Where Implementation Meets MBA

When I was debating whether to pursue an MBA or remain comfortably nestled in the extremes of startup life, one of the primary arguments against MBA pursuits came from my bosses: “you or someone like you would be much more valuable to me with two more years of this type of experience than you would be with those same two years spent in business school.” The answer made sense to me in a kind of vacuum, yet did not explain away the fact that all of my bosses had MBAs, and most of their closest business connections had MBAs, and that none of them regretted collecting their own MBA. Clearly they had reaped enormous value of some sort from their MBA, yet in that moment they were speaking directly to the tactical – something that one could argue is indeed missing in that graduate pursuit. What they may not have realized, however, is how deeply aware most MBA professors are of the missing tactical piece, and what those professors are doing to remedy the stigma.

I am currently enrolled in two tech-focused classes, and both of the professors have gone to great lengths to underscore the importance of technical ability of some sort, and sought to at least introduce students to core concepts. I firmly believe that MBA programs should invest heavily in at least introductory technical training (even more than what I experienced this semester) in order to graduate students who are as prepared in this tech-heavy world as they used to be graduating into a management-heavy world.

One of my two classes focused on statistical analytics, kicking off with anecdotes from the professor detailing visits to companies whose own decision makers were not capable of running and analyzing testing (even in cases when they believed they were). This to me seems deeply irresponsible, all the more so in a world so rich with data waiting to change the path of a company for the better. While not all individuals will be naturally analytical thinkers, an MBA program has no excuse for not at the very least teaching the steps required in an analytical process. Worst case, the student will then be able to recognize the questions he or she should be asking and whether they are up to the task, such that if not, they can hire the right analytics team to keep their company competitive.

The second of the two classes focused on SQL, the importance of which I personally found to be incredibly high. Upon joining the ecommerce company I was a part of for three years I found that there were really only two of us proficient in SQL. In a situation like this one learns very quickly just how widely applicable company data is to day-to-day operations, how dramatically different individuals’ job performance can increase with access to pertinent data, and how critical good data is for making company-altering decisions. An MBA who can walk into a startup and immediately access, dissect, understand, and utilize that company’s data will be a very different MBA than the one who cannot. One can add value immediately in a variety of ways, while the other will constantly be adding to the bottleneck of those who can.

As it becomes more and more rare for companies to exist completely offline, tactical tech savviness only becomes more and more critical for those purporting to be leaders in the business world. While mobilization, attracting users, and monetization are all foundational, it is the implementation that allows them to be so at all. I look forward to the day when questions like mine – to-business-school or not-to-business school – will be met with absolute confidence in the implementation ability of those graduates, truly a killer complement to the softer value offered in MBAs today.

By: Anya Hayden


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Navigating the World of Digital Mapping

To the cursory observer, online map services like Google Maps or Bing Maps may seem like simple tools, simply placing a searchable compilation of points of interest on a scrolling set of map images. In reality, it’s a very complex business with immense potential going forward, with demand coming from transport electrification, autonomous cars, consumerization of ground logistics (UPS -> Uber/Lyft), and broader use cases for unmanned aerial vehicles, among other areas.

Mapping entails digitizing the physical world, so every map service at its root needs access to mapping data. This consists of the actual imagery – satellite images, aerial photos, and street level photos, for instance – mapped to a digital overlay of roads containing all manner of metadata (e.g. street name, type, traffic direction, speed limit, toll road). Collecting these data is an immensely labor-intensive on-ground task that is never complete (as roads and buildings keep changing), so there are really only a few global players in this space that almost all map-based services ultimately get their map data from – namely HERE (originally Navteq; recently sold by Nokia to Daimler/BMW/VW), Google, and TomTom.

There are a few hybrid players – e.g. Microsoft sources map data from HERE and others, but also had a hundred employees building out their own map data via street vans, aerial imagery, and such (a division recently sold to Uber), and Apple, which recently entered the mapping space with Apple Maps, gets its data from TomTom but is also building out a fleet of its own mapping vans.

On top of map data, you need routing algorithms, address and point-of-interest data, search, and lots more.

Below I will start with an anecdote about my introduction to the world of mapping and then discuss some opportunities in the space today.

TA Maps and Google

After college, I shipped out to India to work at Mahindra, which is India’s largest automaker (and also the world’s largest farm equipment manufacturer, among other things). After moving into my apartment in Mumbai, I realized a few things—one, the Google Maps app, which back home in the U.S. I used quite extensively on my phones at the time, an iPhone and an HTC HD2 (running Windows Mobile 6.5), had incomplete data in some parts of the city, so pretty often I’d be switching between Google and other map apps. Then I upgraded to an HTC HD7, running Microsoft’s rebooted-from-scratch Windows Phone 7 OS (whose story I’ve written about), and there was no Google Maps app in the store at all.

Windows Mobile had earlier conquered the pre-iPhone high-end PDA/smartphone market, crushing Palm OS with a remarkably feature-packed and open OS. So if Google wanted its mapping service in high-end mobile users’ hands, it had to be on Windows Mobile (just as it had to be on iOS later). Yet as many large tech companies often do (e.g. MS ceasing development on Internet Explorer after IE6, having beaten Netscape, only to be woken up later by the upstart Firefox project), Microsoft was busy running a victory lap when the iPhone launched and took a while to respond, by jettisoning Windows Mobile completely in favor of the ground-up Windows Phone 7. Meanwhile Google’s acquisition, Android, launched as a very Windows Mobile 6-like response to the iPhone. By the time Windows Phone launched, Google felt it could forego its biggest rival’s platform entirely and thereby perhaps gain a competitive advantage for Android.

So, with an incredibly smooth Windows Phone 7 device that I wanted to use daily, and no Google Maps in front of me, I sought to fix the problem by writing my own mapping app – TA Maps – that would initially serve as a Google Maps client and then expand to include multiple map sources, thereby solving the constant switching problem I had with Google Maps on iOS and Windows Mobile 6.x. To do this, I sourced map tiles from Google (and later Bing, OpenStreetMap, and others), plugged into their point-of-interest search and directions APIs, and then handled a bunch of curiously complicated tasks like reverse-engineering Google’s compression algorithm for map polylines (e.g. route lines on a map for directions).

With multiple data sources, I solved my own navigation problem and others’ too (e.g. building in OpenCycleMap for bicyclists). In the process, I put the app up on the app store and gained thousands of free and paying customers across the world, learning a ton about mapping in the process (e.g. when customers in China all reported the map as being off by a certain distance, I found that the Chinese government had at some point built a location offset from the (US military-run) GPS system, as a rudimentary security measure ensuring that all non-China-specific maps would be off unless they specifically compensated for the offset).

Then Google began to restrict access to its map data, deprecating old versions of its API and forcing users onto its new API, which required 1) authenticated tokens that identified the particular client requesting map data, and 2) agreeing to ever-narrower usage terms. When the API was updated to essentially ban native third-party navigation clients from using Google Maps, I received a not-so-friendly email from the Google Maps team – not quite a takedown notice yet, but clearly on the way. At that point, I decided to just take down the app (it still had standalone value sans Google, but I was too busy with my actual job to maintain it). Around the same time, another app emerged, as a pure-play Google Maps client that was even (egregiously) called “gMaps” and used a modified version of Google’s own Maps icon as its own. The difference? Those developers were in Russia and had no qualms agreeing to terms that they’d then explicitly violate (and then fight a technical cat-and-mouse war around Google’s API access blocking).

Google clearly saw map services as a tool to gain a competitive advantage in other areas of its business. For instance, when Motorola – then one of the top Android phone manufacturers – decided to use the services of the startup Skyhook Wireless to provide its users better location sensing than Google could provide, Google’s top executives responded with fury to the threat of losing consumer location data, forcing Motorola to switch course on Google’s supposedly “open” Android platform.

A couple years later, in January 2013, I and some others online discovered that Google had begun to specifically block Windows phones from accessing its own Google Maps website—presumably trying to get users to switch to Android. Google somewhat absurdly claimed that this was because Google Maps only worked well on browsers built on Webkit (i.e. Chrome, Safari) – strange, as the site worked fine on desktop Internet Explorer, Firefox, etc.

As I wrote here, if you changed the user agent (UA – a piece of identifying text by which the browser tells websites about itself and the device it’s running on) of Google’s own desktop Chrome browser to pretend that it was running on Windows Phone, it would no longer load Google Maps, and conversely, when a different UA was used on a Windows phone, the site loaded perfectly fine. Eventually the mainstream tech media picked up the story, and having been caught red-handed, Google was forced to re-allow access to its site. (incidentally, so much for “Don’t be evil”)

HERE, Uber, and Waze

Last year, Nokia put its market-leading maps service on the market, by then rebranded from Navteq / Nokia Maps to HERE. This was part of its exit from consumer-facing businesses (selling its best-known mobile phone unit to Microsoft, whose then-CEO Steve Ballmer apparently also wanted to buy HERE, but was turned down by a board so skeptical of any Nokia deal that Ballmer essentially sacrificed his job for it, agreeing to a timetable for stepping down as CEO in exchange for board approval on the Nokia phone deal).

A bidding war ensued for HERE, in which Uber battled a consortium of the German car manufacturers – Daimler, BMW, and Volkswagen. Why would either of these parties be interested in what might seem like off-core-competency offerings for either? The answer is simple – the future of transportation will depend on distributed data collection.

An Israeli startup, Waze, was an early entrant on the consumer side of this space, with the basic premise that if you collected position and speed data via a smartphone app running inside consumers’ cars, and had enough users, you could get a good idea of real-time traffic flows (better than existing sources of traffic data, such as government-installed highway car counters that at best can estimate traffic at particular locations) and use this to provide better traffic-adaptive routing. Waze executed exceedingly well and was acquired by Google for $1 billion.

Waze is dependent on a smartphone running inside a car, though. What if one thought of the car itself as a device—as an increasingly sensor-laden rolling connected device? Every car on the road could provide all of what Waze sees and much more (e.g. road grades, potholes, lane markers, more precise positioning, etc.)? Herein lies the problem for carmakers—platform companies like Google (Android Auto), Apple (CarPlay), Microsoft (Windows Embedded Auto), and BlackBerry (QNX) have designs on moving beyond where they currently play – in-dash infotainment systems – and into the car as a data platform.

Carmakers hate the thought of being reduced to commodity device builders like the no-profit world of Android smartphone/tablet manufacturers. Hence the German automakers’ interest in HERE, to preemptively build out the car as a digital platform and avoid getting marginalized by Google (which is the second largest mapping player and now, with Waze, also the leader in crowdsourced road data). HERE has its own infotainment platform, but more importantly, soon every Mercedes, BMW, and VW (meaning VW, Audi, Porsche, etc.) will provide Waze-like data to HERE, building up a strong, Google-free Waze alternative. HERE’s ambition is to power both tomorrow’s cars and location-based applications of all sorts.

Meanwhile car dispatch apps like Uber, Lyft, Didi Kuaidi, Ola, and such are essentially in the logistics business. The better they can route cars, the faster customers and drivers meet, the more transactions the companies process, and the more they profit, consequently. The business of route optimization, previously limited to delivery companies like UPS (whose in-house routing famously avoids left turns at almost all costs, reducing wait time in turning lanes and avoiding accidents), is now squarely within the sights of Uber and its ilk. Uber’s driver app on Android (but not iOS) currently bounces drivers out to Waze by default for optimized routing. But that’s a ton of useful data that Uber’s feeding to Google instead of itself, and at the same time, Google’s looking to directly encroach on Uber’s terrain (with its own car sharing service), so for Uber, becoming Google-free as quickly as it can is a priority.

One route was for Uber to buy HERE and have a full-fledged mapping business on its hands. With its huge market cap, Uber could probably afford to outbid the German automakers too (which itself is something worth reflecting on). Yet Uber eventually lost that bid and opted for another strategy, which was to make a deal with Microsoft. Under CEO Satya Nadella, Microsoft is focusing heavily on cloud-enabled services and treating everything below that in the stack as a commodity (its own offerings there will eventually just be demand drivers). Part of that is a new strategy for its map services (such as Bing Maps) in which, rather than driving imaging vans around the world, Microsoft will have strategic deals with map vendors like HERE to source imagery while focusing on higher-end services (such as 3D mapping and integrating mapping into other services). So Uber and Microsoft struck a deal by which Microsoft is transferring its surface imaging unit (and the technology entailed) to Uber, and Uber will integrate deeply into Microsoft services like Office and Cortana. With this, Uber can eventually turn its global network of drivers and riders into a huge source of map data that’ll be of value for its own routing but potentially also to others.

Looking Forward

At Mahindra, I eventually headed strategy and tech planning for the electric car venture, Mahindra Reva (a startup in Bangalore that we had acquired). One of my focus areas was building out a vision for the connected car, and as part of that, I looked at areas in which we could build EV-specific experiences. One idea that came to mind was in mapping— electric powertrains are drastically more efficient than internal combustion engines (ICEs), so when looking to improve efficiency and maximize range, one starts to look at things like aerodynamic drag and road grade much earlier than with ICEs (where these things only really matter for racing cars).

Could we create map routing that would optimize energy consumption by, say, sticking to flat or downhill roads? I met with map vendors and realized the idea would be a bit challenging to implement because most navigation apps calculate the crow’s flight distance (i.e. if the land were all flat from a top view), not a 3D-mapped altitude-sensitive true distance. Further, in some regions, grade data were not available at all. We would’ve had to develop grade-sensitive navigation routines in-house, which was beyond our core competence, but the opportunity here remains significant.

There are lots of potential applications in robotic navigation as well – how would an Amazon delivery drone best navigate an urban environment (FAA rules permitting), for instance?

Clearly, much remains to be done in mapping, and it’s quite an exciting field today.

By: Ashish Bakshi


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What is Poshmark?

Poshmark is a platform that allows users to buy and sell clothing and accessories from each other’s “closets”. Although items are shoppable on desktop, a user can only sell goods through the mobile app. Users can post items to sell “in less than 60 seconds”, and Poshmark makes 20% commission on all items sold. Although Poshmark provides the shipping label for sellers, the buyer is responsible for paying the standard shipping price of $4.99.

With over 700K users, Poshmark has raised $47.2 million in outside funding and has over 10 million items for sale at any point in time. Items for sale are displayed in an instagram like feed that can easily be liked, commented, or shared.

Magic Sauce: The Community

Users love interacting with each other and will even shop for a “posh friend” they have met through the app. This makes users more likely to share not only their own items, but other user’s items with their followers. Users are constantly looking for more followers and other user to follow you. This cycle continues then continues over and over. Once a user has reached a certain threshold they can become a suggested user and will appear on the many users timelines as someone they should follow.

A Like acts as a watch feature for items a user may want to buy. All liked items are stored in the app and users are notified when the price of a liked item has dropped.

Bundling allows sellers to provide a discount to buyers who buy multiple items from their closet. It incentivizes more sales at a faster rate. One common bundle is buy 3 items and receive 15% off total purchase.

Shopping Parties are blocks of time where items of a certain theme are available for purchase. Users enter the party to shop or share their items for sale. The limited time encourages users to act

Community Meetups is Poshmark’s way of taking the online offline by bringing together poshers in the same physical community to share tips and talk about their experience. This continues the user buyin to the Poshmark brand.

Platform Risks

Although all transactions should occur on the app, there are many users who leave comments on items and request that they be sold through Mercari or direct with Paypal. Mercari is a hugely successful mobile shopping app in Japan that launched in the US in July. They do not charge any fees or take a portion of the sales and the seller is responsible for shipping. Because Mercari does not take any fees, sellers could potentially get 20% more for their items.

Any time your business is a platform, there is a risk that users can bypass the platform. Some users simply list clothes on Poshmark to reach a broad base of potential customers and then conduct all of their transactions through Paypal, cutting Poshmark out completely. When buyers do this, they leave behind all of their protection. However, the Poshmark community feels trustworthy due to all the communication and interaction that happens between users.

There is also the buying and selling of counterfeit goods. Poshmark offers a $35 authentication service for goods over $500. The buyer purchases an item through the app and the seller ships the item to Poshmark. Once the item has been verified as authentic, it is then sent to the buyer. Given this high threshold, there are complaints of many counterfeit goods being sold.

The Future

There is so much competition in this space that it is too early to tell who will be the market leader. However, Poshmark has built a strong community and can continue to build services and features to add to the stickiness of their platform, which will position it for success in the future.

Sources
https://poshmark.com/what_is_poshmark
http://fashionista.com/2015/04/poshmark-funding-round
http://techcrunch.com/2015/04/21/fashion-marketplace-poshmark-raises-25-million-more-heads-to-apple-watch
http://blog.poshmark.com/community-meet-ups/”

By: Anndrea Moore


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cyber security banner

Have you ever experienced identity theft that forced you into a zero-cash state for an amount of time that feels like forever? Or have you ever wondered how that app knows you so well—your habits, your route to work each week, your interests? The more we shift towards personalization, the more data is collected about your every move.  And that’s borderline cyber stalking, no?

This makes cyber security ever more important. What is it, you ask? According to TechTarget:

“Cyber security is the body of technologies, processes and practices designed to protect networks, computers, programs and data from attack, damage or unauthorized access” [1].

For any app, website, or technology in this online economy that collects personal data, one may hope that the company does just as much to protect it. However, this is an area that constantly faces challenges. A survey conducted by the ISACA and RSA showed that 76.6% of respondents expected an increase in security attacks in 2014 compared to 2013 [2]. In fact, the top 5 cyber security risks for 2015 as mentioned by CNBC are as follows [3]:

  1. Ransomware: Malware that restricts access to your own data and then requires ransom payments for re-access.
  2. The Internet of Things: Vulnerability of physical devices connected to the internet.
  3. Cyber-espionage: A war between national governments fought on the keyboard.
  4. Cyber theft increases: Stolen financial information, such as credit or debit cards, on the black market
  5. Insecure Passwords: Passwords that can be cracked effortlessly

These are no small risks and they appear to be inter-related to a degree. Moreover, cyber security is a national security issue and a hot topic among presidential candidates – a cyber war against China and Russia [4]. Additionally, according to a report on CNBC, China attacked Apple’s iCloud to steal data related to iMessages, photos, and contacts [5].  Apple has the reputation of ultimate security, yet weak passwords and public access to data make it easier to crack passwords and answer security questions. On the other hand, as technology companies increase privacy and security on apps and devices, the country’s intelligence services will continue to go dark reducing their capability to prevent such attacks. Perhaps this is why cyber security continues to be a challenge, it is an ever-lasting complex battle with a lot of gray area.

Fortunately, VCs are continuing to invest in cyber security startups each year. In 2014, 240 cyber security startup deals collectively amounted to $2.5B in funding, and 2015 is on the same trajectory [6].  As startups continue to mobilize, founders should ensure that an adequate amount of resources are invested in cyber security.

Sources

  1. http://whatis.techtarget.com/definition/cybersecurity
  2.  http://www.isaca.org/cyber/Documents/State-of-Cybersecurity_Res_Eng_0415.pdf
  3. http://www.cnbc.com/2014/12/19/top-5-cyber-security-risks-for-2015.html
  4. http://www.wired.com/2015/08/lets-school-presidential-hopefuls-cybersecurity/?mbid=social_gplus
  5. http://www.cnbc.com/2014/10/21/china-targets-apples-icloud-with-hacking-attack-report.html
  6. http://www.inc.com/will-yakowicz/cybersecurity-companies-on-pace-to-raise-2.5-billion-2015.html

By: Shemeka Neville

 


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There has been a lot of activity in the market for peer-to-peer (P2P) payments lately. While the concept of P2P payments is not new (one could argue it started once upon a time with the barter system), multiple products are trying to capture a share of this market today in the world of mobile. PayPal’s latest quarterly earnings report notes that $2.1 billion of payments were processed through Venmo in Q3–2015, growing at the rate of 200% a year! Venmo is just one of the products, although arguably the most popular, and competes with many other products such as Square Cash, Google Wallet, Facebook Messenger and PayPal itself. Apple is also planning to launch a P2P payment service, according to the New York Times.

The objective of this post is to analyze

  1. Whether P2P payments is a winner-takes-all market and
  2. Brief strategies that both larger incumbents and newer entrants can pursue to succeed in this market.

This post does not cover the market size, different features and nuances of the various products (unless they’re relevant to the above objectives), various stakeholders involved in building such products and their incentives (e.g. banks, credit card network operators etc.) and other considerations such as security and privacy.

Is P2P payments a winner-takes-all market? ?

To evaluate the extent to which this is a winner-takes-all market, we can evaluate the following:

  1. Strength of network effects

    In a P2P payment transaction, by definition, there is a ‘payer’ and a ‘receiver’. The products above clearly exhibit network effects in these terms because more payers in a network attract more receivers and vice versa. A user can play the role of both ‘payer’ and ‘receiver’ across different transactions and, hence, each additional user increases the value of the network to the other users too.

    But how strong are these network effects? In P2P payments, a user could potentially want to use this service with multiple other people (including friends, family, colleagues at work, an acquitance at a party etc.). It is also not easy to predict in advance when or with whom a user will transact. However, there is not much value in the ability to transact with a ‘random’ person (unlike the ability to check the profile of or connect with a ‘random’ new person on Facebook). Hence, on a scale from 0 (none) to 5 (high), I would rate the strength of network effects in this market as 4.

  2. Multi-homing costs

    Multi-homing means the ability to check multiple products offering the same functionality in parallel (which product the user ultimately decides to use depends on various other factors such as cost, user experience and so on). The process of homing has 1 to 2 steps in this case: installing the product and signing up for it (if not already done) and making a transaction.

    How high are the multi-homing costs? I would argue that the first step of installing a product and signing up is costly. While some products allow signing up through a debit or credit card, they may charge fees in making P2P payments (especially when using a credit card). The one mode of payment that is mostly free across several products is transacting through a bank account. However, signing up through a bank account takes time: the user needs to recall the bank account number, routing number and wait for a day or two to verify the account (usually done through a debit and credit of random amounts less than $1).

    However, once a user has signed up for another product, multi-homing is not as costly. It depends primarily on the user experience (e.g. details the user would need to enter to make a transaction and the ease of use).

    Overall, on a scale of 0 (none) to 5 (high), I would rate multi-homing costs in this market as 3.5.

  3. Demand for differentiated products

    While the core functionality may not be different across products, users would appreciate differentiation of the products in terms of the user experience (e.g. ability to start a transaction even without signing up, a feature of Square Cash and Google Wallet), platforms it is available on (e.g. mobile-only or both mobile and desktop) and other related features such as tracking, security and so on.

Overall, while there are strong network effects and strong (although less so) multi-homing costs, there is also a demand for differentiated products. Hence, the P2P payments market is not likely to be winner-takes-all and will likely have multiple products competing in the long-term. At the same time, due to the network effects and multi-homing costs, I would not expect more than 3–4 players competing in the long run.

Strategies to succeed

Given the above drivers of the extent to which this market is winner-takes-all, both large incumbents and new entrants can follow different strategies to succeed. A few of the strategies (certainly not exhaustive) are very briefly discussed below:

  1. Reduce ‘friction’ in signing up and using the functionality for the first time

    This is especially important for new entrants so that they reduce multi-homing costs, but this is not easy. Companies like Apple may have an advantage on this front: If P2P payment is added to Apple Pay, existing Apple Pay users are signed up by default. Companies like Facebook and Google are also making it relatively simpler by adding ‘$’ buttons to Facebook Messenger and Gmail respectively which already have large user bases.

  2. Provide a superior user experience when making transactions

    This is one of the definite ways to differentiate the product. For example, Apple Pay can have a mechanism where the user double-taps the home button, scans the fingerprint and pays/requests another iPhone nearby, all this without even unlocking the phone! Of course, not all better user experiences are necessarily appreciated by the users. Careful attention should be paid to user experiences that actually solve a pain point. For example, is the ability to pay/request a nearby iPhone without unlocking the phone actually valuable to users?

  3. Develop a differentiated and valuable offering, perhaps for a specific niche in the market

    One of the differentiating factors of these products is cost. For example, some of the big incumbents may not necessarily aim to make money through this ‘feature’ and hence have a lower charge. Their aim may be to increase usage and engagement of their products and monetize through exisiting or other means. New entrants may also start by serving specific niches and developing a differentiated offering for them. For example, one specific niche could be an offering optimized for payments and settlement between users in a large group.

Finding good strategies and executing them is easier said than done, but it would be fun to see how this market plays out.

What do you think?

By: Shankar Vellal


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I’ve found the recent trend of online retailers opening up offline retail stores very intriguing, given that in the past few years, there has been a lot buzz around ecommerce and about how online stores were going to reduce and eventually obliterate the need for brick & mortar stores.

In a bid to not be left behind, big box retailers such as Macys, Walmart and Target had made a significant investment in increasing their ecommerce presence and capabilities. However, just recently, it was announced that Amazon, the world’s biggest ecommerce retailer had opened up an Amazon brick & mortar store. Some other players that started online have also expanded into offline stores such as Warby Parker, BirchBox, BaubleBar in recent years.

This to me shows that there is no one simple answer to the question of online vs. offline stores. The question should thus be: should a business be an online only store or be an offline only store or be in both retail channels. And if the plan is to be an omni-channel retailer, should the business start online and then expand to offline or start offline and then expand to online? And are there specific product categories that each of these strategies works better for?

To answer this question, I analyzed the pros and cons of having an ecommerce only company. The major benefit of starting a business online first vs. offline is the low upfront cost associated with building an online store. Websites like shopify and squarespace make it easy and cheap to start selling items online. This gives one an opportunity to prove the concept and to prove the demand for the product before investing significantly in it. Online stores also provide a broader reach and more national or global exposure than offline stores given that anyone can access the website from anywhere in the world and potentially make purchases from it. Being able to carry a diverse and unlimited inventory of products is also a benefit of an online store as there are no physical space limitations. On the negative side, online stores tend to have high logistics costs and a high return %.

There are also a lot of benefits to shopping offline, which is why approximately ninety-two percent of all purchases in the U.S still happen offline. The benefits include being an avenue for people to touch, feel, and try the product before purchasing, having a personalized in-store experience such as great customer service which can lead to brand loyalty, legitimizing the business for those who don’t know or are not yet trusting of the company, building the brand look and feel through the physical design and experience in the store. A physical store in a great location also serves as a form of marketing, because it will attract new customers to the store. These benefits all translate to an increase in repeat customers, a lower rate of returns, and potentially more sales as its easier for someone to buy multiple items when they see them in person than online. The cons of this approach are the pro of online stores such the high startup and overhead costs, the limited reach of customers, limited physical space etc.

In addition to the aforementioned benefits of both models, other benefits to the hybrid model of retail includes providing an avenue for one to buy online and to return to the store, where they can in turn find something else that suits them, thus ensuring the sale is completed. From a logistical standpoint as well, being able to fulfill orders from the store closest to the consumer as well leads to reduce shipping costs and shortened delivery times, both of which are of value to the consumer.

Some product categories such as beauty products, home and office make more sense to start online because for beauty products, online allows one prove out the concept and demand for the products first, and home and office will result in high rental costs initially so starting online is a way of getting maximum value at a lower overhead cost. However, most other categories such as fashion, electronics, mobile, games, tablets, computer, collectibles can be profitable if started online, offline or if a hybrid model is employed. I think it comes down to the personal preferences of the entrepreneur, the amount of funding secured, how quickly they are looking to build a brand presence and to grow, how sure they are of the demand for their products, how important the in-person experience is for the brand and what it represents and finally what kind of store do they the capabilities to build and manage as the needs for the two types of stores are very different.

By: Oare Avbuluimen

 


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While living in Milwaukee, there were parts I liked about going to the barbershop; however, there were parts that I really disliked.

The parts I liked: the environment, the community interaction, and the relaxation

The parts I disliked: appointment setting, waiting, and the transaction

1)      I could make an appointment by phone, by setting the next appointment after a completed appointment, or by physically stopping by the barbershop.

  • Phone – First, I had to find time to call during the working day.  Second, I had to call when the barber was not busy or was willing to put the clippers down to answer the phone.  Once we connected, we had to navigate his day planner, which he manually updated using a pencil, to find times that worked for both of us.  Overall, this was not an efficient process for both parties.
  • Plan Ahead – It meant that I had to know my schedule 10 days in advance, which was hard to do.  If I had to reschedule, I had to call (thus falling into the situation mentioned above) and hope that my available time slot(s) weren’t already taken.  In general, the time slots that worked with my schedule were filled up 4-5 days in advance.
  • Dropping by – This was the least efficient option.

 2)      I was forced to wait for two reasons: the barber underestimated the amount of time it would take to perform a particular haircut or one of the clients ahead of me was late.  Both scenarios forced the barber to run behind schedule.

3)      The barber only accepted cash so, if I forgot to get cash at the ATM or store during my regular routine, I had to set aside time before my appointment to get cash, which added an additional 10-15 mintues.

Like most, I brushed off these inconveniences as just “part of the process.”  However, after moving to Cambridge and finding a new barber, I discovered that these inconveniences did not need to be part of the process and could be eliminated.

My new barber was able to service his clients more efficiently because he had integrated technology into his operation.  Serendipitously, the efficiencies he was able to achieve addressed my three pain points.  First, rather than keeping a written day planner for appointments, he signed a contract with Genbook, an online solution provider who specializes in click-to-schedule appointment setting.  Through this system, via the barbershop’s website or Genbook App, the customer is able to see the barber’s schedule for the next couple weeks and set an appointment for one of the open slots.  All the barber has to do is input the days/times he is available to work.  This transparency allows his clients to make, reschedule, and cancel appointments without having to interact with the barber, thus saving time for both parties.

Second, the Genbook scheduling system forces the client to disclose the type of service he/she wants before the appointment can be set.  This allows the barber to more accurately predict the time needed for each appointment, thus decreasing the potential wait time for clients.  As for addressing the late clients, although Genbook cannot eliminate this efficiency damaging act, the software has features that try to help alleviate that problem.  When setting an appointment, the client must include his/her phone number and email address.  The software will then automatically send out email and text notifications reminding the client of their upcoming appointment.  This feature also helps the barber avoid the dreaded “no-show,” which is the worst case scenario for the barber as it dramatically increases the likelihood that he will sit idle for a given period of time.

Finally, although my barber does not accept credit cards, arguably the easiest and best option for the client, he allows his clients to pay him via venmo.  Once again, eliminating one more inconvenience.

Overall, I have to commend my barber for the progressiveness of his shop.  Many barbers understand that their business and revenue generation is based on maximizing throughput, minimizing idle time, and satisfying their clients, but few have done the research and have utilized technology in the manner in which this barber has.  I find the comparison between these two barbers interesting, because I see this story as an anecdote for the world of small business.

How many small businesses fail to reach the customer satisfaction, efficiency, or revenue numbers they aspire to achieve simply because they do not seek out or fail to find the cost effective solutions that are readily available?  In that same vein, what can be done to help small businesses discover these solutions?

By: Josh Stull


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Amazon Prime Air image prime air 2

I first came across Jumia when I was in Nigeria this summer following conversations with a fellow HBS student who was interning at Jumia. He was there to review their Nigeria operations and then go help the company launch in Kenya.  Jumia wants to be the Amazon of Africa, and it is no surprise that majority of the founders are former Amazonians, who started the company in Nigeria in 2012 with funding from Rocket Internet.  Today Jumia has warehouses in 10 African countries.

The Jumia founders have seen the potential of e-commerce in Africa. With a population of just over 1 billion opportunities in this space are endless.  According to a report by Frost & Sullivan, e-commerce is expected to be worth US$50 billion by 2018 compared to US$8 billion in 2013 in Africa. However, like its inspiration Amazon, Jumia operates at substantial losses and due to substantial infrastructure challenges in Africa, lack of cashless payment systems, low levels of internet penetration and the endemic lack of an actual addressing system in many areas where majority of the population live. Jumia’s staff complement far exceeds that of Amazon in order to make up for the various inefficiencies in the African market.  The Managing Director of Jumia in Cote d’Ivoire, Francis Dufay, purports that only improvements in Africa’s infrastructures like roads will enable Jumia and others be able to meet the ever growing demand of e-commerce sector on the continent.  I actually disagree and I believe that African entrepreneurs need to think creatively about addressing their perceived infrastructure challenges.

For example, how many years did Africans lament the inability of their governments to provide reliable telephone lines and service?  We saw all those complaints nullified with the penetration of the mobile phone, and this revolutionized communication and even facilitated transactions with mobile money in Africa.  I believe the octocopters or drones, which will be launched in the next couple of years will revolutionize e-commerce and delivery systems in Africa.  Amazon is taking the lead in fine-tuning these new drones and once all technical and regulatory barriers are overcome these drones will revolutionize delivery services in the US by making delivery of small packages faster.  A Washington Post report, estimates the sales of drones will be worth US$11 billion in the next decade, but this also includes personal drones. These drones can cost as little at $499 and as much as $6,000. But in Africa, this means that the need for good roads and addressing systems will be circumvented and we will no longer need to wait for government to come mark where I live and tar our roads to make it easier to get my delivery.  If I have a cellphone everything will be done using it.

I imagine a world where I can order a product on my phone and then an e-commerce company can take my order, I pay using my mobile and then when I am ready for delivery I let the company know and the drone is loaded with my package, gets my GPS and takes off and goes to the coordinates where I am located. Then once my package is dropped outside my door, the drone sends notification to my phone and then I come out and pick it up.

Some naysayers worry that is technology will never get off the ground and that it will not work. But in the world there are always naysayers, think of those who laughed at the Wright Brothers when they were adamant to invent a flying vehicle that would be able to carry us across oceans in the air? Every great technology has its fair share of critics. Some of them argue that the technology will not be approved by the FAA in the US because of high crash rates and poor maneuvering.  I have no doubt that the technology will continue to improve and be more superior and address these concerns and others.  Some also argue that the technology will be subject to high-jacking and theft.  I ask myself what makes a delivery guy immune to those? Nothing and in fact it is better a machine is high-jacked than an actual human being.  But what these cynics fail to think of is that the technology can be fitted to the drones to track their movements and even little hidden security cameras.  In fact, one final argument is that people will game the system and pretend they did not get the package.  I have heard of instances where people game the system today with our current postal services.  And so these hidden security cameras can also be installed in the drone to take a picture of who picks up the package before they fly off back to base.

I strongly believe in the future of e-commerce in Africa, but it will not happen with the current inadequate infrastructure we have.  Yes we must continue to work on improving the infrastructure but this may take years, time we do not have. Revolutionary thinking and adoption of out of the box technologies can change the way Africa develops and even leapfrog us into new businesses and industries beyond even our wildest imaginations.

By: Laone Bukamu Hulela


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Facebook, it is argued, is eating the media. With the launch of autoplaying native video and lightning fast-loading Instant Articles, Facebook isn’t just letting publishers share their content with readers – it is hosting the content itself, and in doing so, shaping how audiences experience that content.

The trouble for the media, it seems, is that once Facebook controls both publishing and distribution, it will have even more power to control publishers’ traffic and access to audience data – and therefore their monetization as well. But might this be a power grab that serves users and saves publishers from themselves?

The dangers of depending on Facebook

Publishers find themselves in a tricky spot. None of them set out to become beholden to Facebook. Most fell into depending on Facebook passively because their readers were sharing on Facebook without prompting. Once they realized the incredible ability of the platform to drive traffic, they started engaging more deliberately. Even BuzzFeed, who built their audience and monetization model on Facebook sharing (it accounts for over 50% of their traffic), did so because Facebook was where the audience was, not because they wanted to depend on the platform (CEO Jonah Peretti’s famous ‘distributed’ content strategy).

And publishers are right to be wary of depending on Facebook. Their brand partners provide a cautionary tale: they were encouraged to build large followings on Facebook, only later find they needed to pay Facebook in order to reach a meaningful number of those fans. Zynga faced a similar fate when it found overnight that the in-app purchases for its Facebook-hosted games would have to be made via Facebook ‘credits’ – a service that Facebook would charge 30% for. In both cases it’s clear that Facebook gained from a change that arguably had little impact on users (in the case of brands it was arguably negative – cutting users off from content they’d signed up to see).

A user-centric power grab?

But, I would argue, this move by Facebook is not simply a nefarious grab for money and power. This is a push for a drastically better user experience. Money and power are simple a pleasant extra. With both Facebook Video and Instant Articles, Facebook has dragged publishers, kicking and screaming, toward providing users with a cleaner, faster browsing experience.

The problem for users was that publishers’ desire for ad revenue and user data had led them to overload their sites with megabytes of software that added nothing to the user experience, but added massively to loading times and data consumption. A New York Times report showed that over half the loading time of leading publishers’ mobile sites was driven by the need to load advertising tech and content. These delays meant that people browsing Facebook and then seeking to load articles or videos from the publisher sites were stuck staring at blank loading screens. This was a bad user experience that made browsing on Facebook less attractive, and therefore reduced the value of the users to Facebook.

Facebook’s grab cut through this. With Facebook hosted content, Articles would load instantly,  and videos would play automatically, as long as they were hosted by Facebook itself. And in the process, Facebook would control more of the user experience – making it cleaner, clearer and more uncluttered.  Facebook can then give the publishers data on users and share with them the revenue from any ads that run alongside the content.

Publishers saved from themselves

In other words, the power grab can been as Facebook saving publishers from themselves. It lets them get data about customers and get revenue from targeted ads with a vastly superior user experience.

The devil, of course is in the detail. Facebook knows that this user experience is compelling and has resulted in radically higher user engagement. (Publishers know this too – just as BuzzFeed or the Washington Post). And while commercial terms are no public, it seems safe to assume that Facebook is capturing a substantial portion of the additional value it creates.

There is no doubt that this move deepens the publishers’ dependence on Facebook. But it does so in service of their end users. More importantly, it is also an acknowledgement from Facebook that publishers are critically important to its ability to engage and retain users. Already Facebook has shown that it’s not immune to publisher pressure, with reports in November suggesting it is looking at changes to Instant Articles that will improve publishers’ revenue per article.

On top of that, having Facebook cajole publishers into Facebook-hosted content seems a significantly lesser evil than having Facebook launch its own content production in house. In that light, this represents Facebook insisting that both sides stick to their knitting: Facebook will focus on a compelling, user-friendly experience it can sell ads against, and publishers will focus on producing great content.

The price is eternal vigilance

This isn’t to say that publishers can rest easy under the benevolent gaze of Facebook. They will have to watch Facebook carefully for plans to adjust the terms of these programs. Continuing to maintain their own sales and ad tech capabilities will likely be necessary, to give credibility to a thread to pull out of the Facebook hosting ecosystem. However it seems that continuing to produce great content that people want to share on Facebook – thereby remaining important to Facebook – is the best insurance policy in an uncertain world.

By: Steve Hind


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“Make something for yourself,” the founder and CEO of Evernote, Phil Libin, exclaimed in a crowded auditorium at Harvard Business School’s annual entrepreneurship conference. If you are the ideal customer for your own startup, he reasoned, you are much better equipped to approximate market fit, evaluate quality standards, and make the best possible product. As I glanced through the list of companies that recruit on campus and the stack of cases I read in my tech and entrepreneurship classes, I noticed that many of them, including several founded by HBS alumni, seemed to naturally follow his advice. If you need to borrow clothing, get make-up advice, find a song for your current mood, get your nails done, find an Ivy League graduate to date, share photos of your dinner, make yourself look better in all your photos – worry not, there’s an app for that. Many startups have succeeded to identify these “pain points” and profited handsomely from the endless supply of capital chasing outsized returns, under the philosophy that we are our best customers.

The world’s best and brightest seem intent on creating products and services for consumption by the founder and his or her class of people. How have we ended up in this world of solipsistic startups? A year ago, as I started thinking about where I wanted to work after graduation, I asked myself a simple question: which products have fundamentally improved my life over the last few years? For me, it was the smartphone I carry around everywhere, the software on it that has made it so much easier for me to consume information, and my camera since I’m an amateur photographer. Tech has dramatically improved my life, but after a while, I realized that I was asking the wrong question. The future shouldn’t be about me. When I look at the new wave of startups emerging everyday, I noticed they all seem to be helping a small percentage of people share, message, and buy things more easily. None of them seem to be radically ambitious in how it uses technology to help people in a meaningful way. By adhering to the philosophy that we have to be our own customers to succeed, and yielding to the natural self-centric gravitational pull of focusing on our own problems, we’ve lost sight of the true value of technology. We’ve overestimated the power of technology to solve our problems in the short term, and we’ve underestimated the power of technology to be a transformative force in the long term.

There is no question that talent has been migrating from Wall Street to Silicon Valley, but the same problems that led to the financial collapse of 2008 are evident in today’s exodus. When I took my first job on Wall Street, there seemed to be an endless supply of brilliant mathematicians, athletes, politicians, and economists from the ranks of Yale, Wharton, Harvard and every other elite institution, all converging in a single industry, working inhumane hours to make capital multiply. Curiously, the same structural incentives govern the startup scene today: highbrowed VCs, top accelerators, prestigious MBA programs, and of course the student who has no idea what to do with his or her life – are all complicit in this new game. More money is getting pumped into the system, this time landing in the coffers of solipsistic app creators rather than those of traditional wealth managers. As a result, over 80 private companies have raised money at $1B+ valuations in the last few years.[1] As famed investor Bill Gurley points out, overcapitalizing this crop of immature private companies can have the affect of eroding their operating discipline, further exacerbating the tenuous bubble in valuation and risk.

So what’s the solution? Not everyone can claim Elon Musk’s philosophy of using profits from early product generations to subsidize more revolutionary, mass-market products in future generations, but we all have to start somewhere. Identifying a problem worth solving is a step in the right direction. Venture needs to shift from funding companies that provide features and widgets back towards funding truly transformational ideas.

Some ideas affect large numbers of people but don’t get much attention at Davos or on political campaign trails. Growing up, I’ve noticed that opportunities are so randomly distributed starting at birth, and these variables generate such large discrepancies in people’s quality of life later on. Every time I walk around the streets of San Francisco, I’m taken aback by the sheer number of homeless people there relative to many other cities. I don’t think there’s enough empathy or conviction that this problem can be solved. When I read about Palantir’s philanthropy engineering efforts to help homeless veterans in SF find housing through an algorithm that efficiently matches veterans with housing providers and more importantly, cuts through bureaucratic hurdles that make housing so difficult to place, I was encouraged to discover that things can be changed.[2] I hope these capabilities can be expanded beyond veterans to help the other groups in need.

These kinds of problems are hairy, unglamorous, and offer no immediate economic value. Admittedly there are many things beyond our control – the entrenched financial systems and their appetite for risk and reward. But we can control what we choose to do with our precious day-to-day. We have to believe that we can solve real, hard problems with technology; we must.


[1] Investors Beware: Today’s $100M+ Late-stage Private Rounds Are Very Different from an IPO | Above the Crowd

[2] Palantir Philanthropy Engineering. 2014 Annual Report

By: Louisa Xu


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