The answer to your business problem can occasionally be found by looking at how other industries have solved a similar challenge.
Take, for example, Pomarfin, a smallish family-owned shoe maker based in Pomarkku, Finland. Even though the company manufactured its shoes in nearby Estonia, where costs are lower, Pomarfin found itself competing with Asian companies with a manufacturing cost base around one-fifth that of Estonia. Squeezed for profits, Pomarfin had a decision to make: it could outsource the manufacturing of its shoes to Asia and simply become a brand, or it could find a new way to differentiate the business while keeping its production in Europe.
Not wanting to walk away from its manufacturing roots, Pomarfin decided to compete in the emerging world of mass customization by making made-to-measure shoes for well-off men who hate shopping for shoes and want a perfect fit. Pomarfin envisioned installing a foot scanner in retail stores that sold its shoes. Clerks would scan the customer’s foot, and the image would be uploaded to a server in Pomarfin’s manufacturing plant, which would create and ship the customer a pair of shoes for his unique feet.
Pomarfin named its new made-to-order brand “ LeftFoot.” Once a customer scanned his foot with a LeftFoot machine, he could reorder a custom shoe through the website, cutting out the need to visit a retail store.
And therein lay the problem with LeftFoot’s business model.
To introduce its shoes to new customers, LeftFoot needed retail partners to scan feet. But retailers were not prepared to install a scanner in their stores only to lose their customers for life to a web-based competitor. LeftFoot began building its own retail stores but it still needed traditional retailers to fully cover the market.
LeftFoot looked to other industries for ideas to solve its channel conflict problem with retailers. Inspired by the publishing and music business, LeftFoot offered to pay retailers a royalty for life for each new pair of LeftFoot shoes purchased by a customer sent its way. From the retailer’s point of view, the offer was attractive because it needed only to scan the customer’s foot once and it could look forward to a lifetime of future payments from LeftFoot without having to stock inventory or pay staff to serve the customer — it was found money for those that signed on willingly.
LeftFoot now has retailers set up throughout most of Europe and Asia.
I learned about LeftFoot from Lausanne-based Alexander Osterwalder, who has just co-written a book called Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers. Mr. Osterwalder used the example of LeftFoot as a company that had not only innovated its products, it also started thinking differently about the way it brought those products to market.
Mr. Osterwalder encourages owners to plot out their business model using something he developed called the “ business model canvas.” It forces entrepreneurs to communicate their business model visually, which Mr. Osterwalder says sharpens their thinking and allows them to get what’s in their head onto a canvas for others to see and contribute to.
Mr. Osterwalder’s idea struck me as particularly valuable if you’re trying to build a company you might be able to sell one day. Instead of living in your mind, his tool forces you to communicate your ideas to your team and allows employees to co-create your business model, refine it and make it their own. Once your vision has been exported from your head onto a canvas your employees helped to create, you’ll have a business that can grow without you calling all the shots — which is the essence of a sellable company.
Special to The Globe and Mail
John Warrillow is a writer, speaker and angel investor in a number of start-up companies. He writes a blog about building a valuable – sellable – company. Follow him on Twitter @JohnWarrillow.