Innovation at the business model level has the potential to deliver higher returns than product innovations. It also drives improved sustainability performance, and create deeper systemic value.
So, why are we advocating for product development?
Transforming an entire business model is not an easy undertaking. In fact, few organisations would even consider the idea, even those with innovation and sustainability at their core.
There are many reasons why business model innovations fail, including high failure rate of the unknown and high upfront costs, complex supply chains, tensions between consumer expectations and profit margins, and internal culture and buy-in challenges.
These challenges impede or prevent progress, but instead of an “all-or-nothing” approach, incremental steps can help mitigate risks and overcome limited resources and expertise.
While radical innovation and systemic change are necessary to drive solutions to global challenges – and have proven successful for many companies such as Patagonia – it’s equally important to recognise the value of progressive incremental change.
In many cases, a gradual approach can be more practical, especially when managing resistance, navigating risks, or fostering alignment among stakeholders.
It’s within this context that product development could be explored. It can trigger an environment of creativity and experimentation amongst teams, and serve as a powerful strategic entry point for sustainable business model innovation.
By prioritising product improvements and shifts in design philosophies, organisations can build a solid foundation for broader, more ambitious business model transformations.
Below we outline the potential benefits of product level (sustainability-led) innovation:
7 benefits of innovation at the product level.
A microcosm of what’s possible:
Product innovation can serve as a ‘test lab’ for sustainable business operations, offering valuable insights on scaling practices and future innovation.
Lower barriers to implementation:
Product development may require less initial investment and fewer operational changes, enabling faster implementation.
Test consumer buying behaviour:
An opportunity to gather data on consumer preferences, helping refine strategies and better align with market demands.
Increase Market Differentiation:
Product innovation helps businesses stand out in a crowded market, creating a competitive edge and showcasing commitment to sustainability.
Develop partnerships:
Use the product development stage to collaborate, explore strategic partnerships, and engage with stakeholders to advance shared goals.
Build long-term infrastructure for sustainability:
Lay the groundwork for sustainable infrastructure, setting the stage for long-term operational changes that align with evolving regulations and standards.
Accelerate market readiness:
Introducing sustainable products helps speed up adoption, influencing both consumer behaviour and industry standards.
Two key opportunity areas.
Two primary product types that can be explored for innovation opportunities:
Products that support the business journey: Primarily in the digital space, but also extending to solutions aimed at addressing the increasing demand for tools that help manage operations. These can include data management platforms, as well as other software solutions that assist with sustainability tracking, compliance, or supply chain transparency. With businesses increasingly needing support in these areas, there’s a significant opportunity to build scalable, adaptable solutions that cater to this demand.
Product development: This is the development of sustainable products that address market gaps and customer needs while overcoming the challenges of cost, value, and the “behaviour gap” where green preferences (from customers) don’t always match buying habits.
Risks of relying on products.
Many companies market individual products as sustainable but fail to address the broader environmental and social impacts of their operations or fully understand their product’s life cycle. This may fall anywhere on a spectrum from greenwashing to genuine effort.
Relying solely on products or features, such as biodegradable packaging, risks eroding trust as consumers become more informed and discerning. This risk intensifies with the growing accessibility of diverse information and perspectives through social media networks, short films, exposé books, and documentaries.
Expanded access to varied voices and information sources reshapes expectations, introducing new or heightened ideas of equity, justice, consciousness, and even our consciences!
Confronted by this, businesses can build trust through transparency.
Be clear about your process journey.
Why are you focusing on a specific sustainability feature? What are your challenges in implementation? How are you learning as you move forward?
Effective communication – is a tremendous opportunity to build trust with your customers, but in the long run, product innovation will only carry your brand so far. Meaningful sustainability extends beyond products, requiring alignment throughout the business model, from sourcing and manufacturing to corporate culture and supply chain practices.
Trust through metrics.
Sustainability metrics set clear baselines for product development and provide benchmarks that enhance credibility. They drive continuous improvement, support compliance with standards, and can open doors to new markets.
Incorporating established or emerging metrics into product design grounds your business in measurable sustainability. Examples of metrics include:
- Carbon footprint: Quantifies carbon emissions across a product’s lifecycle, indicating its environmental impact.
- Recovered materials and reuse potential: Helps promote a circular economy by identifying materials that have been or can be recycled or repurposed.
- Product longevity: Tracks durability and lifespan, guiding design to reduce frequent replacements.
- Repairability: Evaluates how easily a product can be repaired, extending its lifespan and reducing waste by enabling consumers to maintain rather than replace items.
- Biodiversity impact: Measures a product’s effects on local ecosystems, highlighting commitment to habitat preservation and species protection.
Examples of companies that are demonstrating radical transparency of ESG factors, and in so doing, creating new forms of value include: Nudie Jeans, Everlane, Maison Cléo and Tony’s Chocolonely.
For example, Nudie Jeans shares extensive information about their operations, including supplier and factory details (and their third-party audit results), material sourcing, carbon footprint measurements, and water usage. Their retail stores also serve as repair shops, completing hundreds of thousands of free repairs – a cornerstone of their brand and a key driver in attracting new customers.
Tony’s Chocolonely publishes detailed annual reports sharing their progress towards fair and ethical sourcing across their supply chain. Their openness and clarity of mission – their promise to end exploitation in cocoa – has strengthened their position as a leader in sustainable chocolate production. Similarly, Maison Cléo and Everlane share detailed information about production costs, turning transparency into a selling point and marketing tool.
Getting started.
Processes and strategies for product innovation will vary by sectors and organisations. However, three key starting points include:
- Know your market. What are the opportunities to better meet customer needs through product innovation?
- Enhance or create an internal culture that values innovative thinking.
- Determine your organisation’s capabilities and resources.
At The Inceptery, our approach to innovation goes beyond frameworks; it nurtures a mindset of curiosity and confidence, grounded in scientific rigour.
We collaborate with teams to create an environment where innovative thinking thrives, encouraging experimentation with product as well as service initiatives. These initiatives can then gradually align with and enhance the business model.
This incremental path allows for learning and adaptation, enabling meaningful change that aligns with market demand and long-term organisational goals.
Curious about your first step?
