“You are not in the hamburger business, you are in the real estate business. The empire is created by being the owner of the ground where the hamburger is cooked. “
This is how financial advisor Harry Sonneborn tells the controversial Ray Kroc, founder of the McDonald’s empire, in the film that portrays part of his adventures: The Founder (2016 – Dir. JL Hanckock). From there, what was a good idea, multiplied with a lot of effort in a few places, finally took off.
According to the movie, the McDonald brothers innovated the restaurant business in passing. But it was not enough. There is even a very interesting scene where they prototype the kitchen using a tennis court and some chalk. Half a century before the Design Thinking, try to fail fast and cheap was already used.
However, a good idea does not necessarily generate great business. Even if people are willing to pay and we develop a “kitchen” that delivers like clockwork. We are missing one more ingredient.
Sonneborn’s contribution gives Kroc more control and puts the business on a growth path. But he didn’t change the burger, or the cuisine, or the name, and they were already on a franchise basis. But it reformulated the business model in a key way to grow and differentiate itself from thousands of forgotten burger stalls.
About the value
The business model portrays how an organization generates, delivers, and captures value. In other words, what you give, how you give it and how you charge it. There are many, very different, and some very innovative.
We said before that for it to work, an innovation has to a) matter to someone, b) we have to be able to deliver it in sufficient quantities and c) we have to make money with it, or at least it has to be financially sustained. The latter, sometimes feared or despised by inventors and creatives, is essential for innovation to live and fight.
The Xerox 914 was the first copier. As the equipment was very expensive, the company included the possibility of paying per copy, with the first 2000 free, using an internal meter. In 3 years the copy market multiplied by 10.
My razor replacement is priced high compared to the compatible handle. But I have to pay it if I don’t want to throw everything away. Sony revolutionized the world of radios with its Spica model, which was sold in supermarkets and not in specialized radio houses, which despised it.
In innovations, technology seems to be the star, but without a business that works, there is no technology, idea or invention that is worth it. Goodbye innovation.
Look around
Whether you are thinking of innovating in a startup or in an organization, thinking about the business model is essential. Especially if it seems that you have a good idea in your hands, but that it is stuck.
Can I charge differently? Perhaps instead of selling “the thing”, I can sell “what the thing gives you.” For example, Rolls-Royce, in its civil aviation engines business, sells the turbofan operating hour instead of the equipment.
Can a third party pay? For example, I sell a service to a private party and a state development agency pays me. Can I pass work on to your own client? For example I sell disassembled furniture. Can I do a part for free and another part paid? Like Dropbox. Can I sell the product through another channel?
There is a lot of creativity in this aspect of innovation too, although it is less sexy than technology.
Look to the sides
The innovation effort did not end with “the idea”. Missing a lot. Some ideas can be marinated for months or years waiting to be encapsulated in a viable business model. Or even waiting for the “ecosystem” to evolve, for example, 20 years ago it was impossible to think of a streaming service like Netflix, with the existing internet infrastructure.
So if your idea doesn’t take off, don’t just look you technology or product. Ask yourself what other ways exist to deliver value. Study other industries, other types of products, other technologies that have faced similar challenges.
It is thanks to this elegant operation that the successful business models that we have from Airbnb and Dolce Gusto coffee, to the BigMac Combo, have.
* Founder of Ignite consulting in innovation and design. He directs the Innovation Program at UCU Business School.
