Hockey great Wayne Gretsky offered insightful business advice in explaining his scoring success. He said, “A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be.” San Antonio, Texas’ Rackspace Hosting understands Gretsky’s model for success. Now twelve-years old, Rackspace designed its business model and value promise around a basis of competition – exemplary service – that will undoubtedly become more important going forward. Its Fanatical Support®, provided by 3,200 Rackers, is a high-touch offense in a rapidly changing industry in which participants often compete on technology capabilities. Rackspace delivers enterprise-level website, e-mail and application hosting services to 130,000 customers around the globe, most of whom buy Rackspace’s cloud computing solutions. Its value proposition is working. Since 2007, Rackspace’s revenue growth has averaged 30% per year. With $70M net income expected in 2011,…
Business model innovation lessons from century-old IBM
I fondly remember being a guest at a 100th birthday celebration – that of my client Hufcor, the worldwide leader in moveable partitions and walls to create flexible space. But Hufcor wasn’t always the leader. A savvy new owner/CEO, Mike Borden, saved Hufcor from bankruptcy by pursuing an operational effectiveness strategy, process innovation and global expansion, which ultimately positioned Hufcor where it is today. At its centennial celebration, I observed the pride its stakeholders felt as they celebrated generations of Hufcor’s contributions to its employees and their families, its customers and distribution partners and the humble blue-collar town of Janesville, Wisconsin. As IBM celebrates its well-deserved 100th year birthday this month, business leaders should study how this Fortune 500 giant (and mid-size companies like Hufcor) arrived at this momentous milestone. The $100 billion global technology leader, with its 427,000 employees, defied the odds….
More is less in McDonalds’ business model innovation
Burger King has struggled for years to capture market share from McDonalds. Let me propose a winning new business model for Burger King. While driving to Door County, Wisconsin for a short holiday, Nick and I stopped at a McDonalds to quench our thirst. I love McDonalds iced tea as the chain provides real lemons and the drink is always cold. Or so it used to be. Unfortunately, McDonalds replaced my usual 12-ounce plastic cup with a behemoth disposable cup containing more iced tea than I can drink in a day. The first sip confirmed my worst fears – there was so much iced tea in the container that I tasted no lemon, and the drink was on the warm side. In this case, more product provided less consumer value. Far more important, the “32-ounce drinks for $1” promotion also reduces societal value,…
Is Groupon’s business model innovation worth its valuation?
“Bubble or no bubble?” That’s the question being asked about Groupon given its expected $20 to $30B stock valuation. Two and one-half year old Groupon is the pioneer of daily discounts for members from local service providers. Its revenue from 83 million users across 43 countries surged in 2011 to $644M just in its first quarter, versus $44M for the same quarter of 2010. Despite this rapid growth, it’s in the red. Groupon reminds me of a hearty perennial bulb, bound to break through the crusty earth come spring because its time has come. Increasingly powerful purchasing agents have pounded B2B suppliers for discounts since the 1980s. Big-box retailers have demanded excruciating discounts from consumer goods companies like P&G and Kraft. So why shouldn’t service providers have to discount more? Enter Groupon. Now local services like fine dining sell for huge discounts from…