To develop this case, the authors collected background and qualitative and quantitative information of the company from its participation in the Best Performance in Sustainable Luxury in Latin America Award, getting this award in the category ‘Best Fashion and Accessories Enterprise of Sustainable Luxury’ in the 2011 edition. The criteria needed to be met to receive the award are:
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-social aspects: the strategies carried out by the company underscoring positive impacts;
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-environmental aspects: the strategies carried out by the company underscoring positive impacts;
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-economic aspects: upfront investment; sales volume, profits (as a percentage of revenues), future growth expectations based on company performance, average price of product/s that your company sells, and distribution or sales channel
This source was supplemented with the chapter written by Kavita Parmar (2014) in the book titled Sustainable Luxury and Social Entrepreneurship - Stories from the Pioneers, whose editors were Miguel Angel Gardetti and María Eugenia Girón (2014). Moreover, the authors considered the e-mails exchanged with Ms. Parmar within the framework of the above award.
The analysis of the collected information focused on the business model based on the canvas presented by Clark et al. (2010). Even though this model not only applies to the clothing industry, it puts special emphasis on the supply chain development and on the relationship developed between the initiative and its customers. It was also analyzed if within the framework of the canvas the initiative fostered a relationship between the customer and the artisans who were part of the supply chain.
(Disruptive) innovation and business models
Innovation provides the means to create a new reality. It involves converting knowledge, learning, capabilities, and insights into value and creative new perspectives, products, productive outcomes, and business models. Innovation is more than change: it is making incremental and/or radical improvements to systems, technologies, products, processes, and practices (business models) (Rainey, 2004).
There are different types of innovation, namely sustaining, evolutionary, revolutionary, and finally disruptive (Christensen, 1997) innovation. Out of all of them, disruptive innovation is very much interesting and quite applicable to apparel industry. It is rather the need of the hour for today’s apparel sector. Disruptive innovation is defined as innovation which helps creating a new market (and eventually disrupts an existing market) by implementing different value sets (Christensen, 1997; Christensen and Raynor, 2003; Christensen and Overdorf, 2004). Disruptive innovation refers not to the incremental improvement but rather to innovation that leapfrogs standard routines and knowledge (Hart and Milstein 1999). It is what Quinn (1996) called a much focused process - discontinuous with the past and generally irreversible. Thus, rather than simply seeking to reduce the negative impacts of their operations, firms can strive to solve social and environmental problems through the internal development or acquisition of new capabilities that address the sustainability challenge directly (Hart, 1997, 2005a, 2007 and Hart, 2003). It is what Rainey (2004) defined as moving from thought to action.
Disruptive technologies can bring to the marketplace a very different value proposition than previously available, and, most importantly, products based on disruptive technologies can be cheaper, simpler, and smaller and can be more frequently made and very convenient to use (Christensen, 1997; Aneja, 2010).
The business model concept has become increasingly used to provide explanations and tools for studying the dynamics of businesses (Amit and Zott, 2001; Zott et al., 2011). Several authors have proposed varying definitions and theoretical frameworks to explain business models. See for example the works of Perkmann and Spicer (2010), Osterwalder (2004), Osterwalder et al. (2005), and Teece (2010). Osterwalder and Pigneur (2010) have applied a pragmatic perspective to the concept that helps to understand how a firm does business, for analyses, comparison, performance assessment, management, and communication, and to assist firms in their innovation. Given this provenance, some concepts prioritize the creation of economic value for business (Chesbrough and Rosenbloom, 2002).
Lüdeke-Freund (2010) describes a sustainable business model as a business model that creates a competitive advantage through superior customer value and contributes to a sustainable development of the company and society. The business model concept has recently been employed in the context of sustainable innovation (Boons and Lüdeke-Freund, 2013, Wüstenhagen and Boehnke, 2008, Wells, 2008, Hannon et al., 2013).
A frequently used approach from Osterwalder and Pigneur (2010) deconstructs the business model into nine inter-related ‘building blocks.’ These blocks require:
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-Customer segments: customers comprise the heart of any business model. An organization must take a conscious decision about which segments to serve and which segments to ignore. Once this decision is made, a business model can be carefully designed around a strong understanding of specific customer’s needs.
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-Specification of the value proposition: the value proposition is the reason why customers turn to one company over another. The value proposition consists of a selected bundle of products and/or services that caters to the requirements of a specific customer segment.
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-Channels: are customers’ touch points that play an important role in the customer’s experience.
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-Customer relationships: a company should clarify the type of relationship it wants to establish with customer segment. This relationship may be driven by customer acquisition, customer retention, and boosting sales.
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-Revenue streams: represents the cash a company generates from each ‘customer segment’.
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-Key resources: these resources allow an enterprise to create an offer a ‘value proposition’, reach markets, maintain relationship with ‘customer segments’, and earn revenues.
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-Key activities: these are the most important actions a company must take to operate successfully.
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-Key partnerships: companies create alliances to optimize their business models, reduce risk, or acquire resources.
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-Cost structure: this is the most important cost incurred while operating under a particular business model.
Figure 1 shows the CANVAS model developed by Osterwalder and Pigneur (2010). It should be noted that since Osterwalder and Pigneur (2010) defined customers as the heart of any business model, we adjusted the original version, putting customers in the first place.
In 2012, Clark - with the cooperation of Osterwalder and Pigneur- adapted the concepts of the 2010 CANVAS to business models where the key resources are, basically, individuals (entrepreneurs), their skills and abilities, and the assets they own and control (Clark et al. 2012). Based on this adjustment, Figure 1 would be as follows (Figure 2).
The IOU Projecta
Kavita Parmar and Iñigo J. Puente Henales (her husband) created the IOU Project. With an investment of USD 2.5 million - between the founders and financial funders - and profits of USD 1.5 million (in 2012)b, IOU is a new disruptive e-commerce initiative that offers fashion-conscious consumers a very distinct platformc. This platform not only enhances the online experience by linking end buyers with artisan producers but also draws upon the most compelling aspects of social media to construct a community around its core brand values: authenticity, transparency, uniqueness, and both social and environmental responsibility. Born from the need to empower both the artisan and the consumer, it uses the full scope of modern technology and the social web by creating a new supply chain that we call the ‘prosperity chain’, and IOU expects a 100% growth in the coming years based on the past years’ performance.
The IOU’s mission is to promote responsible consumption, whereby the consumer engagement is fundamental. People are already very much interested in the provenance of things; once they see who makes the product they use, there is an emotional value attached to knowing its true worth. This makes the product less disposable.
IOU is wholesaling the product directly to their consumers, which means that IOU can make the highest quality product paying the craftsman in India and Europe their fair share and still sell it at the same price as most ‘high street retailers’ so that the consumer gets great value at an affordable price tag. A comparable shirt made in Italy with handmade fabric would cost at least twice the price at the IOU’s site. Prices range from USD 30 to 170.00. Thus, consumer’s purchases are allowing these weavers and artisans in India and Europe to self-sustain and not have to migrate hundreds of miles to work in factories as laborers.
But, most importantly, IOU’s impact is that it gives back ‘pride’ to the artisan’s work; to date, these artisans have never had a chance to speak, let alone get connected with end consumers. In this relationship, the consumer can learn some things from the artisans and have access to a video that introduces them as well. For example, the weaver artisan R. Ramanathand belongs to a cooperative called Kanjamanathanpettai Handloom Weavers Cooperative and has been a member of IOU since 26 September 2010. The website also shows some characteristics of the cooperative to which this artisan belongs. For instance, the year it was founded, how many artisans it employs and how many looms they have, etc. In turn, the weavers who are the members of the IOU Project - who have agreed to work with higher quality standards - receive economic compensation which is equal to 100% of their usual salary for each lungie they knit. An interesting testimonial that shows the possibilities this relationship entails is that of Jessica Adams, a consumer and textile design student from the University College Falmouth (England), who visited Karaikadu Handloom Weavers Cooperative. On the last day of her visit, she said: ‘It was a lovely day, the set up here seems to be working well and the weavers seem to be content. The atmosphere is so wonderful. I really hope to return one day, and wish all these wonderful people the best for the future…Hopefully this weaving way of life can continue’.
The IOWEYOU label has taken beautiful hand-woven ‘Madras’ plaid fabrics made for centuries by artisans in India and turned them over to artisans in Europe who create one-of-a-kind apparel items to be sold online via the IOU specialized social e-commerce tools, the ‘trunk show host.’ The affordable, easy-to-wear apparel items found on the site are handmade and unique, in every sense of the word.
On the IOU website, buyers can shop for unique items and have access to a wealth of audiovisual material that chronicles the process whereby an item was produced. End buyers also have the opportunity to ‘become part of the story’ of each item by using a unique QR code on the items which electronically links them to the specific artisans that created their unique piece. IOU has already expanded into other authentic fabric sources and artisan groups: the real indigo plant-dyed denim from Japan, real cashmere wool from Northern India/Nepal, and yak wool from Tibet, among others. All of them sourced from artisan communities with full traceability and transparency. The IOU big dream is to create a Wikipedia of artisans worldwide.
The IOU Project also offers partner retailers, and others brand the possibility of using the platform and the IOU’s MAAP (mass aggregated artisan produced) system to produce their designs.