Here’s my thought for today: in the spirit of trying to keep up with idea of something you can actually do on a Monday, I figured it’s been a while since I personally engaged in some serious thought exercise, and I thought I would share my idea on something that we can all do today.
Business Models: The Status Quo
Businesses have a strong forward momentum in everything they do: strategically, in marketing, sales and technology. Perhaps the core of this foundation is in their business model. It is very rare that you see a company (especially a large one) change their operating model – that is, how they make money, how customers pay, how they grow, etc. This becomes a self perpetuating problem. New entrants feel that they can differentiate themselves in some surface way – marketing, branding, customer satisfaction, service levels, etc. – but VERY few people enter with an aim to challenge the prevailing business model. Maybe that’s because it is the best model, but more than likely, it’s because it’s the one currently used.
So What’s the Exercise?
First, let me give you some insight into why I asked this question, then we can go into the exercise we can all do.
It is very hard to sell something the purchaser cannot touch, fell and see. Selling the invisible is perhaps one of the most challenging things that exist within product sales – especially when that invisible thing happens to be paired with one of the most socially volatile industries at the moment – Wall Street.
It is a well understood situation that Main Street is losing faith in Wall Street – capital outflows are one the indicators of this phenomenon. So, why is that? It might be because of the extravagant salaries, the lavish lifestyles, or anything else that the Wall Street image portrays, but I don’t think that’s the case, I think it’s much more simple: Main Street doesn’t understand and can’t see Wall Street’s workings – so they don’t trust it.
So, in that context, the solution becomes obvious: you need to create something physical that the average investor can touch, feel and understand. Here’s where the first step in my solution comes in: build out a physical branch, much like a bank branch, for buying and selling of securities – but make it WAY less sterile. Have a place where customers can go in, use research computers to read reports, talk to professionals about the markets and what is going on. Hold ‘teach-ins’ at night so individuals can learn about fixed income, different order types, what sectors they should be invested in, what their portfolio mix should be like, etc. etc. Make it somewhere that people want to GO. Think record store meets brokerage. Help people form connections with other people, and facilitate that exchange.
Now the second part: the new model. I have NO idea if this is profitable or not, economical or even feasible, but I think it is (because the markets are biased to go up over time due to several factors, including inflation and an increasing money supply). Only charge users when the value of their portfolio rises. You can come in, talk to a staff member about the tech industry (since you attended a teach-in the night before) and buy 100 shares of Microsoft. If you end up selling it at a loss (including dividends, and any other income), you don’t have to pay anything – it’s a partnership. If it happens to go up, you pay a certain percent back to the company. It’s a win-win. It’s transparent, it’s fair, and it could be highly profitable.
Think about all the other routes for side door monetization too. You now have a forum of people exchanging investment ideas and education across the country. Now you can offer them advanced courses, provide an online communication/social platform, sell advertising space to large mutual funds, and on and on the list goes.
If you are still with me, here’s the exercise. You probably already know the basic model in whatever business you are in. If you are in the CPG business, it’s a chain of re-sellers that eventually hit the customer. If you are in banking its service fees. Now, here’s the exercise. If tomorrow morning the government came out and outlawed your current business model, could you think of another way to structure your industry? You don’t need to reinvent the wheel – just look at other industries, how they are pricing, and how you can parallel it to your business. How can you include the consumer in the process? How can you promote a win-win environment? How can you get the consumer to take a personal and emotional stake in your business? Think about those questions – because if you can find a new approach or method, you may quickly become the rising star at your organization.
Blair Livingston’s Blog