5 innovative ways to hack your business model

Innovation is often associated with the creation of new products and services. However, this type of innovation fails to provide the highest return on investment. Take a look at these 5 unique business models and learn why innovating your business model is a great investment.

Think of some of today’s most influential companies, such as Airbnb and Uber. They definitely excel at product features and user experience, but what separates them from the pack is their emphasis on business model innovation. There’s a reason why “The Uber for…(x)…” has become the go-to catchphrase for aspiring entrepreneurs.

When it comes to business model innovation, most companies focus on innovating the obvious: their value proposition. But the most successful companies look beyond this. They figure out ways to innovate elements of the business model canvas that competitors typically ignore.

Let’s take a look at five companies that are innovating their business model in unique ways.

What it is

StockX is an online marketplace for sneakers, bags, and streetwear.

Why it’s innovative

StockX integrates a market exchange (like the stock market) to set the price of its products. Customers can buy and sell sneakers, watches, and bags on an open market and access hard data to determine the value of a product. The stock market proposition brings transparency to an industry that has traditionally been dominated by asymmetric information between the seller and the buyer.

Which areas of the Business Model Canvas does it innovate?

boardofinnovation-business-model-canvas-stockx

Customer segments

In traditional shops and e-commerce platforms, the price of an item is usually fixed and determined by the seller. As a result, people who don’t agree with the price don’t buy. By introducing an open exchange and variable pricing, StockX makes their products more accessible to a wider market of customers. In addition, the stock market model attracts a new customer segment: traders looking to make money off of trading alternative assets (streetwear in this case).

Revenue streams

Rather that simply adding a markup, StockX takes a percentage of the transaction (around 10%) and charges a fee for using its payment system (around 3%). As prices fluctuate on the market, so does its revenue.

What it is

Bird is an electric scooter-sharing company.

Why it’s innovative

Besides offering a convenient and ecological urban mobility solution, Bird crowdsources many of its activities, such as collecting and charging scooters, by making it a cool activity for youngsters.

Which areas of the Business Model Canvas does it innovate?

boardofinnovation-business-model-canvas-bird

Key resources

Rather than investing in charging stations, Bird adopts an asset-light business model by crowdsourcing scooter charging to its users.

Key activities

Similarly, by crowdsourcing the collection of scooters, Bird is able to focus on customer acquisition and expansion: two activities that have enabled the company to grow astronomically since 2017 (current valuation around $2 billion).

Cost structure

The asset-light nature of Bird’s business model allows the company to operate with minimal fixed costs. Given that Bird’s founder previously worked for Lyft and Uber, the similarity in business models between the companies comes as no surprise.

What it is

Stitch Fix is a personal styling company that sends outfits directly to your door.

Why it’s innovative

Stitch Fix uses a combination of machine learning and expert human judgment to recommend five items that are personalized according to a customer’s style. The items are then shipped to the customer’s home where they can try them on and pay only for what they decide to keep and send the unwanted items back at no cost.

Which areas of our Business Model Canvas does it innovate?

boardofinnovation-business-model-canvas-stichfix

Customer relationships

Physical retail outlets don’t provide any type of guidance when it comes to pairing outfits. While e-commerce platforms may provide basic recommendations based on purchasing history, customers are still often still unsure of what to buy. Stitch Fix, on the other hand, asks customers about their fashion preferences and then matches each customer with a personal stylist who hand-picks five items for them. This extremely personal relationship is one of the key reasons behind Stitch Fix’s high customer lifetime value.

Key activities

While most view Stitch Fix as a fashion retail company, it is actually a data science company. With millions of data points and countless algorithms, Stitch Fix employs dozens of data scientists to constantly analyze customer behaviors, preferences, and patterns; all to ultimately perfect the shopping experience.

What it is

The Holberton School of Software Engineering is a two-year, project-based educational program designed to teach people (often from non-technical backgrounds) the skills needed to become a software engineer.

Why it’s innovative

Holberton is completely free. Students only need to pay once they find a job (17% of internship earnings and 17% of annual salary over 3 years).

Which areas of the Business Model Canvas does it innovate?

Revenue streams

Rather than charging students upfront and making it affordable to those who have the means to pay tuition, Holberton adopts a “success fee” model in order to align the school’s incentives with those of the students.

Customer segments

By eliminating the most significant barrier to entry in higher education — the cost of admission — Holberton is able to reach a wider market of students. In particular, the school is able to attract talented students from underprivileged backgrounds.

Key activities

There are no formal teachers or lecturers at the school. The entire program is project-based and designed to reflect the work environment. Students are assigned to projects with a deadline and recommended some resources. However, it’s ultimately up to each student to figure out how to complete their project. By focusing on preparing the students for the workforce as much as possible, Holberton is able to minimize the chance that students fail to find a job after the program.

What it is

Local Motors is a car company that uses co-creation to build cars and then print them using direct digital manufacturing in micro-factories.

Why it’s innovative

Local Motors leverages co-creation with its customers and a community of designers and engineers to create open-sourced designs. They then manufacture vehicles in low volumes in small plants. The company has launched the Rally Fighter, the world’s first co-created vehicle; the Strati, the first 3D-printed car, and most recently Olli, the first cognitive, autonomous vehicle.

Which areas of the Business Model Canvas does it innovate?

boardofinnovation-business-model-canvas-local-motors

Key partners

Local Motors’ extensive community of engineers, designers, and tinkerers enables the company to tackle some of its toughest problems by harnessing the power of crowdsourcing. The company also relies on a network of small, local manufacturers and 3D printing to decentralize its production structure.

Cost structure

By working with a community, Local Motors is able to “outsource” its R&D, thereby significantly cutting costs in comparison to traditional automobile manufacturers. Moreover, the smaller production hub network doesn’t burden Local Motors with the fixed costs of typical large manufacturing plants.

Customer relationship

The relationship that Local Motors builds with its customers is truly unique. Firstly, Local Motors invites customers to share their ideas on how they would like their car to look, feel, and perform. These ideas are submitted online and elements from the most popular concepts are then taken into the final design by Local Motors. When the final design is released and a customer places an order for a vehicle, they are invited to help build their car from scratch. The customer spends two weekends of manual labor co-building their car with a professional. This type of experience and relationship enables Local Motors to build an extremely loyal customer base.

In the meantime, you might be interested to learn more about FinTech business models or check out our business model innovation webinars

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Thanks for reading!

I’m Alberto Mucci, Innovation Consultant @Board of Innovation. Spreading innovation culture is in our DNA – if you liked the read, contribute to our mission by sharing this article.

Thanks for reading!

I’m Kenan Muhovic, Innovation Consultant @Board of Innovation. Spreading innovation culture is in our DNA – if you liked the read, contribute to our mission by sharing this article.

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