NESTLÉ’S PORTFOLIO OF COFFEE BUSINESS MODELS

Nescafé

VP mass market (nescafé)

CS mid-tier (Dolce Gusto)

Nespresso

CS high-end (Nespresso)

DAIMLER’S CAR2GO BUSINESS MODEL

Market introduction of car2go

Our final example is still emerging as of this writing. Car2go is a new concept in mobility created by German vehicle manufacturer Daimler. Car2go provides an example of a business model innovation that complements the parent company’s core model of manufacturing, selling, and financing vehicles ranging from luxury cars to trucks and buses.

Daimler’s core business generates annual revenue exceeding U.S. $136 billion through sales of more than two million vehicles. Car2go, on the other hand, is a startup business offering city dwellers mobility on demand using a citywide fleet of smart cars (smart is Daimler’s smallest and lowest-priced vehicle brand). The service is currently being tested in the German city of Ulm, one of Daimler’s key operational bases. The business model was developed by Daimler’s Business Innovation Department, which is tasked with developing new business ideas and supporting their implementation.

Here’s how car2go works: a fleet of smart “fortwo” two-person vehicles is made available throughout the city, serving as a vehicle pool accessible by customers at any time. Following a one-time registration process, customers can rent fortwo cars on the spot (or reserve them in advance) then use them for as long as they like. Once a trip is completed, the driver simply parks the car somewhere within the city limits.

Rentals cost the equivalent $0.27 per minute, all-inclusive, or $14.15 per hour with a maximum of $70 per day. Customers pay monthly. The concept resembles popular car-sharing companies such as Zipcar in North America and the U.K. Distinctive characteristics of car2go include freedom from the obligation to use an assigned parking place, on-the-spot rental for as long as one likes, and a simple pricing structure.

Daimler launched car2go in response to the accelerating global trend toward urbanization, and saw the service as an intriguing complement to its core business. As a pure service model, car2go naturally has completely different dynamics compared to Daimler’s traditional business, and revenues will likely remain comparatively small for some years. But Daimler clearly has high hopes for car2go over the long term.

In the pilot phase, launched in October of 2008, 50 fortwo cars were made available to some 500 employees of the Daimler Research Center in Ulm. These 500, plus 200 family members, participated as initial customers. The aim was to test the technical systems, gather data on user acceptance and behavior, and give the service an overall “road test.” In February 2009, the pilot was extended to include employees of Mercedes-Benz sales and service outlets and other Daimler subsidiaries, with the number of vehicles increased to 100. At the end of March, a public test was initiated with 200 vehicles and car2go was made available to all 120,000 of Ulm’s residents and visitors.

At the same time, Daimler announced a U.S. pilot in Austin, Texas, a city with 750,000 residents. As in the first phase of the German test, car2go will begin with a limited user group, such as city employees, then be opened to the public. These pilots can be seen as prototypes of a business model (see Prototyping). Now, car2go’s business model prototype is being fixed into organizational form.

As of this writing, Daimler had not yet decided whether to internalize car2go or spin it off as a separate company. Daimler chose to start with business model design, then test the concept in the field, and defer decisions regarding organizational structure until it could assess car2go’s relationship to its long-established core business.

Daimler

Daimler’s phased approach to business model innovation:

PHASE 1: Business model design within Daimler Innovation Department

PHASE 2: Field test of the concept run by Daimler Innovation

PHASE 3: Decision on organizational structure of new business model (integration versus separation) vis-à-vis relationship to established core business

car2go