9. Business Model

The business model defines the relationship between the governing body and the operator. Its goal is to create a relationship that balances service provision with resource allocation. In defining this goal, do not confuse the purpose of a public service with its provision.[1] Former New York Governor Mario Cuomo once put it like this: “It is not a government’s obligation to provide services, but to see that they are provided.”[2]

So in deciding which type of business model works for a city, the key direct questions to look at are:

  • What is the total capital investment?
  • Who can most efficiently operate the system?
  • How can the operator be incentivized to provide good service?

The answers to these questions can then be expanded on in further detail:

  • What options are available for paying for the capital investment?
  • How can the best operator be courted and incentivized to provide the best user experience?
  • How can the operations be paid for?
  • How will this relationship be monitored and incentivized?
  • How often should this relationship be reviewed or changed?
  • What is the governing body’s preference for such arrangements?
  • What is an acceptable and successful relationship between the private and public sectors in providing a public transport service?
  • What is the financial, legal and legislative environment?

A business model is selected through refining the needs of the business. The process of doing this will narrow the potential model options and the selection will become more apparent, given the goals of the system.

[1] This thinking is ascribed to Milton Freedman by Stephen Goldsmith, professor of government at the Harvard Kennedy School and formerly deputy mayor for operations for New York City, in his article “Defining the Role of Government,” in which he argues that “public officials have to think creatively about how to ensure needed public services get delivered.” (Goldsmith, 2010).

[2] In the above article, Goldsmith queries what makes public transportation or public education “public”: “Is it the fact that public tax dollars support them, the fact that public employees provide them or the fact that the public is served by them? … If we can’t maintain government services in the traditional way, we have an obligation to look at how to make the market work better in other ways to serve residents … When thinking of how to do this, we need to think if there are private or nonprofit providers that could extend their service if government would reduce market barriers or provide subsidies.” (Goldsmith, 2010).

The figure below illustrates one of the aspects of the ‘Business Model’ chapter in the book Bicycle Sharing 101: Getting the Wheels Turning. It is meant to be viewed in the context of reading that chapter. 

CONTRIBUTE YOUR PEER REVIEW of this chapter. If you are an industry expert who has read the book, we would value your feedback.

FIG 1: The chart below shows where a PBS might fit in the range that encompasses social benefit and responsibility.

BS101 Business

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