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Business model innovation and the global ecosystem for sustainable development
Heather Louise Madsen
PII: S0959-6526(19)33972-1
DOI: https://doi.org/10.1016/j.jclepro.2019.119102
Reference: JCLP 119102
To appear in: Journal of Cleaner Production
Received Date: 17 July 2019

Revised Date: 27 October 2019
Accepted Date: 29 October 2019
Please cite this article as: Madsen HL, Business model innovation and the global ecosystem
for sustainable development, Journal of Cleaner Production (2019), doi: https://doi.org/10.1016/
j.jclepro.2019.119102.
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Article Title: Business Model Innovation and the Global Ecosystem for Sustainable Development
Author: Heather Louise Madsen
Academic Degree: Ph.D.
E-mail Address: bacagreif@gmail.com
University Affiliation: Aalborg University, Denmark
Funding Organization: Innovation Fund Denmark

Business Model Innovation and the Global Ecosystem for Sustainable Development
By: Heather Louise Madsen
ABSTRACT
Current literature on business model innovation is moving away from liner models, and highlighting critical
success factors such as knowledge, creativity and innovation. However, understanding how these issues
relate to business model components, and how they are connected to surrounding networks and
ecosystems, is still an area that requires more attention. In an effort to explain how business model
components work together and impact one another in the networks and the wider ecosystems in which
businesses exist, a conceptual framework has been developed: The Ecosystem View of Business Model
Innovation. This is a holistic and unifying framework, highlighting the flow of connectivity between the
internal and external components of a business. In this paper, an illustrative case study provides the
foundation for studying this new framework within the context of the global ecosystem for sustainable
development. In addition to case study research, action research was applied to gain an in-depth
understanding of the interactions between the dynamic components involved. This conceptual framework
and supporting illustrative case clarify the types of organizational capabilities, practices and routines that
can strengthen both internal value processes and external networks and ecosystems, allowing for
knowledge, creativity and innovation to develop.
Key words: Sustainable Development, Business Models, Innovation, Ecosystem Development, Creativity,
Dynamic networks
1. Introduction
Business models have historically been informed by linear concepts in which functional units perform their
individual tasks, and all work is structured into a sequential value chain. This focus has contributed to the
formation of organizational “silos” where knowledge sharing and learning within, much less between,
organizations becomes difficult. With an increasingly dynamic, turbulent and interconnected global
economy, today’s business models have begun to look beyond traditional linear thinking. One
consequence of incorporating this dynamism, however, has been a lack of consistency in conceptualizations
of the business model, making consensus difficult (Zott et al., 2011). Another consequence is that current
literature on business model innovation is helpfully beginning to highlight critical success factors including
creativity, innovation, networks and the ecosystems in which they exist (Chesbrough and Bogers, 2014;
Neumeyer and Santos, 2018). This article develops and combines these elements to create a new
framework with which to bring clarity and consistency to business model innovation: The Ecosystem View
of Business Model Innovation. In order to clarify how the different components of this new framework
interact in dynamic ways, iterative action research methods were applied to the illustrative case of Danish
Energy Management (DEM). DEM is a consultancy company re-orienting its core business logic around
sustainable development in support of existing services as well as developing new, innovative services.
And because of the context that this illustrative case provides, the broader ecosystem for sustainable
development is also illustrated and analyzed, to better understand the benefits that this framework can
provide.
Across all companies and sectors, a business always sets out with a specific idea in mind, either implicitly or
explicitly laying out a model for the way in which value will be created, delivered and captured (Teece,
2010). In this way, a business model describes the what, how and why of a business. First, value creation
describes the what – what are we selling, and what is the strategy and value proposition that is going to
1
convey this value to our stakeholders? Value delivery then describes the how – how is the business going to
structure finite resources to deliver products and services? Businesses must ask themselves: do we have
the right capabilities and resources? Do we have the right partners? Are we reaching the right consumers
for the value that we are creating? And finally, value capture describes the why – why does the business
exist? Traditional conceptualizations of value capture highlight profit alone, whereas newer
conceptualizations take a longer-term and more holistic look at benefits, thinking in terms of a broader
range of stakeholders which can also include the environment (Boons and Ludeke-Freund, 2013).
Three components of a business model:

1. Value Creation – or what value is created, linking to products/services delivered, strategy and value
proposition
2. Value Delivery – or how value is delivered, linking to the key activities and resources needed to
execute the strategy
3. Value Capture – or why value is captured, linking to profits and the measurement of benefits to
stakeholders
Business model literature has skyrocketed since the mid 1990’s (Ghaziani and Ventresca, 2005). Over time,
business models of the industrial economy have evolved along with new technologies and the network
economy, providing new opportunities for value generation and differentiation (Applegate et al., 2006). In
classical linear business models, all work is organized into a sequential value chain. Although this division of
labor creates efficiency in the execution of individual tasks (just think of Ford’s assembly line), it also means
that it is very difficult for information or knowledge to be transferred between units, or across an
organization. This type of thinking, no matter the size of the organization, leads to the formation of “silos”
where knowledge sharing as well as organizational learning become difficult both within and between
organizations. And while this may be an acceptable payoff when assembling an automobile and selling it off
the shop floor, increasingly turbulent global markets necessitate new models that take this dynamism into
account.
In looking beyond linear thinking, today’s business models can usefully incorporate concepts of creativity,
innovation, dynamic networks and ecosystem development. First, following Anderson et al. (2004), business
innovation involves new and improved ways of doing things. With a focus on what is new and applied
within an organization, business model innovation involves a change in the way business is done, rather
than focusing solely on what the business does (Amit and Zott, 2012; Bocken et al., 2014). Understanding
how innovation can be incorporated into value creation, value delivery and value capture processes can
help organizations to adapt in line with rapid changes and inherent uncertainty in evolving markets. And
fostering innovation also means focusing on individuals and their creativity. Focusing on creativity in the
workplace is important because “Creative employees pioneer new technologies, birth new industries, and
power economic growth.” (Florida and Goodnight, 2005, p.2). Put another way, without creativity,
innovation would not be possible.
And while value creation, value delivery and value capture are important concepts to work with internally,
well-formed business models provide a holistic view of a company, which shows how a company’s internal
structure is managed and how it connects with its external environment (Chesbrough & Rosenbloom,
2002). In connecting the internal workings of an organization to its surrounding environment,
understanding dynamic networks is also important. Dynamic networks can handle massive amounts of
complexity while making use of individual specialization, which can be a much more effective use of
resources when considering a single organization that would otherwise have to gather, allocate and
maintain these resources (Miles & Snow, 1986). Already in 1986 Miles and Snow were able to identify
cross-organizational collaboration, rapid technological change and internationalization as important and
2
growing trends. Over thirty years later, each of these trends has become the norm, making network
dynamics even more important to understand today. And for organizations wanting to make the most of
their business model innovation, not only understanding network dynamics, but understanding the role of
their products, services and innovations in their ecosystem is key.
Innovation ecosystems focus on the synthesis of new offerings and other firms’ offerings that together
create coherent customer solutions (Adner, 2006). As stated by Harvard’s Lynda Applegate when
addressing a room full of entrepreneurs with grants from the Danish Innovation Fund: “For your innovation
to be successful, you must cultivate your business ecosystem, placing your innovation at the center.”1 So
while business networks are focused on the relationships between individuals, the ecosystem is focused on
the products, services and innovations that businesses offer on the market, and how they can complement
other solutions to provide customers with integrated solutions that they want and need. Growing and
cultivating an ecosystem is an iterative process that can bring together a number of different networks.
Having a wholistic view of the ecosystem can help to identify unforeseen risks and delays, identify novel
solutions to mitigate risks, and ultimately lead to innovations being integrated into the ecosystem (Adner,
2006).
In this article, the concepts of knowledge, creativity and innovation are discussed within the context of
traditional business model components. Business model innovation is then set in the context of dynamic
networks and ecosystems, providing a new conceptual framework: the Ecosystem View of Business Model
Innovation. The remainder of this article is structured as follows. First, the research methods and approach
will be described. This is followed by a theoretical background and analysis of the concepts introduced
above, which are then combined to form a new conceptual framework. Organizational capabilities,
practices and routines are highlighted within this framework, to show ways in which innovations can gain
traction in the market by allowing for knowledge and creativity to develop. This conceptual framework is
then applied to an illustrative case study, examining the consultancy company Danish Energy Management
(DEM), and their business model innovation within the ecosystem for sustainable development. In the final
section, implications and future perspectives are discussed with relation to the ecosystem for sustainable
development, proposing advantages and broader applications of the new conceptual framework, and
suggesting a path for future research in the area. Let us begin with a discussion of the research methods
and approach employed by this paper.
2. Research Methods and Approach

Studying business model innovation where actors collaborate, share knowledge, learn and develop new
and interconnected products, services and innovations is not straight forward, and requires an
understanding of dynamic processes. To gain an understanding of the way in which these dynamic
processes unfold, case study research is seen as useful and needed, by providing details about how
processes actually play out (Siggelkow, 2007). Illustrative case study research is deemed to be particularly
important for providing details where processes of innovation and creativity can be studied under
conditions of rapid organizational change and development. Within case study research, closeness to the
data also provides “the discipline that mathematics does in formal analytic modeling” (Eisenhardt &
Graebner, 2007, p.25). In other words, the case study presented in this paper illustrates the ways in which
concepts developed in the theoretical framework play out in dynamic ways, capturing the rich contextual
description and informing the theory. It is also important to note that for case studies, knowledge is gained
through an iterative cycling between theory and data, which is a process that can provide substance for
both theory and practice (Eisenhardt, 1989). It is precisely the application of this iterative process that led
1 th
Lynda Applegate, January 25 , 2017. Presentation to Innovation Fund Denmark grant recipients, Hotel Scandic
Copenhagen, Vester Søgade 6, 1601 København.
3
to the design of the new conceptual framework presented in this paper, offering a wholistic approach
combining business model innovation with innovation ecosystems.
The case study selected for this research is the Danish-based international consultancy DEM, a company
operating in the fast-developing global market for sustainable development. Within the company, a recent
merger has been one of the primary catalysts for business model innovation, including a new strategy, new
management structure, a transition towards including private sector procurement, the development of
new innovative services, and a general sense that change is under way.
Action research has also been applied to this illustrative case study – studying research in action – which,
like the iterative process described above, goes through cycles of constructing, planning, taking action and
evaluating (Coghlan, 2019). The researcher began a project funded by the Danish Innovation Fund on Aug.
1, 2016, facilitating this approach. The researcher began by holding meetings with the CEO to share
knowledge and manage change processes from the 9th of August, 2016. The researcher also began
attending and participating in a number of internal meetings, including weekly meetings discussing
international activity beginning on the 19th of August, 2016, bi-weekly meetings discussing domestic
market activity from August 29, 2016, and weekly management meetings from the 21st of November,
2016. A steering group was also assembled for the two-year, longitudinal research period, consisting of the
CEO, Senior Market Manger, Business Development Consultant, and the researcher. The objective of this
steering committee was to enable reflection and the development of insights, as well as to generate
commitment to action (Coghlan and Shani, 2015). An actions report was also created for the committee, so
that each member of the group had a list of objectives to achieve before the next meeting. This was also a
very effective way to ensure that action was taken in a timely manner.
The data gathered for the illustrative case study presented here is primarily qualitative (language based), in
order to study phenomena with depth, openness, and detail (Durrheim, 2006). One of the hazards of
longitudinal qualitative research is that there is an overwhelming volume of data accumulated (Miles and
Huberman, 1984). This challenge has been addressed by creating a timeline of organizational change
(Plowman et al., 2007). This timeline tracks main events, dates and people, keeping a systematic overview
(Coughlan & Coghlan, 2002). Due to the iterative nature of the process, supplementary interviews were
conducted as needed, in addition to process tracking (involving observation and participation) which
continued throughout the two-year period (Aug. 2016 – Dec 2018).
Table 1: Action Research Timeline
Date Frequency Event/Action

9/8/2016 – Every quarter – four per Researcher began holding 2 hr. meetings with CEO to share
18/12/2018 year, ten total knowledge and manage change processes.
19/8/2016 – Weekly meetings Researcher began participating in weekly Friday “UDLAND”
21/12/2018 meetings, with all consultants in Denmark and around the
world working on the international market
24/8/2016 – Employee interviews – Researcher began conducting 1 hr. interviews with
25/1/2019 fifteen total management, engineers and consultants. Semi-structured
interview guides covered issues of knowledge and
innovation management, business models & sustainability
29/8/2016 – Bi-weekly meetings Researcher began participating in 1.5 hr. bi-weekly Monday
17/ 12/2018 “INDLAND” meetings, with all engineers working on the
Danish Market in Aarhus, and often including managers
from other offices
4/10/2016 – Increasing frequency Researcher began holding meetings with Market Maker for
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21/12/2018 leading to daily contact Energy Management, leading to collaboration and the
development of SDG services and the Sustainability
Management Market Area
21/11/2016 – Weekly meetings Researcher began attending 2 hr. weekly Management
17/12/2018 meetings, with INDLAND and UDLAND managers, including
2 managers from Copenhagen
19/12/2016 – Monthly meetings Researcher began holding 1 hr. monthly Steering
17/12/2018 Committee meetings for innovation project, identifying
roles and responsibilities, discussing action plan &
delegating/following up on task list
6/6/2017 – Day-long “retreat” Researcher began attending Market Maker meetings to
9/11/2018 meetings away from the observe development of strategy Action Plans and
office held every six discussion for moving forward
months, four total
We will now turn to the concepts of organizational creativity and innovation, relating them to each of the
three business model components.
3. Theoretical Background and Analysis – business model innovation and the role of creativity
Business models are identified as an excellent lens to study managerial and entrepreneurial approaches, as
well as combining and redefining old and new business philosophies (Schaltegger et al., 2016). The
innovation expert Henry Chesbrough has even identified a better business model as often able to ‘beat’ a
better idea or technology (Chesbrough, 2007). Let us consider why this might be. One obvious reason is
that having great products, services, or innovations is only one part of running a successful business. Having
a great concept also necessitates identifying where the demand for the concept is, where it is likely to be in
the future, and how best to meet that demand with the human capital and material resources available.
With relation to the human capital element, it is clear that companies able to manage creativity well will
have a definitive advantage in the competitive, global search for talent (Florida and goodnight, 2005).
More and more often, running a successful business also necessitates working together with other
businesses in dynamic and changing markets to create integrated solutions that can meet a range of
changing customer needs in a seamless way (Neumeyer and Santos, 2018). It necessitates identifying what
an innovation is worth on the market, and which factors may cause its value to increase or decrease in the
future. The aim here is to shed light on the benefits that can be gained by working with business model
innovation, and key approaches that can foster creativity and innovation throughout this process. This
discussion will also incorporate literature on knowledge management and organizational learning, as this
literature and the associated theories underpin innovation theories, for example through dynamic
capabilities and absorptive capacity (Teece, 2007; Cohen & Levinthal, 1990). As stated by Tidd et al. (2005,
p.15): “Innovation is about knowledge – creating new possibilities through combining different knowledge
sets.” As such, knowledge and learning also constitute an essential component of this research. Now we
will examine the theoretical background, discussing each of the three business model components, and the
role that creativity and innovation can play within them.
Creativity and Innovation in Value Creation

When business representatives look at value creation and ask the question “what value are we creating?”
they will often turn to their strategy and value proposition, and to the products, services and innovations
that they offer to customers. In discussing business model innovation in these areas, we will first examine
some conditions seen to facilitate innovation and creativity within organizations. Then we will turn to some
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key routines for ongoing organizational creativity and innovation, which is important in turbulent
environments where technological, market, political and other changes happen quickly.
There are two main conditions that will be emphasized as particularly important for business model
innovation regarding value creation, namely having a clear and common vision and leaders who are
‘creative entrepreneurs.’ First, having a clear and common vision is important because “without a shared
vision and striving for the desired future, a company will not move forward.” (Ding et al., 2009, p.21) Clear
and common vision is seen as a major factor in helping individuals to work with each other, reducing
opportunistic behavior, and allowing them to move forward in the same direction rather than pursuing
creative ideas that may not support one another (Inkpen and Tsang, 2005; Parkhe, 1993). Having a shared
vision can also provide a strong sense of purpose, creating a collective effort to ‘think outside the box’ and
inspire participation when the task at hand is difficult (Isaksen and Lauer 2002). Having a clear and common
vision seems particularly important when working with the core strategy and offerings of a business.
There is also a great deal of literature suggesting that creativity and innovation is most successful in
organizations where the leaders of the organizations are ‘creative entrepreneurs’ who encourage the same
behavior in their employees (Napier & Nilsson, 2006; Amabile, 1998; Bennis & Biederman, 1997). Leaders
who are ‘creative entrepreneurs’ are individuals who identify opportunities, take risks and allocate
resources to creating something new within their organizations (Napier & Nielsson, 2006; Shane, 2003).
This concept is also similar to literature on transformational leadership, where leaders are seen to inspire,
intellectually stimulate employees, and act in a way that is individually considerate (Bass, 2010). And this is
important not only because their input will be valuable for developing a new strategy. Leaders who inspire,
take risks and allocate resources to new ideas will not go unnoticed among their managers and employees,
making it easier to foster these same behaviors in others.
Next let us look at three key routines which are understood in academic literature as nurturing creativity
and innovation in organizations, namely allowing for continuous external interaction, practicing peer-to-
peer leadership, and creating cross-silo forums. With relation to continuous external interaction, keeping
up to date with what is available outside an organization through conferences, networks and events can
help to see things in new ways, and be a source of inspiration. Dorothy Leonard in her book Wellsprings of
Knowledge: Building and Sustaining the Sources of Innovation, states that continuous monitoring has a
positive impact on performance (Leonard, 1998). When making changes to business strategy or
product/service offerings, it may be particularly important to understand what others in the same or similar
industries are doing, talking to other business leaders about how they perceive market trends, and how
others may be addressing challenges they face in the market.
Peer-to-peer leadership is also identified as important because knowledge work is seen as best conducted
in informal and egalitarian cultures with primarily horizontal, as opposed to vertical, communication
(Newell et al. 2002). Peer-to-peer leadership is seen as fostering innovation within organizational value
creation because it allows for more ideas to come forward, and for rapid change to occur through
concentrating on customized, outcome focused approaches (Bahrami and Evans, 2005). One last routine
also proposed by scholars Bahrami and Evans (2005) is that of cross-silo forums. Where continuous external
interaction can help to understand what is going on outside the organization, cross-silo forums can help to
get a better picture of what is going on within the organization, and facilitate the sharing of ideas across
different areas of an organization. Putting senior managers together in these forums with the explicit
purpose and direction of re-shaping company strategy or product/service offerings could provide
innovation outcomes that take a wider range of company competencies into consideration – while still
focusing on the clear and common vision mentioned above, as this is also identified as particularly
important for the success of cross-silo forums. Business model innovation is not easy or straight-forward.
6
Through the iterative process of cycling between both theory and practice, the conditions and routines
discussed here come forward as critically important for successfully incorporating creativity and innovation
into the components of a business model that deal with value creation. Next, let us examine ways in which
creativity and innovation can be fostered within the value delivery processes of an organization.
Creativity and Innovation in Value Delivery

Value delivery links to the key activities and resources needed to execute a business strategy. With relation
to thinking creatively and innovating within working groups that develop and/or deliver goods/services,
there is a substantial amount of research from organizational learning literature on the concept of
communities of practice, and their ability to achieve innovative solutions (Brown & Duguid, 2000, 1991).
There are three dimensions that are proposed as needed in order to form a well-functioning community of
practice, namely enterprise, mutuality and repertoire (Wenger, 2003). Enterprise is the ‘spirit of inquiry’,
which is akin to the concept of engagement. If individuals are actively engaged in what they are doing, they
will be more likely to come across new ways of doing things, seek out new knowledge were needed, and
spend time thinking about how to achieve desired outcomes. In the context of value delivery, it would then
make sense to choose managers who are already interested and actively involved in developing new
business and market ideas, and put them together with others who are similarly inclined. If these
managers come from different divisions within the company, or have different technical backgrounds, their
‘spirit of inquiry’ may lead them to learn and adapt ‘tricks’ from other trades.
The second dimension to forming a successful community of practice is creating mutuality. Mutuality is the
‘depth of social capital’, and is related to forming a sense of community. It is important that the community
interacts regularly enough to understand the ability of other group members, and that members trust each
other enough to feel comfortable speaking honestly about real problems and how to address them. Mutual
engagement can create an environment conducive of people giving and receiving knowledge about what is
known by members of the community and, combined with enterprise, asking questions about what group
members do not know so that they can seek out the answers together. The last dimension of a community
of practice is repertoire. Repertoire has to do with the artifacts, discourse and processes used by the
community. Documents produced, common language that is developed and procedures that emerge are all
part of the repertoire. By being aware of their repertoire, a community can reconsider basic assumptions
and patterns, “uncover hidden possibilities, and use this self-awareness to move forward” (Wenger, 2003,
p.81).
When a successful community of practice has been formed, this community will have group cohesiveness
(Huang, 2009; Chang et al, 2006). As opposed to ‘group think’ where everyone shares the same approach to
problem-solving, group cohesiveness forms a multi-dimensional approach where both ‘interpersonal
cohesiveness’ (mutuality) and ‘task cohesiveness’ (repertoire combined with a clear and common vision)
are present, and each individual shares their unique expertise for achieving common innovation objectives.
As this concept of group cohesiveness suggests, it is of utmost importance that what brings people together
does not lock them into unwanted routines or ways of thinking, but instead allows the community to be
conscious of the working repertoire, as well as guided by new developments both inside and outside the
organization (enterprise). When creating a community of practice for the purpose of working with an
organization’s value delivery, flexibility is key, being open to re-adjusting the ways of doing things in
iterative cycles so that optimization and innovation can work hand in hand. We now move to a discussion
of value capture.
Creativity and Innovation in Value Capture

When looking at value capture, or why an organization is doing what it is doing, the discussion often
revolves around profit maximization and Milton Friedman’s (1962) understanding that the purpose of
business is to increase profits, capturing value for its stakeholders. However, in more recent times,
7
answering the question of why an organization exists, and who it is capturing value for, has expanded
beyond pure shareholder profit maximization. One of the main driving forces in this transition was
facilitated by RE Freeman’s book published in 1984 titled: Strategic Management – A Stakeholder
Approach. This book expandes the understanding of stakeholders to include not only shareholder profit,
but also the surrounding society and natural environment that businesses impact. And although it has been
slow to develop within the area of business model innovation, having this expanded view of stakeholders is
now presenting some interesting opportunities for both creativity and innovation by fundamentally
changing the approach to value capture.
The question that is being addressed here, namely how creativity and innovation can be fostered within the
value capture processes of an organization, can then lead us to examine the broad view of stakeholder
responsibility, where concepts such as triple-bottom-line, sustainable development and circular economy
can usefully be incorporated. In this context, the triple bottom line refers to looking precisely at the
broader range of stakeholders that an organization is affecting, incorporating not only economic but also
social and environmental considerations into a company’s business model (Bocken et al., 2013). The Danish
Insulin company Novo Nordisk was one of the first companies to incorporate the triple bottom line into
their reporting standards, and since 2004 they have produced annual reports that combine financial, social
and environmental aspects.2 For Novo Nordisk, this approach has led to a number of creative changes in
the fundamental design of the organization, for example balancing short term growth with long-term
investments3 that can positively impact sustainable development. The concepts of sustainability and
sustainable development are also emerging in business model literature, addressing economic as well as
social and environmental issues (Rauter et al., 2017; Stubbs and Cocklin, 2008; Lele, 1991). Sustainable
development is defined as development that “meets the needs of the present without compromising the
ability of future generations to meet their own needs.” (WCED, 1987). Current literature is linking back to
the Brundtland Report’s understanding of sustainable development from 1987, while tying business models
to product lifecycle and impact analysis (Baumgartner & Rauter, 2017).
There are also a number of scholars proposing business models based on circular economy (Manninen et
al., 2018; Urbinati et al., 2017). Rather than linear economy which coverts natural resources into waste,
circular economy shifts the focus away from ‘end of life’, and towards a ‘cradle-to-cradle’ approach
(McDonough, 2002). This approach focuses on restoring damage done in resource acquisition, while
minimizing waste generated throughout the production process and product lifecycle (Murray et al., 2017).
Incorporating this concept into value capture, creativity and innovation can be applied by figuring out how
to design out waste in business processes, design-in re-use and recycling, and how to most efficiently
capture value by closing material loops (UNEP, 2006). These sustainable business practices, processes and
innovations are also seen as necessary in order to addressing the currently unsustainable rate of
consumption of natural resources (Neumeyer and Santos, 2018).
The above-mentioned sustainability concepts can also be incorporated into policies and programs under
names like corporate social responsibility (CSR). Historically, many companies with CSR divisions within their
company have not incorporated the triple bottom line into their business models, and instead handed over
all ‘sustainability focused initiatives’ to one individual or team, receiving little support from the rest of the
organization. This approach is of course not conducive to sustainability being a driving force for thinking
differently and innovating within an organization, or “the holistic changes necessary to achieve long-term
2
Novo Nordisk (2018) Performance on our Triple Bottom Line: https://www.novonordisk.com/sustainable-
business/performance-on-tbl.html. Accessed Sept. 1, 2018
3
Novo Nordisk (2018) Sustainable Business- Finance and Corporate Governance:
https://www.novonordisk.com/sustainable-business/performance-on-tbl/finance-and-corporate-governance.html
Accessed Sept. 10, 2018
8
social and environmental sustainability.” (Bocken et al., 2014, p.42). There are also recent studies showing
that businesses are being increasingly affected by a more and more sustainability-driven market (Franca et
al., 2017). By incorporating concepts like triple bottom line, sustainable development and circular economy
into understandings of value capture, however, companies may be able to use these concepts to propel
business model innovation.
To this point, we have discussed a range of issues for facilitating creativity and innovation within each of
the business model components of value creation, value delivery and value capture. However, a business
model does not exist in a vacuum, and for business model innovation to succeed in the environment in
which it exists, context is also key. For this reason, we will now turn to the vital role that external networks
and ecosystems can play in navigating business model innovation.
The Role of Dynamic Networks in Business Model Innovation

In 1986, Miles and Snow described technological change and shifting patters of competition and
international trade as leading to an environment where “Not only is it a competitive jungle out there, new
beasts are roaming around that we can’t even identify.” (Miles & Snow, 1986, p.62). Now, over three
decades later, these observations have never been more true. This may be one of the reasons why a
number of scholars emphasize that innovating and transforming a business model necessitates not only an
internal company focus, but also requires extending beyond the company itself, to include a broader
network of stakeholders ((Zott et al., 2011; Sommer, 2012; Bocken et al., 2014).
In general, networks are seen as important because of their ability to facilitate organizational flexibility,
efficiency, and collective accomplishments that could not be achieved individually (Weber & Khademian,
2008; Powell, 1998). Networks are also seen as being able to create value and gather resources and power
to accomplish shared tasks and missions (Weber & Khademian, 2008). While we have already covered
some of the aspects of well-functioning internal networks in looking at the network relationships that are
built up, for example, in communities of practice, the dynamic networks being discussed here look at
networks beyond the organization itself. These dynamic inter-organizational networks are seen as creating
complex webs of communication and mutual obligation that spread information and sustain conditions for
innovation by combining different logics (Powell, 1990). But what does the literature tell us about critical
success factors for benefiting from inter-organizational networks?
To understand how organizations can cultivate effective dynamic networks, perhaps it is important to first
take a step back, and ask the question: Who should be involved in dynamic inter-organizational networks?
According to the knowledge and innovation expert Dorthy Leonard, organizations who want to develop
dynamic networks should identify and nurture boundary spanners. Boundary spanners are highly skilled
individuals who can take information from one group, and present it in a meaningful way to another group.
This requires a high level of job competence, as well as highly tuned interpersonal skills, enabling these
individuals to both “translate” and “disseminate” knowledge to different groups effectively (Leonard,
1998). And once an organization has identified ‘who’ should be placed in these dynamic networks, the next
question becomes ‘what’. What is it that organizations should do to benefit from these dynamic networks
that are populated with individuals who excel at their jobs, and are good at re-framing new knowledge to
make it understandable for, and applicable to, others?
One thing that organizations can do to capitalize on dynamic networks is to ensure strong ties through
repeated interaction. You may remember that when discussing value creation, continuous external
interaction was identified as important for keeping up with new developments outside an organization.
And while the point of that exercise is to continually scan the environment for new developments (which is
related to breadth of knowledge), the point of repeated interaction as discussed here is to allow boundary
spanners the opportunity to build strong network ties (which is related to depth of knowledge). By
9
interacting on a regular basis, boundary spanners can build both personal and professional relationships
with other network members, facilitating strong network ties. Strong network ties are seen as important for
knowledge sharing (Inkpen & Dinur, 1998). Strong ties have also been linked to a high degree of learning, as
well as the ability to promote long-term perspectives, trust and reciprocity ((Kale, Singh, and Perlmutter,
2000; Larson, 1992). Here it is suggested that putting boundary spanners in fora where they can repeatedly
interact with boundary spanners from other organizations over time (building personal relationships and
trust), will help to form a productive dynamic network.
Another thing that organizations can do to capitalize on dynamic networks is to make sure that within the
network, there are clear and genuine shared goals. Genuine shared end goals refer to both a common
understanding and approach to achieving network tasks and outcomes (Inkpen and Tsang, 2005). This same
concept has also been termed shadows of the future, where “forward looking expectations of gains hold in
check proclivity toward agreement violations.” (Parkhe, 1993, p.799). Having common end goals can also
help people to move in the same direction, and even to ‘think outside the box’ and come up with
innovative solutions to reach difficult-to-achieve common objectives (Isaksen & Lauer, 2002). In the
absence of genuine shared end goals, dynamic network members may find it difficult to agree, as each
member seeks to fulfill their own agenda, at which point coordination and cooperation will likely break
down, making the network ineffective. Having shared goals can also contribute to operationalizing a
common vision. And if the vision of the dynamic network aligns with the visions of the participating
organizations, these organizations will have an easier time learning and benefiting from the dynamic
network.
The last point to be put forward with relation to capitalizing on dynamic networks is to take collective
action. By utilizing the experience of the skilled individuals that are placed in dynamic networks, allowing
them to think creatively about how to achieve genuine shared goals, these individuals can take collective
action that will build a common frame of reference for the network. Tacit, or implicit, knowledge that
people build up through personal experience over time needs to be made accessible to the people who can
use it. If it is not accessible when needed, tacit knowledge will not be beneficial within a dynamic network
(Davenport and Prusak, 2000). When network members act together, these actions create very specific
frames for joint understanding, which would otherwise likely remain tacit. Put another way, without action,
the knowledge and understanding within a network is based on the different frames of reference of the
network members, and not on a common frame that is created together. Action provides a frame that is
directly observable, and can uncover many of the tacit elements of individuals’ knowledge and lead to
learning. In other words, action helps new information come to light, making it possible to identify both
unforeseen possibilities and limitations (Bahrami and Evens, 2005). This means that for organizations
wanting to capitalize on dynamic networks, allowing these networks to take collective action can also
identify new opportunities for the respective organizations involved, in addition to creating a more
effective network.
While in years past innovation was often developed in concealed labs, we are now seeing the increasing
prevalence of more open collaborative innovation that can be realized through dynamic networks
(Fjeldstad et al., 2012). Understanding success factors for dynamic networks helps us to understand the
interpersonal relational dependencies and opportunities that exist in the environment. However, when
looking at product and service offerings on the market, and how they are interconnected, understanding
innovation ecosystems is equally as imperative (e.g. Chesbrough, 2007; Bogers et al., 2014). And this leads
us into our next discussion, namely that of examining innovation ecosystems in more detail.
Cultivating Innovation Ecosystems

Innovation ecosystems provide “the collaborative arrangements through which firms combine their
individual offerings into a coherent, customer-facing solution.” (Adner, 2006, p.2). At the most fundamental
10
level, studying ecosystems provides a holistic view of companies and the environment in which they act
and interact (Moore, 1993). As a research area, innovation ecosystems are seen as linking to concepts such
as individual behavior and entrepreneurship, as well as involving a coevolution between the ecosystem and
business models (Bogers et al., 2014; Ritala et al., 2013; Nambisan and Baron, 2012; van der Borgh et al.,
2012). Innovation Ecosystems can usefully focus on the ways in which innovative goods and services are
combined and adopted within a market. These complex, collaborative agreements that take place within
innovation ecosystems are increasingly gaining recognition as a key to business success in both innovation
and business model literature (Chesbrough and Bogers, 2014; Van Der Borgh et al., 2012; Adner & Kapoor,
2010). What we are interested in here, is to understand what is critically important for successfully
cultivating an innovation ecosystem.
One aspect suggested in the literature as critically important for successfully developing an ecosystem is to
remain agile and recognize the iterative, rather than static, nature of innovations. In a Harvard Business
Review publication analyzing fourty new business models across a variety of industries, one of the critical
success factors listed was having an agile and adaptive organization. In this study, agile organizations were
identified as better able to respond and adapt to market needs (Kavadias et al., 2016). Having a flat
organizational structure, remaining open to making decisions quickly, and adapting innovations being
offered within the ecosystem can mean being better able to identify and meet customer needs. In line with
this, Adner (2006) describes focusing broadly on adoption opportunities as a success factor for innovation
ecosystems. Akin to the saying ‘don’t put all your eggs in one basket’, the interdependence that exists
within an innovation ecosystem means that delays by one partner can cause serious delays in time to
market. With a broad, rather than narrow, focus on adoption opportunities, innovations become
considerably more robust, and businesses can uncover new collaboration opportunities and new options
for the adoption of their innovations in the ecosystem. Single-user and open collaborative innovation are
also seen as growing more prominent today, making this focus on broad adoption opportunities more and
more salient (Baldwin and von Hippel, 2011). With relation to risks that are inherent in innovation
ecosystems generally, one last success factor that will be highlighted here is to identify risks up-front
(Adner, 2006). Although it seems like common sense, the simple act of considering where challenges will
occur can enable businesses to be better prepared when challenges do arise, saving considerable time and
money when solutions or other plans are readily available.
Scholars Zott, Amit and Masse (2011) identify the need to develop theoretical foundations of the business
model and how they relate to concepts such as new organizational forms, networks and ecosystems. Being
able to understand, work within and positively impact new organizational forms emphasizes a few of the
many reasons that scholars and practitioners are increasingly moving away from linear thinking with
relation to businesses and their business models (Applegate et al., 2006). A wholistic view of the business
model and business model innovation is becoming more and more prevalent. It acknowledges the need to
look at internal elements of the business, as well as including components of the external environment in
which the business is situated.
The following conceptual framework explicates the way in which internal as well as external components of
business model innovation work together. This new framework aims to provide a more holistic view of
business model innovation. It highlights key components which can help innovations to succeed by applying
network and ecosystem perspectives to traditional business model concepts.
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Innovation – can be understood as
the intentional introduction and
application of new and improved
ways of doing things (Anderson et al.,
2004). Innovation and creativity can
then be applied to one or more of the
three foundational components of
the business model, namely
value creation – answering the
question regarding what value is
created, linking to products/services
offered, who they are offered to,
strategy and value proposition;
value delivery – answering the
question regarding how value is
delivered, linking to the key activities
and resources needed to execute the
strategy; and
value capture – answering the question regarding why value is captured, linking to profits and the
measurement of benefits to stakeholders.
These are all elements that can be managed within the business, but their success or failure is intricately
linked to dynamic networks and the ecosystem(s) which lie beyond the boundary of the organization itself.
Dynamic Networks – describe the personal interactions (nodes in the framework above) that are built up
over time at the inter-organizational level, forming complex webs of communication and mutual obligation
that spread information and sustain conditions for innovation by combining different logics. Arrows in the
network represent feedback loops on the left and right of the model, while acknowledging that personal
relationships require mutual engagement. Networks work best when trust is built, and knowledge sharing is
reciprocal. The network within the ecosystem is also nonlinear, because the nature of relationships is
complex. Choosing to pursue, or not to pursue, the development of particular network relationships could
be due to identified opportunities or risks, timing of events, personal compatibility, etc. While dynamic
networks focus on personal interaction,
innovation ecosystems – provide the environment for innovative products and services, where the focus is
on how innovations can be combined and offered on the market as coherent customer solutions. As action
is applied within dynamic networks, innovative products and services are dispersed within the ecosystem. If
an organization is 1) open to new opportunities, 2) agile with relation to modifying innovations to meet
customer needs, and 3) proactive and systematic in their approach to identifying potential risks, they will
be well positioned to grow the ecosystem, continue their innovation process, and secure a central role for
their organization in the network through their ability to capture value within the ecosystem.
The conceptual model above identifies three possible outcomes emerging from the value delivery of
innovative products and services. Agility to the right provides a non-linear feedback loop to new value
creation, allowing the organization to continue its ongoing innovation process. Openness to new
opportunities and up-front risk identification to the left provides a non-linear feedback loop to value
capture. Where nodes branch out at the bottom of the figure, the ecosystem begins to grow, as new
network members become aware of new opportunities within the ecosystem.
12
To this point we have examined business model innovation, and some of the critical success factors for
managing creativity and innovation within the main business model components of value creation, value
delivery and value capture. Business model innovation has also been set in a holistic context by discussing
its connection to, and critical success factors for, operating within dynamic networks and ecosystems in the
external environment. Let us now take a look at an illustrative case study, to add depth, openness and
detail about how the concepts discussed above actually play out ((Durrheim, 2006; Siggelkow, 2007).
4. Illustrative Business Case: Danish Energy Management

DEM (Danish Energy Management) is a consultancy company that began working with business model
innovation in June 2015, when it merged with the company Esbensen Consulting Engineers. The two
companies began working together in 2012 when Esbensen was acquired by the Danish Management
Group. The merger provided increased capacity for the two companies that both had a core competency in
the areas of energy and sustainability. DEM now provides consultancy services for municipalities,
government agencies and private clients in the areas of energy efficiency, renewable energy, contracting,
management, legislation development, and monitoring and evaluation. With this merger, DEM’s CEO, Jørn
Lykou, was faced with two simultaneous challenges. The first was to fully integrate the resources of
employees who had been used to working within different markets, one primarily domestic (within
Esbensen) and the other primarily international (within Danish Energy Management). The other challenge
was to re-focus the entire company toward including private client acquisition, where the primary revenue
for both companies had previously been based on public tendering.
As the work of both companies focused on sustainability and energy, DEM adopted the vision statement:
“Based on a passion for energy, we strive to build a future where energy is applied efficiently and
sustainably in an affordable way.”4 This vision statement provided the foundation and direction for working
on a new company strategy, incorporating knowledge, creativity and innovation to achieve set targets in
newly specified market areas. To facilitate the development of each market area and the overall strategy,
Market Makers (division leaders) were selected to identify new potential, creating action plans with
milestones for each respective market, and setting corresponding budgets. In discussing why he created
Market Maker positions Mr. Lykou stated:
“I think the main idea was to create some kind of ownership of this new vision, of this new
strategy. I could have drafted something, and then people could have said ‘yes’ or ‘no’, but I
think the product became much more valuable for us during these retreats that we had,
where we were discussing our strategy. I think that was very helpful because it released a
lot of energy, and I think people believed that they could impact the final strategy
5
document.”
Then, in September of 2015, Jørn Lykou attended the launch of the UN Sustainable Development Goals
(SDGs) in New York, NY, which he saw as a business opportunity to link DEMs activity even more closely to
the new strategy internally, and global sustainability externally. Subsequently, four of the seventeen SDGs
were incorporated into the first page of the company strategy. Then in January of 2016, the researcher was
hired into DEM, with the task of incorporating the SDGs into working practices of the company. This work
began by linking the four chosen SDGs on Energy (SDG 7), Sustainable Cities (SDG 11), Climate Action (SDG
13) and Partnerships (SDG 17) directly to the four pre-existing company values. These actions identify Mr.
Lykou as a creative entrepreneur, seeing the SDGs as an opportunity and taking the risk to incorporate
them strategically, and later creating innovative services based upon them, and a market area oriented
around them. Mr. Lykou recalls that:
4
dem.dk/en/about/sustainable-development-goals/vision-values
5
Jørn Lykou, CEO of DEM, January 19, 2019. Recording time: 22:45.
13
“We started this discussion about sustainability because sustainability was on the agenda in
society, and then there was this event on the SDGs that added fuel to this process, which of
course with DEMs international profile was extremely intriguing for us… And out of that
came this notion that we have to work much more on sustainability and include it in the
strategy because this is where the major players – at least internationally with the World
6
Bank, EU and so on will allocate funds.”
The SDGs have also been used to focus multidisciplinary expertise across the company, increasing the
number of knowledge sharing activities generally. For DEM, the merger and the incorporation of the SDGs
provided the opportunity to combine complementary knowledge sets and re-design the company business
model. This re-design has meant:
1) new purpose with adoption of the Sustainable Development Goals and new sustainability services
(value creation),
2) the re-direction of the company to include the private market and ramp-up of sales and marketing
(value delivery), and
3) increased focus on internal resources and the measurement of both financial returns and sustainable
impact (value capture).
Table 2. Timeline of Organizational Business Model Change

Date Milestone Event/Action Business Model
(dd/mm/yr) component
1/6/2015 Work begins on a new strategy, at the same time as Danish Energy Value creation
Management acquires Esbensen consulting engineers/ Company vision places
primary focus on energy and sustainability
1/6/2015 Market Maker positions created – 8 areas of expertise with a manager Value creation
assigned to each. Each Market Maker creates an Action Plan with short,
medium and long-term milestones
15/9/2015 CEO attends UN General Assembly in New York, NY, where the Sustainable Value creation
Development Goals (SDGs) are launched as a global business opportunity
1/3/2016 Each of the 4 company values is linked directly to a specific UN Sustainable Value creation
Development Goal (SDG)
3/6/2016 – Company strategy released to all employees and presented by the CEO to Value creation
25/8/2016 each division in person (Aarhus, Copenhagen & Sønderborg)/ Market Makers
present Action Plans to all relevant employee groups
29/8/2016 Management meeting held to identify how different market activities overlap, Value creation
and knowledge could be shared as a consolidation of common activities across
Market areas
12/9/16 Innovative services oriented around the UN SDGs offered for the first time Value delivery
publicly
1/12/16 First contract won which includes the SDGs in the Terms of Reference and Value capture
proposed methodology for the Ministry of Foreign Affairs, Finland
3/2/2017 Results of SDG project measurement released publicly (online SDG system Value capture
developed in-house) through the Global Compact
st
15/3/2017 1 Market Maker attends a course on “Consultancy sales” Value delivery
6/9/2017 & Market Maker meetings to revise Strategy Action Plans, including SWOT Value delivery
14/9/2017 analysis and focus on action milestones highlighted on a transition map
15/12/2017 First private contract won for SDG services Value capture
1/1/2018 Sales Manager joins the company & begins work with each Market Maker on Value delivery
execution of Action Plans using tools like Business Model Canvas (BMC)
15/6/2018 Sustainable Working Culture event for entire company with launch of new Value delivery
brand strategy, new website, and revised Market Maker areas & SDG services
6
14
19/9/18 First time being contacted by a client to provide SDGs services Value capture
Table 1 shows some of the main events and actions that have contributed to the transformation of DEMs
business model innovation. If we first take a look at value creation, external interaction such as Mr. Lykou
attending the UN General Assembly in September, 2015, (as well as many subsequent trips to New York)
meant that the environment could be scanned, and in this instance new knowledge could be gained
regarding sustainability. This new knowledge was distributed within the organization personally by Mr.
Lykou in June 2016, as well as in a peer-to-peer fashion in a series of workshops and meetings that began in
August, 2016 where Mr. Lykou, Market Makers and other cross-disciplinary employees discussed many
different aspects of working with the SDGs including strategy, services and methodology. As stated by Mr.
Lykou: “the atmosphere that was created was one of cooperation, where people were rather open.”7 This
combination of viewpoints and skillsets enabled a wide range of innovative solutions to come forward,
some of which are being marketed today. Also, dividing the company into market areas, rather than
discipline areas, in June, 2015 is a way that DEM has provided cross-silo forums, where everyone providing
solutions for a particular market (such as sustainable buildings and cities) can meet and discuss together,
rather than being divided by their specialty. This approach means that employees gain a better and more
holistic overview of projects, as well as gaining expertise outside of their individual competency areas.
Additional meetings also take place to share knowledge across market areas, at interfaces where market
areas overlap. As Mr. Lykou put it: “people have begun to see that everyone can benefit from each other.”8
Turning to value delivery, we can see that innovative communities of practice have been formed not only
within individual market areas, but also by the Market Maker group within the company. For example, by
attending consultancy sales courses beginning in March, 2017 and then again in January, 2018 when hiring
a Sales Manager. Market Makers were displaying enterprise by showing interest in learning something new
and developing their role as market leaders. This then led to mutuality when these managers shared the
experiences and tools they gained from these courses with the rest of the group, and all market makers
began utilizing tools such as the SWOT analysis to study their market areas in September, 2017 and the
Business Canvas Model (BMC) after January, 2018. Over time, repertoire has also built up in this group,
with common language and standard approaches. As the Market Maker for Sustainability Management
observed:
“When the Sales Manager came onboard, he put a lot of emphasis on the demand-driven
process for selling services in general. And he opened our minds to other approaches. And I
think it has also helped us a lot to accept that there might be other approaches, rather than
jumping into one thing that we think might fit the customer. For example, doing a BMC
9
(business model canvas) to identify the actual situation for the customers.”
The culmination of this common repertoire could be seen across the company in June of 2018 with the
launch of a common brand strategy, on the new website, and in the structure of the transition map. The
common frame of reference that this Market Maker group has built up is one of mutual understanding
about objectives and tools that can be used to help achieve those objectives, as well as an environment
where questions are asked openly, and new opportunities are discussed often.
Then looking at innovative value capture, it is clear that sustainable development and the SDGs are being
used as a means to capture value by international donor organizations in December, 2016 by including the
SDGs as a weighted criterion in their Terms of Reference, which they use to assess open calls for tender.
Winning this contract also meant value capture for DEM, as stated by the Market Maker: “the first project
7
8
9
Market Maker for Sustainability Management at DEM, January 25, 2019. Recording time: 06:50.
15
that we did for the Ministry of Foreign Affairs in Finland, it has provided access to some of our projects that
we are working on in developing countries.”10 The fact that DEM is now being contacted for their SDG
services, from September 2018, is another example of the company capturing economic value based on a
strategic focus on sustainability. Value capture can also be seen in the way that the SDGs are being
incorporated into a wide range of other projects which did not originally place focus on the SDGs. For
example, the Market Maker explains:
“For the data-based project that we are working on that is supported by the Danish Energy
Agency – It was not supposed to include anything about the Sustainable Development
Goals. But because of our past projects, it took me a four-minute telephone conversation to
convince the project managers within Arhus municipality that we should of course include
the Sustainable Development Goals in this project.... And this means that we will be the
very first company who will actually be able to support what they have tried to address in
11
the municipality’s strategy, which mentions SDG 17 – partnerships.”
Within DEM, incorporating four of the seventeen UN SDGs, selected corresponding SDG Targets, and
individualized company indicators into the core of the company also led to innovation. This took the form
of an online SDG Project Management System developed by the researcher, together with a company
engineer and IT developer. The development of this system took knowledge about creating indicators for
the European Union, and combined it with creativity to develop an innovation that can measure progress in
delivering on Energy (SDG 7), Sustainable Cities (SDG 11), Climate Action (SDG 13), and Partnerships (SDG
17) across all company projects. In reflecting on what the SDG Project Management System has contributed
to employees and fellow Market Makers, the Market Maker for Sustainability Management explains:
“I think it has opened the minds of some of the Market Makers by having the system…
Currently we are revising the strategy for the entire company, and one of the Market
Makers is basing the next draft of the strategy on the impact that we are achieving with the
four SDGs that we work with. He is taking the four Goals, and saying: based on that, I can
see that we need to do more in this area. It has been an eye-opener for the employees, and
12
for the Market Makers who are supposed to sell the services and drive this forward.”
Also, the fact that from February, 2017 the researcher began using results from the SDG Project
Management System as a parameter for annual reporting is yet another sign that DEM incorporates
sustainability as an important parameter for value capture.
To this point, we have established a high degree of business model innovation within DEM, but have they
been able to use this to grow the sustainable development ecosystem and secure a central role for their
organization within it? What are the obstacles and successes that they have experienced? Let’s take a look.
After having discussed internal business model components with relation to the illustrative case of DEM, let
us now discuss DEM’s external environment. Knowledge, creativity and innovation are equally important to
DEM with relation to their dynamic network and ecosystem. Table two shows some of the main events and
actions that have contributed to the longitudinal transformation of DEM’s dynamic network, and the
ecosystem within which DEM is an actor providing a range of innovative products and services on the
market.
Table 2. Timeline of Organization/ Ecosystem interaction and Change

Date Event/Action
10
11
12
16
(dd/mm/yr)
15/06/2016 Discussions with the US Clean Tech & Investment companies regarding their use of SDGs
– ongoing for business purposes
16/06/2016 Multiple meetings with UN offices – Responsible for Platform on SDG Reporting,
– ongoing Responsible for Environment, PRME office for Sustainability in Business Schools, Danish
Delegation in NY, etc.
16/09/2016 Meetings with Cleantech companies in Demark regarding SDG implementation projects
– ongoing
28/09/2016 Participation in Networks – Global Compact Nordic Network, Global Compact Network
– ongoing Denmark, Danish Statistical Office working group on the SDGs, Cross-Party Governmental
working group on the SDGs, etc.
28/10/2016 University Lectures & Workshops – for students at Aarhus and Aalborg Universities in
– ongoing Denmark, and Workshops for professors at Aalborg University to incorporate Sustainability
and the SDGs into international business curricula
25/05/2017 SDG focused Sustainability Reports distributed to all DEM clients and partners with
distributed personal letters from Market Makers
annually
16/08/2017 DEM Contact to all Municipalities in Denmark and meetings with over 20 regarding
– Ongoing opportunities for working with the SDGs
19/09/2017 Discussions and meetings at US Universities – meetings with Assistant Vice President for
– ongoing Sustainability at NYU, Director and staff of AASHE (Association for the Advancement of
Sustainability in Higher Education, with the most widely used system for university
sustainability reporting in USA), and sustainability staff for universities in and around New
York regarding the incorporation of SDGs into relevant programs and systems
03/05/2018 SDG Pilot Project Delivery in USA for the Harvard University Office for Sustainability (2
workshops & 4 face to face meetings with the Director, four staff, and two students)
03/10/2018 SDG Workshop held in New York with US partners from Cleantech companies,
universities, and other stakeholders from the green built environment, for the Building
Energy NYC conference in New York
04/10/2018 Presentation held at annual AASHE conference to highlight pilot study with Harvard's
Office for Sustainability. Harvard Grad student was a co-presenter for the case they
worked on together with DEM, highlighting benefits for student engagement and future
work at Harvard.
In this context, the ecosystem that DEM’s business model innovation draws from and feeds into is the
sustainable development ecosystem. This ecosystem is not classified by a particular industry or sector, but
rather a common vision to create sustainable impact through the products and services provided on the
market. There is a very wide range of dynamic network partners and clients that DEM works with in this
space, including national and municipal authorities, universities, private organizations and businesses, etc.
At DEM, a number of technically and interpersonally skilled boundary spanners have been identified as a
core team working with sustainability services. These boundary spanners have built many strong ties
through repeated and ongoing interaction with cleantech companies in the US and Denmark from June,
2016 as well as with local authorities and university representatives in the US and Denmark. Boundary
spanners at DEM including the researcher have also built strong ties with sustainability responsible
employees working for a variety of organizations in the Nordic region by meeting on a regular basis at
various network fora from September, 2016. The Market Maker for Sustainability Management is also
identified as a boundary spanner having built strong ties within these networks when she describes her role
in these networks:
17
“Over time our role has evolved to becoming one of the preferred knowledge partners. I
can see that the role that I have in the governmental SDG network – I am THE expert within
this network… And then we are hired in to speak about our experience. And of course, a
benefit of this is that we are known as an expert within this field, and the hope for us is of
course that we spread the message. And at the end of the day of course the main goal is
13
also to win contracts among the listeners and participants of the network.”
In some instances, DEM has also been able to identify clear and common goals and take collective action
within these networks, for example in developing the pilot project that the researcher conducted with
Harvard’s Office for Sustainability. There were many stakeholders involved in this collaboration, including
the Director and staff from Harvard’s Office for Sustainability, students representing three different campus
schools, and Harvard University professors. Initially, the objectives were established with the Director and
one staff member from the Office for Sustainability, after which a number of other stakeholders were
involved to develop a range of deliverables – from a mapping of their current Sustainability Plan in line with
the SDGs, to Food Standards and Energy cases developed with student participation. This action-oriented
collaboration created common frames of reference that have been disseminated within a wider forum in
October, 2018, at the international AASHE (Association for the Advancement of Sustainability in Higher
Education) conference for sustainability in USA, as well as in the summer of 2018 to network partners in
Denmark. The Market Maker for Sustainability Management explains:
“We worked very closely with the Office for Sustainability, and engaged with students in
order to develop hands on cases within two different sectors… We have also been invited
to disseminate the results from that collaboration, not only in the US at AAHSE, and Building
Energy NYC, but also here in Denmark at the Global Compact Nordic Network annual
14
conference, and the Danish Communication Association.”
Figure 2 shows Business model innovation at DEM within the wider ecosystem of sustainable development.
Within this ecosystem, the sustainability services that DEM provides work with partner and client solutions
to create coherent customer-facing solutions. Because the ecosystem for sustainable development is
evolving rapidly (Twidell & Weir, 2015), it has been very important for DEM to remain agile in its service
offerings. This can be seen for example in Table 1., where original services that were offered in September,
2016 were revised and expanded, providing new innovative service offerings in June, 2018. As stated by the
Market Maker:
“We realized that the tools that we should use, rather than being a monitoring system, were
the tools and the approaches that we utilized as consultants in general in the Danish
Management Group. And this is where we sit together with the client, and we listen. We ask
about their challenges and we try to jump into their actual situation and facilitate the
process. And that was actually what we offered. And then we had a number of different
products within the Sustainable Development Goal ‘service box’, and then we could suggest
what we could see that they needed… And that was something that we brought in, the
ability to facilitate processes, rather than sticking to a system or a product itself, like
15
engineers normally do.”
DEM has also focused broadly on adoption opportunities, which can be seen in Table 2. with the numerous
discussions starting in June, 2016, including cleantech companies, universities and governmental and
nongovernmental offices and institutions in both Denmark and USA. Within each of these sectors,
opportunities have been discussed and provided. There has also been an attempt within DEM to identify
both risks and opportunities up-front within the Sustainable Development Ecosystem, as evidenced by a
series of meetings that have taken place from September, 2015. Initially, these meetings took place
13
14
15
18
primarily between Jørn Lykou, CEO, and the now Market Maker for Sustainability Management. Over time
these meetings grew, both in frequency and number of participants. Each meeting has had the specific
objective of discussing current trends in the ecosystem, as well as potential obstacles and opportunities. As
stated by the Market Maker: “the main purpose is external, on developing the service area and discussing
constraints and challenges, and the opportunities for the company.”16
Figure 2. Business Model Innovation at DEM In looking specifically at the

within the Global Ecosystem for Sustainable Development ecosystem view of business model
innovation, both internal and
external components of creativity
and innovation can be observed.
Internally, DEM is working with
value creation, delivery and
capture in creative and innovative
ways, continually evolving their
business model innovation.
Externally, dynamic interpersonal
networks within the sustainable
development ecosystem comprise
the external environment in which
the business’ innovative services
for sustainable development are
being offered.
If we then look more broadly at the ecosystem for Sustainable Development as a whole, it would appear
that DEM is gaining some traction within the ecosystem, and particularly in Denmark. However, services
provided here do not yet account for a substantial profit margin within the company. According to the
Market Maker, there have been three primary obstacles that have been encountered. The first is that the
initial service that was developed was not demand driven. The Market Maker recalls:
“At that time, the potential customers didn’t even know the letters S.D.G. And we wanted
to provide a monitoring system. And what should they monitor? We had the projects and
process in place that we were able to monitor. We were trying to sell something which no
one needed at that time – they didn’t know that they needed it. And they still don’t need it,
17
because they are in the beginning phase of adopting the Sustainable Development Goals.”
Providing tailor-made consultancy services in the form of sustainability strategies or SDG impact tracking
reports and cases proved to be much more effective services to offer. These services provide the first steps
for showing clients how they can use the SDGs as a framework to measure sustainable impact.
The second obstacle identified was a need to expand the scope of sustainability services beyond the energy
sector. The Market Maker for Sustainability Management states:
“I also think in looking back at our services, whether at company meetings or at

conferences, we primarily talked about energy. And we realized very fast that we needed to
talk about the service that we can provide from a broader perspective, as a facilitator. And
16
17
19
the one who can ask the right questions and guide a company – not necessarily just those
working with energy. We were always asked: Do you also understand the other Sustainable
Development Goals, or do you also work within other sectors than energy? And that is why
we now use the name Danish Management whenever we talk to clients about the
18
Sustainable Development Goals, who are not targeted within the energy sector.”
To overcome the obstacle of operating within a company that primarily provided services to the energy
sector, DEM initially began to describe new SDG services in broader terms, talking about the process rather
than sector-specific indicators. Gradually, as DEM built a network within the sustainable development
ecosystem, consultants were also able to use different types of cases such as food, IT or transport to
exemplify experience in providing SDG services. These new cases also enabled a more concrete discussion
about a number of different sectors with relation to the Sustainable Development Goals. DEM has also
promoted these innovative SDG services under the name Danish Management, in order to move away from
a strict energy focus.
One other obstacle that is now emerging for DEM is that although demand is starting to increase for the
sustainable development services that they offer, competitors are also becoming visible. The Market Maker
explains: “over the last half a year we see that our competitors are really moving fast now, and they are
providing more or less the same services.”19 To meet this challenge, the Market Maker recognizes that: “We
need to jump in whenever a new opportunity might come up. And when I say opportunity, I mean a personal
dialogue, this is where we get the most out of it… So it’s about networking. Networking, networking,
networking, and meeting people, and being present.”20 With a relatively small company like DEM, being
present at a number of sustainability events can be a challenge.
In sum, a great deal of inherent uncertainty lies in the future directions of global change, but there is little
doubt that a wide and diverse development and implementation of sustainable technologies lie ahead
(Twidell & Weir, 2015). To cope with the many new challenges that this transformation will raise,
knowledge, creativity and innovation are crucial for consultancy firms such as DEM - not only for business
performance, but also for speeding up the transformation toward a more sustainable future. In examining
the case of DEM, it is possible to pinpoint knowledge, creativity and innovation processes within their
internal business model development, and external network and ecosystem. Being invited to speak at key
events within the sustainable development network and having won contracts for providing sustainable
development services in a number of different sectors are examples showing that they have had some
success within the sustainable development ecosystem. This article proposes that a continued focus on up-
front risk identification, along with remaining agile and open to new opportunities, will be necessary for the
company to build a central role for their innovative products and services within the sustainable
development ecosystem.
Conclusions and Future Perspectives – The Global Ecosystem for Sustainable Development
As more and more academic literature places focus on the need for organizations to be ‘fluid’ and adapt to
fast-changing market forces, research is moving away from linear models and identifying the need for a
theoretical platform which can capture contradicting requirements in organizations (Schreyogg & Sydow,
2010). The paradox is that organizations need to stay the same and form organizational routines to
capitalize on optimization, efficiency and mastery, while at the same time being fluid and flexible in order
to respond to evolving circumstances and changing realities. To compound this issue, an overall lack of
consistency in the general conceptualization of the business model has “prevented, or at least significantly
slowed, cumulative research.” (Zott et al., 2011). The purpose of this article has therefore been twofold.
18
19
20
20
The first objective has been to develop and propose a new conceptual framework: the Ecosystem View of
Business Model Innovation. This framework combines widely recognized business model components,
explaining how components work together and impact one another in the networks and wider ecosystem
in which a business exists. This is a holistic rather than silo-based approach, highlighting the flow of
connectivity between the internal and external components of the business. The second objective of this
article has been to identify the types of organizational capabilities, practices and routines that can
strengthen both internal value processes and external networks and ecosystems, allowing for knowledge,
creativity and innovation to develop.
To demonstrate how this Ecosystem View of Business Model Innovation unfolds in practice, the illustrative
case of DEM has been presented in order to provide depth and understanding for a process of rapid
organizational change and development. DEM, like an increasing number of organizations around the
world, sees sustainability as an opportunity to innovate the core strategy of their organization and
contribute to the global ecosystem for sustainable development. Global threats to our planetary
boundaries leading to an increase in climate change, natural disasters and other global threats can be seen
as a primary driver spurring an increase in consumer demand, regulatory support, and innovation focus on
sustainability (Rockstrom et al., 2009). When businesses balance economic, environmental and social values
in their business models, they are able to innovate not only their value creation and delivery processes, but
their value capture and assessment processes as well (Rauter et al., 2017). In this context, business model
innovation provides an opportunity for creating positive impact for businesses themselves, as well as for
the wider range of stakeholders and ecosystems within which these businesses operate.
This theoretical development, conceptual framework and illustrative case study research also provides a
number of implications and avenues to explore and develop in future research. With relation to practical
implications of this research, it is suggested that in addition to traditional business model components,
business leaders can usefully incorporate dynamic networks and ecosystems into their decision-making
processes. For example, identifying risks up-front, being agile and being open to new opportunities can
help businesses to provide innovations that better fit into an evolving value chain and meet individualized
consumer needs. This article also identifies the ecosystem for sustainable development as one that is
growing rapidly, and redefining the basic premises upon which businesses operate. In practical terms, this
means that businesses are not only focused on economic concerns, but also social and environmental
concerns, when making decisions. Also, successful businesses are increasingly identified as those able to
recognize and adapt to society’s transition towards sustainability (Franca et al., 2017). This recognition may
help business leaders in making decisions about which partners and innovative solutions to take into
consideration.
Methodologically, this paper uses an illustrative case to explore how the dynamism that is inherent in the
Ecosystem View of Business Model Innovation plays out in reality. Creating a large study across multiple
industries could add considerable substance to this conceptual framework, testing the broader applicability
of the iterative theory/ practice approach undertaken here. This would undoubtedly also uncover
additional critical success factors for business model innovation and help to move theoretical components
of this framework forward as well.
There are also a number of interesting questions left to be answered with relation to the ecosystem for
sustainable development. For example, are business models and corresponding innovation ecosystems
being developed to the extent necessary to meet the needs of our global, biological ecosystem (Daly and
Farley, 2011)? What are the best practice examples of business model innovation within the Global
Ecosystem for Sustainable Development, and what can we learn from these? What defines best practice
examples within the global ecosystem for sustainable development, and do these cases contain all of the
21
same capabilities, practices and routines identified here? Are there other capabilities that are more
important for achieving sustainable impact? Do capabilities, practices and routines need to change
depending on the industry in question, in order for them to create the largest impact with relation to
sustainability. It would seem that all of these are important questions to ask and answer, not only with
relation to the conceptual framework developed in this paper, but with relation to addressing business
activities that are the root of many social and environmental sustainability concerns being faced today
(Schaltegger et al., 2016).
22
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Declaration of interests
☒ The authors declare that they have no known competing financial interests or personal relationships
that could have appeared to influence the work reported in this paper.
☐The authors declare the following financial interests/personal relationships which may be considered
as potential competing interests:

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Journal Pre-proof

Heather Louise Madsen

To appear in: Journal of Cleaner Production

Received Date: 17 July 2019

© 2019 Published by Elsevier Ltd.

Author: Heather Louise Madsen

Academic Degree: Ph.D.

E-mail Address: bacagreif@gmail.com

University Affiliation: Aalborg University, Denmark

Funding Organization: Innovation Fund Denmark

Three components of a business model:

2. Research Methods and Approach

Table 1: Action Research Timeline

Date Frequency Event/Action

Creativity and Innovation in Value Creation

Creativity and Innovation in Value Delivery

Creativity and Innovation in Value Capture

The Role of Dynamic Networks in Business Model Innovation

Cultivating Innovation Ecosystems

4. Illustrative Business Case: Danish Energy Management

Table 2. Timeline of Organizational Business Model Change

Table 2. Timeline of Organization/ Ecosystem interaction and Change

Figure 2. Business Model Innovation at DEM In looking specifically at the

“I also think in looking back at our services, whether at company meetings or at

Bass, Bernard M. (1999). Two Decades of Research and Development in Transformational

Baumgartner, R.J., Rauter, R. (2017). Strategic Perspectives of Corporate Sustainability Management to

Shane, S. (2003). A General Theory of Entrepreneurship. Edward Elgar, Cheltenham.

Sommer, A. (2012). Managing Green Business Model Transformations. Springer, Berlin.

Stubbs, W., Cocklin, C. (2008). Conceptualizing a “Sustainability Business Model”. Organization

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