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Deborah Mills-scofield's book recommendations, liked quotes, book clubs, book trivia, book lists (read shelf)

Entries in Business Model Innovation (4)

Sunday
Jun162013

Innovating The Brick-and-Mortar Injustice Infrastructure

This week's post is by Andy Posner, Co-Founder & Executive Director of Capital Good Fund (CGF), a non-profit microfinance organization targeting the root causes of poverty through innovative micro-loans and personal financial coaching.  In a world filled with Pay-Day lenders that ruin lives, CGF is starting to making a difference by innovating the basic business model.  Maybe you can help! 
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Go into any low-income neighborhood in America and you are almost certain to come face-to-face with a cabal of bright neon signs and welcoming storefronts proclaiming fast cash, no credit required.  This is the brick-and-mortar infrastructure of a $100 billion/year industry—check cashers, pawn shops, payday lenders, refund anticipation lenders, rent-to-own stores and other sub-prime lenders—that profits handsomely off the backs of the poor.  As the Co-Founder & Executive Director of Capital Good Fund (CGF), a non-profit based in Providence, RI that uses financial services to tackle poverty, I am all-to-aware of the damage these companies do to the fabric of communities and the families that reside therein.  Take, for instance, payday lenders: a study by the Insight Center for Community Economic Development found that in 2011 “the burden of repaying [payday loans] resulted in $774 million in lost consumer spending and 14,000 job losses.[1]

Traditional economic theory dictates that market forces should spawn more affordable alternatives, but they haven’t.  America’s poor are forced to choose between the 260% payday loan and mainstream financial products and services from which they are often excluded due to poor credit.  Few for-profit alternatives exist because small, risky loans aren’t highly profitable if they aren’t accompanied by high interest rates, and few non-profit alternatives have scaled because of the limits of philanthropic dollars. 

Recognizing that this paradigm is untenable, at CGF we are using business model and other innovation to scale a solution that is affordable and financially viable for us as an organization. From the outset we knew that our solution had to compete with existing options in terms of ease-of-use, customer service and turnaround time; we also knew that our model had to be about more than just making loans and collecting loan payments—we needed a way to obviate the need for expense financial products to begin with. 

In order to meet these requirements, it became clear that having a physical presence in the communities we serve would be critical, but expensive.  To solve that, we are partnering with a local non-profit, within whose office we will house a loan officer.  After running the numbers, we have a realistic target: the program will be self-sufficient if we can close 240 loans per loan officer per year while maintaining a repayment rate of 93% (and charging 36% APR).  Of course, we have to acknowledge two things: first, that people don’t wake up in the morning and say “Boy, I wonder if there’s a non-profit alternative to the local payday lender,” and second, that the established players have a lot of marketing clout.  With that in mind, we are running an aggressive advertising campaign, from billboard ads and bus shelters to flyers, community presentations and door-to-door visits.  In concert with that, we are working to ensure that it takes no more than two days to go from loan application to loan closing—slightly longer than with the predatory firms, but still within reason. Finally, we require that every borrower also avail him or herself of at least one session of individualized Financial Coaching, focusing on budgeting, managing debt and opening a bank account so that they have the tools the need to achieve financial success.  Already, our average clients saves $1,100 / year thanks to our program, and we have disbursed over 340 loans to low-income families.

Taken together, these program components—a community storefront, an affordable, customer friendly product and an aggressive marketing campaigned married to Financial Coaching—have the potential to, at scale, put the predatory financial services industry out of business.  Of course, lending and Coaching alone aren’t enough to cover all the costs of running each of these ‘micro-branches,’ so we need to explore alternative streams of revenue.  Grant funding, to be sure, is an option, but an unreliable one at that.  We don’t yet have all the answers, but we are considering a few possibilities.  For instance, suppose we were to partner with a forward-thinking, ethical grocery store chain and turn our micro-branches into micro grocery stores.  This would address several issues: healthy, affordable food is notoriously hard to come by in low-income neighborhoods; the more products and services sold at our branch, the more we come to be seen as a community hub; and we can earn a percentage of sales, thereby increasing our earned income.

What I want to emphasize is the importance of thinking out-of-the box, for on the one hand, the for-profit mentality says it isn’t worth doing if the profits won’t be large, and on the other, the non-profit mind doesn’t want to do it without grant funding.  By thinking hard about our customer’s needs, understanding our competition, and thinking creatively about how to solve an endemic problem that takes a drain on our country on both the macro and micro-economic scale, we are building something that can truly make a difference.  It’s time for us to finally put poverty out of business for good.


[1] http://www.huffingtonpost.com/2013/05/05/payday-loans-cost-economy_n_3211597.html

Friday
Oct212011

Creating Business Models in Real Time

In 2009,  I was privileged to co-create an awesome book, Business Model Generation, with Alex Osterwalder and Yves Pigneur.     Co-creating the book with Alex was an amazing experience, created some lasting friendships with other co-creators, and of course Alex.  After Angela Dunn's monthly twitter-chat, #ideachat, I decided to ask Alex what made him decide to do co-create this book:

Why did you decide to co-create Business Model Generation?

Several managers and consultants around the world were already using the content of my doctoral dissertation because I put it online. Yves, my former PhD supervisor, and I thought it would be great to involve these practitioners and their experience to evaluate our content and make the book more relevant. It would allow us to test each and every one of our ideas with practitioners immediately. Co-creation helped us assure we were on track in creating a useful book.

Of course we could only do this because we decided to self-publish at the expense of the comfort of the infrastructure of a publishing house.

How did you decide whom to invite?

I wrote a blogpost and anybody who paid our “entry fee” was able to join. Each member would become part of our so-called “Book Hub”, get access to content, be able to give feedback, and they would have their name in the book. The fee was first USD$24 and we raised it gradually to USD$243 to keep the community exclusive. We tested the limits.

How did you manage all the ideas and comments you received?

We posted our content continuously as so-called “book chunks”. These were raw and undersigned pieces of content. For each chunk we started a discussion thread and answered almost every comment personally. The comments helped us create better content. Sometimes we specifically asked people about their experience or about their opinion. For example, it took some iteration to get members of the Book Hub behind a title for the book.

What tools did you use to help with the project?

I customized a Ning.com platform – an online website to create communities. We had to do everything ourselves, since no publisher offered a platform to do this back then.

How did you decide which ideas to use?

We selected content and ideas based on the strength of the argument or the relevance of the experience. We already did research on business models for 10 years, so it was easy for us to weed out pure opinion. I believe every co-creation project needs an experienced core team that makes final content decisions.

Was most of the input valuable or was there a lot of “noise”?

Well, even when it was “noise”, it was usually a good indicator that our ideas were not clear enough or our arguments too weak. Very little content was useless. Of course some of the co-authors were more experienced than others and their comments were naturally more relevant. However, since we wanted to create an inclusive book we carefully listened to every single comment in order to sense what people were concerned about, what they wanted (or needed) to learn, and to learn how we could best convey our ideas.

What were the benefits of co-creating the book?

  • It forces you to make every idea you write about relevant. Feedback is immediate, which makes you vulnerable as an author in the short term, but the long-term benefits outweighs this: it forces you to do your best for every piece of content you submit to co-creators.
  • We could immediately test what would or would not work/resonate with our audience.
  • Co-authors brought in a lot of experience and good comments that guided us throughout the writing process.
  • The 470 co-authors became a powerful global sales force, because each and every one of them had their name in the book, contributed to it, and believed in the final outcome.
  • It helped us pre-finance the expensive design and production of the book, since we managed the whole publishing process from A-Z on our own with a core-team of 5 people.

What were the limitations or obstacles, if any?

 

Co-creation is much more work than writing somewhere in a hidden corner and then publishing your content. However, the benefits outweigh the costs.

It was hard, hard, hard, to set-up everything ourselves and do something totally new and different. We were running the project on a shoestring budget, but aimed at creating a global management bestseller.

Nobody believed this could work: Two no-name authors who wanted to create a visual management bestseller and get people to pay to help him or her write the book. People thought we were crazy. All of them probably thought we were totally naïve.

Now publishers are studying our project to learn how they can set-up co-creation platforms for authors who want to go down a similar path.

What did you learn from the experience?

You need to be naïve enough to do things differently. No big publishing house would have allowed us to co-create a fully designed, four color business book in landscape format – because it was contrary to the publishing industry logic. However, we thought of Business Model Generation as a product, not just a book – similar to Apple products.

Our goal was to create the same kind of “unboxing experience” you have when you buy Apple products. This obviously meant breaking with most of the rules of traditional business book publishing. That’s exactly why it became a bestseller. Yves and I created a book on business models that we would have loved to buy ourselves. Since nobody had done it, we did it ourselves.

Would you do it again? And if so, what would you do differently?

We made countless errors on the way, but they were not foreseeable, since we created something totally new. We needed to make the mistakes to learn and iterated.

However, our biggest mistake was not sticking to our plan A of using Fulfillment by Amazon to distribute the book. We wanted to save the margins and went for plan B, which was partnering with a Dutch direct mailing company. That was a painful experience that I really wouldn’t want to live through again. After switching back to Plan A we got back on track again. After a couple of months of proving the success of the book we sold the publishing rights to Wiley – a big publishing house – in order to get physical distribution as well. Now it’s Wiley’s best selling international book.

What advice would you give someone who was thinking of co-creating/co-reviewing?

Don’t look at it as a pure marketing stunt, because it’s trendy to do co-creation. Ask yourself how the process of co-creation can help you craft a better product. Also, be aware that it’s much, much more work to co-create.

Note: Last year, I was honored to co-review Steve Denning's book, Radical Management.  An interview with Steve will be coming shortly.

Friday
Oct212011

Why Is It So Hard to Execute?

Why is it so hard to Execute?

Ok, we all know that, compared to execution, creating the strategic plan is cake.  So why is executing so darn hard?  This a huge issue and given our economic situation, it's even more critical (remember the adage, I'd rather have a B plan with A execution than an A plan with B execution?)

So why is this so hard - well, not sure how wired our brains are for execution in the first place.  As humans, we tend to focus on the here and now - the present - the crisis du jour, what's in front of us, the day to day.  It's harder to focus on the longer-term that is a bit less ‘tangible' and more ‘abstract'.  Let's face it, how many of us keep New Year's resolutions?  Perhaps it's just how we are.  But, that's no excuse, is it!

In my experience at AT&T, a few startups I was involved in, and of course my terrific clients, lack of execution boils down to, yup, CULTURE! In looking back, there usually wasn't an Execution-Oriented Culture.  Why? There are lots of reasons but one I see a lot, as strange as this may sound, is a underlying lack of confidence that they can really execute - the rationale includes the lack of certain skills, lack of more information, lack of confidence the plan is right in the first place - second-guessing - mostly themselves vs. the outside world.  The "We don't have what it takes to make this happen" is usually based on no history or habit of execution.  Senior management doesn't have a good track record; there's no budget, money, resources (by the way, budget follows the strategy; now economic situations may change, and if so, then you need to revisit the strategies and tactics and change them for the changed world)

So how does this cultural ‘deficit' happen? The usual ways.  There isn't clear ownership for execution overall and pieces and parts - and I'd bet that there isn't a clear sense of accountability in lots of areas in the organization, so why should this be different? Also, let's face it, people's natural tendency is to resist change (lots of research in this area).  In order to overcome this, get people involved, get their buy in - by participating in the planning, by management communicating (over and over and over) the need for the strategic direction and showing employees how they can help and support the plan and what it means for them.

What happens if you don't execute? Well, you know the rest.  The point is, while execution is hard, it's not impossible, it's not insurmountable and in fact it can become a habit that creates collaboration, increases teamwork, and in fact, increases innovation (no, that's not an oxymoron).

What have you seen as the biggest obstacles to execution?

 

Friday
Oct212011

175 Years of Innovation Lessons

Suffice it to say I was honored my friend Chris Thoen would agree to talk about P&G’s Open Innovation history at the 3rd Open Innovation (OI) Summit at BW’s Center for Innovation & GrowthPractical Challenges of Global Open Innovation.  Chris has been interviewed, quoted, written about extensively as a leader in OI, and for good reason.

He opened with P&G’s 175yr old history OI.  Two brother-in-laws, William Procter (candle maker) and James Gamble (soap maker), using the same raw material, fats, were encouraged by their father-in-law to collaborate to get better ‘fat’ pricing! This was the start of P&G in 1837.  They grew the company with their own innovations and through (un-named at the time) open innovation with other technology makers and companies.  These partnerships were the foundation of P&G’s growth into 300 brands in over 180 countries, 24 billion dollar brands and most importantly, one of the most trusted names in the world.

About 10 years ago, CEO A. G. Lafley transformed P&G’s open innovation heritage into a key cultural component of the company –Connect+Develop (C+D).   This wasn’t just a way to come up with new products, but a fundamentally new way to do business.  Lafley challenged P&G to source at least 50% of their innovation from outside its hallowed R&D halls.

Chris clearly described OI as an ongoing journey requiring recognition and investment in top talent and external synergies.  When done well, OI is all about value creation for both partners, with both sets of interests in mind.  It’s about sharing your expertise and strategic needs of your brands, businesses, even corporately.  To do this, P&G has developed and put 70+ C+D leaders around the globe with 11 regional hubs (e.g., NA, LA, Europe, Israel, China, India, Japan), 100s of networks and academic partnerships.

Several products you may know are a result of OI: Swiffer, Tide, Mr. Clean eraser (1 of my faves).   Clorox’s Glad ForceFlexproduct is based on a P&G licensed technology.  Sometimes, you can even collaborate with your competitors! P&G’s technology and IP have created $3B in sales for their OI partners.

So what has P&G learned on this 10+ year journey?

  1. Drive from the Top:  Without Lafley’s challenge, commitment and leadership as CEO, it couldn’t have taken hold corporate-wide.
  2. Build an OI culture: You have to support and learn from failure, communicate openly (and often) to build trust, help your people understand the innovation process and consistently reward partnerships and results, not just patents.
  3. Focus the Hunt: Keep your eyes on the strategy at all times!  It’s what guides you; build internal relationships by sharing needs and goals; manage leadership’s expectations for reality, not for fantasy; create and communicate clear innovation selection and filtering criteria.
  4. Be Where the Action Is: get out of Cincinnati (or wherever)! You need to be where the innovation is happening and the markets exist – like developing markets, areas of VC activity, Social Media, SMEs, Academia/Universities and places with diverse expertise, cultures, ideas.
  5. Build Efficient and Effective Knowledge Management Systems: Track connections among your own people, capturing their knowledge and experience partnership nuances, deals so they are not repeated, saving time and money.  Include your partners, networks, and competitors while protecting your IP and create a way to visualize and analyze these intertwined relationships.
  6. Obey the Law of the Land: Take what you need, only what you need, and leave the rest.  Share what you’re not using because it may find a great application in another home
  7. Staff for Success: Hire and train a unique blend of Hunter-Gatherer.  This is not a typical person, but you may already have them – people who have expertise in a technology with business acumen with the ability to develop relationships, influence people, inside and outside your company.  Deliberately hire for this.  And, keep investing in R&D – doing OI doesn’t mean closing down your own R&D.
  8. Be the Partner You’re Looking For: The Golden Rule!  Celebrate your partners, look beyond the first deal with them, facilitate more connections for you and them, keep that Win:Win mindset front and center and be transparent because a second (third, fourth…) deal with the same partner takes about half the time while creating twice the value.  Remember, strong partners make you stronger as well.

Bottom line? P&G has created more value together with their OI partners than they ever could have alone.  It is a real ecosystem that creates value on a global scale to accomplish P&G’s mission: “…improve the lives of the world’s consumers, now and for generations to come.”

Ok, so maybe you’re not P&G, but you can still start the journey.   What do you need? What do you have to offer? Who could you partner with? Just start small, doesn’t have to be huge, just a step.  Give it a try.