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I feel guilty that I don’t recycle as much as I would like. The truth is, I’m lazy about sorting, and I don’t have room in my kitchen to have separate bins for cans, paper, glass, etc. And, I always wonder, does the stuff in the bins really get recycled? I know that at my office, rumor has it, only the cans and bottles really get recycled because the staff is paid for recycling cans. However, the paper in the paper bins gets thrown in with the regular trash because the staff isn’t incentivized to recycle that.  I know I’m being lazy, but really, why does recycling need to feel like work? Why can’t we get incentivized for recycling all things recyclable?

I think I just found the company that solves all those jobs: RecycleBank. It is one of the coolest green companies I’ve come across. RecycleBank introduces financial incentives and convenience (no sorting needed, curbside drop off) to the recycling process, offering new dimensions of performance that motivates everyone to recycle more.

RecycleBank has a winning customer value proposition to every participant in the value chain: 

• RecycleBank provides financial incentives to households to recycle, which reduces the total tonnage of landfill-bound material
• Municipal officials save disposal fees
• Recycling companies make more money from processing
• Retailers gain positive association with an environmentally beneficial activity
• Partnering waste haulers can differentiate themselves in the competitive hauler market

How does this process work?

Households put unsorted recyclable materials into recycle bins for curbside pickup. The recyclables are weighed on the back of disposal trucks when they are picked up by the sanitation crew. Information is scanned and recorded through a computer chip embedded in the garbage bins and then is channeled from an on-board computer in the garbage trucks into a databank. Households collect points, which can used at more than 400 national retailers such as Starbucks, HomeDepot, neighborhood grocery stores, etc.

RecycleBank has formed partnership with diverse players in order to make its innovation process work. It has partnered with over 35 cities and municipalities, over 400 business sponsors, with technology providers, and with waste haulers.

How does RecycleBank make money?

RecycleBank has developed three diverse revenue streams. This first is from municipalities (or private haulers, depending on the agreement), who pay a fee per household involved. The second is from recycling plants, with the amount determined by how much it increases the amount of materials that are processed (see NYT's article).  The third, and potentially the biggest, is advertising revenues from online website used by households to manage their “RecycleBank point” accounts. (Fortune, Sept 20, 2007)

What is RecycleBank’s disruptive impact…so far?

In the 3.5 years since RecycleBank was founded, it expanded its services to more than 35 municipalities the Northeast and is planning a national US rollout and an expansion to the UK. In its first 3 years of operation, RecycleBank has diverted more than 36 million tons of recyclables from landfills (see Press Release and Green VC article) 

In need of legal advice, a man went into a lawyer's office. He knew how expensive lawyers could be, so he inquired, "Can you tell me how much you charge?"

"Of course," the lawyer replied, "I charge $500 to answer three questions."

"Don't you think that's an awful lot of money to answer three questions?"

"Yes it is," answered the lawyer, "What's your third question?"

To an average family or small business owner, legal advice feels expensive because you pay (a lot) and you pay by the advice. What you get is assurance that your interests are protected against generally unlikely events or liabilities. The majority of families, who rarely consult with lawyers and have not been on the losing end of a legal issue, are not accustomed to spending $200 per hour for advice. To those families, the benefits of legal advice don’t seem to outweigh the costs. Could the popularity of greedy lawyer jokes be the indicator of a disruptive innovation opportunity?

Yes! Even those of us who do not have frequent needs or resources to regularly seek legal advice still relate to the emotional satisfaction of having a lawyer in our corner to make us feel more protected. The question is, why can’t legal advice be more affordable, to satisfy this need for assurance amongst those who don’t have deep pockets?

Prepaid Legal (PPD) recognized this opportunity back in 1972, when its original founder began to offer legal expense reimbursement to motorists through a membership club after he suffered a collision and significant legal fees not covered by his car insurance. Prepaid Legal Services developed into a membership-driven organization that provides a range of specific legal services to any member for a flat monthly fee. 

Here’s how it works: You pay Prepaid Legal a monthly fee ($16 per month in Massachusetts for a standard family plan). This membership provides you access to a lawyer at a local law firm who is a part of Prepaid Legal’s partner network. For that membership fee, you get access to an attorney for phone consultation at any time. If the lawyer believes it would be prudent to pursue a legal matter in more depth, you have access to a menu of services that are limited to a set number of specific activities per year, such as document review or drafting legal letters. 

Prepaid Legal has proven it has a successful business model, with over 1,481,531 active memberships reported at the end of first-quarter 2008. What makes them an interesting example in the disruptive playbook?

Targeting constrained customers: By focusing on the question of “How can we make legal advice accessible to non-consumers?” Prepaid Legal discovered an innovative way to design the pricing and distribution model for legal services, making it accessible for those who were previously priced out of the market. Sixteen dollars a month for on-going basic legal service is much more feasible to these customers than paying $500 to hire a lawyer one time to review a document.

Offering “just good enough” service: Customers get an inferior product by traditional standards, sacrificing unlimited service for a cheaper price point. If you need a lawyer to review documents to purchase a home, a membership affords you up to two reviews of legal documents that are no more than 10 pages. If additional services are needed, you are entitled to a 25% discount on your lawyer’s regular fees.  For the majority of infrequent advice seekers, this level of benefit is a good deal. Their legal matters tend to be straight forward and the reassurance of having a lawyer on call by phone provides a significant emotional and practical benefit.   

Changing the business model: What makes the offering possible is the scale that Prepaid Legal can provide to the distribution channel (its partner law firms). This is done through multiple business model innovations that deliver the same old legal services from the same old law firms, but to new consumers: 

• Prepaid Legal changed the financial model to aggregate receivables before legal services are rendered. Their partner law firms benefit from a predictable revenue stream
• Prepaid has created a marketing network of associates who are usually members and who receive commissions for referrals. This pyramid type of marketing approach has garnered criticism for its ability to drive sustainable growth. But it keeps marketing and sales expenses low and allows the company to remain profitable with its low cost positioning.
• Finally, the company created a new value proposition in the marketplace that positions legal services much more like insurance. This was done by limiting the features and benefits of the service to the most scalable and frequent kind of legal advice, and by targeting that advice to traditional non-consumers.

Statements like “the Dell, Wal-Mart, or Southwest of new industry x” always get us excited because they indicate that an entrant has shifted the focus of innovation efforts from the product to the business model.

Not that there’s anything wrong with technology-based product innovation – it is, of course, essential. But it is also a gamble; pursuing product-driven innovation alone means that you’ll be entrenched in a fierce competitive battle because it is relatively easy to frame a challenge in technological terms. Changing the basis of competition by innovating the business model – as Dell did with PCs, Wal-Mart with retail, and Southwest with air travel – has historically increased the odds for breakthrough success.

That’s why it caught our attention when Fortune’s Green Wombat blog labeled Berkeley-based solar start-up Sungevity the “Dell of solar energy.” Solar power has been red hot, aflame with technological advances and billions of dollars in investment. Getting business model innovation right in this context promises enormous success.

Has Sungevity gotten it right? For starters, their tagline, “faster, easier, affordable solar,” is as close to Disruptive Innovation 101 as you can get. As loyal readers of this blog know, disruption is fueled by companies delivering on speed and convenience, ease of use and de-specialization, cost and accessibility. Doing so removes barriers to consumption, enabling large swaths of consumers who were otherwise locked out of a market to participate – non-consumers, in disruptive innovation terms. And there are certainly a lot of nonconsumers of solar power…just think of all the unused rooftop real estate out there.

Sungevity is looking to put solar panels on those barren roofs. The company is a solar installer; they take the panels produced by giants like SunPower, Evergreen Solar, and BP Solar, affix them to rooftops, and connect them to the grid. This final step in the value chain has, predictably, been beset by inefficiency and variability up until now, because it depends on all too human factors like the availability of good installers who know what they’re doing.

The flock of solar installers that have emerged in recent years are seeking to centralize and simplify this complex and potentially frustrating process. Economies of scale give any company a natural advantage over the independent contractors they compete with, but Sungevity’s clever web-based interface is what really sets the company apart.  The company asks visitors to their site to enter their home address, and then uses software and satellite imagery to come up with customized quotes that outline what a solar power system would cost and what it would produce. This estimate makes the system planning process quick and easy by obviating initial site visits from a contractor.

Crucially, moving the quotation process to the web figures to lower the bar for potential customers who are not yet intent on installing systems. Instead of taking time out of the day to accommodate a sales visit, people can simply plug in a few numbers online. There’s no commitment, no investment, no contractors marching around on your roof who’ll be disappointed when you tell them that you’re not yet ready to commit to laying down $10,000 for the panels.

In addition to mapping out a custom-designed system for your rooftop, the nifty Sungevity site also projects install costs and lifetime energy and cost savings. The site produces images of your house decked out with solar panels and then allows you to enter a credit card number to make the purchase on the spot. In the words of CNET’s Greentech blog, the customer-friendly web interface “reduc[es] a complex sale into a quick online exchange.”  As easy as customizing and purchasing a PC, right?

Innovative service-oriented business models like Sungevity’s that are just now emerging will spur the development of the solar power industry, enabling it to maintain its blistering pace of growth while reaching more and more of mainstream America. When you factor in other clever business model innovations such as solar financing and the cost reductions and efficiency improvements that will emerge from the technological arms race underway in the industry, the picture starts to look very sunny indeed.