business models

Market testing

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In innovation and entrepreneurship circles, it is often assumed that the market provides a sure test for the validity of a new project. The logic is apparently tight: if a product or service doesn’t sell, it means that it’s not needed, either because of a core design flaw, or inadequate positioning.

However, the very same circles encourage the development of pitching and sales skills, including a great buzz around storytelling – because this is how you gain the attention of your customers.

There is a gap in this logic that nags me. When a new venture fails, is it because their offer is inadequate – plagued by a fatal flaw or badly positioned – or is it because the people in charge of promoting it have insufficient skills in sales, and all the people in their target market have exhausted their funds and attention on other offers, less suitable, but better packaged?

Or should we then understand that innovation has nothing to do with the development of new services and products, but only the never-ending improvement of packaging techniques?

On non-profits

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‘So, if you run a non-profit, does it mean you can’t run activities to generate revenue,’ someone with a business background asked me. And here I was, explaining how non-profit status has nothing to do with income generation, but how you share the spoils. No return on capital, but talent can be rewarded. You cannot offer dividends. You can pay salaries, even bonuses. You can develop commercial activities.

I’ve run a non-profit for the last five years, and developed a keen interest in the philosophical underpinnings of company structures. Accounting, or the art of categorizing assets. Governance, or the art of collective decision-making. Incentive systems, or the art of eliciting and sustaining activities that benefit the group.

As I learnt more, I realised how ignorant I was – indeed most of us are – about companies, how they run, what they are. How imprecise our use of words. Income, profit, revenue, benefit, trade, hover together in a golden cloud, while charities and nonprofits merge in mysterious shade. And by effect of sheer confusion, the non-profit sector itself may begin to question: if there is no profit, how can there be value?

On procurement

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We seem conditioned to value the visible result over the long preparatory process, the house over the foundations, the gain earned – no matter how trivial – over the pain avoided – no matter how great.

A friend from China used to work in supply chain management. She has exceptional procurement skills, and saved her company millions of dollars. Her achievements barely received acknowledgement. Meanwhile, when the sales team brought in a few hundred thousands in contracts, everybody cheered. Eventually, she quit.

A balance sheet has two sides, income and expenses. Yet the dominant wisdom I absorbed from business people is, focus on income. The Business Model Canvas presents elegant symetry between cost and revenue structure, but most of the tips and case studies I read celebrate clever ways of bringing in more money.

In our age of abundance, we do not value temperance. There may be reason for it. After all, a danger avoided offers no chance for heroics. After complex research, modelling and bargaining, we did not incur a certain sum – but were we ever going to pay that much? The risk did not manifest, was it through complex strategy, or pure luck? And who can tell if it was ever even present? My sale, however, the crisis I solved, the monster I slayed, that’s concrete, and should be dutifully rewarded.

On narrative experiences

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Our current conception of music distinguishes three main figures: the composer, the performer, and the listener.

In Music, Nicholas Cook interrogates the Western construct of ‘music’ as an historically and geographically determined cultural experience. As I read his book (I’m up to chapter three), I wonder about writing as an art form. In particular, I wonder to what extent our current understanding of ‘writing’ echoes industrial production models. The writer is the ‘primary producer’ of a good (the book, the article), packaged and transported by intermediaries (editors, publishers, booksellers), and eventually purchased by customers (the readers). With this model as a background, we fight for the right of ‘writers’ to be paid in proportion to the quantity they produce – alternatively using word count or number of copies as a basis to calculate their share.

This framework has always struck me as dated and deceptive. Value chains are significantly more complex, involving layers of direct and indirect benefits, social, symbolic and financial. In addition writers don’t  produce goods in the way publishers do. Books and magazines are goods – texts may not be.

So what if we redefined writing as ‘crafting narrative experiences’, using contemporary service industries as a model?What new business model and value proposition could we come up with? What new prospects would that open to rethink the way we pay the writers, and the type of literature we produce?

The sad truth is

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Never trust somebody who starts a sentence with ‘the sad truth is’.

The context

Four years ago, friends and I founded a cultural non-profit organisation called Marco Polo Project. A few months ago, after attending an Asia-leadership event full of cynical corporate workers, I posted a rant on my Facebook wall: ‘What does it say about our current intellectual environment that the first question asked about Marco Polo project is typically not ‘what’s your pedagogical model’, ‘who do you publish’ or ‘why did you develop this’ but ‘who funds it’ or ‘how do you make money’? ‪

Somebody replied: ‘The sad truth is, though, that finanical returns/alternative sources of funding are unfortunately essential for making projects (and the pedagogical models they employ) sustainable.’

Irritated, and amused, I replied: ‘That’s the sad truth. The happy truth is – we haven’t really had financial returns in the first four years, and we’ve survived so far – not growing exponentially, but able to do the job, and regularly trial new things.’

The contention

People will often present statistical probability based on their own ethical outlook under the veil of ‘truth’, and on that premise, disguise ethical decisions as facts. This is dangerous, and should be resisted.

The argument

  1. We live in a world that encourages us to think of our own existence in statistical form. Yet our lives are strictly personal, and probabilities translate existentially to binary alternatives. To take a radical exemple, if you’re having an operation with a 40% survival outlook, by the end of it, you won’t be 40% alive – you will either be dead, or survive. The fact that expected chances of survival are given to you as 40% may lead your decision to have the operation or not, but does not tell you with any level of certainty what your future will be.
  2. ‘Sustainable’ is the biggest keyword in social enterprise and non-profit worlds – even in education. Yet who said cultural ventures need to be sustainable? Maybe writing books and making art is not meant to be ‘a sustainable activity’. Based on historical observation, art seems to flourish in times and spaces where there is abundance, and when abundance ebbs, it dies out. For culture to flourish, we need to create situations of abundance. And maybe the ebb is OK.
  3. That people work for rewards is probably a general truth. Yet what rewards people pursue varies considerably. I did not and do not pursue direct financial rewards through Marco Polo Project. I do seek other types of rewards, and received them. The first was social access – I’ve been invited to join two leadership programs, met with a considerable number of people, and gained their respect. As an educated migrant whose skills and diplomas are non-directly transferable, this is a significant gain. Rather than pay for a degree so that I could run a project, I ran a project so that I am now getting paid to do a degree. The invested cost of running Marco Polo Project was less than a Masters’ in, say, cultural management. The time required arguably identical. The result, I am in a better position to apply for a job in cultural management now. And in the meantime, there’s been a side benefit: I’ve built an organisation, educated language learners, shared Chinese literature, and brought people together.
  4. Everybody recognises that good timing is part of business acumen. Yet few mention patience as a key business virtue. Timing acumen has two logical consequences – either you develop a venture based on what is most likely to succeed now – or you select your own pace of growth waiting for a time when the environment is ripe. Part of patience includes a capacity to be thrifty, and last longer on the same resources. Let’s think more about these old virtues – thrift, temperance, patience – as essential to business success, especially for social entrepreneurs.

The proposition

In a heavily mediated world, where online and offline conversations, comments, arguments are omnipresent, we are in a position to set the discourse. The better story-teller may win the game. So let’s reset – it’s not about ‘the sad truth’, but ‘the happy truth’. And no, I’m not interested in your depressed vision.

(Photograph by Bizarria)

Space sharing, time sharing: future of work, or existing models?

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Our current (but changing) mindset is to think of work in the following way. Full-time work, dedicated work space, and regular daytime week hours are correlated. Work occurs Monday to Friday, 9-to-5, in a particular dedicated space and for a particular organisation. Anything  outside these spatial and temporal boundaries is either non-work or not-really-work.

We seem to be moving towards a model where work is more often part-time, with flexible hours, for multiple organisations, and occurring at different locations. However, this is by no means a new phenomenon. Let’s look at these very common professions – to quote a few:

  • Doctors and nurses may work more during the day, but 24 hour and week-end presence is required from some at least.
  • Teachers spend about one third of the time in front of a class, and two thirds preparing classes or correcting papers – which occurs in all sorts of settings, including offices, cafes, public transport or bed.
  • Cleaners typically work when others are not around, and pretty much everywhere.
  • Hospitality workers are flexible – a typical ‘daytime’ restaurant will open from 10h30am to 11pm – but start at 6 or 7am if they serve breakfast. 
  • Drivers – whether of trains, buses, trams, taxis, planes or trucks – work 5am to 12pm, and sometimes round the clock. A number of people in the transport industry will be around to support them.

When we think of new models for work – whether it’s part-time allocation, flexible work hours, or work outside the office – let’s not forget that these very common professions have been doing exactly that for years. These are by no means marginal phenomena, and maybe there’s something we can learn from them.

Please, feel free to share reflections here!

Business Model

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[This is a repost from the Marco Polo Project blog]

The first person to put this question in front of me was my friend Pearly, who works as financial advisor in Hong Kong. I was talking to her about the website, and she very naturally asked: “what’s your business model.” I was a bit embarrassed at the time that I didn’t have an answer. The second time I remember was during my interview with Jean-Michel Billaut, when again, the question hit me: “how do you make money from that?”.
The question’s not all that new. We’ve thought about it, of course. But for some reason, I kept pushing it away, finding it irrelevant. Yet people are asking, and I should give them an answer. So I’ve started looking at ‘business models’. As a former arts student, an educator, and a writer, I always find ‘business’ talk odd and alienating at first – but I’ve discovered it’s only new labels on standard ideas and concepts, and as a translator, I’ve come to accept that you must learn to speak other people’s language. So ‘business models’ are simply proposals about the way that an organisation will access resources and derive revenue from its activities. I can handle that.
I looked around, and soon discovered there was something called a ‘community model’ – wikipedia would be the best example on the web. In an organisation running on a ‘community model’, monetary transactions are kept at a minimum; most of the tasks are done on a voluntary basis, for intrinsic reasons, symbolic rewards, or because participants derive a direct benefit from working with the community.
That’s how we’ve been running so far, and that’s how we plan to run in the future. The Marco Polo Project is a very cheap organisation to run. We built our website, systems, database and community so far on 3,000 dollars, although the project also received a considerable amount of support – in the form of work-hours, advice and publicity – for a value much higher than this. Our only monetary needs are to pay for web hosting and government fees, less than $500 a year. So we could keep the Marco Polo Project running on a yearly budget equivalent to the price of an i-pad.
Now that is not entirely true. To reach a critical mass of users, and keep our existing community satisfied, we need new features on the website – multiple languages, better searching and sorting, a personalised user page, mobile compatibility – and this in turn will require more design and programming, which will have a cost. On a more ongoing basis, we need to keep editorial standards, both for choice of texts and translation quality control, and someone has to keep the structure together – making sure bills are paid, newsletters are sent and mailing lists are updated. But even then, the platform could be successful on a skeleton team of paid part-timers and interns working flexible hours with no set office. And it’s not impossible that we could raise enough money for such a team through donations, grants and sponsorships.
So that’s our business model: we won’t ‘make money’, that’s not our purpose. We design and develop a free tool for people to practice Mandarin and learn about China; we pick, sort and label a selection of quality Chinese writing; we maintain and engage a virtual community of translators and language learners. We bring together people across languages. It’s not expensive. We’re looking for grants and sponsors. And we take donations. Can you help?