A business model canvas for the 21st century
Traditional strategy constructs don't capture the interconnectedness and complexities of the living ecosystems that companies are inherently entangled in today. Here are suggestions for an update.
If you’ve looked into designing a business, you’ve most likely come across a business model canvas. Made up of nine components — customer segments, value propositions, channels, customer relationships, revenue streams, resources, activities, partnerships and costs — it’s a wonderful, easy tool to describe what happens within a business.
But it has certain limitations. Osterwalder and Pigneur’s popular business model canvas does not capture the interconnectedness and complexities of the living ecosystems that businesses are inherently entangled in today. It is high time to acknowledge that it requires an urgent update for the world we live in; one that defines business success far beyond the net value of the two boxes at the bottom (revenues and costs).
Our "updated" business model canvas keeps the core of the original nested within what really matters today:
From profit to purpose
Any business is in business for a reason. Purpose provides the foundation for how a business runs, serving as a roadmap for everything from the tough decisions management has to make to what kind of food employees eat for lunch. As Simon Sinek says, "People don’t buy what you do, they buy why you do it."
A strong purpose inspires, attracts and activates — both customers and employees alike. A strong purpose serves as a moral compass for the business. In 2014, the CEO of U.S. pharmacy chain CVS, Larry Merlo, walked away from billions of dollars in revenue when he made the decision to stop selling tobacco in its pharmacies because it was incompatible with the company's purpose of helping people on their path to better health.
Author Marjorie Kelly describes a company’s "living purpose" as "creating the conditions for life." In practice, this means embedding values and a regenerative intent at the company’s birth: "You don’t start with the corporation and ask how to redesign it. You start with life, with human life and the life of the planet, and ask, how do we generate the conditions for life’s flourishing?"
When you look at your own business model, what is its living purpose? How is your business allowing human life and the Earth’s life to flourish?
From private ownership to prosperity sharing
When you think about starting or growing your business, it’s important to think about its purpose — but you’ll also need funding. And with funding comes decisions related to ownership and governance.
Patagonia is privately funded — and its mission statement is enshrined in its bylaws. Yvon Chouinard, the company’s founder, believes that this "creates the legal framework to enable mission-driven companies like Patagonia to stay mission-driven through succession, capital raises, and even changes in ownership, by institutionalizing the values, culture, processes, and high standards put in place by founding entrepreneurs."
Inequality is a threat to a flourishing and thriving society. With profits going mainly to shareholding owners — and a tax system that is, at best, unbalanced — it’s no wonder that inequality continues to rise. These new governance models — such as private funding and worker cooperatives — are an effort to right old wrongs, allowing more people in the ecosystem to benefit, not just the company’s owners.
When you look at your own business model, how is your business sharing its prosperity with all who have contributed to its success?
From consumption to compassion
A business cannot operate in an environment without norms, values and rights — and the state contributes to nurturing and upholding this environment. The state enforces, for example, rights on ownership of ideas through patent laws; builds infrastructure for goods and people to move to and from businesses; and provides healthcare and education for business employees to remain and become productive. In return, businesses pay taxes to the government — unless they don’t.
Economist Mariana Mazzucato declares that the state takes an even more active role in supporting innovation in private companies. She contends that every technology that makes the iPhone so "smart" — the internet, GPS, its touch-screen display, voice-activated Siri — was government-funded.
Besides the state, households are also often overlooked members of the ecosystem. Households — the family members of employees that make up the workforce — are crucial. As futurist Alvin Toffler provocatively posed, "How productive would your workforce be if it hadn’t been toilet-trained?"
When you look at your own business model, how is your business actively serving and contributing to the society and community in which it lives?
From linear to circular to regenerative practices
Earth and nature have long been considered separate from business. But a new perspective is starting to take hold: that we all, including businesses, are entangled with our natural systems, and we will flourish or perish with its well-being. Thinking about sustainability as a business case is a poor motivation for making the world a better place. This is why having a true "living purpose" is so important; if you operate from this purpose, you are operating from an intrinsic motivation to do good.
When you look at your own business model, how is your business having a net positive effect on the life-supporting systems of the Earth?
Accounting for impact
A business generally determines its success by accounting for its costs and revenues. Today, businesses also need to account for their net regenerative impact: the positive contribution they make towards society and the Earth, minus their negative impact. The intrinsic value of nature (not its financial value) and the intrinsic well-being (not financial wealth) from leading a happy, balanced life within strong communities should be considered sufficiently compelling to act on for any business.
For all but a handful of businesses, this is new terrain. Businesses may find themselves in a dilemma, caught between making their business sustainable versus making the future regenerative.
With our nested business model canvas, we hope to provide a framework, a living instrument of positive intent to fuel these endeavors. This nested canvas quite literally frames the pure business questions of the original canvas and embeds them within the larger context, for businesses to contribute to a thriving, flourishing world for ourselves, our fellow citizens and for generations to come.