Core business logic, part 2
Try writing yours after reading this
Hi all -
I got a lot of responses from last week’s post on the core business logic. Readers tried to write out their core business logic. I saw a few misconceptions pop up in the responses, so I decided to write an example version of the core business logic today.
What is the core business logic? I wrote last week:
I think of the core business logic as having four interconnected parts, naturally starting from the demand side:
What’s going on in the world that’s causing people to need to change.
The specific people who need to change, and what options they’re considering.
How your business fits into the options these people have, and why you’re different & better.
Therefore, what you are focusing on & building.
So let’s dig in.
Here is an example of the core business logic applied to a random idea I had while driving yesterday. Note that I’m not starting with the idea. So, you can work through my logic without being biased.
1/ What’s going on in the world that’s causing people to need to change.
Business software is getting more competitive as it gets easier for anyone to build a software product. This makes customer acquisition more difficult, and customer acquisition costs are climbing. Which means there’s a lot more emphasis on the activation and retention side of the business. Companies are making investments in customer success and loyalty; tracking, predicting, and improving retention; and leaning heavily on their product & growth teams to drive success and repeat usage.
When writing part 1, figure out how you’d test:
Is this a specific trend, not something too generic?
Is this a trend that causes people to NEED to change, vs. one that seems ephemeral & based on people’s whims / desires?
2/ The specific people who need to change, and what options they’re considering.
At some point, a company looks and sees early user churn. An executive flips out and assigns a growth manager to figure out how to make new customers successful faster. This is the growth manager’s #1 priority. Their objective is to increase the percentage of customers who achieve “product success” in Month 1 from 70% to 90%. Without engineering resources.
So they they consider:
Product walkthrough tools like WalkMe
Email sequences to drive early customers back into the product
Process changes like 1:1 onboardings for key customers
Specific product improvements to make early success faster & easier
But they aren’t quite happy with any of these. Product walkthrough tools and email sequences may help some customers, but they annoy a lot of others.
Process changes and product improvements are too costly. The growth manager has identified a few lightweight product improvements that the engineering team could make, but those won’t be implemented until late in the quarter, and results won’t come in for a few months after that. The growth manager needs to deliver results sooner than that.
When writing part 2, figure out how you’d test:
Does this person actually need to change?
Are these the real options this person considers?
3/ How your business fits into the options these people have, and why you’re different & better.
Finally, the growth manager hears about user success rewards: software that gives real-world rewards to users who start using the product. Like a tree getting planted when they complete onboarding. Or a donation to a charity of their choice when they hit the “success” metric. Or a branded tee-shirt when they upgrade to the annual plan.
The growth manager likes this option because it is:
Easy to trial / implement / track success at a small scale without engineering resources
More valuable & enjoyable to users than pop-ups and modals
Something they could see using in other parts of their revenue operations, such as in their sales process
When writing part 3, figure out how you’d test:
Am I lying to myself? Do customers actually see the world this way?
4/ Therefore, what you are focusing on & building.
So, if I were to go and build something like this, I’d focus on building something that’s simple to integrate and trigger in a product, something that growth managers can trial and prove results, and a LOT of content around rewards and retention metrics.
This product would win in the market by being simple to use for growth managers; drive real results; and have tons of easy-to-use integrations that provide different user rewards.
When writing part 4, figure out how you’d test:
Is it really clear what I need to do in order to be successful?
Does this create a sustainable business?
I came up with all of this while driving, so a product like this probably exists. But now you can see how I’d think through the core business logic