Switchboard Profit Model

For the second time this month I discussed with someone a very interesting business model: the Switchboard Profit model. The Switchboard Profit model is an exciting model for evaluating and developing business models.

Adrian-Slywotzky's Art of Profitability is a business noval set in a very simple plot: a teacher (David Zhao) with many years of practical experience and a willing student (Steve Gardner) who is committed to move his organization forward.

The book covers 23 profit models in a way that hits the little gray cells. By no means what is written is sufficient in itself, but I found by rereading some chapters I filled in more details than actually are there.

Another interesting and sometimes bothering thing is, is that a lot of the homework assignments for Steve are to read other books.

Back to the Switchboard Profit model.

Switchboard Profit identifies the components that led to the business success of the Hollywood agent Michael Ovitz who took the bundling-of-talent concept that he so successfully perfected in television, and applied it to film-making, but with a difference, because it was much more difficult to create a concentration of power in an industry fragmented by many movie studios. Ovitz' first step was to assemble talent; the second, to find a source of stories through a great literary agent; and third, the creation of critical mass. In the author's words, "The more critical mass you build, the higher your probability of putting together a package that works. That, in turn, means that a star, a writer, or a director will be better off being represented by you rather than any other agent, because the odds of being part of a winning combination are so much higher. …So now the studios have to deal with you, and the stars want to deal with you." Thus the analogy of the old-fashioned switchboard Ovitz became that all his various contacts needed to plug into. The lesson, of course, isn't that simple. Predictably, much work is needed to arrive at the numbers constituting the critical mass that is required to generate revenues seven to ten times greater than in the traditional model for that industry.

With this in mind I discussed a business model for a professional-association and a university. The interesting part is that with a model like the Switchboard Profit model one can quickly translate it to the specific situation and drive down into the particular crucial nifty gritty details. And the Switchboard Profit model is just one of the models that can be used to evaluate and develop profound sounding business models.

Of course the real interesting and challenging part is what is coined in the book as the drudgery part of innovation. Where people need the most pressure and encouragement: turning a new idea into people working processes, procedures, etc to deliver the real products; from marketing to sales, from purchasing to manufacturing and delivery. However interesting, it is outside the scope of the Art of Profitability.