People were using charcoal for art about 30,000 years ago. And we’ve been consciously manufacturing charcoal for at least 5000 years. Because charcoal burns hot and clean, it was the primary fuel source for making iron for quite a while, before it made its recent shift to cooking steaks on barbeques.
Most of our charcoal these days comes in two forms. You can get charcoal briquettes, which are primarily made from sawdust and other industrial byproducts. The ecological problem with briquettes is that they use a lot of glue and other chemicals to bind this material together, so they don’t burn very cleanly, and they are very inefficient. Or you can get charcoal made from wood – the performance of this type is much better than that of briquettes. The ecological problem here is that in many cases the timber source for charcoal comes from chopping down forests, which isn’t very sustainable.
So how can you innovate something that has been around so long, particularly since the technology for making commercial charcoal hasn’t changed much in the past 100 years or so?
You change the business model.
In his book 43 Principles of Home, Kevin McCloud tells the story of BioRegional Charcoal Company. BRCC is a loose network of people that have gone back to charcoal-making techniques that are hundreds of years old. Primarily, they are making charcoal out of coppiced timber. This is a sustainable source of wood – coppicing involves chopping the tops off of quick-growing trees such as willows every 7-20 years. With a large enough forest, you can do this forever.
Most of these operations are run by only one or a couple of people. And working at that kind of scale, you can’t make enough charcoal to supply the big grocery store chains in the UK. This is again the problem of diffusing a new idea through existing economic networks – and this is where the business model innovation comes in. Here’s how McCloud describes from a discussion with Pooran Desai, one of the co-founders of BioRegional:
… what it suggested was that the likes of Ben Law, underwoodsmen working by themselves in dank, lonely woodlands across Britain, were getting together and supplying big superstores like Sainsbury’s and B&Q with charcoal.
Pooran was able to put me right. Yes, tehy were selling charcoal from small British suppliers. Tehy’d grown in ten years to supply not only the B&Q stores but also Homebase and a couple of supermarkets, and they’d done it not by creating a single production company but by creating a network of small charcoal makers and acting as the coordinating agency for all of them. This was, I thought, a brilliant idea, because if you, as a company, want to supply one of the big supermarkets, who incidentally control 70 per cent of the UK charcoal market, you have to get yourself certified as one of their suppliers (in an age when they are trying to reduce their supplier base), you have to be able to guarantee supply (no easy when you’re representing a bunch of old bac kilowattoood hippies), you have to barcode the product all ready for them to retail (who’s going to do that in the middle of a forest?) and you have to buy and run their electronic purchase software (at an annual cost of about £1,500 – prohibitive for a small charcoal maker). BioRegional was galvanizing the small charcoal makers into stepping up their production and dealing with purchasing, admin and distribution. BioRegional calls this ‘network production’ – a term for a loose affiliation of people and ideas who work flexibly together that Pooran borrowed from his academic background in neuroscience.
The story of BRCC illustrates a few important points about innovation:
- Business model innovation is powerful because it lets you innovate anything – even an industry that has been around for 5000 years like charcoal production. It becomes even more powerful when you build business models that address some of the questions that Umair Haque raises in his recent post, such as: “Does it make people lastingly happier, in a sustainable way?” Thinking about these questions is a good way to start picturing new business models.
- Network production is a great way for small, craft-based firms to compete against large multinationals. As McCloud points out, without banding together there is no way that these small charcoal producers could get into the large chain stores. This is one way to get around the problem of getting your innovative ideas to spread throughout the embedded network economy.
- BRCC is creating value by using an aggregate, filter and connect strategy. They are aggregating all of the small charcoal producers into one large entity. And they are connecting them to each other, and to the technology and processes they need access to be able to act like a large firm. These are critical steps in creating value these days.
I love the story of BRCC. If you can innovate in an ancient industry like charcoal production, then you can innovate anything.