Slacking Off to Get More Done

More and more companies are using Slack as their internal collaboration tool of choice. Why has this chat app found so much success in cracking the enterprise market?

With more than 1.7 million daily users as of December 2015, Slack serves as a prime example of effectiveness in driving alignment between its business and operating models.[1] It is a team chat and workplace collaboration tool that was originally released two years ago and shows no signs of slowing its growth anytime soon.

The program was created for internal use at a game development company, originally existing as a set of incremental improvements to a basic instant messaging service. As the team added more and more features it became clear that the product would prove to be useful at other companies as well. Slack relies on group channels and private direct messages to allow team members to communicate with each other. At the same time, it has native integrations with countless other enterprise services – including Box, Dropbox, GitHub, Google Drive, Twitter, and Wunderlist – to act as a single place for people to interact with each other and their company’s data, files, and alerts.[2] More importantly, all of the chats and linked files are searchable, and the entire system is accessible through a browser and native desktop and smartphone applications.

Stewart Butterfield, Slack’s CEO, explains that beyond just providing a polished chat experience the tool further creates value for users by increasing transparency in an organization across different functions and projects and by serving as “the digital manifestation of [a company’s] institutional knowledge.”[3] The entire business model is noteworthy as it underlines the role of a wide range of data sources in the success of modern firms: users rely on the Slack interface to not only communicate with their coworkers but also to access aggregated information related to their their business.

The company’s operating model has a pricing policy with several tiers that reflect the amount of value captured for teams by the app. The pricing scales with the number of features provided to users, and Slack’s revenue is directly related to the support it provides its customers. As the levels increase, companies are given larger message archives, more extensive search features, stronger support, and greater access to usage data, message compliance, and security.[4] Teams pay per user, and workplaces can use the free tier for an unlimited time without ever upgrading to the next level if they do not need anything more than the basic package.

Slack’s own development process is in line with both its business model and origins as features continue to be added incrementally and are prioritized based on user need and amount of value provided. It leverages both direct feedback from customers and an active community of developers building their own Slack add-ons to maintain momentum in its product roadmap. The company uses its own service, and Butterfield has not sent an email to a coworker in over four years.[5] It is very easy to set up a new team in the app, and the continuous roll-out of new integrations and features makes it increasingly difficult for companies to switch to alternative platforms because the tool’s competitive advantage only grows as teams build longer historical archives and orient their own workplace communications and operations around Slack as a central hub.

Slack’s astounding performance directly reflects the effectiveness of its strategies. In early 2015 the company was adding $1 million in annual subscription revenues every two weeks and revealed that users were connected to the app for over 9 hours during the course of the workday.[6] Its high-profile paid customers include Pandora, Venmo, Airbnb, Adobe, Foursquare, Yelp, Nordstrom, eBay, and Expedia – just to name a few – and many of these companies have started listing use of the chat app in their offices as an “employment perk.”[7]

Slack has proven itself as the clear choice for startups and large corporations alike, whether they just need a clean chat app or require a robust suite of collaboration tools, and the set of features it provides to its customers only continues to grow. Based on current moment there appears to be no end in sight to the number of Slack-ers in the workplace.


Endnotes

[1] https://slack.com/jobs

[2] https://slack.com/integrations

[3] Rachel Metz, “Three Questions with Slack’s CEO,” MIT Technology Review, November 21, 2014, http://www.technologyreview.com/news/532606/three-questions-with-slacks-ceo/, accessed December 2015.

[4] https://slack.com/pricing

[5] Ellis Hamburger, “Slack is Killing Email,” The Verge, August 12, 2014, http://www.theverge.com/2014/8/12/5991005/slack-is-killing-email-yes-really, accessed December 2015.

[6] Eugene Kim, “Billion-dollar Startup Slack Says It’s Adding $1 Million in New Contracts Every 11 Days,” Business Insider, February 12, 2015, http://www.businessinsider.com/slack-growth-after-one-year-2015-2, Accessed December 2015.

[7] Mat Honan, “The Most Fascinating Profile You’ll Ever Read About a Guy and His Boring Startup,” Wired, August 7, 2014, http://www.wired.com/2014/08/the-most-fascinating-profile-youll-ever-read-about-a-guy-and-his-boring-startup/, Accessed December 2015.

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7 thoughts on “Slacking Off to Get More Done

  1. Have you heard anything about their development process? Like, maybe how they iterate on their processes? Does that give them a competitive advantage too?

  2. Glad you ended up writing about this, Damjan. It is fascinating how this chat platform took off when many others didn’t. I think you hit the nail on the head though: the institutional knowledge thesis is not to be underestimated. There is a growing repository of internal knowledge and so it is no wonder users want to stay as close to it as possible. What Slack will really need to hone to further link business and operating model is being able to build a strong, scalable back-end that can very effectively parse that enterprise’s knowledge so that when a user makes a query, they get the best results.

  3. Interesting post, Damjan!

    My old company used SKYPE as our enterprise chat through 1800+ employees, LOL. Then when we finally switched, it was to HipChat, which I actually really disliked and I thought had terrible UX. I’ve used Slack a bit too, but not as extensively/professionally/on a daily basis enough to feel all the pain points.

    What do you think sets Slack apart from its many competitors (business or operating model or feature-wise), including HipChat?

  4. We also tried using Slack, but unlike some of the success stories, our Slack adoption failed because there was so little company training/incentive to use it amidst all of our other collaboration tools.

    Do you think Slack has lasting power beyond the small pockets of tech-savvy Millennials, and do you think they can afford to not invest in more intensive training/support mechanisms for less-savvy users?

    Also, do you think that they potential for long-term success? I just remember looking at my Microsoft Link Exchange tools and thinking how outdated it looks and feels, even though it has been around for less than two decades. Can it survive the changing whims of us flighty Millennials?

  5. I think Slack has done an amazing job of aligning the customer promise (a fun, easy and productive way to interact with coworkers) with the operating model, which includes integration with Dropbox, Twitter, etc. What concerns me most about the company is that I don’t think its competitive advantage is particularly sustainable. It should be relatively easy to copy, and much of the value comes from the other companies its integrated to.

    Furthermore, given that whole companies need to adopt it, I don’t think the “networking” effects will be as strong. With Facebook, if all your friends are on Facebook, you get no value from signing up on MySpace. However, with Slack, if all the other companies I know and work with use Slack, there stil doesn’t seem to be a tangible benefit to using it.

  6. I find it very interesting that the CEO hasn’t sent an email in 5 years. Email is the workhorse of communication in many companies today. What is the main difference between Slack and email?

    I have heard Stewart Butterfield say that email will become a relic and seen as outdated communication. Perhaps as someone who has never used slack it is difficult to imagine a workplace without email and how that might function.

    Do you think that Slack can show improvements at companies that adopt their software?

  7. Super interesting!

    Do you think Slack is a serious competitor to Outlook? Will it be adopted by larger and more established corporations, or will it only be used by newer technology companies? My company tried to adopt it, but we struggled because we couldn’t get IT to allow us to use Dropbox. We still had to use Outlook to send documents, and Slack was basically a no go after that. (Employees over 30 also couldn’t figure it out, which didn’t help.)

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