Revolutionizing a market just by changing the business model

Yesterday I decided to read in bed a bit and check out the latest issue of my favorite magazine Wired (yes, now that I have borrowed a MacBook Air, I am reconsidering my initial opinion. It is in fact quite light and comfortable, regarless of that it takes almost as much space as a normal computer). Before I comment on what I read, I want to stress how cool it is that Wired issues are all available online. It's just a matter of setting a reminder in the calendar so that you can have a look at the latest issue instead of feeling like browsing an archive. No more expensive subscription for me :-).

Anyway, the article which caught my eye was the title page one. Of how Shai Agassi, 38 years old, is audaciously set on completely getting rid of the dependence on oil in the car industry. That's a pretty highly set goal.

Agassi wants to accomplish this great feat by using existing electric car technology (no hybrids or any of that mess) and circumventing the issues of large investment cost and limited range by setting up the "fuelling" network in a similar way as cell phone operators work - if you commit to a subscription for a certain time, your expensive car will be paid for partly or entirely by the operator. Since the operator also owns the battery in your car, when you need to "fuel up" rapidly, like driving into a car wash, you can having your battery rapidly replaced for a fresh one with little extra cost. They also have other clever details in that system, such as navigation support, parking/refuelling and route planning to make sure you always get the cheapest energy.

Now we of course may have our opinions about the power granted cell phone operators in that existing business model, and maybe it's very basic to an average business student, but I'm really impressed by the way of amortizing large investments onto subscriptions and lowering the entry treshold for new customers. I really hope better place makes it, and fast!

Actually I've myself recently been in touch with a business idea which could benefit from the subscription model in terms of spreading out the cost of an expensive system. Though there's no good way to "lock" the clients to the subscription and otherwise force them to stop using the system, and the initial setup pretty much makes it all run indefinitely, partly because it's a matter of training and knowledge. At the same time, it would be nice to give the clients the opportunity to try things out and realize the system is so good it's actually worth the long-term more expensive subscription, if they initially are reluctant to chuck up all that money for a system the value of which they are not certain of. Anyone good at product management who would share ideas?



(Update: Shai Agassi has a blog called "The Long Tailpipe")

(Update 2: Finally, PRI's The World: Technology Podcast 229 mentions Better Place. PRI's WTP is a very nice podcast, do check it out and subscribe to it)