Here are two examples from the charity I work for.
Scale and the right size
At the charity I work for, we produce graded reading books to support our literacy curriculum. These aren’t available elsewhere in Indonesia – especially not ones that can be tightly integrated with the curriculum – so we need to make them ourselves.
The catch is, that there’s an economy of scale to printing books. The cost-per-book of printing small runs of books costs more than three times as much as if you bulk print a thousand copies. In fact, a bulk-printed colour copy of a book costs less to print than a black and white photocopied version.
If we want to bring price down and quality up, we clearly need to print in bulk. The catch is, this takes a significant investment, and the only way to make it worth it is if we have thousands of teachers using our books – at which point they pay for themselves.
So a few years ago it became clear that if we wanted to serve more groups at a lower cost (which is a key factor in more groups being able to afford our program in the first place), we need to be big enough to make bulk-printing and storing thousands of reading books a realistic proposition.
Scale and the free prize
The best example of this that I’ve come across is how Amazon moved into web services and cloud computing with Amazon Web Services. In short, they built a huge amount of electronic infrastructure for their own use, then realise that they could share it with others.
Amazon gained a new revenue stream, and companies could run their online infrastructure on Amazon’s servers for a fraction of the cost of making their own. This created huge value for everyone (prizes all round!) – Amazon got richer, and a whole generation of companies (netflix, godaddy, airtable, hubspot, airbnb, coinbase,wetransfer, dropbox*) was able to offer services as if they were already big companies, and grow with their customer base, rather than needing a huge capital investment up front.
And look what it’s done for them:
*This is not to say that AWS is the most efficient way to do this – apparently dropbox is saving a fortune by migrating off AWS. But AWS allowed them to test and validate their business model before they spent huge amounts on hardware.
Scale, the free prize and the non-profit (1)
The free prize here came when at the same time as we were working out the above, we used the Business Model Canvas to study our (charitable) business model. It became clear that the books were an asset not just to us and our users, but to many other groups doing education work across Indonesia. They wanted books. We sorely needed an income stream.
By selling our books, our partners gained a useful resource to add value to their work, and we gained extra income for little additional effort. Prizes all round!
Scale, the free prize and the non-profit (2)
The other example of this is a work in process – we’re looking at sharing our curriculum and training materials online under a creative commons (open source) license.
This supports our core activity – equipping teachers to teach reading effectively – by allowing our users to review training sessions and check their technique. It might also come in handy for training future partners.
But it will also be a resource for anyone working in the same field as us – something that helps others that we can make available at no cost to ourselves. Free prize!
And of course, the free resources also help potential clients to hear about what we do, and perhaps makes them more likely to use or recommend our other services too.