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Pursue massive scale: And other startup lessons from my corporate life

After more than 24 years working in corporate marketing and PR positions that have inspired me, humbled me and taken me to four continents and countless industries below are my “short” notes on lessons from those days as I fight to scale my current start up.  I hope some of these are helpful to other founders and folks working at early stage companies.

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Focus on massive scale. In the fairly limited time spent working with Jeff Weiner when I was at LinkedIn I learned something from him in each and every interaction that is of value in what I’m doing now. One of his mantras back then was to focus on “massive scale.” In 2009, it meant having a LinkedIn member base that was in the hundreds of millions, densely interconnected and very active on the platform.  I joined when we were at 30 million members so it was still very much aspirational and clearly has hit massive scale since.  My takeaway on that now is for startup co-founders to plan for and anticipate bringing their business to a massive scale, because as I’ve learned, there’s a force multiplier effect on every aspect of the business when you go from 30 million customers to 300 million customers. And, if you can recruit someone to your team or board of advisors who has taken a start up from nothing to massive scale you must do it.  That experience is invaluable and will help you anticipate the potholes that lie ahead while giving you immeasurable street cred.

The other thing Jeff used to say in meetings was “there’s always a downstream” impact. He’s right of course.  Within a product environment like LinkedIn if you change something over here, something over there will be effected — maybe immediately or maybe six months from now.  But, there is always an impact — intended or otherwise.  Now that I am back in a consumer-facing startup, early in product development I have stapled that message to my forehead. It reminds me to go into every decision with eyes wide open — even if I don’t have a contingency for every consequence, I know to be ready to react. It echoes the Lean lessons to test, test, test your product before rolling out to a mass market.

Act like an owner. I’m not one for corporate missions statements. In fact, for the first 16 years of my career I used to roll my eyes at clients who spent time and money on these. When I got to eBay company values were everywhere. The one that stuck was: act like an owner.  It works universally for whatever you do and especially within a startup. Something magical happens when an employee knows its his company, too.  Suddenly, every detail matters and relationships with co-workers are worth building and protecting.  Startups need to be generous and open minded about how to structure early employee compensation and hire people who fit the demands of that stage of the company.  Being employee number 3 is very different than being employee number 3,000.

Your true self is revealed in the politics.  At some point you will be faced with making a decision based on what’s right for the customer or business and what the internal politics want.  Screw Myers-Briggs and all the personality tests, nothing reveals your true character more profoundly and swiftly than this moment. Someone asked me very recently and very bluntly why I had so many 2-year long jobs. Here’s your answer, pal. I made the decision very early on in my career that I was okay with losing a job for being unpopular with management, because I am not okay with losing a job because my programs or teams were underperforming.  For founders looking to build a team that will be tasked with making the impossible possible and facing the 98% failure rate of all start ups, I ask: who are you picking first for your kickball team?

Managers run operations, investors manage their money. In the mid- and late-90s I did investor relations for a many micro- and small-cap technology companies (in a wide range of industries) during the first tech boom.  I worked with some of the smartest CEO’s and CFO’s I’ve ever been around and prepared countless investor-facing materials and many Q&A’s for quarterly meetings and earnings calls. What I learned is that investors are in the business of managing ROI of their money. Period. While some were very knowledgeable and had good suggestions about how to make improvements that could drive growth and profitability — they never could see the full picture. Ever. In repositioning an equipment supplier to the then still burgeoning fiber optics market that would eventually serve this thing we call the Internet, a client’s investors were roiled about the change in strategy and positioning to capital markets.  Management was very smart to stick to its guns because this new strategy turned a $10 a share stock into a $500 a share stock on a split adjusted basis — within 18 months. For startup teams who take on investors the lesson is really clear — screen your investors as thoroughly as they are screening you.  Pick the ones who fit the stage of your business and have expectations in line with those of your company. For really early stage companies, listen very closely if a prospective investor wants to run operations or just provide capital.

Sometimes PR and marketing doesn’t matter.  I once had a very heated run in with a product manager who got in my grill and stated “PR doesn’t matter” as it relates to an upcoming launch.  I think my carotid just about exited my neck when he enunciated the m in matter.  Turns out, though, he was more right than wrong.  And this product manager has gone on to found a hugely successful company and probably could’ve retired four or five years ago.  In the years since I’ve more than once uttered to another marketing person a quote I saw that said “at some point, the product is the PR.” I remind myself of this lesson all the time and that if the product truly adds value to the customer’s life it will get adoption. Solving for that first and foremost trumps any marketing or go to market strategy you and any consultant can cook up.  When you’re sitting with your small team wondering if it’s time to turn on the marketing spigot — put your big boy pants on first and ask if it matters. Ask if you’ve proven yet that what you’re building is in fact a value add.

M&A gets done for one reason: Their growth, not yours. Specifically, the growth of the acquiring company. I’ve been involved on the investor relations or corporate communications side of well over 100 acquisitions and this is not a warm and fuzzy endeavor.  The acquiring company’s agenda isn’t to give the owners of the other company a soft exit, it’s to grow their company by 1) buying revenue and customers 2) acquiring technology or IP they can’t build themselves 3) buying talent that won’t otherwise go to work for them.  If you’re running a startup and your projected exit is via acquisition you better think through this now or you’re probably running a lifestyle business and don’t know it.

Lawyer up. In utopia there isn’t a need for lawyers, but this isn’t utopia it’s corporate America and if you’re building something with contractors and partners that is worth selling to the market it’s worth protecting your ass with strong legal counsel. LegalZoom is a start but soon after you fork over your $500 to get your LLC set up you’re going to need to sign on a contractor or investor and that will require a lawyer who understands your business, its risks and your objectives.  Having the conversation with counsel about who owns the kernel to software many years after it was built with millions of users on the platform is an intensely stressful conversation — been there and it sucks.

Higher education PR and marketing people are rock stars. The demands of doing marketing and PR within a university are unparalleled. I tell my former colleagues who work in corporate and consumer roles that it’s a lot like having 10,000 of your customers living in your building with their parents right around the corner.  If you’re looking for a marketing person to join your startup, look in higher ed. These folks tend to go under-appreciated but have the mettle to deal with unthinkable crises and have current experience engaging with the largest and most digital savvy generation in the history of the world — teens and young adults.

Customers buy what they want. If I had to list the companies I’ve worked with who promised a full suite of solutions to customers so that they can buy from a single vendor, I’d get a several dozen cease and desist letters and a bill from GoDaddy for the space I ate up on this blog. Its mind numbing how many companies — startup or mature — build their differentiation on the single solution provider value proposition.  Meanwhile, I can’t remember more than 10 case studies when a customer actually said “Screw it, we’re firing all of our other vendors and going with just you!” Most businesses in the U.S. are small- to medium-sized businesses and most of those companies aren’t organized in a way to buy from and manage a single provider.  So they tend to buy a la carte. Accounting buys bookkeeping services from a vendor of its choice while sales picks the CRM application it wants.  It’s the reality of the market.  For a startup — particularly a services company — looking to compete on this plane, I’d encourage you to think through this and focus first on the killer app, feature or product that could be your cash cow. Once you’ve proven that, build or buy adjacencies out over time. Google didn’t launch with Maps, Android OS, the Nexus phone, Gmail and ChromeBook on Day 1. It took them a couple of years to achieve world domination, so it might take you a little longer.

– Jose Mallabo

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Social media complements search and email marketing (for now)

Looking at this Forrester post almost a year later feels a lot like going back to high school after your first year in college. You thought it was a good idea to visit but then you realize by the end of it — not so much.

The blog post’s conclusion is to draw your own conclusion about social media’s impact on holiday purchasing. The post meanders from having an opinion that the ForeSee research was limited to having no point of view whatsoever. How am I going to join a conversation or rebut your point of view if you don’t have one?

While there are no official rules to blogging – the universal and unspoken rule is to have an opinion.

Here’s mine: The idea of social commerce (buying stuff on Facebook) is still a pipe dream. Rather, social media can drive brand, product and deal awareness and therefore serve as a complement to a retailer’s larger search and email marketing programs.

Since this post in late 2010, LinkedIn and Groupon have gone public. Facebook’s IPO has been delayed – but will be the biggest one in the history of ever. The point being, these companies are all well capitalized, have hundreds of millions of subscribers and are not going anywhere. So industry pundits and luddites alike need to bite down on the reality that marketers will continue to throw marketing dollars at them to hock their wares regardless of whether we have any proof of a causal relationship between the social media consumption and clicking the “buy” button on a shopping site.

At 2.9% e-commerce conversion rates there is no proof needed.

While this question of “Was social media a big factor in holiday purchases?” will come up again and again over the next few weeks and months, I encourage marketers and PR people to do one thing:   challenge the question.

As Augie Ray correctly points out social media is a mere infant and it will take time to prove its correlation with purchasing behavior. In the meantime it serves a lot of other organizational needs that are no less important than shopping cart clicks. Don’t get suckered into the conversation about social media and its impact on transactions because you’ve got more to attend to with your 2012 social and media dollars such as:

  • Reputation management
  • Product and corporate branding
  • Influencer relations
  • Partner relations
  • Customer service
  • SEO
  • Issues management and crisis communications
  • Recruitment and workforce engagement

While the analyst community continues to look under the hood for purchase conversion evidence, what they’re missing is that the owners of these social media programs may not at all be focused on driving holiday (or non-holiday for that matter) transactions.


Bite down. Chew. Gulp.

And therefore, there might be some reason why the transactional or purchase conversion evidence is not to be found.

In fact, most brands and retailers I know are still investing more in tried and true search and email marketing initiatives to drive transactions and conversion online and in stores –- while using Facebook and Twitter as complements to those initiatives and for all of the other communications objectives listed above. That explains why search and promotional email remain the primary drivers for purchasing behavior for the holidays.

There. I said it.

Don’t go back to high school. But do take my poll on LinkedIn

-Jose Mallabo

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Sudden hotness: Social + E-commerce = Social Commerce

Amazing how hot the juncture between e-commerce and social networking has gotten. It’s simple, really. E-commerce is eating into the overall retail segment. And, marketers go where the crowds are. Right now those crowds are not on AOL or WPIX (except for this page about Victoria’s Secret). They’re on Facebook and Twitter.

I remember having some very heated dialogue over using ‘social commerce’ as a thought leadership position within the corporate PR program at eBay about 3+ years ago.  I don’t recall what side of the argument I was on, but needless to say, despite the PR agency’s best efforts (you know who you are) to make it real, it took a Joe Pesci pen to the neck (Nicky in Casino) and never saw the light of day.

Until now.

Sudden hotness has arrived in that kink of a place where social and commerce are meeting.

After CyberMonday all the rumors were about Google to buy Groupon for $2.5 billion (Kara Swisher reports the offer is $5.3 billion). A colleague of mine asked if they’d call it Goopon? Heck, for that mountain of money, they can sponsor the TSA and rename it Gropeon. Today, Payvment announced a $6 million round of venture financing. In recent weeks Facebook has launched Deals to sit on top of its Places product. And, all you need to do is do a Twitter search for #CyberMonday to see how much traction commerce gets on Twitter.

So, while TechCrunch ponders if Amazon missed the boat on social commerce the reality is we all did. Or we would’ve called Nicky and his pen off back in 2007, created a Moto RAZR app for surfing the Urban Outfitters page on Facebook and retired on Black Friday 2009 on the speculation that Google was going to buy it.

Lesson of the day: A lot of the time the PR firm is right.

Update 1:  Dec. 2: Groupon: In the days since Mashable posted the Google buys Groupon rumor, most of the banter has been about how sexy the deal is. Rumors about M&A are dead sexy and dramatic. But we all know that most deals don’t work. And the honeymoon usually ends quickly once the hot company gets ingested.  I’m just happy someone is giving some sound analysis to this deal before it gets done.  Thanks, Sucharita.

Update 2: Dec. 3: Having worked with eBay Classifieds Group before and while classifieds was being integrated into the marketplace, I find this $75 million deal to buy…fascinating. I have to figure it out in light of all the above, eBay’s constant refrain about mobile as well as it’s M&A history. More later.

-Jose Mallabo

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