Chris Anderson’s book “Free: How Today’s Smartest Businesses Profit by Giving Something for Nothing” explores the history of free business models, showing its not a new concept created by the internet, and articulates a number of free business models which are used today.

An example of some of the content includes an explanation of each identified Free model:
Free 1: Direct Cross-Subsidies
Free 2: The Three-Party Market
Free 3: Freemium
Free 4: Nonmonetary Markets

What i like about this book is it explores the mindset how people react to free, one of the chapters is “The cost of zero cost” and Chris explains free and “behavioral economics” by drawing on work from Dan Ariely in “Predictably Irational”.
Basically zero is not another price point, its an emotional hot button, two experiments were conducted where two competing product were priced at 15cents and 1cent and participants asked to choose; 73percent chose the 15cent product and 27percent the 1 cent product. But when they dropped the price by 1 cent, and the products were now priced 14cents and $0 the customers reversed their preference.

So it doesn’t matter what the value of the product is, when its free we can we disregard the other choice, additionally people who may not have bothered paying at all sign up simply because its free when its free, we waste.

At work we recently changed our website setup price from $2000 setup to $0 (with $99 monthlies), the team accepted this and it was easy to see that by dropping our setup costs we could get more people onto the subscription. But it wasn’t until we started talking about releasing a new product that was actually ‘free setup and free monthlies’ and you pay for the premium edition did the team start to get worried. Some of the questions were, “but whats stopping clients using the software and never upgrading” and “that means we have users which are paying absolutely nothing”. Its an uncomfortable change for many people to go to the Free business model, where you relinquish control and embrace that users will wast the service simply because its free. But the payoffs can be great, by giving it away, if your product is good enough that you capture the audience and get mass adoption; you can now worry about how you monetize the use.

Want examples of profitable businesses that use free? Want to know more about how you can do it for your business? Go buy the book, I thought it was a really interesting read, it kept me thinking to the end, and now the next big thing I ship will be “Free”.

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Rating: Loved it 5 Stars
Recommended to me by: Matthew Gay from REA Group
Title: Free How today’s smartest businesses profit by giving something for nothing
Turns traditional economics upside down ‘Guardian’
ISBN: 9781905211494
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After reading purple cow, I was keen to see what was in store for linchpin, but was disappointed. I could see how people who follow the system by going to work and following the rules realllllllllly need this book and could be enlightened by the repetition of his message. But there are only so many ways i need to be told that the current employment and education system breeds followers before wanting to skip pages.

If you need a kick in the pants because you find yourself saying “I don’t have the authority to make change” or even get uncomfortable if somebody was to call you a genius then read this book, because Seth does articulate that everybody has the capacity to bring an indispensable ability to your work, just in too many words for my liking.

This was an amazing book, it had me quoting to friends and jotting down ideas on how I could apply the principals to my own team but importantly got great results when applied.

I’m writing this a few months out of reading it, and seeing the rewards. The book is a historical look into toyota lean manufacturing and the concepts and cultures that were observed in how Toyota works.

You look inside the culture and way of life of Toyota, not giving a cookbook of how to’s but you walk away with an in-depth understanding on the subject.

I found the stories were great and really stick in your head I.e the concept of “stop when there is a quality problem” (jidoka). This principal for Toyota started with Igi Toyoda where he built an automatic weaving loom that stopped when the thread broke so no material was wasted. A simple concept but we constantly overlook this in todays IT industry. (unless your agile and writing tests for your code) This was just one of many concepts which stuck with me.

I think what’s interesting is it’s universal application to production of any sort. I was able to apply the concepts to a web design team that produces between 15-30 bespoke realestate websites per month. As well as the support process for alterations to these sites which has upwards of 200 changes per month. I found the teams were working in their specialist areas with the customer being bounced around different departments with each department reporting on how efficient their piece of the puzzle was, but for every change of department there was a delay (muda or waste), which when you calculate all the waiting time to all the individual time, there was more waste than there was value creating time. Even worse the change requests, the time we spent doing (value creating time) was around 2 hours, and the time waiting (mud) was 2 weeks and we knew a lead time of 2 weeks 2 hrs was not acceptable to.

What do you do. I applied the concepts of lean manufacturing, realizing that the most importing thing is getting the product to the customer in the shortest period of time instead of how efficient The designers were at completing their portion of the request. The designer now called the client so we removed the admin staff from the process, and banned emails for requests that need communication (back and forth). Plus scrapped measuring developer time and only measured end to end time process as seen by the client. And finally put in place an automatic quality check (judoka) where we ask the client a customer loyalty question (nps) so the same day we deliver a service if there is an unhappy customer we can stop and fix the problem before another client is affected.

After 1 month of operation it dropped the turn around time 63% from 24 days to 9 days when compared to the same time the year before and with the same number of changes.

Now a few things which you need to fight. Your designers are now spending a portion of their day doing administration and customer service, they need cross skilling, time management and motivation that this is the best solution for the client. The knee jerk reaction would be to keep you high paid designers on design only, but if your customers are churning because it doesn’t work, then its not working.

Reading the toyota way put me on a fantastic learning curve for a web team leader, and showed that applying lean manufacturing to a web production house was possible and beneficial. It also opens your eyes to how young the digital industry is because whether you are building a boat, a phone, a website; there are approaches to working which seem to be overlooked in the IT industry today. It is like we’re to hi tech to look back into history for ideas.

Well thanks I learnt a lot.

A few more which are great also: