You see the opportunity for a new business model. Great. But are you aware of all the changes that go along with it?
I recently had lunch with one of my favorite people, someone who has been the catalyst for growing his company's revenue 4X in just over 3 years. It's a private company and so I can't share actual revenue but we are talking single-digit millions to double-digit millions. And, they maintained/increased their profitability during this same time period. (In other words, they did not buy their revenue.)
As a 14-year-old company, they have plenty of entrenched processes that support their business, including a very traditional sales method: They are an outbound cold-calling machine. They are so adept at this approach, in fact, that other local companies come to them to learn how to do it.
To support this sales machine (and the revenue momentum it's responsible for) they have an internal HR/recruiting staff that follows a familiar, old-school model, targeting and hiring high-GPA recent college graduates from around the nation. It's also worth noting that a critical component of their product suite is software, and their development process follows a waterfall approach on older technology platforms.
By now you should get the picture: They have a traditional operating model built on standardized sales, recruiting, and product development. But that's about to change ,and change in a big way. I am so excited for them.
Here's why: A number of years ago a colleague of mine coined the term "data exhaust" which refers to the data that is collected as a by-product of your primary (probably software) business. It was a big deal back then and has become an important part of many business models today. These guys are no exception.
Recently they decided to completely change the way they engage with existing and future customers. They will give their base product away for free as they move from software as primary model to a data as primary model. They already have more than 1 million customer data points. I imagine they will easily triple or quadruple this over the next year. They are going to crush the data exhaust opportunity.
Sounds great, right? Probably. Maybe.
Here's the rub: As they developed the new strategy they also realized that a basic culture shift has to happen to support it. Whereas last month they monitored metrics like calls per day per rep, number of live touches, and sales conversions (the artifacts from a traditional software sales model), now they will have to focus on inbound web traffic, free or trial sign-ups, data exhaust per customer, and upsells to more robust software tools.
They are moving from a sales culture to a marketing culture. It is completely different. Like, night-and-day different. They will need different people. They will need to establish different goals. They will need to embrace a different rhythm in their business. Product development will change forever.
CHRIS HEIVLY: is a managing director at The Startup Factory, a seed-level investment fund making 10 to 14 new investments per year. In addition to TSF, Chris is the founder of the Big Top Job Fair and a national writer and speaker about start-ups and start-up communities. @chrisheivly