Thanks Steven, great post
You mention financial flexibility Expeditors has due to its asset light business model. I find this being quite unique among 3PLs, particularly ground carriers, as it leaves them rather inflexible when responding to customers’ individualized requests. It’s therefore very interesting to hear that company’s key differentiating factor is its focus on CX and ability to cater each customer’s individual business needs. Do you see them strengthening the business model by repositioning from asset-light to asset-heavy model? Also, I assume they do not provide the last mile delivery based on their asset-light business model. Given the explosion of e-commerce and importance of cracking the last mile delivery model – i.e. part of logistics that customers are most exposed to (in B2C operations at least) – do you see them incorporating this in their business model to drive further CX?
Great to see that Jean-Claude Biver’s interests lie outside of watch industry…
Very interesting article. Many business nowadays place heavy emphasis on product and CX. I see the speed and convenience of delivery & returns as two key CX components in commerce. Big advances in logistics (deliveries are becoming faster and more reliable as 3PLS and e-commerce (Amazon) / tech (Google, Uber) players continue to innovate in this space) are enabling both small and established brands to offer their products online and thus expand their customer reach. How do you see Bonobos addressing the challenges of competition and ensuring for CX to remain one of its key value propsoitions? Do you see it pivoting the business model in another direction as customers begin to take high CX quality for granted?
Business model is indeed very capital intensive – while only 6% of the capital invested has been lost (ventures closed down), the majority of the remaining ventures face very long paths to profitability. I’d argue that Rocket’s strategy relies heavily on success of “black swan” ventures to support the operations (= enormous cash burn) of the rest of the portfolio. Throughout the history, they had several successful exists (i.e. Alando – sold to Ebay, MyCityDeal – sold to Groupon, Zalando – IPO ’14) where the strategy proved successful and given the size of these exists they were able to not only recoup the early losses, but also to make a significant profit.
Depending on the stage its ventures and their associated risks, Rocket divides its portfolio into Proven Winners, Emerging Stars, JVs, Concepts and Others – analysts valuations of these ventures are very diverse and lead to a huge range of the parent company’s valuation (from $10bn – $70bn). This points to the enormous risks associated with the business model. I’d argue one needs to be in for a very long term to reap the benefits…
Very good points, Surabhi.
Co-Founders / MDs (in Rocket jargon, this is top management running the venture – not necessarily from its inception) receive a relatively small equity stake and salary equivalent to the base at top banks / consultancies (usually matched with people’s salary at former employer). Fixed component therefore doesn’t change, while the variable one becomes the function of people’s performance at the job. Rocket is monitoring very closely the day-to-day performance of all of its ventures, thereby ensuring that targets are met and assess whether it is worthwhile to continue financing the projects. People who fail to meet their targets are quickly replaced, which creates a competitive and aggressive culture. Given the above, motivation is not really an issue but Rocket’s operating model does come at the expense of poor culture and very high turnover.
Specifically, unsustainable culture and heavy operational reliance on parent company become an issue for those Rocket ventures that scale and want more independence. I think this is a result of extreme focus on short-term performance and as you pointed out, lack of (early stage ventures’) management’s buy-in in the long term vision of the company. In ventures that survive the incubation period and continue to grow, it becomes increasingly difficult to change the organizational culture and establish intra-company processes that are less reliant on parent company (i.e. Rocket).
Thanks Eric, great idea.
You described Loolia’s value proposition being to support influencers in video production, content management, etc, as well as to drive influencers monetization potential. Three main drivers of your operating model supporting the above objectives – aggregation of prominent influencers, tailored content and “meet & greet” events all seemingly focus on strengthening the relationships with the existing customer base. Since the monetization potential increases with the size and engagement of your customer base, I’m curious to know about the customer acquisition strategies employed.