Using Digitization to Enable Business Model Innovation for Sustainability
The rise of the Internet and influx of connectivity around the world has enabled entirely new, more socially and environmentally impactful, business models to come to the fore. In fact, the term ‘business model innovation’ did not come to prominence until after the birth of the Internet in the 1990s. And similarly to the Internet, saw an exponential increase in its popularity and usage into today’s ‘buzzword’ status. Below are just a few exciting examples of the many current and emerging business model innovations that are creating improved environmental and social outcomes, or are redistributing economical value more equitably throughout society.
Technological Globalization, an Enabler
The influx of digital technology and smartphones to hundreds of millions formerly excluded from the economy has provided access to finance, and created new job opportunities.
For example, Andela, a growing social business in Nigeria, uses technology to address a skills gap — the shortage of qualified software developers. Andela has created a four year program that provides remote training in basic coding. Students then divide their time between schoolwork and real projects for IT companies in need of talent. Clients include Microsoft and Segovia.
Another example includes Novopay, which is providing access to secure banking to India’s poorest 50%. Novopay uses a distributed network of street-corner convenience stores and bank services to secure transactions at kirana shops, street-corner convenience stores that are easy to access.
And Eneza Education provides education to the world’s “very end of the last mile” children, or those who have dropped out of school, girls in extremely impoverished areas, and children who can’t attend school due to conflict. Eneza Education is a tech startup from Nairobi’s iHub community that creates content that kids in low-income rural areas can access on low-end cell phones.
Data & Analytics Helping to Use Resources Better
Digital technology has also provided the precision, transparency and connectivity to enable more resource-efficient business models.
In early 2015, IBM announced a partnership with Yarra Valley Water, the largest water and sanitation utility in Melbourne, Australia, to enhance the management of the utility’s assets and customer service to over 1.7 million people and 50,000 businesses. The partnership will leverage IBM’s experience formulating cloud-based systems combined with big data collection and analytics to make Melbourne’s water management smarter, so far reducing the cost of managing water by 15%.
WISErg utilizes technology to close the loop on food waste, which sadly is the fate of 30-40% of the food supply. It leverages a network of grocery stores and restaurants, from which it collects food waste, analyses and collects information on the waste to help grocery stores to better stock shelves in the future, and then grinds the scraps to create a nutrient-rich liquid fertiliser. By enabling better management, this kind of waste technology can help lessen threats to global food security.
Sharing is Caring, and Smart Too
A main business model innovation enabled by technology is the shared resource model. Shared resource models enable customers to access a product, rather than own it, and use it only as needed. Because the product is shared, the model enables efficient, productive use of a resource that might otherwise sit idle.
Examples include the well-known Airbnb, and others like FLOOW2, a Dutch start-up that facilitates the sharing of equipment and employee time between companies; and Haier, a Chinese appliance company that invites outside inventors to propose innovations that they can co-produce.
Lending Club is based on this model, but the shared resource is capital. By connecting borrowers and lenders via an online marketplace, borrowers can take out loans at lower rates than traditional bank lending programs and lenders can receive better returns on their investments. Lending Club leverages the connectivity of the Internet to aggregate a marketplace, and is also aiming to provide capital to more marginalised communities. In April 2015, Citigroup lent US$150 million through Lending Club to provide affordable credit to underserved borrowers and communities.
Emerging Technology Holds Sustainability Potential
Newer technologies like blockchain, the technology that underscores the cryptocurrency Bitcoin, may even take the place of trusted third parties like central banks, land registries or federal databases.
Fostering a ‘crowd-trusting model’ that enables multiple users to contribute to a secure digital location that creates a record of who owns what without disclosing identities, could allow more business model innovations to emerge. For example, carbon currencies, which are based on the idea of trading money for the ability to pollute, are already the focus of organizations utilizing blockchain technology such as Batan, Block Chain Asset Co., and multiple altcoin (alternative coin) creators.
Other emerging technologies, like deep learning, nanotechnology, 3D printing, the Internet of Things (IoT) and virtual reality, to name a few, also hold potential for fostering more sustainable business models. Although ripe with possibility, it is important to remember that technology is a neutral tool for enabling or amplifying what we want. Thus, we need to make sure what we pursue is not just short-term and unsustainable gains, but long-term and shared benefits.
So far, digitization and technology have allowed many new business model innovations for sustainability to emerge, and likely many more to follow.