DocuSign is an example of a company with highly effective alignment between its business model and operating model.
Context: DocuSign is a rapidly growing technology start-up with one main product: an electronic signature (e-signature), and its supporting digital transaction management platform. Their objective is to replace all wet ink signatures (pen and paper) with e-signatures.
Business Model: As a new innovation, DocuSign seeks to capture value by charging for each e-signature completed. They have chosen to focus on monetization via B2B sales (the sender of the signature) rather than the signer. As with many new technologies, they face challenges with user adoption. There is a wide variation of potential use cases across functions, industries, and geographies (see graphic below1) – with companies often adopting piecemeal by function and requiring different product customizations to fit a particular use case.2
Operating Model: DocuSign wants to drive sales/growth in as many of these industry/functional areas as fast as possible (a drive for breadth and depth in order to gain position before competitor entry). Growth is constrained internally by available headcount and externally by user adoption. In light of this challenge, DocuSign has made an interesting operating decision to leverage their existing human capital.3
- Tier 1 Targets: Standard Operating Approach – There are clear priorities with the largest current market opportunities (large industries like Real Estate, Financial Services). These targets have dedicated headcount to drive business unit strategy, sales/marketing efforts, and industry specific product development.
- Tier 2+ Targets: Unique Operating Approach – The lower priority targets are important to growth and represent business opportunities, but do not have dedicated headcount due to resource constraints. Many of these are specific functional uses (e.g., legal, procurement, finance) or smaller industries (e.g., non-profit). As a large number of these segments relate to internal business functions, DocuSign has chosen to assign the responsibility of these “incubator” business units to their respective back office personnel. For example, the DocuSign procurement department lead at is also responsible for sales/product development for the procurement business unit. Their responsibilities include business planning and sales; it is included as part of their incentive compensation package.
Alignment to Strategy/Business Model: With back office workers becoming “cross-functional” and taking on front line business tasks, they are enabling DocuSign to grow at a faster rate than they would otherwise and at lower investment costs. Direct advantages include technical expertise, peer-to-peer credibility, and efficient resource allocation; in addition, DocuSign gets an additional set of trained individuals and improved company culture.
- From a resource allocation perspective, DocuSign is able to leverage their current workforce for areas that do not yet justify their own dedicated headcount. These Tier 2+ segments represent additional strategic value and growth opportunities. DocuSign is often looking for an initial “in” with new customers, and customers are generally willing to try out e-signature with a smaller function before making a larger scale investment across multiple functions. With someone to guide strategy for these Tier 2+ segments, it helps fuel overall company growth.
- From product development and marketing perspectives, the employees who can best understand customers’ needs are the ones currently in that type of internal role. This internal “expert” can leverage their expertise to speed up product development and improve the overall quality of the product. They also immediately lend credibility to sales pitches and relevancy to the marketing plan, and thus reduce time of the sales cycle.
- From a Human Capital development perspective, DocuSign has made their back office more aligned to company growth goals by enhancing their set of responsibilities and making them responsible for real results. This provides many benefits: it improves overall culture (at many firms, the back-office is siloed), worker motivation (more input/responsibility), and skills (functional teams becomes more business savvy, can shift roles more easily, and better perform in current roles).
Conclusion and Future Considerations:
DocuSign’s operating model decision to assign business unit responsibilities to back office workers has helped drive growth through enhanced speed to market, improved product quality, and reduced cost. While this “internal incubator” model works while the company is in a high growth stage, there may be future limitations:
- Once e-signature has been adopted more broadly, there will be reduced need for functional specific business units.
- Capacity for these back office functions will become more constrained with growth. For example, the internal legal team lead will no longer have time to head up both internal legal operations and the legal business unit; attempting to do so may have costly consequences.
- Incremental benefit gained by having business unit leaders with functional expertise will reduce as focus shifts from initial e-signature product adoption to product enhancements.
- Internal interviews and experience
- Internal interviews and experience