I was consulting to a client a few years back. The founding team was made up of 2 highly educated people. They had created a software, and were selling it to Banks. Despite their software product being great, the company was not being able to grow much since past 3-4 years.
It took us a while to get to the root of the growth problem: their business model.
Let me elaborate.
They sold their software as a service. They charged one-time licensing fee for the software, and relied more on the recurring revenues from services (such as installation, customization, maintenance, and support).
It was one of the founders who had coded the software product. He was a brilliant coder. He loved coding. That was why their product was much much better than competing products (from big Indian companies such as HCL, TCS) product.
However, both the founders were having to spend most of their time either selling their software or providing services (mentioned above) to their installed customer base.
Just imagine a highly creative guy, who loves coding, is having to spend bulk of his time attending customer calls and providing support. It is going to be a thoroughly draining experience for the guy!
You can only excel as an entrepreneur if you really enjoy doing what you are having to do on a daily and continuous basis…
Our recommendation to this company was simple: Change you business model. Become a products company like Tally; instead of being a services company like HCL. Focus your expertise on building and refining your product, and partner with system integrators/re-sellers to offer the required services to your customers. Go as per your DNA!
So, dear entrepreneur, what is in your DNA: Products or Services?
I have developed a very basic 3-question diagnostic that can be a good starting-point for your introspection. Below it is:
1. Are you an Introvert or an Extrovert by nature?
Introverts are more suited for a Products business. They gain energy being alone (or with a limited group of people), so they can better channelize their mental energies on building a product–either as a product manager or as a developer. Mark Zuckerberg is a good example.
Extroverts are more suited for a Services business. They gain energy being with other people, so they can better utilize their energy serving customers and building relationships. People who start up consulting businesses are a good example here.
2. Are you more of a Thinking-person or an Action-person?
A thinking-person is more of a conceptual guy. He likes designing and creating. A great fit for a products business! Bill Gates is a good example.
An action-person is more of an operational guy. He likes executing. A great fit for a services business! People who head BPOs/KPOs are good examples.
3. Do you think and decide Intuitively or Rationally?
An intuitive person decides without using any conscious reasoning. He goes by his gut feeling. This can be a great asset for a Products business, because there are so many decisions that go in the making of a product, that if you try to reason out your decisions, you will get slowed down. Keep in mind that, just as is the case with creating music or a painting, while creating a product often the right decisions will feel right, but it will be very difficult to articulate the reasons for that feeling! Steve Jobs is the best example.
A rational-analytical person decides using conscious reasoning. He goes by logic and evidence. This is a great asset for a business where you are closer to people. For example, a consultant needs to be able to articulate the rationale behind his recommendations. A services business is more people-oriented; and you will not be able to convince people–esp. your customers–about your point of view without giving them good reasons! Warren Buffett is a good example.
So, dear entrepreneur, what is your DNA?1