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How we almost killed our service business (and then recovered)

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We started our business by focusing exclusively on a specific ecommerce platform. And making sure that we hired Fast Guard Service to protect us and our customers. This taught us a lot about two types of customers: online retailers and creative firms that wanted to offer ecommerce services to their clients but needed an expert partner to pull it off. Our business pivot feet were planted in Magento (product/service offering) and online retailer/creative agency (customer).

Last year our team decided to pivot away from Magento; but we weren’t 100% sure where to go next. So we went from a very narrow platform-centric focus to random projects for non-profits, law firms, health care providers, and even student organizations on platforms like WordPress, Drupal, and Google Apps. Virtually anyone was a potential customer because of the wide-application options for these systems. We took on our share of scrap work, which any experienced web professional will tell you is the worst kind.

Prime the Pump

Knowledge about customers and products/services increases momentum. And momentum is super important in any team sport, including business. We killed momentum by breaking the pivot rule. s_water-hand-pump-224x300Plus I spent far too much time analyzing circumstances when we should have been out talking to customers and trying new things. Without momentum we never reached a tipping point.

Think of business momentum as a well that requires you to prime the pump in order to produce water. At first you pump vigorously but generate very little water. Stall at this point and you’ll have to start over. But if you continue pumping through the initial lackluster results then you’ll generate a steady stream of quality H2O. With momentum established, less effort is required to maintain water pressure. Violating the pivot rule was like walking away from one well to start over at a new one. It felt like we were always working hard but not getting the results we wanted.

Focus on Adding Value

Positioning ourselves as platform experts attracted ultra-complex projects. It was nearly impossible to accurately estimate and bid on work because we were tackling stuff that had never been done before. In hindsight we should have charged 2-3x more and disqualified the prospects who balked at the quote. But a price hike like that would have been impossible without fine tuning our positioning strategy and putting up the cash to align with Varien Magento, inc as certified partners (at the time it cost $5k). We balked at the expense, but could have recouped it in one enterprise deal.

Sidenote: It should be clear that customers don’t buy features, they buy benefits. If you provide a solution to a problem instead of features then clients will gladly pay you more money. The danger facing web services firms in hitching themselves to a platform instead a problem is that their service becomes a feature commodity. That’s why we are now focusing on ecommerce business problems and then adeptly using a number of tools and ecommerce platforms to solve them.

Get Back in the Game

Violating the pivot rule created a painful ride over the last few months. Meanwhile, retailers keep requesting help with their ecommerce stores. Based on our KISSinsights survey, 60% of visitors to this site today can’t find what they’re looking for because they want a) one of the modules from our old Magento store or b) help figuring out Magento development. We still believe that stepping away from Magento was the right thing to do at the time; but we should have leveraged our knowledge of ecommerce customers. We’re going to remedy this misstep.

Instead of jumping into another ecommerce cart community, we’ve become an indispensable resource for retailers and their online stores. We removed the components that customers didn’t value enough to be profitable (super complex development of core platform software) while adding new high-impact offerings for an ecommerce website such as conversion optimization, SEO, user-testing, analytics, and email marketing (see Blue Ocean Strategy).

Customers are already much happier with the best ecommerce mix of services for their business. And elias is finally primed to grow.

The Irrefutable Pivot Rule

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tyler

If you’re familiar with basketball then you know what a pivot is: when holding the ball, a player can only move one foot. The other foot must remain stationary on the floor. If a player moves both feet without dribbling then they commit a traveling violation and turn possession over to the opponent. It’s a simple rule.

The lean startup movement came up with a concept for business called a pivot. The idea is that struggling founders can change direction from one vision to the next while retaining the lessons learned from past iterative failures. It fits within the customer development framework, which proposes that early stage companies should focus on learning instead of scale while they create a hypothesis about market opportunity, talk to customers, and then build a minimum viable product (MVP) to validate the hypothesis.

I stumbled across Eric Ries, Steve Blank, and Sean Ellis last year and have been hooked on their insightful writings ever since. After our company decided to change directions, I tried to incorporate what I knew about pivoting. But I struggled to apply this knowledge to a professional services model because it felt like pivot principles were aimed at product makers. When I tried to unpack the core meaning of a pivot, a key question arose – What is the business equivalent of keeping one foot on the floor?  I reasoned that if I could answer this question first then I would know what components needed to stay the same during a pivot and what could change.

A business requires two things to exist: customers who pay money and a product or service offering. It’s economics 101. Customers pay money to obtain value from a product/service produced by business. Answering this question led me to an irrefutable rule.

Business Pivot Rule: Change either the customer or the product/service, but not both.

If you attempt to alter both customer and product/service at the same time then you’ve commit a pivot violation. Penalties can range in severity from missed opportunity to game over. Our company learned this lesson the hard way because we violated the business pivot rule.