I like to think I have a business oriented mind. Unique or original business models are exciting to me. I’m a dork like that. But I marvel mostly at someone’s ability to put A together with B and get C, D, and E. This synthesis of ideas in the marketplace separates those that strike out and those that become very wealthy. And I use the term wealth to mean more than rich. For instance, one of my favorite business models is the one established by donorschoose.org. This is a charity aimed at funding specific school projects for children. Each project tends to be less than $1000 with most around $500 or less. What is different is that it specifies what this exact donation is accomplishing from a learning perspective. The teacher notifies the donor, often with pictures of joyful kids, of what transpired after the donation was put to use. This reinforces the good will of the relationship. Plus the donor knows what came of that check they wrote. It makes it real.
So this brings me to another business model I love. ARM, a UK based designer of computer chips, understands what it’s core business is – chip architecture and design. The personnel within ARM are super skilled in how computer chips function and can customize the design of chips to fit particular needs. The ability to manufacture the chip with its correlating device is the core business of another company i.e. Qualcomm, Nvidia, and Nokia. Here is an excerpt from a Fortune.com article called Giving Intel and AMD a run for their money by Jon Fortt:
Unlike Intel (INTC, Fortune 500),
which designs and manufactures its chips and sells them to customers,
ARM just sells chip blueprints, and lets customers like Qualcomm and
Samsung build the actual chips on their own. ARM makes less money than
Intel by selling ideas instead of products, but it also carries lower
Because it sells only designs, ARM doesn’t have to worry
about building its own multi-billion-dollar factories or deploying an
army of marketing specialists to keep those factories busy. So even
though its annual sales are so much lower than Intel’s, ARM still
retains a healthy 32% profit margin — and the flexibility that comes
from its lean structure.
This reminds me so much of Dan Pink’s book A Whole New Mind. In it he talks about how routine work will not be the opportunity of the future. In this case it is the manufacturing of the chips. He writes about six essential senses: design, story, symphony, empathy, play and meaning. Each of these are skills that can’t be installed in a manufacturing process i.e. chip architecture design.
I wish I could just generate and license business models like ARM does with chip designs