While the car industry sends its lobbyists to Bali to fight for lame change (more next week), there's a useful lesson in sustainable business models going on right now in France.
Paris ends 2007 with a completely new transport network that joins together many points that weren't accessible to eachother before. This network consumes negligible energy versus anything else around, produces zero emissions and is very low cost for users - even tourists can benefit from it for just 1 Euro per day ($1.50). It combines classic technology, the bicycle, with some nice digital technology, that basically makes it really easy to borrow one of over 20,000 bikes from any of at least 750 bike stations in Paris and drop it somewhere else at a different post. The system is so intuitive and so low cost that calling it bike rental is a misnomer - you simply feel like you grab a bike and then put it away at the end. You feel you borrowed and used a piece of the city. Velíb is really cool, and it has been spectacularly popular.
But where it really breaks new ground is in its business model. The system is privately funded (yes, in France) by a company best known to date for running outdoor advertising. This company, JC Decaux, has discovered that being a landlord is no longer just about owning property which you sit on and charge rent for. It's about creating 'inhabited infrastructure' which attracts people and which creates more valuable advertising propositions for those with budgets.
Albert Asséraf, director of strategy and market studies at JC Decaux is up there with the coolest men you can meet. He was kind enough to spend time with us in Paris last week. And the great thing is you sense this man has more to come:
"JC Decaux was intended as a company dedicated to advertising in the city. But based on a very simple premise - of services to citizens, financed by advertising. That's why today it's considered as a media company - because today 99 per cent of our revenues come from advertising. But, in many cases, the origin of revenues are linked to a service to people."
Here Asséraf is talking about things like bus shelters, which the company operates and which are funded by advertising. "Bus shelters are a kind of service to people - designs usually feature an ad on one side for commercial business and something on the other for cities themselves." So there are two public features - shelter and information, and one private one - advertising to those using or passing the shelter.
"But when we look at the city of tomorrow, what we understand from people is that they are expecting a city that is more sustainable, where mobility is easier and so on. So we did a 'trend-zoom' on mobility." Asséraf's team concluded that city inhabitants have two expected 'givens' for the future. The first is what he calls in French 'intermodalite' (using several modes of transport in one day) and the other is mobility itself (actually wanting to move around, not stay still). "So we met inside our company and said "what can we deliver?", to give a new service to people, mixing inter-modality and mobility - which is out of our core business."
As Bruno Marzloff at the think tank Groupe Chronos put it to us, the big opportunity is to create new flows from points along pathways, not to focus so much on the terminus at each end. Think of the opportunity as being able to drive activity through each of those little tube stations or bus stops along the way between the two big ones. An "interoperable city". Velib delivers that in an obvious way, and there are obvious advertising benefits to be gained from increasing those flows. Marzloff talks of the opportunity to reinject information into the physical network. He talks of the creation of a "Google of the CIty", where "information is half of the mobility".
JC Decaux has spent about 90 million Euros this year putting Velíb into Paris. But not taking anything away from the sophistication and quality of the Velib system, that investment is on a containable scale and nothing like the staggering investments required for massive public infrastructure projects related to trains and trams. Here is its advantage.
But it IS on a scale that the French can accept but maybe other countries might not. Asséraf stresses that JC Decaux pays for everything:
"We understood how to make it work, and our economic model is to finance the bicycles via advertising. So it costs nothing to municipalities and city halls. We invested about 90 million Euros in 2007 to launch the service, and it's all charged to JC Decaux. There's nothing to pay for anyone and the city earns money on that, because the revenue from the bicycle stations goes to the city, not us."
JC Decaux delivering the Velib demonstrates just how far you can stretch this model. It takes vision, and it's by no means the cheapest or least complex route, but it is game changing and it ups expectations for what anyone using public space can expect in return.
So where next? Well Velib evolved from Vélo'V, a smaller project in Lyon with 3000 bicycles at 300 stations that with hindsight has become the 'pilot' system. Today it means the company is for the first time evolving ways of promoting its value to consumers, not just to advertisers. That will be tough - people still equate the cost of something in a very direct way. Each culture, country, city will make assumptions about why something in the public realm either works or is cheaper than it really feels it ought to be. Most people waiting at bus stops assume they were built by the council. Trying to change that can incite the "well it should be build by the council" response. It certainly would in Britain. Life's complicated like that.
A better approach would be creating the myth that has worked so well for Google. So don't try to explain why search is free, or why Google Docs is free. Propagate it, build an eco-system around it, and make it work. Use advertising to fund it.
Am I saying JC Decaux can be the Google of the built environment? I don't know. That depends what they do next.
As we see it there are two paths Decaux can take from here. One is to just sell this piece of intellectual property it's created - a business model and a set of designs and technologies for bikes / posts. It could fund a tract of advertising to consumers, the sort we occasionally see from corporates like Accenture and Cisco, 'halo building' or doing what oil companies do and spending vast sums on double page newspaper ads talking about how we must all work together to tackle climate change. Rather than actually working together with people.
The second option is to learn from what's going on at the really dynamic end of the economy. Don Tapscott and Anthony D. Williams' work, Wikinomics, is a good primer. What we have here is a global, highly connected, extremely creative ecosystem of design and business entrepreneurs. Decaux can use that budget to engage young (and old) design and creative teams to create a long tail of concepts, integration plans and more. They can build a city-by-city network of implementation teams doing all kinds of things involving, and going beyond, bikes. That tail is capable of taking JC Decaux much further than it can travel on its own. The tail can help work out the subtleties of implementing its bike system in a complex world. But it can identify the next big thing. And the next.
We know you're out there. Because you're reading this.