Iceberg Model: Solving Deep Issues in a SaaS Business
Similar to icebergs, most concepts are bigger than what they actually are. People’s competencies, problems in the company, or issues concerning society.
All these things present themselves vaguely at first. It’s only when you dive deeper that you’ll discover something larger beneath the surface.
That’s what the Iceberg Model is.
This blog covers this concept and will relate it in the SaaS industry to help you improve your bottom line.
Iceberg Model & Systems Thinking
But before we dive deeper into the iceberg, we need to talk about systems thinking.
Systems thinking is the idea that everything is interconnected and has a cause-and-effect relationship with each other. Everything is a part of a bigger system. A change in one area affects all areas.
To flesh it out, everything happens because of a cause that sets a series of events that lead to that event.
Are you familiar with the butterfly effect? It says that small things, like a butterfly flapping its wings, can lead to a number of possible events that are more significant, such as a hurricane.
The point is that this kind of thinking doesn’t just look at results. It looks back on the different factors and causes that have led to that outcome.
Much like the iceberg model, systems thinking can apply to any sector of society. Some people would even accept it as a principle or a philosophy.
Let’s take the field of medicine, for example. Systems thinking is used for diagnosing illnesses. Doctors don’t just treat pain, or cough, or whatever symptom you may be experiencing. But since each organ is a part of a system, the symptom only indicates a deeper condition.
They perform tests, x-rays, and whatnot. They find out what is causing those symptoms and deal with that cause rather than just the outward signs.
Making accurate diagnoses doesn’t just help the doctors identify what to treat. It also helps them know how to treat the condition. Imagine a doctor merely prescribing painkillers to a patient who is actually suffering from organ failure.
I’m exaggerating here. No decent doctor would ever do that. But you get the point.
When it comes to problem-solving, systems thinking requires a lot more time and effort. It looks beyond the visible problems and the systemic structures that perpetuate them.
But it leads to accurate and long-lasting solutions. It gives you awareness of the root cause of the problem and solving it at its source.
The thing is, roots are usually not visible immediately. That’s why the first step to finding it is to look at what is visible.
The tip of the iceberg.
What Is The Iceberg Model?
Like we have discussed earlier, the iceberg model is a systems thinking tool that is typically used for rooting out the causes for problems in an organization.
The iceberg has four parts: event, pattern, structures, and mental models.
Let’s explore each one.
This is the tip of the iceberg. It’s what you can see on the surface. It’s what is happening here and now. If people are involved, it’s their current behavior.
Since we’ve established that you can use the iceberg model for troubleshooting problems, let’s take an example in that area.
Let’s say that you just released an update for your SaaS solution and you get user feedback saying that it’s riddled with bugs.
I know it can be tempting to just patch it and move on. But those bugs could just be the tip of the iceberg.
Sure, you need to debug your software as soon as you can. But you don’t stop there.
Does this problem happen frequently? If it does, the pattern for this problem could lead you to a much deeper root cause.
Pattern or Trend
This is the event that keeps on happening or even escalating.
Just to balance this out, not all events may belong to a pattern. Some are just isolated cases and may never come up again.
Still, it’s worth investigating if a particular problem has a bigger root cause.
And besides, all patterns start out with one seemingly isolated event.
In our example, imagine that the last several updates also had bugs that you needed to fix.
The same event has occurred more than once.
Now that’s a pattern. Time to find the factors that make it so.
This pertains to the practices that allow the pattern to develop. It has to do more with the systemic structures that exist in your workplace.
And the best way to find these structures is to identify the events present in the pattern you’re mapping out.
Let’s go back to our example with the bugs. You decide to investigate why the bugs on the new features make it to release. And you find out that the new features don’t go through proper testing and quality assurance before rolling it out.
Why? Well, you’ll need to dig deeper still.
Which leads us to the deepest part of the iceberg.
Now, this is the root of the problem. They are the mindsets, motives, and processes that shape the structures.
Going back to our example, you find out that the developers feel the need to forego testing because they are pressured to keep up with the deadlines.
Supervisors don’t make room for adjustments as they are more concerned about meeting deadlines rather than the quality of the product.
That’s the root cause of your bug problem. Now you can make the necessary changes that would make your development teams prioritize the quality of your product.
As a result, it would encourage them to make sure that it doesn’t have any bugs before submitting the updates.
Dealing with mental models is one of the best ways of solving problems within your organization. If you only deal with the event or structure without changing prevalent mindsets, those problems will inevitably return.
Other Iceberg Model Examples in SaaS
The beauty of systems thinking and the iceberg model is that it covers a lot of possible aspects of your business, not just quality assurance.
Here are several more examples of how SaaS companies apply the iceberg model for problem-solving:
Churn is the boogeyman of any SaaS business as it never dies. You can only contain it to an acceptable level.
Bugs can be debugged. But churn is eternal.
Fortunately, there are many ways to reduce churn for your SaaS business. And the most effective way to do that is to find the root cause.
So let’s look at an example of how you can use the iceberg model to find out the very thing that is causing your customers to leave.
In this case, a user opting out of your SaaS solution is the event. The pattern is that more and more follow suit.
You can do different things to find the underlying structures that allow a steady churn rate. The easiest one is to ask leaving customers why they want to discontinue their subscription. You would need to compile their responses and find out the most prevalent reason.
There are varying causes to this:
- It can be a poor user experience
- It can be a steep price range
- Or it can be that they are switching to a competitor of yours
Let’s take the last one as an example.
Most of your customers say that they prefer your competitor’s services as it’s more suitable to their needs.
Again, that can be caused by so many possibilities.
Do the competitors offer better prices? Better features? You will need to dig deeper to find the structure that makes your users leave.
After looking into your SaaS solution, you realize that it has become so similar to your competitors’ products.
You started out strong with a unique value proposition that drew the attention of your target audience. But along the way, your feature updates made your product look similar to your competitors.
Somewhere along the way, you lost the uniqueness that attracted your customers in the first place.
That could be due to the mental model that you need to beat your competitors’ features in order to go toe to toe with them. That may be true in some cases.
But losing your unique value proposition will cost you your customers. All it would take is for your competitors to offer a better deal.
Now slow growth is not always a problem for a SaaS company. It depends on what your business prioritizes at the moment. There’s a time to focus on profit and a time to prioritize growth.
If you’re a SaaS startup, you probably want to grow as fast as you can so that you can grab a piece of the market and catch up to your competitors. You may even be using the T2D3 framework to achieve this goal.
But if your growth has been stalling for the past several months, you need to find out what’s causing this pattern to emerge.
Again, there are many different possible structures that could lead to your stunted growth.
For our example, let’s say lack of product-market fit is the culprit. You’re not getting more customers because your marketing and sales teams are directing their efforts to the wrong target audience.
But why would they do such a thing? What kind of mindsets and beliefs would make marketing professionals target the wrong audience?
You decide to dig deeper and find out that your marketing team thinks that it’s always better to prioritize prospects with higher buying power.
And this thinking led them to disregard whether or not the product matches their needs.
That’s where you can solve your growth problem at its core. It takes a change in mindsets and beliefs to rework your marketing and sales strategy.
Who knows? Rethinking your target market may even lead to an opportunity for a blue ocean strategy. You could dominate a market all by yourself and maximize your growth.
Whatever misguided mental model your marketing and sales teams have, you can replace it with one that serves both your organization and the target audience that you should be having.
Another problem that you can solve with the iceberg model is poor employee performance. This example isn’t exclusive to SaaS. All businesses experience this.
So let’s say you have an employee who shows up late to work on a Monday, of all days.
Trying to search for a pattern, you notice that there are also a few others who consistently clock in late. And it has been going on for a few weeks now.
That’s a clear sign that one employee showing up late on a Monday morning isn’t just an isolated incident. And that it’s time to find the structure that’s causing this behavior.
Digging deeper, you find out that it has been common practice to stay in the office till 10 PM.
And it has been tough on some of your employees, causing burnout and exhaustion that leads to them clicking late.
Now, what mental models would cause employees to stick around way past closing time?
You ask your employees why they do it and learn that they believe that putting in extra hours is necessary to show their dedication to their jobs. To leave work on time was too early.
But you know that there are other ways to excel at work.
Now, identifying what mindsets lead to your employees’ performance will help you plan the right approach in addressing it. This could result in a change of culture that would improve employee performance and, ultimately, your bottom line.
The iceberg model in business helps you solve not just minor issues, but their very source. It’s not just a change in external behavior, but an internal transformation.
Dealing with problems at their core will take time, effort, resources, and a whole lot of leadership. Since you’re dealing with mental models and probably applying a system change, it won’t happen immediately.
You can fix a few bugs overnight. But changing mindsets and organizational culture takes a whole lot more.
Yes, it may take a lot of effort. But when done right, you won’t need to deal with those problems again.
For more strategies to help your SaaS business, check out our blog here.