Harvard innovation lab :       Michael J Skok :           Startup Secrets :   Business Model HiHi    Harvard innovation la...
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Business ModelHi                                        ...
Harvard innovation lab :         Michael J Skok :                     Startup Secrets :                 Business ModelHi  ...
Commerce Innovation. Not Infrastructure.
Forward-Looking StatementsThis presentation includes forward-looking statements. Demandware, Inc. (“Demandware” or the “Co...
Demandware Is at the Confluence ofThree Significant Markets Global eCommerce                                              ...
Global Retail Market Shifting from Offline to Online                                                eCommerce             ...
Demandware Delivers The Best of Both WorldsBuild and Run Internally              Outsource / ASP     The Pros:            ...
Demandware – Business Model Elements   CORE value ?   Multipliers ?    Multipliers:                     • Increase reven...
The Demandware CORE:SaaS enabled Commerce Innovation Initial “Table Stakes”       Today‟s Differentiators                 ...
Demandware business model– simplified summary of value creation & capture…   Create: Development plus LINK partnerships  ...
Demandware LINK - Multiplier AND Lever                                                        LINK Technology             ...
Demandware: LINK program   MULTIPLIER    – Creates whole product – fulfilling value proposition    – Extends whole produc...
Harvard innovation lab :       Michael J Skok :                     Startup Secrets :   Business ModelHi                  ...
Leading Brands Choose Our Model                                                             517                           ...
Net Result: On-Demand is in Demand!                                                         Sept. 30, 2012                ...
Revenue Growth MomentumAnnual Revenue Growth                             Nine-Month Revenue Growth$ in Millions           ...
Target Business Model                         2010   Q4 2010   2011         Q4 2011                 Target   Revenue      ...
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Business ModelHi                                        ...
Harvard innovation lab :       Michael J Skok :           Startup Secrets :   Business Model HiHi    Harvard innovation la...
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Game Changing Business Models - Case - Demandware - leveraging SaaS to create a model for innovation and shared success with customers

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Demandware is presented as an example of a company that leveraged it’s SaaS technology disruption with a fundamentally different business model to it’s competitors, creating innovation on demand for it’s customer and making partners out them with a shared success model.

This is part of the workshop on Game Changing Business Models - itself part of the series on Startup Secrets, by Michael J Skok on how to get competitive advantage as a startup.
Michael's slides are the framework for the workshop, and are NOT self contained. For fuller coverage of the slides, visit Michael's website www.mjskok.com

Published in: Technology

Transcript of "Game Changing Business Models - Case - Demandware - leveraging SaaS to create a model for innovation and shared success with customers"

  1. 1. Harvard innovation lab : Michael J Skok : Startup Secrets : Business Model HiHi Harvard innovation lab #innovationlab @mjskok #startupsecrets www.mjskok.com START UP Case in point: Demandware SECRETS An insider‟s guide to unfair competitive advantage SaaS enabled CORE, Levers & Multipliers Disruptive Business Models to build Value MICHAEL J SKOK North Bridge Venture Partners twitter: @mjskok mjskok.com 1
  2. 2. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets For context and more information: and as part of the overall Business Model session http://www.mjskok.com/resources/business-modelDemandware is presented as an example of a company that leveraged it‟s SaaS technology disruption with a fundamentally different business model to it‟scompetitors, creating partners out of it‟s customers with a shared success model. 2
  3. 3. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Disrupting Software… 1990+ 2010+ • Installed by IT  Web based • Customized  Self service • Infrequent upgrades  On demand, SaaS • Proprietary  Open Source • License  Subscription Subscription SaaS On demand Self service Extende Extende d Up-sell d Re-Trial Up-sell …a fundamentally disruptive & more valuable Open source Lifecycl e Lifecycl e Web business model short, low cost (CAC), quick payback, EXTENDED lifetime value (LTV) 3
  4. 4. Commerce Innovation. Not Infrastructure.
  5. 5. Forward-Looking StatementsThis presentation includes forward-looking statements. Demandware, Inc. (“Demandware” or the “Company”) has based these forward-looking statements largely on its currentexpectations and projections about future events and financial trends affecting its business. Forward-looking statements should not be read as guarantees of futureperformance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statementsare based on information available at the date of this presentation and management‟s good faith belief as of such date with respect to future events, and are subject to risksand uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factorsthat could cause such differences include, but are not limited to:• the Company‟s ability to attract new clients to enter into subscriptions for its solution;• the Company‟s ability to service those clients effectively and induce them to renew and upgrade their deployments of the Company‟s solution;• the Company‟s ability to expand its sales organization to address effectively the new industries, geographies and types of organizations the Company intends to target;• the Company‟s ability to accurately forecast revenue and appropriately plan its expenses;• continued acceptance of SaaS as an effective method for delivering software solutions;• the Company‟s ability to protect and defend its intellectual property;• costs associated with defending intellectual property infringement and other claims;• events in the markets for the Company‟s solution and alternatives to the Company‟s solution, as well as in the United States and global markets generally;• changes in the competitive environment in the Company‟s industry and the markets in which the Company operates; and• other factors discussed under “Risk Factors ” and “Management‟s Discussion and Analysis of Financial Condition and Results of Operations” in periodic filings with the Securities and Exchange Commission (the “SEC”).In addition, in this presentation, the words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “predict,” “potential” and similar expressions, as theyrelate to the Company, business and management, are intended to identify forward-looking statements. In light of these risks and uncertainties, the future events andcircumstances discussed in this presentation may not occur, and actual results could differ materially from those anticipated or implied in the forward-looking statements.Forward-looking statements speak only as of the date of this presentation. You should not put undue reliance on any forward-looking statement. The Company assumes noobligation to update any forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting future performance or results, exceptto the extent required by applicable laws. If the Company updates one or more forward-looking statements, no inference should be drawn that it will make additional updateswith respect to those or other forward-looking statements. Copyright 2012 Demandware, Inc. – CONFIDENTIAL | 5
  6. 6. Demandware Is at the Confluence ofThree Significant Markets Global eCommerce Global SaaS 16% 18% CAGR CAGR (‘10 – ’15) (‘10 – ’15) $317 Billion $10 Billion $12 TrillionData Reflects 2010 Global RetailSource: Gartner (Global SaaS Market) and Euromonitor (Global Retail and Global eCommerce) Copyright 2012 Demandware, Inc. – CONFIDENTIAL | 6
  7. 7. Global Retail Market Shifting from Offline to Online eCommerce An Essential Requirement for Retailers / Brands Today Consumers Buying Selling Retailers / BrandsConnected, In Control Across Deliver Exceptional Always On, Multiple Touchpoints Online Experience Always Consuming 2004 Laptop/Desktop Need for Easy Design, Current Implementation QR Enabled and Management of Print Ads Kiosk Mobile Tablet Call Center Social Media eCommerce Sites NFC Geolocation Future Services Clienteling Ad Digital Content mPOS Networks TV Web Sites Customer-Enabled Check Out on Smart Phone Embedded in Content Experience Embedded in Store Commerce Copyright 2012 Demandware, Inc. – CONFIDENTIAL | 7
  8. 8. Demandware Delivers The Best of Both WorldsBuild and Run Internally Outsource / ASP The Pros: The Pros:  Control  Less Hassle  Customization The Best of  No Infrastructure ✗The Cons: ✗The Cons: Both Worlds  Costly  Inflexible  IT-Constrained  No Merchant Control of  Performance/Security Merchandising  Responsibility  Limited Customization  Slow Pace of Innovation A Unique and Better Approach to eCommerce Copyright 2012 Demandware, Inc. – CONFIDENTIAL | 8
  9. 9. Demandware – Business Model Elements CORE value ? Multipliers ? Multipliers: • Increase revenue • Increase reach Levers ? Levers: • Increase coverage • Reduce time • Reduce costs • Reduce resources Multipliers Levers CORE Copyright 2012 Demandware, Inc. – CONFIDENTIAL | 9
  10. 10. The Demandware CORE:SaaS enabled Commerce Innovation Initial “Table Stakes” Today‟s Differentiators Merchant Reliable and Proven Empowerment Provides Full Control 99.98% Platform Availability Ease of Open Development Environment; + Fully Development Cutting Edge Flexible, Extensible Access to Steady Stream of New, Innovative Functionality as Soon as it Becomes Available Customizable Simplifies Complex eCommerce Easy Functionality Fast Time-to-Market Only 6 Months No Infrastructure SaaS Solution Significant Barriers to Entry Copyright 2012 Demandware, Inc. – CONFIDENTIAL | 10
  11. 11. Demandware business model– simplified summary of value creation & capture… Create: Development plus LINK partnerships – Traditional R&D with leverage from LINK partners for whole product Deliver: SaaS – On Demand Commerce Innovation NOT Infrastructure Harness: % of GMV payment Highly – Shared success Disruptive Copyright 2012 Demandware, Inc. – CONFIDENTIAL | 11
  12. 12. Demandware LINK - Multiplier AND Lever LINK Technology Partners • Extensive library of pre- built integrations between leading third-party ® technologies and LINK Technology Partners Demandware Commerce Benefits to Retailers / Brands • Accelerated Revenue Growth • Rapid Access to Applications • Reduced Implementation Costs • Early Visibility into Emerging Technologies12 Copyright 2012 Demandware, Inc. – CONFIDENTIAL | 12
  13. 13. Demandware: LINK program MULTIPLIER – Creates whole product – fulfilling value proposition – Extends whole product to broader solution LEVER – Reduces cost of integration – Reduces time to deploy 13 Copyright 2012 Demandware, Inc. – CONFIDENTIAL | 13
  14. 14. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Demandware LINK impact: • Win / Win for customer and vendor – Improves Gain/Pain with integration and whole product – Improves = LCV/CARC with higher value and longer lifecycle Multipliers Levers Up-sell CORE Re-Trial 14
  15. 15. Leading Brands Choose Our Model 517 445 402 361 321 Websites 253 237 215 Customers 175 143 137 123 124 104 101110 95 91 60 70 69 75 78 50 53 6039 39 43 38 40 4616 17 19 23 28 32 „08 „09 „10 „11 „12 Copyright 2012 Demandware, Inc. – CONFIDENTIAL | 15
  16. 16. Net Result: On-Demand is in Demand! Sept. 30, 2012 $18.4M 52% CAGR 137 Sept. 30, 2009 517 $5.8M $468K 38 79% 95 $290K 78% Copyright 2012 Demandware, Inc. – CONFIDENTIAL | 16
  17. 17. Revenue Growth MomentumAnnual Revenue Growth Nine-Month Revenue Growth$ in Millions $ in Millions $56.5 $53.1 64% 46% $9.3 $8.1 $37.9 $36.7 $47.2 79% $7.0 $45.1 $8.0 $21.4 $30.9 $28.7 $5.3 $16.1 2009 2010 2011 9 Months 2011 9 Months 2012 Services Subscription Copyright 2012 Demandware, Inc. – CONFIDENTIAL | 17
  18. 18. Target Business Model 2010 Q4 2010 2011 Q4 2011 Target Revenue 100% 100% 100% 100% 100% Cost of Revenue 40% 36% 35% 28% 30% Gross Margin 60% 64% 65% 72% 70% R&D 17% 14% 20% 15% 12% Sales and Marketing 30% 27% 35% 30% 25% G&A 11% 9% 11% 11% 8% Operating Income 3% 15% (1)% 16% 25% (Loss) Copyright 2012 Demandware, Inc. – CONFIDENTIAL | 18
  19. 19. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets For more information: See the full resource on Business Models at http://www.mjskok.com/resources/business-model 19
  20. 20. Harvard innovation lab : Michael J Skok : Startup Secrets : Business Model HiHi Harvard innovation lab #innovationlab @mjskok #startupsecrets www.mjskok.com START UP Case in point: Demandware SECRETS An insider‟s guide to unfair competitive advantage SaaS enabled CORE, Levers & Multipliers Disruptive Business Models to build Value MICHAEL J SKOK North Bridge Venture Partners twitter: @mjskok mjskok.com 20

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