Company goes to basement
Finds $40 billion business opportunity
Pushing the frontier of what is technologically possible is only a small aspect of innovation, although it tends to get all the attention and a lot of the budget.
Why? It’s exciting, it feels extraordinarily impactful, yet the shelves in the basements of the ivory towers of the largest corporations in the world are bulging under the weight of their unused inventions.
I refuse to talk about innovation here, since that would require it to actually have an applicable marketable use, by definition.
Endless product invention has sometimes generated outstanding results, yet often it is not the what but the how that has truly brought about epic change.
We are talking about the sharing economy, subscription based revenue, structured debt, digital products, buy-out deals, licensing deals, 360 degree contracts, pay-what-you-want, non-monetary-based exchanges, freemium, crowdfunding, the list goes on.
Elemental changes in our economy are often driven not by the creation of a new physical product (although that is a great enabler for blue oceans) but by the redistribution and re-consideration of how we can monetise our existing resources.
Business. Model. Innovation.
Especially in a time where resource-based thinking is essential due to the mounting impact of our activities that our visibility changing climate is reminding us of, a way of utilising our existing resource base in a novel way to generate revenue should be a key focus for all businesses striving for sustainable growth.
This does not necessarily mean the changing of an income model, but also the approaching of new markets and discovering new places to sell your product for a new and extended purpose without ever having to tweak your core offering.
Many large businesses command extraordinary capacities that are only used in bursts. Think of the vast lab space a pharmaceutical company resides over, the liquid bulk storage of the wine industry, the incredible technological capacity a fully automated car factory possesses, endless server capacity of AWS (which totally originated out of the need of basically running the biggest website in the world).
As our tools become more modular, so should our thinking. How can we share such resources in ways that drive their utilisation closer to 100%?
Think of the incredible void that Airbnb filled, with the most simple business model innovation in the world, Uber did the same for cars. These businesses are some of the most valuable companies in the world without ever having invented any core technology.
Can you go and do what Airbnb does from a technology aspect? Sure you can, it will probably take you about 3 days, and there’s probably not even “real” IP in your way. Good luck getting past that network effect though when you actually start selling.
The point is, these guys looked at the basement of the world and went “Hold on, what’s the problem with using that thing over there? Can I have that?”
They took it, for free, and built some of the largest businesses today. Airbnb is branching out, smartly taking over holiday experiences and consolidating providers under their network effect, creating considerable revenue while benefiting their new sub-contractors by vetting them and driving a stream of already-trusting customers their way.
Technology innovation in creating Airbnb experiences? Pretty much zero.
Revenue created in its first year after launch: $15M.
Is that a lot for Airbnb? Not at all.
Did they have to make any significant investment or take risks to generate that money? I do not think so.
Also there is a slight issue with perceiving Airbnb experiences as a separate category from Airbnb core business. It is a complementary product, an add-on that makes the core offering all the more enticing.
The real revenue it drives should be measured on how many people book a stay with Airbnb because they were enticed by the “Experiences” offer they found in any particular place.
Sailing around Lisbon harbour at sunset? That sounds like a dream for a bachelorette party! Guess where you can book that, and guess where you will be booking your apartment.
My point is, before commissioning another xxM€ into your next R&D project, go to your (companies’) basement, have a look around and get creative. You’ll never know what you’ll find.
In case you are interested in how Hatch can help you innovate, go to www.hatch.blue/innovation-services or contact tanja@hatch.blue
