Chapter 6: Social Business & Innovative Business Models

Question 1

Why do we need change in our current business models?

Answer 1

• Many existing business models are predicated on the assumption that natural and social capital are virtually limitless in supply.
• It is hard to convince a CEO to change a business model based on threats or opportunities that have not yet materialized. Executives are often held back by vested interests in their current approach.
• Innovation, therefore, often remains incremental rather than fundamental and system wide.
• There is an urgent need for fundamentally different approaches to value creation and consumption.

Question 2

What does consumerism refer to?

Answer 2

Consumerism refers to a social and economic order and ideology which encourages the acquisition of goods and services in ever-increasing amounts.

Question 3

What does the “degrowth”-movement intent to do?

Answer 3

The degrowth movement seeks to develop economic and social models that are independent of growth and can provide for a good life for everybody.
->Research and actions to consume less and share more.

Question 4

When can we speak of “artificial demand”?

Answer 4

• Artificial demand constitutes demand for something that, in the absence of exposure to the vehicle of creating demand, would not exist.
• Demand is usually seen as artificial when it increases consumer utility very inefficiently.
• Vehicles of creating artificial demand can include mass media advertising, etc…

Question 5

Please describe examples of startup companies that try to address the problem of the proliferating of plastic in consumer products.

Answer 5

1. Soul Bottles
   - sells reusable drinking bottles made without plastic.
   - raises awareness of the consequences of buying water in plastic bottles.
   - supports access to clean water in other regions of the world.
2. Supermarket selling unpackaged food
3. The Tiffin Project
   - startup offering plastic-free food containers that can be borrowed from partnering restaurants.
   - containers can be taken home or to work and returned later to be cleaned and reused.
   - customers can also decide to buy their own container.

Question 6

How does Alexander Osterwalder define the term business model? Please discuss whether you think that according to this definition the startup you described in (4) can be seen as a business model innovation. You may also use the elements of the business model canvas to argue for your position.

Answer 6

Business Model:

fundamental structures for how companies create, deliver and capture value.

Question 7

What are “sustainable business models”? Please name examples of characteristics that these business models should have.

Answer 7

Sustainable business models address the current sustainability and responsibility problems that businesses are facing.

Characteristics:

• minimization of consumption
• maximize societal and environmental benefit
• closed-loop systems
• delivery of functionality and experience
• fulfilling, rewarding work-experiences
• collaboration and sharing

Question 8

How do companies usually set prices?

Answer 8

1. Demand-based pricing
   - based on customer analysis
2. cost-based pricing
   - based on accounting and controlling information
3. competition-based pricing
   - based on pricing of competitors

Question 9

When would we refer to price setting as “unfair”?

Answer 9

Make product unnecessarily expensive if the pricing has very little effect on the demand (e. g. medical products).

Question 10

How do innovative pricing mechanisms like pay what you want work?

Answer 10

Innovative pricing mechanisms like pay what you want work because people voluntarily pay non-zero prices.

Question 11

Why do you think are many companies reluctant to communicate their price structure transparently?

Answer 11

Possibly because of artificially inflated prices. Especially in products of strong brands.

Question 12

Name three archetypes of business models as developed by Bocken, Short, Rana, and Evans (2014). What could be exemplary companies implementing these business models?

Answer 12

1. Maximize material and energy efficiency
   - > Low carbon manufacturing solutions
2. Encourage sufficiency
   - >Consumer Education, Communication and awareness
3. Repurpose for society/environment
   - >home based flexible working companies

Question 13

What do we mean when we speak of a social business?

Answer 13

• created and designed to address a social problem
• financially self-sustainable
• prime aim of a social business is not profit maximization
• not dependent on donations