Capturing Value in Nontraditional Ways

When I grew up in Massachusetts, I remember reading a story about Joe Kennedy. He would go up to owners of older drafty apartments in downtown Boston and make them a unique proposition. Many of the units were poorly insulated and cost a small fortune to heat in the winter. Joe would agree to insulate the building at no cost to the owner if the owner agreed to simply pay Joe the historical heating bill for a contracted period of time.

Then at the expiration of the contract, the owner would begin to pay the actual heating bills from that point forward and owe Joe nothing for his investment in insulation. Joe captured his value in the margin between the lower heating costs he had to pay while the owner continued to pay Joe the much higher historical based cost. Joe capture additional value in the form of tax credits.

Since I live in Colorado where it is sunny for over 300 days per year, last year I contemplated buying a solar panel to supplement my electricity. After doing an ROI analysis, I determined that based on the large upfront cost it would take more than six or seven years to see any kind of savings from the purchase. I recently read an article by clean energy entrepreneur Jigar Shah that got me thinking. There is an opportunity for a solar panel company to look at the Joe Kennedy model and just give away the solar panel in exchange for capturing the margin between the market cost of purchasing electricity from the utility company and the actual cost paid by the consumer with the panels supplementing their electrical need.

The solar company could devise an economic model based on a contract period where the margin would provide an ongoing annualized revenue stream for a given number of years that would not only cover its cost but provide a hefty profit. Rather than carry all the costs, the solar company could unitize the cost of the panels plus their installation and offer the deal to investors who could also capture the subsidies.

Have you ever considered giving away your product in exchange for capturing revenue in other ways?

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