Creating Great Disruptive Business Ideas #5 – The Power of Changing a Business Model
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Can you imagine a day when the amount you – or your health insurance – pay for a surgery is based on how successful the outcome is? Or the cost of a doctor’s visit goes down the longer you sit in her waiting room before she sees you? Or even better, when all medical services can be procured through an auction process that lets the buyer negotiate pricing and terms using independent ratings of each provider’s level of abilities and service?
How about a world in which you can buy goods and services far off into the future like insurance, appliances, vacations and even houses using a forward contract at today’s prices? Or your museum membership includes showing off one of your favorite works of art in your apartment one month/year?
Sound crazy? Not at all.
You may be too old to remember the days when the only place you could get a hamburger, fries and a soda was at a greasy spoon diner. That simple meal cost most people the equivalent of one or two hours of work. That was before Ray Kroc applied the franchise model to restaurant ownership. His model also included rigorous guidelines for cleanliness and the kind of negotiating power that dramatically lowered the cost of ingredients because of the huge amounts of ingredients being bought, further helped by innovative shipping and storage ideas.
Suddenly the average consumer had access to hamburgers, fries and a soda at sometimes half or even a 1/3 of their former price at clean, friendly and efficient restaurants. You always know what you were getting because the quality is pretty much the same at any McDonald’s you go to.
Before Zipcar, you could only rent a car for a whole day not just an hour or two pro-rated to the amount of time you use their cars. The idea of staying at a house owned by someone you never met was strange enough to some people but the fact that you could actually exchange your home for that of a stranger free of charge was inconceivable until recently.
Gone are the days of endless talking to friends and “experts”, flipping through magazines and newspapers, visiting multiple showrooms or stores before finally having the information you needed to buy a car, lawn mower, appliance or a book.
Most large and well-established companies can’t shift easily to business models completely foreign to their usual way of doing business, even if none of the concepts are particularly new. (Indeed, whole businesses and industries have been built around models like auctions, franchising, futures contracts, renting, etc. for decades even centuries.)
Any business model that is the norm for one industry and applied to another will challenge industry incumbents because it forces companies to do things differently and, most importantly, faster and cheaper. When faced with these disruptive ideas most CEOs and their teams can’t even begin to understand how to run a company that does that, much less figure out to make money at it. Most of these “business model transfers” are then dismissed as being unrealistic, silly or even threatening.
That is until a Ray Kroc, Michael Dell, Bill Gates, Antje Danielson and Robin Chase (the founders of Zipcar), the originators of Intervac International (a precursor to companies like Homeexchange.com and others) and many others come along. In addition to using franchise models, they took models like just-in-time manufacturing (Dell), licensing (Gates), short-term rentals (Zipcar) and barter (Intervac) from one industry and successfully applied them to a different industry thereby ignited a disruption that went on to excite millions, even billions of people.
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