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Build Your Business Model to Expand the Market Faster

Feb 3, 2008
Most people consider cost reduction in terms of matching an unmet need to an available capability that few have chosen to pursue. That's a good way to appreciate that traditional ways of developing markets, enterprises, and habits are working from only one business model, a model that is increasingly irrelevant.

In this article, I want you to see that there are many alternative, advantaged business models. In fact, you may well develop such an alternative business model that is better than the ones I describe. When that occurs, I will be pleased. My purpose is to stimulate your imagination and experimentation, rather than to give you a recipe to rigidly follow.

The key element of this new way of thinking is to see the location and circumstances of the bulk of future consumers for your offerings as the base for all aspects of your new business model -- from design and branding to production and service through to purchase and consumption. On the surface, that idea sounds like the developed world manufacturer who wants to sell more refrigerators to Chinese people. The goals are the same.

But in the new model, that refrigerator isn't like the one that is made now in Louisville, Kentucky, doesn't have the GE brand, has different capabilities, is endorsed by Chinese celebrities, and is clearly based on a Chinese heritage. And (here's the most important difference) this new refrigerator is so terrific that people in Louisville, Kentucky, will want to buy one.

Chinese food has made it to Louisville. I've often eaten it there. There's no reason why Chinese-featured refrigerators shouldn't too.

Let's conduct a thought experiment about what such a refrigerator might be like to help you see the new business model alternative we are describing. Most Chinese people live in small homes with limited space. They don't refrigerate much food because they prefer to buy and consume fresh food. They also have small nuclear families. So we're talking about a small refrigerator.

Today, a refrigerator tends to have a cool compartment and a frozen compartment. Why couldn't a refrigerator have more compartments providing more preservation choices? With more compartments, it would be possible to maintain different types of foods at quite different temperatures, for instance.

If an oven can vary heat, why can't part of a refrigerator vary coolness? For dishes that require marination, a higher temperature would often allow greater absorption of the marinade while just enough coolness would help retard bacterial growth. For items with high bacteria risk like chicken, there could be near-freezing compartments.

In such compartments, families would avoid the flavor and appearance degradations of freezing while keeping the bacteria count lower. Some compartments might have higher humidity levels and temperatures to help keep delicate items from drying out, such as snow peas.

With a little research, you could probably figure out how to adjust temperatures and humidity by compartment to allow fruit to ripen to match the schedule for its use. Each compartment could have its own door to reduce the numbers of times that other areas experience temperature fluctuations.

Some compartments would have the ability to adjust humidity and temperature over a wide range as well to provide for more flexibility. Add enough features and you have a refrigerator that would also appeal to anyone in a small household who appreciates having higher quality ingredients available at home without a last-minute shopping trip.

A manufacturer could then hire authors to create new books that describe how to use such a refrigerator to produce more authentic versions of other cuisines such as Indian, Pakistani, Indonesian, and Brazilian. For the larger countries, the manufacturer could also copy the Chinese refrigerator business model to create local brands with an authentic base in each country.

Instead of stainless steel or solid color enamel finishes, the refrigerators could be produced in a variety of artistic designs and colors much like wallpaper is now. You could order a custom-made refrigerator, as you do a Dell PC, to fit the size, shape, and decor in your kitchen or bar.

And there's another opportunity. Many homes in developed countries sport consumer electronics in virtually every room. Why should refrigerators only be in the kitchen? Specialized refrigerators could be available in other rooms to keep beverages and snacks at ideal temperatures.

But why is this business model cheaper for customers, consumers, and other beneficiaries? The major cost for a refrigerator over its life is the electricity that powers it. If a consumer can buy a refrigerator that exactly fits his or her needs, the refrigerator will be smaller and more energy efficient.

For instance, most refrigerators have a frozen compartment that's much larger than a family needs. Since most of the energy goes for that compartment, there's an opportunity to cut costs a lot by providing a smaller compartment.

If beverages are kept at ideal temperatures, refrigerators used solely for that purpose won't need freezer compartments at all. If temperatures can be greatly adjusted, some compartments can be kept at room temperature as dry, humidity-controlled storage rather than refrigeration. Baked goods, for instance, could be kept in humidity-controlled surroundings while not lowering their temperature.

If compartments aren't going to be opened and closed as often, it will make sense to put better door seals on to keep warm air from intruding. The frozen compartment can also be placed at the center of the refrigerator so that less energy will be required to keep that section cold.

But the big problem for refrigerators in many homes is that they no longer match a planned update in kitchen decor. If you can buy replacements to update their exteriors to get a new look, most refrigerators can remain in service much longer.

Here's another big cost. How much food does a family throw out because it goes bad or is no longer satisfactory in appearance or freshness? For those who shop infrequently, this cost can be substantial. If you are able to keep foods in peak condition longer, that wastage goes down. Such savings could be hundreds of dollars a year per household.

If you provide a family with such a new concept in food storage while reducing costs for electricity and wastage -- plus preserve better looking and tasting food -- you are bound to see an explosion in refrigerator sales. Why? It won't make economic sense to keep the traditional models.

If refrigerators are normally changed every 20 years, you might see an expansion in sales by 400 to 600 percent for a few years among those who own refrigerators. That market demand will be higher if the multiple refrigerator use in households becomes widespread.

The market demand will go through the roof if those in underdeveloped countries who have no refrigerators or very inadequate ones also upgrade to an entry-level version of this product. Putting authentic designs from that country on the exterior will make it irresistibly attractive to make such upgrades for refrigerator owners.

You still have a problem among those who cannot afford a refrigerator. Why not develop a larger model that can be the base of a refrigeration rental business? In the same way that people in many countries go to laundromats to wash clothes by inserting coins in a public machine, people in a small town could rent a secure compartment or two in a large common refrigeration unit for much less than the cost of owning an entire refrigerator.

If the family needed a larger space for a special meal, they could rent more space just for that purpose. Each compartment could be accessed by key and sanitized between renters. Local entrepreneurs could use this offering as a way to help attract people into a local store that's open late at nights (when most people are preparing their evening meals).

What is the ideal way to provide benefits to your customers and consumers?
About the Author
Donald Mitchell is an author of seven books including Adventures of an Optimist, The 2,000 Percent Squared Solution, The 2,000 Percent Solution, The 2,000 Percent Solution Workbook, The Irresistible Growth Enterprise, and The Ultimate Competitive Advantage. Read about creating breakthroughs through 2,000 percent solutions and receive tips by e-mail by registering for free at

http://www.2000percentsolution.com .
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