Business Modeling

Business Modeling
A book by
A. Mosavi, & A. Delavar
Book: Mosavi A, and Delavar A, Business Modeling. Budapest, Obuda University, 2016. DOI:10.13140/RG.2.1.4017.8962
Business Modeling
Business Modeling
Keywords: Business Modeling, Sustainable Development, Product

Development
Abstract:
The aim of this book is to investigate the role of business models and to
explore the potential of business modeling for sustainable development
in particular. Further the focus would be narrower to the research on
sustainable product development. Thus this book provides a broad
revision
to
the
literature
on
business
models
for
sustainable
development. Our literature review is mainly concerned with the

business models which have been adapted by firms involved in product
development or the researches related to product development. This
book concludes that using business modeling in product development
can empower sustainability and highly contribute in sustainable
development.
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Preface
Product development can be seen as a process from invention, design,
planning, production, to service phases and customer relation. Product
development is a
multi-criteria and
multidisciplinary topic. The
multidisciplinary topics in product development include art, management,

and engineering. From a primary idea to the manufacturing stage a
product must be simulated and evaluated from different perspectives.
In addition to the different fields of engineering involved a product may
be required to be considered from aesthetic point of view. And many
simulations and tests may be performed. Further marketing and
customer relationship management, and supply chain management play
important roles in the success of product development.
Thus engineering firms should have the knowledge to generate new
product ideas, evaluate these ideas and also manage the decisionmaking development process. While doing this, understanding the
market, future analysis, economic analysis, uncertainties, sociology and
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human behavior would be other possible criteria involved in the success

of a product.
With all these complexity involved in the business of the product
development it is clear that product development is more than an
engineering process. And with the complexity involved in todays
competitive market in order to maintain profitability, the important factors
of product development must be carefully considered by firms. The
concept of business modeling provides a framework for product
innovation.
This book contributes to the idea of business modeling. The idea behind
the concept of business modeling would be developing a visual business
network within a firm instead of a product. This would provide the
possibility to consider all the success factors involved in making value.
Furthermore a business model would provide the possibility to easier
consider the environmental and social factors in developing a product.
It has been our assumption that using business models in product
development would be beneficial in decision-making, highly contribute in
sustainable development and would empower sustainability in firms. Yet
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conducting a literature review would provide a better understanding

about the capability of business modeling for sustainability.
Nonetheless the recent research shows the importance and beneficial of
business modeling for progress and innovation in sustainable produce
development. In this book the business models are going to be
discussed as the important factors that can highly support cleaner
products promoting sustainability.
The book is about business model literature and the creation of benefits.
From a strategy perspective business model innovation is an approach
to design, implement and change business models to increase value
and bring competitive advantage.
With this book I hope the provided literature allows for developing further
theoretical and empirical research in the field.
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TABLE OF CONTENT
Preface ............................................................................................................. III
TABLE OF FIGURES ........................................................................................ X
Abreviation
1.
Description .............................................................................. XII
Introduction ................................................................................................ 1
1.1 Definitions ............................................................................................. 4
1.2 Justification ......................................................................................... 11
1.3 Research Purpose .............................................................................. 12
1.4 Outline of the book ............................................................................. 13
2.
Theoretical Background ........................................................................... 14

2.1 Business Modeling and Sustainable Development ............................ 16
2.2 Business models for product development ........................................ 17
3.
Business Modeling ................................................................................... 25

3.1 Design of the Business Models .......................................................... 31
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3.2 Literature Review on Business Modeling ........................................... 38

4.
Business modeling for sustainable developement ................................... 47

4.1 Literature Review ............................................................................... 53
4.2 Business models for sustainable development; requirements and
barriers ..................................................................................................... 62
4.3 Business Modeling for Sustainable Product Development ................ 71
5.
Conclusions and Future Works ................................................................ 81
6.
References ............................................................................................... 83
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TABLE OF FIGURES
Figure 1-1 Business model in a firm in connection with business functions
according to Blanks (2013) [16] (self illustrated) ......................................... 5
Figure 1-2 Three pillars of sustainable development (illustration from [23]) ...... 8
Figure 1-3 Illustration of the multidisciplinary research area of business
modeling for sustainable product development (self generated image) ... 10
Figure 2-1 Components of business model for product development
(Osterwalder & Pigneur 2010); Business Model Canvas for Design of
Business Models [45] ................................................................................ 20
Figure 3-1 Business model as the link between strategy and business process
in the firm according to Seddon & Lewis (2003) [60] (self illustrated)....... 27
Figure 3-2 The role of the business model in the firm [35] ............................. 28
Figure 3-3 Business Layers according to Osterwalder (2004) [35] ................. 30
Figure 3-4 Business Model Canvas for Design of Business Models;
Osterwalder and Pignuer (2010)s Standard Model [45] ........................... 33
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Figure 3-5 The Business Model Environment Template according to Kamprath

& Van Den Broek [66] ............................................................................... 37
Figure 3-6 Business Model Vs. Technology from 1996 to 2005 (Osterwalder, et
al. 2005) [13] ............................................................................................. 44
modeling for sustainable development (self made) .................................. 49
Figure 4-2 Illustration of Eco-innovation business model innovation proposed
by Rennings (2000) [100], and modified and updated by Ldeke-Freund
(2010) [80] ................................................................................................. 56
Figure 4-3 Basic requirements for successfully developing sustainable
business models according to Boons and Ldeke [9] .............................. 64
Figure
4-4
barriers
in
developing
business
models
for
sustainable
development (Boons and Ldeke) [9] ....................................................... 68

Figure 4-5 left: introducing the multidisciplinary research field of business
model for sustainable product development, vs. right: business model
elements proposed by Wstenhagen & Boehnke, (2008) [103] and
modified by Ldeke-Freund (2010) [80] .................................................... 74
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Abreviation
Description
IT
Information Technology
ICT
Information and Communication Technology
IS
Information Systems
B-MET
Business Model Environment Template
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1. Introduction
We live in a competitive, uncertain economic environment. Today firms
are highly challenged with the dynamic of the business environments.
This makes business decisions complex. In order to deal with complexity
of decision-making in firms, the concept of business modeling has
become popular and handy (Stubbs & Cocklin, 2008) [1], [2]. However
because of the todays business environments shaped by information
and communications technologies (ICT), globalization and an increasing
complexity and uncertainty leaves managers with difficult decisions to
make. Consequently managers have been eager to be well informed
what business models actually are and how they can be implemented in
their business (Schaltegger et al., 2012) [3].
Today firms have to keep up with increasingly rapid "product to market"
cycles. In addition they are faced with shorter product life cycles, new
technologies, market uncertainties as well as global and competitive
markets. According to Sommer (2012) in such business environment, in
order to react to market changes, firms should be able to react fast and
manage a very effective product development strategy [4].
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Sommer (2012) believes that todays firms in order to be competitive and

survive the have to also manage reliable supply chains, effective
distribution channels, ICT implementations, and maintain strategic
partnerships [4]. To doing so today firms need useful tools that allow
them to understand, simulate, assess, and improve their business
models. However the innovative tools that can help managers to
facilitate complex decisions are still not well identified. Furthermore firms
require better communication tools for improving internal (teams and
employees) as well as external communication (customer relation)
(Hockerts & Wstenhagen 2010) [5].
Linder and Cantrell (2000) describe mainly managers have an intuitive
understanding of how their businesses function. In the other words
managers only intuitively know about the method that value is created
[6]. This means that managers may not necessarily be able to present
their business model clearly even though an intuitive understanding of
the firms business model could be available.
Nevertheless the business model of a firm effects all decisions made
within a firm. Yet if the business model is not clearly documented it
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cannot be easily understood by the employees. Consequently it is

essential to use innovative tools to easily understand and clearly
communicate the business model. According to Linder and Cantrell
(2000) such innovative tools will let them easily communicate the
business model within the firm in order to secure further business
opportunities [6].
Yet recent environmental, economical and financial worldwide crises
have raised important attention to the importance of sustainable
business models. According to Schaltegger & Burritt (2005) the concept
of sustainability for business model refers to approaches dealing with
environmental, social, and economical issues [7]. Kanashiro & Starik
(2013) put it in the other worlds that sustainability in environmental,
social, and economical issues in an integrated manner must transform
firms toward sustainable development [8]. And sustainable development
can only be happening within the limits of a sustainable ecosystem.
Thus currently managers are challenged to participate in the idea of
sustainability by exploring the innovative business models which
profitable while maintaining positive environmental effects.
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The researches conducted by Boons & Ldeke-Freun (2013) and earlier

by Hansen et al. (2009) show the growth of this new field of research [9],
[10]. Furthermore, according to Sommer (2012) and Hockerts &
Wstenhagen (2010) the sustainable business models would be useful
for existing firms for a transformation [4], [5]. In addition the entirely new
business models invented by researchers would highly benefit.
1.1 Definitions
The concept of business modeling for sustainable product development
is the main concern of this book. Understanding this topic would require
a broad understanding on the combination of three different concepts
and research fields. These three concepts would be business modeling,
sustainable development, and product development. In the following we
provide definitions to these three concepts.
Business Model, according to Johnson (2008), is defined to be the plan
implemented by a firm to generate revenue and make a profit from
operations including product development [11]. Debei & Avison (2010)
explain that the business model is in fact an abstract representation of a
firms business strategy [12]. And Osterwalder et al. (2005) states that
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Business Model is the description of profit making within a firm [13]. In

the other words value proposition, and value architecture of a firm
shapes the architecture of its business model.
Product
Costs
Capabilitie
s
Business
Value configuration
Distributio
Model
n
Partner
Management
network
Infrastructur
Custome
Revenue
Figure 1-1 Business model in a firm in connection with business functions

according to Blanks (2013) [16] (self illustrated)
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In fact, business model presents how a company outsources the market

and profits in regard to customers (Slywotzky 1996) [14]. On the other
hand, Mayo & Brown (1999) seen business model as the design of an
interdependent systems that create a competitive business strategy
[15]. Further Sawy & Pereira (2013) state that the business model
includes different components and functions of the business [52].
Functions of the business depends of the type of business may include
product,
distribution,
costs,
value
configuration,
management,
competencies, infrastructure, pertner network, target customer, revenue,

core capabilities.
According to Blanks (2013) following figure describes the business
model of firm in relation with the main business functions including
product development, cost, distribution, etc. [16].
Sustainable development refers to the process of development that is
conducted without threaten of natural resources [17]. In the other words
an
economic
development
is
process
for
meeting
human
development goals while maintaining the ability of natural systems to

regenerate [53]. Yet Daly (1990) suggests that development may have
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different dimension including ecology, environment, agriculture, energy,

transportation, economics, business, income, politics, and culture [18].
Brundtland (1987) defines that the new concept of sustainable
development is connected to natural resource management in a
sustainable manner [19]. Sustainability is simply defined by Kahle and
Gurel (2013) as the way of maintaining natural resources for our future
generation without causing harms to the ecosystem [20]. Finn (2009),
Lele (1991), and Daly (1990) further described sustainable development
as a vital issue that challenges humanity concerning social, political, and
economic [21], [22], [18].
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Figure 1-2 Three pillars of sustainable development (illustration from [23])
These three challenges are considered as three pillars of sustainability

(Goodland 1995) [24] see figure 1-2. The research on sustainable
development has been further conducted by numerous scholars e.g.
James, P. (2014) and Melville (2010) on the basis of these three pillars
[25], [26].
Other scholars for instance, Esty (2005) provide other definition to
sustainable development i.e.; the organizing principle for sustaining
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resources necessary to provide for the needs of future generations of life

on the planet [27], [54]. According to the latter definition, sustainable
development is considered as a process that seeks a desirable future for
humanity where resources will meet human needs without harming the
stability and beauty of the nature [54]. In fact today concerning human
development there is an additional urge for people responsibility to
maintain resources for future generations [54].
Product development is the complete process of bringing a new product
to market [28]. As Kenneth & Kahn (2013) states this process may be
investigated from either business or engineering point of view [29]. Yet
according to Smith & Steven (1997) the new definition to product
development would be the process of designing, creating and marketing
new products to benefit customers [30]. Sometimes referred to as new
product development, the discipline is focused on developing systematic
methods for guiding all the processes involved in getting a new product
to market.
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modeling for sustainable product development (self generated image)
Here we aim at focusing on the intersection of these three independent

fields of research. In the other words an integration of these three fields
of research would require conducting a multidisciplinary research. Thus
the focus of business modeling would be first narrowed down to
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Sustainable Development. Further the focus would be narrower to

Sustainable Product Development.
1.2 Justification
Currently sustainable development has become an important matter for
firms around the world [31]. Being in harmony with natural systems
would be the solution that sustainable development suggests to the
social, political, and economical challenges that firms are facing today
[32].
One of the major fields of sustainable development concerns with
product development. Firms which are involved in product development
highly count on technology-driven innovations in order to produce novel
and unique products [31]. And Doganova & Eyquem, (2009) believe that
the commercial success of a product is highly dependent on the
business model that creates value from innovative technology [33]. In
this context success of the innovative business ideas of firms is highly
dependent on business models [11]. Therefore concentrating on
business modeling for sustainable product development would be of
interest of product development firms. And according to Korsten et al.
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(2008) designing business models that are promising woulod be a major

challenge for the innovation-oriented and environmentally conscious
firms. Consequently doing a literature review in order to identify the
practical use and real potential of business model in product
development in a sustainable way sounds essential [34].
Integration of these three fields of research would require conducting a
multidisciplinary research. Thus in this book the focus of business
modeling would be first narrowed down to Sustainable Development.
Further the focus will be narrower to Sustainable Product Development
(see figure 1-3). As the result focusing on the intersection of these three
independent fields of research would justify our research topic.
1.3 Research Purpose

The general research purpose of our book is to identify the research
gaps in the field of business modeling for sustainable development.
Along with the literature review we aim at increasing the knowledge and
understanding on the both fields. Further our purpose is to generate
insights into the multidisciplinary research on sustainable product
development. In doing so, this book aims at exploring how business
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modeling has been assisting the sustainable development in firms in

general and in product development firms in particular. This would
include those firms which are involved in developing products. With our
literature reviews we aim to investigate how business models can
contribute in sustainable development.
1.4 Outline of the book

In the chapter one a brief definition to the concepts of this book is
provided. Chapter two presents a theoretical background to business
modeling and also business modeling for product development in
particular. Chapter three concerns with business modeling and a general
revision to the topic of Business models. Chapter four focuses on
business modeling for sustainable development and reviews a number
of case studies.
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2. Theoretical Background
In this chapter first we provide a background to Business Modeling and
Sustainable Development. Later we briefly present a background to
business models for product development. At the end we will discuss
how these two fields can be integrated to approach the idea of business
models for sustainable product development.
Osterwalder (2004) presents a good definition to the potential and usage
of business models. He states that: a business model is a conceptual
tool that contains a set of elements and their relationships expressing a
company's plan of earning money. He further states that: a business
model is a description of the value a company offers to customers and
the architecture of the firm and its network of partners for creating,
marketing and delivering this value [35].
Peter Drucker, who is one of the most influential managers, is among
the first pioneers in adopting the business model 50s. He challenged
managers to answer their firms important questions by developing a
viable business model. According to Drucker et al. (2008) a business
model must answer a firms fundamental questions about its mission,
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customer, customer values, results, and plan [36]. The lessons of Peter
Drucker have been guiding the managers and researchers who seek
deeper understanding toward business modeling. Weill & Vitale,
Timmers are considered as those scholars whom took the research to
the next level [37], [38]. And further Amit & Zott explain more about
designing of the business models [39].
Hacklin & Wallnofer (2012) states that: business modeling since early
90s has been seen as a new way to illustrate a firms core logic for
creating and capturing value [40]. However they also conclude that the
literature on business model is very young. Further Osterwalder et al.,
(2005) highlights that the business modeling is very dependent on the
advancements in information technology (IT) [13]. Thus after the year
2000 by expanding the Internet, it experienced a boost. It is worth
mentioning that despite the popularity of the term business modeling
among todays firms, accordingly our literature review, presented in the
next chapter, will present an understanding over the concept.
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2.1 Business Modeling and Sustainable Development

In this part we provide a brief background to business modeling for
sustainable development to get an overall understanding about the topic.
In the next chapter our investigation would be more detailed.
Recent environmental, economical and financial worldwide crises have
increased attention to the importance of sustainable business models.
According to Schaltegger et al (2014) these crises have forced United
Nations World Business Council to rethink the contributions of
governments and firms to sustainable development [41]. And as it was
defined in the last chapter sustainability must be managed with respect
to sustainability of social, environmental and economical issues.
Sustainable development was defined three decades ago by Burton
(1987) [42]. According to him the development that meets the needs of
the present without compromising the ability of future generations to
meet their own needs is considered as Sustainable development [55].
As it was mentioned above the concept of sustainable business model
should be dealing with social, environmental and economical issues.
Further Starik & Kanashiro (2013) describes that environmental, social,
and economical facts together should transform firms toward sustainable
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development within the boundaries of a sustainable ecosystem. Thus

currently managers are challenged to contribute to sustainable
development. Furthermore, researchers on other hand are therefore
increasingly exploring the new business models for maximum profit
making while maintaining environmental issues [8].
The researches conducted by Boons & Ldeke-Freun (2013) and earlier
by Hansen et al. (2009) show the importance of this new field of
research [9], [10]. Furthermore according to Sommer (2012) and
Hockerts & Wustenhagen (2010) the sustainable business models would
be useful for existing firms for a transformation [4], [5]. In addition the
innovative business models pioneered by researchers would highly
benefit.
2.2 Business models for product development

In this part we provide a background to the concept of business
modeling. We briefly review the business modeling for the firms which
are involved in product development regardless of sustainability issues.
In the next chapter we will particularly focus of business models for
sustainability development.
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Concerning product development in particular, the concept of business

modeling has become increasingly very popular during past two
decades [44]. The innovative idea for product development has been the
shift from developing a product to developing a concrete business model
that indicates how to make profit [37]. According to the literature of
Osterwalder & Pigneur (2010) business model in fact has been known
as a tool to assist product development firms [45].
Sommer (2012) emphasizes that it isn't enough to have a product
developed but a concrete business model is required to make profit at
delivering value to of customers. As the result the value is better
delivered to the target customers [51].
Business
model
simply
(in
an
abstract
manner)
helps
simplifying/describing the way profit is made in a firm. According to

Business Model Canvas of Osterwalder & Pigneur (2010), one of the
effective tools as such for simplifying/describing the profit making in
firms would be the visual business models [45].
Figure 2-1 describes the elements of Business Model Canvas. Such
model is well communicated through manager to the employees and
different teams within a firm. According to Osterwalder & Pigneur (2010)
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the concept of business model for product development has a number of

components. These components include: Customer Segments, Value
Propositions, and Channels of Distribution, Customer Relationships, Key
Partners, Key Resources, Key Activities, Cost Structure, and Revenue
Streams [51].
Further by identifying the components of a business model we can
develop any business model to be used by any firm. In fact, by
identifying the components and relation between them it is then possible
to investigate the business model, for creating new products. This would
deliver the ability to investigate how business will be profitable.
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Figure 2-1 Components of business model for product development

(Osterwalder & Pigneur 2010); Business Model Canvas for Design of
Business Models [45]
Figure 2-1 provides an overview over components of a standard

business model according to Osterwalder & Pigneur (2010). This
business model canvas presents a visual representation of business
models for firms. Nevertheless such representation of business model
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can be used for creating either a sustainable conscious business model

or a one-dimensional (conventional profit-oriented) business model [45].
Today, due to dislocation in numerous industries, increasing the new
global competitors, growing risk in global businesses, and increasing
ecological constraints, the concept of product development more than
ever needs innovation. Yet as Osterwalder & Pigneur 2010 states the
discipline of business modeling offers an advanced approach to growth
in this challenging environment [45].
Business modeling for a product innovation means an innovative
business idea coming at the right place and the right time. However to
benefit from a reliable and competitive advantage, the business model
must be systematically cultivated and managed [44]. Researchers such
as argue that business modeling for product innovation is highly relevant
to the current business environment. Timmers (1998)s research works
describe the details that business models have proved valuable and
further discuss how companies can develop competitive business
models [38].
Among the top product development companies the business models of
Apple, McDonald's, Toyota, Blockbuster, Home Depot, Intel, Dell and
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Starbucks would be the honorable mentions. The business model of any

of these multinational firms are very good examples for an innovative
product development business model. In the following we will consider
the Apple products innovation.
In the following we describe a bit more about the business model of
Apple as a successful case. However the success stories of such
multinational firms are only considered from the perspective of success
implementing an innovative business model. Thus such models cannot
necessarily be a role model for sustainability in midle-sized firms.
As Lindgardt (2009) states Apples products business model would be a
good example of success adaptation and product innovation [44]. In 90s
Apples initial business model to profit was not very promising. In fact
Apples approach to designing both hardware and software limited its
progress. As the result Apple was not able to compete in the market with
its high prices. Yet in 2001 Apple started introducing new products and
services according an innovative business model. The iPod, the iTunes
and the iPhone were the innovative business ideas that helped the
company to get to the top of the market.
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Apples shift to an innovative business model wasnt only a matter of

product innovation rather a reliable and well designed business model.
Apples success, in the other words, came from a reliable business
model for downloading music. This business model had in fact highly
influenced the music industry since then. Apple provided an integration
of product innovation and business model innovation that brought it the
success. It also helped the expansion of the company successes to the
Apples computers.
Lessons learned from the Apples successful business model argues
that when technology-driven innovations produce novel products, the
true success can only be achieved thought an innovative business
model. Accordingly the survival of business profitability is highly
dependent on novel business models [32].
In this chapter we presented a background to Business Modeling for
sustainability as well as business models for product development. Yet
our further aim would be to get these two fields integrated to approach
the concept of business models for sustainable product development. As
it was mentioned above the successful business model cases such
Apple may not be necessarily a good example of business models for
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sustainable product development as the profit of shareholders and

stakeholders is dominant.
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3. Business Modeling
In this chapter the concept of the business modeling is reviewed in
respect to product development firms. Here we tried to raise
understanding on the topic regardless of sustainability issues. In the next
chapter our investigation will be narrower by focusing on the
sustainability issue.
According to Debei & Avison (2010) business model is an abstract
representation of a firm [12]. Such representation may be graphical,
conceptual, and textual of architectural, co-operational, and financial
arrangements of a firm. Designed. Based on such arrangements the firm
aims at pursuing its strategic planes. Debei et al. (2008) further indicates
that a firms business architecture allows the movement of products and
information [46]. And such architecture which also used for pricing,
revenue structure and value network constructs the basis of a business
model. In fact a business model is a conceptual tool including a number
of elements expressing the business logic of a specific firm [13].
Therefore, a simplified representation of the business and relationships
with customers would be considered as a business model.
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Business models aim at systematic simplification of complexities of a

particular business which is often difficult to conceptualize [33]. In fact
through such simplification the design, implementation of business
models would support firms in managing new business ideas. Thus,
business models represent the essence of firm activities [31].
Furthermore business models support manager in analysis of the
success factors and the adaptation of business activities. In other words
a business model supports the development process within a firm and
illustrates it a simplified form. An Illustration presents what resources are
used and how they are converted into products. Consequently a
business model includes valuable information about the optimal
production factors and the corresponding functions. In this context, and
according to Wirtz (2010), the business model can be understood as a
management tool for empowering firm success [47].
According to Sthler (2002) a business model is always a simplifide
version of a complex reality [48], [49]. Further Cavalcante et al., (2011)
regards business model as an abstraction for describing a business at
the conceptual level [56], [57]. From this point of view Magretta (2002)
differentiate between the terms business modeling and strategic
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planning [58], [59]. As the result we can describe business model as a

system showing how parts of a business can gather together. Yet the
concept of strategy planning acts as a critical dimension of firms
performance [58], [59].
Firms Strategic
planing
Business Model
Business
Process
Figure 3-1 Business model as the link between strategy and business
process in the firm according to Seddon & Lewis (2003) [60] (self illustrated)
Further Seddon & Lewis (2003) present the abstract representation to be

the main difference between business model and strategy planning [60].
In the other words a business model is an abstract representation of a
firms strategy [19]. An abstract representation simply presents the
important details of a firm concerning delivering customer value. Seddon
& Lewis (2003) indicate strategy planning is always specific to a
particular firm, yet a business model can be used for a number of firms
[60]. Here we should note that the concept of business model has the
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capability to change the traditional strategic planning by providing a

more dynamic planning perspective for firms.
According to Osterwalder (2004) business model in the firm is the link
between strategy and business processes [35]. He models the
relationship between strategy planning and organization.
Figure 3-2 The role of the business model in the firm [35]
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Figure 3-2 represents his proposed model. He uses the concept of a

business triangle that which is subjected to external pressures including
social change, technology, competitive forces, customer opinions and
legal environment.
Figure 3-2 defines the business model as a conceptual implementation
of a business strategy and with that the role of business model is shown
more clearly [50]. Such implementation, according to Osterwalder
(2004), would be the foundation of business processes and information
systems in a firm. Consequently, the business model would be a
translation of the strategy of the company into a profit making plan [35].
Osterwalder (2004) believes that strategy planning, and business
models address similar problems but on different business layers of a
firm. Figure 3-3 shows the different layers of the business in a firm [35].
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Figure 3-3 Business Layers according to Osterwalder (2004) [35]
In fact the business model layer of a firm is positioned between the

strategies layer and process layer. Strategic layer includes all the
planning toward vision and goals of a business. And process layer deals
with the implementation and inner organization of a firm. Yet the
business model according to Osterwalder (2004)s business layers
would be the architectural and logic behind profit making of a firm [35].
Figure 3-3 illustrates the layers of business in a firm and the position of
business model layer.
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3.1 Design of the Business Models

Klang (2010) explains that there is a significant inconsistency
concerning the business model design and the terms used to describe
the parts that configure a business model [61]. Yet According to Ghezzi
et al. (2010) it is reported that business models should be analyzed
through a design stages. In fact business model design support strategic
planning design instruments with a more flexible representation and
implementation within a firm [62].
Here we should note that in designing a business model the elements
(Yip, 2004) of a design may have different terms in different literature
[63]. In fact today in the literature different terms is used interchangeably
in concerning the topic of business model. For instance Osterwalder &
Pigneur (2010) refers them as components, Venkatraman & Henderson
(1998) as vectors, Chesbrough & Rosenbloom (2002) as functions, and
Schweizer (2005) as dimensions [64], [45], [32], [65]. Yet according to
Linder & Cantrell (2000) business model is actually characterized by its
constituting components [6].
Nevertheless the components of business model are very important for
implementation of innovative business ideas and also understanding the
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strategy planning and further adaptation [40]. And as the components of

a business model are dynamic, it is not only useful to model the actual
strategy of a firm but also provides a framework for discovering new
business models in response to strategic planning.
Concerning the dynamic components of the business models, Amit &
Zott mention that the early research in the field mainly deal with the
innovation potential of business models [39]. However todays highly
competitive market has very much changed the judgment on business
models. Consequently recent books and articles on business modeling
emphasize the importance of dynamic business modeling for firms
success [12, 13, 14]. Thus it is evidenced that those firms that are willing
to innovate new business models are suitable to bring a sustainable
competitive advantage. Consequently, researchers urging innovative
firms to invest more in the area of business modeling[19].
In respect to above Osterwalder (2004) proposed a standard model on
the basis of the similarities of a vast vnumber of different business model
configurations [35]. His proposed approach which was actually inspired
by Kaplan & Norton (1996) further was advanced and developed the
Business Model Canvas for the purpose of designing the business
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models (Osterwalder & Pigneur 2010). Osterwalder & Pigneurs

reference model, which is shown in the following figure, is considered as
an analysis tool that offers entrepreneurs with a common language for
designing the business models [45].
Figure 3-4 Business Model Canvas for Design of Business Models;

Osterwalder and Pignuer (2010)s Standard Model [45]
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The standard business model of figure 3-4 helps managers to

understand, design, analyze and communicate the business strategy of
their firms. According to Osterwalder & Pigneur (2010) the Business
Model Canvas includes the four areas of infrastructure management,
product, customer interface, and financial aspects that every business
model has. Furthermore, every business model has to describe the nine
vital building blocks within a firm. These blocks according to Osterwalder
and Pignuer (2010)s standard model include; key resources, customer
relationships, customer segments, key activities, revenue streams value
proposition, key partnerships, cost structure and channels. In the
following we provide the definition to all these blocks according to
Osterwalder & Pigneur (2010) [45]:
Customer Segments Block: it defines the different groups of customers
that an enterprise aims to reach [45].
Value Proposition Block: it describes the bundle of products that create
value for a Customer Segment [45].
Channels Block: it describes how a company communicates with its
Customer Segments [45].
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Customer Relationships Block: it describes the types of relationships a

company establishes with specific Customer Segments [45].
Revenue Streams Block: it represents the cash a company generates
from each Customer Segment [45].
Key Resources Block: it describes the most important assets required
to make a business model work [45].
Key Activities Block: it describes the most important things a company

must do to make its business model work [45].
Key Partnerships Block: it describes the network of suppliers and

partners that make the business model work [45].
Cost Structure Block: it describes all costs incurred to operate a
business model [45].
The above proposed building blocks for business model design have
proved practical applications in developing business models. Further
they can be used as a general tool for supporting strategy analysis of
firms. Accordingly the dynamic nature of the business modeling would
be particularly beneficial to firms strategic plans. As McGrath (2010)
reports the benefit of integrating the business model concept into the
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strategic planning. In this context the abstract nature of business models

enables a planning approach that primarily is based on rapid
experimentation [65].
In fact recently managers recognize the value of business models as a
unit of analysis, planning and innovation [40]. Further Sthler (2002) and
Cavalcante et al. (2011) see business model as a systematic tool for
evaluation [48], [56], [57].
Kamprath et al. (2014) proposes an analysis tool and template for
business modeling. This tool is known as business model environment
template (B-MET) which is a theory-driven and a practical modeling and
analysis tool. This template is considered as a new direction in
management literature and it can transfers different theoretical definition
into a practical context. Yet according to Kamprath & Van den Broek
these concepts include business ecosystems, sustainability, multi-sided
markets, industry convergences, social construction of markets, value
co-creation, technology regimes and transitions [66]. Following figure
presents the proposed template.
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Figure 3-5 The Business Model Environment Template according to

Kamprath & Van Den Broek [66]
According to Kamprath & Van den Broek the B-MET defines a firms
business model into three broad dimensions which are Value Creation,
Value Proposition and Value Capturing [66]. Note that this template
satisfies the definition that Osterwalder & Pigneur (2010) provides for
business models [45].
To understand these dimensions Osterwalder & Pigneur (2010) states
that business models are the logic how an organization captures value
[45]. The above template further includes each of the business model
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dimensions with a major area in the area of the business model. In a

proposed business model template a firms value capture method
supposed to be influenced by sustainability and value chain. However
the effectiveness of a firms value capturing system is highly dependent
on the consumers value. Moreover, as Vossler (2015) [107] states the
Market Attractiveness within an industry is deemed to have the largest
impact on how firms organize their Value capturing modes (Vossler
2015) [107]. Kamprath et al. (2014) further illustrates (see figure 3-5)
four sub-dimensions for each environmental part of the business model
[66].
As Vossler (2015) [107] mentions that scholars provide support to
managers in analyzing the consistency between firms business model
and its sustainability. In this manner they would offer generating ideas
for modifying the business model to captures better opportunities [66].
3.2 Literature Review on Business Modeling

Modern business model concepts initiated in the late 90s [67]. However
as Osterwalder, et al (2005) describes the popularity of the term
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business model is a relatively young concept [13]. In fact the term the
term business model appeared for the first time in a research article in
1957 by Bellman et al. Nonetheless it became very popular only after the
end of the 1990s [68].
In the early 2000 when the business model started to become popular a
number of authors for instance Timmers (1998) and Rappa (2001)
proposed the early definitions and classifications to business models
[38], [69]. Further authors for instance Chesbrough and Rosenbloom,
Linder and Cantrell (2000), Magretta (2002) completed the definitions by
proposing the elements of business models. These propositions were
simply defining the components of a business model [32], [6], [58], [59].
Further authors for instance Weill & Vitale, Osterwalder & Pigneur
(2010), and Hamel (2000), described in details the components of
business models (see figure 2-1) [37], [45], [70]. Other researchers for
instance Kamprath & van den Broek and Osterwalder modeled the
components conceptually [66], [35]. Their work resulted to the
proposition of business model in the form of standard templates. And
according to Kamprath & Van Den Broek the business models also
started to be evaluated more rigorously [66].
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The examples of early business models have been recently reviewed by

Wirtz et al. (2015) [67]. According to Alt & Zimmermann (2001) the idea
of business modeling initiated by the urge to describe and evaluate new
forms of businesses [71]. And worth mentioning that in conventional
term, the business model integrates a number of research disciplines
together [32].
The concept of business modeling received attention as general
management concept for instance by Chesbrough & Rosenbloom (2002)
[32]. They in fact integrated the business model to strategic planning and
innovation. Further business model research initiated numerous
approaches to implementing business models [58], [59]. Gay (2014)
states that: when a business enterprise is established, it either explicitly
or implicitly uses a particular business model. Such model describes the
architecture of the value creation, customer vaue, delivery, and value
capture of the business [72].
Business models have become much more advanced over the years.
According to Teece (2010) the meaning of a business model is
understood as the way a firm delivers value to customers. In fact a
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business model reflects management and customers requirements and

how to make profit accordingly [73].
To understand the above definition here we provide an example
business model provided by Teece (2010) [73]. He describes the hook
and bait business model, as one of the early documented business
models that was proposed in 2000. According to this model a product is
offered in low price, yet charging further amounts for dependent
products. Examples include razor and blades; cell phones and air time;
computer printers and ink cartridge. Further model would be Adobe
reader which provide a free document reader, however charges more for
its better software package [56], [57].
In 50s, innovative business models were introduced by McDonald's and
Toyota. In the 60s the Business models of Wal-Mart and Hypermarkets
came out. The 70s business models from Toys R Us and FedEx was
introduced. One decade later during 80s, Home Depot, Blockbuster, Dell
Computer and Intel, presented their successful business models.
In 90s the Southwest Airlines, Netflix, eBay, Amazon, and Starbucks
would be major examples of outstanding business models. Nonetheless
during the last decades it was evidenced that the characteristics of
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business models highly depends on how advanced technology is

adapted. For example managers with the aid of advancement of ITC can
create innovative models based on the existing technologies. In fact it
was evidenced that by using the novel technologies, businesses can
profit from customers with low costs. In addition to technology, the right
organization of supply chains in the global market would make a
difference. In other words the due to globalization the business models
must also benefit from the advancement of supply chains management
[56], [57].
Gay (2014) describes further that: the business models value creation
function. In the business model the architecture of the value creation is
of importance as it delivers and captures mechanisms of a firm. In fact
the essence of a business model is that it emphasizes customer needs
and further defines the manner by which the firm delivers value to
customers [72].
As it was mentioned above a business model describes the logic of how
a firm creates value and profit [45]. Wirtz (2010) describes how recently
the design and implementation of business models have become
relevant increasingly vital [47]. Especially in the business of product
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development the concept of business model is often utilized. Business

models are mainly connected to increasing competitive advantages in
the market. Nevertheless it is evidenced that the success of a firm is
largely related to the implementation and management of business
models [74].
Here it is worth mentioning that increasing globalization and a high
degree of economic integration have made the markets very competitive
and more complex. Therefore to stay competitive in the market a firm
must immediately adapt to the changing market conditions. With the aid
of business models firms can manage to adapt to the dynamic and
complexity of market competition [11].
An extended definition to business modeling focusing on elements of the
value creation has been given by Osterwalder & Pigneur, in the book
business model ontology and business model canvas [13].
Here we would like to emphasize the positive relationship between
business modeling and internet. (Osterwalder, et al. 2005) points out the
effect that internet had on the progress of business modeling [13]. In fact
advancement of the Internet in the business world can be seen from the
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steep rise of the NASDAQ stock market for technology firms (see figure
3-6).
Figure 3-6 Business Model Vs. Technology from 1996 to 2005 (Osterwalder,
et al. 2005) [13]
According to Osterwalder, et al. (2005) the number of times the term

business model appeared in a research journal resembles the shape of
the NASDAQ market index (see figure 3-6) [13]. Consequently it is quite
obvious to mention the fact that a business model has indeed a
relationship with internet-related technologies.
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Our literature review in this chapter has shown that the business model
concept as a new and emerging concept that have potential to be further
explored.
In
addition,
consultants
in
order
to
understand
the
relationships within the business elements have become increasingly

interested in the topic.
On the other hand here I would like to conclude that business models
become known as a tool to create an easy to understand business
description of a firm to improve the communication within a firm. It also
simply can answer the fundamental questions of a business. However
here I would like to argue that a concrete approach to business models
is necessary in order to detect new possibilities within business firms.
Currently there exists knowledge about the terms, elements, attributes
and relationships of the business model concept. However we will need
a step forward towards the conceptualization.
Here I would like to agree with Osterwalder (2004) that for future studies
on business models there will be a number of possible paths toward
exploring the potential of the business modeling [35]. Accordingly one of
these paths will be indeed the alignment of business and IT strategy. In
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addition it will be necessary to investigate a number of business models

and analyze to find out the pattern of a successful business models.
In the next chapter we will particularly focus on business modeling for
sustainable development. This will limit the concept of business models
to the sustainable business ideas.
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4. Business modeling for sustainable developement

In this chapter business modeling is discussed as an important tool that
can support the adoption of cleaner products. Recently the research on
sustainable innovations has expanded dramatically to increase an
understanding in which new technologies enable businesses to become
more sustainable. On the other hands clean sustainable technologies
have become more advanced [75]. In addition we have been observing
a
new
dimension
for
systemically
including
more
sustainable
technologies into business modeling approaches [88]. In this context

Diaz and Coenen (2010) have well contributed in increasing awareness
about factors that empower the sustainable development [89]. They
studied the firm characteristics, as well as factors in sustainable
development that support the products innovation [90].
This chapter searches for links between sustainable development and
business modeling. To recall from the last chapter the business
management specifies the dimensions of a successful market and
describes how a firm can make profit from providing innovative products.
This would include the customer value and the value creating in a
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profitable manner. Yet such profit elements are vital for the success of
sustainable innovations.
Schaltegger et al. (2015) present a definition of a business model for
sustainability. They state that business model for sustainability must
help to implement a companys sustainable value proposition to its
customers and all stakeholders [50]. Such sustainable model further
maintains an effective management and communication. In addition a
sustainable model concerns with the ways how such sustainable value is
created and delivered. In the other words a sustainable model must
define how a business model can capture value while maintaining
natural,
social,
and
economic
sustainability
beyond
the
firms
boundaries.
And as Schaltegger, et al (2012) explains the research on business
modeling in the context of sustainable development has recently
become very popular topic among researchers and industries [50].
Sustainability researchers are challenged to offer reliable alternatives to
conventional
business
modeling.
However
the
challenges
and
techniques in this field are expanding continuously and therefore a
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unique definition of business models for sustainability is yet to be

provided [92].

modeling for sustainable development (self made)
The intersection of business modeling research field and sustainability

which we consider as a multidisciplinary field of research highlights the
value-making strategy of a firm and its effects on the environment and
natural resources. It further enables the firms and other private
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partnerships to narrow their focus for designing models for maximizing

profit [93].
As it was reviewed in the second chapter, Teece (2010) provided a
definition to business modeling. However from the perspective of
sustainable development, Teeces definition is considered as a
conventional description to business modeling which is one-dimensional
for profit making only [73]. Such profit making is done without
considering the consequences towards the ecological contexts. Here we
would like to recall that the conventional business paradigm has been
the mentality of egocentric value creation.
Further sustainability researches reviewed by Breuer & Ldeke-Freund
(2014) extends Teeces definition further towards ecological values for
sustainability. In such researches according to [50] lots of emphasis
given to firms market that distinguish the business models for
sustainability. Accordingly extending the conventional view of a business
model around a customer value must be performed with creating value
to a broader range of stakeholders. This must however include the
natural environment, beyond customers and shareholders.
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Boons and Ldeke-Freund (2013) further propose a definition to

business modeling which is very effective and relevant in the framework
of sustainable development [9]. They believe that value proposition in
sustainable firms must provide ecological concerns through offering
products. In addition the business portfolio must consider the principles
of a sustainable supply chain management. Furthermore the customer
relation must enable a better and more reliable relationship with
stakeholders to be responsible for sustainable products.
The above definition proposed by Boons and Ldeke-Freund (2013) is
considered as a strategy for sustainability that can be used in firms
instead of only selling stuffs [9]. According to a revision by Bocken et
al. (2015) in this strategy the business models will distribute economic
costs and benefits equally among the constituting elements involved
[94].
Nevertheless the popularity of the business modeling for sustainability
concept has become very much increased. In fact the intersection of
research on business modeling and sustainable development as
Schaltegger (2015) would say stimulates new approaches in the fields
of
corporate
sustainability
management
and
sustainable
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entrepreneurship with particular consideration on environmental aspect

of development [50], [91].
Stubbs & Cocklin (2008) introduced more reliable business models that
contribute to firms sustainability, as the early works on business models
for sustainability [1], [2]. According to Hansen et al. (2009) business
models for product-service systems such as car or bike sharing have
been the cases where analyzing business models done from a
sustainability
perspective
[10].
Such
cases
are
considered
as
sustainability-oriented innovation for use-systems [3].

Other researchers for instance Wells investigated the relationship
between business models and sustainability management [79]. In
addition a number of researchers studied the sustainability from a social
development perspective. For instance Ricart (2010) developed an
interactive business model for low income countries [95]. Furthermore
Seelos (2014) [108] seen business modeling as a technique for
addressing social needs and healthcare services in poor regions.
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4.1 Literature Review

Here we would like to review the current scientific literature about the
connection between business models and sustainable development. We
would like understand how the business model concept can help
defining a perspective for future research on sustainable development.
For this reason we will focus on the link between sustainable
development and business modeling in recent research. And as it is
mentioned above business modeling can define the components of a
business that need to be managed for creating customer value by
integrating the three important business aspects of environmental,
social, and economical [9].
Callon et al., (2007) mentions that innovation and development active
actors in business are considered to be firms, companies, financiers,
and research institutions which shape the innovation networks [96]. And
further Doganova and Eyquem (2009) explain that a business model is
a marketing tool for these innovation and development actors to connect
such actors through narratives and calculations. Concequently the
business model can be interpreted as a reliable market device Model
(2010) [33].
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Many researchers such as Timmers (1998) focuse on the consequences

of innovative technologies on how firms organize to make profits [38].
This fact has been very relevant for the field of sustainable development
since technologies highly contribute to sustainability. Among the recent
technological advancement, the internet and ICT has the most
importance. According to Boons & Ldeke (2013) business models
became popular during the internet era. Since the progress of internet
firms and analysts came to realize that existing ways of earning a profit
would be more sustainable and also profitable via a shift to web-based
products and services [9].
Researchers such as Linder and Cantrell (2000) have seen business
model as a strategy planning technique to improve a firms profit-making
approach [6]. Accordingly business model serve as a development tool
for business systems for representing and planning the business with an
emphasis on firms efficiency. Afuah (2004), Casadesus and Ricart
(2010), Johnson (2010) and Tikkanen et al. (2005) add the element of
market competition to the efficiency factor of business model [97], [95],
[87], [98]. Accordingly, creating and delivering customer value lies at the
heart of business model. Moreover, while creating and delivering
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customer value the business model itself can deliver a competitive

advantage [9].
Boons and Ldeke-Freund (2013) show that innovation is one of the
most important topics in the research on business modeling as an
important factor form making advantage and renewing firms [9]. In this
context Baden-Fuller et al. (2010) [109] describes that business
modeling can support the strategic marketing for innovative products
development. Furthermore business models can provide competitive
advantage to the firms (Chesbrough 2007) [110].
According to Calia et al. (2007) there is a two-way connection between
sustainable product innovations and business model designs. In fact in
the management literature there is a connection between business
model of a firm and its innovative business strategy and related
activities. In this context Calia et al. (2007) describe that business
models are crucial aspects of managerial sustainability activities.
However we need to further explore what makes product innovations in
firms sustainable. In the following we overview the literature on
sustainable product innovation. To do so the recent research on
sustainable business models are presented [99].
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Rio et al., (2010) [111] define sustainable development as ecoinnovation in product development. They further provide an overview on
the recent research in the field. In many of the recent studies the term
eco-innovation is referred as clean technological development. As Del
Rio et al., (2010) [111] describes eco-innovation is concerned with a
term overlaps with innovations that have an effective ecological
performance.
Figure 4-2 Illustration of Eco-innovation business model innovation

proposed by Rennings (2000) [100], and modified and updated by LdekeFreund (2010) [80]
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Eco-innovation has recently become of the particular interest of

researchers in many different disciplines including economic sociology,
science and technology studies, evolutionary economics, innovation
economics, and even history. Nonetheless the focus of all these
disciplines is mainly on innovations related to the ecological and
environmental impact of the product development [101].
According to Boons and Ldeke (2013) in order to understand deeper
the eco-innovation in a product development firm the focus should be on
the innovative capacities of that individual firm at the organizational level
[9]. Therefore the research focuses would be on developing innovative
technologies for marketing and production in order to improve the valuemaking. For instance EcoDesign tools (Visser et al.) would be one of
those technological advancements that help firms at the organizational
level. Yet the technological advancement that may contribute in the
process of managerial decision making has been reported to be limited
[102].
Horbach (2008) studied the impact of various factors on firms innovative
capacities through statistical methods [86]. They studied the impact of
governmental regulation on the ability of firms to develop towards
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sustainability. Further Montalvo (2008) and Boons and Ldeke (2013)

investigated the sustainability adaptation of cleaner technologies [88],
[9].
Hall and Clark (2003) further described that eco-innovations without
diffusion in society, are meaningless. However they conclude that in
capitalist societies where the market is a dominant mechanism there
have been many cases of success. According to Hall and Clark (2003)
further challenge for development of businesses towards sustainability
would be profit making abilities of firm. Nevertheless considering the
sustainable innovation from a business model perspective will meet
these challenges [75].
Lovins et al. (1999) aligned business models with environmental
expectations. They introduced such alignment as Natural Capitalism
which consists of management principles for increasing the natural
resources productivity and reinvestment in natural capital. They believe
that with Natural Capitalism they can realize a major change towards
sustainable business models [76]. However the emergence of such
models requires an upgrade on the firms performances. Schnaiberg
(1980) further outlines that according to Natural Capitalism a controlled
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business model can increase the work force productivity in firms while
increasing the exploitation of natural resources. In the other words
Lovins et al. (1999) see business model as an important step towards
Natural Capitalism [76].
In respect to Natural Capitalism, Hart and Milstein (1999) point out the
fact that the global economy as a collection of different economies that
each of these economies requires a suitable business modeling
approach. And the aim of utilizing the business model in each different
type of economies should be a contribution to sustainable development.
In this context business model can be identified as an important tool to
support sustainable businesses. In addition business models can be
linked to sustainable innovation for creating sustainable value. Milstein
and Hart (1999) propose that business modeling for sustainability must
deliver green industrial revolution. To do so they proposed that
managers must connect business opportunities and their business
models to this challenge [77]. To conclude we would bring this line from
Boons and Ldeke (2013) that business models can be seen as a way
to reduce negative ecological impacts which is require to achieve
sustainable development [9].
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Hart and Milstein (1999) however further argue that three different types
of economies which are emerging, consumer, and survival economies,
must be distinguished. In fact in each economy the respective conditions
for production and consumption dramatically differ in the light of
sustainable development. Accordingly each economy may require entire
different business models. Consequently Hart and Milstein (1999)
conclude that understanding an economy would be the first step toward
sustainable development [77]. In addition as Boons and Ldeke (2013)
would say social and technological innovations are required to avoid
weak points of traditional business models in emerging and survival
economies [9].
In the following we distinguish the three types of economies and
consider the business modeling from the economical perspective of local
firms. Different types of economies would be consumer, survival and
emerging economies.
Consumer economies of the industrialized countries would have a great
purchasing power comparing to emerging, and survival economies.
Great purchasing power would result in unlimited consumption power. In
such economies business models have to be designed in a way that
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reduces Carbone footprints and separates production and consumption

from ecological impacts [9].
Survival economies on the other hand due to rural lifestyles and also
lacking infrastructures people suffer from the lack of basic needs. In
such economies according to Boons and Ldeke firms have to come up
with outstanding business model innovations to bring advantage to the
traditional consumer models. The business models proposed by
Microcredits of Grameen Bank and Ruf & Tuf Jeans which is a model of
ready-to-make and
low-priced for clothing would be the success cases
[9].
The economies in emerging countries according to Hart (1997) are

characterized by satisfying basic needs yet increasing purchasing power
[78]. In such economies the trends of rapid industrialization and
urbanization requires new business models to meet customer needs as
well as social and environmental sustainability.
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4.2 Business models for sustainable development; requirements

and barriers
Implementing business model within a firm needs a number of
requirements to be satisfied. Furthermore Firms will be facing a number
of difficulties in order to truly benefit from innovative business models.
Once we overcome requirements and barriers then we will be very close
to the realization of business models for sustainable innovation [79].
Boons and Ldeke describe a number of requirements and barriers. In
the following we provide a summery to the research of Boons and
Ldeke and present their important findings [9].
According to Boons the concept of business modeling should be
considered from the wider perspective of sustainable development.
However the concept of sustainable business models has been reported
to very young today [80]. According to Lele (1991) sustainable
development is a process where ecological, economic and social values
are in harmony [22]. Such process involves inter-organizational networks
which include firms and also other stakeholders.
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Here we would like to recall that business model according to Boons and
Ldeke consists of four elements which are value proposition, supply
chain, customer interface, and financial model. These elements present
a number of standard requirements that has to be met for successfully
marketing sustainable development. These requirements are defined
generically on purpose. Future research on these requirements however
may allow investigating their actual relevance. Boons and Ldeke
explain that these requirements actually pose as boundary conditions
which need to be satisfied in order to cooperate within a sustainable
innovation system. Further they define how particular innovations can be
utilized [9].
Further Schaltegger and Wagner (2011) conclude that by satisfying
these boundary conditions the sustainable development would be
successfully marketed to clarify a firms sustainability potential. In
addition the created business model also has to operate within certain
boundaries to avoid contradicting firms potential [82].
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VALUE
SUPPLY
CUSTOMER
FINANCIAL
PROPOSITION
CHAIN
INTERFACE
MODEL
BASIC
REQUIREMENTS
BUSINESS
MODEL
Figure 4-3 Basic requirements for successfully developing sustainable

business models according to Boons and Ldeke [9]
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Above figure shows four basic requirements to be met for developing

business models for sustainable development. In the following we briefly
describe these requirements according to Boons and Ldeke [9].
The value proposition [83] provides economic, ecological and social
value into the business models of firms. The value proposition reflects a
business-society dialogue concerning the balance of economic,
ecological and social needs [115].
The supply chain concerns with suppliers which make responsibility for
their firms stakeholders. Via supply chain according to Seuring and
Mller (2008) a firm actively engages suppliers into its own sustainable
supply chain management system [84].
The
customer
development
interface
motivates
in
business
customers
and
model
for
stakeholders
sustainable
to
take
responsibility for their consumption. In fact a firm cannot, on their own,

shift towards a sustainable socio-ecological relying only on its
customers. However according to Hart and Milstein (1999) a reliable
customer interface can be set up with recognition of the sustainability
challenges of market [77, 115].
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The financial model in a business model for sustainability is responsible

for an appropriate distribution of economic costs and benefits among
actors involved in the business model (Gaziulusoy 2014) [112].
According to Maas and Boons (2010) financial model accounts for the
firms ecological and social impacts [81].
Beside the requirements that we mentioned above here we would like to
outline
the
barriers
facing
the
implementation
of
sustainable
development. In the following we briefly discuss the possible barriers

and the way to overcome barriers.
Charter et al., (2008) explain that sustainable innovations are often
considered as challenges that come from novel technologies and
designs [85]. Further Geels (2005) discuss that with the advancement of
technology, firms can overcome economic and further environmental
barriers and gain value from sustainability [83]. From this point of view
the technological innovation would highly contribute to overcome
barriers.
This is actually the characteristic of sustainability that it has to fit within
the firms expectations to be economical and further contribute to solving
sustainability problems [86]. This matter is discussed by Hansen et al.
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(2009) as a barrier to business models for sustainable development [10].

Thus novelty in utilizing the technological advancements within the
framework of business models for sustainable development is
considered to be vital.
Considering product development the sustainability innovation and
technological advancements can be seen as a process to fit within the
already existing business models. For instance a firm producing light
bulbs can transform from conventional to energy saving bulbs. However
such firm can go even further and fit the advanced technology of energy
saving bulbs within a novel business model. And as Boons and Ldeke
says this will be the case when the light bulb producer delivers lighting
services where the bulbs are only part of the value proposition" [9].
The case study of energy saving bulbs would be a good example for
increasing the awareness about the importance of the technological
advancement within a firm. In fact a maintaining a productive
relationship between technology and novelty in creating a reliable
business model for sustainability is vital. Thus keeping up with
innovative technologies can indeed empower a firms business model. It
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further can increase the ability to overcome barriers to develop a new

product.
In the process of creating business models for sustainable development
in particular, firms are facing a number of barriers. These barriers can be
internal or external. The barriers which are more concerned with
organizational level within a firm are called internal barriers. And further
barriers which are concerned with firms environment and for instance
market situation and governmental regulations are referred as external
barriers [76].
BARRIERS
IN
DEVELOPING
BUSINESS
MODELS
EXTERNAL
INSIDE
BARRIERS
BARRIERS
Figure 4-4 barriers in developing business models for sustainable

development (Boons and Ldeke) [9]
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An important internal barrier for a firm, according to Johnson (2010) and

Boons and Ldeke (2013) is the institutionalized organizational
memory [87], [9]. Institutionalized organizational memory refers to
business rules, organization behavioral norms and success metrics.
These internal barriers are indeed powerful inhibitors to the creation of
successful business models.
On the other hand external barriers can be identified in the external
business environment of a firm. In developing business models for
sustainable development for firms involved in product development
identifying such external barriers is of particular importance [9].
In industries such as energy and automotive, where the complexity, high
capital intensity and disruptive technologies are involved considering the
external
barriers
become
even
more
important.
According
to
Wstenhagen and Boehnke (2008) the out of date technologies may

lead to passive business models [103].
An example for an industry that is locked in its passive business
environment and barriers is mobile telephony [9]. Mobile telephony is a
firm with a number of external barriers. In fact having external barriers in
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meeting the goals of sustainability means a firm with huge ecological

impacts [103].
Before describing the business model of ICT Mobile firm we should
explain that the marketing of mobile phones is a joint effort of the
cellphone producer and the network provider. As Camponovo and
Pigneur (2003) explain according to the business model of the firm
called Mobile telephony the cellphones were offered free to the
customers within a long term contract [104]. Boons & Ldeke-Freund
(2013) report this is a viable model in terms of revenues for both the
network provider and the hardware producer [9]. However this would
result in increasing the substitution of devices. And because firms offer
new fashionable models with a divers fashion this business model led to
excessive resource overuse with negative social and ecological impacts.
According to above such external barriers indicate that introducing a
sustainable innovation requires a far reaching approach to change
things at the company level. Thus external barriers which came up by
the wider environment of the respective consumption system must be
taken into account [50]. Nonetheless dealing with barriers towards
reducing the environmental and social impacts and also the demands of
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sustainable development in such firms would be a complex issue to

achieve [85]. Tukker and Tischner (2006) [114] however believe that in
such situation more innovations are required to have a greater
sustainability result.
4.3 Business Modeling for Sustainable Product Development

This section intended to review how the business model concept helps
to understand and enhance sustainable product development. Further
via reviewing a number of case studies we explore that how this
perspective can become a new research field of sustainable innovation.
The integration of sustainability with business has become one of the
most debated topics of the modern consumer world. However
sustainability is indeed very vital fact for human health and happiness.
Yet as Wells (2013) would describe It is already apparent that in certain
critical respects the prevailing business models may be inappropriate
and inadequate to meeting the challenge of sustainability [117].
According to the research of Nidumolu et al. (2009) [116] today firms are
actually convinced that being sustainable and so called environmental-
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friendly can be very costly and it will prevent them to stay competitive.
In the other words they actually believe that adding the sustainability
factor to the concept of business modeling will add to costs and will not
be financial beneficial.
In addition to above we would like to add that sustainable product
development in manufacturing stages actually needs new equipments
and innovative processes which can be more expensive. And not to
forget that the average customers may not be willing to pay more for
sustainable products which may be more expensive. These are only a
few reasons why most firms dont take their social responsibility
seriously and would rather hesitate to become more sustainable.
In this situation we should definitly need an innovative transition to adapt
to sustainability in product development. According to Nidumolu et al.
(2009) such transition can be easy. Firms that have started the journey,
our study shows, go through five distinct stages of change. They face
different challenges at each stage and must develop new capabilities to
tackle them, as we have shown mapping the road ahead will save
companies time and that could be critical [116].
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These five stages according to Nidumolu et al. (2009) are; stage 1:

increasing the value chains sustainablity stage 2: creating innovative
platforms for sustainability, stage 3: developing innovative business
models, Stage 4: designing sustainable products Stage 5: viewing
governmental rules as opportunity. It is suggested that by following
these five stages firms can develope more sustainable business models
for product developement.
As Wells (2013) describes for a sustainable product developement
business model we should combine the economic and sustainable
concerns together. To doing so the business management strategy must
contribute to innovative business planing. Wells (2013) further suggests
that sustainability must be seen as a fundamental structure of business
modeling for product developement. Furthermore the creation of
innovative sustainable business models should benefit from a deep
understanding of the whole system of product developement.
As it was explained in chapter two in the product development business
model of Teece (2010) firms strategy, innovation and barriers are
combined [73]. Accordingly the essence of a business model was
defined as a way to only clarify the customer needs and make profit. In
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fact the idea of the business model was actually limited to defining how
firms deliver value to customers and make profit. Nonetheless it was
reported that creating and delivering customer value was the most
important aim of any business model. Therefore the central element of
the business model would be customer value proposition [87]. However
today by dragging the idea of sustainability into business modeling the
initial concept of business model has been very much challenged.
Figure 4-5 left: introducing the multidisciplinary research field of business

model for sustainable product development, vs. right: business model
elements proposed by Wstenhagen & Boehnke, (2008) [103] and modified
by Ldeke-Freund (2010) [80]
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Figure 4-5 illustrates the conventional business model which is based on

customer value versus business models for sustainable produce
development.
Figure 4-5 presents an illustration to the business model elements
proposed by
Wstenhagen & Boehnke (2008) [103]. Figure shows the
basic strategic elements that have to be considered in order to create

customer value. These elements are value proposition that needs a
value creating planning. Yet to pursue sustainability the customer value
must be integrated with the requirements of sustainable business model.
Hamel (2000) describes that in the firms involved in product
development the strategy of having a sustainable business model would
be an effective management with a focus on innovation, with minimum
environmental impacts [70]. In a number of researches for instance
Magretta (2002) and Afuah (2004) strategies of a number of firms
towards the goal of having a sustainable product are discussed [58],
[59], [97].
Further Wirtz (2010) explains that strategy stream of business model of
a firm involved in product development can be differentiated from
technology and organization perspectives [47]. This means that the
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business model as a firms inner architecture toward profit making can

be independent from the technological advancement used in product
development. Regardless of having a green and eco-friendly innovative
product the actual business model for creating profit must be
investigated from sustainability point of view. And as it was mentioned
earlier, sustainability beside the environmental issues must bring to
consideration the social and economical concerns as well. In this context
working on developing a business model which supports sustainability
can be independent from the product innovation.
In respect to above a business model must let the firm to capture part of
the customer value and make a profit [32]. In addition, a business model
must provide competitive advantage to the firm with the aid of business
model innovation [87].
Now in order to shift towards a sustainable model for product
development the customer value needs to be revised in respect to
sustainability. In fact a business model which reflects managements
strategies about customer values must also consider ecological impacts
simultaneously. Baden-Fuller and Morgan (2010) [113] discuss different
business model functions considering customers values, behavior of
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revenues and costs, changing customer needs and competitor

responses and sustainability.
Lovins et al. (1999) introduce Interface Inc as a good example of an
early role model for sustainable business models. Interface Inc proposes
a real-life successful ecologically enhanced business model [76]. This
firm updated its business from manufacturing carpets to a million-dollar
floor-covering model which is actually a service-centered model. And as
Cocklin and Stubbs (2008) further explain that altering a servicecentered business model may lead to an innovative customer value
model [1], [2]. This model was based on changing the traditional logic of
produce-and-use to a model in which suppliers get paid to provide the
agreed-upon level of comfort [9]. As the result the flow of materials has
been more than thirty-fold reduced. With such business model the goal
of reducing ecological harm has been met.
As it was mentioned in the last chapter and in the survival economies
the business models proposed by Ruf & Tuf Jeans which is a model for
ready-to-make and also low-priced for clothing, would be a business
model for sustainable product development [9].
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As Camponovo and Pigneur (2003) explain according to the business

model of Mobile telephony the cell phones were offered free to the
customers within a long term contract with a network provider [104].
Although this model for product development was viable model
considering profitability for the network provider and the hardware
product developer, it led to an unsustainable business model. In fact this
business model led to excessive resource overuse with negative
ecological and social impacts [115].
Here we would like to briefly review the sustainability in automotive
industry from the article of Wells (2013). In automotive industry the
advanced industrial processes need to develop a particular product. For
that a firm first of all must manage emerging the industry to supply that
product. Then a business model must be employed by a firm operating
in a particular business sector for creating economical value. And as
Wells (2013) explains this set of inter-dependencies suggests that, for
example, it can be difficult for an established sector to absorb new
technologies or, put another way, that new technologies in product and
process
create
and
enable
new
business
strategies
[117].
Concequently a sustainable business idea is not about a sustainable
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product for instance an electric or a hybrid car. It is rather about a

sustainable product that can be developed in a sustainable industry
satisfying
social,
economical
and
environmental
concerns
simultaneously.
Wells (2013) further belives that; since the 2004 article there has been
a growing interest in business model innovation in general, and an
emergent interest in the automotive industry with respect to sustainability
in particular [117]. However the his research report that sustainability
factor in business models in automotive industry has indeed been highly
effected by the ongoing economic crisis after the year 2007.
Nevertheless the progress in sustainability innovation in automotive
industry has been significant in fact. This progress has been reported by
Wells (2013) to be remarkable either in developed countries economies
like Germany and also emerging economies like China.
According to our revision we would like to suggest that in todays
emerging business situation, firms are indeed very interested to get
involved in developing business model which are more sustainable.
However their first priority is often remain to be the profitability and
customer value. Yet to plan business model that are also sustainable
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firms must initiate the change their business process in an early stages
in order to develop successful business model options.
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5. Conclusions and Future Works

Here we would like to conclude that the business model is emerging as
a new field of business analysis. Business models emphasize a holistic
approach towards explaining how firms conduct business. In fact
business models try to explain how value is created and captured within
a firm. The revision of the recent literature in the field shows that there
has been a growing interest in business model innovation in general,
and an increasing interest in numerous industries worldwide. However
strategy planning of firms play an important role in adaptation of
business models towards sustainability.
This book provides a summary to current research on business models
for sustainability. It further provides an introduction to join the
sustainability-oriented business model researchers. In this book we
studied the significance of business models and explored the potential of
business modeling for sustainable development in particular. Our focus
was narrowed to the research on sustainable product development. A
broad review of the literature on business models for sustainable
development was given. Our literature review mainly concerned with the
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business models which have been adapted by firms involved in product

development or the researches related to product development.
Here we would like to conclude that generally, there has been not much
research on business modeling for sustainability in product innovations.
And as Wells (2013) clarifies there is therefore an urge to understand
more clearly the potential of business model innovation in industries with
respect to sustainability [79].
Furthermore an important future research agenda is to uncover the
relationships between sustainability, governmental regulation and policymaking, and business modeling. Skippon (2012) points out that there
has been much research on the cost of regulation for the industry and
for consumers with regard to the forthcoming European Union carbon
emissions regulations [105]. However here we would like to report that
there has been not much research done on the impact and relation of
regulation on business models. In this context a research on the
importance of governance on sustainable businss models would be
required [106].
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Keywords: Business Modeling, Sustainable Development, Product

development. Our literature review is mainly concerned with the

multidisciplinary topic. The

multidisciplinary topics in product development include art, management,

human behavior would be other possible criteria involved in the success

conducting a literature review would provide a better understanding

Description .............................................................................. XII

Theoretical Background ........................................................................... 14

Business Modeling ................................................................................... 25

3.2 Literature Review on Business Modeling ........................................... 38

Business modeling for sustainable developement ................................... 47

Conclusions and Future Works ................................................................ 81

Figure 3-5 The Business Model Environment Template according to Kamprath

development (Boons and Ldeke) [9] ....................................................... 68

Information and Communication Technology

Business Model Environment Template

Sommer (2012) believes that todays firms in order to be competitive and

cannot be easily understood by the employees. Consequently it is

The researches conducted by Boons & Ldeke-Freun (2013) and earlier

Business Model is the description of profit making within a firm [13]. In

Figure 1-1 Business model in a firm in connection with business functions

In fact, business model presents how a company outsources the market

competencies, infrastructure, pertner network, target customer, revenue,

development goals while maintaining the ability of natural systems to

different dimension including ecology, environment, agriculture, energy,

Figure 1-2 Three pillars of sustainable development (illustration from [23])

These three challenges are considered as three pillars of sustainability

resources necessary to provide for the needs of future generations of life

Figure 1-3 Illustration of the multidisciplinary research area of business

Here we aim at focusing on the intersection of these three independent

Sustainable Development. Further the focus would be narrower to

(2008) designing business models that are promising woulod be a major

1.3 Research Purpose

modeling has been assisting the sustainable development in firms in

1.4 Outline of the book

2.1 Business Modeling and Sustainable Development

development within the boundaries of a sustainable ecosystem. Thus

2.2 Business models for product development

Concerning product development in particular, the concept of business

simplifying/describing the way profit is made in a firm. According to

the concept of business model for product development has a number of

Figure 2-1 Components of business model for product development

Figure 2-1 provides an overview over components of a standard

can be used for creating either a sustainable conscious business model

Starbucks would be the honorable mentions. The business model of any

Apples shift to an innovative business model wasnt only a matter of

sustainable product development as the profit of shareholders and

Business models aim at systematic simplification of complexities of a

planning [58], [59]. As the result we can describe business model as a

Further Seddon & Lewis (2003) present the abstract representation to be

capability to change the traditional strategic planning by providing a

Figure 3-2 represents his proposed model. He uses the concept of a

Figure 3-3 Business Layers according to Osterwalder (2004) [35]

In fact the business model layer of a firm is positioned between the

3.1 Design of the Business Models

strategy planning and further adaptation [40]. And as the components of

models (Osterwalder & Pigneur 2010). Osterwalder & Pigneurs

Figure 3-4 Business Model Canvas for Design of Business Models;

The standard business model of figure 3-4 helps managers to

Customer Relationships Block: it describes the types of relationships a

Key Activities Block: it describes the most important things a company

Key Partnerships Block: it describes the network of suppliers and

strategic planning. In this context the abstract nature of business models