How to think about a business

Someone in an interview once asked me, “How would you describe the PagerDuty business?” So many things went through my head, but nothing came out of my mouth. I didn’t have a good answer. I mean, PagerDuty has a Software-as-a-Service business model, but that would hardly be a sufficient answer.

Since then, I’ve thought a lot about his question, and what the best framework is to answer it.

The framework I ended up finding actually comes out of HBS. They used it a lot for an entrepreneurship class I took.

Here it is:

CVP = Customer Value Proposition: How does the company drive value for its customers? What unmet needs is the company addressing? Slack’s value prop is that they make people more productive at work. And Uber says it’s the smartest way to travel. In a nutshell, what is the company in the business of doing.

TOM = Technology and Operations Management: These are the things that need to be done to actually get the product out there. For none tech businesses, this can be big piece, as you could be working with distributors, retailers, and other third parties to get your product out there. For SaaS businesses, I think the answer is really just AWS.

GTM: Go-to-Market: How are you going to get customers to the top of the funnel, through the funnel, and even loop back and repurchase. This includes marketing, partnerships, distribution, scaling, and sales.

CFF: Cash Flow Formula: How will you actually collect money? Per user/per month, or will you use service contracts? Is a franchisee involved? Is someone else getting a cut? These a important questions!

I personally think this framework is very helpful when thinking about any type of business holistically. But who knows, maybe I should’v just said, “SaaS” when that question came up.