Page 163 - 6 Secrets to Startup Success

142 6 SECRETS TO STARTUP SUCCESS

focus, and take on more complexity and more leases? “We decided we
would try to get our existing ten branches up to $50 million a month,”
J.C. says. “As it turns out, we got those branches up to $100 million a
month, 50 percent faster than we thought we could get the twenty
branches up to $2.5 million a month.” The result was a more focused
and easily coordinated growth strategy, one that wouldn’t have been
chosen without real-time market feedback.

BUSINESS MODEL – During 2009, even as Modality continued to de-
velop and release exciting new titles for the iPhone, Mark and his
team grew increasingly frustrated with the product clutter and noise
in the booming AppStore sales channel. Home to more than 100,000
applications and counting, many of them free or very cheap, with
names like “Angry Kittens Attack,” “Flick-a-Booger,” and “Cow
Toss,” the AppStore had mostly become a distributor of novelties and
games rather than a place for serious learners to find educational
products. As a result of this low-end chaos in its primary channel,
Modality’s total sales were climbing more slowly than before, and
sales per title were slumping.

While redoubling efforts to improve unit product sales through
marketing strategies and a revamped website, Mark and his team de-
cided to quietly launch a complementary “publishing services” model,
in which they would sell their production capacity to publishers or
other businesses, building new apps in exchange for a negotiated fee.
Unlike selling licensed products under the Modality name, this
wholesale model was non-speculative, generating cash for every title
produced and shifting the market risk and marketing burden to the
purchasing client. Early opportunities had already made their way to
Modality’s doorstep with no marketing, as media companies were
looking for ways to compete in the digital space. Mark and his team
hoped that they could “turn the knob” and grow this business through
more concerted business development efforts. By the spring of 2010,
they were enjoying roughly equivalent revenue in each of their two
major business lines: the original direct-to-consumer line and newly
hatched publishing services.

American Management Association • www.amanet.org