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El blog de Mikel Niño
Industria 4.0, Big Data Analytics, emprendimiento digital y nuevos modelos de negocio

Product sale VS Service provision: how do you want your startup to grow?

The dream of every digital entrepreneur is to be able to build a product that "works by itself" and generates recurring revenue without involving a significant dedication from the entrepreneur (at least beyond a minimum attention for customer service and product maintenance). Besides, a "thin" organizational structure allows us to reach more markets without making huge investments in international presence, therefore it looks like a perfect combination. But, is it really that simple to achieve a sustained success over time with that strategy?

If we focus too much in an automated product that involves no close contact whatsoever with the customer, as David E. Weekley very well points out in this interesting article, we risk falling into a competition for "who offers the same at the cheapest price", because the customer won't perceive any real difference among providers, except for the price tag. Given that we all know which "magical price" our customers are going to prefer (above all in the digital world), one would say that this trend forces us to offer something that adds value to the relationship with the customer, therefore enabling us to become a trusted partner and to get out of the "commodity zone" (something similar to a "friendzone" for digital businesses :-) ).

It seems clear that a methodology like customer development, by its own nature, leads us to establish a trust relationship with our customers, built along this co-creation process, which gets us closer to being considered a trusted partner who offers them an added value just for being us. On the other hand, if we want to maintain the same strategy with more customers and markets, that forces us to have a heavier organizational structure (because that shared value with the customer is not going to be created without having real people building that relationship), therefore complicating our chances to scale.

Thus, we face a difficult choice when designing the strategy for our digital startup. Shall we enter the frenetic race for a product whose market can grow at a big scale, but with little to no defense against other solutions that offer the same at a cheaper price (or even for free)? Shall we leverage our value building in a market that knows us more closely, which forces us to have a structure strongly oriented to that "trusted partner" profile, but also supposes a handicap to scale in the future? Or -what might be the key-, is there a strategy which combines the advantages of both approaches?

[Haz clic aquí para la versión en español de esta entrada]

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