In a previous article, we looked at the Business Model Canvas developed by Dr Alexander Osterwalder and Yves Pigneur. The canvas explained a company's business model graphically under nine key building blocks - Customer Segments, Value Proposition, Customer Relations, Channels, Key Resources, Key Activities, Key Partners, Cost Structure and Revenue Streams. This is the conventional business model that is oriented predominantly to making profit.
The Concept of Making Profit
Making profit is an essential prerequisite if a business is to continue operations. Even nonprofit organizations need a revenue stream that covers their costs if they are to survive and continue to do their work.
Traditional businesses focused on maximizing shareholder returns while developing profit-making strategies, viewing shareholders as practically the only stakeholders in the business. However, this concept is ceasing to be effective for the very objective of making profit owing to several developments;
- Employees get unionized and bargain for better wages and working conditions, and they can shut down a business through strike action
- Consumers join action forums to put pressure on companies and can bankrupt a business that delivers a shoddy product or support in the modern world of social media
- The general public resort to protest actions against unethical practices of businesses, including disregard for the environment, and can cause a company lose market share by not buying its products
Employees, consumers and members of the public are voters who outnumber business entities. Democratic governments have to attend to these voters' grievances for remaining in power. Also many businesspersons feel a sense of obligation to society and the environment, and begin to implement "ethical" business practices.
The business model canvas incorporated two new building blocks: Social & Environmental Costs under existing Cost Structure block and Social & Environmental Benefits under existing Revenue Streams block. (See the graphic at top left and at the bottom). The revised model allows us to focus specifically on these issues and explain relevant solutions included in the business model.
The Idea of Business Ethics Goes Mainstream
Ethical businesses consider all stakeholders, not just shareholders. They seek to create value for employees, customers and other sections of the society in which they operate. They also consider the impact of their actions on the environment in which we and our future generations will live.
For example, Nestle displays the following objective at its website: "To create value for our shareholders and our company, we must create value for people in the countries where we are present. This includes the farmers who supply us, the employees who work for us, our consumers and the communities where we work." They have created a library of case studies of Nestlé's efforts in the areas of nutrition, water, rural development at their website.
The Climate Action Partnership is an organization of several top U.S. companies that subscribes to the view: "We are committed to a pathway that will slow stop and reverse the growth of U.S. emissions while expanding the U.S. economy. In our view, the climate change challenge will create more economic opportunities than risks for the U.S. economy."
Businesses have to do more than just Make Money
Businesses are being called upon or taking voluntary action in such areas as education, healthcare and the environment.
The Business Roundtable Institute for Corporate Ethics states as its objective: "...enhance the link between ethical behavior and business practice through executive education programs, practitioner-focused research and outreach."
A great presentation on Grameen Phone of Bangladesh describes a project that helped a poor community find a livelihood while also helping a business make money. The Business Model Canvas is used to present the case study that also embeds YouTube videos that elaborate on the significance of ethics.
The Business Model Canvas that helps a business look at its existing strategy and to develop a winning one can thus also be used to incorporate ethics into the strategic view. The graphic representation calls attention to these issues and makes specific discussion easier.
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