Increasingly we see almost all aspects of software development and delivery managed as code. But while software might be eating the world, practitioners too frequently overlook proven engineering practices.
As the industry thinks more diligently about how data should work in modern systems, we’re encouraged to see the growing maturity in the techniques and tools surrounding analytical data and machine learning.
This analysis of the business model that underpins the success of Shopify, the ecommerce software-as-a-service business, seeks to show that core to the business model is the idea that success comes from helping their customers be successful by providing digital products that seek to solve the challenges and meet the needs of modern retail businesses selling on the web. All aspects of Shopify’s business model are designed to acquire and retain high quality small to medium retail businesses as customers who are serious about building successful ecommerce businesses, and supporting them to succeed. This strategic approach could be summed up with the phrase, ‘your success is our success’.
Background and history of the business
Shopify started life as a single ecommerce store selling snowboards, and was built on the new (in 2004) open source software framework called Ruby on Rails. With 78% of the internet running on open source software (Vaughan-Nichols, 2015), contributing to the development of Ruby on Rails software and its community helped support the Canadain tech start-up ecommerce software-as-a-service platform that became Shopify in 2006 to develop a platform that could grow over the coming decades. The business raised $7m in 2010 and $15m in 2011 in funding, and by 2017 Shopify was hosting “over 325,000 shops for individual sellers and internet giants like Google and Tesla” (Product Habits, 2017), and by 2019 had expanded to 1,000,000 businesses in approximately 175 countries (Shopify, 2019).
Analysis of the business model
The term ‘business model’ requires definition before an analysis can be undertaken. A business model can be described as “a conceptual tool containing a set of objects, concepts and their relationships with the objective to express the business logic of a specific firm. Therefore we must consider which concepts and relationships allow a simplified description and representation of what value is provided to customers, how this is done and with which financial consequences.” (Osterwalder et al, 2005).
Understanding business models is particularly important for businesses that rely on technology to deliver value as how transaction cost economics (Williamson, 1989) and innovation are incorporated into the model will greatly impact its chances of success. Over time, the rate of innovation in any given technology falls (Abernathy & Utterback, 1978), and so technology becomes easier to use at scale so reducing the transaction costs, which increases margin, unless and until a competitor product steals market share through new innovation that better meets the customer needs. The objective of the business model of a technology company then, is to deliver maximum value to customers to increase revenue whilst reducing transaction costs to increase margin, and continually innovating to stave off competitors in order to maintain or increase market share.
With this understanding of a business model we are able to use the business model framework (Rayna & Struikova, 2016) to analyse Shopify’s business model to understand if it meets the objectives above.
Value creation
Core competencies
Shopify provides hosted ecommerce solutions to enable retailers to quickly and easily launch an online business and make that business a success. Developing and maintaining the software-as-a-service platform that enables its customers to set up and run online stores is Shopfy’s core competency.
Key resources
Shopify’s key resources include:
Web infrastructure
Ecommerce platform software
Payment provider
Point-of-sale technologies
Marketing
Fulfilment & logistics
Partner programme
The breadth of these resources extends beyond competitor ecommerce software providers which don’t also offer physical retail technologies and fulfilment services, making Shopify unique in the market.
Governance
Shopify is an incorporated public company with a board of directors responsible to its shareholders for increasing value over the long term (Shopify, 2018).
Complementary assets
Shopify’s complementary assets include marketing capabilities, strategic partnerships, brand awareness & market share, and investment & acquisition capabilities. Having the complementary assets to commercialise the technological innovation (ecommerce platform in Shopify’s case) is essential for the success of the business (Teece, 1986).
Value networks
Shopify understands the need for commercially successful partnerships and business relationships and places itself in a network with a multitude of other modern internet businesses, including Amazon, Facebook, Snapchat, Ebay, logistics and delivery firms. These indirect network externalities all increase the power of lock-in Shopify has over its customers (Arthur, 1989).
Value proposition
Product offering
Shopify competes in the business-to-business ecommerce technology market, with other hosted solution providers such as BigCommerce and Volusion. Shopify could be seen as competing with consumer ecommerce marketplaces such as Ebay and Amazon, however Shopify is clear in its market positioning for small to medium business and not consumers. Shopify is increasingly moving into the large business market (Shopify, 2014) to compete with enterprise ecommerce software providers such as Magento and Salesforce Commerce Cloud.
Service offering
Shopify offers a number of services in addition to its core product offering, including:
Capital – provides capital investment in customer’s businesses to enable the customer to purchase merchandise to sell.
Partners – supports an ecosystem of partners that provide services such as custom design and development, and are rewarded for referrals to Shopify.
Fulfilment – offers a logistics and delivery service to customers to enable them to fulfil orders placed on their Shopify store.
These supporting services fit the ‘your success is our success’ approach of Shopify’s strategy as the capital investment encourages customer businesses to prosper and so continue selling through Shopify, the partners help to maintain and recruit Shopify’s customers, and the fulfilment services contribute to a more complete offer.
Pricing model
Shopify utilises a ‘freemium and versioning’ price model. Potential customers are offered a 90 day trial period at no cost and then a choice of three levels of features at three corresponding prices (Shopify, 2020). The pricing tiers seek to communicate Shopify’s position in the market for small to medium businesses; more expensive than selling on Ebay (as an individual might) and less expensive than running a Magento website (as a large retail business might). It also communicates that Shopify only wants customers who are committed to building their own brand and developing their business over a longer term.
Value delivery
Distribution channels
As a software-as-a-service business Shopify distributes its products to its customers over the internet, via a browser. This meets the fourth characteristic of digital goods; being aspatial (Quah, 2003), and enables customers to have near instant access from anywhere in the world and allows Shopify to update it’s software quickly and regularly to meet the needs of its customers.
Value capture
Shopify captures value from its customers through its monthly subscription model, adding to the value provided to customers through investment in developing new products, features and services and through acquisition of companies that add to its portfolio of services. This investment in technology drives increasing returns for adoption as improved capabilities serve more customer needs and so “the tendency for that which is ahead to get farther ahead” (Arthur, 1996) results in an increase in the number of customers using Shopify.
Revenue model
Shopify’s revenue model for it’s ecommerce platform and associated services is a monthly subscription fee and additional transaction fees. This model has provided revenue growth of 6475% (Table 2) and profit growth of 4457% (Table 3) over seven years.
Analysis of the digital product
Public goods
The Shopify ecommerce platform is built on open source software called Ruby on Rails. Open source software is non-rivalrous and non-excludable, making it a public good in the economic sense. Once produced there are zero extra costs associated with allowing another person to use it (Coase, 1974) whether or not they contribute to its maintenance.
Digital goods
In Shopify’s case, the additional programming that is done to utilise the open source software and packaged up in a way for customers to use defines the ecommerce platform as a digital good. Quah argues that excludability is not an intrinsically part of the economic nature of the digital good but instead follows from additional protective mechanisms (Quah, 2003). Shopify put barriers, both technological and legal, in place to prevent copying of the software in an attempt to make the digital good excludable (Whinston et al, 1997).
In addition to being non-rivalrous, Shopify’s ecommerce platform exhibits the other four characteristics of digital goods. The ecommerce platform is infinitely expansible – it can be copied as a means to increase the number of users or to create backups, is discrete – it only exists as a whole and will have no value if broken down, is aspatial – does not physically exist, and is recombinant – can be combined with other digital goods to form new digital goods (Quah, 2003). All of these characteristics lead to Shopify’s core digital product to enable the realisation of the benefits of digital goods, including increasing returns and decreasing average cost.
Shopify’s software product does not utilise network effects, meaning the value users receive does not increase with the number of users (Katz & Shapiro, 1994), and does not create customer lock-in, however the business model utilises complementary assets (Teece, 1986) to create commercial gain from the digital product and external partnerships that do create customer lock-in through making it difficult for customers to move to other suppliers (Vandermerwe, 2003).
The Shopify business model and digital product offering is a system of interdependent activities (Zott & Amit, 2009) of public good (open source software), digital good (ecommerce platform), and supporting services.
Analysis of the pricing strategy
Shopify has adopted a ‘freemium and versioning’ pricing model for the subscription revenue from it’s ecommerce platform.
Whilst the majority of companies utilising the freemium pricing models for software allow users to use the product for free with the expectation that a percentage will convert to a paid version (Teece, 2010. Günzel-Jensen & Holm, 2020), Spotify fixes the length of the freemium offer to ninety days resulting in reducing the barrier to entry for digital goods where the value cannot be realised until experienced (Varian, 1998) whilst also driving those customers with a serious buying intention to purchase the paid versions within a predictable time frame. This ‘try before you buy’ approach enables Spotify to understand conversion rates and make financial modelling and cash flow predictions more reliable.
The versioning aspect of Shopify’s pricing strategy enables the business to target multiple markets (small to medium, and large) with essentially the same product and certainly the same underlying infrastructure, codebase, developers, etc. The three price tiers of $29, $79, & $299 per month have different features and benefits associated with them, and as monthly recurring revenue give Shopify a level of predictability, and for its customers costs are not tied to the success of their business in the same way a cost-per-sale model (for example) would be.
This ‘freemium and versioning’ pricing model fits the proposed strategic approach of Shopify recognising that the success of their business is dependent on the success of their customer’s business, and so avoiding a pricing strategy that appears to penalise or prevent the growth of businesses using the Shopify platform.
Alternative pricing strategies
There are a number of alternative pricing strategies Shopify could consider:
Usage
Description: Cost related to the number of services in use.
Benefits: Can increase revenue where services are either the cheapest, highest quality, or have few competitors.
Disbenefits: Could cause businesses to look to competitors for services such as email marketing and fulfilment thus reducing Shopify’s lock-in.
Example: Stripe payments.
Assessment: Not be a viable option for Shopify.
Users
Description: Cost related to the number of users.
Benefits: Increases revenue as customer business grows and requires more users.
Disbenefits: Only fits products that require lots of users.
Example: Freshdesk customer service.
Assessment: Not a commercially successful option for Spotify.
Active users
Description: Cost is related to number of users active in a given month.
Benefits: Is a selling point for customers as they feel that charging is fair.
Disbenefits: Only fits products that require lots of users.
Example: Slack messaging
Assessment: Not a commercially successful option for Spotify.
Tiered
Description: Cost is related to quantity breaks, e.g. value of transaction processed
Benefits: Revenue increases with higher revenue customers.
Disbenefits: Makes forecasting and financial modelling difficult.
Example: PayPal
Assessment: Could potentially be successful for Shopify although favours large business customers rather than small to medium sized businesses that process lower value transactions.
Dynamic
Description: Cost is variable and related to demand.
Benefits: Enables revenue to be maximised depending on demand.
Disbenefits: Harder to be transparent with customers and maintain relationships.
Example: Booking.com
Assessment: Not a commercially successful option for Spotify.
Two-Part Tariff
Description: Cost is lump sum and per unit.
Benefits: Decouples the price charged for digital goods from processing costs, enabling increases in one without affecting the other.
Disbenefits: Can result in uncertainty for customers and in forecasting.
Example: Credit cards
Assessment: It could be argued that Shopify uses this model as there is a fixed cost for the platform and a per unit cost for processing transactions, but equally these could be viewed as different charges for different products and services.
Shopify could perhaps adopt an alternative pricing strategy to increase revenue but a cohesive business model is one where there are “business design choices that reinforce one another” (Osterwalder, 2005) and it seems clear that Shopify’s current pricing strategy supports the wider business strategy and business model.
Recommendations
Given Shopify’s strategy of providing complete products and services that support retailers it is difficult to uncover any aspect of ecommerce that Shopify hasn’t already provided services for. Below are some suggestions of how Shopify could expand their offer whilst remaining true to their ‘what’s good for our customers is good for us’ approach.
Sourcing & procurement
Provide buying and merchandising services that locate suppliers and negotiate on costs on behalf of Shopify’s customers to enable them to expand their product range.
Further expansion into the enterprise market
Integrate with large enterprise ERP systems such as Microsoft Dynamics AX and Power BI, Oracle and IBM systems.
Consumer services
Move into the consumer market and leverage existing infrastructure such as Shopify Shipping to enable individuals to send packages (that they may have sold on Ebay, for example), and personal website and blog builders to compete with WordPress, Medium, Wix, SquareSpace, etc.
Partnering with adjacent business services
Support merchants to run their business by partnering with adjacent service providers such as accounting and tax returns, human resources management, etc. all part of Shopify’s strategy to help its customers run successful businesses.
Conclusion
Shopify’s business model utilises the public good nature of open source software, builds digital goods that leverage the technologies of increasing returns and decreasing average cost, forms strategic partnerships that achieve customer lock-in, and provides additional services that offer the complete solution for businesses selling online. These elements achieve an effective business model made up of “business design choices that reinforce one another” (Osterwalder, 2005).
Based on our agreed definition and objective of a business model, we can assert that Shopify has a successful business model. It is able to deliver maximum value to customers and collect on that value as revenue, seen by the increase in annual revenue between 2012 and 2019. whilst developing technology that reduces transaction costs to increase margin, and continually innovating with new services to stave off competitors in order to increase market share.
Appendix
Annual revenue
Year
$m
2019
$1,578
2018
$1,073
2017
$673
2016
$389
2015
$205
2014
$105
2013
$50
2012
$24
Table 2 – Source: macrotrends.net
Annual Profits
Year
$m
2019
$866
2018
$596
2017
$380
2016
$209
2015
$113
2014
$62
2013
$37
2012
$19
Table 3 – Source: macrotrends.net
Shopify plans & features
Basic ShopifyAll the basics for starting a new business
ShopifyEverything you need for a growing business
Advanced ShopifyAdvanced features for scaling your business
Monthly price
$29 /mo
$79 /mo
$299 /mo
FEATURES
Online StoreIncludes ecommerce website and blog.
Yes
Yes
Yes
Unlimited products
Yes
Yes
Yes
Staff accountsStaff members with access to the Shopify admin and Shopify POS.
2
5
15
24/7 support
Yes
Yes
Yes
Sales channelsSell on online marketplaces and social media. Channel availability varies by country.
Yes
Yes
Yes
LocationsAssign inventory to retail stores, warehouses, pop-ups, or wherever you store products.
up to 4
up to 5
up to 8
Manual order creation
Yes
Yes
Yes
Discount codes
Yes
Yes
Yes
Free SSL certificate
Yes
Yes
Yes
Abandoned cart recovery
Yes
Yes
Yes
Gift cards
Yes
Yes
Yes
Professional reports
No
Yes
Yes
Advanced report builder
No
No
Yes
Third-party calculated shipping ratesShow calculated rates with your own account or third-party apps at checkout.
No
No
Yes
SHOPIFY PAYMENTS
Fraud analysis
Yes
Yes
Yes
Online credit card rates
2.2% + 20p
1.9% + 20p
1.6% + 20p
In-person credit card rates
1.7% + 0p
1.6% + 0p
1.5% + 0p
Additional fees using all payment providers other than Shopify Payments
2.0%
1.0%
0.5%
Table 4 – Source: Shopify website
Shopify products and services
Through development or acquisition:
Shopify – ecommerce platform for small and medium businesses.
Shopify Capital – financial loans to customers.
Shopify Payments – online payment processing.
Domain name registration and hosting – website services.
Business name and logo generators – branding assets.
Buy button – enabling non-Shopify websites to embed Shopify functionality.
Select Start Studios – mobile software developer.
Jet Cooper – design studio.
Shopify App Store – API platform for third party developers.
Shopify Chat – native chat function allowing merchants to have real-time conversations with customers.
Handshake – business-to-business e-commerce platform for wholesale goods.
Shopify Fulfillment Network – shipping logistics for merchants.
6 River Systems – fulfillment solutions.
Shopify Email – native email marketing tool.
Shop – personal shopping assistant app.
References
Steven J. Vaughan-Nichols. 2015. It’s an open-source world: 78 percent of companies run open-source software. ZDnet.com.
Product Habits. 2017. How Shopify Grew From a Snowboard Shop to a $10B Commerce Ecosystem.
Shopify. 2019. Now Powering Over 1 Million Merchants, Shopify Debuts Global Economic Impact Report. Shopify press release.
Osterwalder, A., Pigneur, Y., and Tucci, C. L. 2005. Clarifying business models: Origins, present, and future of the concept. Communications of the association for Information Systems, 16(1):1–25.
Oliver E.Williamson. 1989. Chapter 3 Transaction cost economics. Handbook of Industrial Organization. Volume 1, 1989, Pages 135-182. Elsevier B.V.
Abernathy, W. J. and Utterback, J. M. 1978. Patterns of Industrial Innovation. Technology Review. Alumni Association of the Massachusetts Institute of Technology. Cambridge Massachusetts.
Thierry Rayna & Ludmila Striukova (2016) 360° Business Model Innovation:Toward an Integrated View of Business Model Innovation, Research-Technology Management, 59:3, 21-28
Shopify. 2018. Shopify Inc, Board Charter
David J.Teece. 1986. Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy. Research Policy. Volume 15, Issue 6, December 1986, Pages 285-305.
W. Brian Arthur. 1989. Competing Technologies, Increasing Returns, and Lock-In by Historical Events. The Economic Journal, Volume 99, Issue 394, 1 March 1989, Pages 116–131.
Shopify. 2014. About Shopify Plus.
Shopify. 2020. shopify.co.uk/pricing.
Danny Quah. 2003. Digital Goods and the New Economy. Centre for Economic Performance London School of Economics and Political Science.
W. Brian Arthur. 1996. Increasing Returns and the Two Worlds of Business. Harvard Business Review, July-August, 1996.
R. H. Coase. 1974. The Lighthouse in Economics. Journal of Law and Economics, Vol. 17, No. 2 (Oct., 1974), 357-376. The University of Chicago Press.
Andrew B. Whinston, Dale O. Stahl, Soon-Yong Choi. 1997. The Economics of Electronic Commerce. Macmillan Technical Pub
Katz, M. L. & Shapiro, C. 1994. Systems Competition and Network Effects. Journal of Economic Perspectives. Vol. 8, No. 2, Spring 1994. (pp. 93-115).
Vandermerwe, Sandra. 2003. Getting Customer Lock-on Through Innovation in Services, in Service Innovation: Organizational Responses to Technological Opportunities & Market Imperatives. Ed. Joseph Tidd, Frank Hull. Imperial College Press, 2003.
Christoph Zott & Raphael Amit. 2003. Designing your future business model: An activity system perspective.
David J.Teece. 2010. Business Models, Business Strategy and Innovation. Long Range Planning. Volume 43, Issues 2–3, April–June 2010, Pages 172-194.
Franziska Günzel-Jensen and Anna B. Holm. 2020. Freemium business models as the foundation for growing an e-business venture: a multiple case study of industry leaders. Journal of Entrepreneurship, Management and Innovation.
Varian, Hal R. 1998 (revised: October 16, 1998). Markets for Information Goods. University of California, Berkeley.
"The enemy of innovation is the mandate to 'prove it.' You cannot prove a new idea in advance by inductive or deductive reasoning." – @RogerLMartinpic.twitter.com/w8ahk1adE3
I’ve been working how we can use Microsoft Teams to facilitate online mentoring. Fundamentally, Teams is built as an enterprise collaboration platform with certain assumptions built-in, things such as everyone in the organisation knowing who each other is, which don’t always meet the needs of mentoring where safeguarding and privacy is really important. Our challenge is that Teams is the tool we have, and we won’t let not having the right tool stop us from enabling mentors to support young people, so we have to find ways to make it work.
One of the things I like about my role is that I get to do a lot of zooming-in and zooming-out, so I move my thinking from almost philosophical ponderings about the value young people get from one-to-one mentoring to the technical details of how Teams handles permissions for certain types of users, and the organisational stance on safeguarding and the volunteers experience of using Teams in between. I think finding the best solution to a problem comes from being able to hold all those different and sometimes conflicting perspectives and figuring out which parts trade-off against which other parts.
Teachers using Teams
Microsoft wants to get Teams into 27,000 schools across the UK. Lots of people don’t like MS Teams, and it certainly has its product peculiarities, especially if you are used to ‘one-product-one-function’ approach like using Slack for messaging, but Teams is a far more complex product, and I wonder if the hate comes from not taking the time to learn how it works and how to use it. I’m sure this is something all those teachers will go through as more schools introduce Teams.
If the schools had good IT people to teach the teachers, or if Microsoft provided really good onboarding, then Teams would make a huge impact on digitising schools, but I worry that it’ll come up against the same old problem of expecting the tech to solve/change everything and not do enough for the people using the tech. When Teams is used as part of an ecosystem with other MS products it could take a huge chunk of what schools do onto the internet. Teams and Sharepoint could be a far more effective intranet than lots of companies have. Timetables could be managed in Shifts. All school work could be done within documents in Teams, allowing teachers to provide fast feedback and students to iterate on their work. Lessons delivered via video could be recorded so that students can watch them again later if they missed anything or was absent. Chat between students and teachers would be secure and monitored for safeguarding issues. There are so many benefits schools could get from Teams and I can see a future of education where location is irrelevant and rather than attending a school because they live near it, students will attend ‘the school’ because it will be the one and only online education platform.
Anyway, back to real life. We’re using Sharepoint to build a content repository for teachers working with young people outside of mainstream education. Sharepoint can be used to produce some quite interesting public facing websites, but the question of whether Teams is the right frontend is an interesting one. On one hand, if teachers are using Teams in their school then they will be familiar with how it works and can switch accounts to access our content easily. One the other hand, it doesn’t look like a marketable product and something that will encourage adoption, especially if teachers have had a bad experience with their Teams. So, as with so many product decisions, deciding what to make trade-offs between is part of the challenge.
Cookies
I’ve become a bit obsessed with cookies (the website tracking files, not the confectionery) and how websites handle them. GDPR and the ICO say users should be given the choice about whether to accept non-essential cookies (those used for analytics, advertising, etc.) but the vast majority of websites don’t do this. I think it’s an interesting moral choice; should you respect your visitors enough to not track them without their permission, or as you own the website should you be able to implement things that work for your business objectives?
It makes me think back to my old ‘hierarchy of compliance’ that says comply with laws first, e.g. GDPR, then industry specific regulations e.g. PCI-DSS, then your organisation’s policies, e.g. security, then your organisation’s procedures and practices. Should morals be first and above laws, or does it belong alongside every layer?
Browsers don’t differentiate between essential and non-essential cookies. If you block them all, some stuff on the site won’t work, and then you have to allow all cookies again. Browser controls are too blunt a tool. When Chrome shows that cookies are blocked on a page it uses a red square with an X in it, the universal sign for something bad or wrong. Interesting, but not surprising that Chrome tries to signal to us that blocking cookies is bad given Google advertising business model.
But the Cookiepocalypse is coming. Before too long cookies won’t be a means of tracking users on a website. Some browsers block third-party cookies by default already. And Google looks like it’ll follow suit in time, but probably not before they’ve introduced a means to track users without cookies and so lock-in websites to using Google Analytics.
There’s so much to those little cookies, if I get time I’d like to write up all the stuff I’ve learned.
User Guides
I wrote some more for my Whiteboard product user guide, and tested how formatting in Google Docs renders as an ePub file. I’m keen to make my little shop of user guides the next project I put my time into after I’ve finished this term for my masters.
I’ve also started thinking about how this might evolve into online courses for using products more effectively, and how a course could be delivered by email, perhaps with a button in the email that triggers the next part of the course so that learners can control their own pace.
—
And studied some stuff…
Reinforcing business design decisions
An effective business model is made up of “business design choices that reinforce one another” (Osterwalder, 2005). This week’s lecture was about business models. Something that lots of people talk about and very few can explain. I like Osterwalder’s definition. It helps us understand that a business model isn’t a finished, discrete thing that exists ‘over there’, but actually is made up of lots of choices that in order to be successful need to reinforce each other. Lots of organisations, that probably don’t do enough business model thinking, seem to make choices that have them competing internally or one department requiring a level of support from another department that they don’t have the skills or people to do. A business with a good business model makes choices that makes the parts work together.
There are no rational agents
I listened to the recording of last week’s lecture about the nature of digital goods. It was about the nature of different types of goods and how defining them along the lines of excludability and rivalrousness leads to four types of goods: Private, which are things that a person can own and so prevent another from using and can only be used by one person at a time, e.g. a car, Public, such as street lighting which anyone can use and using it doesn’t stop anyone else from using it, Common-pool resources, which anyone can use but if they are that prevents anyone else from using them, and Club goods, like television which requires particular access and you watching a show doesn’t prevent anyone else from also watching it. It’s a bit of a revelation to me to think about the model for providing a product or service being driven at the micro level from the nature of the goods themselves and not from the marco level of whether the government or the commercial sector should provide it. Internet access (see Cassie’s tweet below) is an interesting example of this. Currently my access to the internet is somewhere between a private good and a club good, because I can prevent anyone else from using it, and has some technical limitations on how many people can all use it at the same time. To shift internet access to being a public good would require tackling the technical limitations that then mean everyone could access the internet and no one accessing it prevents anyone else from accessing.
As lectures this term have been digital, starting as video meetings with the lecturer presenting the slides and moving to recorded lectures for pre-watching and then group exercises and discussions over video calls, it has made me consider the format of lectures as a means of providing information. I got a lot more out of listening to the recording of the lecture and listening live, perhaps because the lecturer was more focused. Lectures often seem to have tensions between providing information because it’s part of the curriculum, providing some context and real-life examples to aid with learning, but not biasing the content. I have to sometimes remind myself not to get lost in exploring ideas.
The economics says that Public Goods shouldn’t work because a rational agent should free ride as they get all the benefits without any of the costs, but people aren’t rational agents they are social creatures which is why we have Public Goods paid for indirectly through taxes.
Bigger and better
Worked on my analysis of Shopify’s business model, digital product offering and pricing strategy. Shopify announced its partnership with Facebook and their stock price jumped up. I saw a tweet that said investing in Shopify after their IPO would have given you better returns than investing when they were at Series A funding, which is usually not the way those things work, and perhaps shows . Anyway, it’s been interesting to work on something that feels so ‘now’ but still uses economic thinking from the seventies.
—
And thought about a few things…
The business of charity
Over the years there have been a few occurrences of business people thinking they can apply business thinking and techniques to make charities work more efficiently. It never works because charities are obviously different to businesses in lots of ways. Having been thinking about the nature of economic goods I wondered whether part of the reason for this misunderstanding is that the nature of the services charities provide are excludable and rival, like many commercial services. Being excludable means the services provided by a charity aren’t available equally to everyone, and being rivalrous means that if the service is already being used by someone it can’t be used by anyone else.
In contrast, a service that is non-excludable and non-rivalrous (the classic examples are lighthouses and streetlights) can be used openly by anyone regardless of whether anyone else is also using it. So I started thinking about how charity services could be public goods. The closest example I could think of was Citizens Advice, whose services are available to anyone via their website. They came from, and still have a rivalrous & excludable aspect in the face-to-face advice sessions that they provide, and I’m not suggesting that any charity should get rid of the face-to-face work they do if its meeting a need, but most service delivery charities haven’t figured how to make the shift, and arguably because most charities tackle issues that affect a small segment of society, but it’s interesting to think about the thinking of how they would scale services as public goods if they need to.
New news
I’ve got into email newsletters lately. Email, and so email newsletters seem to be making a come back. The idea that web messaging was going to kill email didn’t happen, instead email evolved, and I think for the better. I’ve mentioned before the trend of emails becoming more like an editable document that passes between people, so that’s one trend of improvement. The other trend is in improving how people use email, something hey.com is working on solving. And then the third trend is in the quality of content that utilises email’s unique features. Emails aren’t limited in size like a tweet, and can either contain all the content for the reader or links to more content. They can be read at a time that suits you and are easier to find later if you want to go back to something interesting.
Email newsletters are also a great means of building an audience as even if you took a no-tracking approach you’d still know how many people are sign-up to receive your newsletter. If email could solve the problem of being able to select which content you want to read before you get it (usually informational products problem) then I would definitely rather have the ‘our content/thoughts/opinions sent to me’ approach rather than ‘we put our content on our website and expect you to find it if you search hard enough. Also, an idea for a product, imagine getting search results by email rather than websites. Describe in greater detail what you are actually looking for and get a high-quality curated list of links emailed to you for you to read at any time. That’s pretty much how I search for things, it’s just that I do the work of copy-and-pasting into my notes.
Woody Zull tweeted “Heuristic: If you spend “too much time in meetings”, it is likely that you have too much work in process. Limit WIP for a week and see how it affects your meeting time. Adjust accordingly.” ~@duarte_vasco
One of the replies to the tweet was about how many problems vanish when work in progress is reduced. I think this is because it reduces complexity across the whole system of work rather than just allowing individuals to focus more.
Fluid office
The Verge tweeted ”Microsoft’s new Fluid Office document is Google Docs on steroids”. Microsoft is getting into blocks in a similar way to tools like Notion, where a document (if there will even be such a discrete object in the future of work tools) is made up of lots of blocks from different sources that pull content and functionality into the ‘document’ you are working on.
I think it’s another step in the journey of information moving from being centralied to be decentralised and distributed in an internet-y way, and the next step will be in how content is made discoverable to pull into a document, so the author doesn’t have to write original content that becomes locked into the document if someone else has already written it or the data is already available. Rather than having to go and find last year’s sales data and create a chart to then create an image to be embedded in the document, you would import the live data into the document and the chart would be up-to-date in real time.