Box is a cloud software as a service (SaaS) business focused on serving large enterprise customers (e.g. P&G, GE, Nationwide.) Interestingly, Box started off simply, as cloud storage for consumers. Their unique operating model allowed them to pivot two years in, and continues to let them stay nimble and fast as the technological and thus competitive landscapes quickly change around them.
Box’s business model is to create value for their customers by adding layers of sophistication to their offering, and thereby meet their customers’ ever-changing needs. (See Exhibit 1.) They capture this value by selling their cloud technology stack via enterprise software license agreements that deliver on their customer promise: a secure, cloud-based, customizable business information platform with 100% uptime… that end users love.
Since its earliest days, Box’s technology has offered cloud data storage to individuals, who use it to back up personal content (e.g. photos, videos) or work-related content (e.g. spreadsheets, presentations, documents). However, in the broader industry context of decreasing storage costs, Box faced an intensely competitive, fragmented market (e.g. Dropbox, Microsoft Sharepoint, Google Drive), downward price pressure and the eventual commoditization of their original storage offering. Box needed to (and did) change its business model to survive.
Today, Box focuses on serving the sophisticated (and deep-pocketed) buyers who have highly technical needs in large enterprises.
Unlike consumer apps, enterprise apps like Box require a high-touch sales process and substantial marketing investment to explain value to prospects over a multi-month sales cycle. To grow quickly enough to capture large share in the still nascent multi-billion dollar “cloud enterprise content management” market, Box invests heavily in enterprise sales reps and large marketing campaigns. Consequently they invest in the engineering required deliver on the latest, bold customer promise. As Box succeeds in meeting the evolving requirements of their customers’ key decision makers (e.g. CIOs, VPs of IT) they continue to see their contract volume and average size grow exponentially.
Box’s operating model is similar to many startups, despite now being a larger publicly traded company. The tangible pieces of this model include an open floorplan work environment, flat organizational design, transparent senior executives, weekly all-hands meetings, free meals, hackathons. All of these contribute to similar company advantages to many tech companies in Silicon Valley: good internal communication, quick execution and iteration, and employees empowered to take on responsibility. The most important intangible aspect of their operations is their fun culture of personable people, which helps employees look forward to coming to (and staying at) work. To reinforce this culture, employees are reminded often to adhere to the core values, including “Bring your wacky self to work”, “Think 10X”, “Get sh*t done”, “Take risks, fail fast”, “Make mom proud (unless she’s evil.)”
More uniquely, Box is deliberate in its operational emphasis on building and sustaining excitement about the company itself. Crucially, they accomplish this via a steady, sustained drumbeat of press announcements. This PR fuels a virtuous “hype” cycle: More press, greater awareness/credibility, more sales, better recruits, faster growth, faster development, more press, and so on. This “engine” portrays Box aspirationally, announcing products well before they may have been ‘ready’ to announce, and making bigger, public statements (e.g. Box for Industries) The announcements publicly commit to releasing product features (e.g. Metadata) on really aggressive timelines, putting pressure on the product and engineering teams to catch up. This internal sense of urgency results in fast development and innovation, which in turn provides software improvements and new value to customers faster than its competitors. In other words, this “self-fulfilling prophecy” operating model drives a business model that promises rapid, continuous increase in value to its customers.
At the same time, Box gives substantial operational influence to its sales employees on the frontlines, by giving them power in prioritizing product decisions. Through their product feature request process, sales reps submit asks to the product team along with associated future contracts (and revenue amounts) that are contingent on this new product or feature. The more reasonably certain revenue that is associated with a certain feature, the higher the product team prioritized it. So, inherent to the sales and product development process is a customer feedback channel that effectively prioritizes features based on revenue.
In summary, Box’s operational model relies on openness, PR engine and sales feedback to drive efficient product development. Thus the operating model effectively aligns with its business model by rapidly creating and capturing the customer value required to grow quickly and continue to differentiate (and thrive) in a highly competitive market.
Exhibit 1: Full-stack hierarchy of Box’s customers’ needs (customer)
(Developers building on the full technology stack)
|Security and IT controls
(VPs of IT)
(Knowledge workers in teams)
(Individuals or teams)