The Most Innovative Business Models
Often, the only way to get ahead is to have a great plan. Which is exactly what makes the companies below so special. It’s not just that they’re making the big bucks (and they are doing that). This small group of companies from the Inc. 5000 class of 2014 are notable for their innovative business models. Read on to find out how they work and why they’re so successful.
As a broke college student, Brad Wilson was tired of being ripped off. After printing 10,000 fliers to protest the prices at his college bookstore during orientation, he founded Brad’s Deals in Chicago in 2001. He started the curated deals website as “an act of civil disobedience,” he says in hindsight. “It was not starting a business.”
“The business model, in short, is just trying to level the playing field for consumers,” says Wilson.
The model: Every day, a savvy editorial team curates coupons, promotions, and other deals from around the Web–from $17 sunglasses to cheap airfare and student discounts at Urban Outfitters. Brad’s Deals redirects customers to the original retailer’s website when they’re ready to make a purchase. “It’s distinctly not a store or a deal provider,” says Wilson. “It’s a curated guide of the best decisions to make on a daily basis.” As the middleman, the site gets a small cut of retailers’ sales and also makes money from online ads.
Revenue in 2013: $17.5 million
Smartest move: Wilson credits his success to staying lean and not taking outside funding. “Even if you come to our office, you’ll see it’s just stuff that we’ve gotten good deals on.”
Managing partners Bill Angsten, Patrick O’Rahilly Jr., and Brian Greviskes pose with a Fanuc 6-axis robot.
2- Compass Automation
In 2009, three recent college grads–Bill Angsten, Patrick O’Rahilly Jr., and Brian Greviskes–launched Compass Automation, a high-tech robotics company, with a little financial help from O’Rahilly Jr.’s father. The three engineers had recognized that the field of robotics was growing and there was plenty of young, technical talent, like themselves, looking for jobs. Today, the Elgin, Illinois-based company builds custom assembly machines that can make things such as circuit boards, jet engines, and plastic bottles for top manufacturers in the U.S. and abroad.
The model: Historically, the tech companies that have served the manufacturing industry have been something of an old-boys’ club, the companies’ having been around for years, says Angsten. So one of the ways Compass differentiates itself is through its talent and expertise: The 35-person company recruits young men–and women–from MIT and pairs them with industry vets. Angsten says the strategy helps keep the company, which counts Caterpillar and Raytheon as customers, on the cutting edge of robotics technology.
Revenue in 2013: $5.7 million
Secret sauce: A deep bench of bright people. “Because of the talent, we can take on a much broader range of manufacturing processes,” says Angsten. “Everything is from scratch, so it’s like you’re reinventing the wheel every time, which is a challenge”–and also the reason why the young MIT grads love working there.
Steve Esposito initially launched a direct-mail marketing service to help lawyers find more clients.
3- Drivers History
Around 2001, an attorney named Steve Esposito noticed that a lawyer friend would go to public courts to look up recently filed offenses and then reach out to the defendants, offering representation. Not a bad idea, Esposito thought. He decided to automate the process, creating a direct-mail marketing service to help lawyers find more clients. A few years later, the company pivoted to focus specifically on auto insurance.
The model: The Philadelphia-based company created DocIT, a real-time database of traffic and criminal traffic court records. Drivers History sells access to the database to auto insurance carriers so they can “price the driver,” explains Brian Wolfson, senior vice president of sales and business development. The company says its data covers around half of the nation’s driving population. It plans to diversify the types of data it collects and partner with more insurers.
Revenue in 2013: $7.8 million
Honorable mention: This isn’t the first time Drivers History has been named to the Inc. 500|5000. It ranked No. 636 last year.
On Lending Club “you’re cutting the middleman out,” says the founder.
It was 2006, and Renaud Laplanche was fed up with his credit card’s high APR–and the fact that his savings account only earned 1 percent interest. “The initial idea was, could there be a more cost-efficient mechanism to give people some money on one side and credit on the other side?” he says. He decided to build an online marketplace to do just that.
The model: San Francisco-based Lending Club cuts out the middleman with a peer-to-peer solution: Customers in need of a loan–both individuals and small businesses–apply online. On the other end, individuals and institutions can search approved applications and decide to offer a loan for monthly returns. Lending Club takes a cut of up to 1.5 percent, depending on the grade, of borrowers’ loan amounts, and charges a 1 percent service fee on each monthly payment from borrowers.
Key differentiator: Transparency. “We publish the performance of every single loan and have made about $5 billion in loans,” says Laplanche. “You can download an entire loan portfolio and see how it’s performed since 2007. No bank has ever done that.”
Revenue in 2013: $98 million
“It’s a customized business,” Hickey says of Lolly Wolly Doodle. “That’s where the consumer world is moving.”
5- Lolly Wolly Doodle
Brandi Temple always dreamed of becoming a trophy wife. But when her second husband’s earnings dropped by half in 2009, she embraced the thriftiness her parents had inculcated in her. She began sewing clothes for her two daughters from her home in Thomasville-Lexington, North Carolina. She posted the garments on eBay and figured she could make more on demand to use up her leftover fabric. The business took off.
The model: “We consider ourselves the Dell of apparel,” says chief operating officer Emily Hickey of Lolly’s “customer-specific” system. Shoppers customize every detail online, and Lolly’s made-to-order factory produces items with the same features in supersmall batches. Lolly recently launched its first iPad app and interactive Web feature, Design Me, which will let customers design apparel from start to finish.
Fan power: Lolly says it does more sales on Facebook than any other brand in the world, thanks to its base of roughly 900,000 fans. “Our customers are just so fanatical about the brand, they’ve really helped us spread it,” Hickey says of Lolly’s traction on Facebook. “I think a lot of people will just share [their designs] all day.”