Consumer and Enterprise : One App To Rule Them All
Rookie VC #3
Hi, Ulysse here. Rookie VC is a weekly newsletter to share my thoughts about companies and trends I love. Tech and investing will be the primary focus, but nothing’s forbidden.
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Today I wanted to discuss the blurring frontier between the consumer and enterprise world and point out to some interesting trends and companies surfing that wave.
Let’s dive in !
A short bit of history
I wanted to take a step back and remember how, and most importantly why this trend took shape in the first place.
To understand what’s happening in the space, it’s important to remember how the innovation and massification of consumer productivity software took place. In 2004, Douglas Neal and John Taylor coined the term “consumerization of IT” to reflect a simple observation: people wanted to use consumer devices at work, because the experience they provided was significantly better. For instance, pressure began mounting on IT departments to make iPhones and iPad usable in workplaces.
The same phenomenon unfolded in software. Google was amongst the first to seize the opportunity of bringing its consumer productivity apps to the workplace.
Microsoft and its almighty CEO of the day, Steve Ballmer, originally dismissed the trend. They didn’t believe in cloud-based apps. It wasn’t until the early 2010s that Ballmer appropriated this narrative:
“Fantastic devices and services for end users will drive our enterprise businesses forward given the increasing influence employees have in the technology they use at work — a trend commonly referred to as the Consumerization of IT.”
Steve Ballmer, Microsoft 2012 shareholder letter.
In a 2016 piece, Ben Thompson from Statechery outlined possible definitions of "the consumerization of the enterprise":
Products already used by enterprises that have evolved to be more user-friendly, so that employees enjoy using them (what Ballmer was referring to and what Microsoft has executed on).
Consumer applications that are ported to the enterprise and made "enterprise-ready". Google did this with Google Apps such as Gmail and Calendar, which they launched for companies to use with their own domains
Enterprise software, but with bottoms-up adoption. This is neither a traditional enterprise product with a consumer-like interface, nor a consumer product ported to the enterprise. Instead, it's a new business model for selling software - in this case, products like JIRA and Trello - "bottoms-up" to employees, teams, and eventually entire companies
Microsoft Office began to get aggressively unbundled when SaaS companies started to shift the focus on selling and catering to teams and users. This translated in user-centric products, but most importantly in a user-centric distribution and growth framework.
For instance, Slack injected some dose of a viral adoption factor in allowing users to cumulate different “workspaces”, thus letting it spread outside offices. Atlassian focused on selling Jira and Trello to teams, not to companies, allowing WoM to become a primary acquisition loop for the best products.
Unbundling Microsoft Office gave rise to the popularity and amazing growth of G-Suite, Basecamp, Dropbox, Notion, etc. Companies competed to offer the best experience and diversified their acquisition channels, causing their respective products to be consumer-grade.
The limits of unbundling
But at 1bn+ users and 130m+ DAUs, Office is still the household name in productivity. SaaS competitors did not completely replace the suite, but instead created “stack overlap”.
Identity management company Okta found out about the extent of the overlap when its surveyed Office customers last year:
76% of surveyed customers use a competitor software on top of Office, that they could have had for free
28% use Slack daily and 24% use Zoom
Intuitively, you’d look at this overlap and think “Ah, see! The opportunity still is huge for collaboration tools unbundling MS Office”.
Yes, but it also creates “Tool fatigue”. We’ve all already felt it more than once, the average company has 75+ products installs across the board. In my opinion, this overload will either lead us to:
Go back to he old bundles, first and foremost MS Office, for they already own the integrated stack
Turn to wide-reaching collaboration and communication ecosystems like Notion.
Also, don’t forget that bundling makes sense for businesses from an economic standpoint, especially when you want a little of all the tools at your disposal. As Nathan Baschez pointed in his excellent essay about bundling, it eliminates deadweight loss in consumer demand.
What’s next ?
As the line between consumer and enterprise products in productivity blurs, some heuristics of the first category start making sense in the intersection of both worlds.
Let’s look into trends that I think are important to consider when looking into this new SaaS sweet-spot.
Collaboration and productivity tend to be seen as two conflicting concepts. In the early days of digital work, collaboration was external to productivity and looks like this:
This involved painful time and productivity costs of versioning and updating documents we work with, which is why the model evolved:
Then Slack displaced Dropbox and messaging and integrations became the center of gravity for collaboration:
In a 2019 essay named “The Arc of Collaboration”, former Greylock investor Kevin Kwok highlighted why the best productivity apps have collaboration baked in, arguing that Slack is a “last resort” medium for when the app you’re using doesn’t allow to properly collaborate. Digital work should be about blending the collaboration feedback loop with the actual workflow you’re doing work in. Figma (in which Kevin invested during his time at Greylock) does this well.
The next evolutionary step would be to create an overarching collaboration software to tie all functional workflows together. This can be achieved in synchronous collaboration tools such as Screenhero, or in asynchronous workspaces like Notion. The former propelled real-time collaboration to new heights, while the latter injected creativity in building asynchronous collaboration tools.
Where to go now? In my opinion, the user fatigue and “stack overload” can stir users in three directions, though not mutually exclusive:
“The hacker’s way” - Working hard to interconnect pieces of software that are best in their respective functional use via connectors (Zapier, IFTTT, and the like)
“The comfort choice” - Slowly coming back to known integrated bundles such as MS office. We’ve already seen Teams overtake Slack in DAUs, so it seems like it can be compelling at least in terms of written and oral collaboration
“Build your own stack” – The third way would be to use tools that have flexibility, collaboration and productivity baked in together like Notion to build your own workspace around specific use cases
One of the most discussed yet misunderstood trends in productivity apps is how entrepreneurs are trying to make their products feel like games. Product gamification is often described as a silver bullet to solve all your retention and usage issues when you’re building a consumer SaaS company.
Companies like Superhuman don’t gamify. Here is why:
Gamification is based on including goals and competition in some features or core feedback loops in an app to incentivize repeated usage
Game design, instead, is aimed at designing an entire product to trigger complex and intense emotions
Superhuman founder Rahul Vohra insists that his product was built like a game, for it respects 7 principles:
Here is a link to a keynote he gave on this topic last January at a16z :
In my opinion, there is two separate levels of depth in interface design for productivity apps and in the emerging “Luxury SaaS” category.
Level 1:
The value proposition of the product is based on speed and the classic <100ms rule
The design is minimalist and has a dark mode toggle
It sees itself as a modern alternative to a legacy product from a big company
Level 2:
The workflows are opinionated, i.e. they are designed to force you into flow state (more on this here)
The product is not gamified but designed as a whole like a game, and is therefore compliant with principles of game design
This newfound intersection of consumer and enterprise calls for a reinvention of the way companies grow their user bases, and how thinking circularly instead of linearly can help.
In 2007, angel investor Dave McClure first introduced the AARRR funnel to help entrepreneurs think about their acquisition strategies. But some argue it has not aged very well because:
It created “strategic silos”: Marketing and growth functions started to operate and strategize independently of product and sales teams
Funnels are directional: Optimize input don’t worry about the rest. Funnels don’t model acquisition as a compounding and overarching force for businesses, which don’t scale as fast as they could
That is why Silicon Valley’s growth wizards introduced another concept: growth loops.
Growth loops create compounding effects, by allowing businesses to reinvest the value of gaining a new user: generate other signups, facilitate repeated purchase or usage, create data moats, etc.
In the case of productivity apps, the primary growth loop is collaborative and social. The output that gets injected back in the loop is a strong network effect: users can only use the product together only if others also use it.
Starting such a flywheel is hard, because the product must be exceptional enough to generate repeated usage to a point where it becomes a defensible moat. Getting one person to use Slack in an office is hard when it’s the first, much easier when it’s the 20th, painless when it’s the 5000th.
Some areas of consumer software are impermeable to collaboration and social features. The best example is email: you can collaborate in email regardless of the app, hence no network effects.
I like how Superhuman got extremely creative to bend distribution and go-to-market to its advantage.
They worked around the problem by :
Crafting a high-touch and unique onboarding that compels people to refer Superhuman to their friends (or even just brag about it on Twitter) and
Designing the product to create unforgettable Aha moments: intelligent prompts for keyboard shortcuts are a good example.
One could be fooled by the simplicity of loops as a magic recipe for user growth and retention. In fact, you’re better off not following the age old saying “if this ain’t broke, don’t fix it”. The best leaders think about growth in sequences. One core loop may be replaced by another as the company grows in scale.
If we go back to Superhuman: their current loop is mainly based on a very high touch onboarding process, that costs a lot in resources to generate referral. It means that they’ll be forced to transition to a more scalable loop at some point. Likely, features will be introduced to drive adoption inside organizations: collaborative inboxes, shared email editing, etc.
To finish off this piece, I wanted to share some my top picks with you and what’s unique about them.
Airtable, the tree that hides a forest. A lot of people around you know and use Airtable, and I think its excellence in relational databases and API-driven interoperability is really what makes it unique. That said, and as an avid Excel user, I think we must go further than the common belief that “AiRtAbLe iS ExCeL oN StEroIds”. Here is a mapping (probably a little outdated) that I found to give you an extended look at Excel use cases and how many companies have unbundled the space.
Figma and its exciting plugin ecosystem. I think the success of the platform speaks to an underlying shift in what is central to build great companies. The past decade and the explosion of developer tools like GitHub made code collaborative, and the same thing is happening with design. An immediate consequence is that design expectations from users and product teams across the board are going to quickly ramp up. Another thing I love is that Figma is building a great community on top of the collaboration it enables for teams, which is a great way to create healthy competition and have the general skill level of designers go up. Finally, I think the emergence of plugin companies like Overlay, which enables anyone to create a library of clean and reusable React components from Sketch and Figma designs, will give birth to a bustling coder/designer employee that will be in (very) high demand for the years to come.
Superlist, a good story of persistence. I recently came across the news that Wunderlist would be shutting down. The company was bought out by Microsoft in 2015 but faced integration difficulties because its API was hosted on AWS. Founder Christian Reber offered Satya Nadella to buy back the company, arguing that people still loved and used it (3m downloads in 2019). Since this didn’t happen, and in the midst of building Pitch, another high-end software debunking Powerpoint, decided to start working on Superlist, a supercharged version of Wunderlist.
Yourstack. If you made it thus far, you’re probably wondering : how is this about productivity apps ? Well, product Hunt has seen more than 150k products launch to the world in a great vision of sharing and discovering new tech products daily. It is still in beta but it’s going to allow to share something I’m constantly discussing with tech-savvy friends: personal stacks and how to interconnect the product you use, tips and methods to optimize them, etc. Product Hunt is all about trends and novelty, while Yourstack is going to go into the deeper, more social layer of showcasing your personal system. And of course, bonus points for the adorable pancake mascot of the project.
If you liked this issue, don’t forget to embark on my email list and spread the love on social media !
Also keen to take any comments and questions by email at ulysse@techmind.vc or on Twitter (@UlysseLaroche)
Ressource list:
📰 The Arc of Collaboration, Kevin Kwok
📰 Growth Loops Are the New Funnels, Reforge
📰 Chat and the Consumerization of IT, Ben Thompson, Stratechery
📰 Investing in Figma: The Decade of Design, Peter Levine, a16z
📰 The SaaS Opportunity of Unbundling Excel, Ross Simmonds on Angelist Blog, May 2019
📹 Superhuman Founder on How to Move Past Gamification, Rahul Vohra at a16z conference, January 2020