| Focus on finding value improvements that open the | | | | started out in the business of providing cleaning |
| doors to further value improvements, and your | | | | chemicals for manufacturers, institutions, restaurants, |
| business model will improve its profitability in | | | | and other service providers. |
| exponential ways. | | | | For restaurants, Ecolab learned that it was more |
| As you consider the type of value you want to add | | | | important to restaurants to keep good relations with |
| to your business model, you should also examine the | | | | the health inspectors than it was to simply have |
| longer-term consequences. Otherwise, you may | | | | good cleaning supplies. As a result, Ecolab expanded |
| create short-term solutions that offer limited benefits. | | | | its offerings to include the chemicals to sanitize |
| For example, adding new variations on a fad toy, like | | | | everything in a restaurant. |
| a hula hoop, will extend its life. Yet, at some point, | | | | With its knowledge of the chemicals, Ecolab also |
| the fad will be over no matter what you do. The | | | | added ways to improve and maintain the equipment |
| rewards of offering those variations will not continue | | | | to make better use of the chemicals. Later, the firm |
| to expand into the future. | | | | also defined itself as being in the pest elimination, |
| By comparison, other improvements may have a | | | | janitorial, floor care, water treatment, and |
| geometric effect over time, especially in rapidly | | | | management advice businesses. |
| growing markets. For instance, EMC decided in the | | | | In each area, Ecolab carefully measures its customer's |
| mid-1990s to make sure that all of its storage | | | | experiences to locate what the best practices are. |
| products and software would work with any server | | | | Combining expertise from these perspectives and |
| platform or operating system at no extra charge. | | | | many customers that Ecolab has developed in each |
| This change made it easier for a customer to | | | | of these areas, the company can show a customer |
| connect EMC's storage to their existing servers, and | | | | how to save a lot of money, get better results, |
| made it less likely that EMC would lose a customer | | | | while paying normal prices for its chemicals and |
| after a new server vendor made a temporary or | | | | services. |
| even permanent inroad. | | | | The cost reduction benefits are often a large multiple |
| During the period when most other electronic storage | | | | of what Ecolab's products and services cost. |
| was not so flexible, EMC rapidly gained market share | | | | Compare that happy situation to the alternative of |
| while charging higher prices for its products, as its | | | | the immediate and long-term costs of a restaurant's |
| customers highly valued this flexibility. | | | | harmed reputation due to having a facility closed |
| The most far-sighted companies think about how | | | | down because of a health problem. Imagine how |
| having a benefit for customers in one area can be | | | | much worse this problem is for the large restaurant |
| used to create an important benefit in yet another | | | | chains. |
| area. For instance, Paychex began as a company that | | | | No local provider of any one of these services can |
| provided reliable, low-cost payroll services for small | | | | hope to provide a more effective combination of |
| companies. | | | | solutions than Ecolab does. No new entrant can hope |
| Paychex's leaders began to realize that many other | | | | to gain the knowledge that Ecolab has to create |
| services that small companies need depend on having | | | | valuable, custom solutions at regular prices. |
| accurate payroll records. Whoever is providing those | | | | As a result Ecolab is often the first choice of |
| records can do the best job also in those other | | | | restaurant chains for cleaning supplies and related |
| areas, saving customers lots of time, money, | | | | services. The added exposure to similar activities in |
| aggravation, and government fines. | | | | other end use markets (such as food manufacturing, |
| As a result, Paychex offers a whole range of | | | | as a similar space for restaurants) provides even |
| record-development and record-keeping services | | | | more chances to learn and create customer benefits. |
| related to employees that are built from the payroll | | | | Having seen how well this expanded business model |
| database that was its initial product line. Many of the | | | | applies to restaurants, Ecolab has duplicated this |
| company's customers buy all of Paychex's services | | | | knowledge-based benefit-development process for |
| because of the accuracy and time-saving benefits | | | | other types of customers. Hospitals were an early |
| that its integrated systems provide. | | | | and natural extension of this concept. |
| Ultimately, the most valuable benefits are those | | | | As you can see, Ecolab is beginning to develop many |
| which are built on knowledge that cannot be | | | | of the characteristics of an ideal business model. |
| duplicated in any other way. For example, Ecolab | | | | Copyright 2008 Donald W. |