Science Applications International Corp., or SAIC, is a $7 billion technology integrator that focuses on government agencies as clients.
But in recent years, the US goverment has been shifting how it buys technology, looking to purchase more commercially-available — rather than custom-built — software, and looking for vendors to take on more responsibility if projects go off the rails.
In 2022, says Heath Starr of SAIC, “about 15 percent of the customers’ buying habits right now are shifting to some kind of alternative business model, not just labor-based acquisitions. So it’s starting. The question is, how fast will it scale, and become the plurality of what they’re buying? My best guess is three to five years.”
And Starr, Vice President of Business Transformation and Innovation, notes that more adaptation lies ahead. “To me, it’s a mindshift in the way that we build. Growing up in a services business, we qualify ourselves as experts, and we show up to solve a problem that is very unique. Now, we’re asking ourselves, what is the common thread across these problems? It’s the mindshift of trying to solve a problem ahead of being asked to solve it.”
One tool that SAIC relies on as it works to develop a portfolio of new offerings is the Maturity Model below. It helps the company “to rapidly discover, with minimal investment, whether something begs to be invested in — or not,” Starr explains.
“With this system,” says VP of Product Management Michael Hauser, “a smaller proportion of innovation initiatives achieve their validation targets, but those that ‘graduate’ to the next level typically receive an investment increase of about 10X.” The approach, he adds, “has helped triple revenue from alternative business models in our company over the past three years.”
Hauser explains the model, which they call the USE framework, below.
Hauser explains, “The USE framework is a customer/market-centric framework for determining whether to continue funding an incubated new venture. In this framework, a new venture progresses through the following stages:
- Useful – Does the venture solve a meaningful problem for a viable addressable market?
- Usable – Once you test an MVP with problem owners, is its value clear and intuitive to the user?
- Used – Is there demand from the people or companies you test it with to become a beta-client? Is the solution stable and valuable in beta?
- Scalable – Can we expand beyond our first mover customers and build out a robust sales pipeline?
- Exitable – When the venture achieves a scale that starts to affect corporate earnings where should it live? As an autonomous business unit, a spin off, or serve as the engine of transformation across other businesses?”
The green trend line above shows investment into, and cash flow generated by, the new venture as it launches, grows, and matures.
InnoLead members can download the model in PowerPoint form here.
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