What Is the ‘Business of Your Business’?

I often meet with entrepreneurs with some great product ideas. In fact, I just finished speaking with a NYC start-up with a really cool idea. Great founder.

I asked him about his potential product’s use cases. I think such hypotheses really drive strategy and go-to-market. One product can have multiple use cases, each of which can pull a company in the same direction, or, often, in conflicting ones.

So, hypothesizing up front about use cases, and rank ordering them, is one thing I often encourage entrepreneurs to consider during the seed stage. Funding experiments to test the top hypothetical use cases can even be the objective of an early-stage VC financing.

In the above example from this morning, the NYC start-up is thinking of making life easier for the high-end business traveler (I won’t say more than that in order to keep confidential the idea).

My questions were:

  • Is your value prop meant to make life easier for business travel–or, the person making that executive’s travel plans?
  • If the business traveler, is it a senior exec., a mid-level manager, or a junior employee?
  • Is that business traveler paying for your start-up’s costs out-of-pocket, or are those expensed passed on to a client?

These questions may sound minor, but, for me, they begin the mental journey to a go-to-market strategy.

For example, a classmate-friend from business school runs a very cool off-line employee rewards companies. He is a one-stop-shop service for companies looking to reward companies with items such as ski tickets, concert tickets, trips, etc.

In this case, you might think he runs a company that offers employee rewards.

Or, IMO, the “business of the business” instead is that he has built a machine that can cost-effectively market to regional sales VPs–and, his company happens to sell employee rewards. If that’s the case, you can view this company differently.

In fact, this company can then consider selling items other than employee rewards to those same regional sales VPs; in other words, “pack more SKUs” to a customer base.

Another example is Amazon.com. They started off selling books. Then, they moved to CDs (yes, I am that old). Then, they started to offer more products. Then, they opened an on-line marketplace whereby other retailers could list products on the Amazon platform. Then, they started AWS and offered a cheap cloud offer. Then, streaming, and in the future, Amazon Dash.

It’s a pretty interesting collection of businesses. They are a retailer of physical goods and digital ones, offering both a platform for e-commerce, as well as a robust and scalable back-end for cloud.

What is the business of their business? IMO, it is two, comprised of a virtuous flywheel involving both a customer acquisition machine (a B2C business) and a robust technology platform (a B2B business).

Together, as both grow, they provide synergies to each other. The more customers Amazon.com can get, the more it can get economies of scale in its back-end, which allows it to in turn lower prices for consumers and companies renting cloud services from it.

So, this is something I try to think about as I meet an entrepreneur: “What is the ‘business of your business’?”


Leave a Reply