(and one case of a well-known brand that failed to stay relevant with the changing times)
Does your business model make sense? Just because it did at one time doesn't mean it still does now. No one understands this better than these five companies that went back to the drawing board to reestablish their claim on their respective markets, or those markets they broke into as a result of recognizing a different need that their products or services could solve. As MSPs, it may be time to rethink the way you do business.
5 Companies that Got It Right
The First Model:
Imagine a world without Super Mario Kart. I know, it's a bleak scenario, but one that almost became reality. Back in 1889, Nintendo was founded as a card company. In the 1960s, when cards failed to get off the ground, founder Hiroshi Yamauchi tried to diversify and penetrated additional markets, including taxi and hotel services. These were all unsuccessful ventures and with public interest in playing cards diminishing, Nintendo almost went under.
Everything changed when one of the assembly line engineers, Gunpei Yokoi, brought in a project he created called the Ultra Hand. After the game sold over a million units in Japan, Nintendo decided to target the toy market and rebranded as Nintendo Games. Eventually breaking into the video game industry in 1974, Nintendo released Donkey Kong and the rest was history.
As of May 2015, Forbes listed Nintendo's market capitalization at $22.2 billion.
The First Model:
You can't have a blog post about business model innovation and not include Apple. Contrary to popular belief, Apple was not the first to sell portable, digital music players. In the late 1990s, the predominant MP3 market strategy was to focus solely on the technology, at the expense of the user experience. For example, as described in a Macworld article, "[h]ard drive players held far more, but were relatively big, heavy, and they sported difficult-to-navigate user interfaces that did not scale well when scrolling though thousands of songs." Additionally, many of the existing products had a poor music-transferring process.
Then in 2001, under the leadership of Steve Jobs, Apple disrupted the MP3 market by launching the iPod. Apple didn't just change their own business model to stay relevant, but eradicated competitive offerings to dominate the space. Why was the iPod such a hit? Apple focused entirely on enhancing the user experience. Rather than clunky machinery, the iPod was small enough that you could fit "1000 songs in your back pocket." This combined with its simple user interface, revolutionized music technology and set Apple apart.
As you know, the iPod didn't just die out. Numerous models were launched and as storage capacity increased, device size decreased. Apple eventually reapplied the same simplified design principles and further addressed the market need for portable digital entertainment when it released the iPhone in 2007. Eight years later and the device is still going strong, contributing to 68% of Apple's quarterly revenue as recent as Q1 of 2015.
The First Model:
Before YouTube brought you videos of cats playing the piano and autotuned versions of viral videos, the startup was originally founded to be a video dating site called "Tune In Hook Up." Unfortunately, YouTube version 1 didn't receive any love and the founders were forced to reevaluate their business model.
Similar to Flickr recognizing users needed a simple way to share photos online, YouTube's founders realized their core business strategy would be developing a service that gave users a simple way to share videos online. Acquired by Google in 2006, it's also worth noting that the company pivoted again later when they decided to run ads and partnered with the likes of NBC, ABC and CBS to provide popular video content.
According to the site's press statistics, YouTube has more than 1 billion users. Additionally, three-hundred hours of video are uploaded to the site every minute.
The First Model:
Do you remember Palm Pilots? Before PayPal was an online payment service, the company existed merely to assist the transfer of funds between Palm Pilots. Insert facepalm meme. Yes, those gadgets were all the rage in the late 1990s, but PayPal would have gone the way of the Palm Pilot had it not adapted and built a business model with sustainability.
Just how did they do this? They realized that there weren't any existing solutions that made it easier to exchange money online and knew their technology was the answer. The company hit it big assisting eBay with online transactions before eventually going public in 2002 and being acquired by the company for $1.5 billion.
As stated on their website, last year PayPal earned $8.03 billion in revenue and processed 1 billion mobile payments.
5) Netflix vs. Blockbuster
For this last successful case study, it's worth juxtaposing against a failed version. Once upon a time, Blockbuster business was booming because the video rental market was booming. Then, Netflix arrived on the scene and brought the ease and convenience of movie home delivery. Whereas Blockbuster forced customers to drive out to their stores to rent a movie, with Netflix, customers could order online. When you factor in the rising infrastructure costs of accomodating the public's need to visit movie rental stores without driving too far, it's not hard to see why the business model did not have longevity. Then, there was the added hassle of having to return the movies after viewing them. Perhaps one of the main reasons Netflix dominated, however, was because the company didn't charge late fees and offered unlimited rentals. That was game changing. Over the years, Netflix, a company with $25.5 billion market capitalization, has continued to reinvent itself unlike Blockbuster, which went out of business for failing to adapt in time. As a monthly or yearly subscription video streaming service among many (Hulu, Apple iTunes, etc.) the time will come when Netflix must reinvent itself once more to maintain its competitive advantage, just as all companies - regardless of industry - will have to do. Still, the case study serves to remind us why it's important to be flexible and to always reevaluate the way we do business.
The New Business Model for MSPs
Just like the companies in the above examples, MSPs are at a fork in the road. Currently, you're unable to scale your business. You're already exhausting your technicians, and acquiring more clients means managing more clients. Where do you find the time or the resources? Not only that, but you also must differentiate your service offerings to maintain a competitive advantage in your local area. What's going to make you stand out from all of the other MSPs located within a fifty mile radius? Stellar, stickier, round the clock service.
In order to build more meaningful relationships with clients, look for an RMM solution that allows you to extend your IT support team by integrating with a Network Operations Center (NOC). Two of the main hardships MSPs are faced with are exorbitant labor costs and hiring and retaining talent. Does it make sense to staff a technician to monitor your clients' endpoints through the night without knowing their services will be needed? A NOC will do that for you at a cost you can budget for, allowing for more predictable cash flow. Similarly, with an RMM solution backed by a NOC, you don't have to stress about staff leaving to set up their own shop. Employee churn can happen at the worst possible moment when you need all of the manpower you can get. A NOC will always have your back, freeing up your technicians' time to work on higher value work and delighting clients with your consistent service. When things go awry, a NOC will detect it, often before the client is any the wiser.
If you're still solely relying on software automation, the time to pivot is now! Like innovators before you, you must realize that this way of conducting business can only hold you over so long before you reach a ceiling. You won't be able to simultaneously grow your business and scale your services. The secret to MSP success is to maximize margins by acknowledging that humans and tools are more powerful together. One of our partners, Scott Spiro of Computer Solutions Group, has championed this business model. Read how he achieved 250% growth in just thirty-six months after pivoting!
A NOC serves the MSP. A Help Desk serves your end clients.
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By Gretchen Hoffman
By Gretchen Hoffman