Verifying Business Model Resilience with SPACE

Recently, from colleagues from Callbackhunter, I came across an interesting SPACE concept of testing the sustainability of a business model. Ruslan Tatunashvili simply and clearly explains how to find a balance . In this article we tried on this approach to the development of sites. The concept is very simplified and does not give answers as to what and how to do, but it clearly shows where there is a bias, which 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 here. There are several circles on it (hereinafter referred to as orbits), which we will consider as intermediate points for understanding the concept.
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5 basic concepts - S upplier, P roduct, A 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 is you as a product supplier. Closer to the center is the type of supplier “surgeon” (before buying, the buyer prepares for a long time, but pays a lot, there are few specialists, etc.). In the middle - the therapist (the buyer came, consulted, tried, watched, felt better). In the outer orbit, there is a pharmacy (came, got acquainted with brief instructions, bought, took medicine, felt better).

Product is your product. What is it 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, implementation takes place in several stages). In the middle of the sector - smartphones (bought, configured, studied the instructions, use). In the outer orbit - bought the product, set and 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 the outer orbit.

Customer - the number of potential buyers. If their number is limited, 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 purchase 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: I wanted it - I bought it.

Naturally, access to external orbit is a mass market, fast turnaround and simple scalability. But to go into external orbit is not necessary. The main thing is that you are on the same orbit (on one line). Pivot 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 in SPACE?

So, to begin with, we will analyze the components of the “individual website development” of an average studio. In the Product sector, website development is located closer to the center, between cell phones and the kitchen. The service provider (studio) by the 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 nearest to the outer side (there are more customers). Customized customers are a large and small business, 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 the decision is made by several people in several stages, we are trying to create a stable business. What kind of stability can there be? Therefore, most studio owners will say that a business called “Website Creation” can safely be called risky and low-profitable.

Such an imbalance is most often associated with the fact that the threshold for entering the market is low and a huge number of start-up entrepreneurs are trying to enter the market of customized development solely at the expense of price. The life cycle of such companies is very short, because This business model is very fragile. Then there is a division into 3 ways.

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

The second way is the rise in prices, specialization and quality service. Such actions allow you to balance the performance, stabilize and grow, rotating in its orbit. Most of the successful studios look like this (90% of the studios from the TOP 100 at cmsmagazine work with budgets starting at 100,000 rubles).



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

There are many examples of such companies, even in the Russian segment. Callbackhunter has almost reached external orbit and is set 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 concept of SPACE makes you look at your product in a different way and look for new properties to reach the desired orbit.

Position of WebCanape in SPACE

Below is our path 2010–2014.



Unlike most of the TOP-100, we did not go to the center. We are interested in the mass market. Going to outer orbit with the product “Website Development” is unrealistic, but to get closer to it and dot all the same level - this was the task until 2015. The main goal is to enter the mass market of entrepreneurs in order to get many loyal customers for the rest of our services.

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

The most difficult thing in this transition was to look at the service as a product and carry out the subsequent organization of production so that we could serve a large number of projects, ensuring low cost and high speed of launching turnkey projects (take it and use it). I’m not going to tell our steps in this article (its purpose is only to reveal the concept of SPACE), but to whom it’s interesting, our path is consistently described in the blog .

We wish everyone to find their orbit!

Vasily Churanov and WebCanape team