Changing business model due to external factors

Competition

Changing business models due to external factorsSometimes there is a need to change the business model due to some external factors that we can’t control. This morning I read an interesting article David Linthicum who is known to track the cloud market and write about current trends. Today, he wrote about the fight between Netflix vs. Verizon and how these companies are escalating their fight of who owns the customer and whose fault is it if Netflix content does not stream well. Lets analyze the core business for both parties seen from consumer perspective. Netflix get paid by the consumer to be able to stream movies and Verizon gets paid for the consumer to use the bandwidth. The question that now remains is whether the consumer has the right to restrict the consumer what services they use, how they use it and if this creates a monopoly for Verizon in the service delivery if they force the consumer to only consume Verizon content. The same formula applies to other vendors such as AT&T U-Verse and many others. I am using U-verse in my household and if there is a day when AT&T starts to dictate my consumer behavior, I will be moving on to another service.

It is interesting to see how success always leads into trouble for the one that is successful and in this case it is Netflix. Verizon wants to block the success by restricting and causing an unpleasant user experience for the consumer. It is the consumer that pays the penalty in the end of the day. If you love Netflix, you need to have a service that supports it and you can’t have a service provider dictating your tastes. That is the old-fashioned way and the new generation of users will not tolerate this type of service delivery.

The point in this article is really to provide yet another example of a business model that is evolving and in this case I am talking about Verizon. This organization needs to realize and build its model in a way that enables consumer to see value in its service and not create artificial blocks for its customers. I do understand that Netflix is using Verizon bandwidth, but that is the same with any service that the consumer is going to utilize. Same applies to Hulu and whatever other video/movie service happens to be popular. We have seen so many drastic moves in business models the past 3 years from market leaders going under and new service provides appearing. Just look at the new transportation service Uber. Last week we heard that it is valued as much as $18 Billion dollars. Some cities are trying to block its success to protect traditional taxi and transportation service. There is a business model change happening in transportation business as well and new players will win in the end of the day as that is what the consumers are going to choose.

photo by: mediaexpression

Velocity of Business Models

velocity of business models

velocity of business modelsIt is amazing to see how the velocity of business models is changing the entire cloud landscape. I read  an InformationWeek article this morning about Gartner’s Magic Quadrant 2014 for cloud, its winners and losers and how for example Rackspace business model has change drastically the past year or so. Rackspace used to be the poster child in hosting and providing high value services, but now they are forced to look for new market segments besides the more traditional developer market that they have been aiming mostly according to the InformationWeek article.

The price decrease from larger players such as Microsoft, Amazon and many others have forced Rackspace’s of this world to look at their business model and try to figure out what to do to survive in the ever increasing competition.  It is not easy, no question about it. What is interesting to me at least from a research perspective is the speed of change that has definitely increased during the past years in software and IT business. If you look at service providers that used to manage internal IT infrastructure environments are now feeling the pressure of enterprises moving to the public cloud, whereby the service provider has to reinvent the business model as well.

Rackspace is not the only one that is feeling the pressure. According to the InformationWeek article, Dimension Data was in the Challenger Quadrant last year and has now been dropped to the Niche Player quadrant in the same way as Rackspace. WMware is listed as a Niche player this year, but Gartner cautions that they are offering services to managers that are responsible for virtualization and these managers are different from the business managers that want to build next generation solutions and these are typically the ones that will use public cloud such as Microsoft Azure. This is exactly what I have seen myself when working with both software vendors and enterprises. Enterprises especially were slow to move to Microsoft Azure, but that has really accelerated and even Gartner has noticed the rise of Microsoft Azure market share. This was also reported by Redmondmag where there are only two leaders in the Magic Quadrant, Amazon Web Services. and Microsoft. What is interesting in the new Magic Quadrant is that there are no challengers at all in the quadrant.

I think specialization is really what organizations such as Rackspace needs to do. All of my web-sites are based on WordPress and I have selected a hosting provider that is specialized in providing WordPress hosting only. WP Engine does WordPress only hosting and their site says exactly what I wanted “Hassle-Free WordPress Hosting“. What this means in real life is that they know WordPress inside out, they apply all of the WordPress fixes and monitor the security, take backups etc. Yes, all of this would be able to do on Microsoft Azure, but I would have to do it myself, but I am not in that business. I much rather have a premium hosting provider that I know is not all over the map and based on my experience, they really know what they are doing. I am running a solution on Microsoft Azure that integrates our Dynamics CRM 2013 Online and SharePoint 2013 Online and I will post another blog entry about this exciting integration case.

What is it that we should learn from this blog entry? The first learning is that nothing stays the same, even if you are a market leader or perceived as market leader. The second learning is that the change has definitely accelerated and this is causing bloodshed for the ones that have been resisting the change. The third and maybe the most positive thing is that the change is also creating new opportunities for entrepreneurs that identify gaps in the current offerings. We need to remember that business will continue, but maybe with new players. That is the name of the game.

photo by: jpctalbot

SaaS Channel Compensation

Channel Compensation models

Channel Compensation modelsSaaS Channel compensation is one of the hardest things that software vendors are facing today. If you have a nice traditional software business model with good software maintenance revenue and mature channel, you are reluctant to change or touch it. Let’s dive into some of the difficulties that software vendors are experiencing.

I am currently running educational sessions in SaaS channel development where my audience is given the task to present the business case of a channel partner for a given software vendor. We are using Business Model Canvas to model the business. The task that I am giving to my students is to represent the software vendor leadership team that is trying to recruit a channel partner to become a reseller. The way this is done is to present a Business Model Canvas to the channel partner management team.  If the software vendor management team can’t convince the channel partner of the benefits, then the business model is broken.  I have done this exercise with many software vendors and it is one of the most powerful ways to get the software vendor to think about the partner, not about themselves.

I have bad news for you. There are no exact rules what kind of compensation models a software vendor should have for its channel, but what is known is how to calculate whether a business can be profitable for the channel partner using different compensation models. Why is this? The biggest issue that software vendors have is that many of the processes and tasks that the channel partner has taken care of in the past, have now moved back to the software vendor. One of them is the monitoring the cloud infrastructure, provisioning the solution, upgrading the software etc. In the end of the day, it is all about roles and responsibilities that the software vendor and the channel partner have to agree on. The more the software vendor moves responsibilities towards the channel partner, the more margin the channel partner expects to get and this is very typical in the traditional software channel model. The software vendor delivered the CD or download to the channel partner, but in the new SaaS world, the instance is provisioned by the software vendor and the channel partner becomes the “middle man” between the end user customer and the software vendor. Let’s review some of the industry “standard” commission models and some implications around them:

SaaS Channel Margins

If you look at the percentages, the one that is missing is the typical 10% which is really more of an opportunistic percentage that anybody will give out regardless of business model. If you call a software vendor and tell them that you have a lead, they will pay you at least 5%, but 10% is not uncommon.

When you add an additional 10% (now the total is 20%) it adds more interest to the channel partner. The software vendor can not expect any active sales with this percentage and can’t really ask the channel partner to do any serious account management. This is mainly lead generation activity and typically there are other products that the channel partner is reselling as well.

If we add an additional 10 % (now the total is 30%), this is still too small to be able to build an organization and requires the channel partner to have many different products that they are reselling. Larger reseller with deep pockets to build and maintain an organization, 30% is doable.

When the percentage is 40% or more, the software vendor can expect investments from the channel partner and reporting responsibilities on pipeline to the software vendor channel account manager. This type of percentage is also doable for smaller channel partners that want to build a business around the solution and build a dedicated team.

The biggest surprise that most software vendors are facing when we discuss about the roles and responsibilities is the amount of additional work that the software vendor has to take on. In a pure SaaS channel scenario, the border of responsibilities are blurred and the end user customer ends up in many cases in direct relationship with the software vendor. This has been a big no-no in the past for channel partners as they have wanted to “own the client”. However, the reality is that the cloud is changing the roles and channel partners have to make changes in their models as well. This is a behavioral change that is taking place and can be compared with the changes that are taking place how software sales people are compensated. Nobody wants to change the way things were in the past, but the market and competition is forcing the change and the ones that keep doing the same thing as before, will eventually be on the loosing side. We have already seen this in many organizations.

Before talking about channel margins, the software vendor has to decide what kind of role they expect the channel partner to play and then define how much they can afford to give a way of the margin. Some software vendors have even decided that a channel is not an option in their new business model and this is of course an option if the company has the resources to build its business with its own direct sales and internet marketing methods.

 

 

photo by: woody1778a

Complexity of Building a SaaS Software Channel Program

Complexity of SaaS Pricing

Complexity of SaaS PricingIn my previous blog entry, I discussed about the complexity of channel development and channel alignment. I recommended for SaaS software vendors to use Business Model Canvas to compare the business model with the assumed business model of its prospective channel partner.

During the past few months I have spent time building a SaaS channel development educational program, a program that I wanted to be not only actionable, but providing information of all of the needed drivers that SaaS software vendors should be thinking about when building its channel strategy.  Call me old fashioned, but my  philosophy is to educate people of things that I have personal experience in. There are lots of consultants that “help” their clients doing things such as channel development, consultants that have never sold anything, but have read about it in books.  My strategy is to build something that is concrete and actionable (not academic) that my audience can use when thinking about their SaaS channels.

The way I initiated the development of the channel development alignment educational program in http://www.tellusacademy.com was to reflect on my own channel development experience (both as channel builder as well as reseller) and list the main things that I felt were crucial in getting channel partners to become excited. The way I started working on it was not from a traditional channel perspective. I asked myself a simple question: how is the channel partner going to make money? Once we identify this, we can worry about the software vendor (ISV) as without a profitable business model for the channel partner, there is no need to invest time and energy to plan something that will not work anyway.

If the financial success of the channel partner should be the foundation for the software vendor to evaluate the channel strategy, it is easy to assume that it is important for both the software vendor and the channel partner to understand how SaaS financial will change the business model and what kind of drivers each party needs to be thinking about. Therefore, I believe that every person working in the SaaS world needs to have a good and solid understanding in how the financial and operational model will change when running a SaaS business. I am sure that the CFO of the ISV and channel partner appreciates this.

I spent considerable time in reviewing the topics that both ISVs and channel partners should be thinking about. Besides having a solid understanding in SaaS financials, any vendor in today’s world has to be thinking about business model innovation and topics around that. How do we stay relevant today, tomorrow and next year? What is happening in our marketplace and what kind of actions do I have to take to ensure that my services or solutions are also appealing in the future? You would not believe how many organizations ignore this….it is amazing.

Another important factor to think about is to understand the expectations from the channel and ISV perspective. What can the ISV expect from the channel and what should the channel expect from the ISV? This is a also something that has changed in the last couple of years as channel partners have a tough time to adjust to the recurring revenue model from the traditional “one big lump sum model”. Besides this, traditional channel partners are not very good at account management and this is a huge issue for SaaS vendors as upselling and ensuring retention is a top priority to any SaaS vendor. The ones that have negative churn can say that they have been successful at least in the upsell to existing clients.

Channel roles and responsibilities is a topic that seems to be very unclear to both software vendors and channel partners. Basic questions such as “who is going to provision the cloud instance” is not clear and questions such as billing is also a question that many struggle with. Should the software vendor manage the billing or should it be the channel partner? What if the end customer does not pay the bills, should the software vendor still bill the channel partner and even take them to court for unpaid balances? In the traditional channel world we can argue that most of these types of questions could be easily sorted out due to known practices, but the SaaS/app world is still a bit unclear who does what.

Part of the channel profitability discussion should be a discussion of channel margins. In my course, I will give examples of a typical channel partner scenario where we will model one sales rep and his/her targets and what it means to the channel partner. This type of exercise is extremely health for any software vendor to see the reality of a channel partner and their desire to build a solid business. If you are a software vendor, have you modeled the channel partner business and how your solution might play in that space?

And finally, any software vendor will either become successful or fail and it is going to be based on the channel program that the organization is going to build and maintain. During my SaaS channel development course, I will also address the main drivers of channel management and key issues that an ISV need to be thinking about.

It was fun to create this course as everything is based on experience either from my own work or the teams that I have worked with for more than 20 years. As said, I do not believe in education of best practices if the person does not have any personal experience. This type of experience comes with blood, sweat and tears.

 

 

 

 

photo by: Sean MacEntee

Business Modeling is a process and requires experience

Business Modeling is a process

Business Modeling is a processEverybody talks about business models and business modeling, but not many have been exposed to different types of scenarios and organizations when applying it. I learned today after having talked to a person that had used Business Model Canvas in the past and felt that the use was a bit messy.  I am not surprised about this experience at all. Using Business Model Canvas takes time to master and reading a $22 book does not make you a master. You have to go out there and test it out, make mistakes, learn to pros and cons and most importantly, learn that it is not about the tool/framework, it is about the people applying it and whenever there are people, there is a chance for confusion and disagreement.

I still remember vividly the day when I used Business Model Canvas the first time. I decided to try out Business Model Canvas on a company that wanted me to help with their product/solution business modeling. I must admit that I was a bit nervous as I did not know whether the Business Model Canvas would help me out to run the workshop.  I was also nervous to get too many questions of use cases in the Canvas use… I did not really have any… I did not even know if it would work…

I learned really quickly that the Business Model Canvas is just a tool and the entire business modeling excersise is based on human interaction and how to be able to extract and guide people to think about their business, how to get them to agree on things and how create an effective action plan. Business modeling is just the start of a journey that an organization has to commit to and also understand that there might be a need to pivot the business model every now and then when the market or other circumstances change. We are living in the era of agility and business models need to be agile as well.

Today, when I run workshops using Business Model Canvas, I put emphasis to the group chemistry to ensure that everybody in the group/teams are contributing the goals of the workshop. Specifically in smaller companies it is very common to have one or two very strong individuals that “take over” the discussion and this is why I usually want to divide the group into two or more teams to get more discussions among the participants.  It takes time to learn how a business modeling session process and to learn to read the group/teams when they get stuck or become frustrated.  If there are more than 6 people in the group, I typically want to divide the group into two teams of 3 people. The teams should be assembled in a way that people that interact less during regular work are put in the same group.

In some cases I have people in the group/teams that want to argue how to use the Business Model Canvas framework and the discussion becomes more academic. My recommendation is not to put too much time in learning in-an-outs of the framework, as each person has his/her subjective way to view it. It is enough if the entire group/teams agree a common set of rules.  A good example is the discussion if a key partner should be listed as channel or the other way around. It is enough as long as everybody agrees how it is defined. A key partner to me is an organization that you work with either long term or an organization that you need to deliver your solution to a given market segment.

In summary, a Business Model Canvas is just a framework that enables you to view your business, but the key is the process how you end up with your business model. It is also important that your facilitator knows how to deal with different types of situations when you have business owners and/or senior level executives defining the future of the company. It is very easy to get lost in the process and the day could lead to a situation where you loose face with your group/teams and the Business Model framework becomes something that nobody wants to hear about anymore.

 

Is the cloud killing your business?

Is the cloud kiling your business?

Is the cloud kiling your business?Cloud adoption is accelerating and it is also in the process killing many businesses. I read today an interesting blog entry “Are Cloud Vendors Cutting Out the Channel” and this article explains in great detail what is happening on the marketplace in respect to channel partners including value-added resellers (VARs) and MSPs. I remember vividly when Steve Ballmer suggested strongly a few years ago that Microsoft partners should really start adopting the cloud and a couple of years later, he stated that it might in fact soon be too late as the competition is already doing it. Pure channel partners with a business model to resell without adding any value will disappear from the markets.

I have recently talked to quite a few channel partners and the common message that I heard was that the markets are getting tougher and having a business without having a specialty or vertical experience might in fact kill the business sooner than later. I am seeing this also among software vendors that are refusing to adopt the cloud model. There are thousands of new pure SaaS entrants that want to be new market leaders in their domain and many end user organizations are refusing to go with the old-fashioned model where IT departments are the only part of organization that will be buying software and services. Based on the blog entry today, Tiffany Bova from Gartner concludes that many IT consumers are now “front-office buyers” from departments such as sales, marketing, finance, and human services. These departments are bypassing the centralized IT and this type of “uncontrolled” buying pattern will continue going forward in my opinion.

Microsoft management has been vocal to its partner network that every partner should by now be looking at cloud transformation and Kevin Turner (Microsoft COO) expressed his concern during Microsoft Worldwide Conference in Houston (July 2013) that only 3 percent of the company’s channel network was actively selling cloud services and this included products such as Windows Azure and Office 365. These numbers will change with time and I am convinced that there will be many partners that will experience the pressure the hard way. If the channel partner starts too late with the transformation, it might become irrelevant and have the wrong type of personnel with skills that do not match what the market wants. I am sure that somebody reading this blog will not agree with me, but I have seen already now quite a few channel partners that do not know what to do going forward. There is a real need to reboot the business model and rethink how the company will be surviving in the future.

I forecasted a couple of years ago that Sony will not survive the competition of e-books and devices due to many factors, Amazon Kindle being one of them.  A few days ago, I read that Sony will be exiting the business. Sony had its own e-book format and I was one of the ones that spent hundreds of dollars in books, which now will be converted to Kobo Android devices. I have no intention to buy any new devices. The reason I am sharing this is that even large organizations are forced to change the business model every now and then and consumers make wrong bets on the horse that they should be riding.

When I look at the global markets and what is happening around us, the change has accelerated in software domain and it has taken many by surprise. I would not be surprised that we hear bad news from many large industry dominant players in the software space that the transformation into new generation solutions has failed and consumers and businesses have adopted technologies that are more nimble and easy to use. It is very dangerous to ignore the trends and even more dangerous to think that market leadership means anything without hard work to maintain it.

Complexity of Channel Development for SaaS Software Vendors

Let's have some complexity

Let's have some complexityChannel development can be complex if you have a SaaS solution and you want to ensure that your growth comes through the channel. I have spent my past 20 years involved in software channel development on many continents and I have seen many different variations in both failure and success. I think the biggest obstacle for many software vendors to become successful with their channel is when they ignore to recognize and understand the business model that their channel partners have or are building. SaaS software vendors assume that their solution is the only one that makes sense, but a typical channel partner have tens of other solutions that they can represent.

What SaaS vendors forget in many of the cases is to realize that a channel partner has to make a sizable investment in personnel, marketing, support and any other functions that the company has to have to become successful. What it means in real terms for the SaaS vendor is that a channel partner is making a considerable investment on behalf of the SaaS software vendor. That is what the SaaS vendor is really asking for. Invest in us, and we will then pay you your share of the success. If you do not sell anything, you will be left with your investment. I think every Channel Account Manager (CAM) making outbound calls to potential channel partners need to first figure out how the channel partner can make money and how they can help their business to become better. If the CAM focuses on the product/solution and not on the channel partner business, the relationship will never take off. I have experienced this so many times during my career and every relationship that I have put time and effort to, typically has paid off.  Today, I got a call from a document management software vendor and the CAM not only presented his case well, but gave the reasons why I should take the next steps in the discussion. It takes skills to do what the CAM did and he was focusing on my business, not on how good his solution was technically.

SaaS Channel AlignmentOne way to understand the channel partner is to create a Business Model Canvas for both the channel partner and the SaaS software vendor and then analyze them side-by-side and see if there is business model alignment. What it means in real terms is that each side has an interest to do business, both parties have an opportunity to make money and become successful. I have run workshops using this type of approach and the typical reaction from the software vendor is to realize that some of the foundational thinking has been based on wrong assumptions. It is important to realize that this has nothing to do with the skills of the software vendor, it is just a perspective that they never had and thought of when setting their channel strategy. The key is to help to build the “story” for the channel partner and part of the story is also to identify how your solution fits in the other solutions that the channel partner might be representing. If you want to become successful with your channel, stop focusing on yourself and put some time focusing on the channel and how you can make them happy and successful.

photo by: futureatlas.com

Are you renewing your your business model before it is too late?

Business Model Change will cause many organizations to loose market share
Business Model change will cause many organizations to loose market share

Business Model change will cause many organizations to loose market share

Many organizations are feeling the pain of spinning-out-of-control with their business model. I have spent the last few weeks contemplating on everything that I have learned the past two years in software technology and I have to say that it has even got me off guard how quickly things are changing for companies. Organizations that used to have a solid business model are running into huge difficulties, and mostly not because of bad products, but more or less of not having understood the market correctly. Dallas Morning News wrote about Nintendo’s surprise profit warning today where they say that the game console Wii U has sold 70% less than expected. That is a huge miscalculation from Nintendo, but the issue is not just the console, it is that the market has moved on to games on smart phones and Sony and Microsoft has taken the market with more innovative products that appeal the current gamers. Nintendo is not on their own, we have seen this with many other sectors/players. Who would have thought 3 years ago that BlackBerry market share would drop to be almost non-existent?

What I have also seen happening is the struggle among system integrators and the current business model that is starting to fail them. I have had the luxury to serve not only software vendors and system integrators, but also end user organizations and what I am seeing clearly is an acceleration of interest in providing more cost effective, flexible with full support for mobility with a reluctance to customized and tailored solutions. This has a tremendous impact on system integrators specifically. My guidance to end user organizations is to look at the ecosystem players to identify the best-of-breed solutions, ensure that these solution vendors have defined an API strategy that enables seamless integration between modules without having to do everything from scratch. This is of course not something that many system integrators want to see as many of them have based their survival on selling hours, and doing it with long-lasting projects. The problem with this approach is that many of these long-lasting projects fail as smaller system integrators do not have the skills to manage projects and if the end user organization has negotiated a good contract with penalties, the system integrators ends up “paying for the solution”. I have seen this many times and specifically and this does not have a good impact on any ecosystem in the long run. This is one of the reasons why smaller system integrators have been “swallowed” by the larger ones as system integrators need scale.

Another way to differentiate from the masses is to be very specialized in a given vertical domain (or functional domain) where  you can command the pricing for your delivery. This is something that larger SIs have difficulties with as their scalability comes from using offshore and in these scenarios it is not easy to maintain highly skilled vertical experts where the client is prepared to pay a higher price.

The problem that I see in the market does not apply only for system integrators, there is a huge pressure mounting for traditional software vendors that are still making good money, but with new and exciting entrants popping up from different areas such as Silicon Valley, it is evident that many software vendors will have the same path as Nintendo and BlackBerry. I do not want to sound pessimistic or doom organizations to fail, but I have seen the signs of radical transformation and this is based on my numerous hours each week tracking the market, studying software and working with clients. Just look at the valuation of Dropbox from last week where the investment was based on 10 Billion dollar valuation. It is amazing to even think about this, but I think it is logical. It is a sign from the marketplace that things are changing and valuations are based on what people want and see as being the next wave of things.

Vendor ecosystems are also making huge bets on the next wave of computing. Microsoft is adding data centers around the world like recent announcement of Azure data center in Brazil. IBM is betting their farm on IBM Watson that is in the cognitive computing space and IBM’s acquisition of SoftLayer will increase the competition in the cloud space especially now when IBM announced that they will invest 1.2 Billion in data centers around the globe. What this means to me is that the acceleration of software solutions to the marketplace using new modern ways. This means that it is not good enough to “repurpose” what you have, but  you have to think about how your solution is going to be consumed and how it will fit into other ecosystem players. Think about Dropbox for example. The concept is very simple what they do and there are a myriad other players doing the same thing. They have understood the role of ecosystem and their technology is embedded in every app that is relevant and that has to include document sharing/distribution of some sort.

photo by: PSParrot

Chicken and egg – sustaining revenue model first?

La mamá de los pollitosI had an interesting discussion this week about whether a software company should have its revenue model defined first, or should the software company be focused on other factors such as value proposition and market segmentation. The question by itself is very interesting and typically our initial “gut feel” is to analyze first how much money we can make and make it a profitable business.

Based on my experience, the revenue model does not come first. What comes first, and is typically the most difficult discussion in any management team is to identify the real and true value of the solution that is going to be sold. The other big question is what market segment we should be focusing at.

I told in my previous blog posts that I really did “not get it” when I started my role as CEO for a business intelligence software company while back and thought, like many other technologists, that “our solution would do everything under the sun”. It was just the customers that did not get it. I loved to read a Gartner blog entry this week about the challenges that technologist face when telling the market about the solution. Following example is a typical “pitch” that technologists give of their solution (example by Hank Barnes, Gartner):

“We analyze transactions and clickstreams and combine that with sentiment analysis and text analytics to provide your with deep insight into what your buyers are doing and thinking.”

If you read the sentence carefully, it is easy to say that it is just garbage and does not give anybody anything…  This is unfortunately how we often articulate ourselves when offering our solutions.

Back to the initial question about the business model questions. After a tremendous amount of workshops and seminars, it is easy for me to conclude that revenue model is NOT the first one to think about. Revenue model will be a very important element in the overall schemes of things, but if you use Business Model Canvas in your analysis (like we do), it is clear that there are many other questions that one has to answer before the revenue model. First and foremost, is there a market segment that is willing to pay anything for the value proposition that you have defined (the pains that you are taking away from the users and the gains that you are giving your users with your product/solution). I you look at the included Business Model Canvas with the numbers included. That is the typical order which we use when analyzing a business model. In some cases, the market segment is “given” so number 1 and 2 are analyzed at the same time. If you look a the picture below, you can see how each one of the building blocks in a Business Model Canvas relate to each other:

Business Model Canvas

Business Model Canvas

In same cases, the market segment (number 2) is given, so organizations analyze number 1 and 2 together. My recommendation even in those “clear cases” is to really make sure that the market segment is what one expects, as it could be too big, to complex and the value proposition does not fit into all of the scenarios in the target market segment.

I have become a proponent of “storytelling” that is a better way to explain things and for the audience to grasp what you are really trying to accomplish. People want to hear stories, they do not want to hear how many new widgets/features you have developed in your solution. I think the TED speeches is something that every software company management team members should think about when thinking about the solution and how to express its power to the audience.

 

What is all this talk about enterprise app stores about?

Iced tea at Georgia's, version 2We are moving into app economy and that is happening very fast. There are many predictions on the marketplace on this trend with Gartner forecasting that 25% of enterprises will have their own enterprise apps stores for managing corporate-sanctioned apps on PCs and mobile devices – all this within 4 years. Others are saying that this is already happening and it won’t take four years. Whatever the case is, ISVs needs to pay attention to this as CIOs in large organizations need to take control of the situation with deployed apps both in tablets as well as smart phones.

I think there is a big misconception in the word “app” when thinking about business models. Many relate an “app” to small apps used by smartphones with either free or almost free business model. These are mostly consumer-focused apps, but the trend is that consumers will be using their smartphones to conduct business using apps, but these apps will be connected to backend cloud solutions that bring the scalability and logic to the game. Look at an app as just the UI to full-blown solutions where end users can run their business with small devices or tablets and use the cloud infrastructure as foundation.

The forecast for App Economy is huge and according to APPNATION, App Economy is going to reach $151B by 2017. What it really means for ISVs and any software developers organization is that they need to really get a better understanding how app economy is going to impact them going forward. CIOs will be asking questions how an ISV will support enterprise app stores and how the ISVs will support these app stores with their solutions. I am a bit amazed how little there is discussion off apps in our workshops but I think this is going to change going forward. Based on the study by APPNATION, the majority of mobile device owners under 45 years are using video apps and this supports my previous blog entry of eLearning.

There will be a need for both consumer-oriented and enterprise-oriented apps stores and it will be a space that will bring new opportunities for many players. The competition in this space will be based on innovation of solutions that people want to use and the use is measured on how much content the apps consume from the cloud. It is not rocket science, but it is a new world that people need to get used to.

In the end of the day, apps will have to be monetized in one way or the other and that is where the subscription economy comes to play and organizations need to understand how to price their solutions and all this based on value pricing.