Maintenance
Part of Model innovation: what to keep and what to drop
How owners, finance and sales ask model innovation questions differently
The questions owners, finance and sales each ask before a business changes how it charges, written out role by role, with a worked cash-timing example.
A proposed change can sound settled in one conversation and remain unclear in another. Ownership is trying to locate the business problem, finance is weighing exposure, and sales is working out what can be explained to customers. Keeping those needs separate helps the team compare useful answers instead of mistaking one function's view for a shared decision.
What does each person need from the conversation?
Each role needs a different answer because each meets the proposal at a different point. Ownership diagnoses the business issue, finance explains the exposure attached to a choice, and sales tests whether the customer-facing explanation is clear enough to use.
| Person | Question to answer | Contribution |
|---|---|---|
| Owner | What is underperforming? | A view of the business issue |
| Finance | What financial exposure is being considered? | A view of the financial side |
| Sales | Can the terms be explained consistently? | A customer-facing explanation |
Combining the three prompts into one approval question can hide an unresolved concern. Sales might understand the terms while finance is unclear about exposure, or ownership might see a problem that a polished explanation cannot fix. Each person should state what they can answer without presenting another function's view as their own.
What should the owner find out first?
The owner should establish whether the problem is a pricing issue or a deeper model issue before asking the other functions to respond. The first question is whether realized price is below list; that distinction directs attention to discount authority or to the business model itself.
The owner's questions are diagnostic:
- What is underperforming, and since when?
- Is realized price below list, and by how much?
- Are customers leaving, or staying and paying less?
- Would a new way of charging fix the cause, or only move the problem?
Model or pricing problem?
Realized price below list?
discount authority problem
structural model problem
If realized price is already below list, the question is whether discount authority explains the gap; otherwise, the owner is facing a model question. That distinction keeps a sales explanation from being mistaken for a structural diagnosis, while giving finance a defined issue to assess.
What questions does finance ask?
Finance should explain what the proposed choice means financially, not decide its customer wording or replace ownership's judgment. Its questions are about exposure:
- What happens to margin per customer under the new terms?
- How long until the cost of the change is paid back?
- When does cash arriveupfront, monthly or in arrears?
- How would revenue be recognized under the new contract, and should the accountant confirm that before launch?
- What is the downside case if churn or discounting is worse than planned?
Arithmetic the new model depends on
- 3%monthly loss rate
- 69%cohort remaining after a year
- 33 monthsimplied average life
- 10% discount at 50% marginneeds 25% more units
The exhibit shows the kind of arithmetic finance brings: at 3% monthly churn, about 69% of a group of customers is still paying after twelve months, and the average customer stays about 33 months.
What does a model change look like in numbers?
Take an invented example, not a real company. A shop sells a product for $240 upfront and considers a $20 monthly subscription instead. Cash on day one falls from $240 to $20. If 3% of subscribers cancel each month, the first twelve months collect about $204 per starting customer, not $240.
That gap is the finance exposure in plain figures. Finance asks whether the lower early cash can be funded, and whether lifetime revenue improves enough to justify it. If monthly churn rose to 4%, average life would shrink from about 33 months to 25.
Frameworks can help structure these questions. MIT's new enterprises course is a reference for business design.
What questions does sales ask?
Sales needs terms concrete enough to explain consistently before a changed offer reaches customers. Its questions are practical:
- What exactly changes for the customer, and from which date?
- Which customers keep the old arrangement, and for how long?
- What objections will buyers raise, and what is the honest answer to each?
- How will win rates and discounting be tracked after the change?
- Does the compensation plan reward the new offer or the old one?
Sales should know the effective date, the groups that retain the old arrangement, and how long that exception lasts, so similar customers do not receive conflicting accounts.
When both arrangements remain available, prepare distinct explanations for each and keep the related marketing materials consistent. Check sales compensation at the same time: if the former deal still rewards representatives, language changes by themselves may not shift what they choose to sell. The owner can raise that tension during the handoff rather than label it a training issue.
For help framing the commercial terms, see pricing architecture, recurring pricing questions, and revenue model questions. These references can help the team discuss the offer and its wording while leaving finance to explain the financial side and ownership to make the decision.
What if the three views do not match?
If the positions do not converge, one named decision-maker with authority should make the call after hearing each view. That keeps unresolved disagreement from becoming an indefinite pause, without asking finance or sales to speak beyond their part of the decision in the meeting.
The owner should keep the boundary clear: sales can confirm whether customer terms are usable, finance can state financial exposure, and ownership selects a direction. For checks common to all three functions, use the model innovation checklist. The model innovation framework connects choices to reversibility, and model innovation mistakes can help pressure-test the plan.
What should I do first?
Begin with the owner's question, then ask finance and sales for the answers that belong to their roles. Name who will decide after those views are heard, and make the transition details clear before representatives explain changed terms to customers.
- Ask what is underperforming and whether realized price is below list.
- Give sales the effective date, affected customer groups, and exception period.
- Name the decision-maker who will choose after finance and sales respond.
