The Concerned Corker
K. Caven, that is a fetch article! In addition to the points you outlined above, what I find most fetching about RtR’s business model is the fact that it has the potential to be a truly environmentally and economically sustainable model (I am channeling the take-aways from our previous class on Climate Change). The sad part about most of today’s companies is that they make more money by selling more products, which require more resources to make. This vicious relation is fundamentally opposed to the idea of sustainability, no matter how many trees the company plants in the process or how many water-saving programs it initiates.
RtR, in contrast, makes more money the more times clients reuse each dress: the average dress is worn by 30 different customers. This usage rate per clothing item (let’s call it utilization rate in TOM parlance) is especially impressive given the nature of the industry. Apparel and accessories in the high-end fashion market generally have short life cycles and are used only a few times by each single customer.
Therefore, I would also dissuade RtR from investing in physical stores and locations – it would be an unwarranted use of resources that pollutes their potential to be a truly groundbreaking, sustainable company.
I can think of at least one reason why LEGO should not worry that much about diversifying into digital play: the fact that tangible “natural” play is developmentally very important for small children. As exciting as visual online/iPad/iPhone-type games might appear at the beginning, they still teach a limited number of skills. Physical games, in contrast, encourages imagination and exploration because it makes children engage multiple senses and also interact directly with their peers. (See here for more information: http://empowered-mom.vineyardesigns.com/moms/educational_toys/non_electronic_toys_games.shtml). We do not need to over-digitize everything in our lives, which is why I think Lego can still continue to benefit from their strong brand, as long as they are consistent in producing the fun, engaging games generations of children have known and loved.
Very interesting article! It reminded me of another article from a few years ago on the efficiency of roundabouts: http://green.blogs.nytimes.com//2008/12/30/roundabouts-efficient-or-annoying/. It turns out that roundabouts are 30% more fuel efficient (not to mention safer) than 4-way intersections because they do not require drivers to stop and idle. According to the Insurance Institute for Highway Safety, there is on average a 40% decrease in all accidents and a 90% drop in fatal ones when a traffic intersection is replaced by a roundabout. Over the past decade the U.S. has installed over three thousand British-style roundabouts (http://www.bbcamerica.com/anglophenia/2014/02/why-americans-dont-understand-the-roundabout), but there is more room for growth. Could we all lobby alongside UPS for the introduction of more roundabouts in the U.S.?
Algorithms like those embedded in Narrative Science (NS) will only exacerbate the death spiral facing the business model of newspapers today. News providers like AP or Reuters are already providing a baseline for pure information-based news reporting. Listicles, Buzzfeed, and other click-bait articles might as well be written by computers – I am not sure anyone would care. I would imagine that these are the jobs NS will have the potential to replace.
However, the higher quality form of journalism that involves on-the-ground reporting or investigative journalism will probably never be replaced by data-crunching algorithms because, by definition, they require digging in for new information and alternative theories that cannot be extracted from databases. The real challenge is to convince users to pay to access high quality online content (NYT, Wall Street Journal, etc) that requires significant resources to produce.
I do wander weather the athletic tracking wearables and fitness app market is not already too crowded to allow for more entrants: there are countless FitBit-like wrist bands, RunKeeper-like apps, and big data crunching platforms out there! Even new iPhones come pre-loaded with health apps that can track everything from your weight to how much you are sleeping every night. What would make a consumer move from one existing app to Under Armour’s software? I am not convinced that their value proposition can make a difference, even though I would love more Misty Copeland in my life!
Your post reminded me about another article I had read some time ago about artificially grown meat, which is supposed to be indistinguishable from the real deal in terms of taste: https://www.washingtonpost.com/national/health-science/lab-grown-meat-is-in-your-future-and-it-may-be-healthier-than-the-real-stuff/2016/05/02/aa893f34-e630-11e5-a6f3-21ccdbc5f74e_story.html. The costs of developing this at scale are still prohibitive, but it might the option that is much easier to swallow and that overcome consumers’ aversion to meat substitutes, particularly in developing markets where meat consumption is misteakenly seen as an indicator of financial success.
Another strategy to reduce the amount of new oak needed for making bourbon barrels would be to further increase the proportion of bourbon maturated in previously used port, wine, and rum barrels (http://whiskeyreviewer.com/2013/06/bourbon-scotch-and-the-port-finish/). This would not only reduce overall waste across the spirits industry, but also reduce costs: new barrels can cost up to a few thousand dollars, while recycled ones cost in the hundreds. The key might also lie in educating consumers about the value of more complex flavors seeping into the bourbon fire water when using old barrels. Now I’m going back to my Old Fashioned, over and out…
What always surprises me about water delivery is that many people have a strong moral aversion to paying for the water they consume. They feel that water is a right, and should therefore be (almost) free, which results in vast and preventable waste. If we care about reducing water use, particularly in prolonged drought conditions, wouldn’t it make sense to start by raising the delivery price?
It is ironic that we have spent the past century trying to build an interconnected grid that takes advantage of economies of scale, but that some companies are now considering increasing backup capacity on a piecemeal basis. That is why I do not see this business model as being particularly sustainable or scalable – only few companies will have a Value of Lost Load that justifies investing in off-grid backup power, given the fact that such events are still relatively low probability. Moreover, more and more distribution companies are considering implementing new technologies that allow their engineers to isolate the effects of such disruptions and improve redundancy in their systems. Public Utilities Commissions are also advocating for monetary support from the federal government to support storm-proofing distribution grids(http://www.nytimes.com/2012/12/29/business/hurricane-sandy-alters-utilities-calculus-on-upgrades.html), which drastically reduces the window of opportunity for companies such as Go Electric, unless they manage to find a more integrated business model that does not disproportionately relies on emergency power.
Your post reminded me of another article (http://www.nytimes.com/2015/10/17/business/international/norway-is-global-model-for-encouraging-sales-of-electric-cars.html) that describes the even more aggressive electric car subsidy regime in Norway. Due to generous tax breaks and much higher prices for diesel fuel, it is cheaper for a Norwegian to buy an electric car than a traditional combustion engine vehicle. I thought this policy decision was fascinating in a country that produces 1.6 million barrels of oil per day, accounting for 8% of GDP. I am sure this decision was not based on an economic cost-benefit analysis, but rather on a value-based interpretation of the role of government in shaping consumer preferences. Concerns about climate change and sustainability cannot be easily internalized at an individual level to account for all inter-generational externalities. That why I think there might be a role to play for governments to direct some of those choices, despite short-term costs.