 "The free culture")
Historically, giving away your product has seldom been a successful business model. Certainly, there have been exceptions, such as network television, which provided programs free of charge thanks to advertising. Other free products were offered only up to a point, or through cross-subsidy shifting the cost of one product to another. Keep a $5,000 minimum balance, and you can have a free checking account. Buy a couch, get free delivery. Buy a $20,000 new car, and get free floor mats. This sort of phony free was harmless fluff of little consequence. In the world of commerce, truly free stuff was quite rare. A company that simply gave away its main product or service would have been asking for bankruptcy.
Not anymore. Thanks to disruptive technologies, an increasing number of wildly successful business models start with providing stuff for free. Organizations such as Craigslist and Wikipedia, famous for charging nothing for their services, have eliminated barriers to knowledge and provided vital services to millions. In doing so, they have knocked down (if not out) your grandparents newspaper want ads and encyclopedias. But how is free workable? And why is this business model such an important one in delivering public value?
Chris Anderson, author of Free: The Future of a Radical Price, contends that a new sort of free has emerged in the past fifteen years, a much more robust and impactful type of free. Thanks to technology, the cost of creating products and services is plummeting, while new disruptive technologies are creating whole new definitions of value. As a result, free has become a real player in the solution economy.
In traditional TV and radio, commercials pay for free content, as evidenced by the likelihood that the phrase Like a good neighbor... conjures the rest of the jingle in your mind. The price of watching a football game is Viagra commercials. The internet has extended this notion, paying for eyeballs but also for information about users. Technology has helped extend the traditional advertising model since in addition to eyeballs, companies can sell information about you and your online behavior. Online search and social media companies dont just sell ads to you, they make money by selling information about you.
One new strategy made possible by ever-shrinking marginal costs is the freemium model a play on free and premium in which someone gives a product or service away and makes money by selling a premium or complementary product. This model relies on a small percentage of users to cover the nominal expenses of the free majority. Skype, for instance, offers unlimited calls between computers, but calls to landlines and voicemail services come at a price. The model is gaining traction among companies such as Dropbox, which gives users five free gigabytes of online storage and then charges for additional storage space.
Offering free samples to consumers is an old tactic. What is new is the extent to which a companys main service can be free, thanks to the premium-paying minority. Also new is how these disruptive variations on the free theme have the potential to provide solutions to public problems.
Free can yield a wide array of public benefits. Socially minded hackers are building apps that map crime scenes, bike routes, and farmers markets, all from data that governments put on the web for free. Open-source tools that equip citizens to create these types of contributions at no direct cost are multiplying rapidly. Forums for collaboration and codesign also abound, even bridging physical and virtual neighborhoods with services like Nextdoor, which brings local community coordination online.
One of the most promising free trends involves initiatives such as the now famous Khan Academy, which grant unprecedented access to the great equalizer of education. When Salman Khan made a series of videos and posted them to YouTube in 2004 to help tutor his cousins, nieces, and nephews, he didnt know that his efforts would eventually affect entire educational systems. But soon after he uploaded the videos, total strangers began using them and, as it happened, one of those strangers was Bill Gates, who used Khans free, simple, and effective videos to tutor his own kids. With more than $15 million in funding, much of it from the Bill & Melinda Gates Foundation and Google, Khan Academy and its free online educational videos now are moving into classrooms and private homes across the world.
In just two years after receiving this funding, Khan Academy grew to serve about four million students every month. Students can choose from more than three thousand lessons that range from simple arithmetic to calculus, finance, and history. Each course is free and open to anyone with a web connection.
At last count, Khans math program was being used in twenty-three schools, mostly in California. The Los Altos school district near San Francisco uses Khan software to flip its classrooms; students watch the Khan lectures at home so teachers can spend less class time on common lessons and more time working one on one with students.
THE SOLUTION REVOLUTION: HOW BUSINESS, GOVERNMENT AND SOCIAL ENTERPRISES ARE TEAMING UP TO SOLVE SOCIETYS TOUGHEST PROBLEMS
AUTHOR: William D Eggers & Paul Macmillan
PUBLISHER: Harvard Business Publishing
PRICE: Rs 1,250
ISBN: 9781422192191.
Government should create an environment where problem solvers can flourish
By erasing public-private sector boundaries, the solution economy has the potential to unlock trillions of dollars in social benefit, Eggers and Macmillan tell Ankita Rai
Why the title...
The solution revolution is the antithesis of how societys toughest public challenges have traditionally been approached by large institutions. In no other space do we see such diverse resources volunteer time, crowdfunding, entrepreneurial and social capital, philanthropic funding aligned around common objectives such as reducing congestion, providing safe drinking water, or promoting healthy living. By erasing public-private sector boundaries, the solution economy has the potential to unlock trillions of dollars in social benefit and commercial value.
On the role of government...
In todays era of fiscal constraints and political gridlock, we can no longer turn to government alone to tackle these. Instead the governments role is to create an environment where problem solvers can flourish. Governments willingness to forge partnerships (and vet those partners with accurate metrics) to make data more open, to reduce regulatory minefields and to convene diverse groups of contributors will hold major sway over the scale of the solution economy within its borders.
William D Eggers
Global research director, Public Sector Practice, Deloitte
Paul Macmillan
Global Industry Leader, Public Sector practice, Deloitte
Not anymore. Thanks to disruptive technologies, an increasing number of wildly successful business models start with providing stuff for free. Organizations such as Craigslist and Wikipedia, famous for charging nothing for their services, have eliminated barriers to knowledge and provided vital services to millions. In doing so, they have knocked down (if not out) your grandparents newspaper want ads and encyclopedias. But how is free workable? And why is this business model such an important one in delivering public value?
Chris Anderson, author of Free: The Future of a Radical Price, contends that a new sort of free has emerged in the past fifteen years, a much more robust and impactful type of free. Thanks to technology, the cost of creating products and services is plummeting, while new disruptive technologies are creating whole new definitions of value. As a result, free has become a real player in the solution economy.
In traditional TV and radio, commercials pay for free content, as evidenced by the likelihood that the phrase Like a good neighbor... conjures the rest of the jingle in your mind. The price of watching a football game is Viagra commercials. The internet has extended this notion, paying for eyeballs but also for information about users. Technology has helped extend the traditional advertising model since in addition to eyeballs, companies can sell information about you and your online behavior. Online search and social media companies dont just sell ads to you, they make money by selling information about you.
One new strategy made possible by ever-shrinking marginal costs is the freemium model a play on free and premium in which someone gives a product or service away and makes money by selling a premium or complementary product. This model relies on a small percentage of users to cover the nominal expenses of the free majority. Skype, for instance, offers unlimited calls between computers, but calls to landlines and voicemail services come at a price. The model is gaining traction among companies such as Dropbox, which gives users five free gigabytes of online storage and then charges for additional storage space.
Offering free samples to consumers is an old tactic. What is new is the extent to which a companys main service can be free, thanks to the premium-paying minority. Also new is how these disruptive variations on the free theme have the potential to provide solutions to public problems.
Free can yield a wide array of public benefits. Socially minded hackers are building apps that map crime scenes, bike routes, and farmers markets, all from data that governments put on the web for free. Open-source tools that equip citizens to create these types of contributions at no direct cost are multiplying rapidly. Forums for collaboration and codesign also abound, even bridging physical and virtual neighborhoods with services like Nextdoor, which brings local community coordination online.
One of the most promising free trends involves initiatives such as the now famous Khan Academy, which grant unprecedented access to the great equalizer of education. When Salman Khan made a series of videos and posted them to YouTube in 2004 to help tutor his cousins, nieces, and nephews, he didnt know that his efforts would eventually affect entire educational systems. But soon after he uploaded the videos, total strangers began using them and, as it happened, one of those strangers was Bill Gates, who used Khans free, simple, and effective videos to tutor his own kids. With more than $15 million in funding, much of it from the Bill & Melinda Gates Foundation and Google, Khan Academy and its free online educational videos now are moving into classrooms and private homes across the world.
In just two years after receiving this funding, Khan Academy grew to serve about four million students every month. Students can choose from more than three thousand lessons that range from simple arithmetic to calculus, finance, and history. Each course is free and open to anyone with a web connection.
At last count, Khans math program was being used in twenty-three schools, mostly in California. The Los Altos school district near San Francisco uses Khan software to flip its classrooms; students watch the Khan lectures at home so teachers can spend less class time on common lessons and more time working one on one with students.
THE SOLUTION REVOLUTION: HOW BUSINESS, GOVERNMENT AND SOCIAL ENTERPRISES ARE TEAMING UP TO SOLVE SOCIETYS TOUGHEST PROBLEMS
AUTHOR: William D Eggers & Paul Macmillan
PUBLISHER: Harvard Business Publishing
PRICE: Rs 1,250
ISBN: 9781422192191.
Government should create an environment where problem solvers can flourish
By erasing public-private sector boundaries, the solution economy has the potential to unlock trillions of dollars in social benefit, Eggers and Macmillan tell Ankita Rai
Why the title...
The solution revolution is the antithesis of how societys toughest public challenges have traditionally been approached by large institutions. In no other space do we see such diverse resources volunteer time, crowdfunding, entrepreneurial and social capital, philanthropic funding aligned around common objectives such as reducing congestion, providing safe drinking water, or promoting healthy living. By erasing public-private sector boundaries, the solution economy has the potential to unlock trillions of dollars in social benefit and commercial value.
On the role of government...
In todays era of fiscal constraints and political gridlock, we can no longer turn to government alone to tackle these. Instead the governments role is to create an environment where problem solvers can flourish. Governments willingness to forge partnerships (and vet those partners with accurate metrics) to make data more open, to reduce regulatory minefields and to convene diverse groups of contributors will hold major sway over the scale of the solution economy within its borders.
William D Eggers
Global research director, Public Sector Practice, Deloitte
Paul Macmillan
Global Industry Leader, Public Sector practice, Deloitte
Reprinted by permission of Harvard Business Review Press. Excerpted from The Solution Revolution: How Business, Government, and Social Enterprises Are Teaming Up to Solve Societys Toughest Problems. Copyright 2013 Deloitte Global Services Limited. All rights reserved.