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.
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.
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.