As stated above, a firm’s business model is its plan or recipe for how it creates, delivers, and captures value for its stakeholders. Glance ahead to Figure 4.2, the Barringer/Ireland Business Model Template. As you can see by looking at the template, a firm’s business model represents the core aspects of its busi- ness. It also describes how the core aspects fit together and support one an- other. For example, three important elements of a firm’s business model are its target market, its basis for differentiation, and its key assets. In Her Campus’s case, its target market is college-aged females, it differentiates itself by focus- ing on six topics that college-aged females care about (style, beauty, health, love, life, and career), and its key assets include 4,000-plus college females volunteering in Her Campus chapters across the country writing articles that they believe other college females will be interested in. This example illustrates a nicely designed business model, at least as it pertains to the three elements mentioned above. Each element supports the others. It’s also a business model that would be difficult to copy. It would take a tremendous effort on the part of a competitor to match Her Campus’s network of 4,000-plus volunteers on col- lege campuses.
Savvy EntrEprEnEurial Firm
Quirky: How One Company Creates, Delivers, and Captures Value for Its Stakeholders
Web: www.quirky.com; Facebook: Quirky; Twitter: @Quirky
Quirky is an interesting company. It was conceived by Ben Kauffman, a young entrepreneur who launched his first company when he was 18. Kauffman’s first company, Mophie, designed accessories for Apple prod- ucts. In 2006, Mophie won Best in Show at Macworld for a modular case accessory system for the iPod nano. The next year at the same conference, Kaufman and his company did an unusual thing. Instead of bringing their hottest new products to showcase, they brought next to nothing. Instead, they set up a booth made out of two-by-fours, and handed out scratch pads to 30,000 people, asking the Macworld community for new product suggestions. The sketch that got the most attention, and was repeatedly exposed to the community for improve- ments, was a case/bottle opener for the iPod Shuffle. The product was built, and with this amazing story behind it, became a hit, selling in 28 countries worldwide.
This and similar experiences became the inspiration for Quirky, which was launched in 2009. In a nutshell, Quirky is an invention company that allows people to sub- mit product ideas (mostly household items and kitchen gadgets) that are then vetted by the Quirky community. The best ideas are selected for prototype development and possible sale. It’s become quite a success. over 550,000 people are now part of the Quirky “community,” and participate in pitching, refining, or voting on product ideas. The process has created several hit products, including Pivot Power (a flexible power strip that bends to fit large three-prong plugs in each outlet) and Crates (modular plastic milk crates used as shelving). Quirky’s products are sold via its website and in big-box stores such as Target and Home Depot. The system is a win- win for everyone involved. The inventors and community members who help with the product get a cut of the profit. In 2012, Quirky launched 121 new products—all invented by ordinary people.
Quirky accomplishes what it does via its business model. As we noted above, a business model is a firm’s plan or recipe for how it creates, delivers, and captures value for its stakeholders. Here is how Quirky accom- plishes each of these key elements:
■ Quirky creates value by allowing ordinary people to submit product ideas. ordinary people often have good product ideas, but don’t have the wherewithal to start a company. As a result, the ideas generally never come to fruition. now, because of Quirky, anyone with an idea for a household product or a kitchen gadget has a shot at seeing the idea become a reality.
■ Quirky delivers value by providing an easy-to- navigate process for ideas to be submitted and vetted by the Quirky community. The most prom- ising ideas are fashioned into products that are sold. By creating this process, Quirky has brought down the barriers that prevent most people from seeing their ideas realized. Quirky has just what a good idea needs—product designers, prototype specialists, manufacturing capabilities, and rela- tionships with retailers to get products on store shelves.
■ Quirky captures value for its stakeholders via the profits that it realizes on the products that are sold. for every product that is sold, Quirky takes 60 percent of the revenue and returns 40 per- cent to the original inventor and the community members (called Influencers) that help shape the idea. To minimize risk, Quirky only fully develops products that have a certain level of pre-sales. Quirky has relationships with a growing number of retailers to maximize revenue from the best- selling items.
The attractiveness of Quirky’s business model is that as the company grows, it can expand into new product categories. Quirky is also a business that would be difficult to copy. It has raised over $91 million in venture capital and as noted above, has over 550,000 people in its network. It has also built relationships with organizations up and down the manufacturing and retail supply chains.
Questions for Critical Thinking
- Do you think Quirky’s basic business model is sound and fair? If you could suggest any changes, what would they be?
- To what degree does Quirky’s business reflect the attributes of a sound business idea as described in Chapter 2?
- In what other product areas would Quirky’s business model work the best?
- Think of the challenges in your own life that might represent a product idea for Quirky. If you don’t think of something right away, don’t give up. All of us encounter problems and challenges in our everyday lives that might represent the basis of a promising idea. Be prepared to describe to others one of the challenges or problems you encounter and how a solution to the problem could be fashioned into a product idea to submit to Quirky.
Source: Barringer Bruce R, Ireland R Duane (2015), Entrepreneurship: successfully launching new ventures, Pearson; 5th edition.