The software and web industry can learn a lot from the lumber industry, the oil business, and corn and soybean farmers. They take waste and turn it into hefty profits.
The lumber industry sells what used to be waste — sawdust, chips, and shredded wood — for a pretty profit. Today you’ll find these by-products in synthetic fireplace logs, concrete, ice strengtheners, mulch, particle board, fuel, livestock and pet bedding, winter road traction, weed killing and more.
Ultra refined petroleum finds its way into plastics, cosmetics, food, rubber, synthetic fiber, insecticides, fertilizers, heart valves, toothpaste, detergents, waxes… The list goes on.
Corn and soybeans are refined and processed into just about anything these days. By noon you’ve probably consumed a few pounds of corn energy without even knowing it. It’s hidden in your food in the form of HFCS, xanthin gum, dextrin, maltodextrin, MSG, or ethanol in your gas tank.
By-products
Everything listed above is a by-product. Lumber was originally cut for boards for building. Oil was originally drilled for fuel. Corn and soybeans were originally farmed for food. But today these industries have figured out how to use the waste to make even more products. They’re squeezing, pressurizing, refining, heating, cooling, and otherwise processing leftovers into money.
We’re lucky and not so lucky
In some ways, we’re lucky to be software people. We have easy jobs. We think, we type, we move the mouse around. We make stuff by putting pixels in the right place and words in the right order. Yeah, that’s pretty much what we do.
But that also makes it tough to spot our by-products. A lumber company sees their waste. They can’t ignore their sawdust. But we don’t see ours. Or we don’t even think that software development produces any by-products. That’s myopic.
When you make something you make something else
When you make something you make something else. Just like they say you can not not communicate, you can not not make something else. Everything has a by-product. Observant and creative entrepreneurs spot these by-products and see opportunities.
By-product: Getting Real
Getting Real is a by-product. We wrote that book without even knowing it. The experience that came from building a company and building software was the waste from actually doing the work. We swept it up first into blog posts, then into a workshop series, then into a PDF, then into a paperback, and then into a free online book. That by-product has made 37signals over $1,000,000 directly, and probably another $1,000,000+ indirectly.
By-product: Ruby on Rails
Ruby on Rails is another by-product. It came out of building Basecamp. We didn’t set out to build Rails. We didn’t even know we were building it. But David noticed it was laying there on the shop floor. We saw it, picked it up, and did something with it. That by-product changed the web world.
What’s yours?
Think hard about what you do. Look closely at everything you do. There are probably by-product opportunities everywhere. Hell, even your office space could be a by-product. You rent it to work, but what about after hours? Could you rent it out for events? Maybe you could hold stand-up comedy shows like Maryʼs Futons in San Rafael, California does. Sometimes customers return to buy the futon they were sitting on during the show. That’s extra sweet.
Or maybe you can do what Wilco did and film their experience trying to make a record. They had to make the record anyway. They were dealing with issues with their label anyway. They had internal issues anyway. These things were being made as they were making the record. They would have been lost experiences if they didn’t turn the camera on.
Even more important in today’s economy
Selling your by-products is even more lucrative in tough economic times. Finding new revenue streams from things you’ve already created helps pad your cash flow and keep the business churning. And while we advocate charging for your product, if you don’t you still may be able to charge for a by-product of that product. Maybe it’s a workshop on how you built it. Maybe it’s lessons learned from doing customer support. Maybe there’s some code in there you can turn into something else that’s profitable.
So remember, when you make something you make something else. Find it, package it, and sell it. There’s money to be made everywhere.
David Kaneda
on 10 Mar 09Great article, though I also think it’s equally important to simply take advantage of your by-products. I just released jQTouch, a jQuery framework for iPhone web development, as a by-product of working on an iPhone web app (for Backpack). It’s open source, and I likely won’t make money off of it, but it’s done great things so far in terms of raising awareness, engaging a new community, etc.
JF
on 10 Mar 09David: Yes, definitely. We don’t charge for Rails, but Rails has definitely made money for 37signals via increased awareness and press mentions.
Rakesh
on 10 Mar 09Reminds me of William McDonough, http://www.mcdonough.com/cradle_to_cradle.htm.
Patrick
on 10 Mar 09I think another great example of this is College Humor. They were already making the website / updating with humor articles. They saw the opportunity to film their office antics and have now become even more successful (MTV show, etc).
Patrick
on 10 Mar 09In short – creating content becomes the content.
André Wendt
on 10 Mar 09Funny you should mention it. Just the other day, I posted about extracting plugins as by-products of your Rails apps: Yet another plugin extracted.
Gaurav
on 10 Mar 09Its interesting that I am reading this post today. We just decided over the last few weeks to take some of the domain knowledge we acquire from building web apps for clients and use them to create products. We know if a few clients in the same industry asked for it, there is a possibility there are others who need it too.
The challenge is to start to think from a product oriented mindset, when we’ve been service oriented for so long.
Thoughts?
Michael
on 10 Mar 09You guys are hitting these posts out of the park. Keep it up! Although ironically, they’re inspiring me to stop reading and get off my ass. :)
Rob
on 10 Mar 09Jason, You make a great point. That opportunities exist everywhere and you need to look beyond the surface to take advantage of them. R
Tiffani
on 10 Mar 09Rad article. Just the kind of practical, can-do advice we expect from you guys. Keep’em comin!
Tyler
on 10 Mar 09Sometimes you find that you can’t sell, but must give away your by-product. In northern Minnesota, the iron/taconite mining companies give away their waste rock and dirt. If they charged for it, they would have to carry all of it on their books as inventory. Since there is no way to sell all of it, they don’t really want all the excess ‘product’ on their books.
Erik Schmidt
on 10 Mar 09Many companies are starting to open their APIs for similar reasons. While the primary purpose of the API may be to power specific products or services, making them available for others to use can generate greater brand awareness, lead to more partnerships, and ultimately bring in revenue from previously unexplored areas.
Shane Vitarana
on 10 Mar 09Typo: xanthan gum, not xanthin. It is actually a bacterium that is usually fed corn to grow. This bacterium is known cause plant diseases!
Nate Bird
on 10 Mar 09I created a site for my Dad’s business and the by-product of that is a web application for his affiliates (300+ of them) that is now a small little revenue stream for me and a good useful application for them.
I’m now looking into other by-products that have come up because of this web site like internet marketing education screencasts. By-products for the win!
Shane Thomas
on 10 Mar 09It is posts like this that keep the SvN blog at the top of my feed reader!
I have been considering this issue for a while now, but you have really put it succinctly. In my artwork, there is considerable waste in the form of sketches, photos, conversations with models, concept art, etc. All of this could be repackaged for sale or as a driver for increasing exposure.
(Oh, and thumbs up to DHH regarding the “Charge for it!” posts… that is as big a problem amongst my artist friends as it is in San Fran web startups!)
Benjy
on 10 Mar 09An even more interesting situation is when the byproduct actually becomes more lucrative than the initial product. A company now known as APAC Customer Services started out as a way to use phone banks used for radio sales calls during off-hours, and grew into a huge outsourced call center company. I’m sure there must be other companies like this…
Cedric
on 10 Mar 09It’s great to see insightful/educational and optimistic web-oriented business posts like this in this down economy. Keep it up.
Austin Kleon
on 10 Mar 09Great idea, well-put. Reminds me of the cartoonist Lynda Barry, who sells her original calligraphic manuscript pages, sketchbook scraps, and “outtakes” on Ebay.
Happy
on 10 Mar 09Jason, I like the bold section headers in this post. It makes it easy to scan the post, get your overall meaning, and then dive into details section if desired.
Allison
on 11 Mar 09This was one of my favorite tips from FOWA Miami! Great concept and write-up, Jason.
BJ Vicks
on 11 Mar 09Don’t forget Twitter as an Odeo by-product.
Nick Lo
on 11 Mar 09I think we’re already doing this but not really thinking of them as by-products. Examples that come to mind for web designer/developers are reselling hosting space, email marketing, SEO, etc. Basically anything that we’d have to do anyway that can also become ways to generate income.
WestinConsulting
on 12 Mar 09Great article and something people need to be thinking about in this climate. What features can be extracted to increase revenue? How can things be re-purposed? Have you created anything to make your development easier that might help others?
Angel
on 13 Mar 09Stats is the more common side-product generated by programs that I’ve ever see. Stats are great, let you get a better informed view of your users, the use that is giving to what your code, and it can be even used in data-mining process to get more sales of the main product. As a software developer I think knowing all the data that my programs generate (even the one that doesn’t get show) is a key part of building more effective apps.
Olga
on 13 Mar 09That’s just what I’ve been thinking. If any team/company just writes the history on how they’ve developed, what they did – this could sell like hot pancakes. History’s repeating, so sharing knowledgel brings along new and new cycles of development for the audience, and growth opportunities for content authors, and it goes on like moebius band.
Collagist
on 14 Mar 09There are many stories of people working for software or product companies that converted their learning and experience it books or educational/learning material. And made money from it. Bob Walsh of 47hats.com and Avinash Kaushik of kaushik.net. Both Walsh and Kaushik wrote books after blogging for a long time in a niche.
Whether the efforts or deliberate or not it sure is a great idea to stop and think about how to identify the material, package it and sell it.
We have seen many tips that we offered our customers that we are planning on launching some of the techniques on a new website called domorewithyourpictures.com!
Simon Wilcox
on 16 Mar 09Flickr is the surely the ultimate example of selling your by-products. It grew out of an add-on to a massively multi-player online game, it was never the core business of LudiCorp until they realised they could make more money out of that than the core game.
S.
Tim
on 16 Mar 09Another by-product is job boards. You have one here, 43folders.com used to I believe and Joel Spolsky talked recently (can’t find the link) about how his came to life and how much it’s making his company.
I think job boards are a great example of by-products: you built an audience with your blog (that wasn’t even your product) and you can now sell job ads for this audience.
Saverio Mondelli
on 17 Mar 09This is exactly how we came up with Heartbeat.
We had a hard time managing all of our apps on the AppStore and keeping track of sales…a few weeks later we had a beta for Heartbeat and figured that other developers might like to use it too.
Great post.
This discussion is closed.