Crowdfunding shows principles for disruptive business models

Self-publishing used to be called ‘vanity publishing’. But the arrival of the Internet, the ability to sell e-books, and the technology to cost-effectively produce small print-runs, made it increasingly popular.

Now an online publisher unbound.co.uk has taken the model one step further.

Interested readers can visit their website and review potential books being proposed. If they find one they are interested in they can register that interest by clicking, and using a sliding scale to pay, say, £10 for an electronic copy of the book, £20 for a hardback copy, and more to attend the launch party or meet the author over lunch.

Once the book is fully financed, publication goes ahead.

There are seven billion people in the world and this model allows small numbers of them who share an interest to get together to make a project happen. It also allows them to engage in the project to varying degrees, depending on their level of interest and enthusiasm.

As a publishing model it is likely to become more popular: partly because Unbound is promising to share a larger percentage of the profits (50:50) with the authors; and partly because it brings new value to customers that the existing models do not provide.

And it is, surely, also a model which could be applied to many industries, and allow not only to customers but also shareholders to participate more ‘intimately’ (subject to investment legislation). Other similar industries that spring immediately to mind are movies, television programmes and music. There was also a case study from a few years ago where a similar model was applied to beer — customers said what kind of beer they wanted, committed to buy a certain number of bottles. The brewer managed the customer-engagement process and then produced the beer.

Lessons to be learned from this story:

• It is possible to make a profit from a smaller number of customers than has previously been thought profitable
• The key lies in finding a group of people who are interested in a particular ‘project’
• And allowing them to participate to differing levels of engagement
• Delivery success skills for this kind of project include a more intimate kind of marketing — ‘community engagement’ rather than ‘customer management’
• But the levels of value created per customer can be higher
• And the value recognised by the creative individual can be higher too

How might you apply this in your industry?

How might your competitors go about applying it?

“Crowdfunders turn another page in publishing,” Financial Times, 11 November 2011.