Higher education in the US has reached a breakpoint, where underlying and conflicting trends force an abrupt and often unexpected change in how a market works. The conflicting trends for education are that families’ and governments’ ability to pay for rising college costs has fallen at a time when individuals, states and our nation need higher education more than ever. Typically, when products become more expensive, consumers buy less. But the demand for college education continues to grow as wages for lesser degrees largely erode. So, what will give? When I was an MIT economics doctoral student, we learned that services like education, healthcare and government would increasingly represent a higher share of GDP because they would never achieve the efficiencies observed in manufacturing and agriculture. One teacher even referred to this expected outcome as the “Europeanization of the US economy.” But today’s…
Best experience business models drive customer expectations
I did not see my name on the Hertz’s Gold Car screen at Washington, DC’s Reagan International Airport on Saturday morning, the day before Mother’s Day. Securing a car quickly was one of the linchpins of my 950-miles-in-a-morning trip that I needed to make in order to catch my godson’s exhibit at Maryland College of the Arts (an hour drive away), have lunch with him, and still make it to my mom’s house (another 4.5 hours drive away) in time for dinner. Yes, the scheduling was tight with crazy connections, but the airlines came through and I could have arrived to dinner right on time had Hertz delivered on its promise of a “no frustration” car rental. With Hertz unprepared for my arrival and offering a route recommendation that unnecessarily added an hour to my driving time, my trip assumptions (and timeline) were…
Blueprint Health inaugural class of start-ups reinforce business model lessons
I had the pleasure of being one of about 400 people attending Blueprint Health’s “Demonstration Day.” Angel, venture capital and corporate investors from across the US listened to investment pitches from the nine start-up companies that Blueprint Health selected (out of 300 applicants) for its inaugural accelerator class. I am an advisor to NEEDL, one of the nine. Blueprint Health’s out-of-the box success deserves a shout-out. It serves as the hub of healthcare technology innovation in NYC by bringing together a collaborative community of entrepreneurs who build businesses and learn from each other in a co-work space that offers a broad array of educational classes. Companies that want accelerated help can apply for a 3-month program of support (in exchange for an equity share) from Blueprint’s network of healthcare entrepreneurs, investors and industry mentors, the largest in the country according to Blueprint. These…
A new basis of competition demands new business models
Joe Vanden Plas, of Madison’s InBusiness, summarized my keynote address kicking off WTN‘s highly informative FUSION 2012. FUSION is the annual Midwest conference to deepen understanding of the business implications and key success factors associated with new information technology. I’ll blog about what I learned at the conference next seek. For now, read my take on how the information age has transformed the economy and its implications for C-suite leaders and IT professionals. Thanks Joe! Joe’s summary article In their preoccupation with today’s challenged economic environment, business executives might not have noticed that the nature of competition is changing, but failure to adapt could put an organization on the critical list. So says former Madisonian Kay Plantes, a principal with the San Diego-based Plantes Company who still works in Wisconsin. Plantes, delivering the March 8 keynote at the 2012 Fusion CEO-CIO Symposium, said…
Big pharma faces big business model questions
To pick the best vacation spot for hiking in February, I look at climate patterns. In the world of business, external trends help suggest the most attractive market spaces. Arrive before the crowds, and you’ll have the best experience, a principle as true for industry convergence as it is for hiking. Nevertheless, leaders too often stay stuck in current market spaces by failing to challenge historic answers to the vital business model strategy question, “What business are we in?” They get left behind as their industry converges with others, with pharmaceutical companies the latest example. As scientists’ understanding of cellular and molecular mechanisms deepened, pharmaceutical manufacturers added biologics to their offerings by evolving their internal R&D approaches and acquiring or partnering with biotech drug discovery start-ups. But with a few exceptions, drug companies’ core business remains developing and selling drugs that treat specific…
Business model strength, not numbers, should drive Facebook’s valuation
Are investors making a fundamental mistake in using LinkedIn’s market capitalization as a reference point for Facebook’s potential value? Selling consumer ads (at least twice the market size of B2B ads) to a network over six times LinkedIn’s 135 million members, why shouldn’t Facebook’s value be $100 billion, about twelve times LinkedIn’s $8.4 billion market capitalization? Think again. About LinkedIn LinkedIn’s revenue increased 115% from 2010 to 2011, from $234.1M to $522.2M with adjusted earnings before interest, taxes, depreciation and amortization increasing from $48.0M to $98.7M. For six straight quarters year-over-year revenue growth exceeded 100%. Behind these powerful numbers is a smart set of business models. The business models are synergistic as each leverages LinkedIn’s social media platform, a platform about advancing careers. The platform connects professionals through vital professional histories, business-related articles and commentary. My daughter introduced me to her college life…
Business model lesson in Komen’s public relations disaster
Susan G. Komen for the Cure®, global leader of the movement to eradicate breast cancer, learned a painful lesson last week that we should all remember. An organization’s value promise must guide every decision it makes unless it has previously alerted stakeholders to caveats. Your value promise captures the beneficial outcome your organization aims to create for your customers. Komen promises donors a terrific feeling of making a difference, by allowing them to honor a friend or relative affected by breast cancer and by giving hope for better treatments and even a cure. A remarkably successful non-profit and the leader in the breast cancer space, Komen protects its coveted “pink” and “Race for the Cure” brand identifiers like a lioness guards her cubs. So powerful is Komen’s presence that for every US woman who correctly identifies heart disease as women’s greatest health risk,…
With less shine, what will happen to Apple’s performance?
How will loyal Apple customers react to Apple’s first public supplier performance report card? Recent news about abuse of labor hours and environmental standards by some of Apple’s Asian supply chain partners might lead the loyal and merely satisfied to shop elsewhere. After all, loyalty, past satisfaction with purchases and implicit expectations about corporate behavior are woven together in a rope that can propel or, in Apple’s case, choke off future growth. About loyalty, satisfaction and expectations Customer satisfaction measures, “Did the product or service I purchased meet my expectations?” If it did not, once satisfied customers become dissatisfied, shop elsewhere in the future and, depending on the magnitude of dissatisfaction, encourage others to do the same. Customer loyalty is more than very high levels of satisfaction. A disappointed loyal customer gives a brand a second chance following any disappointment. Most of the…
A winning crusade to slash healthcare costs
Want to build a more competitive business model by lowering labor costs? “Why then are you leaving management of healthcare benefit costs to outside health benefits administrators?” John Torinus, Jr. might ask. Torinus, chairman of Wisconsin-based Serigraph Inc. and former business editor at the Milwaukee Journal Sentinel, views health insurers as “middlemen with a busted business model.” With “a foot in both the provider and payer camps,” health insurers fail to extract best value from provider care networks that insurers need to win business. Torinus understands the value of proactive management, which may explain why the printing, in mold labeling and custom industrial graphics company he purchased in 1987 has grown more than three-fold to 1000 employees, with plants in the US, Mexico, India and China. By reinventing his company’s approach to healthcare, he’s avoided the dramatic increases in employer and employee benefit…
In Amazon vs. Netflix war, Amazon wins the battle for satisfied customers
Competition in a free market economy favors the lowest cost business model as markets mature and price-driven shoppers grow in size. Design a business model that delivers unique benefits, on the other hand, and you must also focus on efficiency. Because customers only pay price premiums for unique benefits, any inefficiency costs come right off your bottom line. Is it any wonder then that on-line retailing is growing by leaps and bounds, steadily gaining share against in-store retail? E-commerce is far more efficient, something Amazon understood in disrupting the book industry. In addition, on-line sales lower consumers’ indirect costs by saving time and gas money and, during the busy holiday season, avoiding the frustration of fighting crowds. Nevertheless, efficiency and convenience won’t overcome frustrating on-line shopping experiences. So how successfully are on-line retailers satisfying the increasingly demanding consumer? Better and better according to…