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Extreme Business Modelling

An Exercise: Extreme Changes in Key Business Plan Variables

Hatching a new product strategy? Writing a business plan? Developing a new product? If you're faced with formidable challenges or hitting a mental roadblock or two, try (as an exercise) modulating your key business variables to the extreme.

This exercise will either (1) make your business plan stronger or (2) you'll discover a new area to exploit.

The exercise can best be illustrated by some classic business execution roadblocks and how they were surmounted by changing a key variable in the business plan (who you sell to). Both SuccessFactors and MySQL AB chose a radically different approach for the software they market. And both were/are very successful for that decision and, more importantly, for great execution on that decision.

Roadblock #1: Too Many Companies Selling to VP HR

Let's say you've developed a new piece of software that automates employee reviews and status reports. Trouble is there's dozens of software packages that do the same thing. You may have a cost advantage, because you're deploying in the cloud, but you can't change the fact that there are dozens of HR Automation vendors trying to get the VP HR's attention. So you change a key variable. You say "what if we could make this important to the CEO?". You then focus on mapping your solution to solve a large CEO problem. In your research you discover that there is no CEO on this earth who is entirely satisfied that their rank and file is aligned to the corporate goals. Bingo. You've nailed a CEO problem. You've changed a key business plan variable in the extreme. You're not selling to the VP of HR anymore. You're selling to the CEO.

This is exactly what SuccessFactor's breakthrough market idea was. And it's working. Take a look at their sales and their market capitalization. By changing a key business variable, to the extreme, they have created a new category of software called "business execution software".

Of course I'm making SuccessFactor's success sound easy. I have no inside information but you can bet it was no cakewalk.

Another Classic "Yet Another Vendor for X Problem"

It's 1995 and you have an idea for a new database. That's crazy, right? There are dozens of database vendors. And you've got an 800 lb gorilla named Oracle, not to mention a few 500 lb gorillas (Sybase, Microsoft and IBM). As such, there's no hope of selling to the CIO or the VP of any division in a company (because they're already being wined an dined). So what if you make your product free. Would that work? You'll still strike out when selling to those folk because nobody will believe you.

MySQL faced exactly this problem. But the internet was evolving rapidly at the same time and they could easily make their product available for download with a quasi-open source license. But they did more than that. They supported the hell out of if (leveraging email to do so). The key variable they changed was that instead of selling to the CIO or the VP of some division, they "sold" (the product was free) to individual developers who were searching the internet for a database the could use for a specific (typically internet-related) product.

I want to stress that it was more than just the free price tag that made MySQL attractive. There were a dozen other factors like ease of use, integration with other languages, support for MS-Windows, Linux, SunOS, and Apple OSX, to name a few. (This is why they ate the lunch, so to speak, of their major open source competitor, Postgres).

They key variables, as I see them, are:

• Cost of marketing
• Cost of labour to build software
• Cost of hardware
• Speed of hardware
• Who you're selling to
• Technology platform choice
• Switching cost
• Vertical industry knowledge

Play with these variables.

One company I worked, InSystems, created a document generation platform that was far more powerful than your average mail merge feature within a word processor. If they would have gone to market with as a horizontal document generation solution, they would have lost. Instead they focused on particular pain within the insurance industry.

There are dozens of more examples.