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Social Machines: How to Develop Connected Products That Change Customers' Lives by Peter Semmelhack

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Chapter 11

How to Build a Business Using Social Machines

Retrofit Model

Many companies, such as those discussed in Chapter 10, are creating a new service layer on top of an existing class of assets just by connecting them to the Internet—Progressive via a black box attached to your car and GlowCaps via a cap on a standard medicine bottle. They are driving new revenue streams from existing things. I call it the retrofit model. This business approach has the advantage of an existing target market—for example, there are hundreds of millions of cars in the United States. This is great if, for example, you want to start a new, socially connected car-sharing service in your area. Because all U.S. cars share a standard OBD-II port (the same one that Progressive uses), you can build one “black box” that connects customer cars to the Internet and enables the sharing of data. What it shares specifically is up to you (recall the discussion in Part II). But the point is that a single product investment allows you to retrofit a large, existing market.

Let’s use the same thinking with the Airbnb example from Chapter 10.

For Airbnb to work, it needs a large inventory of houses, apartments, and other forms of accommodation. To accomplish that, the company needs to convince you that your house is worth putting on its system because it will generate interest and therefore income for you. But for most of us, our houses are not rent-ready. As a potential Airbnb customer, you start to think about how ...

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