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New Bottom Line Volume 7.2 – A Simple Business Model. A Profound Business Challenge.

January 27, 1998

More value. Less stuff. It’s so simple it bears repeating. Perhaps because it’s so simple it needs repeating. Or maybe it’s just that as I probe it gets clearer and more resonant in my own mind as the central business proposition of the coming decades — certainly for “sustainable” business, and ultimately for all business.

Regular readers of New Bottom Line have heard some of these ideas before, so I beg your indulgence as I try to crystallize them. Some will note that these thoughts owe a debt to many others too numerous to mention in this forum; I thank them in advance, and in absentesia.

More value. Less stuff. Let me put it a bit less bluntly: in a radical departure from the business model of recent centuries, 21st century business leadership will accrue to companies that can successfully build value — for customers, shareholders and allies — while systematically reducing energy and material throughput.

This proposition emerges from a simple yet powerful “reality-based” business model: Every business, regardless of sector, regardless of scale, can be characterized by its basic “metabolism.” Every business (like every living organism and ecosystem, like every household and community) takes in energy and materials, transforms them, and emits energy and materials. The outputs of living systems find their way beneficially into the metabolic flows of other living systems. For a business these outputs take the form of two flows, and only two: products and services — which add value — and non-product output — which don’t.

Two reinforcing lines of argument follow — one from economic principles, one from physical law — that sing one tune.

In economic terms, it makes no sense for a business to spend scarce resources — money — on resources it does not need. And it makes no sense for a business to spend more of those scarce resources to produce — and then dispose off — resources it cannot sell. A successful business should try to do less of each.

In ecological terms, since what we call production is actually transformation, (remember conservation of matter? we actually “produce” nothing), since any transformation within a closed system nets disorder (remember entropy?) a successful economy will try to minimize transformation and throughput, rather than maximize them.

Moreover, since only energy from outside a closed system can “pump the chaos” that would otherwise accumulate within that system, a successful economy will draw its motive power from our 93-million-miles-away solar fusion engine — most of whose disordering effects take place far from here.

So watcha gonna do? Minimize throughput. How? In several key ways, necessary but not individually sufficient conditions for ecological and economic success:

EcoEfficiency:

Minimize use of resources needed to produce a product. (How efficient can you be? Don’t know. But do find out faster than your competitors.)

Dematerialization:

Minimize the amount of product needed to provide the service. (We’ve seen radical dematerialization in computers, telecommunications and even packaging. What’s next?)

Product-to-service:

Turn the product into service, minimizing still further. (Be clear what your customers are buying. Do they really want the stuff, or what the stuff does for them?)

Waste into product:

Whether through traditional recycling or sophisticated industrial symbioses, serve your “waste” up as someone else’s food. (Don’t minimize waste, Bill McDonough would say, glory in it — as long as you’ve designed it to be “edible” by other processes and non-toxic.)

Harvest existing throughput:

Power the remaining transformations with earth’s innate solar flux, rather than running new fossil and nuclear flows — and their physical and thermal byproducts — into the biosphere.

And — lest this seem like religious dogma — do all this within the context of present financial viability, since sustainability must be eco-nomic as well as eco-logic. (Though it wouldn’t hurt to tweak the economic rules a bit to better reflect physical reality.)

We are admittedly in the Zone of Invention here. The roadmap does not yet exist. Profitability and competitive advantage don’t follow automatically from these concepts — rather from their inspired translation into breakthrough operating efficiencies and new terms of trade, and from their outstanding execution in a competitive landscape in which every firm is continually tested by both the immediate rigors of the marketplace and the inexorable rigors of the laws of nature.

(c) 1998 Gil Friend. All rights reserved.

New Bottom Line is published periodically by Natural Logic, offering decision support software and strategic consulting that help companies and communities prosper by embedding the laws of nature at the heart of enterprise.

Gil Friend, systems ecologist and business strategist, is President and CEO of Natural Logic, Inc.

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