If you work for a non-profit or governmental agency, you might feel that this type of innovation clearly doesn’t apply to you. It does, but the terminology may need a tweak or two. Perhaps you might think of it instead as a “value model,” or how you sustain your organization and create value for constituents. The same principles and tactics are useful, even if maximizing financial returns isn’t the objective.
How to spot potential Profit Model innovations:
Does the company make money in ways that are different from competitors or industry norms (for example, selling a service when everyone else sells products)?
Are there interesting differences between who uses the offering and who pays for it? Does the company have multiple revenue streams from different constituencies?
Are margins (particularly gross margins) significantly higher or lower than those of competitors? Are there substantial differences in variable or fixed costs?
Does the business generate cash quickly (or immediately)? Are working capital requirements low (or even negative)?