A few weeks back, Tim wrote a post about how a change to one dimension of a business model usually means a rethink of other parts of the business as well. One thing that I have always found interesting is how technology can change a business model. There are many examples of this such as the Ford production line which changed the car manufacturing business and also the entire supply chain, including sales and marketing.
To get the most out of technological innovations, we need to see past the technology and understand how it can change the business. In other words, technological innovation can also be a catalyst for business model innovation. Sometimes the opportunities for a new business model are not immediately obvious but learning and experimentation can result in a business that is quite different from the one that preceded the introduction of the technology.
One of the best examples I can think of is my podiatrist in Brisbane. I have had problems with my feet since I was about 6 years old due to a hyper flexibility gene that runs in my family. You can see my foot ‘party trick’ in the following picture if you are not too squeamish. My feet can twist nearly 180 degrees- not a very useful skill but fun to see.
This flexibility means that my feet are totally flat (pronated) and if I don’t wear orthotic supports I end up with knee and back pain. I got my first set of orthotics at a little podiatry clinic where the analysis of my feet was done by the podiatrist watching me walk up and down the corridor. A plaster cast was taken of my feet and the cast was sent to the US to be the model for the actual orthotic. This manufacturing took about a month and if corrections had to be made then the whole process took another month after that. It was all very expensive too.
Every few years these orthotics needed to be replaced and I eventaully found some clinics who could do the plaster cast and the construction of the orthotic. Initially this was done with cork and hide but later on, plastics became common. However, this was still a craft business with the skill of doing the cast and making the final product in the hands of someone who had developed a ‘knack’ for the work. Finding the right podiatrist was important and even then there was variability from cast to cast. These were my last set before I moved to Brisbane in 2003. If they look rigid and uncomfortable, that’s because they are.
Soon after moving to Brisbane, I bought shoes in a city shop and the assistant told me about a new type of orthotic from a podiatry clinic called My FootDr. The guy who ran the business, Greg Dower, had it set up as a fairly typical specialist centre in a busy shopping street.
The big difference was the way that the orthotics were measured and made. Rather than being a craft operation, pressure sensors were able to get the shape of my foot which was downloaded to CAD software. Using recorded gait analysis, Greg was able to put some finishing touches on the final design with a few clicks of the mouse. You can get an idea of how this works in the following video.
The really impressive part from my point of view was the next step. The design was then downloaded to an automated milling machine (see video) and I could pick up the final product a few days later. The end result for me was a much more comfortable pair of orthotics, which served me well until last year, when they eventually wore out.
When I booked my appointment I found that Greg had moved the business but the location wasn’t all that had changed. This was a much larger clinic in a central suburb and he had converted the downstairs area into a manufacturing operation. Having non-specialists finish the product means that the qualified podiatrists can spend more quality time in consultations with patients. Upstairs there were consulting rooms and a substantial selection of shoes for purchase.
A newer version of the orthotic technology had been purchased but the real change to the business was a shift in thinking about the relationship between the technology, the business and the value that is created for the consumer. From the customer’s point of view, the whole process from foot measurement to design and production can take be done in an hour, which means that I only need to make one appointment. It also means that Greg can free up appointments for more customers.
Greg doesn’t describe it like this but the technology changes podiatry from a non-scalable craft business into a scalable business. What’s more, the investment in the technology means that the business becomes more profitable at scale. The more the orthotic mill runs, the better it is for the business.
This means other parts of the business can change too. Greg sells a custom-designed sandal (see picture) and he can customize orthotics to suit other shoes. Instead of buying just one orthotic, I can buy a few to fit my work shoes, runners or strap-up sandals. Because of the new business model, these can be done cheaper than orthotics from other clinics due to the scale efficiencies and having the operations downstairs means that final alterations can be made on the spot, also saving the patient time and money.
Greg has also adopted a hub and spoke structure with smaller clinics surrounding his larger production clinic. Again, this drives scale and increases the ratio of variable to fixed costs. The scale also means that he can get a better deal from the supplier of the rubber and now he has also licensed the orthema cad/cam technology for distribution in Australia.
Greg now has a very exciting business with real growth possibilities. When I first met him, he had really cool technology. He now has 14 clinics in South East Queensland with plans to open 50 clinics across the country. The trick to turning cool technology into a great business is finding the right business model and this means a lot of careful thought and experimentation.