Developing Innovative Financing and Pricing Options for Tomorrow Today!

Over the past few years, a number of well-known academics and leading consultants have recognized and discussed the need for business model innovation. Some of these leaders include: Michael Porter, Stuart Hart, Bob Willard, Clayton Christianson, the late C.K. Prahalad, and others. All have discussed the on-coming dynamic change forces of disruption that can be seen in the marketplace. through new products and services, new technologies, and new companies. These disruptions can be quick, decisive, and sometimes painful without proper planning.

So today, the age of disruption, or the age of being disrupted, is clearly here. It seems that the only thing constant today is change! But how do you plan for this disruptive change? What will the impact of disruption be on product pricing and financing options? Are there new sources of capital that can be tapped for innovation?

Let’s take a look at the area of business model transformation, and some suggestions for how to finance innovation:

• Crowdfunding: Some may not be aware that in 2013 Michigan passed into law the approval that up to $2MM in capital can be raised from residents in Michigan for each new business plan through crowdfunding sources. This new law will help and assist the development of new local businesses and ventures, such as in downtown areas, and local neighborhoods and communities. “For the Run of It,” a runners' club in Muskegon, used this strategy to raise private money for clearing a few miles of the Lakeshore Trail near the downtown area.

• Freemium Products: This strategy is consistently used by software and technology developers where a basic service or proprietary product is offered for free, but a premium is charged for an upgrade with more capabilities, features, and functionality. A good example is Dropbox, which offers a free plan for up to 2G of storage space for shared files. This strategy allows for users to experience the ease of use from any type of device. For $9.99 per month a user can share files for up to 1TB of storage, which is especially needed for pictures.

• Creative Product Financing: There are increasing numbers of both consumers and industrial customers that would prefer to lease or rent a product they only need for a short period of time, rather than purchase the product outright because of minimal use or an unaffordable price. Transportation is a great example and brings up the growing trend in shared mobility, especially within inner city and dense urban areas. Car-sharing has been a transformational business model change, and Zipcar was one of the first to enter the market. Now there are co-op, peer-to-peer, and private options as well. Bike-sharing has also taken off, with many cities now branding their own programs such as the Denver B Cycle, Paris Vehb, Montreal Bixi, and the New York City Sobi. Many bikes now come with mobile computing and GPS tracking options for greater convenience and use. The Spoke Folks in Grand Rapids, a bike co-op that provides bike maintenance and assistance, have recently launched an on-demand bike sharing app where you can rent bikes for $1 plus 15 cents per mile, with different pick-up and drop-off locations.

• Pay for Success: A typical business model for services, such as consulting and legal, has always been fee-based. Fees were determined by methodology and the number of hours spent on a project multiplied usually by a fee per hour. However, a new business model is evolving centered on the concept of performance-based contracting and measureable results. The US Government and the armed forces have been significant proponents of performance based contracting and solutions in recent years. Examples of these services include advertising, technology solutions, energy solutions, maintenance etc.

• Subscription Fees: This fee-based model is well known, and financial newsletters are a good example. Consumers pay a yearly fee to gain financial insight on a monthly basis, with varying fees depending on the desire for additional alerts, briefings, and reports. However, this model is also being used to lower the barriers of entry for sustainable development and clean technologies. For example, the Cleantech Group offers a subscription fee for their i3 platform that allows corporations, investors, and service providers to connect with 24,000 companies globally on sustainable and clean technologies across 18 different market sectors.

So what is the message? Innovation and creativity can take place with pricing, financing, and investment options for a product, as well as with the product design and engineering parameters for development. Our economy is changing. Advocacy for a shared economy and shared mobility are driving some of the new products and services that can now be seen in the marketplace.

All the best on your sustainability journey!
Norman Christopher
Grand Valley State University Author, Sustainability Demystified
Source: Model Behavior- 20 Business Model Innovations for Sustainability, SustainAbilit