Category Archives: Finance
Despite the straightforward definitions of margins and breakeven analysis, the math that can go into profitably offering a product or service can be an unusual calculus. This post, originally written for the UBM Tech site, Business Agility, notes how businesses are finding ways to transform their products into services. Incorporating business process in the delivery, however, remains the true answer to the arithmetic of creating profits
Much of transformation has come courtesy of businesses attempting to build on the success of the open source business model. Many businesses have offered no or low cost software and applications. Offering services to maintain those applications generates revenue.
The end result is an increased dynamic of digital assets that were once passive tools. Websites are an example. Advanced techniques with programming language have changed websites from passive documents presented from a server to platforms that can provide simple services to customers.
Companies are scrambling to compete with those who have successfully adopted open source approached into their business model. The economics are still being studied, but most pundits agree that the trend will continue. Neil Gandel, a professor of Economics and Head, School of Government and Policy at Tel Aviv University noted on Vox, a Centre for Economic Policy Research (CERP.org) website showcasing global economic studies, that “many proprietary firms now use a mixed-source model…a model in which some of their products are proprietary and are distributed under traditional licenses, while some of their products are open source and distributed under an open source license. Such a mixed-source strategy enables firms to benefit from the advantages of both open source and proprietary development.“
One example of a business transforming its business model to include more comprehensive services occurred from a former grad school friend of mine. Garrison Atkisson, founder of broadAngle and a past Zimana client, emailed me on the change his company made from being a producer of a video platform to a broad provider of platform services.
“We started broadAngle in late 2007 with the intent to develop and market a product that helped corporate clients manage and deliver video content using a custom branded player. The economic crisis of 2008 made this very difficult for us. We found ourselves in a position where we needed to re-evaluate our strengths and the needs of the market to find a more viable business model. We had assembled a great development team for our own product development, and pivoting the business to provide their development services to our clients was a natural fit. It was much easier to demonstrate value with a services-based strategy that it was trying to create a new market for our product.”
Despite notable successes, the math of a business plus software is not a straightforward answer to success. Longevity and profitability lies in creating unique business process management practices that enhance the services that serve open source programs.
Developing the service systems can lead a business to providing even greater value than simply offering the product itself. Many experts, in varying degrees, believe such value is attainable. Jonathan Byrnes in his book Islands of Profit In a Sea of Red Ink notes that the “Selling more products can give a vendor additional leverage with customers, but selling the right related services can give vendor a new strategic position and a host of valuable benefits.” Indeed Garrison states that broadAngle has made such gains. “We’ve built solutions that integrate SaaS services to add customer relationship or salesforce management functionality to custom applications that otherwise would have been out of scope due to time or budget constraints.”
Businesses that incorporate business process management may want to examine its content management and business analytics practices to optimize service delivery opportunities. Doing so adopts the economic benefits of open source-based business model into the right mix of incremental related services that outweigh any potential initial costs.
Gaining more by adding the right business process management approaches is a math I can live with.
Original Post Date; September 9, 2008 (Now we know who is responsible for Excel!)
Every day there’s a new invitation to a network here in NYC. Some groups are “out of the wrapper, still have styrofoam peanuts in the nooks and crannies” new, others have been laboring online for years. Few have hit the sweet spot combination like The New York Tech Meet Up. Started only a few years ago, the numbers of registrants increases every year. In June 2009, the Meet Up had over 10,000 members. Held in the Fashion Institute of Technology (FIT — gotta love it!) Auditorium, attendees listen to speakers from every aspect of application development.
I was pleased to see the presentation by Dan Bricklin, founder of the first spreadsheet, VisiCalc. Now a spreadsheet does not sound sexy, but think about how much can not be achieved without a cell to hold important information (Update: Here is an All Analytics post “Don’t Toss Out Excel Yet” that notes how far Excel plug-in development has come). Zimana’s business, along with many other analytics tools, business firms, consultancies and organizations, rely on the ol’ spreadsheet as a starting point for data analysis. This movement owes much to VisiCalc.
But Dan did not bore the audience with just column-and-row talk. His autobiographical book Bricklin On Technology covers the early days of his start up and serves as a window into the early days of the computer industry. Bricklin spoke to the New York Tech audience about entrepreneurship, how many people are looking for the pot of gold, but should just try to run a solid business. Says Bricklin, “You’ll end up in an nice home, just focus on what you love to do.” I personally like that statement!
Thinking of an eCommerce business? Select a cart that makes digital analytic measurement easy to plan first!
I’ve made this chart of eCommerce shopping cart solutions available. Each offer different capability to integrate an analytics solution. Although some coding effort is needed in general, some solutions provide a plug-and-play capability. The chart includes a consideration of which kinds of banking/payment options are available, whether the sites include Facebook commerce option, and if analytics integration is available. Having these features in place makes sales easy to manage, and to permit an analytics tools to reveal when customers are dropping out of a cart…and not purchasing your product.
Having trouble trying to communicate a data-interpreted decision with the executive team? Or maybe a small business client is really resistant to understanding the need for adding analytics to a website? Many professionals run into trouble managing the expectations of others. The difficulty can be a particular pain when the situation applies to a client, be it corporate or small. I call it “client funk”. The following are sources of quick tips that can help analytics practitioners minimize “client funk”.
Michael Bierut at Pentagram presented before 300 creative design students and graduates at Galapagos Art Space in Brooklyn. The talk was sponsored by CreativeMornings, a designer forum based in New York City. His talk offered a balanced view of the client/designer relationship, stating the factors that make or break a designer’s success, as well as what makes a good (and bad) client. His intended audience are web designers, but the perspective is very sound for web analytics practitioners, and furthermore, any service providers who work intimately with a client.
For corporate environments, analytics practitioners must understand financial terms to convince managers and decision makers on analytics-related projects. To sway and convince project skeptics, three metrics must be kept in mind with every argument of a project’s merit:
- 1. The dollars needed for invest in the project
- 2. The revenue that can be generated
The third is a metric based on the prior two — return on investment (ROI).
This post on creating an analytics corporate culture (by Top Rank’s Jolina Pettice) offers more on how to convince executive management as well as best practices to establishing analytics as an integral part of a business.
You can also read Avinash Kaushik’s book Web Analytics 2.0. Much of his book addresses the challenges of working with various departments to create an analytics environment. For those with broader analytics application, there is another book, called Analytics at Work, by Tom Davenport and Jeanne Harris.