China | Human-Centered Change and Innovation

Changing Business Models Around Some business models and products have been around so long that we just take them for granted, while others concepts that are becoming new business models are so new that we’re not quite sure what to expect. It is probably easiest to explain what I mean and why this juxtaposition is important by looking at a few examples. Most of these examples involve challenging our orthodoxies.

1. Coffee Shops

In the typical coffee shop pretty much anywhere in the world, the business model works like this – you buy a coffee and it comes along with it the right to take up a place at any table in the café for as long as you want. So, coffee buys you time. An article I came across on NPR highlights an entrepreneur in Moscow that has opened a restaurant that loosely translates to the Clockface Café where instead of buying coffee and getting time, you instead buy time ($4/hr per person for the 1st hour and $2 an hour after that, up to a maximum of $12 after 5 hours) and get coffee for free. Ivan Meetin, the founder, plans to open his next café in London. Meanwhile I have heard of similar operations in Paris, and by now they can probably also be found elsewhere. So, in your business what do people get for free, and what do they pay for? And is there an opportunity to change around what you charge for?

2. Waste Disposal

In many businesses, and in the creation of most products, there is waste. And in most cases, businesses pay to have this waste removed from their premises. Or there may be waste that the customer has to pay to have removed. But this doesn’t always have to be the case.

KFC, McDonald’s, Burger King, etc. used to have to pay to have their used fryer oil picked up, but now thanks to the rise of biodiesel they may even make money from this waste product.

Chicken processors used to throw the feet away after processing a truckload of chickens, but after they discovered that chicken feet are a delicacy in several Asian countries, they stopped throwing them away and instead started exporting them. In fact, chicken feet sell for more per pound than chicken breasts in China.

Broken OREO’s used to have no value before Cookies ‘n’ Cream ice cream (and now Cookies ‘n’ Cream OREO’s) were discovered.

And finally, I came across an example of a bottle cap concept created by designers from the Lanzhou University of Technology in China, intended to give poor children access to building blocks for play, from what was previously thrown away.

Building Caps

3. Discounts for Data

Data security and privacy is becoming an increasingly hot topic, and in the past companies would either ask customers for their data and not give them anything for it, or just not ask for it. But now we are seeing some interesting models of companies asking customers for data and instead giving them something of value in exchange. For example, Urban Outfitters rewards users that respond to promotions inside their mobile app or to users that allow its app to connect to their Twitter or Instagram accounts with points that can be redeemed for sale previews, concert tickets, or early access to new pieces. What data do you want from your customers? What is it worth to you? How could this exchange be made engaging and not be seen as a purely financial transaction?

4. The Soft Drink Category is Saturated and Cold

Soft drinks… How many people out there think that the soft drink category is a blue ocean full of incredible opportunities for unbounded growth for established soft drink makers? Most people would say that this is a mature category and a tough place for companies, full of merciless competition. But yet, people continue to innovate and challenge this orthodoxy. Witness a couple of interesting new concepts.

Shericks Shakes Britain has always been a hotbed of innovation, and the country that brought us Pret a Manger and Innocent smoothies brings us this tasty treat. Mr. Sherick’s Shakes brings people a little bit of luxury to their day in the form of their high quality milkshakes.

Meanwhile in Japan, there is a growing trend manifesting in a wave of product launches in the soft drink category that are not cold, but instead hot. Witness this example of what has always been a cold drink, Ginger Ale, being brought into the Japanese market as a hot beverage by Coca Cola’s Canada Dry unit.

Canada Dry Hot Ginger Ale People always love something new and different, even if it is something old that has disappeared from the market. This is why fashion runs in cycles, and in a mature category like soft drinks there is no reason why we shouldn’t keep these principles in mind and see if now is the time to bring something back, or to see if there is an orthodoxy that we shouldn’t now look at challenging to see if an opportunity might not be created.

Conclusion

Innovation transforms the useful seeds of invention into widely adopted solutions valued above every existing alternative. Value comes not just from physical invention, or business model innovation, but from psychological and emotional benefits as well and the creation of new psychological or emotional value can happen in any industry at any point in time, no matter how mature the category seems to be. We as humans are strange creatures and we simultaneously fight against change (and hold back innovation as a result) and embrace new things (or at least like to try them). So challenge your patterns of accepted thinking to look for opportunity and work to overcome your beliefs that everything that could be done has been done in your industry.

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The New Reinvigoration of American Manufacturing

As wages and shipping costs rise abroad, unemployment stays high at home, and strategic discontent with offshoring grows, U.S. Manufacturing finds itself facing its best chance at staging a comeback.

American companies are considering a reversal of offshoring and outsourcing to reduce risk, improve agility, shorten product development cycle, and improve their ability to simplify increasingly complex supply chain management.

Missing from this list is innovation, but US companies that commit to engaging American workers in their innovation efforts may also increase their ability to justify manufacturing their products at home.

As wages and shipping costs rise abroad, unemployment stays high at home, and strategic discontent with offshoring grows, U.S. Manufacturing finds itself facing its best chance at staging a comeback.

Moreover, Chinese workers are now three-to-five times more expensive than some other Asian workers, leading American firms to reconsider their sites of production.

One such firm is Nike, whose innovative Flyknit technology could allow it to make shoes easily anywhere in the world by having a machine make the most labor-intensive parts of the shoe. To bring production back to the United States allows Nike to react faster to competitors or to increase the speed of scheduled product launches. In the fashion industry, speed is crucial, and onshore production could create a competitive advantage.

Other firms are taking a second look at their reliance on contract manufacturers in China and elsewhere. Companies that once saw contract manufacturing as a strategic or economic necessity are questioning the wisdom of the arrangement as they watch original design manufacturers like HTC move up-market and strengthen their brands to compete with Apple, Motorola and others.

Adding fuel to the fire are rumors of workers at plants like Foxconn smuggling out plans and components to sell to pirates to make a little cash on the side.

But more importantly, an almost religious focus on cost and increased use of standard components across whole industries has made it more difficult for one brand to differentiate their products from another in the industry – increasing price competition and squeezing margins for all.

As a result, companies like Apple are now looking to reverse some elements of their standardization and outsourcing strategy and instead become more vertically integrated. Apple has acquired a chip design firm — and even their own chip fabrication plant (fab) — in its quest to differentiate itself and control some of its basic inputs and it may still acquire another fab to continue this strategic direction. Not to be outdone, Google is acquiring Motorola, and Nokia and Microsoft are working together closer than before.

It is possible for companies to manufacture their products in the United States and make a profit. When you invest in your workers, engage their hearts and minds and involve them in the innovation process, you can not only optimize your manufacturing processes but also uncover new growth opportunities that no contract manufacturer will ever bring to you.

Companies like New Balance, Snapper Mowers, American Apparel, Caterpillar, Syntax-Brillian (Olevia TV’s), Case IH, American Bicycle Group and many others have been working hard to keep making their products in the United States.

Now is the time for the Obama administration and state and local governments to step up their encouragement of US manufacturing. In these difficult economic times, Americans would love nothing more than to stroll down the aisles of their local Walmart, Target, or independent retailer and find more products on the shelves that say Made in the USA.

This article originally appeared on The Atlantic