In business, innovation is vital. When technological advances bring about the possibility of new products and services, new business models arise to harness them effectively. The accelerating pace at which science and tech have evolved in the last two decades has left the world of entrepreneurship in a state of near-constant flux.
Entrepreneurs and executives alike have unprecedented access to new markets thanks to these emergent technologies. But all that counts for nothing if they cannot devise profitable business models to capitalise upon them.
Innovative Business Models
To illustrate how to marry the two, here are some inspiring examples of innovative approaches from recent history:
Xiaomi | Doing the Opposite of Apple
Apple did not become the world's most valuable brand by merely selling smartphones and computers; indeed, the company's real value is generated by bundling this hardware with a vast ecosystem of accessories, exclusive software, and other services – a process known as "owning the consumer". Chinese rival Xiaomi is doing something similar, but with one major caveat: the consumer electrics firm operates on rock-bottom retail prices, delivering unparalleled value to customers.
Selling high-specification smartphones on such razor-thin profit margins has enabled the company to expand rapidly in price-sensitive markets such as India and China, dethroning established brands in the process including Samsung, Nokia, and LG. This ability to undercut on price is attributed to the company's flexibility, having evolved and tweaked its business model since its inception in 2010.
Indeed, in its early days, the company ran an online-only model, selling phones through exclusive "flash sales" that generated significant amounts of hype and marketing buzz. This allowed them to keep overhead costs low and price their devices accordingly, while still being able to turn a profit.
This is a high-risk model, but if your product is targeted at – and can reach – high-population markets, then it can lead to similar levels of success.
Sweetgreen | Taking "Farm to Table" to the Next Level
Many restaurants have tried to capitalise on the popularity of sustainable food production in recent years, yet few have come as close to cracking this potentially lucrative chestnut as Sweetgreen, a US-based casual dining chain. Although it launched more than a decade ago in 2007, the company continues to rank highly on numerous innovation lists in 2019 and beyond.
Although many brands pay lip service to social responsibility campaigns, Sweetgreen's business model is unusually committed to supporting local produce and farmers. Rather than relying on international supply chains and set menus, the offerings in their restaurants vary depending on the location and seasons.
To generate hype and create appealing menus, Sweetgreen frequently collaborates with celebrity chefs, but most of their innovation in recent years has been focused on fine-tuning their localised supply chains and improving customer service.
In 2017, they started using blockchain and Internet of Things (IoT) sensors in their partner farms, resulting in improved tracking of all ingredients from farm to table. This data also allows Sweetgreen to plan their seasonal menus ahead of time-based on improved harvest tracking.
The Sweetgreen mobile app is also a testament to the successful innovations pioneered by the group in recent years. Instead of partnering with tech giants, the company is creating its own digital platform in a bid to become the Uber of the restaurant industry.
Peloton | From Exercise Hardware to Everything Fitness
The New York-based exercise and fitness brand landed in the limelight for all the wrong reasons in December 2019, when their Christmas advertising campaign was lambasted for being crass, sexist, and altogether "creepy". The company paid a heavy price, too, losing more than $1bn in market value as a result of the backlash.
That notable misstep aside, however, Peloton has been a phenomenal success story over the last eight years, with a business model that highlights the connected nature of physical products, software, and services.
It goes beyond the traditional remit of sporting goods manufacturers, too. In the past, if you wanted to sell treadmills, stationary bikes, or other home exercise equipment, then you would only need to focus on the manufacture and sales of said products. However, as Peloton's story tells us, this may no longer be enough in a market where customers are accustomed to getting a comprehensive ecosystem of products and services.
For instance, Peloton's most popular product is their stationary bicycle, but cycling alone at home is not appealing to many customers – people often listen to music or watch television while doing so. Peloton improves on this concept by providing live-stream and on-demand fitness classes on the bike itself, recreating a gym environment in the comfort of each customer's own home.
With a smart monitor, high-tech sensors, and integrated mobile app, the company's product offers a unique exercise experience and, with a lucrative subscription system for the fitness classes on top of the cost of the bike (plus other branded accessories), Peloton has multiplied its potential revenue streams.
Winc | Introducing On-Demand to Wine
Traditionalists may scoff at the idea of crafting wines based on a buyer's feedback; after all, not everyone is an expert sommelier. But millennial consumers tend towards things that are tailored to their own specifications – an idea that Winc has exploited brilliantly in the last few years.
Of course, wine subscriptions are nothing new; they have been around since before the age of online delivery clubs, while vineyards and wine enthusiasts have used these arrangements to sell their vintages for decades.
However, Winc has turned this business model upside down by putting the feedback from their buyers at the front and centre of the entire winemaking process. Winc experts choose the grapes and create new wines based on current customer feedback and the ratings of their existing products.
What's more impressive is that the company initially began life as a middleman, sourcing wines from producers and finding subscribers for these bottles. But a smart pivot to making in-house wines has resulted in massive sales growth in recent years, putting a new spin on an old model and transforming the company's fortunes.
MyCash Online | Bringing Banking to Migrants
Access to digital services and products usually requires bank accounts, credit cards, and access to other electronic financial services. As a result, large swathes of populations across the world – especially in the ASEAN and the rest of Asia – are automatically excluded from the digital economy.
For instance, migrant labourers are a massive part of local economies in the likes of Singapore, Malaysia, and other nations in the region. MyCash Online – themselves based in Singapore – aims to connect these people with a wide range of online services, including ticket booking, bill payments, money transfers and more.
To get around the absence of internet banking, MyCash Online accepts cash payments from customers, with POS terminals, agents, and licensed shops providing the last-mile connectivity in this chain. Many financial organisations, such as Revolut, have found success by digitalising the personal finance industry, but MyCash is a clear reminder of the still present need to connect online with offline.
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