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Enough With The Blades and Razors - Show Me Beard!

 

I’ve been meaning to write this blog for a long time. A conversation today finally pushed me over the edge. Hope you enjoy.

I was working with a product manager, helping him better understand how to prioritize his backlog for profit. As we discussed internal and external stakeholders, he told me about some of the key problems his customers faced. I know a bit about the problem domain, and I thought that his description of the problems made sense. As far as I know, CIOs and their staff still faced the challenges outlined by this product manager. (Focus on customer problems? Good).

Our discussion turned to his business model and how he was going to prioritize his backlog for profit. He proudly explained that his business model was a “blades and razors” business model—the server was the razor and the various clients were the blades.

“So”, I inquired, “If your basing your business model on blades and razors, where’s the beard? And what causes your client to need more razors?”

He gracefully recovered from the question, but in the end I don’t think his business model is a razors and blades business model. Just because you want recurring revenue (blades) doesn’t mean you can magically create it, just like my eight year old son, who thinks that shaving looks like fun, can’t magically create a beard.

In this case, and based on what I know after one brief meeting, I suspect that his primary value exchange model is a meter, where the meter counts the number of devices under management. More devices? More revenue, and, over time, greater profit. The profit engine, then, is not driving more “blades”—it is managing more devices.

My advice to you? Don’t even think about a “razors and blades” business model until you can identify the beard, identify the segments of your target market that want that beard cut, and create the software equivalent of “blades” that require frequent upgrades and/or transactional purchases to handle the beard.

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