What it Means to Be Ops Intensive in Business

ops intensive business operations biz ops

As the saying goes, the true sign of an intellect is the ability to hold two opposing ideas in your mind at the same time without going crazy. Well, SF surely pushes one's ability to hold a multiplicity of “narratives” that violate in your head at the same time. 

One that I have been caught by recently is the lack of consistency on “operations intensive businesses”. The term rightly describes business models with large on the ground operations teams that are needed to spin up a market playbook. The recent managed marketplaces that take on the logistics needs of customers fit in well with this. 

The term underlies the growth in managed marketplaces but it mis-states the “service intensiveness” in most other business models. Recent analysis has shown the % of revenue from services at mid-stage SaaS companies is 50%. If SaaS companies are making most of their money in hands-on sales engineering, integration and service delivery - is that really such a contrast to the ops intensity claimed to hold back managed marketplaces? 

The issue is not in the semantics of what is ops or service intensive and what is not. The issue lies more in criticisms of managed marketplaces as too ops heavy. When in-reality, the success stories across managed marketplaces and SaaS are down to well executed, high touch service whether matching supply and demand on a marketplace or implementing and running the software for a software sale. 

Maybe we should care less about the “intensity” of the ops or service delivery and more about the moat dynamics proffered by filling the ops or service gaps well. For example, a managed marketplace in repairs and servicing that takes on the challenge of matching the two sides of the market can then offer warranty with lower repair costs than any other repair provider. 

Or, a BI tool that wins on service delivery to do the hand-wringing of setting up ETL pipelines, data warehouse set-up and cleaning up the data; that company has their code and expertise up and down the organization. The switching costs have jumped as a result. Founders who look down on SaaS companies with high service revenue %’s are ignoring the great chance in increasing switching cost and through it driving up their moat. 

I don’t know the right percentage of revenue from service makes sense. But the exact percentage matters a lot less than what you get for your service revenue. If done well, you win customers for life, strong referrals and build out your moat by driving up perceived + real switching costs. 

So, next time someone says “oh that model is super ops/service intensive”, ask “Does that let them get a position in the market nobody else has?”. 

As we have seen now a handful of times, these service and ops costs tend to go down with time, and in their wake, the moat dynamics tend to stick.

The Lean Startup Life Media Network Newest Blog Posts: