This post is a follow-on from an earlier post on how to develop Sustainability framework. It shows how you can turn your business model into a canvas to make your profit-enabled social/environmental impact (PEI) opportunities explicit. This in turn helps you focus your strategic integration effort.
In their seminal article in HBR (2011), Porter and Kramer identify three pathways for Creating Shared Value (CSV). These were:
- Reconceive products and markets
- Redefine productivity
- Improve the social ecosystem.
Note: I have learnt to avoid the term ‘shared value’ because it’s easily confused with ‘shared values’. When the conversation shifts to values, the profit story tends to take a back seat. I use the term ‘Profit-Enabled Impact’ instead of CSV because while values are important, value tends to trump when the shit hits the fan. And this is inevitable.
Anyway, I remember feeling underwhelmed by CSV at the time – it offered little beyond what sustainability practitioners had been exploring for the better part of two decades. While that may be true, those three pathways turned out to be a useful way of framing our work on profit-enabled social/environmental impact, not least because they mapped so nicely onto our business model canvas. You’ll also see that I have changed the wording a bit to align with our approach. It’s not important – use whatever words make most sense to you.
The Profit-Enabled Impact (PEI) Canvas starts with the business model (that smaller rectangle in the centre). By depicting your business model in this way, you will quickly get insight into products, capabilities, partnerships and tech that might be repurposed to deliver social/environmental impact. By extending this into a PEI canvas, you are going to make your PEI opportunity envelope explicit.
Start with your current envelope: Where are you already exploring PEI? Some of these will be regarded as “sustainability initiatives”, many will not. This shows how entangled we have become with what investors want us to disclose… and the extent to which this has hijacked the broader transition to integrating material sustainability considerations into every decision.
So start with what you’re doing already:
- What products, services and customers already support a low carbon / circular / inclusive economy? Link these overtly to the revenue drivers in the profit formula.
- What productivity enhancements already support a low carbon / circular / inclusive economy? Link these overtly to the cost drivers in the profit formula. Note that we are not looking for productivity improvements that simply make it cheaper to produce and flog more widgets. We are looking for productivity improvements that tangibly reduce resource throughput relative to the current previous approach.
- How are we already improving the social or natural ecosystems that feed the profit formula? This supports your deliver systems (key activities, resources and relationships). It will impact the profit formula, but usually in the medium to longer term. It still counts, and anyway, a new regulation can change the time horizon overnight.
This recognises that PEI is not only possible but inevitable. It also shows that you are not starting from a zero base. This is useful for all sorts of reasons so avoid omitting this step because it’s ‘obvious’.
Now bolster your emerging opportunity envelope with research on your peers: Where are they exploring PEI? Which of these are more likely to find a place to express within your current and emerging business model? If there’s potential, someone in the group will probably see it. (This is why we do this work with a group of people that is as diverse as possible and who all have experience in different parts of the value ecosystem. If you still think diversity is about meeting your BBBEE requirements, it’s time to stop and reflect a bit.)
Avoid getting hung up on the three categories. Some (actually many) initiatives deliver in more than one area, which becomes the whole point of the process over time. It doesn’t matter where the pattern goes – it matters that it has potential expression through the business model. You’ll get to the actual expression when you start activating the prototypes.
To be sure, this process gets easier with experience. Just start and see what happens. The more diverse the team, the better.
Incite’s Ideator is a facilitation tool aimed at making this process easier and more inclusive.