A new Schwab advertising campaign states, “Ask not what you should do for your broker.” What a great way to successfully communicate Schwab ‘s value promise given what’s happened with the “too big to fail” banks – Schwab will always act to benefit its clients. The company has built it’s business model around this value promise. Not so Goldman Sachs. The SEC charged the investment bank with fraud for selling an asset to banks whose return depended upon a group of home mortgages being repaid by the home loan borrowers. The alleged fraud arises because Goldman Sachs did not tell the banks that the specific sub-prime mortgages in the group were recommended by another Goldman Sachs customer who planned to bet against these same mortgages ever being repaid by the home loan borrowers. (The fact that Goldman Sachs is selling bets and banks…
If you can’t beat price, stop trying.
The loss was set in motion years ago. Still, it was hard to see my favorite airline, Midwest Express, lose the last vestige of its identity today, its name. It’s recent acquirer, Republic Airlines, also owns Frontier airlines. Republic wisely decided it could not afford to invest in two brands and Frontier better defines the combined companies. “The best care in the air,” Midwest’s brand promise, was not spin. First-class sized seats, food you’d enjoy on land and friendly service, complete with freshly baked and still warm chocolate chip cookies garnered industry awards year after year. An airline started by a corporation understood how frustrating business travel is and found a solution for frequent travelers. In every industry there are new entrants and established players driving the market lower in terms of prices and oftentimes (as in airlines) benefits. If you lack the…
“Better Late than Never” Is a Risky Bet in Business Model Innovation
Blockbuster, the largest retail chain for renting and buying videos, is scrambling. Watching movies at home has become as natural as watching TV shows, and internet speed is steadily increasing. The two forces have created new opportunities for connecting viewers with the videos they want to see. New industry entrants grabbed these opportunities as new entrants always do. After all, why go after a leader where the leader is strongest? Netflix provides movies on-line and by mail, with an Amazon-like artificial intelligence that helps to inform a member’s choices. Redbox offers dollar rentals in kiosks located in grocery stores, a disruptive business model innovation that captures spur of the moment purchase decisions. Both business models increase convenience. Still other kiosk competitors exist. U Flick, a start-up in Madison, Wisconsin, for example, places kiosks on college campuses. The niche succeeds because they’ll offer films…