What if finding your effective business model was easier than you thought?

Everyone is looking for their impactful business model… What if in this quest, almost bordering on the holy grail, the answer lies close to what companies are already doing? Demonstration by example for the distribution sector, with this point of view from Arnaud Florentin, associate director, and Elisabeth Laville, founder of the Utopies agency.

In a context where companies are encouraged to enter the path towards more sustainable growth (or even post-growth), the question of Impact business models (Impact business models in English, i.e. IBM¹ — the acronym we’ll use for simplicity here) becomes inevitable. It is a paradigm shift for business – to understand how to impact society through the business model and not just through operational excellencehow to generate positive effects intrinsic to the activity and not just limit the negative effects.

The growing pressure on companies to integrate the big issues of our time into their business model (such as climate change, biodiversity, territorial impact, social inclusion, etc.) and the risks ofshock wash that their stakeholders are quick to point fingers drives many of them on the difficult quest for an IBM, a business model deliberately designed to create a specific positive outcome for the stakeholders, which represents a significant part of the company’s activity ( instead of a marginal activity that acts as a green alibi).

© Thinking Mu, the ethical and committed Spanish brand

The game is worth the light for retail: a customer who positively perceives a brand’s commitment shows a purchase intention 2.7 times higher

In the distribution sector, the game is worth the light: a customer who perceives a brand’s commitment positively shows an average purchase intention 2.7 times higher to a customer who does not perceive this commitment in a positive way². For retailers or retail brands, the impact that is compellingly written at the heart of their DNA is therefore a powerful lever to create value and differentiation.

However, the walk is not so easy to climb. The highly demanding B Corp certification, which connects almost 6000 companies of all sizes and all sectors in more than 80 countries (including already almost 200 in France), is today the only one that offers a working framework at IBM, which represents almost half of the full questions in its self-assessment framework³. The evaluation questionnaire offers in each section a section dedicated to effect models. B Corp identifies more than twenty impact business models that appear in the details of the overall assessment that is finally published when the company is certified.

Today, very few retail (in-store) brands are on the B Corp list – only two in France (Naturalia and Nature & Découvertes⁴) – while a handful of them manage to “trigger” an IBM and collect maximum points. Vise versaE-commerce players and platforms (physical or digital) that offer a form of disintermediation and a direct connection with manufacturers are more and more within the B Corp community to offer business models with impact (like CAMIF or la Ruche qui dit Oui i France⁵).

© The Hive that says yes

Why is this difficult for distributors to incorporate power into the heart of their DNA and their activity? Several reasons can be put forward : a market historically driven by demand more than supply, price pressure inherent in the sector, the difficulty of playing the role of “chooser” and imposing codes or specifications, green marketing caught in its own game (launching additional green areas rather than transforming conventional assortments), the difficulty for retailers to deal with the additional costs of high-impact products, the relative lack of agility in the physical channel to think about impact (and the difficulty of using the digital channel without bumping into others ethical or environmental issues).

Which way can brands go? Because an IBM under B Corp’s terms is by definition rare and exceptional, one might think that its design must be resolutely disruptive in nature, unlike conventional models. Paralyzed by this complexity, companies often go in search of a “Big Idea” or a complex pattern of innovation that rarely proves capable of shaking up the market.

The adjacent option has a huge advantage – not starting from scratch and maintaining some continuity with the current business model

But if we carefully analyze the companies (all sectors combined) that have succeeded in developing such virtuous business models⁶, we realize that above all they excel in what the biologist Stuart Kauffman calls “adjacent opportunities”, those that are at hand, not far from what the company already knows or knows how to do: these companies verticalize agriculture or industry upstream, they support suppliers in their transformation, they develop their own recycling platforms, they make full use of their by-products or by-products, they rent or repair the products they already market, they open their factory or co-manufacturing thanks be another located nearby, they use the premises (production or sales) more efficiently to create a laboratory or a local hub, they develop more synergies between companies and offer global offers (contracts for integrated services), they are based on networks of micro-producers who lack clarity when they are isolated, they promote local heritage (crafts, art or land) or a series of good ideas left by the side of the road during ‘history…

© Polina Tankilevich

In short, they explore the adjacent wood valorization of know-how or available, dormant or underutilized resources, which allows them to take advantage of a breach, then discover new ones and thus truly rethink their business model. The adjacent option also has a huge advantage – it does not have to start from scratch and maintains some continuity with the current business model.

It is precisely this logic of innovation from the immediate neighborhood that has allowed certain brands to take shape in recent years, and sometimes in record time, a real power distribution model which goes far beyond simple responsible management of activities:

Athletica (GAP Group), through its 234 stores in North America, creates and markets apparel designed by female athletes. Remarkably, almost 80% of Athleta’s products are made from recycled and sustainable materials (a number that has doubled in a few years). That secret sauce of Athletica is to have been able to rely on the most prominent producers of sustainable fibers, such as the Italian Aquafil or the Austrian Lenzing, and to launch co-creation partnerships with them to best incorporate these fibers into their sport;

Eileen Fisher, a women’s ready-to-wear brand (60 stores and more than 1,000 employees worldwide), known for its minimalist designs, has developed a brilliant circular program over the last ten years based on its points of sale. . The brand first developed an ambitious clothing take-back program, then launched the “Lab Store” to sell these recycled clothes and recently opened the “Tiny Factory”, where new designs are made with recycled clothes – a space that has become a real incubator for creators. The brand quickly moved towards circularity (reducing its environmental footprint by 47%) by transforming salvaged clothing into an economically viable collection of recycled clothing;

© Zingerman’s

Zingerman’s and Bi-Rite Market brands offer a “Community of businesses” model where they bring together a family of businesses whose products are sold in delicatessens. Eager to maximize their local roots, these two brands, instead of developing a network across the US, have opted for verticalized local development. Since 1982, Zingerman’s has thus gradually developed within a radius of a few square kilometers around its original delicatessen in Ann Arbor (Michigan), an impressive ecosystem of 15 companies and 700 jobs, with its own farm and its own businesses (coffee, bakery, confectionery, cheese , restaurants and even business services). Using a similar modus operandi, Bi-Rite has transformed a simple San Francisco deli into one of the most influential signs of community engagement across the Atlantic.

The Unto Store, in the heart of London, manufactures made-to-order furniture in a workshop located at the back of the store. The process makes it possible to produce without transport or storage costs, without the risk of overstocking and without packaging, which allows them to be competitive on prices despite the production volumes. The brand has found the miracle formula by adopting lean manufacturing at the local level a kind of concept that mixes the IKEA approach with the Toyota methods in which the team members have been trained. A development of the Unto This Last method in franchising is currently underway.

In conclusion, in distribution, as in other sectors, you can only knock on doors, you can see… Eyou the successful construction of an impact economic model depends more on coherence than on the complexity associated with a potential “great leap” towards a “regenerative” or “symbiotic” model. Simplicity is the ultimate sophistication, said Leonardo da Vinci. Keeping it simple means examining the company’s many boundaries, finding an opening and changing perspective. For brands, the key to impact likely lies in their ability to explore today’s frontiers by reconnecting with a certain entrepreneurial spirit.

¹ IBM and Impact Business Model are the terms used by the B Corp benchmark that we used for the study on which this article is based.
² This elasticity ratio increases to 3.3 for catering, 3.7 for cosmetics or 4 for fashion (Source: Observatory of positive brands, 2018, Utopies).
³ Which, let’s remember, is free and available online to any company that wants it, even if it is not interested in certification (200,000 companies have already used it worldwide): bimpactassessment.net
⁴ Naturalia executes on IBM “Products and services that permanently reduce or remedy pollution or toxins”, while Natures et Découvertes executes IBM’s “Donation Policy”.
⁵ Which performs especially on the IBM “Local Economic Development”
⁶ Empirical study conducted by the firm Utopies on a sample of 228 international B Corp certified companies that demonstrate financial viability and a very high score on at least one IBM of the B Corp questionnaire.

To find out more, discover the study “Impact business models: innovating through the adjacent”, which will be available for download on the website utopias.com next Tuesday, September 13.

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