An evolving business model

If you want to understand how business models evolve in the current environment, consider the picture at right. I received it from Rohit Talwar, the co-founder of Global Futures and Foresight, a think tank in London. It's a micro, but very revealing, example. The picture shows a charging station seen in many Chinese cities, selling power for cell phones: over 420 million Chinese have cell phones, but in many areas electricity supply is non reliable. Hence this company, that, for a modest fee (business model no. 1: fee for service), lets people plug in their phone and charge the battery (notice the array of chargers' plugs for different phone brands on the table).

Soon after starting the business, they noticed that while the phone was plugged in, the clients were hanging around, waiting for the battery to be at least partially recharged, and they figured that they could exploit that idle time by displaying advertising and other commercial content on screen placed on top of the booth (business model no. 2: ad money). The charging stations are typically hosted in areas such as shopping malls, restaurants and railway stations. So the company started displaying virtual coupons and discount codes for nearby shops on the screens: the customers could photograph the virtual coupon with the cameraphone or write down the unique code, and receive a discount at the corresponding shop, with a ‘referral commission’ also going to the operator of the phone-power-booth (business model no. 3: commission on sales). The hotel, restaurant or shopping mall hosting the charging station has the option of sharing in all the revenue streams or simply taking the charging fees and allowing the operator to take all the advertising related revenues.

Rohit believes that they will both need and be able to come up with additional ways to generate revenue streams as average charging fees and ad revenues decline in the face of competition. And that under the pressure of changing conditions (competition, more reliable electricity grid) "it is likely that sometimes soon the first business model - fee for service - will disappear, and charging the phone's battery will become free": it will turn into a loss leader to attract customers.

(Here is another phone charging booth - in Uganda - still on step 1 of the biz-model evolution...)

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