Designing Sustainable Business Models with Emerging Technologies: Navigating the Ontological Reversal and Network Effects to Balance Externalities
Rubén Mancha, Ainara Novales
This study investigates how companies can use emerging technologies like AI, IoT, and blockchain to build sustainable business models. Through a literature review and analysis of industry cases, the research develops a theoretical model that explains how digital phenomena, specifically network effects and ontological reversal, can be harnessed to generate positive environmental impact.
Problem
Organizations face urgent pressure to address environmental challenges like climate change, but there is a lack of clear frameworks on how to strategically design business models using new digital technologies for sustainability. This study addresses the gap in understanding how to leverage core digital concepts—network effects and the ability of digital tech to shape physical reality—to create scalable environmental value, rather than just optimizing existing processes.
Outcome
- The study identifies three key network effect mechanisms that drive environmental value: participation effects (value increases as more users join), data-mediated effects (aggregated user data enables optimizations), and learning-moderated effects (AI-driven insights continuously improve the network). - It highlights three ways emerging technologies amplify these effects by shaping the physical world (ontological reversal): data infusion (embedding real-time analytics into physical processes), virtualization (using digital representations to replace physical prototypes), and dematerialization (replacing physical items with digital alternatives). - The interaction between these network effects and ontological reversal creates reinforcing feedback loops, allowing digital platforms to not just represent, but actively shape and improve sustainable physical realities at scale.
Host: Welcome to A.I.S. Insights, powered by Living Knowledge, the podcast where we turn complex research into actionable business strategy. I’m your host, Anna Ivy Summers. Host: Today, we’re diving into a fascinating study from the Communications of the Association for Information Systems titled, "Designing Sustainable Business Models with Emerging Technologies: Navigating the Ontological Reversal and Network Effects to Balance Externalities". Host: In short, it’s about how companies can strategically use technologies like AI and IoT not just to be more efficient, but to build business models that are fundamentally sustainable. To help us unpack this, we have our expert analyst, Alex Ian Sutherland. Welcome, Alex. Expert: Thanks for having me, Anna. It's a critical topic. Host: Absolutely. So, let's start with the big picture. What is the core problem this study is trying to solve for businesses? Expert: The problem is that most companies are under immense pressure to address environmental challenges, but they lack a clear roadmap. They know technology can help, but they're often stuck just using it to optimize existing, often unsustainable, processes—like making a factory use slightly less power. Host: Just tweaking the system, not changing it. Expert: Exactly. The study addresses a bigger question: How can you use the fundamental nature of digital technology to create new, scalable environmental value? How do you design a business where growing your company also grows your positive environmental impact? That's the strategic gap. Host: So how did the researchers approach such a complex question? Expert: They took a two-pronged approach. First, they reviewed the existing academic theories on digital business and sustainability. Then, they analyzed real-world industry cases—companies that are already successfully using emerging tech for environmental goals. By combining that theory with practice, they developed a new model. Host: And what did that model reveal? What are the key findings? Expert: The model is built on two powerful concepts working together. The first is something many in business are familiar with: network effects. The study identifies three specific types that are key for sustainability. Host: Okay, let's break those down. Expert: First, there are **participation effects**. This is simple: the more users who join a platform, the more valuable it becomes for everyone. Think of a marketplace for used clothing. More sellers attract more buyers, which keeps more clothes out of landfills. The environmental value scales with participation. Host: Right, the network itself creates the benefit. What’s the second type? Expert: That would be **data-mediated effects**. This is when the data contributed by all users creates value. For example, every Tesla on the road collects data on traffic and energy use. This aggregated data helps every other Tesla driver find the most efficient route and charging station, reducing energy consumption across the entire network. Host: So the collective data makes the whole system smarter. What's the third? Expert: The third is **learning-moderated effects**, which is where AI comes in. The system doesn't just aggregate data; it actively learns from it to continuously improve. A company called Octopus Energy uses an AI platform that learns from real-time energy consumption across its network to predict demand and optimize the use of renewable sources for the entire grid. Host: That brings us to the second big concept in the study, and it's a mouthful: 'ontological reversal'. Alex, can you translate that for us? Expert: Of course. It sounds complex, but the idea is transformative. Historically, technology was used to represent or react to the physical world. Ontological reversal means the digital now comes *first* and actively *shapes* the physical world. Host: Can you give us an example? Expert: Think about designing a new, energy-efficient factory. The old way was to build it, then try to optimize it. With ontological reversal, you first build a perfect digital twin—a virtual simulation. You can run thousands of scenarios to find the most sustainable design before a single physical brick is laid. The digital model dictates a better physical reality. Host: So the study argues that combining these network effects with this digital-first approach is the key? Expert: Precisely. They create a reinforcing feedback loop. A digital platform shapes a more sustainable physical world, which in turn generates more data from more participants, which makes the AI-driven learning even smarter, creating an ever-increasing positive environmental impact. Host: This is the most important part for our listeners. How can a business leader actually apply these insights? What are the key takeaways? Expert: There are three main actions. First, adopt a 'digital-first' mindset. Don't just digitize your existing processes. Ask how a digital model can precede and fundamentally improve your physical product, service, or operation from a sustainability perspective. Host: So, lead with the digital blueprint. What's next? Expert: Second, design your business model to harness network effects. Don't just sell a product; build an ecosystem. Think about how value can be co-created with your users and partners. The more people who participate and contribute data, the stronger your business and your positive environmental impact should become. Host: And the final takeaway? Expert: See sustainability not as a cost center, but as a value driver. This model shows that you can design a business where economic value and environmental value are not in conflict, but actually grow together. The goal is to create a system that automatically generates positive outcomes as it scales. Host: So, to recap: businesses can build truly sustainable models by combining powerful network effects with a 'digital-first' approach where technology actively shapes a better, greener physical reality. Host: Alex, this has been incredibly insightful. Thank you for breaking down this complex but vital topic for us. Expert: My pleasure, Anna. It was great to be here. Host: And thank you for tuning into A.I.S. Insights, powered by Living Knowledge. Join us next time as we translate another big idea into your next big move.
Digital Sustainability, Green Information Systems, Ontological Reversal, Network Effects, Digital Platforms, Ecosystems
