Stairway to impact or highway to failure? A cognitive perspective on business model design processes in nascent sustainable ventures

Research Summary: Sustainable new ventures seeking to tackle grand challenges such as climate change or biodiversity loss through new business models face the difficult task of reconciling social and ecological goals with profit. To provide a better understanding of how founders balance such tensions and develop viable business models, this longitudinal case study traces the evolution of business models in six nascent sustainable ventures. We find that depending on the founding team's cognitive configuration (i.e., narrow vs. paradoxical), sustainable new ventures develop business models along two alternative paths. Reflecting different approaches to business model design in terms of what is done, how it is done, and when it is done, these trajectories explain why some ventures survive beyond the proof-of-concept phase while others do not. Managerial Summary: Our study of six sustainable new ventures provides several insights for entrepreneurs on creating viable business models that meet social, ecological, and commercial goals. Founders should pursue a patient, experimental approach to business model design, avoiding early commitments while seeking stakeholder feedback for deeper insights into the challenges at hand. Furthermore, the team's mindset (narrow or paradoxical), influenced by members' value concepts (idealistic or pragmatic), determines the venture's design path. Teams with a paradoxical mindset, simultaneously integrating social, ecological, and economic goals, are more likely to navigate beyond the proof-of-concept phase successfully. Moreover, having idealistic and pragmatic perspectives within the team fosters cognitive diversity, which is crucial to dealing with complex challenges effectively.