Stripe’s John Collison: “Better to be #disruptive than incumbent”

In a Melbourne fireside chat with Paul Bassat (hosted by NAB and Startup Victoria) Stripe‘s co-founder and President, John Collison offered the insight that “it’s better to be disruptive than incumbent”.

Incumbency comes with all the baggage of legacy data, semi-redundant systems, siloed business operations, and customers with long memories.

Whereas, a nimble and agile startup like Stripe can cut out inefficient and lazy business processes – especially in areas like online and mobile payment systems. And in doing so, a disruptive service can make us think, “how did we ever manage before this was invented?”

Collison was careful, though, to point out that Stripe is working with the banks, not against them, in case anyone thought his company has designs on becoming a fully fledged financial institution. “We simply want to make the payments business more efficient.”

Stripe’s approach is to leverage engineering skills and solutions “to fix first world and middle class problems”. Precisely so – why would you want to undermine the system (payments and transfers between banks and their customers) that gives rise to your very existence?

Collison also reflected that never before has it been possible for such a small number of people to create such enormous value, very quickly – citing the fact that WhatsApp had a mere 55 employees when it was acquired by Facebook earlier this year for $19bn. (Stripe itself, founded in 2010, had about 100 employees when it was valued at $1.75bn around the same time.)

While WhatsApp does not yet generate revenue, its valuation as a disruptive IM platform is largely based on a notional value per user, and what that may represent in terms of data from customer analytics or premium pricing for add-on services.

But you don’t even need to be a startup business to disrupt an existing market, as the music industry continues to discover to its cost – you simply need to be part of the demographic that is used to “free” stuff, has no real concept or appreciation for IP, refuses to pay for anything on the internet, and develops brand loyalty based on likes, shares and number of views. Even Stripe would be out of business if everyone switched to peer-to-peer money transfers without wanting to pay commissions or transaction fees.

 

 

 

 

Why #collaboration is not simply “working together”

Along with productivity, innovation and employee engagement, collaboration is fast becoming the new mantra for businesses seeking growth and/or competitor advantage. But while collaboration can take many forms, the mere act of “working together” does not of itself lead to sustainable collaborative outcomes.

The theme for last week’s inaugural class of Melbourne’s Slow Business School was “How to collaborate effectively with other businesses”. Hosted by Carolyn Tate and facilitated by Richard Meredith, the class did not arrive at any prescriptive processes or techniques for collaboration. But, as one student wryly observed, our discussions took the form of a dance without choreography, which is perhaps the highest form of collaboration. However, we did identify a few core attributes without which successful collaboration would be unlikely, if not impossible:

  • Shared values among the players
  • Defined roles
  • Common purpose or vision
  • Mutual trust between all participants
  • Voluntary (i.e., parties choose to be here)
  • Equitability (e.g., recognition of each contribution)

I would also add that from my experience, collaboration does not happen unless there are opportunities for the participants to be co-located at least some of the time.

Which leads me to those activities that are NOT collaborations:

  • A routine or regular project (“BAU”)
  • Outsourcing
  • Commissioning
  • Remote teamwork
  • Shared services
  • Trading transactions

For example, if I commission an architect to design a house, even if I am intimately involved in all the detailed decisions about materials, specifications and aesthetic choices, it is not a collaboration – it’s a transaction between client and professional. However, if I was a heating engineer, and I used my knowledge and experience to work with my architect to come up with some new energy-saving solutions (that could be used in future projects) that would be a collaborative outcome.

Collaboration certainly cannot happen if organisations operate within silos, but nor does it come about by happenstance – there has to be a deliberate and conscious decision to collaborate, even if at the outset there is no specific product or solution in mind other than a desire to collaborate (“Let’s see where the dance takes us”).

One aspect of this approach is “co-creation”, where companies embed themselves in their client’s world to identify what problems they can work on to solve together. In this way, collaboration leads to the outcome. Clearly, to be effective, co-creation would be backed by some formal product development or service design techniques, agreed ground rules and even a game plan – whether that is a lean canvas business model methodology, an iterative prototyping process, or a defined supply chain framework.

In any collaboration, one party may try to force the pace, but if this is not reciprocated, the mutuality will be lost – it becomes just another transaction (or a series of mis-timed steps). The best partnerships and joint ventures are founded on the commonalities of purpose, process and participation. Further, a successful venture will know when it has run its course – even if this means having those “difficult conversations”, which the class felt were also a vital feature of the best collaborations.

By strange coincidence, the same day Slow Business School was in session, Deloitte Access Economics published a research report commissioned by Google Australia. It concluded that greater collaboration by Australian companies could be worth $46bn to the local economy, based on increased productivity and reduced costs/wastage. Although the report reads more as an OD approach to collaboration (linked to the productivity, employee engagement and innovation mantras) it nevertheless offers some empirical evidence that companies who get it right will see benefits across a range of KPIs. If nothing else, employees who are given more opportunity to collaborate will display greater job satisfaction (this is part of the philosophy behind etaskr, about which I have written before).

For me, there are a few interesting data points in the Deloitte report:

  1. While technology has been important in enabling increased collaboration, the right workplace culture, management structure and team members are seen as paramount.
  2. Although “shared electronic resources” were seen as the single most important tool for effective collaboration, “common areas for staff to socialise” was not far behind, and “more meeting rooms” scored higher than “open plan office”, while having more technology solutions (collaboration software, video conferencing facilities and social media) all rated lower.
  3. Finally, just over a third of respondents reported that “collaboration helps them work faster” (and nearly a fifth said “their work would be impossible without collaboration”), but nearly a quarter felt that collaboration meant their work took longer.

So, a paradoxical interpretation of the report could be:

  • fewer open plan offices (but more meeting rooms);
  • more technology (but not just productivity tools); and
  • more teamwork (but not at the expense of getting my own work done).

A final thought: If we think that the prerequisite for collaboration is the “willingness to co-operate”, then this can get murky, as participants will only be prepared to operate at the level of trading favours (and only because they’ve been told they have to play nicely) rather than entering into the venture with enthusiasm and without ulterior motives.

Why is Customer Service still the Achilles’ heel for the Service Industry?

Recent experience has reinforced my deeply held belief that for many service providers, enhancing the customer experience is the last thing on their mind. But when customer service is possibly the one true competitive advantage you can have, why do so many service providers perform so badly when dealing with their own customers?

We know that competing on price alone can be a race to the bottom where nobody wins, and everyone loses. Competing on technology only gets you so far, especially as we operate in an increasingly open-source environment. And first-mover advantage is not always an option, unless you can quickly recoup the higher investment it takes to be a market leader from Day 1.

I also find it increasingly infuriating that nearly every service provider claims to be poring over their customer feedback, yet their service levels rarely improve. Not only are customers expected to be brand advocates (via social media, word-of-mouth marketing, testimonials, etc.), they are also expected to provide training material for the customer service department (see “Some gratuitous advice for customer service managers – 7 handy hints”).

Last week I had to visit the retail outlet of a major service provider in the communications sector. When I tried to explain how frustrating it is as a customer to discover that the company’s website has different information to what I was being given in-store, I got the following responses:

  • The website is nothing to do with in-store service, and is only there for information
  • It doesn’t matter what’s on the public website, counter staff can only go by the information displayed on their in-house computer terminal
  • If I wanted to pursue the matter, I would have to make a complaint (by phone, or on-line – not in-store)
  • If I was unhappy, I could cancel my purchase and get my money back (and presumably take my custom elsewhere?)

Not one to give in easily, I submitted a detailed complaint on-line. A few days later, I received a call from someone who said she represented the “On-line Support” team. She simply reiterated that the public website was only there “for guidance”, and that the on-line content was managed by a different department. The most accurate information could only be provided at the in-store point of sale. The representative also said she would e-mail the web team, but could not guarantee a response as “they don’t communicate with us” – and this is a major communications business!  (Not surprisingly, the person I spoke to could not appreciate the irony in this.)

Banks, utilities, insurance firms, telcos and government departments are regularly criticised for their poor quality of customer service – from their billing systems, to their habit of building their external service delivery around internal business silos – so it’s somewhat encouraging to learn that one local bank is attempting to address this by providing one customer contact person from start to finish. We can only hope that the idea of consistency and continuity of service will catch on.

 

#SoundCloud app update fails Product Management 101

The Golden Rule of Product Management is ‘under-promise and over-deliver’ (otherwise known as ‘managing expectations’). If anyone needs a case study on how NOT to release a new app upgrade, SoundCloud is proving to be a rich source of material…..

Background image via SoundCloud - post-production editing by the author

Background image via SoundCloud – post-production editing by the author

Last week, SoundCloud broke the Golden Rule by releasing a new version of its iOS phone app before it was finished. It did so without telling its customers in advance – not even the paying subscribers. Only after a considerable backlash on Twitter and Facebook (and a growing number of 1-star ratings in the iTunes Store) did the company start addressing customer complaints, via a rather anodyne blog. Based upon user comments, this response has failed to placate subscribers. While SoundCloud admitted that the shiny new release was not the final product, it was unable to give any indication when the rollout will be completed.

For the uninitiated*, SoundCloud is to audio what YouTube is to video. It allows customers to upload audio files that can then be shared with and downloaded by the community of users. It is entirely powered by user defined content:

  • content created and uploaded by content creators, and
  • content curated by users (via re-posts, playlists and social media interaction).

Audio content takes the form of:

  • music, mixtapes, podcasts, radio programmes and spoken word contributions.

Social media content takes the form of:

  • likes, feedback comments, and data on the number of plays, likes, downloads, followers and re-posts.

Many content creators are Pro Users, who pay upwards of $70 a year for the privilege. In return, they get a platform for hosting and distributing their content, and access to a global community of listeners. However, unlike other music streaming services such as Spotify and Pandora, SoundCloud does not charge listeners (yet), nor does it carry 3rd party advertising or sponsored content (yet).

Although SoundCloud has been highly successful (thereby contributing to the decline of MySpace?), it faces a range of competitors – from Twitter Music and Bandcamp to Mixcloud and 8tracks (as well as the aforementioned subscription streaming services).

In recent months, there has been some industry speculation about SoundCloud’s next business move, mostly in relation to increased monetization. There has also been some commentary about copyright infringement, a new cookie policy, and access to SoundCloud’s back-end data by major record labels. Leaving aside the usual conspiracy theories (Big Brother is listening in on you), future commercial relationships with major labels could mean that record companies with more marketing budget than talent may be given preferred access to listeners’ accounts and activity, in order to promote the next generation of Lady Gaga wannabes. And this prospect has no doubt contributed to some concerns among the user community, especially content creators that fuel SoundCloud’s platform.

From the start, SoundCloud has done a couple of things really well (in addition to the widgets for embedding sound files in 3rd party websites, and a few other technical tools): first, it has made it easier to discover new music; and second, it has enabled thousands of independent and unknown musicians to get some public exposure. The mobile app has now seriously compromised both of these features, because a lot of the existing functionality has been removed or suppressed pending the ‘full’ release (admittedly, these functions are still supported on the desktop version).

In short, the new app release has created the impression that SoundCloud is focussing on listeners (rather than content creators) and plans to make it much easier for major labels to connect with consumers, thereby squeezing out the independent musicians, producers and labels who have helped to make SoundCloud successful in the first place.

*FOOTNOTE: Declaration of interest – I maintain a Pro User subscription to SoundCloud under my nom de musique.

ACKNOWLEDGMENT: Credit is due to ‘Do Androids Dance?’ (itself a beneficiary of the SoundCloud user community) for continuing to cover this developing story