As “Occupy Wall Street” protests capitalism’s greed, social enterprise leaders are thankfully tapping the power of market forces to address capitalism’s thorniest social issues. In 2000, Gerald Chertavian founded the social enterprise Year Up to address the “huge waste of human capital” he observed in poor neighborhoods as a Big Brothers-Big Sisters mentor. Year Up gives a “leg-up” to youth aged 18-24 who have been disadvantaged by low income, family dysfunctions, substance abuse, or a criminal record. The high-expectations program combines a six-month professional skills training program (covering topics like writing, networking, time management, conflict resolution, and personal finance) with project-based internships that teach a technical skill. Over 85% of its graduates go on to earn $15/hour or more. A social enterprise, according to the Social Enterprise Alliance (SEA), is “an organization or venture that achieves its primary social or environmental mission using…
Will Netflix’ business model crash as entertainment streams converge?
Netflix’s stock price is falling, fast. My take is that the decline has much more to do with the long-term viability of its business model than the stated cause – recent defections in subscribers owing to a change in its pricing formula and a (since averted) break-up of the company into two parts. Here’s a business model lens on Netflix’s issues. Boundaries are melting in the entertainment world as content that used to be available in only one way becomes accessible in multiple ways. We can see TV shows on the Internet, read physical books on-line, use videogame boxes to watch movies-on-demand and buy hardware solutions that transfer data streams acquired on our computers to our TV screens. Hollywood’s new UltraViolet System will give consumers free Internet or cable access to any purchased DVD. What’s the implication for Netflix of convergence to one…
A sad “Kodak moment” business model failure
Louis Pasteur — “Chance favors the prepared mind.” This quote motivated Bill Welter to co-author The Prepared Mind of a Leader: Eight Skills Leaders Use to Innovate, Make Decisions, and Solve Problems (Jossey-Bass, 2006), a thoughtful leadership book. Bill’s also principal of Adaptive Strategies, a small business that specializes in the application of critical and strategic thinking for business through workshops, strategic thinking behavior programs and one-on-one coaching. And, as I write on the day after Steve Jobs’ sad passing, I am sure Bill would agree that Jobs modeled the attributes Bill wrote about. (See below.) From The Prepared Mind of the Leader Observing. Seeing beyond the obvious Reasoning. Moving from the known to the undetermined Imagining. Envisioning the future before it arrives Challenging. Pushing for higher and deeper thinking Deciding. Choosing with consequences in mind Learning. Keeping a developmental mindset Enabling. Exercising…
More than running shoes – a business model innovation Best Buy should model
Amazon’s quarterly revenue rose 51% year-over-year while Best Buy’s revenue remained flat. Is it any wonder Best Buy’s stock prices fell by one-third this year? What’s going on? A high percent of store visitors use Best Buy for decision-making but turn to the Internet to find best prices and make purchases. Without stores and with a government-given competitive advantage called “no sales tax,” Amazon has the lowest cost business model. Best Buy is stuck in commodity-competition quicksand, sinking steadily while customers see little difference between buying from them, Amazon or other reliable suppliers. Of course, lowest price wins. Best Buy is not alone. Most manufacturers and retailers are stuck in this situation. I saw a great solution to this dilemma while helping my husband Nick shop for running shoes at Road Runner Sports, the world’s largest on-line running and walking store with a…
Professional service firms need business model innovation too.
Commodity is likely the last word that attorneys, accountants, marketing agencies and other professional service providers would use to describe their services and knowledge. Their advanced degrees and personalized, professional approaches suggest just the opposite. But professional services are becoming commoditized because clients increasingly see the outcome of a service as standard; that is, differences from one qualified service provider to the next are irrelevant to the client’s desired outcomes. And some professional services are being transformed into on-line products. For example, QuickBooksTM and TurboTax® reduced very small companies’ use of accounting services. With the law, we see LegalZoom.com, an Internet-based law firm that commoditized straightforward legal procedures like wills and business formations, offering them online at substantial discounts. Companies are sending attorneys Requests for Proposals (RFPs) to take a company public or arrange financing, another signal that even more legal services are…
5 principles for 21st century business models
I’m on vacation, reading a fascinating book by Umair Haque entitled “The New Capitalist Manifesto.” Its gist is that too many businesses are creating profits based on what Haque calls “thin value,” value created by stealing benefits from and imposing unmeasured costs onto current and future generations. These businesses will fail in the 21st century when their “deep debt” comes due. Haque argues that our business models, formed in the industrial age of the 20th century, are based on a hunting mentality that assumes no end to the riches in the forest. As a result, businesses create thin value that is: Artificial, as the business creates gains for some (e.g., shareholders) at the cost of harm to others (the environment and future generations); Unsustainable, as the business abuses environmental and labor resources to extract profits; and, False, as the business fails to make…
Insurance solutions, fast from a model business model
Here’s the situation: Just sold my Wisconsin home, my car in Wisconsin is about to be sold and I’ve yet to purchase a new one in my new home state. So I’ll lack car insurance. I don’t want to pay my rental car company’s expensive insurance rates. My Wisconsin insurer can’t help me – they don’t do business in California. Who to call next? Of course! That clever Australian commonly known for his sage advice on car insurance. Never mind that he’s a lizard, and a cartoon, he’s a cracker-jack sales and service guy. I visualize his chartreuse coat and over-sized burgundy eyes first, then the name GEICO pops into my mind, true evidence of the power of effective advertising. GEICO has more than a well-known name and brand characters. It also has a largely on-line business for selling insurance, a business model…
5 open-market trends fueling business model innovation and disruption
Imagine being a 4h grade teacher with a class of 25 students with widely different levels of math aptitude and competency. How do you challenge the most adept students? How do you help the laggards without boring the stars to tears? The only practical option seems to be to teach to the middle. That it, unless you and your principal are lucky enough to have discovered Kahn Academy, which is in the process of disrupting the long-staid textbook publishers market and K-12 education. Kahn Academy is a stellar example of how any business today can thrive by capitalizing on open-market trends that are melting barriers to entry in most markets. Kahn Academy was started by a Salman Kahn, a hedge fund manager and brilliant communicator, an educator with a passion for teaching math and other lessons to kids. He developed effective on-line math…
In business model innovation as in hockey, play where the puck is going.
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,…
Best practices from mid-size gazelles with winning business models
Four fast-growing mid-size company CEOs shared success drivers at the recent Milwaukee Biz-Tech Conference-Expo. With rapid growth rates and distinctive business models, their advice is worth heeding. The panelists Mary Isbister, President of GenMet, a custom metal fabricator Mike Malatesta, founder and president of Advanced Waste Services, Inc. a customized service provider that reduces customers’ risks and waste. Sue Marks, founder and CEO of Pinstripe, Inc. a talent sourcing solution Craig Schiefelbein, president and CEO of PDS. PDS architects, supplies and implements IT solutions for mid-size companies. (See my PDS blog.) Their advice Never waste a downturn. Pinstripe invested in self-service infrastructure during the downturn that will speed throughput of candidates and allow its employees to do more work and higher-level work as the economy recovers. According to Harvard Business Review, market shares shift significantly during a downturn, a lesson Pinstripe capitalized upon….