Posts Tagged: Frontdesk

What type of market are you operating in?

When we look at investment opportunities, we need to consider the type of market that the potential investment is in. How much room is there for a market leader or leaders? Is it winner-takes-it-all or winner-takes-almost-all? Is there room for multiple potential winners?

Winner takes all

These markets are driven by network effects and only one company will win in the space. Examples of these winners include eBay (auctions), LinkedIn (professional networking), and YouTube (video). When these markets first emerged on the scene, there were dozens, if not hundreds, of companies vying for market share. Yet, only one dominant product survived.

Winner takes almost all

This market trend is happening across the enterprise where adoption is driven by end users, and not dictated from above by IT departments. In this case, a company or tool can emerge as a clear category leader, as word of mouth among satisfied users accelerates adoption across colleagues, departments, and companies. As a result, the tool can grab a large market share in a certain market segment or vertical. Think Mailchimp, Dropbox, Hightail or Unbounce for horizontal solutions or Clio, Jobber or Frontdesk for vertical products (disclosure some of those are portfolio companies). In particular, we see a winner takes almost all dynamic happening in vertical SaaS plays where word of mouth can quickly travel within one industry. For example, lawyers from different firms may work on the same case and spread exposure of favorite tools.

Multiple winners

When markets are not subject to network effects (or there’s minimal network effects/word of mouth), multiple winners can emerge. Today this type of market is mainly in commerce and enterprise IT.

The bottom line

As an entrepreneur, you need to understand what kind of market you are in order to create effective growth and fundraising strategies:

  • Growth strategy: Let’s say you end up being #2 in your market. While second place might be an enviable position for some, it’s essentially worthless in a winner-takes-all market. For this reason, you’ll need to be as aggressive as possible in the first few months after a category emerges to try to lock in the top spot before it’s too late. On the other hand, such an aggressive tactic doesn’t make sense in an e-commerce environment where there can be multiple winners. In this situation, you’re better off adopting a more conservative approach and ensuring you’ve reached product-market fit and nailed unit economics before accelerating.
  • Fundraising strategy: You’ll need to understand your market’s dynamics to know how much money to raise and how quickly. For example, in a winner-takes-all or winner-take-almost-all market, there’s a window to aggressively fundraise while the category is still open. However, once a category leader emerges, it will be hard to attract investors.

Of course, all of this is made even more complicated by the fact that it’s not always clear what the exact category is. For example, do Lyft, Sidecar, Hailo, and Uber all belong to the same transportation category or do they each define their own category? As an entrepreneur or investor, you’ll need to analyze the market and its current players to know how much room (if any) is left.

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3 lessons from a customer-obsessed company

Last week, I attended a fascinating talk about Customer Obsession given by Kim Rachmeler at version one’s portfolio company, Frontdesk. Kim spent 10 years at Amazon.com, where she served as VP of Worldwide Customer Service, CIO International, among several other critical roles.

While it’s no secret that Amazon.com is a customer-centric company, Kim shared a few interesting insights into the role of customer service at Amazon. In particular, I took away three key points:

1. Empower customer service to do whatever is best for the customer:

Customer service is a company’s direct link to the customer, yet in many organizations, customer service is positioned as a “reactive” department – just there to field queries and complaints. At Amazon.com, customer service has the ability to take a product out of catalogue if they see it doesn’t meet customer expectations. The merchandising manager then needs to fix the product before it can be returned to the catalogue.

2. Focus on a simple measure of customer service quality:

Amazon.com includes the question “Was this answer helpful?” at the end of every email that gets sent out. This question focuses the entire team on a single, one-dimensional metric. And the simplicity of the question means that more customers are likely to answer, providing feedback from more customers than trying to get responses from a lengthy survey.

3. Drive customer service into the whole company:

At AbeBooks, we had everybody work in customer service from time to time and Amazon.com has a similar policy (although given the sheer size of Amazon, they need to limit the program to just managers). Having everyone wear the customer service hat accomplishes two things: 1) Participants get reconnected to customers and actual customer needs and 2) Managers view customer service as an important source of knowledge about customers.

In a customer obsessed organization, customer service isn’t viewed as a cost center or simply measured on a P&L report. Customers are valuable assets, and each interaction is an opportunity to improve not only that relationship, but improve your product, processes, and company mission.

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