–

Achielles heel of Web 2.0 businesses

MM: You brought up something really interesting. The notion of managing transactions and customer relationships across a “monetization and maturity model. That tracks really well with another model that we use. An information maturity model for marketing operations.

More specifically, the thing that I find fascinating about what you just expressed… I find the notion that managing the transaction becomes the primary constraint on business growth and transformation. You might have a business strategy that could drive top-line revenue. But because you can’t manage the transaction or re-engineer the transaction, you can’t unlock that opportunity.

ES: No. We see that as the tragic flaw or the Achilles heel of a lot of these Web 2.0 businesses. There are some really unique ways of how they want to monetize their product or service. But it’s managing those transactions and managing those interactions in a scalable fashion, where stuff breaks.

MM: There was a great theorist—actually a master practitioner—Adrian Slywotzki, who’s written a number of books. But the one that really kind of lands that whole concept is something called, “Value Migration.” I think another one was called “Profit Zones.”

The idea was, he was the guy that really came out and started to develop a very comprehensive, robust description of what he calls a “business model,” or a “business design.”

He says that fundamentally, a business model is really about two things. One, your value-add. What you bring to a market. And value-capture. Specifically, the devices that you have for value-capture.

Specifically, he was getting into the idea that a lot of companies leave a lot of value on the table because they don’t have the appropriate mechanisms in place to capture it.

ES: I’ve never heard of him, so I’m fascinated.

MM: Specifically, in a lot of our interviews with other kinds of technical innovation leaders or thought leaders or market leaders, in terms of who are really driving transformational technology or disruptive technology to market, oftentimes it’s just that—what you said. “How they get paid.”

On an abstract level, according to your monetization-maturity model, at the end of the day, you’re selling a transformation of a business model. The ability to constantly re-engineer, tweak, refine the business model—with an emphasis on the value-capture.

ES: Yes. I gave a talk last week at the SaaS Summit. Very similarly, in a converging way, I concluded my talk with… Especially when you consider in the software space, which was the audience I was addressing, here.

Behind-the-firewall, on-premise providers tend to think of their software as their business. When you move to a service-provider aspect, your software is no longer your business. Your customer experience is your business. And your monetization mechanisms are your business. It’s a very different way of thinking.

MM: Yes. Almost a flat world-round world idea.

ES: Yes.

–