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Power of China’s Twitter Clone: 100,000 Followers in 4 Days, 1000 Comments/Tweet

by Vincent Chan on May 25, 2010

Today at TechCrunch Disrupt, DST co-founder and CEO Yuri Milner, talks about Internet is big everywhere in the world, especially in countries like China, Russia, Japan and South Korea. According to Milner:

…the pace of change is really accelerating. You can become very big very fast.

So how fast can that be? Let’s look at Sina’s Mini-blog, the Twitter clone in China. It’s growth is phenomenal. For instance, Charlene Choi, a pop singer in Hong Kong (see attached picture), has signed up an account with Sina 4 days ago. And now she already has more than 100,000 followers and average more than 1,000 comments per tweet! (Sina’s mini-blog has implemented a Facebook-like commenting feature)

That’s really freaking fast.

The scary part is that this Twitter clone still hasn’t gone mainstream yet. Given that China has more Internet users than the US now. I believe the network effects that we are witnessing in this country is only the tip of the iceberg. Will it be 10x more powerful? I don’t know. But more and more US startups are starting to pay attention to the rise of this digital superpower now.

One interesting fact: you actually cannot search for Google’s chinese name on Sina’s Mini-blog. Such a serious censorship software! 🙂


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Two Ecosystems: iPhone vs Facebook

by Vincent Chan on May 3, 2010

When Zynga’s valuation is approaching $3 billion, with the possibility of an IPO over the next year, I wonder why the iPhone platform still hasn’t created a monster startup like Zynga yet. Apparently, I am not the only one with this question in mind. Ray Valdes from Gartner recently did an excellent analysis of the difference between these two developer ecosystems after attending the Facebook F8 conference.

So there is a long-standing perception in the market that the iPhone App Store represents a gold-mine opportunity for developers. This perception is not only found in the developer community, but among the broader audience of consumers and also investors, contributing to a high stock-market valuation for the platform owner. However, the gold-mine perception seems to me to have aspects that are more illusion than reality.

Check out the post for more!


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How Gilt Grew Sales from $25 million to $170 million in 2 years

by Vincent Chan on Apr 27, 2010

Do you know any female friends who are obsessed with designer brands or designer sample sales? If you do, then it’s not difficult to understand why Gilt Groupe and other flash sales or private sales sites are so successful. Why is Gilt so golden? Gilt’s CEO, Susan Lyne, explained:

“Gilt was going to solve a problem for a lot of women I knew. How do we shop for things we love when we really can’t get out to shop the sales, the good sales, the sample sale?”

and…

…there’s no store in the world that could change its entire inventory in a night. We do that every night. Customers know they’ll see something new tomorrow.

When talking about the rise of non-tech focus web startups, besides Groupon, everyone pay attention to the success of flash sales sites, like Gilt, HauteLook, Rue La La, ideeli…etc, as they are extremely profitable. Founded in 2007, Gilt Groupe reportedly had US$25 million in sales in its first year, posted another US$170 million in 2009 (a stunning figure for a start-up), and planned to double that amount in 2010!

During its most recent round of venture capital financing, the company was valued at $400 million. And not surprisingly, with this tremendous growth rate, Gilt is planning for an IPO in a year or two.

Invitation only shopping

Inspired by a highly successful French company called Vente Privée, which sells fashion overstock, Kevin Ryan, former CEO of DoubleClick, decided to bring the same business model to the US in 2007.

His company sells high fashion at prices around 50 to 70 percent off retail. Access is invite-only, limited to friends of the Gilt community, although everyone can get an account if you ask for an invite. Their sales are announced by email a week ahead of time with most of them lasting 36 hours or until everything is sold. According to New York Magazine:

During the hour after its weekday sales kick off, between noon and 1 pm…its site is visited by an average of roughly 100,000 shoppers. For that time, it might as well be the most crowded store in New York.

Gilt is simply a viral-marketing phenomenon because they don’t really have to advertise. Instead it gets referral through users’ personal networks and offers incentives (e.g. $25 credit) to current members to invite their friends to join their community. Result: more than 2 million members and growing rapidly.

High sell through rates

Also, the site’s members are ideal for designer brands because most of them are female, young and high income. According to New York Magazine:

At a department store, a designer’s sell-through rates—the proportion of inventory that is actually purchased—might be around 65 percent over a twelve-week season, but on Gilt, several designers told me, sell-through rates can top 90 percent. Its customers buy everything.

Savior for young designers during recession

From the beginning, the company’s greatest challenge was going to be getting enough merchandise at such a low price level. Many brands worried that lowering prices will hurt their images.

And then recession came in late 2008. People predicted that a deep recession would mean the death of demand for luxuries; however, Gilt has thrived amid challenges.

As incomes tightened during recession, the fashion brands was left with a large amount of inventory. Gilt took the opportunity to suck up all those extra goods, saving a lot of young fashion designers from going out of business.

According to their CEO:

If a designer believes in six items and thinks they’re going to be really big, we’ll agree to take x number as a minimum but we’ll agree to take as many as y. If they can sell the difference at full price, fantastic. If they can’t, we’re going to buy them.

In this difficult times, Gilt offered a quick way to generate some cash flow for these young high fashion brands which operate as small businesses without their own warehouses or factory outlets.

Help designers make more money

However, besides liquidation, why would designers use Gilt if they can’t make any money?

In order to help designers make more money, the site allows members to place orders at the beginning of the seasons, purchasing items that haven’t become overstock yet. In this way, the cost per item will go down because of the increased volume which means that the designer can make more money overall.

Moreover, Gilt is demanding designers to make exclusive lines just for the site. There is a secret in the fashion industry that nobody wants to talk about – designers actually make low quality clothing specifically for sale at outlet malls, which means you could never see those items at retail. Basically, they are planned overstock, helping designers to make an extremely high margins.

Gilt wants to use the same model to expand its inventory. According to their CEO, 35 to 40 percent of Gilt’s women’s apparel will be acquired through this channel this year. Of course, Gilt nor the designers want to let the buyers know which items were made exclusive for the site because they are usually lower in quality.

Sustainability problem

Although the site is wildly successful now, their CEO believes:

This is an easy business to start; it’s a really hard business to scale.

Why? Because there is only so much surplus product in the world. As the company expands and competitors come in, it will be harder for them to get enough pipeline and maintain the quality of their deals.

As a result, diversification is crucial to the future of the company. Before their IPO, they have to prove that their model is able to work outside of just female luxury fashion products. At this moment, Gilt has expanded into multiple categories like men, children, gifts and travel deals.

Conclusion

As legendary angel investor, Ron Conways, recently said on TechCrunch:

Flash marketing, or social commerce, startups like Gilt Groupe and Groupon have “come out of nowhere” and are revolutionizing ecommerce. In three years, he says, you won’t think about Walmart, Target and Amazon when you think about ecommerce. You’ll think about this whole new wave of companies doing flash marketing.

To put it another way, we are witnessing a fundamental and systematical changes taking place in the way products are bought and sold online.

Finally, the success of Gilt has taught an important lesson that happy customers is everything. Why? Not sure if you have noticed, Gilt’s website actually doesn’t apply any Web 2.0 features, SEO tricks or SEM strategies. They just work hard to deliver a simple brand promise – you come every day and it’s new every day. Result: a huge community of loyal customers.


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E-book Battlefield: Kindle DX ($489) vs iPad ($499)

by Vincent Chan on Jan 28, 2010

Early last year, Tim O’Reilly boldly predicted that the Kindle could be gone within two or three years. After the iPad announcement today, it seems that his words will soon become reality.

With the same 9.7″ display size and similar prices, it’s hard to believe anyone would pick Kindle DX ahead of Apple iPad. And the biggest weakness of Kindle is the file format. Amazon forced publishers to user their own file format which can be read on Kindle only. Basically, all your books will be locked to Amazon which is the single point of purchase.

Tim O’Reilly believes:

what Amazon seems to have missed is the important role that “free” played in the success of the iPod. People didn’t populate their iPods solely with music purchased from Apple. It was easy for them to “rip” their own CDs into the standard mp3 file format and load their entire music collection onto the device.

On the other hand, iPad is using the ePub format, the open format from the International Digital Publishing Forum which is supported by a lot of e-book readers.

In this way, Apple can play the same game with their new iBooks Store. Although there is no easy way to “rip” a book, customers can load some of their own epub-based e-books purchased from other vendors onto the iPad. So no single bookstore will take over the e-book world.

According to Paul Aiken, executive director of the Authors Guild:

Amazon is selling e-books at a loss in order to spur Kindle sales – it sells books for $10, but pays publishers more than $10 per copy. But once Amazon gets control of the market, it will be free to impose price reductions – to force publishers to reduce their e-book rates to less than $9.99.

I am sure publishers don’t want to see that happening.

Although Amazon is the pioneer in this category, it seems they still haven’t found the best way to sell digital contents effectively. They should know that if books are not shareable and controlled by one vendor, the marketplace for books will be diminished eventually.

Both Amazon and Apple want to become the nation’s largest e-book retailer. Both of them have revolutionized their own markets with amazing innovations. Who will win this battle at last? While Amazon is the leader now, I am sure Apple will catch up soon, very soon.


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Jack Welch on Company Size and Success

by Vincent Chan on Nov 24, 2009

size

With all the hype about the advantages of small company size in recent years, does growing big really mean failures to your company?

Bill Taylor, cofounder of Fast Company, just wrote a great article on the relationship between size and success on his Practically Radical blog. He recently did an interview with Jack Welch, the legendary former CEO of General Electric. And one of the themes of their conversation was about company size.

While Jack agrees the disadvantages of big institutions, like waste and bureaucracy, he still believes managers and entrepreneurs should want their companies to get bigger. He said:

For one thing, it’s evidence that you’re winning in the marketplace. For another, it gives you the opportunity to bring in more people, which gives you access to more talent, which allows you to tap into more ideas, which you can then spread more widely – and start winning all over again.

In this talent age, which companies don’t want to get more brain power? But for many companies, managing talent is the hardest part. How can a company scale without suffering the costs of size? Jack has an answer for us:

“I want to be big, but then run the company like it’s the corner grocery store.”

Obviously, this sounds easier said than done. And some people even argue that GE was never run like a corner shop either. But that doesn’t mean it is unachievable.

In fact, there are many new companies which are BIG and SUCCESSFUL in the past decade. For example, Google, Amazon, Apple, Netflix, Salesforce, VistaPrint, Research In Motion, Zappos…etc. All these companies were started by a small team of people. But right now, they have thousands of workers, great corporate culture and tremendous success.

After all, IF you have the management skills and leadership to make your company remain quick, responsive, and flexible, why stay small? (Assuming you have an ambitious goal).

Don’t be remain small just because people think you are cool.

Start small. Grow big but remain agile.

In the future posts, I will dig into different strategies that help growing companies to become smarter and remain quick, responsive, and flexible.

Photo source: januszbc @Flickr


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Startup to IPO: Why Few Companies Make the Leap and What We Can Learn from Them (Part 4: Differentiation & Marketing)

by Vincent Chan on Oct 7, 2009

differentiation

At a time that many people building safe businesses and not enough startups trying to change the world, are we, as entrepreneurs, still supposed to dream big? Should we build a company that will go public someday? Or should an exciting startup define success on a $170 million exits?

While I am happy for Aaron Patzer, the founder of Mint.com, the world has just lost the Steve Jobs/Bill Gates/Scott Cook of this generation because of this acquisition. Many young entrepreneurs have to find another role models to look up to now.

Growing a company from a startup to IPO sometimes requires more than ability and knowledge. It also takes a strong will for an entrepreneur to want to build a lasting company. I am sure there are entrepreneurs somewhere building the next big things right now. And I hope this “Startup to IPO” blog post series (Part 1, 2, 3, 4) can inspire them to keep fighting for their dreams.

In this last post, we will look at how these four elite companies (Vistaprint, Rackspace, OpenTable, Salesforce.com) differentiate and market themselves when they just got started.

Pursue Customers that Competitors Hate

In the printing industry, companies usually hate to work with small business customers because of the low printing volume and low profit margin. They rather go after big companies which spend large amounts of money on printing. Yet VistaPrint had a different strategy. Their founder, Robert Keane, once said:

Our experience gave us confidence that there was a market with micro businesses. Other companies did not want to pursue them. Everyone else thought it was a horrible market. We happened to be in the right spot at the right time.

In order to achieve this goal, they have developed technology to automate desktop publishing and manufacturing so that they can sell products at low quantities and superior prices. However, there were another problem. Another reason their competitors hated the micro businesses market was because these customers are not easy to get to. VistaPrint solved the problem through direct marketing but in an unusual way. They gave their products away for free to generate buzz. According to Robert,

That became a runaway success. At the time, full-color business cards were selling online for $85 and $200-$300 at traditional printers. We gave them away free with a $5 shipping and handling fee. That offer was so successful in getting people to try us that it became an acquisition engine that drove our business. Our business model got to scale very quickly.

This free sample offer also built up the credibility of the company. So the customers will buy other things when they come back for the second time.

Do your company and competitors ignore a portion of potential customers now? In fact, even President Obama targeted a tribe (young people, minorities and the poor) that were usually ignored by traditional candidates during his presidential campaign. If you want to be successful in a crowded market, you have to be creative and do something very different from your competitors. Love the customers your competitors hate. They may just be the ones who help your company grow to the next level.

Must-Have Business

During tough times, if your company was a must-have business for your customers, I am sure your company will do pretty well. OpenTable happens to be that kind of business. Like AdWords and regular affiliate programs, OpenTable’s customers only have to pay for results providing an extraordinary lead-generation marketing tools for restaurants. Like one of their customers said:

OpenTable.com has given us new ways to understand who our guests are, and what they want. Their system is helping us utilize the Internet to communicate more easily with consumers, and makes it easier to cater to the desires of our regulars…52% of the reservations that OpenTable.com delivers to us are first-time visitors to the restaurant, which means that OpenTable.com is bringing us significant numbers of new customers, as well as giving our regulars an easy and efficient way to visit us.”

Their system revolutionized the way that restaurants are managed and marketed, and add depth to the way that they welcome and communicate with their guests. OpenTable allows their customers to see who is eating at the restaurant at any given moment. So the restaurants can treat some guests like regulars. Oftentimes, their reservation system is indispensable to the diner, too. Like a restaurant owner said:

Next to the name of one regular, who has a habit of bringing in women he is not married to, is an instruction to make sure the man’s wife has not booked a separate table for the same day…Of another, who takes many of his first dates to Town Hall, the instructions read, “Do not treat like a regular!”

The bottom line: is your product a pain killer (got to have it) or a Vitamin (nice to have)? If you could create values to your customers during downturn, your company will be in a great position to continue to outpace the competition after the bad times.

Specialize in Just One Thing

When asked the key to success for Rackspace to become the fastest-growing managed hosting company, Pat Condon, the cofounder, believes their customers have chosen Rackspace because of their sharp focus.

We specialize in just one thing – managed hosting. We’re focused exclusively on managed hosting with Fanatical Support, and as a result we’re very good at it. Think about it this way: If you needed to have brain surgery, what kind of doctor would you choose? A general practitioner or a brain surgeon? I’d know I’d choose a brain surgeon – a brain specialist.

Moreover, combining this focus with their Fanatical Support, they have created a brand with tremendous value. Whenever potential customers hear about Rackspace, they will have a positive impression of the company. In fact, 60% of their new business comes from referral showing their existing customers are fully satisfied with their services.

For Rackspace, some of their most effective marketing actually came from serving their customers fanatically every day. It’s no surprise that their customer turnover rate is one of the lowest in their industry. Their customers not only stay with Rackspace but also purchase more from them as well. According to Pat,

Our customer base grows organically every month, month-over-month. What this means is that even if we didn’t sell anything to new customers, our existing customer base would keep purchasing additional servers from us. This has caused the Rackspace business to grow at a fairly rapid pace and it is something of which we’re extremely proud.

Rackspace has proven that the most effective marketing strategy sometimes just doesn’t cost you that much. How do your customers feel about your company? Do they have a positive impression of your business now? Do they recommend your services to others? If you want to find out these answers, creating a customer development survey probably can help you get started.

Strong Relationship with the Media

Salesforce.com, on the other hand, uses a totally different approach in marketing. They do marketing on the cheap through public relations and creating buzz. The company has a reputation of being able to work the media very well, especially for the founder, Marc Benioff. He is very outspoken and not afraid to take on their giant competitors like Microsoft, SAP and Oracle. He once said:

Relationships with the media are really important. The media has a more important voice today than it has ever had. We don’t advertise. We only have one marketing vehicle, which is editorial, and our ability to get our message out and communicate it effectively.

Besides disparaging large competitors as dinosaurs, 20th century fossils and monopolists, Salesforce.com is very good at guerrilla marketing as well. They once hired actors to stage mock protest rallies outside a competitor’s conferences, which brought tremendous attention to their company. The reason of doing that? Like Marc said:

In both good times and bad, people are always eager to hear about challenges to the status quo.

After all, does your company have a position in the market? Are you trying to be all things to all people? Find the customers who share your vision and stop blindly follow your competitors in the industry.

Conclusion

After this post series, we have heard consistently that their leaders have defined success on a very big scale. And it seems they are all using similar but actually different approaches to achieve their success. So stop looking for the silver bullet now. There are million ways to scale your business rapidly. Find your dream and fight for it till the end (hopefully).

I would like to end this series with a quote by another highly successfully entrepreneur, Glenn Kelman, the founder of Plumtree and Redfin:

If first-timers don’t create public companies, nobody will.

Telling young entrepreneurs that they’re not ready to be a Jedi yet, just because they’re young” is simply wrong. Fight on to victory!

Photo source: nickwheeleroz @Flickr

Part 1: Leadership & Vision
Part 2: Obstacles
Part 3: Growth
Part 4: Differentiation & Marketing


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Orchestrating the Obvious: Scaling your Business via Metaphors

by Vincent Chan on Oct 2, 2009

orchestration
The Mind Reader“, Steve McCallion from Ziba Design, recently wrote a series of great posts about Consumer Experience on Fast Company Magazine.

Steve argues that entrepreneurs are always looking for a silver bullet or killer app but forget that orchestration can also create significant value to their customers. According to Steve:

In an orchestration it’s the collection of things that create value, not necessarily the things themselves. It’s not the individual notes in the song, but the collection of those notes. When creating meaningful experiences, it is often this orchestration that is the primary source of value creation.

By innovating the user experience using a “metaphor”, a collection of products and services together can help your business win in a competitive market. Steve believes:

A metaphor creates value by transferring associations from a previous experience to a new one. It functions as shorthand to help people understand the offering and what it means in their lives.

So how can you use “metaphor” as the silver bullet or competitive advantage for your company?

Steve gaves us some good examples in the offline world. These companies redefined their respective categories by leveraging the power of metaphor to create a meaningful experience for their customers.

Business Metaphor
Apple Retail Store A Learning Center
Whole Foods An Outdoor Bazaar
REI An Outdoor Industry Expo

A lot of the products selling in these companies are obvious and shared by other competitors (may be except for Apple). However, orchestrating the obvious around a metaphor helped them become winners in their industries.

Can we do the same on the web? I think so. Below are a few examples of online businesses which understand the power of metaphor.

Business Metaphor
Etsy A Friendly Neighborhood Store
Foodzie A Farmers’ Market
ModCloth A Thrift Store
Polyvore A Scrapbook

Do you know any other web businesses using the power of metaphor? Let me know in the comment area. Thanks!

I find this idea very similar to the concept of “Those little ladders in your head” in the classic marketing book – “Positioning” by Al Ries and Jack Trout.

The authors believe our mind will reject new idea that is new and different. It accepts only that new information which matches its prior knowledge or experience. To put it another way, if your product is truly new, you should look into the mind of the potential customers to see what mental images already exist and then select one you can tie your product/company into. Using a metaphor is a good way to do so.

Did you pay too much attention to find a silver bullet or create a killer app for your company? Have you make your business meaningful to your potential customers using the power of metaphor? Never ignore the obvious.

Photo source: steve xavier @Flickr


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Startup to IPO: Why Few Companies Make the Leap and What We Can Learn from Them (Part 3: Growth)

by Vincent Chan on Jul 28, 2009

startup-ipo-growth

Today’s business environment is extremely competitive, especially on the web. Simply building a good product, a strong brand or great distribution won’t guarantee your company success. You also have to do some or all of these things better than your competitors.

After looking at the leadership and obstacles of these four elite “Startup to IPO” companies (Vistaprint, Rackspace, OpenTable, Salesforce.com), we are going to learn about their growth strategies which helped them to outgrow their competitors.

Viral Programs & Product Expansion

free-biz-card

Vistaprint realized early on that if they want to success in a crowded market like online printing, they needed to do something different from their competitors. In 1999, they decided to use viral marketing to attract new customers. The company came up with the idea of free business cards. Customers can order 250 full-color business cards for free for unlimited time. The only cost for the customers is the $5 shipping and handling fee.

Of course, this strategy gave them runaway success. Seriously, how many companies do not want free business cards? Vistaprint knew that if they could have enough volume, giving cards away should not be that expensive. Up until now, the company has already printed over 4 billion cards for this offer. This single viral program has drove their amazing growth from 1999 to 2003.

To get a sense of just how quickly Vistaprint scale up in the early days, you have to see their actual revenue numbers provided by the founder:

In FY2001, which was June 2001, we had $6.1 million in revenues and 25 employees. In FY2002 we did $16.9 million and we had 50 employees. In FY2003 we did $35.4 million, in FY2004 we did $58.8 million, and FY2005 was $90.9 million. The following year we did $152 million and in 2007 we did $256 million. The growth has maintained as we did $401 million in FY2008. Our current guidance to Wall Street for FY2009 is $504 million to $510 million.

And then in 2004, the company started going well beyond the business cards area and into all things related to small business marketing, which includes apparel, pens, magnets, brochures, presentation folders, logo design, graphic design, web sites design and even email marketing. This broad product expansion has fueled their extraordinary growth from 2006 to 2009, from $152 to $510 million in revenue. To ensure the high quality of their new products, the company is spending over $50 million on technology development this year, which is about 10% of their revenues.

Not to Become a M&A Company

Oftentimes, large companies will consider using M&A (mergers and acquisitions) to increase market share, broaden product offerings, enter new markets, or even expand into new distribution channels. For a company like Vistaprint with $400 million revenue, even in a deep recession, they are obviously in a strong position to fuel its growth by deal making. Yet Robert Kean looks at M&A from a different point of view:

Very skeptically. We do look at it, and we have looked at many opportunities…We are not opposed to acquisitions, but we have to be very selective… If there is a win-win opportunity we will take it. We never say never. VistaPrint for a very long time will be an organic growth story…

Rather than looking for innovation outside, Robert prefers internal new products development. For example, when the company decided to go into the software-as-a-service business providing email marketing solutions, they has chosen to develop the product, Vistaprint Email Marketing, themselves despite the fact that they can easily acquire iContact or ConstantContact.

Think about your company now. Are you looking for long-term organic growth or short-term profitable opportunities? Do you have the confident to do a marketing campaign on a very large scale, like Vistaprint’s “free business cards” offer? If your company is not growing anymore, is it the right time to expand your core business to a much wider variety of businesses? Today Vistaprint has over 1,600 employees worldwide, growing from 25 people in 2001. I bet you can learn something from their success.

Customized Solutions

Like Vistaprint, Rackspace also found that following industry norms may not be the best way to do business. Many hosting companies saw themselves as commodity and technology companies. Yet Rackspace believes every customer is unique and has different business objectives. In order to met those goals, Rackspace is writing custom Service Level Agreements (SLAs) for their customers to guarantee their quality of their services. Their co-founder, Patrick Condon, explained:

We’re beginning to work with customers to identify the specific business outcome or business process a customer is trying to fulfill with their Web infrastructure. We then work with them to write an SLA around this business process versus just the infrastructure portion of hosting. I think this is a dramatic shift from how hosting companies have guaranteed quality of service in the past. Customers need customized solutions developed specifically for their businesses. I think the way the industry is moving is more towards a service based model where the technology and specific hardware components become less relevant.

Discipline to Achieve True Profit

In previous post, we mentioned about Rackspace has developed a principle of achieving “true profit“. It turns out that the same strategy has helped the company achieve significant growth.

For example, in 2003, Rackspace launched a low-cost hosting service for very small Web sites. Within months, this new unit was growing faster than the parent, generating $600,000 a month in new revenue and $150,000 in cash flow. Sounds very promising, right? How many entrepreneurs will question about such a fast growing service? Even so, its CEO was not pleased with the new unit:

“Thinking in terms of true profit quickly illuminates a problem within a business. We could see that we were wasting money.”

He found that the marketing costs to bring in new clients were very high and customers could easily switch to cheaper service provided by competitors. In other words, the new service was delivering a minimal return on its capital. Still, for normal companies, it is hard to correct such a huge mistake because, at one point, this new unit was generating $7 million, or nearly 10% of the company’s total revenue of $77 million, in its first year in business. However, due to their strict financial discipline, Rackspace sold the moneymaking unit for $7 million eventually.

Rackspace’s revenue has increased its revenue from $139 million to $532 million since 2005. As you can tell, focusing on true profit has helped Rackspace to avoid businesses that are wasting their resources and pay attention to areas that are generating real growth. In your company, do you have any units that are giving you minimal return on its capital? If yes, can you relocate those resources to some other promising opportunities? For a startup, inefficient allocation of resources could kill your business. Do a due diligence on your business and find out the truth now.

Making Your Customers Success

Sometimes the best growth strategies are so simple and obvious that most people overlook them. In 2005, Salesforce.com’s revenues has grown 77% and paying subscribers has increased from 267,000 to 308,000. When asked about the reasons for the company’s continued success, Marc Benioff, the founder, simply replied:

The No. 1 reason we’re successful is our customers are successful. Before Salesforce.com, you were expected to fail with enterprise software. Salesforce.com is the first company and product that companies loved and users wanted to use.

Who does not know that business has to provide products that customers want? However, in the web industry, companies always fall into the trap of ignoring their customers because of their focus on fancy technology. Apparently, Salesforce.com did not make this mistake given that their customer turnover rate has been less than 1% per month. This amazing loyalty from the customers did not surprise Marc at all. He explained:

“We aren’t changing our playbook here: we work to make our customers successful. Success is the biggest predictor of loyalty.”

Think Big

Again, achieving growth sometimes does not need complex strategies. Wondering how a $5.3 billion company like Salesforce motivates itself to do better? It is as simple as thinking big. Marc never worries about competition as he believes the sky is the limit for his company. He once said:

“If there wasn’t any competition, I’d be very worried, because it would mean we were not doing very well. When you have a company like Salesforce, that’s now one of the top 40 software companies in the world, and we’re shooting to become one of the top 24, which means more than $1 billion in revenue…”

For Marc, status quo is not acceptable. He always looks for growth opportunities. In 2009, Salesforce has achieved his goal of generating more than $1 billion in revenue. How about your company? What is your next goal? Have you took the time to make your customers success? Or you just want to make a profit from them?

Next time, we will talk about the ways these four companies differentiate themselves in this crowded market.

Photo source: Guille. @Flickr

Part 1: Leadership & Vision
Part 2: Obstacles
Part 3: Growth
Part 4: Differentiation & Marketing


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Entrepreneurs that we are supporting currently:
Rachabmoh Tagoeva
Animal Sales, Tajikistan
Mawéana SOSSAH
Charcoal Sales, Togo
Polina Twumwaa
Food Market, Ghana
Kadidiatou Gnabaly
Food Production, Senegal
Let's scale the power of philanthropy together. Please join our lending team at Kiva.