The Two Crucial Aspects to Innovating Your Business Model

In order to grow your company's profit, you'll need to change the way you approach your business model.

Business model innovation isn’t a new concept.

It has always been true that those who accept the existing business model earn less on average than those who shape the game and innovate their business model.

In the Middle Ages farmers made their living repeating simple transactions like trading vegetables for milk. But it was the king who profited from a more creative business model — offering intangibles like safety and infrastructure in exchange for taxes and land rental payments.

So how do we do it today? To get some insight into this I spoke to Gregg Michaelson, CEO of Linkwell Health. He has grown brands such as Men’s Health, Women’s Heath, Prevention, and Runner’s World, and he now uses his experience to run an innovative media and direct marketing company.

Create Value

Michaelson says his mission has always been to "make Americans healthier," which enabled him to see potential in an unprofitable direct marketing company he was asked to lead.

The company followed a simple business model — when you moved and told the postal service you were doing so, Linkwell Health would get your new address and send you coupons. But even though the company had 90 million people in their database, Michaelson found that the direct marketing model did not allow them to turn a profit.

From his experiences in the magazine world, Michaelson knew people would buy publications with compelling content. So he thought, "why don't I just take the consumer publishing model and marry it with this coupon business?"

With this insight, Michaelson began adding the kind of content that "nudges" people to take action — think "5 Ways to Get Rock Hard Abs Before the Summer" headlines — and delivered content that consumers actually wanted to read.

In doing so, Michaelson said he created new value. People started actually using the coupons. And as redemption rates grew, everyone benefited: healthier shoppers, happier investors who were finally earning a return, retailers who were selling more healthy food, and a healthier America.

Collect Value

Michaelson soon began to wonder, ‘who will pay for this?" He and his team saw that health plan providers like Aetna, Humana, and WellPoint would also benefit from being involved. If providers were seen promoting healthier lifestyles by sending their members engaging content and meaningful discounts, their brand image would almost certainly improve.

Linkwell can now prove that a health plan’s brand favorability rating improves when they use the Linkwell service.
Because Michaelson asked how Linkwell Health could create more value and from whom they would collect that value, the company has designed a radically different business model that is profitable and growing.

[Image: Flickr user Sam Felder]

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