Collaboration
WRAP, Starbucks Dig Into How to Drive Business Model Transformation Inside a Company

It was the job of Zöe Arden, director of think-tank SustainAbility, to kick-start the workshop sessions on Monday morning at SB ’15 London with a focus on how to drive business model transformation from inside a company. This workshop was a developed as a hotly requested follow-up to SustainAbility’s workshop last year at SB’14 London, focused on Business Model Innovations for Sustainability. This work was primarily geared towards building a business model from scratch; applicable and targeted towards start-up businesses but lacking in its relevance to larger, established companies. This raised the challenging question: How can big brands really pioneer business model shifts from within a company with established practices and traditions?

Joined by Simon Redfern, Director of Business Affairs in EMEA at Starbucks; Megan Kitchen, Environmental and Ethical Affairs Manager at Home Retail Group; and Gerrard Fisher, Special Advisor at WRAP, Arden shared some the underlying principles of business model shifts, as well as providing real-life examples of how these have been implemented within big brands for positive change.

Arden began by discussing some key principles of driving internal change, highlighting the three key factors influencing a business model shift:

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highlights!1. External conditions: includes physical planetary constraints as well as key societal momentum shifts (such as the development of circular economic models; digitization shifts; increased density of cities, services and goods; and increased consumer pressure). 2. Company culture: the key pillars of developing an internal model shift involve company aspects such as supportive leadership/buy-in, comfort with company failures, inter-departmental collaboration and deflating hierarchies for vertical as well as horizontal collaboration. 3. Individual innovators: business model shifts can often be ignited by single innovative thinkers, but the key to spreading these ideas throughout an organisation is to mine the network by pinpointing other champions within other departments, utilising these individuals to map a valuable business model and build a strong, resilient business case.

This led on to the introduction of a key mapping tool for how these principles could be systematically and practically mapped onto any company with a hunger to undergo significant model shifts.

“In terms of what the future might hold, we at SustainAbility are actually really optimistic. As I said at the beginning, we can’t continue to work businesses the way we have in the past. We’re really excited that there seems to be a lot of interest and traction in business model innovation,” Arden said.

Redfern then toured some of the innovative ways individual Starbucks stores — from Berlin to Seattle — have designed their environments to fit with the company’s overarching sustainability goals. He was proud to announce that Starbucks could say, with conviction, that this year will be the first that it has achieved 100 percent sustainable and ethical sourcing of its coffee beans — the first and most important focus of its long-term targets. Other goals the company has include a 25 percent reduction in its water consumption, 100 percent renewable energy consumption and US$20 million investment in preliminary loans to farmers within its supply chain. The coffee chain is also making significant progress (576 stores last year) in ensuring as many of its stores as possible are LEED-certified.

What have been some of the fundamental outcomes in this shift towards sustainable business thinking within Starbucks?

“It is a multi-departmental approach we have here,” Redfern explained, “from the design team to the construction team, to the operators in store making sure we don’t throw away things unnecessarily and making sure we have good recycling capability. It’s a genuinely joint effort across the business, which in managing 24,000 stores that’s sometimes not the easiest thing to do. We do believe it makes us a differentiator in the marketplace — that we hard-wire this approach into our business model and work.”

“Above all we’re a people business serving coffee, not a coffee business serving people,” he continued. “It’s about making our employees as proud as possible and we get a lot of feedback about food waste, recycling, water and energy. We’re very committed to our people that we want to give them what they want and help them feel proud about our business and happy working there. This makes them a key part of this for us.”

Kitchen, sharing her experiences of developing CSR strategies with retailer Argos, reiterated this focus on multi-departmental collaboration as key to driving business model innovation. A fundamental take-home from her presentation was the absolute necessity of making sure everything within a new model approach followed in line with the company’s established commercial interests and profitability ambitions — targeted strategies for reducing environmental impact should go hand in hand with a stronger commercial case, rather than retracting from it. Through her experience developing Argos’ gadget trade-in programme, Kitchen shared some of the vital steps she highlighted as fundamental building blocks to achieving internal buy-in:

• Gather and utilise as much external market analysis data as possible to make a credible case for its success as a business strategy;
• Internally socialise the idea by reaching out to other departments within the organization to align departmental interests towards this common strategy shift;
• Seek agreement for a pilot run of new initiatives to reduce risk of failure;
• Make sure it makes commercial and profitable sense — it needs to fit well as part of a long-term sustainable business model

“We looked to build partnerships and develop activities that support the business strategy. I think this is the most important thing. Everything that we do to try to drive a sustainable business has to support the business and commercial strategies,” she explained. “We tried to make sure that not only were our environmental credentials enhanced — which was important internally, as well as to our external stakeholders — but more importantly that what we were doing could increase customer loyalty and spend. That of course has huge internal interest and external interest with our investors.”

The Home Retail Group, among many other businesses looking to build more sustainable models, has worked with WRAP and its REBus toolkit for business model evaluation. Fisher, Special Advisor at WRAP, outlined some of the primary steps businesses need to recognise to do this successfully.

“The good news is that this is not rocket science,” he said. “It is hard work, it will take a lot of effort and some resource. But none of the principles are a magic ingredient that you can’t implement in your own organization.”

A key talking point for the following Q&A from Fisher’s presentation was his recommendation that business model innovation move step by step along its transformation journey rather than attempting to take a dramatic leap to the finish line. “Disruption from the edges” was his recommendation. Somewhat contradictory to Unilever CEO Paul Polman’s “go big or go home,” the panellists agreed on the importance of focusing on building the blocks and successful track record incrementally, before choosing the right time to go for the killer strategy shift. This is often a more difficult task for larger, established companies who have an existing legacy, reputation and employee base. New emerging companies, on the other hand, have little to lose in comparison.

The final hour or the workshop involved a more hands-on exploration of the Value Mapping Tool, both SustainAbility and WRAP use with their clients to help them identify and capture more value in their business chain. This tool focuses on the analysis of the current value proposition, value captured and value missed/destroyed by a company’s model for each of its stakeholder groups in order to identify areas where opportunities are being missed. Working in teams to map this value chain out for a pre-existing company proved to be a thought-provoking process in asking and challenging some of the key questions about how a business creates and surpasses valuable opportunities along its value chain.

Despite the varied experiences of each of the workshop’s speakers, all were in agreement about a fundamental outcome, summed up by Fisher: “There’s no room for pet projects. It absolutely has to be core and align with the business’s current corporate strategy, mission and values.”