Q: When is a trash can not a trash can?
A: When it’s a Wi-Fi hotspot, air-purity monitor, and advertising billboard—all in one.
Bigbelly solar-powered trash cans have been street corner fixtures in Philadelphia, Boston, New York, and other cities around the world for the past decade—providing a self-compacting solution to keep streets clean. Last year, however, the Massachusetts-based company’s CEO shared plans to change its business model from selling a product—waste and recycling stations—to selling a subscription-based service that could include Wi-Fi access, sensors, and digital advertising.
“Government is a giant customer. They buy a lot of stuff”
Harvard Business School professor Mitchell Weiss explores this strategy pivot in a new case on Bigbelly, co-written with case researcher Christine Snively, that looks at the implications for technology companies entering the “smart cities” field.
“I wanted to explore the opportunities and challenges of selling to government in a company that is moving from selling hardware in big chunks to selling software as a service,” says Weiss, the MBA Class of 1961 Senior Lecturer of Business Administration.
Pursuing software as a service (SaaS) opportunities is one that many companies are exploring as they follow the friendly economics that can come from moving away from selling one-off products toward licensing products or services on a subscription basis. Think of what Microsoft is doing in transitioning its Office suite of business applications from standalone software products purchased at the store to something companies or individuals license annually over the Internet.
More recently, companies have started selling “anything as a service” (XaaS, pronounced “Zass”), including server infrastructure, applications, and administrative support, all available via subscription through the cloud.
Getting to SaaS is complicated enough as a strategy transition—Bigbelly’s challenge is even more difficult given that it sells to government customers notorious for labyrinthine procurement processes and glacial sales cycles.
At the same time, Weiss reasons, if approached in the right way, selling to the public sector can amount to a huge opportunity for the right business.
“Government is a giant customer. They buy a lot of stuff,” says Weiss, a former chief of staff for the mayor of Boston, who now teaches a course at HBS on public entrepreneurship.
Weiss initially approached Bigbelly looking for a non-technology case about how companies selling to government can expand a business to multiple cities.
“I thought what could be less high-tech than a trash can,” he remembers. When he met with company managers, however, they broke the news that they were transitioning to expand their connected software offering and provide Wi-Fi and other hi-tech services.
“My first thought was, what are you doing to my course?” laughs Weiss. “My second thought was, what are you doing to your company?”
Selling hardware to budget-crunched cities can difficult. Bigbelly’s early pitch was that by providing trash compacting in the units (solar powered to boot), additional waste storage would help keep streets cleaner. Another plus: sensors in the units report when the cans are full, enabling cities to optimize pickup routes and save money.
Even with initial growth, however, the company wondered why it wasn’t selling even more trash products to more customers.
It turns out that the usually universal sales-winning message of “save money” is not always a convincing pitch for cities. “The reality is, 80 percent of a city’s operating budget is people,” says Weiss. “When you say, ‘save money,’ what they hear is ‘lay off people.’ That doesn’t mean it shouldn’t be done sometimes, but it does make things more difficult.”
A better strategy is selling cities on something citizens need. In Bigbelly’s case, the company aims to leverage the power and connectivity already embedded in the waste stations for a public increasingly hungry for data. Not only are Wi-Fi hotspots in demand by those who can’t afford Internet access, but connectivity is also increasingly desired by smartphone users who want to cut data costs while streaming high-bandwidth content.
“I’ve been surprised at how popular it still is, both to bridge the digital divide and for people who like having access to Wi-Fi instead of using their cellular data,” says Weiss.
Providing that service, however, will mean a dramatic reorganization of the company’s sales model. When dealing with slow-moving city governments, perhaps the last thing you want to do is provide a large range of options. “Sometimes you want to give customers choices, but if there are a lot of decision makers, options can slow things down considerably,” says Weiss.
Bigbelly is swiftly moving towards a subscription-only model that, if it alienated some municipalities, would make up for that fact by speeding sales to others.
While that’s not an insurmountable problem, it’s important for companies looking to move to a subscription model to ensure that they gain buy-in from the sales force, provide the right incentives to spur sales, and, perhaps most importantly, facilitate a shift away from one-time sales to managing an ongoing, long-term customer relationship.
While Wi-Fi is the entry point for Bigbelly’s new XaaS model, the company has also been exploring the possibilities around adding more real-time sensors to their trash cans. Cities are currently undergoing a revolution in the way they collect and use data in order to improve planning and provide additional services. Not all data, however, is equally useful. “Engineers can design a sensor for almost anything,” says Weiss. “The real question is, what will cities use a sensor for?”
And the way that service is pitched is important as well. “It’s tempting to say we will have all of these sensors that will measure traffic patterns and reduce your monitoring staff by 25 percent, but it’s better to explain how the public will get through rush-hour faster and how they will be able to pick up their kids more quickly,” says Weiss.
In addition, he says, “city leaders, who are mainly focused right now on the data they own and how to share it, will also need to sort out how to deal with privately collected data.” Weiss notes, “How different will things be when private companies have more up-to-date information on the condition of a city street—for example, whether it has potholes or not—than city governments do? At the intersection of autonomy, sensing, and connectivity, you’ll find we are rapidly approaching that day.”
Cell phones may also be a potentially rich source of useful data for cities, but citizens might be wary of having that data collected. Chicago is moving ahead with a project developed by the University of Chicago dubbed the Array of Things. The idea is to provide real-time, location-specific information on temperature, humidity, vibration, light, and foot traffic from sensors on telephone poles throughout downtown. But there has been debate about foot traffic sensors that work with people’s cell phone from those who fear the technology will be used to capture personal information.
Bigbelly aims to add digital advertising to its connected waste and recycling stations. While their ads are static for the time being, the potential exists to combine data from users’ connected devices and present more targeted advertisements based on the demographics of the passers-by. The LinkNYC program rolling out in New York City will provide a combination of high-speed Wi-Fi and “context aware” ads. The program is a partnership with Intersection, the first company launched from Alphabet Inc.’s Sidewalk Labs.
Wherever companies go with smart-city technology, “it’s important to build products that enhance citizens’ lives and to engage the community early on issues of data and privacy,” says Weiss.
Done right, companies like Bigbelly may profit from a burgeoning new market, at the same time helping cities better provide services to the public.