The walls are coming down. The #NewFinance ecosystem is alive. And in this post we are going to explore how Business Model Innovation (BMi) is driving the creation of a new generation of dealflow.

+ Time for BMi – Business Model Innovation

Rigid. Opaque. Vertical.

Would be a few of many possible words that would come to mind to describe the world of Finance as we know it today.

Fluid. Transparent. Horizontal.

Is how the Finance industry of tomorrow will look.

The shakeup has begun, and while we don’t know exactly what lies in between yesterday’s world of crony capitalism and tomorrow’s world of boundless entrepreneurship, big moves are already being made.

In recent blogs, we have looked at how BMi is reshaping the food (#realfood) and fashion (#sustfash) industries, today we are going to look at how #NewFinance is the beacon for BMi among the three.

Through a combination of digital platforms and network-as-market theories, Finance is being flipped on its head. Rather than going to a bank to ask for a loan or a venture capitalist for an investment, SMBs and entrepreneurs are logging into their laptop and tapping dispersed networks of investors.

+ DIGITAL Markets

It’s faster, it’s cheaper and it’s engaging. The wisdom and knowhow of those who make the deals flow is no longer being locked down in an investment bank or holed up on the 45th floor of a skyscraper. It’s being distributed and shared, becoming accessible for the average guy and girl with a dream to start their own company.

Not to say that the old grey hairs of Finance will be left on the sidelines; quite the contrary. It’s the mechanism that will change, as the real juicy deals will originate from outside of the traditional intermediaries and be packaged in simpler terms.

And the upside will be explosive. That’s what happens when you start to open the pipelines to previously unserved markets. In the same way that a spark can set a pool of gas ablaze, it only takes a shot of capital to set pent-up demand on fire.

Using BMi as the tool, a host of impact-driven entrepreneurs are bringing their scrappy, scalable upstarts to the global stage and collaborating with others in order to reshape the financial landscape.

What is Business Model Innovation?

A business model is defined as the rationale of how an organization creates, delivers and captures value.

+ The Key Components of a Business Model

Business model innovation is the process of reinventing the business model itself. Rather than being focused on end-product innovation, like derivatives and securitized debt, BMi focuses on changes in the process of exchange across the value chain, whether it be a new pricing structure, collaborative partnership or customer channel. In the end, it is the model itself that SHIFTS, rather than simply the product or service.

How do we bring BMi to the Finance Industry?

It’s already happening.

While most of the traditional finance institutions have gone on with business as usual on a debt-driven consumption model, others are opening the door to a new model of finance based on productivity and creation. Finance BMi is being driven from the bottom up – by entrepreneurs, customers and investors alike – while in the process, the old-school economic theories about efficiency and the free market are being torn to shreds.

Because the whole industry, as we know it today, is predicated on control and ownership, neither of which are conducive to economic ‘efficiency’ in a ‘free-market’ system.

How can markets be efficient when key information is controlled by a few?

+ see The Libor Scandal

How is our system free market when a few ‘own’ and disburse key resources?

+ see New Scientist’s analysis of the Capitalist Network

If we really wanted to have a system where entrepreneurship could thrive and ‘free-market capitalism’ could flourish, it sure wouldn’t look like this.

Governments would enable global currency exchange at fair-market value. Banks would lend to growing small businesses. Investors would take chances on high-impact entrepreneurs. Communities would ‘crowd fund’ cultural and social projects. People would loan money to one another to help make important purchases.

And so that’s how it’s going down. It’s distributed. It’s disintermediated. And most importantly, it’s driven by a collective.

How do we tweak the business model to make this happen?

Click here to download the PDF. View the larger image here.

The finance business model can primarily be broken down into two main categories: retail and investment banking. The retail banking business model is built off of scale, while the investment-banking business model is more centred around dealflow depth and securitization. There are many ancillary service providers who help fill the gaps in the market via partnerships and alliances with the banks.

The primary cost drivers are: staff salaries, real estate, compliance, back-end infrastructure and front-end systems.

While one business model is based on scale (retail) and another more on depth (investment), both are low-margin businesses. Retail banking profitability is dictated by the spread, the difference between the cost of borrowing versus lending, whereas investment banking is a fee-based business where profitability is more related to the bank’s brand and advisory services. So while one side focuses on scaling, the other is more focused on relationships. In the end though, both fall into the low-margin categories, with retail margins originating from the interest-rate spread oscillating between 0.5 – 5 % depending on macro factors, while investment banking fees typically ranging between 1 – 10 % depending on the type of service (M&A, IPO, etc), the amount of the deal and other factors.

Banks, whether retail or investment, can become extremely profitable if they can scale their brand across a number of different channels and create a diversified product offering. That’s why partnerships are so important. Retail banks partner with (or acquire) credit-card issuers, mortgage-origination entities, loan agencies and any other organization that can help them to extend their brand and add more volume. Investment banks build back-end partnerships to source dealflow, capital and advisory services, anything that will help them land the big deals.

But it’s all changing. As these vertical, debt-driven institutions are coming to a point where their business model will become unsustainable. There is only so much ‘free money’ that can be printed, mortgages issued and fees charged. Change is required from top to bottom.

In the Market Beacons section of our #NewEraBiz research on Finance, we analyzed three companies who are breaking away from the traditional mould and finding scalability through network and transparency strategies:

+ A New Era of Business: FINANCE

  1. Seedrs
  2. Funding Circle
  3. Triodos
  • Seedrs was the first regulator-approved crowdinvesting platform in the world. Built on a nominee model, they allow companies to raise up to £150,000 from everyday investors who have as little as £10, and just recently raised £750,000 through their own platform the fund their European expansion;

+ FT – Seedrs EU Expansion

  • Funding Circle is the pioneer of the P2B (Person-to-Business) Lending market and recently raised $37 Million to expand their presence into the US and build on their momentum in the nascent SMB P2P Loan market;
  • Triodos Bank is a Dutch-based entity who are building a ‘sustainable banking model’ on the pillars of transparency and ethics, and taking a lead in the impact and SRI (socially responsible investing) investment sectors.

On a macro level, there are three key areas of focus for sparking Finance BMi:

Given that borders and institutional walls make absolutely zero sense in the Finance world – capital needs to be able to flow – technology is acting as the bulldozer to break down the barriers.

There is a distinctive difference between what is happening in the ‘emerging’ versus the ‘emerged’ economies. Emerging markets are bringing in low-tech solutions to help money move within the boundaries of their country, while emerged markets are using high-tech solutions to remove restrictions on global capital movement.

emerged

  • Crowdinvesting, where companies like Seedrs enable anyone in Europe, no longer just the UK, to invest as little as £10 in any startup company looking for £150,000 or less in Europe

+ FT – Seedrs spreads across Europe target=“blank”

  • Money Movement, where companies like Transferwise, based out of the UK, facilitate global money transfers between bank accounts, saving customers from having to fork over huge fees just to make a wire transfer through their bank

+ Transferwise

emerging

  • SMS Money Transfer, where services like M-Pesa enable everyday Kenyans and other Africans to send money between one another using SMS on a basic cellular phone

+ Businesses with Bang! M-Pesa

  • Mobile Banking, where companies like CARD Bank, in partnership with the Grameen Foundation, take advantage of existing mobile networks to build banking service solutions for the previously “unbankable” in the Phillipines

+ How CARD Bank activated 480,000 poor Savers

Taking the ‘borders-are-silly’ analogy, #NewFinance is being driven by distributed networks who are connected via platforms, creating entirely new channels for driving dealflow and connecting with customers.

In the emerged markets, this can be seen in the form of crowd-based platforms, while in emerging markets, channels are being created to help impoverished citizens and communities form networks and access capital.

emerged

  • Crowd Lending, where companies like Funding Circle create an entirely new channel for SMBs looking for a loan, making the approval process much faster and the fees lower
  • Sustainable Pipeline, where companies like Triodos help finance businesses who meet certain ethical criteria and build a community of customers around those entities, creating a new channel for ‘sustainable’ businesses

emerging

  • Crowd Micro Finance, where organizations like Aliança Empreendadora in Brazil help micro-entrepreneurs in low-income communities access to capital through their Impacto crowdfunding portal

+ Impulso platform

The movement towards new forms of currencies is in motion. Part of the transition away from the current system is based on the need to move away from purely debt-driven, government-issued currencies and create new forms of exchange between people (P2P).

In emerged markets, new currencies are sprouting up to help spawn new digital ecosystems. In emerging markets, alternative currencies are being developed to help citizens spend their money in local businesses, as typically 90% of the money spent in low-income communities flows out to global conglomerates.

emerged

  • Digital Dinero, where currencies like Bitcoin are enabling a new method of peer-to-peer payment via a digital currency which can be exchanged for real money. Despite its overhyped valuation and flawed structure, it does provide a signal that bona-fide digital currencies will be emerging in the future.

emerging

  • Local Currency, where the Sampaio in São Paulo helps steer citizens in the urban neighborhood of Campo Limpo to spend their $Reais on local businesses and build a flourishing community

+ Catarse: Banco União Sampaio

Overall, if capital is going to flow, we can’t have a million barriers, a thousand fees and a few controllers. Thanks to technology and a growing realization of the need to redistribute dealflow, the #NewFinance movement has come to life. In both emerged and emerging markets, countless examples of BMi exist to show how a few tweaks of the BM can create big impact, both locally and globally. And the beauty is, this is only the beginning.

Have you seen any great examples of FINANCE BMi?


+ BMi: FOOD
+ Time For BMi


PLAN – the Business Model

Sassy. Sexy. Sustainable.

That’s the future of fashion. And in this post we are going how Business Model Innovation (BMi) is the mechanism to bring it back there.

+ Time for BMi – Business Model Innovation

Not Sassy. Nor Sexy. And certainly not Sustainable.

That’s the fashion industry of today. Why?

Because it’s not sassy to buy a $10 halter top from a fast-fashion brand that’s made on the back of slave labour in Bangladesh.

Nor is it sexy to rock boots and bags mades from the skin of scarce species.

And it’s certainly not sustainable to buy clothes from the fashion houses that destroy the worlds most precious and sensitive ecosystems in order to stock their High-Street shops.

So we need a new vision for fashion, one that is sassy, sexy & sustainable, no compromise.

Unlike the Food industry, which we covered in our initial BMi post, there is no household brand that represents what #sustfash (sustainable fashion) is all about; there is no Whole Foods for #sustfash, at least not yet anyways.

+ BMi: FOOD

Rather, the fashion industry is being led through its metamorphosis by a collective of edgy upstarts & nueluxe brands who are starting from scratch; their designs, materials, business practices and processes are nothing like today’s High-Street fashion brands.

Recycled materials, upcycled designs, tribal patterns and sustainable sourcing characterize how these brands operate. We are moving past the point of burlap bags and hemp overalls, #sustfash is sexy and sassy, far more than its predecessor, the soon-to-be-dead industry of all-that-matters-is-your-image fashion. #SustFash has a soul, a pulse.

As an example, Ser Sustantavel com Estilo (be Sustainable with Style), a Brazilian blog that is on the beat of the #NewEraBiz of fashion, recently launched their runway series SP EcoEra 3.

Wholesome. Colorful. Real. Vibrant. That’s where the #sustfash movement is taking the future of fashion. Defined as – environmentally responsible, socially just, economically viable and culturally appropriate – sustainable fashion is starting to rock the runway.

Not to be completely outdone, a few big brands are starting to realize that you can only run a business with an ignorance-is-bliss / look-at-our-numbers attitude for so long. In the same way people want real, organic food, they want straight-up, sustainable clothes. The demand is building and the market potential is huge.

Will the new fashion industry meet somewhere in the middle, combining the scrappiness and brand purity of the upstarts with the scalability and experience of the icons?

Could be …

But in either case, the real breakthrough potential for fashion is related to Business Model Innovation (BMi). Because stocking a few sustainable brands in the department stores won’t move the dial. You need to create scalable entities and collective units capable of reshaping the world’s High Streets, replacing the icons of today’s fast-fashion / snakeskin-luxury world with spunky, scaleable & sustainable brands. Not just one or two, but hundreds and thousands.

What is Business Model Innovation?

A business model is defined as the rationale of how an organization creates, delivers and captures value.

+ The Key Components of a Business Model

Business model innovation is the process of reinventing the business model itself. Rather than being focused on end-product innovation, such as new materials or designs, BMi focuses on changes in the process of exchange across value chain, whether it be a new pricing mechanism, supply-chain partnership or distribution channel. In the end, it is the model itself that SHIFTS, rather than simply the product.

How do we bring BMi to the Fashion Industry?

As a first step, let’s talk about what we want to BMi towards. We need hundreds and thousands of brands that can deliver on the sustainability side without compromising the design side. Ethics and aesthetics, hand in hand.

The challenge with changing the fashion industry is that there are so many moving pieces, and the logistics/cost pressures required to make a fashion brand fly are immense. With all the factors, including materials, labour, supply chain, distribution, sourcing – it’s a lot of work.

But there are a few mid-size luxury brands, such as Brunello Cucinelli (Italy) and Osklen (Brazil), that are showing that it is possible to deliver on design without sacrificing everything else.

Given our meet-in-the-middle market thesis on the evolution of the future of fashion, it would be brilliant to have heaps of brands who can move into the mainstream market, making it both unfashionable and uncool to purchase a $5 sweatshop T-shirt or a $40 pair of plundered-ecosystem leather shoes.

How can we tweak the business model to make this happen?

Click here to view the bigger image. Download the full PDF here.

The fashion business model can be primarily broken into two main categories: mainstream retail and luxury. Mainstream retail’s business model (ie. Zara) is built off of scale, while luxury’s model is built off of margin.

The primary cost drivers are the materials, designers and labour.

The primary revenue streams are product sales, through both branded and wholesale channels. Distribution Channels is at the core of the fashion business model.

While retail’s business model is based around scale, and luxury’s model around margin, both operate on very high profit margins. From the remnants of the Bangladesh tragedy, a Mango invoice was found showing that the company produced a shirt for $4.45 and sold on High Street in London for $46. Luxury’s margins would likely be even higher because their scale is much smaller. Overall, the typical fashion brand is going to markup products with a gross margin of 75%.

Given all of the moving pieces and logistical components, fashion brands work in a lot of partnerships. Whether it is for materials, design, production, logistics, etc., fashion enterprises rely heavily on their partners to keep everything in motion. In most cases, this is why established brands argue that it is so difficult to become ‘sustainable.’

In the Market Beacons section of our #NewEraBiz research on Fashion, we analyzed a handful of companies that are making moves in an unconventional fashion. These are brands who are shaking up the model in some way, all but one (Fashion.me) in ways that revolve around sustainability:

  1. PUMA
  2. Fashion.me
  3. Eileen Fisher
  4. Catalytic Clothing

+ A New Era of Business: Fashion

  • PUMA is taking on the ultracompetitive sports apparel industry using sustainability as their core strategy. Unlike NIKE, who is focused on Material R&D (link to Sustainability …), PUMA is building their business model on transparency and developing collaborative strategies with sustainable partners (ie. PUMA Wilderness Collection);
  • Fashion.me, the Brazilian fashion social network launched in 200x by two former investment bankers, is selling ‘big data’ packages to brands based on user interaction with key products;
  • Eileen Fisher, the wildly popular New-York women’s clothing line, was built on casual style and a commitment to ethics; however, small ‘sustainable’ tweaks to the business model, such as the Eileen Fisher Repair Program (started in 2005), are what have really helped turn ;

On the macro level, there are three key areas of focus for sparking Fashion BMi:

Materials are one of the key cost drivers in the fashion business; similar to FOOD, the shift from GMO products (ie. cotton) requires a significant shift in agricultural practices and will take time to scale. There is also, however, a significant opportunity to make breakthrough technological advances to speed up the sustainability curve.

  • Cooperatives, where Fashion growers who are farming sustainable crops (ie. Organic Cotton) form cooperatives to help build their collective clout. Inversely, smaller fashion brands can create buying cooperatives to purchase sustainable materials from producers;
  • Nanotechnology, where with new nanotechnologies firms take an approach like Catalytic Clothing in order to bring cool new materials to the small-scale designers who can bring them to the market in imaginative and innovative ways;
  • Collaborative Partnerships, when two different entities find alignment in their motives, there are no limits to what can happen.

Ex. Brazil’s Osklen, a global sustainable-luxury leader, partnered not with another brand, but a country. Italy, a place known for its history of craftsmanship and design, and Osklen have come together to research six new ‘sustainable’ materials and study their potential in the market.

Given the logistical challenges and supply-chain complexity in the Fashion industry, technology can play a huge role in the evolution of the business model.

Beyond Enterprise systems to track inventory and manage suppliers, new brands can use technology to take transparency and brand experience to a whole new level.

  • Material Tracing, where enterprises use technology to trace their entire garment-creation process, from end to end, and show consumers

ex. Rapa Nui – award-winning ‘From Seed to Shop’ transparency

  • Fitting, where companies enable their customers to get a feel for the garment from the comfort of their home by embedding new technologies into their eCommerce store

ex. Embodee – Digital Garment Experience

  • Experience Apps, where companies show how their product(s) fits into their market’s lifestyle and uses technology to help expand their experiences

ex. PUMA Run Navi app

Given that distribution is at the core of the fashion business model, brands need to focus on building new channels via the Web. Especially new #sustfash enterprises, who can use the digital medium to build their market and grab their attention, then enable on-the-spot purchasing.

  • eCommerce, where established eCommerce enterprises scale their channels to help bring new sustainable brands to market, and new upstarts use ecommerce to disintermediate the channels and cutout costly middlemen.

Ex. eTailer Yoox has created the Yooxygen platform for its shoppers who crave chic #sustfash clothing. New startup Evocha is bringing high-quality garments to European shoppers at mainstream prices.

  • Networks, where startups like Fashion.me harness the power of the social web to create new networks of fashion-focused consumers;
  • Clickable Video, where companies take advantage of technologies to enable consumers to purchase garments while they watch a runway show on any one of the main digital media networks.

In the future, fashion brands will start to model their business model around nature. Models built around Closed Loop, Zero Waste and Biomimicry are closer to becoming a reality with each passing day.

Overall, fashion needs to come back to its couture roots while embracing the needs of contemporary culture. BMi is the key to enabling #sustfash to reach a point where it can scale and compete against today’s heavyweights. When this happens, fashion can come back to being sassy, sexy and sustainable, full stop!

Have you seen any great examples of FASHION BMi?


PLAN – the Business Model

The food industry is ripe for a revolution. And while many companies have helped jumpstart the #realfood revolution by bringing in organic, there are few examples of food companies using business model innovation to spark scalable change. That’s why in this blog we are going to look at how BMi can be used to go beyond organic and reinvent our entire food chain.

Business Model Innovation – it’s the theme du jour these days on the blog as we start exploring ways to use it to shakeup some big industries. In our last post, we talked about a few inspiring BMi examples and shared some basic BMi strategies; however, in this post, we are going to get down and dirty, and take a look at how to sow seeds using BMi to bear fruit in FOOD.

+ Time for BMi – Business Model Innovation

When we think of companies that have really shaken up the food industry for the better in the last few years, the first company that comes to mind is Whole Foods. In fact, over the course of the last decade, Whole Foods has become the beacon for what we call the #real-food revolution. Thanks to their leadership, organic has become less of a hippy-homestead symbol and more of a food-conscious-family staple. Step into any Whole Foods store at lunch hour in New York City, for example, and you will see a construction worker entering in one door and a yoga teacher the other.

+ The #NewEraBiz in NYC

And yet, for all their hard work and commitment to reinventing the food supply chain, their business model is anything but innovative. They, like all other major supermarkets, have three key revenue streams:

  • grocery product sales;
  • eat-in market;
  • branded line of products.

Their business model is based on high markup and low wages; recently they have started to compete more with the mainstream market on price, but this is the model which has made them a tremendously profitable and allowed them to reach their current scale.

And while Whole Foods has had a tremendous effect on transforming the supply chain, shedding light on genetically-modified foods, and bringing real food back to dinner tables, it pales in comparison to the potential enabled by BMi.

What is business model innovation?

A business model is defined as the rationale of how an organization creates, delivers and captures value.

+ The Key Components of Business Model

Business model innovation is a process of reinventing the business model itself, rather than focusing on end-product innovation, such as technological, material, etc. This could include simple changes, such as pricing mechanisms, distribution channels or forging new partnerships. In the end, it only the model that needs to change, not the product itself.

How do we bring BMi to the food industry?

First of all, we need to know what the objective is. From our perspective, it’s the return of #realfood to the masses, and it goes far beyond organic.

In a marketplace that is dominated by ten major brands, and a supply chain saturated with GMO inputs (approximately 80%), we need to build a whole new stable of food companies who have both the brand and distribution power to take on the giants.

Graphic sourced from the Huff Post, and the article has 25K+ Likes …

As a starting point, there’s a target: to replace the ten mega multinationals – who strive for profitability at all costs – with a global network of real-food enterprises.

What can we do to tweak the business model to make this happen?

Looking at the business model of the typical food enterprise, it is pretty simple.

The primary cost drivers are inputs (ie. ingredients) and salaries, along with the cost of production equipment and facilities.

The primary revenue streams are product sales, whether through retail or wholesale channels, and for many prominent retail chains, franchising fees.

Click here to view the bigger image. Download the full PDF here.

Depending on the nature of the business, margins can range drastically, from razor thin in the case of most major supermarkets, to fat-cat juicy, as is the case with most premium products and brands. The major moneymaking factor comes through scalability – for retail products, it’s through global distribution, for cafés and restaurants, it’s typically through national expansion.

In the Market Beacons section of our #NewEraBiz research on Food, we highlighted several enterprises that are shifting the dialogue around the dinner table through their trailblazing efforts, including:

  1. The Peoples Supermarket
  2. LYFE Kitchens
  3. Real-Time Farms
  4. Credibles

+ A New Era of Business: FOOD

Beyond being innovative in their own right, each of these entities has used BMi to bring their business to the masses:

  • The People’s Supermarket uses a volunteer workforce to staff its store, and can therefore offer its products at a strong discount;
  • LYFE Kitchens is building a technological system, similar to McDonalds, to streamline and scale its all-organic fast-food offering;
  • Real-Time Farms charges a subscription fee to restaurants, caterers and grocers to use their crowdsourced farm and artisan guide;
  • Credibles has built on the crowdfunding business model and developed their own form of currency to help spur local food businesses.

On a macro level, we see three key areas of focus for sparking Food BMi:

Ingredients are the key cost driver in the food business; therefore, the key to being able to offer lower prices on organic (etc) products and compete against traditional GMO offerings is to focus on cutting the costs of ingredients.

While much of the focus is on expanding the organic (etc) supply chain through agricultural means, new collaborative models need to be developed to help bring down the cost using BMi.

Some ideas for this include:

  • Collaborative buying schemes, where multiple companies in the same industry build collectives to buy ingredients in larger quantities from growers and vendors
  • ‘Hacking’ to increase transparency in the market and shed light on the pricing structure and other variables in key input markets

Ex. Food-Tech Connect’s Hack/Meat Program

  • Open Source Product Development, where companies, suppliers and distributors work in tandem to bring new products to market.

There are already smaller derivatives of these types of ventures underway, as many entrepreneurs and food pioneers are already beginning to experiment in this space. The key is to remember that collaboration is more important than competition, and that the whole industry needs to be overhauled- there will be more than enough of this pie for everyone once the ball really gets rolling.

Technology is the great equalizer for small companies, and food is one of the industries where technology can be used to create scale and efficiency in ways that were traditionally only available to big companies.

Beyond ERP systems at the supply chain and inventory management level, companies can use technology to build rapidly scalable entities and connect across the ecosystem to source better ingredients, find new partners and enter new markets.

Some ideas include:

  • Operation Scaling, where companies such as LYFE Kitchens use the power of technology to add efficiency to production lines and save costs on menial staff labour;
  • Smart Sourcing & Data Mining, using sites like Real-Time Farms to find local producers and databases to find high-level information related to market, consumers (ex.% of the population who are lactose intolerant), etc;
  • Mobile Payment Applications to enable customers to pay more efficiently and reach a broader market, especially for single SKU companies and restaurant chains.

Ex. Sweetgreens salad chain partners with LevelUp to develop their own mobile payment app

Many companies already employ technology in small ways to help them become more efficient, but it is those who can implement technology into their core business model that will see the big results in the long term.

Getting products into key supermarkets and retails stores has always been the key hurdle for new food companies face. Up to this point in history, the strategy has always been to work with distributors and agents (ie. middlemen) and offer a percentage of sales made in return.

But in the network economy, companies can start to focus on reaching customers directly and bypass the middlemen.

Some ideas include:

  • eCommerce, developing a strong online business right out of the gates and making full profits on every item sold;
  • Networks, using social media and actively engaging with specific online communities to promote new products and special offers towards;
  • Mail, distributing a new product via registered mail

Ex. Graze in the UK delivers its weekly snack packs via Royal Mail

Rather than focusing on vendors and distributors, the new network economy will allow future businesses to build people-powered networks and kickstart their companies via online channels.

Overall, the food landscape is ripe for BMi on multiple different levels across markets globally. Those who can take advantage of network strategies to connect across the ecosystem, and build lean enterprises via BMI, will have competitive advantages that last for the long term. The time has come to stop picking the low-hanging fruit and start harvesting the bumper crop.

Have you seen any great examples of FOOD BMi?


PLAN – the Business Model

One of the newest buzzwords floating in the business ecosystem these days is ‘social commerce.’ Now that Facebook, Twitter and other large social platforms have reached critical mass, marketers and execs are starting to see the big opportunity to start selling their products through these networks. While there is no doubt that ‘social commerce’ has the potential to redefine e-commerce, the real potential lies in what we will call ‘collaborative commerce.’

The dawn of the new ‘Collaborative Economy’ is upon us. While there are many adjectives being thrown out there to describe this big economic shift (New, Sustainable, Sharing, Creative … Economy), at the core of the movement is a drive to collaborate across the business ecosystems and bring the next generation of big ideas to life. Perhaps there is no bigger indication of this movement than the advent of crowdfunding, which in the space of a few years has already began to reshape the entire financial landscape.

Late last year, we travelled through Spain to research elements of this new ‘Collaborative Economy.’ The most interesting part of the research process was seeing how different entities were coming together to form a more cohesive and fluid business ecosystem. When you combine crowdfunding platforms / collaborative consumption portals / community hubs, the whole framework for conducting commerce starts to shift. Rather than being driven by competition in a top-down fashion, commerce is being initiated by the community from the bottom up based on real needs.

+ The Collaborative Economy – Inspiration from Spain

In that light, we start to look at the possibilities enabled by ‘collaborative commerce.’ As these entities start to solidify themselves in the ecosystem and the networks develop, those networks become markets and the communities themselves will be driving commerce through them. And it’s not going to be the big platforms (ie. Facebook and Twitter) that drive all these transactions, although they will play a part in it, but the most cohesive platforms (mainly niche) that build the tightest community interactions.

A recent article on Social Media Today sheds more light on this trend. The leaders in ‘Social Media Marketing and Commerce’ were small and mid-sized web-only merchants, many of whom were new in the space; but they all shared one thing in common, they put social media at the forefront of their business strategy. It wasn’t big-budget marketing that drove these transactions either, but a sincere focus on developing real relationships with customers through social channels. Fab.com is considered the darling in this space, where 50% of the site’s membership registration comes from social media.

Beyond just the SME’s, artisans and merchants are also joining in, as can be seen by Etsy’s fantastic fiscal performance last year. In 2012, sales for the company were up 70%, new buyers increased 83% and there were 10M new members. Etsy allows such artisans and small merchants to create micro e-commerce stores to sell their products online and has built a loyal and diligent community to help protect the integrity of the listed products.

These examples are not simply an anomaly or the result of hyped-up advertising, but rather they represent part of a much bigger movement towards a more social and collaborative way of doing business. As we are now starting to see a new era of businesses that are being built from the ground up using social technologies (ie. crowdfunding, social media), these community-driven enterprises will continue to expand their social presence in order to drive sales. From the small baker on the corner to the upstart technology company downtown, the way commerce is conducted is being radically redefined as part of the advent of the Collaborative Economy.

And what do the numbers look like?

From this video, Pinterest : The Future of E-Commerce, the following data was revealed about the average order size generated through each of the following social networks:

As a further example, it was reported that consumers who were referred through Polyvore, a community of young stylistas who create and curate personal style collections (Lookbooks), had an average order size of $220. Bringing together a cohesive online community on a clean, vibrant platform is a lethal combo these days.

Overall, the ‘Collaborative Commerce’ trend signals that the pieces are fully in place for anyone to start empreending (see post The Reason to Empreender – Impact). The new era of business is about creating enterprises that work together in tandem to drive commerce that matters. Instead of buying a cheap product from Asia, people can start to buy great products from the people they know the best and reestablish trust in the business environment. Technology has enabled the connections to occur, now it’s time for the next generation to capitalize.


+ BMBreakdown: ETSY
+ Time For BMi


PLAN – the Business Model