How to create a Green (and Lean) Startup

Mar 18, 2021 | Sustainable business

How to create a Green (and Lean) Startup

We need sustainable businesses and entrepreneurs to play a big role in the transition to a sustainable world. As a (future) business owner you have the chance to use whatever impact you have to contribute to this. Once you have decided to become a green entrepreneur, you will have to determine how to do this. Balancing the three dimensions of sustainability – social, environmental, and economic – is not choosing the easy way to make a living. Therefore, we would like to help you with this inspiring article based on a recent study (Baldassarre et al., 2020). We will share with you what scientific research tells us about how to create a Green Startup, while minimising risks and maximising your chance of success. 

How can environmental and social concerns be integrated into a sustainable business model?

The business model framework which organisations use to plan and execute their strategy is based on a value proposition, value creation and delivery, and a value capture element. A sustainable business model embeds sustainability into this model. In a broader context, ‘sustainability’ refers to a state of human development that meets the needs of the present without compromising the future. In a business context, sustainability is often defined more specifically as triple-bottom-line thinking (people-planet-profit). In other words, balancing economic value with environmental and social value. This means that in a sustainable business, environmental and social impact assessment are usually embedded in the business objectives and operations.

 

Choosing a sustainable business strategy

There are lots of strategies to create a sustainable business. Here are a few examples:

  •  Maximise material and energy efficiency
    A business that focuses on maximising material and energy efficiency.
  • Create value from ‘waste’
    A business that turns a resource normally considered as waste into a product / service.
  • Substitute with renewables and natural processes
    A business that substitutes materials and energy with natural alternatives and renewable energy.
  • Circular business
    A business in which nothing is allowed to be wasted or discarded into the environment, which reuses, repairs, and remakes in preference to recycling.
  • Deliver functionality rather than ownership
    A business that delivers functionality and experience, rather than product ownership.
  • Adopt a stewardship role
    A business that commits to bear responsibility for the environmental and social effects of its operations.
  • Encourage sufficiency
    A business that encourages minimising of consumption (e.g. offering repair service or selling very durable products).
  • Re-purpose the business for society/environment (nonprofit / social enterprise)
    A business that prioritises societal and environmental benefit, rather than prioritising economic growth.

 

From business idea to market launch

One of the major challenges of creating a sustainable business is that many promising business model ideas fail to reach the market, which is needed to actually achieve impact. In the scientific literature, this issue is referred to as a “design-implementation gap”. Business experimentation can avoid a design-implementation gap by using prototyping as a way to iteratively implement business ideas early on. Setting up a small-scale pilot forces an organisation to simultaneously consider the desirability (what users want), feasibility (what is technically achievable) and sustainability (what is economically, socially and environmentally acceptable) of a new business model. Piloting early on saves a lot of time, money and energy and in that way contributes to building a successful startup.

 

The Green and Lean Startup

The concept of business experimentation is intertwined with early business model implementation. The famous Lean Startup movement puts a major focus on this aspect by proposing an actionable framework to set up small-scale pilots based on three iterative steps, called the build-measure-learn loop:

1) The “build” step is about creating a minimum viable product (MVP), defined as the simplest version of a product / service that can be sold to consumers.
2) The “measure” step assesses how the product or service performs on the market, using the MVP.
3) Finally, the “learn” step integrates the learning collected in the previous two steps into the next version of the MVP.

The steps are iterated until the MVP fits the needs of a solid customer base, and sales can be scaled up. The Lean Startup by Eric Ries is a must-read for every (future) entrepreneur.

Within the Lean Startup framework, several practices and methods can be employed. The most central one is prototyping, which is essential for the creation of MVPs, and physical or digital artefacts (e.g., a landing page for a web-based service) to be tested with consumers on the market. A/B testing is a method to evaluate two (or multiple) prototypes simultaneously. The key method for evaluation is defining key performance indicators or metrics (KPI’s), and then using them to quantitatively measure product performance.

 

From sustainable business idea to MVP

Before detailing sustainable business model ideas, prototypes are crucial to bridge the gap between design and implementation, and to verify early on if the implementation is feasible at all.

The scientific article by Baldassare et al. (2020) suggests to build prototypes and execute small-scale pilots by simultaneously taking into consideration four main criteria:

  1. The desirability of the business idea
    2. The sustainability of the business idea
    3. Technical feasibility of the business idea
    4. Financial viability of the business idea

The researchers have created a tool that supports thinking in this direction, called the Sustainable Business Model Pilot Canvas. You can find this canvas below. The canvas is not focused on developing a business idea, but rather on testing new business models driven by sustainability. When using the canvas, it is important to define a plan to execute a small-scale pilot and if you would not be able to make the plan work right away, change it. The small-scale pilot idea should cost minimal effort (read more about how to design and plan your first pilot below).

The Sustainable Business Model Pilot Canvas tool can support you in quickly establishing 1) if customers and stakeholders are interested in the business model idea, 2) whether such an idea is sustainable or not ,3)  if it can work from an operational point of view, and 4)  if it is possible to immediately generate money from it (an aspect that is essential to reach the market).

 

The Sustainable Business Model Pilot Canvas

 

1. The desirability of the business idea

What is the idea? (Sustainable Value Proposition)

– Description of the main idea for a small-scale pilot around a new sustainable product/service that can be quickly executed with available resources.
– Definition and description of who will be the user/customer of the product/service provided in the pilot.
– Explanation of why the user/customer wants the product/service put forward by the pilot.

 

2. The sustainability of the business idea

Why is it sustainable? (Sustainability Impact)

– Explanation of the sustainability impact generated by the pilot and the related business case.
– Definition of one or more indicators to measure the sustainability impact generated by the pilot.
– Assessment of the actual results for each indicator after executing the pilot.

 

3. The technical feasibility of the business idea

How do you make it happen? (Sustainable Value Creation)

– List of all the people/organisations involved in setting up and executing the pilot.
– List of the resources (e.g., knowledge, expertise, network, and infrastructure) that each person/organisation brings to the table to set up the pilot.
– List of all the actions that each person/organisation performs to set up the pilot.

How does it work? (Sustainable Value Delivery)

– Sequence of actions that a user/customer has to do during the pilot.
– Sequence of actions that the people/organisations working on delivering the pilot have to do in order to support each step of the user/customer journey.

 

4. The financial feasibility of the business idea

How do you make money? (Sustainable Value Capture)

-Definition of the costs needed to execute the pilot and how such costs are shared across stakeholders.
– Definition of the revenues deriving from executing the pilot and how such costs are shared across stakeholders.

 

Baldassarre, B., Konietzko, J., Brown, P., Calabretta, G., Bocken, N., Karpen, I. O., & Hultink, E. J. (2020). Addressing the design-implementation gap of sustainable business models by prototyping: A tool for planning and executing small-scale pilots. Journal of Cleaner Production, 255, 120295.

 

Planning and executing the pilot

As mentioned before, it is important to define a plan to execute a small-scale pilot and if you would not be able to make it work right away, change it. By planning and executing the pilot, startups will encounter several bottlenecks that force early reconsideration of sustainable value propositions, value creation and delivery, and value capture. Based on this, the researches have also developed a tool to support you with planning and executing the pilot. You can find the tool below. Using this tool will help you to consider everything that you need for your pilot:


1. Prototype the sustainable value proposition

-Product/service prototype
Briefly define and describe a basic version of a product / service that you can quickly implement with available resources.

– Stakeholder network
List the stakeholders that are needed for creation and delivery of the product / service prototype. Specify who are the end-users / customers.

– Sustainability impact
Define one or more KPI’s to measure the sustainability impact generated by the prototype.

 

2. Prototype sustainable value creation and delivery

Plot on a timeline all the actions that each stakeholder (including end users) needs to do in order for the product/service prototype to be built and delivered to end users.

 

3. Prototype sustainable value capture

 

– Costs
List the costs to create and deliver the product / service prototype and how such costs are shared across stakeholders.

– Revenues
List and explain the revenue streams generated by the product / service prototype and how such revenues are shared across stakeholders.

 

Baldassarre, B., Konietzko, J., Brown, P., Calabretta, G., Bocken, N., Karpen, I. O., & Hultink, E. J. (2020). Addressing the design-implementation gap of sustainable business models by prototyping: A tool for planning and executing small-scale pilots. Journal of Cleaner Production, 255, 120295.

 

 

You have come up with a sustainable business idea, created a prototype, piloted it, and then..?

After the prototype has been tested in the pilot, adjustments can be made to the business model. The improved business model can then be used to design an improved prototype that can be tested in a pilot again. This can go on until the business model has proven to be desired, sustainable, and technically and financially feasible. In this way, you will test your business model in the most efficient and risk-free way. This will save you a lot of time, effort and stress and will increase the chance that your Green Startup will succeed. Good luck! Please let us know how it goes and contact us if you need any further advice.

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References

Baldassarre, B., Konietzko, J., Brown, P., Calabretta, G., Bocken, N., Karpen, I. O., & Hultink, E. J. (2020). Addressing the design-implementation gap of sustainable business models by prototyping: A tool for planning and executing small-scale pilots. Journal of Cleaner Production, 255, 120295.

Bocken, N. M., Short, S. W., Rana, P., & Evans, S. (2014). A literature and practice review to develop sustainable business model archetypes. Journal of cleaner production, 65, 42-56.

 

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