New business models are America’s most undervalued export

William C. Taylor

Here is an excerpt from an article written by William C. Taylor for the Harvard Business Review blog. To read the complete article, check out other articles and resources, and/or sign up for a free subscription to Harvard Business Review’s Daily Alerts, please click here.

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President Obama’s trip to Asia has inspired a wave of worried commentary about America’s diminished standing in the world economy. And there’s no bigger worrier than New York Times columnist Thomas Friedman, who has spent the last few years sounding the alarm about the challenge to the West of the rise of East. Friedman normally focuses his anxiety on China, but this past Election Day, he looked at India and a new generation of startups poised to disrupt established business models.

In particular, Friedman told the story of a startup in South Delhi called EKO India Financial Services. The fast-growing company uses cell-phones, software, and text messaging to allow migrant workers without access to traditional banking to transfer funds and save money — a low-cost answer to a big-time problem. In just 18 months, the company has 180,000 users doing 7,000 transactions a day and is already turning a profit.

It’s a wonderfully uplifting story — as well as, according to Friedman, a potentially big worry. “In the next decade,” he predicted, “we will see some really disruptive business models coming out of here — to a neighborhood near you. If you thought the rate of change was fast thanks to the garage innovators of Silicon Valley, wait until the garages of Delhi, Mumbai and Bangalore get fully up to speed. I sure hope we’re ready.”

I guess I should be worried, although I’m not sure why it’s bad for the United States if brilliant entrepreneurs in India make life a little easier for their poorest countrymen, and eventually introduce their ideas to our economy. Isn’t that called progress?

Moreover, in their understandable urgency to alert us to the challenges of new competitors such as China and India, pundits often undervalue the power of Made-in-the-USA business models. American entrepreneurs still do their fair share of disrupting around the world, and we still have lots to learn about what innovative companies are doing right beyond our borders.

One case in point is the high-flying track record of Azul airline, the next act of legendary aviation entrepreneur David Neeleman. As the founder of JetBlue, Neeleman spent a decade building an airline that defined low costs, high quality, and a unique customer experience. After the famous Valentine’s Day Massacre of 2007, when a poor reaction to an ice storm left thousands of passengers stranded, JetBlue’s board forced the founder out.

Neeleman didn’t stay grounded for long. He took his entrepreneurial insights to Brazil, where he is using the JetBlue model (Azul means “blue” in Portuguese) to disrupt a comfortable oligopoly, which serves rich travelers well, but ignores the needs of 100 million lower-income customers. “People thought, [air] travel is for the elite, we travel by bus,” explained customer-services director Jason Ward, a JetBlue alum. “So we can help the realize that air travel is affordable, accessible, and that it’s for everybody, not just for the rich.” In other words, innovations by a wealthy American entrepreneur are broadening the travel horizons of tens of millions of low-income Brazilians.

Meanwhile, in London, banking customers are flocking to the innovations being unleashed by another wealthy American entrepreneur. Vernon Hill, the founder of Commerce Bank, is one of the most creative forces on the U.S. financial scene in the last few decades. The bank was founded in 1973 with a handful of employees, $1.5 million in capital, and one location in New Jersey. It sold itself 35 years later to Canada’s TD Bank for $8.5 billion, after Hill and his colleagues created one of the most original and distinctive brands in all of banking.

“Every great company has redefined the business that it’s in,” Hill told me a few years ago — and that’s what Commerce did in its business. In a bland, stodgy, colorless field, it created a banking experience around “retailtainment”— fun, lighthearted, surprising gestures that encouraged customers to visit the

branches and spend time there with the kids rather than engage in online transactions and treat banking like a utility.

Hill and his colleagues liked to joke that they operated on the “lunatic fringe” of their industry. Their business practices and corporate culture were so unlike any other bank that their competitors would not dare copy them, even when results showed how effective they were. Well, the lunatic fringe now extends across the Atlantic. In July, Vernon Hill opened the first of what will be many Metro Bank branches in London. Here’s how one magazine described the grand opening:

“On the sidewalk at Metro’s glitzy flagship branch, across from the Holborn tube station, dancers sporting vermilion fright wigs paraded on stilts. Dixieland bands tooted, shoeshine crews buffed, and waitresses toted giant trays of ice cream, 5,000 cups in all…Inside, the giant floor-to-ceiling windows and long, open granite counters lined with smiling tellers, sans Plexiglas, recalled the lobby of a fancy Las Vegas hotel. Signs rallied customers to LOVE YOUR BANK AT LAST and pledged NO MORE STUPID BANK RULES…’I’ve never seen a bank like this,’ says a street musician in attendance. ‘How can you not love a place that’s open on weekends and looks like a disco?'”

In one sense, Metro is more of the same — the Made-in-the-USA Commerce model exported to England. In another sense, it’s a revelation. Metro is the first new bank chartered in England in the last 138 years, a disruptive force that is bound to shake up the five long-established “High Street” institutions that dominate retail banking in the UK, and have created an industry that is even less customer-friendly than in the U.S. “Most banks look at every product line and try to slice-and-dice it: ‘Can we save money here, can we charge more there?'” Hill told me. “Great retailers don’t do that. They ask, ‘How can we make it easier, simpler, more fun to do business with us?’ They look at the whole experience. And that’s what we do.”

Look at the whole experience. That’s good advice for pundits trying to understand the power shifts between East and West as well. In a period of tumultuous change, we have much to learn from studying what other countries and competitors do right. But we also have much to learn from what our most gifted entrepreneurs do right. So let’s face the future with as much confidence as we have anxiety — and stop undervaluing the impact of one of our greatest exports, the American spirit of innovation.

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William C. Taylor is cofounder of Fast Company magazine and author of Practically Radical: Not-So-Crazy Ways to Transform Your Company, Shake Up Your Industry, and Challenge Yourself, coming January 4, 2011. Please click here to visit his website. Follow him at

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