1                                                                                    When was the last time you considered...
2Consider Netflix, one of the most successful                                 international expansion, focusing on innovat...
3    Trend 1:    Permanent    Beta    The line between startup and business-as-               customers, salespeople and s...
4Trend 2:Anytime,AnywhereTechnology has increasingly been teaching                                        complement their...
5Trend 3:User-DefinedValueWhat do you get when you combine price-                                      New York startup Gr...
6   Trend 4:   Put Your Money Where   Your Mouth Is    Driven by the global financial crisis, the           York presence,...
7With the modern business landscape in a state of constant flux, successfulorganizations must embrace change and adapt the...
8   ContactThe Garage Group is a new kind of strategy                                      © 2013 The Garage Group, Incfir...
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The 2013 Garage Review

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Hello friends! Hope the new year is treating you well so far. Here at The Garage Group, we're doing great! And, we're excited to see so many examples popping up of organizations embracing change and innovating their business models. So, we wanted to start off the year with some of these inspiring stories. Check out our 2013 Review of these trailblazing, boundary-pushing, innovative organizations.

We hope The 2013 Garage Review inspires you to consider how you might take an entrepreneurial approach to innovating your own business model. We're always on the look-out for innovative business models, so send us a tweet or a quick note when you see a great example -- who knows, maybe it'll end up in our next Review!

Let's stay in touch!

-The Garage Group
www.thegaragegroup.com
@thegaragegroup

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The 2013 Garage Review

  1. 1. 1 When was the last time you considered a broader definition of your business model, beyond your products or services and their priceThe 2013 Garage Review: points? We believe thinking about your business model in broader terms leads to more open space for innovation. Smart organizationsBusiness Model Innovation to around the world are doing it and seeing the benefits. However, once you enter the game, recognize that business-model innovation willHarness the Constant Flux need to become your standard mode of operation. The world is simply moving too fast for you to stay relevant unless you commit to innovate your model as you anticipate change.Image Source: Photo licensed under Creative Commons 2.0 via Flickr user: IBRoombahttp://www.flickr.com/photos/ibroomba/3987493218/in/photostream/
  2. 2. 2Consider Netflix, one of the most successful international expansion, focusing on innovatingearly dot-com ventures and widely known for new elements of its business model rather than Trend 1: Permanent Betadriving Blockbuster into bankruptcy. Unlike simply relying on adding new content. Whileother companies who, for a variety of well- the story is still unfolding, some investors aredocumented reasons, haven’t anticipated or optimistic that Netflix’s new deal with Warner Trend 2: Anytime, Anywhereacted on market turbulence (think Blockbuster Brothers will stabilize the company and give it aor Research in Motion, makers of that level of protectable differentiation in the video-Blackberry device that’s now buried in your streaming space. However, as services like Trend 3: User-Defined Valuedesk drawer), Netflix realized business-model Amazon Prime grow and as Apple considersinnovation was going to be the key to success entering this space, Netflix will need to continuefrom the very beginning. to innovate or they may risk being acquired. Trend 4: Put Your Money Where Your Mouth IsAfter revolutionizing the DVD rental business To that end, we’ve been exploring changes inwith a new approach to delivery, the company the business world that are driven by economicis now facing its biggest challenge yet—to instability, Wall Street pressure, consumers’ newmaintain the world’s largest video-subscription definition of value and an ever-expanding menuservice and its relevancy as a company. After of new technology.implementing an unpopular price increase andunsuccessfully spinning its DVD rental business We’ve uncovered four broad trends that areoff into a separate company (Quickster), both enabling and demanding business-modelNetflix lost 800,000 subscribers and its share innovation. Here’s a deeper look intoprice dropped 60%. Discontinuing marketing each trend, including the innovations enabledefforts on its DVD business, the company by each and a few inspirational examples ofnow expects to lose DVD subscribers every how companies are benefiting from adaptingquarter. Looking forward, Netflix plans to and evolving their business models.continue to invest heavily in content deals andImage Source: Photo licensed under Creative Commons 2.0 via Flickr user: IBRoombahttp://www.flickr.com/photos/ibroomba/3987493218/in/photostream/
  3. 3. 3 Trend 1: Permanent Beta The line between startup and business-as- customers, salespeople and store managers. To founder is the only full-time employee and the usual in established organizations is blurring overcome the typically slow, overly methodical office space has dropped to 350 square feet. as traditional companies begin to embrace pace of other corporate initiatives, it conducts Instead of employing a staff, the company entrepreneurship as a key competency. Small, a series of rapid, one-week experiments, utilizes between 15 and 30 specialist forward-thinking experiments; iterative co- launching products in beta form to quickly freelancers—software programmers, search- creation of new ideas; and new approaches to identify strengths as well as challenges or engine marketing specialists, graphic designers multifunctional collaboration are transforming issues that can be overcome as they iterate and more—pooled from a vast global talent the way companies operate, unleashing new versions of the product throughout the test. base that includes the US, Asia, Eastern Europe employee ideas, reducing rework and As a result of this process change, Nordstrom and South America. The results? Decreased complexity, increasing agility and driving both is attracting a broad diversity of thinking, overhead, increased flexibility and a solid plan top-line and bottom-line results. increasing relevance through in-field rapid for a more diverse portfolio of deliverables to prototyping, and hastening go-to-market time better delight a whole new set of clients. “...traditional Let’s look at a few for more on-trend products and services thatcompanies begin examples. Against continually define and redefine their hallmark increasing pressure first-class service. While the Lab expects 80% to embrace for retailers to draw of the products it develops to fail, anentrepreneurship in more shoppers, early idea sounds promising—an iPad fashion-specialty retailer app that allows shoppers to try on and as a key Nordstrom completely compare sunglasses. competency.” restructured its innovation process, While Nordstrom chose to leverage its developing a customer-focused internal internal strengths through consultancy they call the Nordstrom process innovation, Texas-based Innovation Lab. Working as a streamlined Lancaster Advertising & Marketing startup within the Fortune 500 company, the restructured its organizational model Watch this video to get a behind-the-scenes look at how Lab leverages a diversified talent base and to tap into the strong, diversified this innovative approach is driving results for Nordstrom. utilizes tools similar to those of a lean startup for talent available in the “freelance rapid results. To ensure user-centric innovation, nation.” In 2004, the small business Lab team members identify opportunities for employed 15 full-time staffers in a growth through face-to-face interaction with 4,000-square-foot office; now, the Image Source: Images taken from screenshots of video: http://nordstrominnovationlab.com/#case_study
  4. 4. 4Trend 2:Anytime,AnywhereTechnology has increasingly been teaching complement their in-showroom choices. The inventory strategy by adopting a high-frequency,consumers that they can get answers as soon guideshops boast tremendous results: 90% low-volume replenishment strategy that allowsas they ask questions and get responses to conversion rates, five times the sales per square for greater merchandise variety. By syncingtheir Facebook posts within seconds; instant foot of traditional retail stores and orders twice online order systems to a local warehousegratification is clearly the new norm. Proactively the value of average Bonobos purchases. stocked with pre-sorted fresh foods, theleveraging this new reality and the technology Bonobos also gets real-time feedback from a stores are able to receive merchandise withinenabling it, forward-thinking companies are now base of increasingly loyal customers to better three to five hours of ordering. This inventoryinnovating how they drive awareness of product guide its fashion buyers. innovation enables the grocers to carry a widelines, enable purchases, deliver products to and shallow assortment, providing consumersconsumers or customers, and manage their Taking a lesson from Apple’s anytime, anywhere with a variety that increases conversion andinventory—all significant drivers of lower cost approach, JCPenney is innovating how and product turnover enough to offset any increaseand higher levels of consumer delight. where customers pay for merchandise by in transportation and logistical costs. Because bringing traditional behind-the-counter the rapid-delivery system virtually eliminates “...instant For example, online activities onto the sales floor for a more the need for backstock, stores require a gratification men’s retailer Bonobos is seamless shopping experience. The retailer smaller brick-and-mortar footprint and therefore innovating its approaches began rolling out mobile checkouts in late less overhead.is clearly the to marketing, retail display, 2012, including both mobile cashiers and self- new norm.” inventory, purchase and checkout stations equipped with RFID-based customer engagement systems that eliminate the need to physicallyby embracing the concept of showrooming scan items. On-the-spot checkouts increasetraditionally leveraged by car dealerships and conversion by reducing checkout wait times andinterior designers. In 2012, Bonobos opened completing the transaction while the customerbrick-and-mortar men’s-club-like guideshops is engaged and convinced. This innovation alsoto allow customers real-life merchandise reduces overhead because mobile checkoutinteraction, including beer and complementary technology is far less expensive than traditionalfitting consultations. While consumers are registers and real estate within the store is freedencouraged to try clothing items on for fit and up to house profit-driving items. Watch this video to better understand how Bonobos islook, they place all orders online, enabled by a innovating to leverage the concept of showrooming.personal profile that lists the products they love, In urban Detroit, small grocery stores aretheir perfect sizes and ideas for other items to advancing their consumer connectivity andImage Source: “mobile-checkout-is-something-johnson-is-heavily-touting-hes-eventually-planning-to-get-rid-of-human-cashiers-completely-leaving-just-mobile-and-self-checkout” from http://www.businessinsider.com/huge-photos-of-jcpenneys-brand-new-concept-shops-2012-7?op=1” from http://www.aaramshoppro.com/2012/07/mobile-checkout-headed-to-store-near-you.html,“286905-612x612-1” from http://fab.com/inspiration/500-guideshop-experience, Image taken from screenshot of video: https://www.youtube.com/watch?v=CjVFzMVRi7k
  5. 5. 5Trend 3:User-DefinedValueWhat do you get when you combine price- New York startup Greentoe took a new tools, appliances and computers can publishsavvy consumers with easily accessible big approach to integrating user-defined value their entire inventories for consumers todata? Interestingly, we find the answer to be when it simultaneously innovated its pricing compare prices and make purchase offers.micro-niche customization—highly customized model and its partnership model. The name- Most price-comparison sites utilize cost-products, services and experiences and your-own-price retail website links buyers per-click billing, charging merchants everypersonalized pricing. The segmentation that with merchants, allowing consumers to decide time their products are viewed; Netotiate,forward-thinking companies are leveraging their desired price on an electronic item, however, functions on a cost-per-acquisitiongoes well beyond the old notion of mass then allowing retailers to match or refuse platform, charging merchants only when acustomization; those that are doing it well the offer. While both parties actively control sale is finalized. Providing merchants withare innovating everything from their product- the selling price of over 15,000 products, the the ability to upload unlimited inventory givesdevelopment processes to pricing structures, company provides another layer of value to its consumers access to a broader selection; inpartnership models and marketing strategies. merchants—it serves as a customer acquisition return, satisfying both partners and consumers vehicle, allowing them to collect consumer increases the company’s conversion and profitCaterpillar, Inc. has radically altered its product- data. Merchants who actively collect data give margin, drives strong future partnerships anddevelopment process, leveraging structured Greentoe a higher cut of each transaction, up promotes consumer loyalty.crowdsourcing during various decision-making to 15%. This innovation encourages both repeatprocesses to develop products tailored to consumers and repeat partnerships, allows Finally, an experiment is underway at Sweden’sa highly specialized group of customers— new growth opportunities due to its agile profit Festival 2014, which hopes to be the first-of-professional truck drivers. During the creation structure (the company plans to add 15–20 its-kind, open-source music festival. Ticketof their CT660 multipurpose truck, Caterpillar product categories by mid-2013), and increases buyers get to choose the lineup after theyinvited professional truckers and other market share by presenting highly relevant purchase their tickets; as the number of ticketspotential buyers to contribute design- offerings to niche consumers. sold increases, so does the popularity indeximprovement ideas and real-time feedback of the headliners. This experimental approachbefore the product ever reached market. This Like Greentoe, online retail middleman leverages an open call for help from musicproduct-development innovation enabled a Netotiate successfully innovated its partnership lovers, a strong Facebook presence and the cityhighly engaged niche market of customers model in conjunction with its pricing model of Umea being chosen as the “cultural capitalto drive rapid-pace development, resulting to simplify and improve both consumer and of Europe” for 2014—all to deliver a true open-in a much more relevant truck design with a partner costs. The Netotiate Inbound Product source, user-defined experience.significantly decreased time-to-market and Feed, launched in 2012, features a consumer- Watch this video for an overview of Greentoe’sincreased brand affinity with its core user group. to-merchant online platform in which merchants innovative partnership and pricing models. for products like glasses, cameras, watches,Image Source: Logo from http://www.thompsontractor.com/PowerSystems/Pages/CATTruck.aspx, logo from http://www.netotiate.com/info/how-it-works,image taken from screenshot of video on http://www.netotiate.com/
  6. 6. 6 Trend 4: Put Your Money Where Your Mouth Is Driven by the global financial crisis, the York presence, its low-key charity involvement brand with a strong equity long focused on eco-movement and the infiltration of cause furthers the brand’s image by presenting sustainability, recently developed a biodiesel marketing, companies are adopting a holistic Nordstrom as a leader in a new wave of behind- shipping program featuring next-generation, mindset that intertwines profit, consumer the-scenes corporate philanthropy. fuel-efficient delivery trucks that are not only centricity, social-cause orientation and lighter and more streamlined, but run on plant environmental stewardship for an evolved Panera Cares, a chain of pay-what-you- oil and petroleum-blend fuel, and release 20% perception of value. Companies are innovating can cafés in urban areas like Chicago and less environmentally damaging pollutants than their distribution and financial models and, as a Portland, allows each patron to pay as much standard trucks. At least some portion of the result, their overall value propositions as lines of—or more than—the recommended amount, savings are passed along to the end consumer blur between internally focused profitability allowing money-strapped patrons to receive in the form of lower prices while loyalty, and externally focused practices that make a discounted or free products. By utilizing an image and category leadership continue to be difference in the world. existing storefront and building on the brand’s strengthened. established consumer trust, the cafés appeal“...lines blur between Treasure & Bond is an to both wealthy and lower-income patrons. On unbranded boutique average, each location brings in between 70% internally focused that sells accessories, to 75% of the would-be retail value, earning profitability and artwork, books, enough to be self-sustaining. Such a business- furniture, jewelry, savvy financial innovation allows Panera to externally focused stationery goods and further its value proposition by giving back to practices that make men’s, women’s and the community while generating brand loyalty a difference in the kids’ apparel from a among existing customers and allowing brand variety of selected exposure to a wide variety of income levels. world.” vendors. Opened in Watch this video for a more detailed explanation of OneMorePallet’s eco-efficient model. Manhattan by Nordstrom, it not only is paving Moving beyond just “talk,” organizations are Image Source: “16_how_biodiesel” from http://methodhome.com/greenskee- the way for Nordstrom to learn about New York making a difference in the environment by ping/biodiesel-fleet/ (a market it didn’t previously have a presence innovating their distribution and logistics “treasureandbond2” from New York For Insiders: Taken from the New York For Insiders blog by Karin Dauch. http://newyorkforinsiders.blogspot. in), but also allows the company to give back: processes beyond eco-efficiency to true eco- com/2011/11/newish-soho-arrivals-treasure-and-bond.html all of the boutique’s profits are donated to effectiveness. OneMorePallet provides shared Photo licensed under Creative Commons 2.0 via Flickr user:Asmythie http://www.flickr.com/photos/asmythie/5635503319, Image taken from children’s charities. While this innovative model shipping for smaller shippers, saving cost screenshot of video: http://www.youtube.com/watch?v=irawJ1ggkag serves the business by establishing a New and fuel. Method, the well-known home-care
  7. 7. 7With the modern business landscape in a state of constant flux, successfulorganizations must embrace change and adapt their business models: First ThirdAdopt a broader definition of your business Put a cross-functional team on a mission tomodel beyond the products you make and drive meaningful innovation within one elementthe prices you charge. Consider distribution, or across multiple aspects of that model.pricing, logistics, organizational structures,product-development processes, financialmodels and approaches to marketing. What Fourthassumptions have you built into your modelthat may no longer be relevant? Don’t rest. Change and the need to innovate your model will likely never slow. Being agile and open to new approaches to Second business-model innovation is the only way to achieve sustainable success.Learn about how customer and consumerneeds are changing, understand emergingtechnology you could leverage and getinspired by keeping a pulse on innovative newmodels within and outside your industry.Image Source: Photo licensed under Creative Commons 2.0 via Flickr user: IBRoombahttp://www.flickr.com/photos/ibroomba/3987493218/in/photostream/
  8. 8. 8 ContactThe Garage Group is a new kind of strategy © 2013 The Garage Group, Incfirm helping companies with business-model 2645 Erie Ave #42innovation through new approaches to strategy, Cincinnati, Ohio 45208ideas and organizational development. 513.943.9700 thegaragegroup.comOur clients include Fortune 500 companies like info@thegaragegroup.comProcter & Gamble, Nationwide Insurance and Kao @TheGarageGroupBrands; professional-service firms like LPK, Kantarand TNS; as well as health-care organizations likeCincinnati Children’s Hospital and the GreaterCincinnati Health Council. We enable business-model innovation through new approaches tostrategy, ideas and organizational development.Essentially, we look broadly and deeply at thefoundational business model that an organizationor brand operates from, and find opportunitiesfor innovation across multiple components—for example, new distribution avenues, newproduction approaches, new pricing paradigmsor new internal organizational structures. We’vefound that by opening up the business model,there are limitless opportunities for innovation.Image Source: Photo licensed under Creative Commons 2.0 via Flickr user: IBRoombahttp://www.flickr.com/photos/ibroomba/3987493218/in/photostream/

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