Let's Change the Business Model

Ever thought about reinventing your business ? I don't mean providing new services or expanding the offering, I mean fundamentally changing he economic model of how you make money.

Let me offer an example. Let say you make zippers (invented in Canada btw... look it up). Your zipper business has traditional pressures, manufacturing material cost increases and pressure from offshore competitors with lower labour costs. The price you're able to command in the marketplace is under pressure too as your product risks commoditization. Normal stuff in a business sense and not dramatically changed I might suggest (except in scope) in the last 10 years.

Historically you have sold zippers on a unit basis and discounted based on bulk purchases, which mapped to some degree to large manufacturing bulk order efficiencies. But. And here is where is gets interesting. What if you examined the value created by the zipper of those that bought it, and instead of selling it, you elected to rent it, or charged per hour that it was used. Now my example is a tad extreme here I’ll admit, as a zipper doesn’t constitute a large percentage of the cost of say, a pair of trousers, but the theory here holds. Placing a small sensor device within the materials to understand (and have relayed) when it was zipped (vs not) would enable you to gather usage profiles and put together a pretty clear picture of the nature of your offering’s use. Instead of selling it, perhaps you might charge per zip-up (or zip-down dependant on the market segment). We don’t think much of the value of a zipper normally – except when we really need it, and it becomes an indispensible part of the overall product. Ever thrown away a pair of pants due to a broken zipper, or perhaps a jacket or a tent that’s not kept out bugs ? I have. Now let’s extend this a little further. What if I offered hot swaps – replacement zippers so the users wouldn’t experience downtime (sorry) or have to throw out the whole greater package. Interesting yes, but it doesn’t make sense, does it…zippers are very very inexpensive and easily replaced. OK, let’s talk jet engines instead with the same situation imposed. Hmm.

As we look at our businesses, often the age-old pressures and tasks of pushing down our sourcing and creation costs and trying to fight for share in our old-world approach to buying & selling traps us.

Open up your creative side, and imagine how your customer uses whatever you do, and then creatively try to address that need – with a win for them in mind. That may see you radically reviewing how you collect their money.