Business model: Sell component or complete solution?
I've working for a product (component) that need to integrated with other software (market: other software developers) for almost a year, to be honest selling this component is not easy, so as a startup company, I need to get sales as fast as possible to get more working capital to the company.
So I deciding to develop a 'simple' complete solution that can target end user.
I need everyone advice whether I should stick with the original plan to continue the component development or postponed the component development and start complete solution development.
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These questions are hard to answer because of the lack of details. Is the marketing/sales hard because you have bad marketing/sales or the market? What does the product do? Would consumers really want it? – Chris Kluis 13 years ago
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I want to be specific, my component is a document viewer, and my solution will be a document sharing portal (similiar to scribd.com but for enterprises). – Jazar 13 years ago
4 Answers
The inherent challenges of self funded start-ups might seem like curses - but in the long term those curses can actually be blessings in disguise. And I think this might be the way it is in your case.
Since you are just starting out and need money coming in now, you're forced to give the customers what they want. Few things are more important in business than making sales and giving customers what they want. If you find it easier to sell a complete solution, and you can build that solution, then I think you should do it.
BUT... don't quit selling your component. Sell both, and keep the money coming in.
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+1 I agree. When starting up you _have_ to accept and embrace the fact that your end product may not be exactly what your original idea was. What you end up is often much better. – Michael 13 years ago
As @Chris Kluis says, it's kinda hard to answer this without more details.
In general, all businesses need to have a value proposition that customers will pay for. There are plenty of component models that work as long as the component solves your customers pain.
In terms of marketing, your best bet would be to co-market with the company that builds the package you plug into (if that's possible) or bundle it with another plug in that has traction.
Either way you go, you must get it crystal clear in your head what customer need you are filling. If you nail that, then the rest is getting the word out.
If you nailed your product, then you have a marketing/sales problem. There are several strategies to improve your marketing presence so that customers get to know you. For example, have you
- Been reviewed on a blog or site that caters to your target market
- Regularly blog about the problem you solve and give customers needed advice
- Co-market with complementary products for deeper reach
- Provide a free version to try
- Have testimonials from users say how great your product is
- Give deals to existing customers who refer more customers
- Give your plug in away for free to needy organizations (assuming you can do that)
These are only a few ways to generate buzz. If you are not doing any, that before launching into a huge new development effort, try a couple and see what works. Good luck.
As others observe, there is no easy answer, but one of the resounding themes of the Business of Software Conference 2009 was that the real value is in approaching your customers with a "complete solution" rather than point products.
In a self-funded startup this is of course easier said than done. I tried to find useful material from that event - Don Norman's talk at the event was very interesting and quite relevant to this question: see here.
As a small start-up selling to a big company I would propose that you will never effectively sell a component or a product. You will have significant opportunity if you can sell a solution to a problem.
The issue is not about a component or a complete integrated solution. This is a false dichotomy. There are tremendous solutions which are a piece of the overall solution, add functionality to a dominant market player, resolve a ongoing challenge customers have using as a specific product -- but they are not sold as a component, they are sold as a solution.
When selling a solution -- mission creep is a black hole for start-ups. As someone very engaged in the challenges of the target customer you see how everything is interrelated. And the need for the "comprehensiveness" of the solution continues to grow. And include more and more fixes, features, and components. Resist the pull -- focus on the solution which is the greatest pain that presents you with the greatest opportunity.
Identify who experiences that pain -- and how you can be in front of them with the solution when they are experiencing the problem. Solve it and you will have a platform for growth.
