I’ve been immersed in thoughts of business models recently because I’ve been on the lecture circuit talking about them.
In my downtime and on flights, I’ve finally gotten to delve into Anthony Trollope’s "The Way We Live Now," which was first recommended to me by an HBS professor. He said it was the definitive work of business fiction.
In a way, the art of business is the real protagonist — embodied in a swindler who takes on Victorian society at a time when the way of life of the landed gentry was being overwhelmed by the successes and excesses of industrialists and the merchant class.
What does this have to do with business models?
Trollope gives us an amazing portrayal of the attempt to preserve the economic viability of a threatened way of life (and business model). Consider the business of maintaining a dissolute lifestyle of gambling and drink when the agrarian incomes they depended on are rapidly dwindling.
When agriculture was king, self-indulgence was paid for by the labor of tenant farms. But by the mid-19th century that didn’t necessarily work any longer.
Here’s Trollope on what replaced it:
"…His father’s property was not very large. His father and his grandfather had both been extravagant men, and he himself had done something towards adding to the family embarrassments. It had been an understood thing, since he had commenced life, that he was to marry an heiress. In such families as his, when such results have been achieved, it is generally understood that matters shall be put right by an heiress. It has become an institution, like primogeniture, and is almost as serviceable for maintaining the proper order of things. Rank squanders money; trade makes it; — and then trade purchases rank by re-gilding its splendour. The arrangement, as it affects the aristocracy generally, is well understood, and was quite approved of by the old marquis — so that he had felt himself to be justified in eating up the property, which his son’s future marriage would renew as a matter of course."
As you can imagine this is not a sustainable business model. Opening the manor house to tourists has proved a much more durable solution.
Moral of the story: No amount of money can fix a broken business model for long. When faced with challenging economic times, you’ve got to face reality to figure out a new model that works.
Interesting example Beth.
My sense is that the model of bringing in cash through marrying money is valid. In the example, the established families have something to offer the trade families. Money buys access to status in the next generation. The problem, with the business model is that the established family’s customer no longer wants the product. In (at least American) culture money IS status and need not be purchased.
This reminds me of the many businesses that we have seen that had a product that the Internet made essentially free. Business models had to change or the companies fail.
So I guess my comment is that in the example, the issue is not scaling but disruptive changes in the market.
NP