Repurposing Done Right

I’ve been ragging on people for some incredible business-related stupidity for the last few entries, so I thought it might be nice to cross over to the other side of the street for a minute and talk about somebody doing something correctly. A topic we’ve been hearing more and more about over the last few years is repurposing: using a firm’s resources to do something other than their original purpose, either because the new business model is more lucrative or because the original purpose is no longer part of a viable business model. Thus we’ve seen old factory buildings renovated for use as retail stores or restaurants; computer monitors recycled as fish tanks; hotels converted into condos, and dozens of other examples. But I don’t know where you’d find a better example than the company in Las Vegas that has repurposed a bunch of heavy construction machinery into a recreational venue…

According to a story in the Associated Press by way ofMSNBC, an entrepreneur in Nevada had rented an excavator to dig a large trench on his own property when he noticed how much fun he was having playing with the giant earth-mover. Quickly realizing that what he found entertaining might entertain other people, and that the state of Nevada had a lot of stalled construction sites to play in and a lot of heavy machinery sitting idle, he set up a company called “Dig This” which allows customers to play in what amount to a giant sandbox, using real construction equipment instead of Tonka trucks. Customers pay up to $750, for which they receive a ten-minute instructional period and are then allowed to operate whatever machines they want to. So far, business appears to be booming…

Now, I don’t want to suggest that every exercise in repurposing will be this easy, or this simple. Like a lot of the best ideas, this one is so simple that almost anyone would call it a stroke of genius, and most entrepreneurs will consider themselves likely to come up with one business concept this good in a busy career. I’m calling this story to your attention not so much to suggest that you go out and look for business opportunities that apply some resource to a purpose for which it was never intended so much as to encourage you to start thinking of resources in terms of what you can do with them. Because that’s one of the only ways you will ever gain an advantage on your competition…

If you study strategic management (not that I am for one moment suggesting that anybody ought to) you will discover that there are really only three kinds of strategy: you can do something better than the competition; you can do the same things for cheaper than the competition; or you can specialize on just part of the market and be better or cheaper than the competition – or sometimes both. In the Internet age, it’s generally best to assume that any asset you can purchase will also be purchased by your competition; that any technology you didn’t create yourself will also be acquired by your competition; even that information you gathered or discovered will be compiled by the competition, assuming they don’t just reverse-engineer your own operations and steal your approach outright. But even in this strange new world, it is still possible to take your various resources and set out in a new and hopefully unexpected direction with them…

Is there some new business venture available to your company? Some new purpose to which you could apply your firm’s assets? Maybe you should think about that…

After-market Onstar

You may already have ignored the announcements, but at a news conference this week General Motors announced that they are expanding their highly successful Onstar service by making an after-market version of the hands-free system available to buyers at Best Buy and eventually other retailers. I thought it was an interesting strategy and a good example of both partially repurposing something and expanding your existing customer base, which makes it worth taking a closer look…

For those of you who have never owned a GM vehicle, Onstar is less hype than it is a cell phone system built into your review mirror. It makes use of GPS technology to pinpoint your car’s location, and can be used to summon assistance from emergency services, get turn-by-turn navigation, diagnose engine issues, unlock your doors (if you lock yourself out of the car), track the people who have stolen your car (if it gets stolen), and in newer models even deactivate the engine so the police can arrest whoever has stolen your car. The hardware is built into most GM products, and the support service is usually free for the first year and then a moderate monthly fee from then on. Just exactly how much safer this makes any given car remains somewhat in dispute; it’s easy to believe that having a system that alerts Onstar operators (and eventually emergency response services) whenever one of your airbags deploys could be useful, and there have certainly been cases where the system enabled police to apprehend car thieves. But since most of these same functions can be obtained through other products, up to this point the Onstar system has served mostly as a selling point for GM vehicles…

What struck me about this new offering is that for all practical purposes, GM is making money without spending any. They already have the three Onstar monitoring centers set up, and even if these new customers start producing a heavy increase in calls it shouldn’t be that hard to increase the capacity of the system. Meanwhile, every Onstar user represents a regular monthly income, and if you want the really snazzy services like turn-by-turn navigation there’s a small additional fee each month. You can also use the Onstar system like a cell phone, assuming you’re willing to purchase the minutes. None of these are particularly big-ticket purchases, but with over 5 million active Onstar subscribers it does add up (somewhere on the order of $95 million per month at the base package price alone, and somewhere around $140 million per month if they all bought the expanded service). Now imagine if you doubled those numbers…

Even before the financial panic and bailout a few years back there were already stories about General Motors making more on car loans through its GMAC subsidiary and licensing the rights to various designs, logos and brands than it did from selling cars. With the company now planning on expansion into new markets in Asia and expanding Onstar coverage to anyone who wants it, it seems entirely possible that the service might become the next major profit center for the company. Making additional profit from sales of the equipment needed to use Onstar would just be a nice bonus; the real goldmine would be in convincing millions of people to sign up for extended service each month…

It’s not a bad showing for something that was originally created just to provide value added for people buying GM vehicles, and it leads me to wonder how many other companies could repurpose some of their value-added services to a wider market. Is there something your company does that people who aren’t even your customers might be willing to pay for on a regular basis? You might want to look into it…