some of the exciting ways that larger firms can change their business models and so secure their survival. It also looks at the dangers of lagging behind.

The sharing economy

One major opportunity – and risk should it be missed – is the ‘sharing economy’. It unlocks the value of idle goods and spaces and brings additional income to ‘rentrepreneurs’, who lease out anything from power drills to rooms. In just four years, the social networking operation Airbnb has overtaken many large hotel groups that have been around for decades, and already has a greater share of room rentals.B&Q and Hertz have cottoned on to this – they’re testing out new leasing schemes and short-term rental services. Matthew Sexton, director of corporate social responsibilty at B&Q, says “people are less keen on owning things now”, while Jordan Reber, vice president of global operations for Hertz on Demand, describes a greater “culture of collaboration across the organisation” in support of disruptive innovation. Both understand the external drivers of change and the internal organisational shifts that need to be in play to keep their businesses buoyant in a fast changing landscape.

The circular economy

Then there’s the ‘circular economy’. This requires new approaches to enable the conversion of waste into resources. It’s something they’re embracing at Caterpillar through its Cat Reman parts business. The company charges customers a deposit, which encourages returns and the ongoing remanufacturing of wind turbine components and other equipment from machinery that’s otherwise reached the end of its useful life.Richard Snodgrass of Cat Reman notes that the company is working with governments, dealers and end customers so that remanufactured goods are valued rather than seen as used and undesirable.A circular economy is emerging out of the increasing importance placed on natural capital, which is also giving rise to restorative or net positive actions. For example, for every unit of carbon generated in the production of chemicals by BASF, three units are saved for customers through the end use of their “climate protection products”. This requires the company to engage across the value chain. Cordula Mock-Knoblauch, global co-ordinator for climate protection at BASF, says it’s “about educating the customers of the customers of the customers”.

The low carbon economy

And there’s even some movement in the power sector. The big utilities are yet to get behind the Esco model – moving from supplying energy units to providing energy services. However, Dong Energy in Denmark is progressing on this front. Not only that, it’s reinvesting the cost savings gained from efficiency measures into additional renewable energy supplies for a number of customers. One happy customer says that “we now get the energy reductions we want and we have more access to green electricity”.

The breakthrough into these different approaches and the rewards that they bring support the view of John Cage. We should be more frightened of sticking with old ideas than embracing new ones.

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