Verify business model resilience with SPACE

    Recently from colleagues from Callbackhunter I came across an interesting SPACE concept of checking the stability of a business model. Ruslan Tatunashvili simply and clearly tells how to seek balance . In this article, we tried this approach on website development. The concept is very simplified and does not provide answers on what and how to do, but it clearly shows where there is a bias that can lead to loss of control. The scheme is universal for any business. While reading, you can easily try it on yourself.

    SPACE concept description

    For those who are not familiar with this approach, I will give a brief description. Consider this picture. There are several circles on it (hereinafter referred to as orbits), which we will consider as intermediate points for understanding the concept.

    5 basic concepts - S upplier, P roduct, A the verage, C ustomer, E valuation - divide the circle into sectors. This is the SPACE (space) in which the business flies. If your points of movement (positioning points) are in the same orbit, then the flight and the subsequent acceleration will be successful. Otherwise, you will be stormy, which in most cases leads to loss of control.

    Supplier- this is you as a supplier of the product. Closer to the center is the type of supplier “surgeon” (before buying, the buyer takes a long time to prepare, but pays a lot, few specialists, etc.). In the middle - the therapist (the buyer came, consulted, tried, observed, felt better). There is a pharmacy in the outer orbit (came, got acquainted with the brief instructions, bought, took the medicine, felt better).

    Product is your product. What is he closer to? In the center of the circle is a compound product. For ease of understanding, imagine a custom-made kitchen (each project is non-standard, the customer makes a decision for a long time, the implementation takes place in several stages). In the middle of the sector are smartphones (bought, configured, studied the instructions, use). In outer orbit - I bought a product, put it and you get a profit.

    Average- the average cost of the product. From the highest in the center of the circle to accessible to most consumers in outer orbit.

    Customer - the number of potential customers. If there are a limited number of them, then your acceleration point is closer to the center. If your product is needed by a wide range of consumers (mass market), then you are closer to the outer orbit.

    Evaluation - making a purchasing decision. The decision in the central part of the sector is taken collectively, often in several intermediate stages. In the middle of the sector, decisions are made on the advice of friends or colleagues. In outer orbit, decisions are made spontaneously: if wanted, bought.

    Naturally, access to an external orbit is a mass market, quick turnaround and simple scalability. But going into outer orbit is not necessary. The main thing is that you are in the same orbit (on the same line). Place the dots on the circle and see what you get. As we work in the web development segment, let's see what happens in this market.

    Where are the web studios located in SPACE?

    So, to begin with, we will analyze the “individual website development” of the average studio into the product components. In the Product sector, website development is closer to the center, between mobile phones and the kitchen. The service provider (studio) by type of tasks performed is between the therapist and the surgeon. The price may vary throughout the sector (from the center to the outer orbit), but most often it is located in the half closest to the outside (there are more customers there). Customers of custom development are large and small businesses, there are relatively many of them. Consequently, the orbit of this sector is in the outer half. The decision-making method depends on the size of the business and the price, but most often it is a collegial decision.

    So it turns out that in an attempt to work as a surgeon in the mass market at low prices, when a decision is made by several people in several stages, we are trying to create a stable business. What stability can we talk about here? Therefore, most studio owners will say that a business called "Website Development" can be safely called risky and marginal.

    Such a bias is most often associated with the fact that the threshold for entering the market is low and a huge number of beginning entrepreneurs are trying to enter the custom-made market exclusively at the expense of price. The life cycle of such companies is very short, because This business model is very unstable. Further there is a division into 3 ways.

    The first way is to simply shut down the business, which most often happens in the web development sector.

    The second way is a price increase, specialization and quality service. Such actions allow you to balance performance, stabilize and grow, spinning in its orbit. Most successful studios look something like this (90% of the top 100 studios at cmsmagazine work with budgets starting at 100,000 rubles).

    The third way is the tastiest thing that attracts most web studios. This is the outer orbit. It is there that the mass market, quick sales and the opportunity for substantial growth. The closer our radius is to the outer border, the more attractive the prospects. Striving for an external orbit, you can not only create a balanced mass business, but also invent a new business model that will be to the taste of the market. This is how outstanding projects are born, and after a couple of months, competitors say: “How could we not think of it, it's that simple!”

    There are many examples of such companies, even in the Russian segment. company Callbackhunteralmost entered the outer orbit and aims to become the fastest growing company in the world. Other examples are AmoCRM, Livetex, SetUP, CallTouch ... They all grew out of web studios. Using the SPACE concept makes you look differently at your product and look for new properties to enter the desired orbit.

    WebCanape Position in SPACE

    The following illustrates our path 2010–2014

    Unlike most of the TOP-100, we did not go to the center. We are interested in the mass market. It is unrealistic to enter an external orbit with the product “Site Development”, but to get closer to it and put all the points on the same level was a task until 2015. The main goal is to enter the mass market of entrepreneurs in order to get many loyal customers for our other services.

    The most interesting thing is that despite the high competition in this orbit, the professional market for custom development is empty here. Only 5% of the TOP-100 studios work in the niche of budget sites.

    The most difficult part in this transition was to look at the service as a product and carry out the subsequent organization of production so that it was possible to service a large number of projects, ensuring low cost and high speed of turn-key project launch (take and use). I will not describe our steps in this article (its purpose is only to reveal the SPACE concept), but who cares, our path is consistently described in the blog .

    We wish everyone to find their orbit!

    Vasily Churanov and WebCanape team

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