business model

Surprising Business Models That Challenge The Status Quo

Photo courtesy of Amber Karnes via Flickr

Startup culture is all about the cultivation of disruptive, scalable business models. Some of the best are deceptively simple; others are extraordinarily imaginative or surprisingly lucrative.

While all business models that scale and turn a profit may be inherently impressive, there are some that stand out more than others for being wholly unique in their approach and success.

Business models are defined by numerous factors such as value proposition, revenue, delivery and more. Here are some examples of surprisingly successful business models, and why they’re noteworthy.

The Anti-growth Model: Cause over profit

[contextly_auto_sidebar id=”RLMoSc9e7U1vcOaHINoUdLqzutWl5r0T”]Outdoor apparel and gear retailer Patagonia has been in the business of environmental betterment since the 1980s, weaving into its marketing strategy an ethos of careful consumption.

The company famously bought a New York Times ad in 2011 with the phrase “Do not buy this jacket,” a call for less consumption that ironically ramped up sales. Patagonia is legally a “Benefit Corporation” in California, which means goals and missions other than profitability may be prioritized by directors.

But as it happens, the anti-growth model is, in itself, profitable: the company is seeing double digit annual growth, spurred by its anti-materialistic standpoint.

The Fitness Franchise Model: Little cost, big gains

CrossFit, estimated by Forbes to be a $4 billion brand, runs off a deceptively simple and surprisingly lucrative business model, and has tripled its number of gyms around the world in just three years.

While the fitness giant’s partnership with Reebok brings in a trickle of revenue, most of the profit comes from education and licensing fees, which allow crossfitters to become certified trainers and open their own “boxes.” Since the boxes (gyms) are in untraditional spaces and require minimal equipment, which affiliates provide capital for, the gains from fees outweigh spending.

This franchise-style branching out of trainers and boxes allows steady growth, while the cult-like philosophy of fitness as sport/lifestyle, super-charged by social media, allows the seeds of CrossFit spread far and wide.

The Affordability Model: Cut out the middleman

Warby Parker’s unique business model started with a problem: glasses are expensive, difficult to buy, and dominated by one company (Luxottica) that holds all the power. Warby Parker offers an affordable, customizable, easy to obtain alternative by cutting the middlemen and optometrist.

The growing glasses retailer does this by circumventing traditional channels (through which prices are normally jacked up considerably), designing frames in-house, and linking sales to a good cause: for every pair of frames sold, another donated.

Careful attention to design, branding, and user experience (customers can test frames online, through free shipping, or in-store) sets Warby Parker apart, as does its specificity in product and attention to detail. Though it’s unclear if the model will be sustainable profit-wise in the long run, the booming brand has won over many hearts and over a million sets of eyeballs thus far.

The Social Impact Bonds Model: Investing in social good

What many people forget is that business models can work not just for companies, but for the government and the public, too. When private businesses, non-profits, and the government partner up, in fact, it can save everyone a whole lot of money.

The model is called a “social impact bond”:  a promise by a funder — such as the government — to finance a public project, with the long-term goal of cutting government spending. If the project meets its goal, private investors receive a return on the money saved.

The most notable example of this “pay for success” model, not to mention the first of its kind, is one aimed at reducing reoffending of UK prisoners. The model has also been tested at Rikers prison in New York, to reduce teenage recidivism via the Vera Institute of Justice’s Adolescent Behavioral Learning Experience.
This outcome-focused model shifts risks of solving social ills from often-rigid government to the more nimble private sector; when successful, it can provide effective and innovative solutions for social services across the board.

We measure success by the understanding we deliver. If you could express it as a percentage, how much fresh understanding did we provide?

 

Jennifer Markert