Total Value and Sustainable Products

FEATURE ARTICLE

Creating and Capturing Value Through Sustainability The Sustainable Value Analysis Tool A new tool helps companies discover opportunities to create and capture value through sustainability.

Miying Yang, Doroteya Vladimirova, and Steve Evans

OVERVIEW: Recent research and practice have shown that business model innovation can be one way to create and capture new value and drive production and consumption toward sustainability. However, business model tools typically

do not create a space to consider how sustainability concerns may be integrated into the innovation process. To address

this gap, this article describes a tool that can help companies identify new opportunities to create and capture value

through sustainability by analyzing value captured and uncaptured for key stakeholders across the product life cycle.

The Sustainable Value Analysis Tool is shown to help companies recognize value uncaptured and turn it into opportunities;

it facilitates sustainability-focused business model innovation by identifying value uncaptured—and hence, opportunities

for innovation—associated with environmental and social sustainability in production, use, and disposal.

KEYWORDS: Sustainable Value Analysis Tool, Sustainability, Business model innovation, Sustainability-focused innovation

In recent years, as companies have been challenged by

environmental legislation and societal pressures (Elkington

1997), sustainability has become a key factor in long-term

business success. As a result, innovation for sustainability

has received much attention from researchers and practi-

tioners (Nidumolu, Prahalad, and Rangaswami 2009; Boons

et al. 2013). However, although technological approaches to

promote sustainability have been thoroughly investigated

(Camarinha-Matos 2011), comparatively little work has been

done to understand how innovation in business models can

support sustainability across the product life cycle, including

manufacturing, operation, and disposal.

Business model innovation looks at how companies create

and capture value at every stage of a product’s journey to

market. While business model innovation has been the

subject of much discussion and research, very few tools have

been developed to help companies integrate sustainability

into the business model innovation process (Evans et al., in

press). Existing tools for business model innovation either

do not consider sustainability (for instance, Osterwalder

and Pigneur’s [2010] Business Model Canvas) or do not

address all of the elements of the business model (for

example, lifecycle assessment tools [Tukker 2000]). Thus,

sustainability considerations and business model innovation

are often not well integrated, with sustainability being

treated as an add-on rather than as a core source of value.

Considering sustainability in the process of business

model innovation can provide entirely new ways to create

Miying Yang is a research associate at the Centre for Industrial Sustainabil- ity, Institute for Manufacturing, University of Cambridge, and a lecturer in engineering management at the University of Exeter. She holds a PhD from the Department of Engineering at the University of Cambridge. Her research is focused on sustainable business model innovation and product-service systems; she is interested in transforming theories into practical tools that help industries solve real problems. She developed the Sustainable Value Analysis Tool from her PhD research to help manufac- turing companies identify opportunities for new value creation and capture. [email protected]

Doroteya Vladimirova is a senior research associate at the Centre for Industrial Sustainability, Institute for Manufacturing, University of Cambridge, and a Fellow of the Cambridge Institute for Sustainability Lead- ership. She leads research on value innovation and new business models for a sustainable future. Her focus is on managing business model innovations that lead to more economically, socially, and environmentally sustainable organizations. She holds a PhD from Cranfield University. Prior to undertak- ing her doctorate, she worked for more than a decade in international

affairs with national and foreign governments and in international business with one of the world’s largest automakers. [email protected]

Steve Evans is a professor of life cycle engineering and the director of the Centre for Industrial Sustainability, Institute for Manufacturing, University of Cambridge. He led the launch of the UK’s first Master’s in Sustainable Design. His research seeks a deep understanding of how industries develop solutions that move toward a sustainable future. He spent 12 years in indus- try, experience which led to his research emphasis on improving engineer- ing performance and provided an excellent grounding for tackling complex, real-life problems. [email protected]

DOI: 10.1080/08956308.2017.1301001 Copyright © 2017, Miying Yang, Doroteya Vladimirova, and Steve Evans. Published with license by Taylor & Francis. This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/3.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. The moral rights of the named author(s) have been asserted.

30 j Research-Technology Management . May—June 2017

and capture value, beyond those offered by merely devel-

oping greener technology or cleaner production systems,

by making sustainability a central element not only of the

product but of the business itself. New tools that help com-

panies integrate sustainability concerns and opportunities

into the design of new business models can uncover new

approaches that yield new sources of value, making

sustainability an opportunity for growth rather than a chal-

lenge to be overcome. To address this need, we developed a

tool, the Sustainable Value Analysis Tool, that provides a

broader way of looking at value, one that integrates sus-

tainability from the beginning of the process, and a strategic

process and conceptual framework for creating and captur-

ing value by identifying where in the product life cycle

value—environmental and social value as well as economic

value—has not been captured. The result is a business

model innovation process that has sustainability at its heart.

Business Model Innovation for Sustainability In the literature, the concept of the business model is closely

linked to the concept of value (Amit and Zott 2012); the

business model explains how a company creates, delivers,

and captures value (Richardson 2008). Thus, business

model innovation is the process of identifying new ways

to create, deliver, and capture value (Casadesus-Masanell

and Zhu 2013). Several tools have been developed to help

companies improve value creation. Value Network Analysis

maps the tangible and intangible value exchanges within

internal networks (between individuals and groups within

a firm) and external networks (between organizations);

the method has achieved practical results (Allee 2011).

Osterwalder and Pigneur’s (2010) Business Model Canvas,

specifically intended to help companies design business

models, has become the dominant tool in industry. This

tool breaks the business model down into nine elements—

value proposition, customer segments, channels, customer

relationships, revenue streams, key resources, activities,

partnerships, and cost structure—and provides a framework

for understanding the relationships among these elements.

A more recent entrant, the Value Mapping Tool (Bocken

et al. 2013; Evans, Rana, and Short 2014), also focuses on

relationships, analyzing value exchanges from the perspec-

tive of multiple stakeholders to identify value creation

opportunities.

Den Ouden’s (2012) Value Framework, which

approaches business model design by developing value

propositions for all stakeholders, is alone among the major

tools in explicitly considering larger impacts; the framework

aims to create shared value concepts for four levels of

value—user, organization, ecosystem, and society—and

considers value from four perspectives: the economy,

psychology, sociology, and ecology. However, the frame-

work remains largely conceptual and is difficult to apply

in industry. None of the other major tools specifically

includes sustainability considerations in the construction

of the business model or the mapping of value relation-

ships. The Business Model Canvas, for example, focuses

Focusing business model innovation on

sustainability requires a framework for

understanding how sustainability may

generate opportunities for value

creation.

on economic value, and the Value Network Analysis, while

it may include larger networks beyond the organization, is

not specifically intended to be used in the context of sus-

tainability. The Value Mapping Tool includes sustainability

issues by considering the environment and society as key

stakeholders, but it still does not offer an adequate approach

to address the concept of value related to sustainability.

Focusing business model innovation on sustainability

requires a framework for understanding how sustainability

may generate opportunities for value creation. It requires

innovation not only on technologies, but across the entire

system, including design, processes, and operating proce-

dures (Szekely and Strebel 2013; Micheli et al. 2012). This

holistic systems view can be based on four key concepts

(Zott, Amit, and Massa 2011; Magretta 2002; Porter and

Kramer 2011; Yang et al. 2014):

. Lifecycle thinking,

. Multiple stakeholders,

. Value uncaptured, and

. Economic, social, and environmental value.

Lifecycle thinking. Lifecycle thinking is about consider- ing the economic, environmental, and social impacts of

a product across its entire life cycle—not just in manufac-

turing or disposal, but from materials sourcing through

manufacturing and use to disposal or recycling. As

described by Jun, Kiritsis, and Xirouchakis (2007), a pro-

duct’s life cycle begins when the product is designed and

manufactured (beginning of life [BOL]), extends through

its life in use (middle of life [MOL]) and to its recycling,

reuse, remanufacture, and disposal (end of life [EOL]).

Many manufacturers expend great energy creating value

from sustainability in design and production, but miss

opportunities to create and capture value while products

are in use or even at the end of the life cycle, when they

are recycled or discarded. Lifecycle thinking can help com-

panies to discover sustainability-focused value opportun-

ities across the entire product life cycle, and perhaps

identify new ways to both maximize value and minimize

environmental and social impacts.

Multiple stakeholders. The manufacture, marketing, and recycling of any product involves multiple stakeholders

at various levels, from company shareholders to employees,

customers, end users, and communities (Freeman 2007).

Building business models focused on sustainability requires

Creating and Capturing Value Through Sustainability May—June 2017 j 31

Building business models focused on

sustainability requires companies to link

resources and outcomes across multiple

stakeholders.

companies to link resources and outcomes across all

of these multiple stakeholders (Argandoña 2011), as

sustainability efforts must contribute to the creation of

shareholder value at the same time as they satisfy customer

needs and make positive contributions to the environment

and society (Stubbs and Cocklin 2008; Hart and Milstein

2003). Engaging with multiple stakeholders can help

managers identify the key players at each stage of the

product life cycle, understand the value exchanges between

stakeholders, and keep all stakeholder interests aligned.

Value uncaptured. The concepts of value captured and value uncaptured offer a way to think about where and

how value is captured in the business model and where

additional value might be created and captured. Recogniz-

ing value captured and value uncaptured and identifying

the opportunities represented by value uncaptured is an

effective approach to sustainability-focused business model

innovation (Yang et al. 2017). Value captured is the benefit

delivered to the company and its stakeholders; it includes

not only monetary value, but also the wider value provided

to the environment and society. Improved energy

efficiency, zero emissions, and clean production are all

elements of value captured for the environment. Value

uncaptured is potential value that is not captured in the

current business model. Some value uncaptured is visible,

for example, in waste streams in production and in reusable

components of broken products that are discarded. Some

is invisible, for example, workforce overcapacity or under-

utilization of available expertise and knowledge. Value

uncaptured may come in any of four forms—value surplus,

value absence, value missed, and value destroyed (Yang

2015; Yang et al. 2017) (Table 1). Value uncaptured has

some similarity with the Lean concept of waste, for instance

the seven wastes of lean production (Bicheno and Holweg

2008), but value uncaptured is broader than Lean’s wastes,

both in the kinds of value it considers and in its coverage of

the entire product life cycle, beyond production.

Economic, social, and environmental value. Value is commonly understood as monetary value; however,

sustainability requires a more comprehensive view of value

that includes social and environmental benefits (Evans,

Rana, and Short 2014). This is what we mean by sustain-

able value. Sustainable value includes economic, social,

and environmental value, and all of the considerations

particular to each of those domains (Figure 1). To effect-

ively integrate sustainability into their business models,

companies must consider benefits to the environment and

to society as valuable—that is, they must integrate sustain-

able value into the other sources of value they consider.

These four concepts—lifecycle thinking (where to look

for value opportunities), multiple stakeholders (who to

identify opportunities for), value uncaptured (how to

identify value opportunities), and economic, social, and

environmental value (what value consists of)—can be

synthesized to provide a conceptual framework for value

analysis focused on sustainability (Figure 2). By analyzing

TABLE 1. Four forms of uncaptured value

Definition Examples

Value Surplus Something exists that is not required. Wasted heat Overproduction Repeated work

Value Absence Something required does not exist. Temporary lack of labor Lack of warehouse space

Value Missed Something exists that is not exploited. Underutilization of by-products Inefficient use of human resources

Value Destroyed Something exists that undermines value. Health and safety problems Bad working conditions Pollution

FIGURE 1. The elements of sustainable value

32 j Research-Technology Management Creating and Capturing Value Through Sustainability

value captured and value uncaptured for all stakeholders

across the product life cycle, companies can identify

opportunities to create sustainable value that yield

economic benefit and contribute to the environment and

society. One novelty of this model is the possibility it

suggests of a kind of reverse application, using negative

forms of value to identify negative aspects of the current

business model that might trigger the discovery of new

value opportunities.

Developing the Sustainable Value Analysis Tool Beginning from this conceptual framework, we worked to

develop a tool to help guide businesses through a process

of sustainability-focused business model innovation. We

began by reimagining the conceptual framework as a

step-by-step process; for example, the concept of lifecycle

thinking is captured in Step 2, “Describe the lifecycle stages

of the unit of analysis.” We then designed an initial version

of the tool, consisting of a poster and a set of cards, to

visualize the process and guide implementation.

We used this initial version of the tool in a series of

facilitated workshops with academics and practitioners.

The first workshops were quite small, including just three

to six participants in a single group; we then moved to

larger-scale workshops that included three to seven groups

of five to six participants each. In developing the tool and in

the early workshops, we used an imaginary case as the unit

of analysis. During the workshops, we introduced the tool

and its use and described the imaginary case; participants

followed the step-by-step process to identify opportunities

to create value from the case. In the later, larger work-

shops, where we used the tool with industrial partners,

we used a specific problem from the partner as the unit

of analysis. The workshops varied in length from short,

one-hour sessions to long sessions of three to four hours.

The length and complexity of a workshop ultimately

depends on the size and complexity of the business and

of the unit of analysis.

At the end of each workshop, we

sent out feedback forms and also asked

participants for oral feedback regard-

ing the ease of use and helpfulness of

the tool; we also asked participants to

identify any specific elements of the

tool they felt needed improvement.

Each workshop was recorded and

researchers also took notes during

the workshops. We transcribed and

analyzed the workshops and the

participant feedback. We then evolved

the tool based on this analysis. For

example, most of the feedback on

the initial version of the tool was that

the participants needed more practical

examples to help them understand the

four forms of value uncaptured; we

embedded those examples into later

versions of the tool.

Several rounds of workshops and redesign resulted in

the current version of the Sustainable Value Analysis Tool

(Figure 3). 1

The tool provides a step-by-step approach to

identify value captured and value uncaptured for all

stakeholders across the product life cycle and a scheme to

search systematically for value uncaptured that may

represent value opportunities. The tool, which is designed

to be used in a facilitated workshop of one to four hours

with five to six participants per group (although there

may be multiple groups in a single workshop) attended

by stakeholders from across the product life cycle, is

implemented in eight steps (Table 2). The outcomes of each

step are captured on sticky notes placed on a poster-sized

version of the tool. The process results in a list of feasible

opportunities for creating sustainable value, evaluated in

terms of both economic feasibility and environmental and

social sustainability.

The facilitator plays an important role in guiding the

process, especially in identifying various forms of

value uncaptured across the product life cycle (Steps 5

and 6), which may be difficult for participants who

are quite close to the current business models. In general,

the facilitator needs to understand the theoretical and

practical elements of business model innovation and value

innovation, as well as the conceptual rationale behind the

tool. The facilitator also needs to be able to guide the

process of using the tool by asking relevant, provocative

questions and providing appropriate examples. Some

examples have been provided in the step-by-step cards that

accompany the tool. The facilitator should tailor prompts

and examples to the specific situation of the company

and workshop participants.

It should be noted that the Sustainable Value Analysis

Tool is intended to support ideation, not implementation.

However, it can be used together with other tools in imple-

menting the value opportunities identified in the process.

FIGURE 2. Conceptual framework for sustainable value analysis

1 For a full-color version of the tool, please contact [email protected].

Creating and Capturing Value Through Sustainability May—June 2017 j 33

FIGURE 3. The Sustainable Value Analysis Tool

34 j Research-Technology Management Creating and Capturing Value Through Sustainability

TABLE 2. The implementation process for the Sustainable Value Analysis Tool

Step Activity Prompts/Examples

Before Facilitator describes the concepts and rationale of the tool and explains its purpose and use. Participants describe existing business models in the company.

What are the existing business models in the company? How does the company create, deliver, and capture value to customers and other stakeholders?

1. Decide the unit of analysis (product/service).

Participants decide the unit of analysis, usually an existing product or service.

What company product or service do you want to analyze?

2. Describe the lifecycle stages of the unit of analysis.

Facilitator explains the product life cycle. Participants describe the actual life cycle of the unit of analysis, combining, adding to, or deleting the stages defined in the tool.

How is the product designed, produced, delivered, used, serviced, and disposed of? What are the detailed stages at beginning, middle, and end of life?

3. Identify key stakeholders at each lifecycle stage.

Participants identify key stakeholders at each stage of the product or service life cycle.

What entities, organizations, or individuals influence the business or are affected by it at each stage of the life cycle? Examples: Beginning—Suppliers, design partners, customers, university, government; Middle—Retailers, logistics partners, service partners, customers, trade unions; End—Recyclers, service partners, NGOs

4. Identify value captured for stakeholders at each lifecycle stage.

Participants identify and explain the economic, social, and environmental value delivered to stakeholders at each lifecycle stage.

What tangible and intangible value is created and delivered to stakeholders in each lifecycle stage? Examples: Beginning—Customization of product design, reduced energy consumption in production; Middle—Continuous income from services; End— Extended product life, reduced waste to landfill

5. Identify environmental, social, and economic value missed or destroyed at each lifecycle stage.

Facilitator explains concepts of missed and destroyed value. Participants brainstorm to identify value missed and destroyed at each stage of the product or service life cycle.

What are the negative outcomes of the business at each lifecycle stage? Is there a potential or perceived risk of value being destroyed by continuing customary practices, for instance, a risk of reputational damage or loss of customers? Is the business creating value in some form that it is failing to capture, for instance, through the better use of data to enhance equipment use?

6. Identify environmental, social, or economic value that is surplus or absent at each lifecycle stage.

Facilitator explains the concepts of value surplus and absence. Participants brainstorm to identify surplus and absent value at each stage of the product or service life cycle.

Are there tangible or intangible resources that are underutilized, such as capital assets or human resources? Are there excessive benefits, such as through overproduction, excessive product functionality, or overservice? What tangible and intangible needs of the company and its stakeholders have not been realized?

7. Identify value opportunities. Facilitator provides methods for identifying value opportunities and guides participants in analyzing each source of uncaptured value identified in previous steps and looking for opportunities for value creation.

How can destroyed and absent value be eliminated? How can missed and surplus value be captured? What innovations could extend the value captured in new and radical ways? How can greater value be captured from the existing business? Where in the life cycle are there conflicts of interests between stakeholders? How can they be resolved?

8. Assess feasibility and sustainability of value opportunities.

Participants assess the feasibility and sustainability of each identified value opportunity and rank opportunities, first by the economic, social, and environmental value they are likely to deliver and then by their feasibility, effectiveness, and ease of implementation.

Which value opportunities create higher economic, social, and environmental value? Which value opportunities are more feasible, more effective, and easier to implement?

After Participants further discuss how to implement selected value opportunities.

How can value opportunities be realized? What new business models are needed to capture value opportunities? What resources are needed in order to implement the opportunities and which stakeholders need to be involved in the process?

Creating and Capturing Value Through Sustainability May—June 2017 j 35

The Sustainable Value Analysis tool can

be used together with other tools in

implementing the value opportunities

identified in the process.

For example, the tool can be used in conjunction with the

business transformation tool developed from Vladimirova

(2012), by embedding the identified opportunities into

business model designs to create action plans for business

transformation.

Testing the Tool We investigated the usability and utility of the Sustainable

Value Analysis Tool in a series of 32 workshops (all

facilitated by the research team); the process included more

than 100 participants from 35 companies. Participating

companies ranged in size from small startups to large

multinational firms and came from various industrial

sectors, including steam turbines, digital video recorders,

automotive, and food. They were based in a number of

countries, including, among others, the United Kingdom,

China, Brazil, Spain, and the United States. Individual

participants were designers, general managers, C-suite

executives, and engineers.

After each workshop, we asked participants to provide

feedback, either orally or on a printed form, regarding the

usefulness and value of the process. Participants were asked

to respond to three questions on a four-point scale, from

“Not at all” to “Very.” Responses were largely positive, with

most participants finding the process both useful and highly

usable. For instance, at a workshop with 32 industrial

participants from 18 companies, all participants agreed that

they could easily follow the step-by-step process for using

the tool and that the tool was helpful to their companies

to some degree; 56 percent of them thought the tool was

very helpful (Figure 4).

Using the Tool: A Case Study One company that participated in our development process,

a state-owned industrial steam turbine manufacturer in

China, used the Sustainable Value Analysis Tool to identify

new opportunities for energy management contract (EMC)

projects. The company’s turbines are mainly used as

auxiliary engines to convert the heat or steam produced in

engineering processes into electrical or mechanical energy.

In EMC projects, the company sells electricity rather than

steam turbines. These projects are achieved by building a

whole turbine system that turns wasted heat into electricity.

Because it retains ownership of the turbines, the company

must maximize the value harvested from the turbines

over their entire life cycle. Thus, workshop participants

sought to identify opportunities for value creation and

capture at each stage of the turbines’ life cycle, especially

at the end of life.

The company held six facilitated workshops with a total

of 26 participants from all levels of the company, including

the general manager, supply chain manager, director of the

company’s computing institute, the director of the inte-

grated management office, and service managers. Follow-

ing the step-by-step value analysis process, participants

identified 156 instances of value uncaptured and 47 value

opportunities across the life cycle of the turbines. For

example, they identified a significant amount of wasted

heat and steam in customers’ processes, representing value

uncaptured in the middle of life. To capture that value, par-

ticipants then identified a value opportunity in the form of

an upgrade to the current steam turbines that would allow

them to utilize the wasted heat. This opportunity provided

a new way of creating value for customers (reduced energy

waste) that would also yield value for the company, as the

electricity produced from the wasted heat could then be

sold back to customers. The workshops also identified

opportunities to link recyclers and suppliers of turbine

components to create recycling schemes for old turbines.

For example, suppliers could rent turbine components

rather than selling them and then take them back at the

end of the turbines’ life, to be repurposed or recycled. This

is a significant opportunity that could change the business

models of suppliers, manufacturers, and recyclers, and

ultimately reconfigure the company’s supply chain.

Feedback from the company has indicated that, beyond

the immediate opportunities identified by the tool, its

use has engendered a new way of thinking about value that

FIGURE 4. Participant feedback on the Sustainable Value Analysis Tool

36 j Research-Technology Management Creating and Capturing Value Through Sustainability

has provided ongoing benefits. For example, after using the

tool, the company has come to regard “customer’s wastes”

as value uncaptured and has identified opportunities to

help customers reduce waste. This effort has yielded new

value for both the customer and the company.

Conclusion The Sustainable Value Analysis Tool addresses a critical need

for tools that can help companies integrate issues and oppor-

tunities related to sustainability into business model innov-

ation. Working through the concepts of value captured and

uncaptured, the tool can help companies understand both

the positive (value captured) and negative (value uncap-

tured) aspects of their current business models and identify

value creation opportunities presented by both.

Many companies think rather narrowly about value

creation and where value may be found, focusing only on

customer value (value in the eyes of the customers) and

value created in production. The Sustainable Value

Analysis Tool can change mindsets about what is regarded

as value and open participants’ eyes to a wider universe of

value opportunities. In this way, the tool provides a new

lens through which companies can understand value and

a structured approach to discovering value opportunities

embedded in a sustainability-focused approach to business

model innovation.

This study was supported by the EPSRC Centre for Innovative

Manufacturing in Industrial Sustainability (grant EP/I033351/1)

and the EPSRC project Business Models for Sustainable Industrial

Systems (grant EP/L019914/1).

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Creating and Capturing Value Through Sustainability May—June 2017 j 37

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