Model #90: The Cluster Model

From the early days of the United States, New York was known as an economic center, with the New York Stock Exchange having its humble beginnings in 1792. New York’s Broadway district took root in the mid-1800s and gained momentum in the 1920s and 1930s, dominating the world of theater in the United States. From 1911 to 1915, Los Angeles grew rapidly into the entertainment capital of the world, as four studios all set up their primary production facilities in the Hollywood neighborhood. Santa Clara Valley (Silicon Valley) started with Stanford University’s cultivation of a high-tech, entrepreneurial environment as early as in the 1940s, with the region earning its name in 1971, shortly after the founding of Intel and Xerox PARC and the invention of the mouse, windows-based software, and networking. Chicago, by being at the natural geographic hub of railroad and water transportation in America, became the nation’s transportation center, which for a while meant that it was also the nation’s meatpacking capital. Las Vegas evolved into a business/entertainment center focused on minimal regulations, since Nevada’s limited laws and legalization of gambling in 1931 attracted many crime-based businesses, laying the foundation for their casino empires. In all these cases, dominance in a particular industry was an evolution based on converging forces.

New York, Los Angeles, Silicon Valley, Chicago, and Las Vegas are all iconic, representing entire industries. Other cities have occupied a similar status, only to lose it due to changing economic times. This list of cities included, notably, Pittsburgh for the steel industry, and Boston for the textile/garment industry. The verdict is still out as to whether Detroit’s leadership in the automotive industry is behind them, but history is not on their side.

Of course, there are iconic cities around the world, many with even deeper roots than those in America.

What does this mean for your geographic region?

Even if your geographic region is not a national icon for some industry, it still has a history. Businesses have clustered in your region as a natural answer to the economic law of supply and demand. Do not underestimate the economic value of the business clusters that have established themselves in your region.

Harvard Business School scholar Michael Porter introduced the world to the concept of clusters of innovation. For example, Pittsburgh established itself as a relative leader in education and knowledge creation, construction materials, and metal manufacturing, the last two being a residual effect of its former leadership in steel production.

Look up your region’s clusters of innovation and then target businesses in those clusters. Innovation will drive the twenty-first century, so go with your region’s innovational strengths.

Taking the concept further, economist/author Richard Florida and others have observed patterns of megaregions, such as the corridor including major cities from Washington, D.C. through Boston and the corridor including Chicago through Pittsburgh. As an extension of your own region’s clusters of innovation, explore how you might be able to share innovations with your neighbors in your megaregion.

Model #89: The Parable of the Talents Model

Complementary models: Alchemist, Anti-Excess, Unlimited Growth

In the biblical Parable of the Talents (Matthew 25: 14-30), a master (symbolizing God) gave three servants responsibility for a large portion of his fortune. He gave five talents to the one that he presumably trusted the most, two talents to another, and one talent to a third, whom we later discover was the least trustworthy. The first two double their money, and the master lets them keep everything, both what they were given and what they earned. The third, fearful of the master and bitter about his wealth, simply buries the talent and gives it back on the master’s return. Deeply disappointed in this servant, the master gives his one talent to the servant with ten talents, where he knows it won’t be wasted.

This parable has traditionally carried the Christian message that everyone should use their God-given talents. In fact, the word talent, meaning an innate ability, derives from this parable. The message, then, is that those who use their God-given talents are rewarded.

The story, however, can be read in a different way.

As written, it sounds as though Jesus is saying at one point that “the rich get richer and the poor get poorer,” which is hardly consistent with Christian tenets. Thus, theologians and Christians everywhere seem to ignore that line. One can hypothesize, though, that the conclusion actually explains why the rich often get richer and the poor often get poorer. Those with limited resources, like the man with one talent, often have limited resources because of their past tendency to fear others and to horde their limited possessions. Such people often focus on “poor me.” Those who think outwardly—magnanimously—don’t think of the world as limited, but rather as unlimited. When they do unto others, they discover that there is enough wealth to come back to them. In other words, the more you give, the more you receive.

If you have a tendency to think only about yourself when you plan how you will accumulate your wealth, think again. Do you find yourself envious of others, believing that you need to look out for “number one” to get ahead? Think about how you can help others, and observe what happens. It may take a while, but think of this as your insurance policy: When you keep giving, sooner or later it will come back to you, as it did to George Bailey in It’s a Wonderful Life.

Model #88: The Anti-Excess Model

Complementary models: Anti-Hollywood

If Hollywood is the capital of excesses, consider all the other excesses in the world. Certainly there are many other excesses worth opposing.

Seeking pleasure is perfectly normal, but Las Vegas represents excessive pleasure. Families living in Vegas don’t want their families exposed to the excesses, but they nevertheless contribute to the paradox that is Las Vegas.

Billionaires, by definition, would seem to represent excess. Nobody personally needs a billion dollars. That is why so many billionaires very quickly turn to humanitarian causes, seeking to counter their own excesses. Humanitarians who become billionaires represent the flip side of this paradigm. Oprah Winfrey became a billionaire in spite of (or more accurately because of) her giving. She now simply continues the pattern of giving that was inherent in her business model.

Choose one or more excesses and see how profitable it is to counter that excess.

Model #87: The Anti-Hollywood Model

Complementary models: Anti-Excess

A considerable percentage of the Living Widgets models have Hollywood-based references. That is because the Living Widgets Global Supply Network connects to what people know, providing useful metaphors—even allegories—from which to base a business model. Many aspects of Hollywood, however, should not be modeled, and those tend to be what gets greater press coverage.

The Anti-Hollywood model seeks to avoid all the excesses of Hollywood.

This metaphor can take you far, but a simple and revealing practice is the Hollywood gift bag. In the Winter 2005 issue of TIME Style and Design, TIME Magazine writer Joel Stein declared that “The way to establish your cachet is to demand tremendous amounts of free stuff.” The 2005 Grammy gift bag, for example, contained $30,000 worth of goodies. The Anti-Hollywood model would say that the way to establish cachet is to give tremendous amounts of free stuff. (There was a famous man who walked the earth 2,000 years ago who said something about this!)

Does this work? I think you know the answer deep down. However, as trivial evidence for those caught up in the Hollywood machine, Joel Stein recounts a simple fable about the 2005 Sundance gift lounge. A gift lounge is a gift bag without the wrapper: seemingly unlimited giving by promoters to insatiable Hollywood artists who are happy to bask in the glory of their status. In this real-life fable, our hero Keanu Reeves drew more press coverage than any of the Sundance movies that year. He did so by refusing to take anything from the gift lounge.

Try this model: For every excess you can think of—which shouldn’t be too difficult—establish an opposing philosophy.

As you continue to develop this philosophy, you will be pleased to see that people start to follow you. Everyone is familiar with Hollywood, and with their excesses. While they may enjoy reading about the excesses and imagining indulging in the excesses personally, these same people would like to see fairness, with the wealth of Hollywood being spread around.

Model #86: The Entertainment Technology Center Model

Carnegie Mellon University’s Entertainment Technology Center, founded by Dr. Don Marinelli and the late Dr. Randy Pausch, casts a new mold for both education and business.

Rather than work on traditional courses, the Masters students in the program work on a project designed to meet the needs of specific businesses.

Students are provided with powerful creativity tools, and their personal creativity is entrusted with an actual business project. The projects require both creativity and technical know-how, which is divided between the artistic Masters candidates and the technical Masters candidates respectively. As in the business world of the twenty-first century, since interdisciplinary thinking is required, interdisciplinary teams are assembled, and members are expected to be comfortable sharing ideas.

Being CMU students, team members are highly intelligent and talented. However, there is yet another, understated advantage to this model: The young minds on the project provide their own built-in focus group, since they are sensitive to the views and needs of other young minds. They are given technology and asked to openly explore it, in whatever ways they find interesting and useful.

The Master of Entertainment Technology program was carefully crafted by CMU’s Entertainment Technology Center. In every respect it is a balance of yin and yang. Perhaps the greatest pair of opposing forces is the strong project focus balanced by the open-ended approach to solutions.

Model #85: The Disney Be Our Guest Model

Under Disney’s Be Our Guest campaign (named after a song from the 1991 movie Beauty and the Beast), employees became an integral part of the product. Although the model perfectly fits the Disney parks and resorts, it also applies throughout the entire Disney organization, with the parks and resorts being a metaphor for the entire company.

Visitors to Disney facilities are identified as guests. This applies not just within the parks and resorts, but in all customer interactions, including at the Disney Store, at the now defunct regional DisneyQuest entertainment arcades, and on the telephone. Disney employees become very familiar with the “Be Our Guest” song (performed by the late Jerry Orbach, of Law and Order fame), where the singing and dancing objects in the enchanted castle give the female star their personalized, undivided attention, even pulling up a chair for her and tying a napkin around her neck.

Continuing the analogy from Beauty and the Beast, Disney calls all employees—at all levels—cast members. In other words, all employees “perform” for the “guests,” the customers. As theatrical as the “Be Our Guest” song is, employees are expected to provide that kind of “wow” experience to all guests at all times. Unless taking a formal break out of sight, all employees are considered “on stage” at all times, even walking down the street with a Disney shirt on.

The Disney Institute offers formal training courses for businesses to adopt the Disney model of service. Many third parties now also offer their take on the Disney model. To get started inexpensively, however, read Be Our Guest: Perfecting the art of customer service, written by the Disney Institute staff and published by Disney Editions.

Model #84: The Consignment Model

If you’re not sure that you can sell a product, the producer or owner of the product may let you sell it on consignment, lending it to you and getting paid only if a sale is made. Otherwise the product is returned.

Consignment is a common practice for resale situations, where consumers attempt to sell their used clothing and merchandise. This includes resellers who sell items through eBay. For this reason, retail resale shops are often called “consignment shops” as a euphemism.

Consignment is also common between artists and art galleries. It may be used between wholesalers and retailers in a variety of circumstances, such as the sale of specialty items, expensive products, or new product lines.

Given how powerful it is, the Consignment model remains sadly underutilized. With creativity, this model can seriously accelerate the sales process.

For example, with software and other intellectual property, consignment is generally not practiced. Instead, brief trial periods are offered. While 30 days is common, ridiculously short trials, like 7 days and even 2 days, are not unusual. The owner clearly wants to get paid before the buyer decides that the product or service is not worth the fee. Reputable companies will offer genuine money-back guarantees, while less reputable companies will offer guarantees with so many constraints that most dissatisfied buyers are unable to actually receive a refund. Consumers experimenting with money-making and money-saving ideas would be much more comfortable paying for a product or service after the monetary goals have been achieved.

If you are selling intellectual property and you want your product to be marketed virally, then this is the model to use.

Model #83: The Outliers Model

In his 2008 book, Outliers, Malcolm Gladwell reveals his research on success factors. Exploring the findings of this book and other research on success can be a powerful driving force as a business model.

In some cases, the findings suggest that seemingly random factors play a role in success. For example, successful Canadian hockey players tend to be born in the first few months of the year. The reason is that Canadian boys are targeted early in life to receive access to the best training, and boys that miss the cut-off date for starting school are larger than their peers and have had more time to develop gross motor coordination. Thus, the older boys in the class are unwittingly selected as superior players and given additional coaching.

Gladwell labels this phenomenon “accumulative advantage,” where people with arbitrary advantages are given a self-reinforcing series of advantages. What this means is that—in any field—leaders should be on the lookout for unrecognized talent. Assessing such talent can be difficult, however, as evidenced by how easily Canadian hockey experts confused age-based development with skill. Hopefully, however, armed with this specific knowledge, future assessments will factor age into the equation.

In your own field, it will probably take considerable research to identify inappropriate biases, such as age, gender, race, intelligence, and even work background. The problem is that such biases lie not with individuals but with situations. Hockey coaches did not intentionally choose the old kids. You may not be biased against race or gender, but you may be subconsciously having the same effect by using speech style and thinking style as criteria. Is the person’s speech or thinking style relevant, or are those arbitrary criteria? What really determines success in your field?

Another success concept permeating Gladwell’s book is the idea of experts emerging after 10,000 hours of experience. Those companies who typically seek employees that have had five years of experience are using this rule implicitly, since there are approximately 10,000 hours of work time in five years. Of course, this is only a guideline, since not everyone acquires 10,000 hours of genuine experience during the five years, and those who put in 80 hours a week of genuine personal growth can achieve the same results in two and a half years.

A corollary of Gladwell’s book would be that everyone should aspire to work with those who have acquired true experience, since they can best meet targeted objectives. This may be obvious for surgeons, airline pilots, and other critical employees, but why should other forms of work suffer from inadequate experience? Those who are not experts at a task should be encouraged to ask an expert, and be provided with ready access to the expert. If someone is an expert on certain tasks but is asked to perform an unfamiliar task, that employee should ask for assistance like everyone else. Such an approach radically differs from common practices. When employees ask questions, employers often doubt their competence, instead of rewarding them for seeking growth and ensuring quality.

Gladwell emphasizes that, since success has a random component to it, successful people should recognize it as a gift from society, and seek to give back. A separate reason for successful people to contribute at a societal level is that the advancement of society and individual advancement are integrally tied together. Societal advancement is the sum of individual advancement. Conversely, individuals grow as they take advantage of societal advances while simultaneously contributing to further advances.

Model #82: The Chasm/Tipping Point Model

In his 1999 book Crossing the Chasm, Geoffrey Moore modified conventional wisdom about the Technology Adoption Life Cycle. His point was that there are vulnerability points in the adoption of new technology, and the largest vulnerability point (“gap”) is so large as to be called a “chasm.” A product needs to leap across this hurdle—after the innovators and early adopters have already bought—if it is going to go mainstream.

In this manner, Crossing the Chasm presents a powerful framework in which to think about product development. A product isn’t a success unless it can go mainstream, and companies need to provide a different plan to target the mainstream market than they do to target innovators and early adopters.

The Tipping Point, by Malcolm Gladwell, takes the concept further and describes how momentum builds until the new technology reaches mass appeal. However, if it doesn’t reach the critical “tipping point,” then it quietly fades out. Gladwell offers details about how ideas are retained and spread throughout a population.

Can you define, in advance, a path to achieve mass acceptance, once you price your product for the masses? How will your innovators and early adopters convince the mass market that your product is essential—or at least worth the mass-market price that you will be charging? If you can’t identify this clear path, then you should not consider this model. Market your product to a niche market, and price it so that you achieve your profits before the demand dies down.