The idaconcpts way to solve a Harvard Business School Case: Collabrys, Inc.

As you may have read in the About the author section, I am enrolled in the Master of Business Administration at the Shidler College of Business at Honolulu, HI.  A very common question that I get all the time is:  “so…what do you do?”  Well, one of the most common assignments that we get is to solve business problems given a specific context.  This context is usally found within Harvard Business School cases.

So how do you solve one?

Let’s give it a try!

Today we will use the idaconcpts way to solve the Collabrys, Inc. case from the Harvard Business School.  Unfortunately I cannot post the PDF file because I would infringe their copyrights.

According to the Harvard Business School, this is the scenario:

The CEO of a two-year-old start-up must now decide whether to become a technology provider or a service agency. In a time of enormous uncertainty about the viability of various business models for Internet-delivered services and products, Collabrys has survived the burst Internet bubble by partnering with brand-name large companies and by responding to market feedback. This case traces the company from its earliest days and its original value proposition to a point at which the two very different future strategies appear feasible. Originally funded by venture capital, the company has changed key personnel, experimented with different distribution and partnering schemes, developed some sophisticated intellectual property, and raised a second round of funding.
Here is my take on the Collabrys, Inc. case:
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I.    Situation Analysis
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Collabrys, Inc.’s situation is a textbook example straight out of the pages of Steven Gary Blank’s book The Four Steps to the Epiphany because of the company initial focus on the product development process rather than on the customer development process.  During the dot-com era, and some still today, Internet startups fail to understand that the most common source of failure for startups is a lack of customers and not a lack of product development.  Collabrys was good at managing its product development, but terrible at managing its customer development.  Let’s review what is wrong with the product development process as a business model:
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Sales, Marketing, and Business Development in a Startup.  Power Point Presentation.  Retrieved on 09/18/08 from www.stanford.edu/class/msande273/resources/Blank%20presentation%20101403.pdf

Steven G. Blank , 2003, The Customer Development Model: Sales, Marketing, and Business Development in a Startup. Power Point Presentation. Retrieved on 09/18/08 from http://www.stanford.edu/class/msande273/resources/Blank%20presentation%20101403.pdf

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The flowchart  above indicates the main problem with using the product development process as the cornerstone for an Internet startup is that it does neither generate customer demand nor sales until after a considerable amount of cash has been spent on building capacity and marketing campaigns.  Even Collabrys’s MVP manager, Villapando-Ibalio, found it difficult to explain the potential for BrandPrint to potential clients and Collabrys always encountered the question:  “What can I do with BrandPrint tomorrow that is different from what I do today?”  Obviously the company failed to solve an existing problem because it was still using the same outrageous sales projections from its written business plan from the financing rounds and it failed to understand that what it needed to do is to provide customers a solution for a problem that was critical for them and eating away their profits.  Collabrys’ sales deteriorated over time because it was not able to answer the following questions:
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  1. What are their customer’s top problems?
  2. Does Collabrys’ services concept solve these customer’s problems?
  3. If Collabrys was to offer its services for free to its clients, will they still acquire them?
  4. If Collabrys was to charge for these services, does it have a repeatable sales model?

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II.    Problem Definition
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Collabrys does not have a repeatable sales model because it failed to address its potential customers’ top problems, its customers did not agree that its current service offering added value, and its customers were not willing to pay for a service that did not offer a solution to their problems.  Collabrys did not have a proven sales roadmap previous to product concept development, did not understand the sales cycle of its customers, and did not have a set of orders that validated its sales roadmap.  In conclusion, Collabrys had a financial model that did not make sense.
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III.    Analysis of Alternatives
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Collabrys alternatives all aim to the customer development process:
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//www.stanford.edu/class/msande273/resources/Blank%20presentation%20101403.pdf

Steven G. Blank , 2003, The Customer Development Model: Sales, Marketing, and Business Development in a Startup. Power Point Presentation. Retrieved on 09/18/08 from http://www.stanford.edu/class/msande273/resources/Blank%20presentation%20101403.pdf

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Unfortunately for Collabrys, the company had already burnt a considerable amount of its funding to realize that it needed to validate a repeatable sales model before it could build a whole company around it.  The two alternatives were either for Collabrys:
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1.    to become an analytics software company
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or
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2.     to use the technology in-house, but as part of a service provision.
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Either of these solutions would have to provide a repeatable sales model to essential clients with these characteristics:
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•    Has a problem
•    Know they have a problem
•    Has been actively looking for a solution
•    Has put together a solution out of piece parts
•    Has or can acquire a budget
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Given the previous communications with clients, it was clear that Collabrys needed to establish a clear difference from other CRM applications in the mind of clients and that Collabrys should not spend time focusing on groups that did not have a clear idea of their problem, did not actively look for a solution (as opposed to explore options), and did not have access to a purchasing budget at all.
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IV.    Recommendations
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The second alternative, to use the technology in-house, but as part of a service provision. provides the right approach through the search of specific answers for the critical questions:  What are we selling? What are its benefits?  Who do we sell to?  At what price?  The creation of  the Tiger Team should have been the starting point for Collabrys and the cornerstone of its business model, because it focuses on the prescribed customer development process of Blank.  The process of contacting all existing partners and 35 potential clients to determine the budget of clients, necessary client interaction (e.g. sales cycle), existing competitors, and price ceiling of clients, would provide Collabrys with a clear idea whether clients are serious enough to buy a service that still needed some tweaking.  The Tiger Team process clearly addresses the customer discovery and customer validation sections of the customer development process, which in turn would allow the company to set realistic year-one objectives according to its market type, position the company and service, and create repeatable, sustainable demand.
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By focusing on being an agency that provides managed solutions for companies during their product launch an introduction and targeting the sales process to brand managers (instead of interactive marketing managers, market research people, or advertising agencies) the company will be able to make more efficient use of its resources and channel management and sales personnel to profitable activities.
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This option is less likely to lead to either an IPO or sale of the company, but it provides a clear spending plan, establishes that the current team is right for this stage of the company and provides a clear sales growth plan.  The company would now have the right mindset and tools to establish the goals for the next twelve months.   A main concern of this recommendation is whether or not existing competitors can replicate Collabrys service provision, because there is not enough information on the case to establish a valid conclusion.
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What do you think? : )

Note: If you are a current MBA student and are planning to use this as a reference, go ahead! But please include me in your references section.

Damian Davila

Ideas and concepts from Damian Davila, Ecuatoriano thriving in Hawaii. Pro marketer and blogger. Find him at @idaconcpts on Twitter.

6 Comments

  1. Thank you for this excellent post. I would like to come back in the future. Thanks again

  2. hello, this is most useful.

    We are trying to prepare the case study HBS 9-296-004 “futures on the Mexican peso”.
    Any help you are able to give would be greatly appreciated.

    many thanks

    Sophie

  3. Aloha Sophie, glad to help. When is your assignment due? Let me see if I can get a free copy of the case. If you have it in PDF file, could you please send it to me at damian [at] idaconcpts #dot# com?
    Thank you,
    Damian

  4. Hi I am working with a group on Mexican Peso crisis too, HBS 9-296-004 “futures on the Mexican peso”, need to finish off very quickly, any help with it would be much appreciated. Thanks

  5. Dear Damian!

    Like many students I am working on the “futures on the mexican peso” case study.
    I would be really greatful if you could help me.

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