Business Model Innovation Trend: User-Defined Value | The Garage Group

Business Model Innovation Trend: User-Defined Value

What do you get when you combine price-savvy consumers with easily accessible big data? Interestingly, we find the answer to be micro-niche customization—highly customized products, services and experiences and personalized pricing. The segmentation that forward-thinking companies are leveraging goes well beyond the old notion of mass customization; those that are doing it well are innovating everything from their product-development processes to pricing structures, partnership models and marketing strategies.

Caterpillar, Inc. has radically altered its product development process, leveraging structured crowd sourcing during various decision-making processes to develop products tailored to a highly specialized group of customers—professional truck drivers. During the creation of their CT660 multipurpose truck, Caterpillar invited professional truckers and other potential buyers to contribute design-improvement ideas and real-time feed back before the product ever reached market. This product-development innovation enabled a highly engaged niche market of customers to drive rapid-pace development, resulting in a much more relevant truck design with a significantly decreased time-to-market and increased brand affinity with its core user group.

Green toe
New York startup Green toe took a new approach to integrating user-defined value when it simultaneously innovated its pricing model and its partnership model. The name-your-own-price retail website links buyers with merchants, allowing consumers to decide their desired price on an electronic item, then allowing retailers to match or refuse the offer. While both parties actively control the selling price of over 15,000 products, the company provides another layer of value to its merchants—it serves as a customer acquisition vehicle, allowing them to collect consumer data. Merchants who actively collect data give Green toe a higher cut of each transaction, up to 15%. This innovation encourages both repeat consumers and repeat partnerships, allows new growth opportunities due to its agile profit structure (the company plans to add 15–20 product categories by mid-2013), and increases market share by presenting highly relevant offerings to niche consumers.

Like Greentoe, online retail middle man Netotiate successfully innovated its partnership model in conjunction with its pricing model to simplify and improve both consumer and partner costs. The Netotiate Inbound Product Feed, launched in 2012, features a consumer-to-merchant online platform in which merchants for products like glasses, cameras, watches, tools, appliances and computer scan publish their entire inventories for consumers to compare prices and make purchase offers. Most price-comparison sites utilize cost-per-click billing, charging merchants every time their products are viewed; Netotiate, however, functions on a cost-per-acquisition platform, charging merchants only when a sale is finalized. Providing merchants with the ability to upload unlimited inventory gives consumers access to a broader selection; in return, satisfying both partners and consumers increases the company’s conversion and profit margin, drives strong future partnerships and promotes consumer loyalty.

Sweden’s Festival
Finally, an experiment is under way at Sweden’s Festival 2014, which hopes to be the first-of-its-kind, open-source music festival. Ticket buyers get to choose the line up after they purchase their tickets; as the number of tickets sold increases, so does the popularity index of the headliners. This experimental approach leverages an open call for help from music lovers, a strong Facebook presence and the city of Umea being chosen as the “cultural capital of Europe” for 2014—all to deliver a true open-source, user-defined experience.

The Garage Review: Business Model Innovation to Harness the Constant Flux
To read about more of these trailblazing, boundary-pushing, innovative organizations, check out The 2013 Garage ReviewWe hope The 2013 Garage Review inspires you to consider how you might take an entrepreneurial approach to innovating your own business model. We’re always on the look-out for innovative business models, so send us a tweet or a quick note when you see a great example — who knows, maybe it’ll end up in our next Review!

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