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This paper was presented at The ISPIM Innovation Conference – Innovation, The Name of The
Game, Stockholm, Sweden on 17-20 June 2018. The publication is available to ISPIM members at
www.ispim.org.
1
Business Model Innovation in the Era of
Sustainable Development Goals
Henning Breuer*
UXBerlin – Innovation Consulting & HMKW University of
Applied Sciences for Media, Communication and Management
Ackerstrasse 76, 13355 Berlin, Germany
E-mail: h.breuer@hmkw.de
Florian Lüdeke-Freund
ESCP Europe Business School,
Chair for Corporate Sustainability,
Heubnerweg 8-10, 14059 Berlin, Germany
E-mail: fluedeke-freund@escpeurope.eu
Christoffer Brick
Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH
Reichpietschufer 20, 10785 Berlin, Germany
E-mail christoffer.brick@giz.de
* Corresponding author
Abstract: Business model innovation is increasingly discussed as an approach
to address societal challenges, such as those formulated by the United Nations’
Sustainable Development Goals (SDGs). The lab of tomorrow (lot) project
facilitates business model innovation for the SDGs through collaborations
between European companies and entrepreneurs from developing and emerging
markets. However, a structured review of the initial experiences with the lot
approach is missing. Furthermore, established management frameworks and
concepts, such as corporate social responsibility or ‘shared value’, and
conventional success measures fall short to adequately address, develop and
evaluate business model innovation for the SDGs. In order to address these
gaps, a review of the initial lessons learned with the lot approach and expert
interviews with project participants are conducted. Secondly, we review and
redefine basic innovation management concepts to communicate about and
manage business model innovation for the SDGs in the particular context of
development cooperation and propose a values-based approach to innovation
and its management. Finally, we propose a new classification scheme for
business model innovation for the SDGs, which includes dimensions such as
type of innovation, business model readiness, scaling potential and business
model patterns. We conclude with recommendations for innovation
management and policy-making for development cooperation and the SDGs.
Keywords: Business model innovation, values-based innovation;
sustainability; development cooperation; stakeholder management; start-up;
sustainable entrepreneurship; classification of innovations; case study;
sustainable development goals
This paper was presented at The ISPIM Innovation Conference – Innovation, The Name of The
Game, Stockholm, Sweden on 17-20 June 2018. The publication is available to ISPIM members at
www.ispim.org.
2
“We must have the courage to strike out in new directions and embrace an
economic model which is not only low-carbon and environmentally
sustainable, but also turns poverty, inequality and lack of financial access into
new market opportunities for smart, progressive, profit-oriented companies.”
(Business & Sustainable Development Commission, 2017, 7)
1 Values-based innovation in development cooperation
New approaches to innovation and substantial engagement by diverse stakeholders are
required to improve equity between current and future generations as well as between
different regions of the world. Recent discourses on sustainable and responsible
innovation (e.g. Owen et al. 2013), along with developments in the stakeholder and
innovation management community (e.g. Freeman & Auster 2015), call for a values-
based reframing of innovation theories and concepts to better meet upcoming challenges.
In particular, business model innovation has already been practised (by companies like
Aravind or Interface) and discussed (Breuer & Lüdeke-Freund 2017a, 2017b; Breuer,
Fichter, Lüdeke-Freund & Tiemann 2018) as an approach to address societal challenges,
such as those identified by the Sustainable Development Goals (SDGs) of the United
Nations (2015).
Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, a provider of
international development cooperation (DC) services on behalf of the German
government pursues the vision “to shape a future worth living around the world” (GIZ
2018). Its lab of tomorrow (2018) is facilitating new collaborations between European
firms and entrepreneurs in developing and emerging countries to pursue the normative
goals formulated as the UN’s SDGs. Forty-six joint prototypes explored the potentials of
business model innovation for the SDGs in the context of international DC. However,
popular frameworks, such as the “shared value” concept by Porter and Kramer (2011),
and conventional measures to evaluate innovation and business success fall short of
adequately addressing, developing and evaluating new business models that cater to the
SDGs and the goals of international DC.
Initiatives like the lab of tomorrow, but also entrepreneurs who seek financial success
by working on what they care about, are missing an appropriate theoretical framework
and a consistent vocabulary to communicate about and advance their efforts. The
framework of values-based innovation management (Breuer & Lüdeke-Freund 2017a)
was formulated to describe and design innovation based on notions of the desirable, such
as those expressed in the SGDs. It differs from traditional forms of innovation
management by stressing the role of values throughout the innovation process, including
but also transcending an orientation towards economic benefits and financial profit.
Values, in this context, do not refer to any eternal truth or tradition to be preserved,
but to notions of the desirable – what every one of us considers important. Personal
values, but also global normative frameworks such as the SDGs motivate and provide a
new perspective and starting point to explore potentials for innovation. Work on values-
based innovation management demonstrates the potential of values to integrate diverse
stakeholders into innovation processes, to direct collaborative efforts and to generate
innovations that matter – innovations that cater to what we really care about. Historical
and current case studies demonstrate how innovation in processes, products, services,
business models and even whole organisations and networks may be driven and guided
by notions of the desirable (e.g. Breuer & Lüdeke-Freund 2017b).
In this paper, we discuss how to use and adapt the values-based view on innovation to
describe, design and manage innovation for international DC between actors in
industrialised and developing countries and emerging markets. International DC is a far-
reaching, yet widely neglected application domain for innovation management, which
bears the potential to provide new and meaningful solutions to some of the urgent
problems of our time and in the future. While the values-based innovation framework
seems to be a natural fit to the new DC approach pursued by the lot, this approach
provokes new questions such as: How does the lot approach differ from previous
approaches and instruments in development cooperation? What are the specific benefits,
challenges and potential pitfalls for such an approach? What kind of support do
participating entrepreneurs and companies need to achieve a positive impact on the
SDGs?
We address these questions based on a review of the documentation of the initial 46
business model prototypes from the lab of tomorrow, using expert interviews with
initiators and managers of the lab of tomorrow as primary data sources, and extend this
review with a theoretical discussion of innovation management concepts in the context of
DC.
We propose a basic vocabulary to communicate about and manage values-based
business model innovation contributing to the SDGs in the context of development
cooperation. We also provide a classification of values-based business models based on
SDGs and point out promising ways to create new business catering to a sustainable
development of the natural environment and society as a contribution to the growing field
of sustainable business model research and practice (e.g. Boons & Lüdeke-Freund 2013;
Lüdeke-Freund & Dembek 2017; Schaltegger et al. 2016). We also identify pitfalls and
critical issues, for instance with respect to the normative framing of development and
business challenges, motivating stakeholders and forming coalitions between them and
estimating future impacts on the SDGs of new values-based business models.
Our results will help local entrepreneurs in developing and emerging countries as well
as collaborating larger firms from Europe to master recurrent challenges and enable
funding institutions to document, compare and evaluate new collaborative business
initiatives for sustainable development. Finally, we discuss how the identified challenges
and lessons learned in the realm of international development cooperation contribute to
critical issues in general innovation management, such as managing diverse stakeholders
and estimating innovation success based on prototypes.
2 The lab of tomorrow (lot) as a business-oriented development cooperation
format
Large-scale and high-impact innovation is needed in order to achieve normative goals.
Following the lead of the United Nations and their Agenda 2030, active involvement of
business actors and private investments to leverage public spending on the Sustainable
Development Goals (SDGs) is required. We assume that the SDGs can only be achieved
if companies adopt them as shared values that guide their business activities and innovate
their core business to tackling the challenges of sustainable development. The United
Nations Conference on Trade and Development estimates annual investment
requirements of US$ 5 to 7 trillion in all countries to achieve the SDGs, and sees an
annual financing gap of US$ 2.5 trillion particularly in developing countries (UNDP,
This paper was presented at The ISPIM Innovation Conference – Innovation, The Name of The
Game, Stockholm, Sweden on 17-20 June 2018. The publication is available to ISPIM members at
www.ispim.org.
4
2018); considering the required infrastructure investments in water, agriculture,
telecommunications, energy, transport, buildings, industrial and forestry sectors).
Therefore, new policy frameworks, concepts and tools for international development
cooperation are needed to motivate private sector investments in line with the SDGs.
The lot matches business partners from Europe and developing and emerging countries to
jointly develop new business models derived from a local development challenge that is
reframed as a shared business idea. This complements existing private sector cooperation
approaches of the German Federal Ministry for Economic Cooperation and Development
(BMZ) to follow the lead of the United Nations and the SDGs, which explicitly require
active involvement of business actors (Business & Sustainable Development
Commission, 2017).
Following the argumentation of the United Nations and the Business & Sustainable
Development Commission, which was co-founded by Unilever’s Paul Polman and
includes leading global corporations, the SDGs can only be achieved if companies
dedicate their core businesses to major issues of sustainable ecological and social
development. But this also requires the willingness to move beyond business as usual:
“This is new territory. Moving business to a sustainable growth model will be disruptive,
with big risks as well as opportunities at stake. It will involve experimenting with new
‘circular’ and more agile business models and digital platforms that can grow
exponentially to shape new social and environmental value chains.” (Business &
Sustainable Development Commission, 2017, 12) Furthermore, global trends such as
population growth and increasing digitalisation change the economics in terms of
competition in many industries and even whole national economies (e.g. due to
automation, digitalisation or resource scarcities). These trends often demand flexible,
industry-specific and business-driven solutions that complement traditional DC
approaches.
Current DC instruments often involve companies as cooperation partners or
contractors in projects for a limited period of time and are usually within the participating
companies’ current business model.. DC projects building on such partnerships run the
risk of being limited in their spatial and temporal scope and impact, and, as a
consequence, they are less attractive for private investors. But particularly private
investments are needed to reach the SDGs (Business & Sustainable Development
Commission, 2017; United Nations, 2015).
The lot aims to engage companies in a new way which increases the attractiveness
and positive impact of DC partnerships with companies. Business activities are no longer
seen as an “add-on”, but as the major lever to address ecological and socio-economic
development challenges in developing and emerging countries. Companies, as DC
agents, are motivated to use their core business to address these development challenges.
Contributions to the SDGs will result from activities that are “natural” to companies, i.e.
to be innovative and cope with challenging environments to conduct their core business.
To avoid mission drift or one-sided dominance of financial interests – which may stand
against the needs of local stakeholders in developing and emerging countries – European
companies team-up with local business partners and further stakeholders from these
countries. Their cooperation is only possible if they agree on the means and ends of their
joint business development, which requires the development of a common ground. This
common ground can be shared values derived from the SDGs – leading to the creation of
business models for sustainable development.
The development of such business models offers the GIZ the opportunity to play a
new role. In addition to contracting companies as service providers for DC projects, the
GIZ can act as a facilitator who matches companies from European and developing and
emerging countries and helps them in identifying common interests and shared values.
We assume that the GIZ can offer a framework within which companies can do what they
are made for, according to modern, normative management theories: to create value for
their stakeholders (e.g. Freeman 2010).
Characteristic for the lot process is its business-model-oriented, co-creation and user-
centred approach. Business-model-oriented refers to the attempt to address development
challenges by means of private sector cooperation between European firms and
entrepreneurs and stakeholders in BMZ partner countries, who develop new business
models together. Co-creation stresses the fact that the lot not only moderates dialogues
between multiple stakeholders but initiates actual collaboration in solving relevant (local
but potentially scalable) problems. User-centred refers to the ongoing participation of
potential users and beneficiaries in the definition and design of solutions. lot participants
run through a process composed of five workflows:
1. Challenge: Specific development challenges, which hold the potential to present
business opportunities, are identified by GIZ in a developing or emerging country.
2. Research: User-centred research enriches the understanding of the challenge and its
underlying causes. Findings are shared on the lot online platform, where anyone can
access the material, discuss and enrich it. Based on these insights, sub-challenges are
defined that will be targeted in an innovation workshop.
3. Ideate: In a three-day, user-centred innovation workshop, interdisciplinary teams create
business solutions for specific sub-challenges, which includes understanding the
challenge, developing new business ideas to solve the challenge and establishing a
roadmap for putting business ideas into action.
4. Evaluate: For each sub-challenge, the most promising business idea developed in the
workshop is carried forward to the test phase. The teams receive support for three
months to evaluate the feasibility of their business ideas directly in the target country.
Estimated impact and potential, unintended consequences of the new business must
also be evaluated.
5. Test: Business ideas that pass the initial evaluation are implemented on a small scale in
the target country to prove the viability of the new business model. At the end of the
pilot phase the proof of concept exists and companies are able to access the required
resources to operate.
3 Review of initial iterations and experiences with the lab of tomorrow
In this section, we review initial iterations and experiences with the lab of tomorrow. An
analysis of secondary data and results from complementary expert interviews are
described.
This paper was presented at The ISPIM Innovation Conference – Innovation, The Name of The
Game, Stockholm, Sweden on 17-20 June 2018. The publication is available to ISPIM members at
www.ispim.org.
6
Methodology
We used three empirical sources to review initial experiences with the lab of tomorrow:
first, an internal documentation of lessons learned from the initial seven iterations of the
lab process, and second, the documentation of the 46 business model prototypes that were
created within the lot so far served as secondary data sources. Complementary, we
conducted three expert interviews, one with the co-initiator of the lot and co-author of
this paper (Christoffer Brick) and two with lot project managers that were responsible for
managing different iterations of the lab process in different countries.
The purpose of such expert interviews is to gather experience-based knowledge
(Bogner and Menz 2009). We used a half-structured interview format. Before such expert
interviews, the interviewer has to acquire a suitable language and specify the topic to
maintain an inspiring and informative interview situation. The documentation of lessons
learned provided a valuable source to get an idea of some of the critical issues in the
process, but the informants also elaborated upon additional issues during the
conversations. We prepared an interview guide that covered essential topics, such as
personal learning experiences throughout the development of the projects, with deep
dives into the different phases of the process, the experts’ understanding of key
characteristics of the lot as a new approach to DC as well as critical issues of stakeholder
management related to the lot. We scheduled each interview for one hour, recorded the
conversation, partially transcribed and paraphrased the responses and identified key
issues and compared lessons learned from the different respondents’ perspectives. For the
analysis of the interviews we created and filled a table listing the names of the
respondents, the challenge or lesson learned they reported, the measure taken to address
the challenge, an example (with or without quote) and an overarching topic that helped to
prepare our discussion of core results. Following the distinction of Bogner and Menz
(2009, 43ff), the interviews can be characterized as systematising expert interview with
exploratory aspects, used to structure the investigated domain and generate hypotheses
with experts. Core results from the interviews and critical issues reported by the three
experts are discussed in the following.
For the scientific conceptualisation and application of the results to wider theory,
which usually follows the identification and comparison of concepts from different
interviews, we build on innovation management literature (chapter 4), its application to
the challenges of development cooperation (chapter 5) and a classification of the
documented lot business model prototypes (chapter 6).
Results from expert interviews
Key issues derived from the expert interviews address the conceptual framing of the lot
approach, the challenge of motivating participating companies, setting up reliable
coalitions and estimating and evaluating future impacts of new business models.
Christoffer Brick, one of the three initiators of the lot reports how the initial team was
searching for faster processes that are independent from fixed time intervals and pose
lower thresholds for companies to foster new collaborations with partners from
developing countries. They reviewed concepts such as corporate social responsibility
(CSR) and shared value (Porter & Kramer 2011) and took inspiration from initiatives like
USAID (www.usaid.gov/GlobalDevLab) and design thinking methods. Whereas formerly
established DC programmes typically motivated larger companies to apply for funding
their projects that might contribute to DC programmes, the lot team took its own
expertise in development challenges and societal problems in partner countries as the
starting point to trigger innovative solutions.
Several critical issues emerged, the first being how to conceptualise the new
approach. We describe eight key issues as questions, briefly discuss lessons learned and
an example or quote from the expert interviews.
• Conceptual framing: How to conceptualise and name the new approach to DC? The
team experimented with different concepts (including CSR, shared value, co-
creation, business model innovation) and learned about the specific implications of
each. For instance, in one case talking to the CSR department was not very helpful as
it was sensitive to development issues, but detached from the strategic core business
and innovation activities within the company. The concept of shared value was
adopted in order to focus on strategic CSR. However, we will discuss in how far this
popular concept may be as seductive as delusive and should be replaced by the
notion of “shared values” as starting point for sustainability-oriented business model
innovation. In fact, our collaboration with GIZ on these issues and this paper were
partially motivated by the need to clarify these fundamental concepts and the
theoretical framework of the lot.
• Challenge sourcing: How to formulate challenges and match challenges and
companies? Development challenges are derived from the SDGs and their
formulation benefits from intimate knowledge of the problems in developing and
emerging countries. Besides, each challenge needs to be embedded in an ongoing
GIZ project in the partner country to leverage the existing network of stakeholders.
However, development challenges need to be translated into business challenges that
companies can and want to address as they recognise a market potential (e.g. there
might be a market potential of providing access to medicine and diagnostics in
Kenia, but not in southern Sudan, which might require other sources of financing).
Early on, the lot team learned that companies are experts in finding new applications
for their offerings and that this may relate to a specific, locally embedded challenge
better than to a globally formulated call, for example to apply for collaboration
projects in Africa. An exemplary challenge asked may Zambia increase its tax
revenues by taxing SMEs, most of which are not registered but in “informal
sectors”? A company that no one had expected volunteered to participate, namely a
company that produces scales and cash registers for retail and that is therefore an
expert for securely documenting and transferring tax relevant data. This case
demonstrates the generative or heuristic potential of values-based innovation to
reframe development challenges as business challenges.
• Motivating companies: How to motivate companies and stakeholders to participate?
Whereas traditional DC programmes ask companies to issue a formal project
proposal at given time slots, the lot lowered entry barriers through an open call for
participation for company representatives and stakeholders from partner countries to
collaborate during a three-day workshop. The generation of new, applied knowledge,
rather than the mere exchange of market data, during these events proved to be of
major relevance for the European companies. Representatives appreciated the
possibility to gain a deeper understanding and new perspective on their own
business, i.e. “to obtain new practical knowledge in how far my current business is
applicable in new ways to a new context, and for new user groups” (Brick, from
This paper was presented at The ISPIM Innovation Conference – Innovation, The Name of The
Game, Stockholm, Sweden on 17-20 June 2018. The publication is available to ISPIM members at
www.ispim.org.
8
expert interview). The challenge persists to attract participants for the workshops by
means of advanced communication. Besides, the specific motivation heavily depends
on the functions and individuals one is communicating with, some are driven by new
business and revenue models or new ways of cost reduction by reducing CO2
emissions, some are motivated by the pursuit of meaningful goals.
• Handover points: What is an appropriate point to end the lab and hand over the
newly developed business models to the next phase of practical development? The
lot team learned that just offering the innovation workshop to translate a
development challenge into a new business model ideas does not suffice. A test and
pilot phase in the partner country were added to provide additional support for the
companies to develop their ideas further, i.e. to increase their maturity. Afterwards,
some companies invested their own resources, but there is an investment gap to
bridge the void between small, initial investments and investments needed to scale-
up a new business model.
• Mixed coalitions: How to set up coalitions? For normative reasons (e.g. to avoid the
impression of a post-colonial approach that aims at new markets for companies from
industrialised countries) but also for practical reasons of higher commitment and
reliability, it proved to be most successful to work with coalitions between
entrepreneurs from developing and emerging countries and European firms.
• Improving methods: Which methodology, methods and techniques should be
applied in the different lot phases? In every iteration several lessons were learned
regarding the best methods to use. For instance, the human-centred design thinking
approach, first focusing on problems before looking for solutions, provoked
resistance by some of the participants. One European business partner complained
that he had to “hide behind the design thinking approach”. He already had his
solutionto diverse problems, but felt as if he had to withhold it. Like him, also other
participants might be unwilling to openly explore problems and new solutions in
case they already have proven solutions that they just want to sell or multiply.
• Team challenges: What are the essential challenges for the teams? Essential
challenges include, first, redefining the tasks and project goals and communicating
the workshop results back into their home organisation that delegated them to
participate in the workshop, second, to remotely structure the processes in the test
and pilot phase, and third, challenges yet unknown to the lot team.
• Impact estimation: How to estimate impact when ex-post measures are not
available? While an ex post measurement of impact is not viable, the lot experiments
with new ways of estimating and evaluating the future impacts of new values-based
business models catering to the SDGs. But how to integrate methods for impact
estimation in the lot process, including the innovation workshop and up to the test
and pilot phase, is an ongoing issue. One of the project managers reports that
addressing the issue of impacts on the SDGs as an integral part of the business
modelling exercise (as tools like the values-based Business Innovation Kit
(UXBerlin, 2018) suggest), and not as a separate work package, already proved
successful in weaving a values- and impact-driven way of thinking into the whole set
of activities.
Based on these lessons learned and internal project reviews, next steps were identified to
consolidate the approach and support the communication of its key characteristics to
different stakeholders, including the project owner in the Federal Ministry for Economic
Cooperation and Development, different organisational units within and partnering with
GIZ, potentially interested companies and entrepreneurs in partner countries and further
stakeholders. These next steps include a critical discussion and theoretical framing of the
fundamental concepts for the lot and a re-interpretation of innovation management
concepts for the context of development cooperation.
Until May 2018, seven “labs”, i.e. iterations of the lab of tomorrow took place, and 46
business model prototypes were developed. A classification scheme was needed to
describe and compare the business model prototypes from the labs in a systematic
manner and to facilitate their evaluation. It was developed based on a review of the
already existing prototypes and a review of scientific sources on shared value, shared
values and values-based innovation. Accordingly, the following sections describe the
fundamental concepts (section 4) and the classification scheme (section 5), before we
draw conclusions (section 6) and outline paths for future engagement of innovation
managers in DC.
4 Fundamental concepts
In order to provide a shared frame of reference for the development, evaluation and
communication about new business models in the context of DC we need to define
several fundamental concepts. Initially the lot team considered notions of corporate social
responsibility (CSR) and shared value creation (Porter & Kramer, 2006, 2011) as a
suitable theoretical framing for its activities. However, through discussions and the
review of initial experiences we learned that these notions tend to dissociate either from
the core businesses of firms (which is a particular risk of CSR approaches) or from the
normative and values-laden quality of DC challenges (which is a risk of purely strategic
approaches such as Porter and Kramer’s shared value creation). Both approaches tend to
inhibit a balanced view on the intersections of DC and business interests. Therefore, they
fall short to adequately address, develop and evaluate new business models that aim to
cater to the SDGs. Notions of shared values and values-based business model innovation
seem to resonate more, and simultaneously, with the interests of both DC and business
experts, as they motivate the search for shared normative foundations as an initial lever to
drive joint business model innovation. In order to apply these concepts to DC, underlying
concepts of business models, business model innovation, values-based innovation and
business models for sustainable development need to be clarified.
Most of these concepts are not conclusively determined, and cannot be, because their
meanings are often context-dependent, such as the culturally diverse interpretations of
sustainable development around the globe. Therefore, we pursue a pragmatic approach
with the aim of providing practically useful distinctions for the work of practitioners in
DC. The following concepts and definitions are provided as a background for a system to
classify business model prototypes. These concepts and corresponding distinctions must
• suit to the context of DC and support the evaluation of business model prototypes,
• be described precisely and accessibly enough to be understood and used by various
readers, thus facilitating communication and
This paper was presented at The ISPIM Innovation Conference – Innovation, The Name of The
Game, Stockholm, Sweden on 17-20 June 2018. The publication is available to ISPIM members at
www.ispim.org.
10
• be aligned with the scientific literature to benefit from academic exchange and a
growing body of knowledge
A critical discussion of “shared value” (Porter & Kramer 2006; 2011) strategies that
integrate social benefits into a traditional understanding of competitive advantage
prepares the introduction of an alternative frameworks based on the notion of shared
values framework (Breuer & Lüdeke-Freund 2017a). It applies shared values among
stakeholders (instead of a competitive strategy of a focal firm) as a starting point and
basic lever for business model innovation. We discuss and define related innovation
management concepts for DC, and thereby prepare a classification system that is
embedded within the dynamically growing discourse on business models for sustainable
development. One useful resource to guide the collection and interpretation of innovation
data is the so-called “Oslo Manual” published by the OECD (2005). It provides helpful
definitions of innovation types (process, product, marketing and organisational
innovations), innovation activities, and different aspects of innovative firms.
Shared value creation
As a rather young management concept, creating shared value (CSV) has risen to
remarkable prominence since it has been presented in Porter and Kramer’s (2011)
Harvard Business Review article (it was discussed for the first time in Porter and Kramer,
2006). CSV is proposed as a management strategy that creates economic value for the
firm in a way that also creates value for society by addressing its needs and challenges.
Companies around the globe are adapting CSV, with prominent examples such as Coca
Cola and Nestlé. Porter and Kramer define shared value as “policies and operating
practices that enhance the competitiveness of a company while simultaneously advancing
the economic and social conditions in the communities in which it operates” (2011, 66).
The instrumental logic that underpins CSV tells us that weaknesses and deficits in society
and environment may impose risks and costs for companies, but also that these
weaknesses and deficits present productivity and market growth opportunities. Every
strategic decision related to social issues must therefore be viewed through a shared value
lens – three strategies are proposed to do so (Porter & Kramer, 2011):
• Reconceive products and markets (e.g. serving disadvantaged markets and
innovative products);
• Redefine productivity in the value chain (e.g. by addressing energy use or models for
distribution); and/or
• Enable local cluster development (e.g. entering into partnerships with governments,
NGOs etc.).
Companies can tailor these strategies according to their needs and should critically reflect
on their strength and weaknesses to focus on the areas they are best equipped to
influence. Dembek et al. (2016) establish some of the potential business outcomes of
CSV to include profit (e.g. via sales, savings or productivity), access to resources (e.g.
raw materials or employees) and an improved competitive position. Societal outcomes
include better quality of the natural environment, improved living conditions and welfare,
as well as improved income (e.g. through employment, savings or entrepreneurial
activities).
Although the win-win approach of CSV is intuitively appealing and might be useful
in addressing companies’ self-interest, we have to consider what CSV is actually not
about: Shared value is not about “’sharing’ the value already created by firms – a
redistribution approach. Instead, it is about expanding the total pool of economic and
social value” (Porter & Kramer, 2011, 65). CSV is about leveraging connections between
social and economic progress to expand the total pool of economic and social value to
share among multiple stakeholders. Value is measured by benefits relative to costs, not
benefits alone, which means that both social and business value are always measured
relative to costs (Awale & Rowlinson, 2014). Social value creation is considered positive
improvements in social issues targeted by a company’s business (e.g. health and
education) as well as societal outcomes or changes achieved. Business value is the actual
economic benefits to the firm such as profits, access to resources or improved
competitive position (Dembek et al., 2016).
“…shared value is not social responsibility, philanthropy, or even sustainability, but a
new way to achieve economic success …” (Porter & Kramer, 2011, 64). Despite the
authors’ claim, CSV is characterised by a significant overlap with the more mature
notions of CSR and corporate sustainability, which has been critically reviewed and
discussed by Crane et al. (2014). Therefore, we are careful not to fall into line with the
spreading use of CSV in spaces where CSR or corporate sustainability have been, and
still are, helpful in analysing and organising the role of business in society – despite the
particular shortcomings of these concepts, which we also have to accept (see the
comparison of CSV, CSR and corporate sustainability in Lüdeke-Freund et al., 2016).
“Shared value, then, is not about personal values.” (Porter & Kramer, 2011, 65) The
conceptual boundaries of CSV include economic and societal benefits relative to the costs
of CSV activities, improved competitiveness and the strategic and profit goals of a
company and ways to achieve these by means of joint company and community value
creation (ibid., 76). Obviously, CSV is not about ecological and social value creation for
the sake of positive contributions to the natural environment and society in itself. CSV is
therefore not responsive to the values of the various stakeholders that are necessarily part
of shared value creation. Values, understood as notions of the desirable that lead to
certain beliefs, attitudes and finally behaviour (Breuer & Lüdeke-Freund, 2017a), are
crucial to understand the needs of stakeholders. But since CSV follows an instrumental
logic, serving a narrowly defined purpose of business (Crane et al., 2014), it follows that
values as such are not considered.
The CSV concept can serve as a communication tool to gain the attention of
entrepreneurs and managers to participate in the lot. However, to explore the potential of
the lot prototypes to contribute to development cooperation and achieving the SDGs,
further concepts, such as values-based innovation and business models for sustainable
development, are required. These are more appropriate to cover the normative dimension
implied in all innovation activities (Breuer & Lüdeke-Freund 2017a).
Business model innovation based on shared values
In order to adequately communicate about, and to address the challenges the new
approach to DC as it is represented by the lot project we propose to refer to shared values
represented by the SDGs, and specified through development challenges. The values-
based innovation approach takes values of different stakeholders as a starting point and
guideline for an exploration of new business models for sustainable development. In
This paper was presented at The ISPIM Innovation Conference – Innovation, The Name of The
Game, Stockholm, Sweden on 17-20 June 2018. The publication is available to ISPIM members at
www.ispim.org.
12
order to clarify these terms, and to prepare a suitable classification system, the notions of
business model innovation, values-based innovation and values-based business model
innovation for sustainable development are discussed.
Business model innovation: Since the beginning of the new millennium, the
discourse on business models and business model innovation has been extending the
traditional focus on innovation in processes, products and services. Business model
innovation is of high strategic relevance for organisations. Based on reviewing and
synthesising major publications, we define a business model as follows:
• “A business model is a representation of organisational value creation (how value
propositions are made), value delivery (how value propositions reach and unfold for
respective customers and further stakeholders), and value capture (how the focal
company and its customers and further stakeholders obtain net value from their
interaction).” (Breuer & Lüdeke-Freund, 2017a, 122)
• Building on this definition, we can define “… business model innovation as
modifications of existing as well as the introduction of new forms of value creation,
delivery and capture, leading to new qualities and/or new configurations of business
model components” (ibid.)
Business model innovation differs from instrumental innovations (e.g. in processes or
products) in that it is a more systems-oriented approach, aiming at deliberate changes to
how companies create value (Wirtz et al., 2016). As a consequence, business model
innovation deals with comprehensive activity systems, bringing together various tasks
such as supplier identification and recruitment, value proposition design, development of
new customer channels, new revenue models and many more (Breuer, 2013; Zott et al.,
2011). There is no straight line between process, product and business model innovation.
Often, one leads to the other, and entrepreneurs and managers must decide whether they
want to, or have to, innovate on the level of a single process, product or service, or on the
level of the business model in which these are embedded. Innovation in business models
can be pursued in at least three different ways (Breuer & Lüdeke-Freund 2017a, 135f):
• First, new business models can be developed based on new value propositions. Value
propositions address customer values, often in the narrow sense of economic benefits
or use value for the customer, but also with respect to more existential customer
values such as comfort, health or safety.
• Second, values held within the organisation can drive innovation in multiple,
interdependent business model components such as distribution channels, customer
touchpoints or cost structures. Companies pursuing sustainability values may seek
ways to reduce their negative ecological and social impacts (e.g. by reducing the
costs of waste management or redesigning supply chains in socially inclusive and
eco-efficient ways).
• Third, innovation in whole business models and their value creation logic can be
pursued as a means to address societal problems and ideals such as those expressed
in the SDGs. In this case, values are clarified and their integrative, directive and/or
heuristic functions are applied to design, review and configure business model
components until new business models are found. Doing so, solving societal
problems or working towards societal ideals can turn into new rationales of
economic value creation and capture.
Values-based business model innovation for sustainable development: The need to
ensure a societal purpose of innovation is not always seen as a requirement for innovation
to be successful, but it is self-evident in the context of development cooperation (DC),
where political goals define the objectives for collaborative innovation activities.
Exploration and identification of potentially shared values and normative frames such as
the SDGs allow companies and organizations to reveal new levers for innovation. That is,
values and their codification within normative declaration may create a common ground
explore new business opportunities, to create new markets and to experiment with new
business models.
Values-based innovation builds on understanding and applying values and normative
orientations as a basis for innovation. This new view on innovation has been defined as
follows: “Values-based innovation refers to values, i.e. notions of the desirable, held by
individuals or a social group that provide a basis for inspiring, directing and evaluating
innovation. That is, values may fulfil integrative, directive and generative functions for
and within innovation projects” (Breuer & Lüdeke-Freund, 2017a, 7). Paying close
attention to values offers integrative, directive and generative potentials for innovation.
Values-based innovation management facilitates innovation processes starting with
values and normative orientations that provide the heuristics for finding solutions, set
directives for decision-making and enable integration of diverse stakeholders.
Organisational values have been defined as “[i]mportant concerns and goals that are
shared by most of the people in a group, that tend to shape group behaviour, and that
often persist over time even with changes in group membership” (Kotter & Heskett,
2011, 5). Research indicates that companies which actively engage for values also tend to
outperform others in terms of financial and innovation performance (Bart & Pujari, 2007;
Manohar & Pandit, 2014; Van Lee et al., 2005). Additional advantages of values-based
management and sustainability-oriented engagement may result from improved
performance and attractiveness for (potential) employees, reduced risks and capital
market costs (cf., Schaltegger et al., 2012).
The collaborative exploration and elaboration of values become essential exercises in
innovation management. Such an approach is capable of achieving impact beyond the
individual company into the value networks and business ecosystems they are embedded
in – an approach that has a lot in common with the lot approach. While such networks
have previously been conceptualised as networks of stakeholders in relation to a
company, values-based innovation unfolds a view on networks that emerge around a
collaborative exploration and elaboration of values and normative orientations – such as
the values and voluntarily established normative orientations of entrepreneurs and
companies from developing and emerging countries and their European partners. Shared
values may provide a common ground among these actors and their diverse interests in
operational or even strategic terms within or even beyond the individual company.
Even though all companies and business actors pursue values beyond economic value
creation, only few explicitly work with these values to drive innovation, and achieve
positive effects on innovations performance (Manohar & Pandit, 2014). Among those are
companies such as IBM, Interface and Aravind (Breuer & Lüdeke-Freund 2017a). One
outstanding example is Aravind, an Indian for–profit eye care provider that successfully
introduced process, product and service innovation and a new social-freemium business
This paper was presented at The ISPIM Innovation Conference – Innovation, The Name of The
Game, Stockholm, Sweden on 17-20 June 2018. The publication is available to ISPIM members at
www.ispim.org.
14
model. However, one needs to recur to the values of the founder and their formulation in
Aravind’s normative mission “to eliminate needless blindness” in order to understand
(and successfully implement) these innovations.
Values deliberately made explicit and obligatory within a project (e.g. one lot
prototype) or organisation turn into normative orientations for innovation in processes,
products, services, business models and networks of cooperating parties. Therefore, the
values-based approach has also been elaborated on the levels of instrumental, strategic
and normative management. “Values-based instrumental innovation refers to a
consideration of customer and other stakeholder values that lead to innovation in
processes, products and services, as well as other marketing instruments (such as pricing
or communication)”(Breuer & Lüdeke-Freund, 2017a, 90). “Values-based strategic
innovation changes the preconditions of an organisation’s competitive advantage and its
strategic goals based on the introduction of new values and normative orientations into
the strategic management dimension” (ibid., 123). “Values-based normative innovation
redefines the values, aspirations and the identity of an organisation and/or a network of
organisations, leading to new norms, principles and strategies” (Breuer & Lüdeke-
Freund, ibid., 151).
This bears the potential to direct and foster innovation in addition to thinking in
terms of competitive advantages and strategic market differentiation that strategists and
innovators are usually concerned with (Breuer & Lüdeke-Freund, 2017a). Rather than
restricting innovation endeavours through a narrow focus on competitive advantages, the
values-based approach invites to explore opportunities within and beyond the given
strategy, i.e. asking which additional goals can be reached within a competitive strategy
(which resembles the shared value approach by Porter & Kramer, 2011) and exploring
which new opportunities arise once new stakeholder values and normative orientations
are considered. Striving for ecological and social sustainability or aiming to fulfil
(selected) SDGs can serve as such an orientation. For example, addressing health
challenges in developing countries can turn out to be the right thing to do from a
stakeholder perspective, and at the same it can offer a new business opportunity or an
opportunity to learn how to innovate and conduct business under adverse conditions (e.g.
in terms of access to resources), which in turn can help a health company to perform
better in other markets.
A mandatory requirement for any lot project is a contribution to (selected) SDGs as
well as regional development capabilities, i.e. adding value to different forms of capital
(natural, social and relationship, human, intellectual, financial and manufactured
capitals). Ideally, successful lot projects also provide blueprints (respectively business
model patterns, see below) that may be applied in further countries (scalability). As such,
the lot approach and resulting new business models for sustainable development are a
new way of contributing, through values-based business, to DC.
Business models for sustainable development: Current research shows a diversity of
orientations that business models can follow to contribute to solving ecological, social,
and economic problems. Major orientations are, for example, to support the diffusion of
new and clean technologies, social and inclusive innovations and new organisational
forms (Boons & Lüdeke-Freund, 2013). These orientations are normatively grounded in
the belief that concepts such as sustainable development or ecological and social justice
should guide the development of business models. Thus, a business model for sustainable
development is about creating significantly increased positive effects and/or significantly
reduced negative effects for the natural environment and society through the way an
organisation and its network create, deliver and capture value (Stubbs & Cocklin, 2008;
Wells, 2013). This approach has recently been defined as follows: “A business model for
sustainability helps describing, analyzing, managing and communicating (i) a company’s
sustainable value proposition to its customers and all other stakeholders, (ii) how it
creates and delivers this value and (iii) how it captures economic value while maintaining
or regenerating natural, social and economic capital beyond its organisational
boundaries” (Schaltegger et al., 2016, 6).
At the heart of such a business model is a sustainable value proposition that goes
beyond a mere customer value proposition. A sustainable value proposition is an offering,
a bundle of benefits proposed to customers and further stakeholders, based on a product
and/or a service. It is valuable not only to a company’s primary and paying customers but
also to its other stakeholders. The notion of a sustainable value proposition has been
defined recently by Patala et al. (2016, 1) as “a promise on the economic, environmental
and social benefits that a firm’s offering delivers to customers and society at large,
considering both short-term profits and long-term sustainability.” This definition adds to
that of a business model for sustainable development. By changing, and in some cases
innovating, their business models and value propositions, companies can find ways to
reconnect social and environmental value creation with profitability.
Business model innovation for sustainable development: The concept of business
model innovation for sustainable development is just emerging. It builds on a different
normative foundation than traditional concepts approaches, namely that companies have
a central role to play in securing a sustainable development of the natural environment
and human society, and it therefore emphasises the need to harmonise the development
(not just survival) of companies and (not just within) their ecological and social
environments (Schaltegger et al., 2016).
The vision of, and need for, a sustainable development of the natural environment and
human society as originally proposed by the Brundtland Commission (WCED, 1987) has
been reformulated several times, often in an attempt to propose more positive and
motivating concepts such as “flourishing” (Ehrenfeld & Hoffman, 2013) or “thrivability”
(Russell, 2013), which emphasise the opportunities for human development and the
positive sides of aiming for a flourishing or thriving world. Although we acknowledge
these attempts to stimulate fresh and forward-looking perspectives, we keep using the
concept of sustainable development and its business counterpart corporate sustainability
as we think these are strong and comprehensive ways of framing the ecological and social
challenges and opportunities of mankind in general and the business world in particular.
Building on a review of definitions proposed in the literature (Al-Saleh & Mahroum,
2015; Bocken et al., 2014; Laukkanen & Patala, 2014) and linking back to our definition
of a business model for SD, we define business model innovation for SD as follows:
Business model innovation for sustainable development improves a company’s ability to
maintain, regenerate or develop natural, social and economic capital beyond its
organisational boundaries by offering new, or changing existing, value propositions for
its customers and all other stakeholders and/or the way how value is created, delivered
and captured.
This definition is outcome oriented. It is about improved organisational abilities and
their consequences for the capitals that relate to the natural, social and economic
environments, and that society and the economy depend on. Achieving such outcomes
This paper was presented at The ISPIM Innovation Conference – Innovation, The Name of The
Game, Stockholm, Sweden on 17-20 June 2018. The publication is available to ISPIM members at
www.ispim.org.
16
requires appropriate guidance throughout business model development processes. This
guidance should make sure that, first, an entrepreneurial approach to DC is supported, i.e.
enabling and empowering local entrepreneurs and companies without solely relying on
more traditional approaches such as financial transfer programmes, and second, that the
resulting collaborative business models are directly related to certain SDGs. Instead,
entrepreneurial attitudes and potentials are encouraged and supported (financially and
process-oriented), not only in developing and emerging countries but also in European
firms and through “intrapreneurs” who try to extend the established boundaries of
corporate engagement.
Values-based innovation management for development cooperation
This review of business model innovation concepts for sustainable development in the
context of DC builds on the idea of values-based innovation in that it distinguishes the
instrumental, strategic and normative management levels on which values and normative
orientations (derived from the SDGs) can motivate and guide innovations (figure 1). The
lot with its emphasis on business models focuses mainly on the strategic level but does
also facilitate innovations on the instrumental and normative levels. Regarding the
instrumental level, new marketing instruments or other business model components are
introduced. On the strategic level new and collaborative business models are established.
Organisational directives are renewed on the normative level. For instance, mission and
vision statements are revised to include the SDGs, and new networks involving different
companies and organizations are created based on shared normative goals.
Contrasting to the purely strategic focus of CSV (Porter & Kramer, 2006, 2011),
shared values result from an exploration of the values and normative orientations of
individuals, organisations and whole nations (e.g. reflected in broader development
strategies). These values and normative orientations can serve as a starting point for the
development of a common ground among collaborating partners (e.g. European
companies and local entrepreneurs from developing and emerging countries). For
instance, improving the health of customers may already be a key element of the
corporate mission of a large food company. Specifying global values such as health or
other SDGs in partnership with local partners may then provide the starting point for a
new collaborative business model (e.g. related to new food supply chains) in a
developing country. Local challenges are addressed while a new business model is
designed and new market opportunities are created. However, principles and process-
related criteria (Breuer et al., 2018) need to be applied to increase the probability of
developing business models with a positive impact on the SDGs. These guiding
principles and process-related criteria emphasise, for instance, the necessity of engaging
in extended value creation and managing the impacts and outcomes of business model
development and implementation (both principles still have to be systematically
integrated into the lot approach).
Figure 1: Overview of business model innovation based on shared values represented
by SDGs
Figure 1 summarises how an orientation towards the SDGs motivates BMZ
programmes and GIZ projects, which, as in the case of the lot, bring together business
partners from European and developing and emerging countries. The overarching
normative motivation results from the SDGs and the German government’s sustainable
development objectives. This motivation is also based on Germany’s bi-lateral country
negotiations related to these goals and objectives. These provide the necessary framing
for a values-based approach to innovation and business development, which is facilitated
through GIZ’s bilateral, regional and global projects. One such global project is the
Sector Project “Private Sector Cooperation/ Corporate Responsibility for Development”
within which the lot approach has been tested. Always working together with existing
bilateral, regional or global projects, the lot brings together local entrepreneurs and
companies from developing and emerging economies as well as European business
partners.
One critical challenge that also characterizes this approach to business model
innovation based on SDGs relates to the issue of ownership. In traditional business
modelling, we start with an idea (e.g. an idea for a new product, service or marketing
measure, or a new technology or cost saving measure). Oftentimes, an entrepreneur, a
manager or a team of founders, is inspired by this idea (feeling a “natural” ownership)
and passionately seeks ways to bring it to the market. This was the case for many of the
values-based business model innovations driven by passionate founders and managers
like Govindappa Venkataswamy from Aravind, Ray Anderson of Interface, or Yvon
Chouinard of Patagonia (see cases from Breuer & Lüdeke-Freund 2017). Even if new
values-based ideas are not driven top-down into an organisation, their ownership is
clearly located within the organisation and among the promoters of this idea.
On the contrary, values-based business model innovation in development cooperation
catering to the SDGs (such as pursued in the lot) is not only missing the initial idea but
also a sense of ownership for the project among the initial participants (e.g. collaborating
This paper was presented at The ISPIM Innovation Conference – Innovation, The Name of The
Game, Stockholm, Sweden on 17-20 June 2018. The publication is available to ISPIM members at
www.ispim.org.
18
companies from the EU and entrepreneurs from emerging and developing markets). With
development goals as initial frame to search for business opportunities, establishing
ownership becomes a significant challenge. Participants from diverse backgrounds first
need to reinterpret the development goal and formulate a vision or mission statement for
their collaboration. We assume that the first sense of ownership develops when the
participants acknowledge this normative statement as important and worth striving for
(i.e. values as representation of what is considered as important). Based on these shared
values previously distributed actors form a team and generate new business ideas, even
before financial ownership can materialize or be negotiated. A unique challenge for
business model innovation in development cooperation catering to the SDGs is mastering
this initial journey: from global SDGs and a reinterpretation of selected SDGs and
targets, to a shared assessment and prioritisation (i.e. shared values) of the importance of
this reinterpretation, and transforming an immaterial sense of ownership for the project to
financial commitments.
The following section proposes a classification system that helps to distinguish six
dimensions of values-based business model innovation for DC and their maturity for the
lot prototypes. This, in turn, allows an approximation of their current status of
development.
5 Classification approach and example
Between 2015 and 2017, 6 lot processes led to 37 business model prototypes which were
jointly developed by companies from Europe and developing and emerging countries.
These prototypes are characterised along the six dimensions of the classification system:
• Type of innovation
• Degree of novelty
• Business model readiness
• Scaling potential
• Business model pattern
• Association to SDGs
Together, these dimensions allow for a qualitative evaluation of business model
prototypes along different ordinal scales which can be aggregated and illustrated as spider
web diagrams, which provide visually distinctive prototype maturity profiles. Their
application can be illustrated using one of the business model prototypes that was
developed in Uganda.
Classification of business model prototypes for development cooperation
The six dimensions are defined in table 1. Although their scales use distinguishable
levels, they are not suited to calculate prototype maturity levels (although this could be a
future iteration of the classification system which should be of particular interest to
funding agencies and investors).
Table 1 Classification system dimensions
Dimension Levels
Type of
innovation
(based on Breuer
& Lüdeke-
Freund, 2017a;b;
Bleicher, 1994,
2011; OECD,
2005)
Instrumental: processes (e.g. a new production method or delivery process),
products (e.g. manufactured from natural materials or enhanced through
software), services (e.g. mobility sharing or health services), further marketing
innovations (e.g. a pricing models depending on customer segments or
utilisation of social media as a new customer touchpoint)
Strategic: value proposition (e.g. simplified usability and accessibility),
systemic relation between new or adapted components (e.g. increasing
affordability based on reduced functionality and costs through new business
partners), or a whole new model (e.g. the food4health model to provide health
insurance through coupons from food purchases)
Normative: identity (e.g. assuming a new mission such as to eliminate polio),
and/or network (e.g. forming a sustainable apparel coalition with competitors)
Degree of novelty
(based on OECD,
2005, 57).
“New to the firm” is the minimum requirement according to the Oslo Manual
as it requires new knowledge and a learning process that may lead to
subsequent improvements and innovations. Also, it is acknowledged that the
diffusion of initial innovations generates their major economic impact. “A
product, process, marketing method or organisational method may already
have been implemented by other firms, but if it is new to the firm (or in case
of products and processes: significantly improved), then it is an innovation for
that firm” (OECD, 2005, 57).
If a firm is the first to implement an innovation it is considered “new to the
market” (i.e. the firm and its competitors, it may include a geographic region
or product line, depending on the firm’s own view). The economic impact on
a larger scale will depend on adoption by other firms.
“New to the world” are innovations of the qualitatively greatest degree of
novelty.
Business model
readiness
(adapted from
Blank, 2013)
Sketch: A business model sketch has been created based on an initial idea in
direct collaboration of local entrepreneurs and at least one European partner
(this stage should be reached after the lot innovation workshops). “Sketch”
covers the initial investment readiness levels (IRLs), up to the validation of
proposed problem-solution combinations.
Prototype: A minimal viable prototype of the offering has been created and
evaluated with potential customers in a controlled environment (this stage
should be reached after the lot test phase). “Prototype” includes the IRLs up to
a validated revenue model.
Proof-of-concept: A basic offering has been tried successfully in a test market
environment. Such a market-ready proof-of-concept requires a high-fidelity
minimum viable prototypes (MVP) and comprehensive, validated business
metrics. This stage should be reached at the end of the lot proof-of-concept
phase, if the participants agree that the concept is ready for real markets;
market rollout and internationalisation become a topic only after this stage has
been mastered successfully.
Scaling potential
Locally: Innovations responding to the specific needs and requirements of a
local community, which may be defined in geographical or cultural terms (e.g.
a specific mountain community, or a subculture in a specific city).
Nationally: On a national level, state legislation may provide a unique legal
framework within which an innovation or a business model needs to unfold
(e.g. peculiarities of a national public health care system).
Internationally: Regionally independent innovations are at least in principle,
globally applicable.
This paper was presented at The ISPIM Innovation Conference – Innovation, The Name of The
Game, Stockholm, Sweden on 17-20 June 2018. The publication is available to ISPIM members at
www.ispim.org.
20
Association to
business model
patterns
(based on
Lüdeke-Freund at
al. 2017)
Identification of similarities to one or several business model patterns to
describe the prototype’s value creation rationale. Business model patterns
support the classification and description of business models, and can be used
to inspire and guide business model innovation. A compilation of 45
sustainable business model patterns is available to support sustainability-
oriented business model innovation. Each pattern provides a combination of a
problem and a solution that can be applied to similar problems. lot prototypes
might contribute new patterns and already documented patterns may be used
to learn from proven solutions to similar problems.
Association to
SDGs (following
UN 2015)
Identification of SDGs addressed by the prototype. Measuring positive impact
based on scientifically obtained evidence is an ongoing and a key challenge
for the values-based approach and its participants.
Spider web diagrams can be used to visualise the classification (or similar tools to
represent aggregated, multidimensional information). The following figure shows the
example of a comparison of two fictitious projects.
Figure 2: Classification visualised as spider web diagram with fictitious examples
Development and business challenges and new business models from Uganda
The classification system is applied to several prototypes illustrate its usefulness. Here
we describe the example of one of the business model prototypes that was develop by a
coalition of German companies and entrepreneurs from Uganda.
Currently only 12 percent of Ugandas’ geography are supplied with modern
electricity. As a contribution to the SDG number 7 to provide for affordable and clean
energy, a development challenge for the BMZ partner country was formulated. The lot
project joined with Siemens to formulate the initial challenge for “Lab Number 6”: How
might we improve access to affordable and reliable energy in Uganda? Together with the
local GIZ representative and potential sub-challenge owners, initial user- and stakeholder
research was conducted, and help to define six sub-challenges. These included the
challenge to improve last-mile grid connectivity, to integrate different energy sources to
increase the productivity of mini grids or to increase productivity in rural areas through
biomass. Insights from desk research and field studies fed into a three-day ideation
workshop. The workshop utilized a Design Thinking approach to come up with new
solutions, a business model and a roadmap to address the refined sub-challenges. After
the workshop, further field research and studies helped the teams to revise their
assumptions and to prepare a pitch of their business model to an expert jury. Based on the
evaluation of these pitches three prototypes were selected to obtain modest financial
support for a three months test and pilot phase. One of these selected prototypes (named
Integrators) went on to test an electrification model for rural SMEs through a renewable
energy based Hybrid Energy System (HES) with the objective of increasing productivity
of SME’s and creating independence from diesel fuels. Another project (named Team
Access) tried to expand the existing information and communication technology (ICT)
and energy infrastructure by leveraging its financing through an investment model. Once
they finish the pilot phase with proof of concept the consortium of Ugandan and
European partners should be able to access the required resources to operate. The mid-
term vision is not only to establish a new self-sustaining business motivated by the initial
challenge of SDG7, but to create a scalable business model that inherently contributes to
the generation of affordable and clean energy.
Table 2 Classification of business model prototype of “The Integrators” (Uganda)
Dimension Specification and levels
Description
A hybrid energy system (HES) combing solar PV and small wind turbines with
battery storage and existing infrastructure enables SME´s in Uganda to
increase their productivity with decreased energy costs and a more reliable
energy supply. SMEs become shareholders of the system and develop
additional revenue streams like selling electricity to surrounding household or
expand their business value chain. The coalition includes a local
entrepreneur, a German project development company, a large German
industrial manufacturing company.
Type of
innovation Type: 2 (a new value proposition to SME)
Degree of
novelty Novelty: 2 (new to the energy market in Uganda)
Business model
readiness Readiness: 2 (prototype, or even 3 proof-of-concept)
Scaling
potential Potential for scaling: 3 (internationally for countries with limited connectivity
to the energy grid)
Association to
patterns G7 “Access Provision”
Association to
SDGs SDG 7 (Affordable and Clean Energy)
This paper was presented at The ISPIM Innovation Conference – Innovation, The Name of The
Game, Stockholm, Sweden on 17-20 June 2018. The publication is available to ISPIM members at
www.ispim.org.
22
Visualisation
6 Insights for innovation management and policy-making in the context of
international development cooperation
The values-based innovation framework (Breuer & Lüdeke-Freund 2017a) allows
addressing critical issues related to the development of business models for sustainable
development, such as the need to reframe development challenges as business
opportunities based on the shared values of collaborating partners, and to design
according innovation processes and projects with potentially positive impacts on the
SDGs. New challenges emerge once the framework is applied to DC. The values-based
framework needs to be refined and further developed to include issues of stakeholder
involvement and impact estimation as well as methods to facilitate collaborative business
model innovation of entrepreneurs in developing and emerging markets who collaborate
with European firms. Within this last section we discuss preliminary implications for
innovation management and policy-making in the context of international development
cooperation.
Implications for the management of innovation projects within the lot
Critical issues were identified and addressed to review and improve the lot process and
leverage its scope and effectiveness. The following are some exemplary lessons learned
and how they have been addressed:
1. The lot approach to facilitating innovation requires a clear terminology to ensure
efficient and effective communication and collaboration among all stakeholders.
Therefore, an initial framework document entitled “Shared Values and New Business
Models for Sustainable Development” was written to introduce and discuss the
relevant concepts and a classification system for business model prototypes resulting
from the lot process.
2. Some participants struggled to understand and communicate their strategic approach
and business model and instead focused on engineering aspects and technical
features of their proposed solutions. A toolkit with appropriate templates and a
handbook with a repeatable workflow alongside methodological coaching will
support future participants to better create and communicate viable business models.
3. Most company partners treated the SGDs in a very selective way and just focused on
obvious win-win opportunities, but rarely considered unintended and negative side
effects of their projects. Guidelines for impact analysis and assessment as well as
criteria for values-based business models are currently being refined in order to
provide better guidance throughout the whole lot process.
Managing innovation projects in the context of international development cooperation is
particularly challenging because of several reasons, many of which are related to the fact
that language matters. Experts in DC, innovation managers and managers and
entrepreneurs who are involved in the lot process may share – unconsciously – common
normative orientations and goals, but as long as they lack a proper terminology and
language that allows them to identify these commonalities, their activities run the risk of
standing unconnected next to each other. Experimenting with concepts such as CSR and
shared value, and finally with the notion of shared values and values-based management,
shows that strong and figurative concepts and terms are needed to motivate and hold
together innovation processes that are stakeholder-inclusive and allow for co-creation
between the participants. Concepts with these qualities offer far more than theoretically
grounded definitions and clarity; they serve as communicative devices and boundary
concepts with the ability to unfold the directive, heuristic and integrative potential of
normative orientations and shared values, e.g. expressed through the SDGs, as source and
guideline for innovation.
Another implication refers to the difficulty to engage in business model innovation.
Although business model innovation is widely accepted as a key to business success, with
the ability to leverage e.g. process, product and service innovation, it was interesting to
see that many lot participants struggled to concentrate on the business model as their
innovation object and instead showed a tendency to remain within traditional innovation
categories such as new processes and products. This might have several reasons, such as
the participants’ disciplinary backgrounds, but if it is that difficult for participants to
engage in a form of innovation that is nowadays seen as the dominating approach to
gaining and improving business success, special attention has to be paid to how the lot
participants are led to engage in business model innovation. As with the notions of shared
values and values-based innovation and their role as communicative devices and
boundary concepts, there seems to be a need for according guidance to navigate the lot
participants towards an improved understanding of, and the capability to apply, business
model innovation. According tools, serving as another class of boundary concepts, are
important to achieve this goal and make sure that the innovation projects finally lead to
new business models (beyond single processes, products and services) for sustainable
development. Tools like the values-based Business Innovation Kit might serve this
purpose.
Finally, the tendency to treat the SDGs as a kind of checklist that can be ticked
whenever some kind of link between a company’s activities and one or more SDGs can
be identified may be highly misleading. First, the SDGs are an integrative framework –
no goal has a higher or lower priority than other goals. Therefore, prioritising one or
several goals as a company may be acceptable for practical reasons as not every company
can deal with every SDG. But it is at the same questionable from an ethical perspective.
Why, for example, is it legitimate that a company cares about green energy but ignores
This paper was presented at The ISPIM Innovation Conference – Innovation, The Name of The
Game, Stockholm, Sweden on 17-20 June 2018. The publication is available to ISPIM members at
www.ispim.org.
24
the needs of people who are in need of food or health care? This is not to say that a green
energy company engaging in innovation activities should take care of all 17 goals
simultaneously, but it should be clear about the reasons why it aims for contributions to
SDG 7, and not SDG 2 or 3. It should also at least explore cursorily whether further
contributions to the SDGs might be possible. Extending innovators’ perspectives and
moving from a tick-box approach to the SDG to a more integrative one is a challenge that
has to be considered in the further development of the lot approach.
Besides these implications for the management of innovation processes within the lot
and in the context of international DC, we can also point to some preliminary
implications for policy-making, particularly regarding the fact that the lot introduces a
new approach to the realm of DC tools.
Policy recommendations
The lot builds on a business-oriented approach to DC. It emphasises the importance and
the potential of companies as agents for sustainable development. Based on this rationale
and the classification of an initial set of lot business model prototypes, some preliminary
policy recommendations can be derived.
New business models and business cases for sustainable development are needed to
activate companies as agents for DC and the pursuit of shared values, such as those
represented by the SDGs. This requires a shift in mind sets on both sides, companies and
DC organisations. Companies, or more generally speaking entrepreneurs, are passionate
about their goals and are efficient and effective in problem solving. The daily business of
entrepreneurs and managers includes dealing with scarcities (e.g. money, employees,
regulatory support etc.). Day by day, they develop solutions to dynamically changing
problems, following the ultimate aim of satisfying their stakeholders. The SDGs as well
as the circumstances in developing and emerging countries call for this type of innovative
and flexible problem solver. However, entrepreneurs and managers can gain greatly from
recognizing the opportunities of advancing the circumstances in the least developed
countries and those on a trajectory to reach the standards of industrialised countries.
Development cooperation organisations can leverage these innovative problem-solving
skills and treat private companies as partners and contributors who not only create
economic value but strive for shared values. But to do so, the communication towards
these important problem solvers has to be adapted to their “language” (see above) and
faster and more flexible frameworks for their engagement are required. Policy-makers are
thus challenged to align the different clock-speeds of their own system and the business
world.
Even if such an alignment is feasible, the ability to solve problems and survive in
market competition will not automatically be applied to DC by every company. And
those who do so might oversee the real needs of local communities in developing and
emerging countries. It has to be considered that companies engaging in DC may also do
harm to the communities in which they engage. Negative impacts due to “land grabbing”
(e.g. agro-industrial corporations in Africa), destruction of local ecosystems (e.g. palm oil
in Asia), negligence of social standards (e.g. in global manufacturing supply chains) or a
pure profit orientation that threatens local socio-economic development (e.g.
hydroelectric power stations in ecologically vulnerable communities) must be avoided.
Development cooperation organisations must develop project development processes,
codes of conduct, control instruments etc. to make sure that a business-oriented approach
to DC does not open doors to devastating and reckless business practices in vulnerable
communities. Professionally managing outcomes and unintended consequences,
monitoring and evaluating them against initial values-based benchmarks and intervening
accordingly are indispensable means to guide the development business models in
support of the SDGs.
Accordingly, the proposed new mind set for DC needs new tools to facilitate
cooperation. Shared values and shared visions derived from the SDGs, but also from the
unique needs of local populations in developing and emerging countries, offer a rich
repository of new business and DC ideas. They can also make sure that detrimental
effects of the involvement of purely profit-oriented companies can be avoided. The lot
offers a framework that flexibly connects different DC stakeholders. Instead of just
focusing on the “business of business”, opening the framework and its tools for a values-
based approach to business and innovation can increase and unfold the potential of lot-
facilitated collaborations and better connect them to the needs of local communities. It
can also help in avoiding mission drift on the side of involved companies (e.g. drifting
from a social mission to typical profit-making) as well as risks to DC as being seen as
supporting business for the sake of business only. According tools are available, for
example values-based business modelling tools, value mapping tools etc., but these need
to be tested and adapted to the DC context, as is currently done with the lot approach.
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