In the last two posts (here and here), we wrote extensively about how the Old Economy way of doing things keeps power and wealth centralized, and how by contrast the cogs of the New Economy are creating the potential to make power and wealth more accessible to individuals and communities. The New Economy enables this phenomena because
(1) it has a tendency to distribute the means (to finance, create, and distribute products and services) to a wider swath of society;
(2) it removes, or diminishes, the role of the middleman,
(3) it empowers individuals to engage in peer-to-peer transactions that are often more favorable than typical client-provider transactions; and
(4) it allows the consumer of a product to collaborate with others in the production and distribution of that product.
In this final post in our three part series, we want to share with you how SolarDesignTool is trying to embrace the New Economy.
Empowering our Customer
Software development is expensive. Seriously, really expensive. If you’re a small company you are not going to develop your own enterprise level custom web application. But if you are a really large company, you will. And with that web application you’ll have an edge that will help you compete against all the small guys in town. With that magical web app, you’ll get more leads, provide quotes faster, and win more jobs. The software will also allow you to operate more efficiently, reducing the now notorious “soft costs” of solar, so you can offer better deals. Our goal is to empower the small and middle-sized contractor with the same kind of tools the big guys have, so they can instead compete on the basis of quality and craftsmanship, and keep more solar dollars in the local economy.
Making our Business Customer and Product Centric
We have adopted a customer-friendly, product-focused business model. What does this mean? Aren’t all business models customer friendly? No. In any company there are multiple stakeholders. You have customers, employees, founders, investors, suppliers, and so on. Each one of these stakeholders has their own set of interests. Customers want a good product at a reasonable price, employees want nice compensation and meaningful work, founders want to get through it without ending up in an insane asylum, investors want to make triple digit returns, suppliers want to get paid on time, and so on. In general the more stakeholders there are, the more compromises that need to be made. In companies where some stakeholders have more power than others, the business model will often favor their interests over the interests of others. In other cases, where participants have equal amounts of power, or even better, there is an alliance of interests, the business model is a win for everyone involved.
So what happens when a business model is too profit-focused instead of customer-focused? You get conniving arrangements aimed at locking customers into products, companies that attempt to position themselves as a middleman in transactions, and businesses that take advantage of customers who are dependent on their products by forcing them to pay exorbitantly high prices. In such cases, the customer becomes resentful of the company they are doing business with.
By contrast, a customer-focused business model is simple. It’s doing business the old fashion way: creating a killer product that customers enjoy using, and offering that product at a fair price. This is the road we decided to take. While this is the path many entrepreneurs try to take, it can be hard to stay the course, especially when it becomes necessary to raise large amounts of capital. The more capital you need, the more leverage investors have, and the more your attention gets divided. If a company depends heavily on cash from investors, the company may find itself in a situation where it has to adopt a business model that does not give as much to customers as its founders had originally envisioned. This is not to say that taking on investors is necessarily bad. However, as a general rule, it is easier to focus entirely on your product and your customers when you do not have to put a lot of energy into attracting new investors and keeping current investors happy.
We’re very happy we decided to take this route. Our focus is squarely on the customer and our product. We are very careful about the investors we take money from and take only what we need. We are cash-flow positive, have a community of happy and supportive customers, and are able to focus our attention on our product and customers.
It’s been a fun ride so far, and we’re expecting it to only get better from here. In addition to plans to add several new features, we’re going to be doing what we can to empower our customers and give them a more active role and stake in our company.