Business model innovation is an important part of the entrepreneurial process. Not only do entrepreneurs bring new products and services to market, but new business models often revolutionize how products and services are sold and have the potential to bring considerable value to businesses and consumers. The following are examples of business model innovations in three industries.

Warby Parker
Warby Parker is pitching itself as an alternative to what it calls the overpriced and bland eyewear available today. By circumventing traditional channels, such as selling through optometrist offices and eyeglass stores, like Pearle Vision, and selling only online, Warby Parker is able to provide high-quality, fashionable glasses for $95.
How can this firm sell glasses at such a low price?
The secret is not doing it the traditional way. Most branded eyewear is designed and manufactured by contract manufacturers, who resell their products to optometrist offices, eyewear shops, and other places where glasses are sold. The contract manufacturer must not only pay for the manufacturing costs of the glasses, but must also pay the brand, like Dior or Gucci, for using their name and logo. Then, the optometrist office or retail shop marks up the glasses an additional two to three times, which results in $300 to $500 glasses.
Warby Parker’s business model is different in two ways. First, it creates its own designs, which eliminates fees to brands like Dior or Gucci, and second, it sells directly to the consumer, eliminating the two- to threetime markup at the retail level. The result: $95 prescription glasses that are equal in vision correction, quality, and durability to the $300 to $500 branded eyewear.
Warby Parker also has a social component to its business model. For every pair of glasses it sells for $95, it donates a pair of glasses to a charity that distributes glasses to people in need.
Shopkick
There are many businesses that help Internet retailers drive traffic to their Web sites. Examples include Google (click ads), Tribal Fusion (banner ads), and Commission Junction (affiliate programs). But what about fresh ideas for driving foot traffic to brick and mortar stores?

Enter Shopkick. Shopkick gives its users rewards for simply walking into its partners’ retail stores. Shopkick launched in August 2010 and quickly signed up Best Buy, Sports Authority, American Eagle, and Macy’s.
To accomplish this, Shopkick has created an iPhone app that automatically recognizes when a user enters a partner’s retail store. After the user enters the store, several things happen. First, the user is given a certain quantity of a virtual currency called “kickbucks,” which can be redeemed for Facebook credits, iTunes gift cards, DVDs, or immediate cash-back awards at the partner’s store, simply for walking in. A certain number of accumulated kickbucks are required for specific rewards. Alternatively, users can donate their kickbucks to charity. Second, a store discount will appear, such as 10 percent off any one item in the store. Often, additional offers will be made, such as 15 percent off certain big screen TVs or 20 percent off DVDs. Sometimes the offer will be a teaser. For example, it might say, “There is an offer waiting for you in the home theater department, but you must go to the department to receive the offer.” You can also earn additional kickbucks for performing certain activities within stores. At some clothing stores, for example, you receive additional kickbucks for stepping into dressing rooms.
This Shopkick process, of course, encourages people to spend time in its partners’ retail stores, and hopefully make spontaneous purchases. While Shopkick’s business model is still evolving, it likely receives a small commission for items that are bought via Shopkick offers and promotional campaigns.

SunRun
Solar energy seems like an ideal alternative to fossil fuels. However, the reality is that purchasing and installing a solar energy system is simply too expensive given the potential cost savings in most instances.
Installing a solar energy system also requires a consumer or business to make a substantial capital outlay for future cost savings. Although there are obvious environmental benefits to consider, how would you like to pay your next five years of electric bills in advance?
There’s also the issue of maintenance. Once you buy a solar energy system you own it and are responsible for upkeep and repairs.
So how can solar energy be an affordable alternative energy source? One innovative business model, pioneered by SunRun, is to provide solar power to consumers via a power purchase agreement. Under the agreement, SunRun purchases, installs, and maintains solar panels on its customers’ homes in exchange for a long-term commitment by the consumer to buy the power generated from the solar panels from SunRun and to pay a set rate for the electricity. This approach reduces the initial capital outlay required by the home owner. Along with a solar power purchase agreement, SunRun also offers a solar lease program where SunRun is responsible for installation, maintenance, monitoring, and repairs. With the lease, which is available in states and cities that do not accommodate power purchase agreements, customers pay a low monthly fee to lease the firm’s system and use the solar electricity for their homes.

Questions for Critical Thinking
1. Which of the business models described here strikes you as the most innovative and even revolutionary? Which business model do you think will have the largest long-term impact on its industry? Why?

2. Select one of the three businesses in the feature, and conduct online research to better familiarize yourself with the business and its business model.
Evaluate the four separate components (core strategy, strategic resources, partnership network, and customer interface) of its business model, and how the separate components reinforce one another.
On a scale of 1 to 10 (10 is high), how strong of a business model does the company have?
Explain your answer.
3. Do you think Warby Parker stands to capture a first-mover advantage in the discount eyewear industry if its business model catches on? If so, how important of an advantage do you think this will be for Warby Parker?
4. Name two additional business model innovations not mentioned in the chapter. How is each business model innovation “adding value” in its industry?