2019 NYU Stern Digital Innovation Conference: Welcome and Opening Keynote

2019 NYU Stern Digital Innovation Conference: Welcome and Opening Keynote


– Good morning everybody. I’m Natalia Levina, I’m the
director of the Fubon Center for
Technology, Business and
Innovation here at Stern. I wanted to welcome all of
you and thank you for coming to our inaugural conference on digital innovation platform
strategy. Just a few words about who we
are. The Fubon Center was launched
at Stern in April of 2018. We are very grateful for
the endowment we received from Richard Tsai, and our
mission is to create cross-disciplinary
conversations and idea exchange on technology
at Stern but also beyond NYU walls, and that’s why we’re very
excited to have this event that brings in together,
researchers and practitioners and leaders in the industry to discuss this very important
topic of a platform strategy as I’m sure you know, as you’re
here. We have a very packed
and interesting agenda which includes conversations
between academics and practitioners, research
that comes straight from the latest research projects
delivered to you in a, hopefully, digestible way, as well as conversations
around lunch table with many of you signing
up for different topics. We will walk you through the
program as the program unfolds. And before we get started, I
just wanted to thank people who help us put this event
together. Lots of volunteers. And I’m sure you would
enjoy the amount of effort and care they took to make it
a great experience for you. People were asking me
about the wifi password, it’s right here. So without further ado, I would
love to welcome to the stage my colleague and friend,
Arun Sundararajan. Professor Sundararajan is a
Robert and Dale Atkins professor here at Stern. I think that among people who
are interested in questions of platform strategy and
modern digital economy, he almost doesn’t need
introductions. He’s a author of the bestselling
book on sharing economy. He has published over
50 academic articles. He’s often seen advising
government bodies, international government
bodies in diverse questions of digital economy and
labor or future of work. He is a friend of the Fubon
Center who helps us engage with
industry, and today he will be
in conversation with… He will be… what do we call it? Leadership conversation, sorry. Talking to Umang (murmurs) who is the former chairman
and the COO of Handy. And now let Arun introduce
his conversational partner. Arun, without further ado,
please welcome to start our event.
– Thank you. (audience applauding) Thank you, Natalia. Whenever people introduce me, I always hope that the
introduction is short and then I can sort of exceed
expectations when I come on the stage. As opposed to sort of
disappointing you all after sort of a long
introduction. But today I’m not worried about
that because I have with me, Umang Dua, who I know
will exceed expectations. Umang is the founder of Handy, which is the world’s largest
platform for services of different kinds. Umang, before he started
Handy, was at McKinsey. Before he was at McKinsey,
he was a college student. During his time at Amherst, he founded a company
called College Connect, so he’s a serial entrepreneur. Then he went to this
university in Cambridge. I forget it’s name, begins with
an H, and was pursuing an MBA
there and dropped out to sort of form Handy
and, you know, take it to sort of the, like, you
know, the fabulous exit that they had last year. So welcome Umang.
– Thank you. It’s delightful to have you
back. I mean, you’re a good friend of
the school and, you know, appreciate
you taking the time. So why don’t we start by talking
about, you know, sort of, tell us a bit about Handy
and how you got from, you know, sort of, that early
stage six or seven years ago to where you are now.
– For sure. So it’s great to be here. So Handy is, it’s a pretty
simple, sort of, idea, which is, what we do is we try
and make buying home services just very easy, you know. The models before we existed
were largely around reviews or (mumbles) in some shape or
form, and the idea was, if we
can make buying services as easy as buying product, which
is, you buy it, you can book it
instantly, you can schedule it for any time
you want, there’s a price and it’s a fixed
price, and you know exactly how much it costs, and then there’s a brand that
stands behind the service being
delivered, which is how you expect to
buy products, essentially. If we could bring that
to life for home services then we thought we could create
something pretty meaningful that would, you know, would
be a better experience than what existed. And so that’s really the
idea with which we started. – But this is sort of a tough
business, right?
– Exactly, and so the idea sounded simple
enough, bringing it to life has been, it was, and continues to be,
sort of, challenging because
services, like product, you know, you’re dealing
with a number of variables. It’s not as straightforward
as, you know, a production line or you getting it right, you
know, every season, you do one thing
right and then you produce that, and so, you know, started with
that idea. Very quickly realized it
probably didn’t make sense to do all home services, and so, we started to
narrow it down from 2012 ’til, literally, a few years ago
and then, again, we started expanding
the number of services but what we realized very
quickly was people weren’t gonna buy a $5000
landscaping project online. Like, that just wasn’t gonna
happen. Maybe it’ll happen now but
at least five years ago, that wasn’t what was gonna
happen. And so we started to narrow in on services like home
cleaning, furniture assembly, things that could be a lot more
discreet that you would buy like buying
product. And so, that’s sort of
where the brand is today. To Arun’s point, it’s been a
journey. You know, we’ve gone from
launching to, the first question was, “why would people let
people into their homes?” That’s significant, like,
the number one question in 2012 was, “sounds
like an interesting idea “but why would I let someone
I’ve never met into my home?” That was, sort of, journey one
for us. To prove that people would
book these services online. And obviously, the Ubers and
AirBNBs of the world around that time helped with bringing,
you know, that to life. The second step was suddenly,
you know, we’d sort of proved people
would book these services online but there was a ton of
competition. Like, why Handy necessarily,
right? There were like eight
companies, all venture backed, all raising significant dollars, and we were in this sort
of, just, massive land grab, for lack of a better
word, where, you know, we’re spending a ton of money, we’re trying to grow and that was a interesting
phase in and of itself where you do a lot of
things that, in a vacuum, probably sound stupid
and don’t make sense, like, heavy discounting. You’re paying, sometimes, a
cleaner more than you’re charging a customer, which obviously doesn’t make
sense from a business perspective, but you’re just trying to
grow as fast as possible. – Yeah, I mean, and this is
common, right, where, like, you know, in
these network effects business where someone goes out,
proves that the model works and then it’s a land grab,
right? And like, you know, everybody’s
chasing market share. – Yeah, absolutely. And people told us this,
even when we were sort of… Whether it’s venture
capitalists or other founders, that there are some businesses
that are very clearly have these real network… Not all businesses have network
effects and not all businesses do
you have to be the largest, you know, the second,
third, fourth player, and a lot of these businesses
are very good businesses but for our space, to your
point, it was very clear that the more, sort of, just
density you had in an area, the better experience
would be for everyone. The more supply you had, the better experience it is for
demand. The more demand you have, you get the supply on your
platform. And that was very clear pretty
early on, and so that meant we had
to, sort of, press the gas or the accelerator.
– Yeah. And then you went from I guess, sort of scaling to proving the business formula. – Exactly, so I would
say that phase of growth at almost any cost lasted
two to three years. So it was a significant, you
know, period, where you’re raising money, you’re spending a lot
on customer acquisition, building out the team. And then, I’m gonna make it
sound like it was sudden, it’s obviously not one fine day, but, to some extent,
you know, very quickly, we went from growth at almost
any cost to, okay there were real
questions about, okay, this is a business people
would use but that doesn’t mean it’s a
good business because if you don’t have the
economics, if you don’t have customer
retention, if you don’t have some of the
core ingredients in place. And it wasn’t just Handy, I
think, these questions were being
asked and continue to be asked in some cases, of a lot
of companies, you know. Whether it was Uber, who is
significantly, obviously, more advanced than us. Whether it was the food
delivery companies. And we sort of got clubbed
in that bucket which is, okay, of course people would
buy it if it’s relatively cheap but can these businesses
actually, you know, do they have a sustainable
business model? And so, that was sort of, if
I think about it in my head, like, the phase three. If the first phase one
was, will people use it? Is there even a business here? Phase two was like, which
one of these is gonna win? And then phase three we’re like, okay, Handy is the biggest in
this space but that doesn’t mean
it’s a good business. And so, we had to really,
sort of, almost go 180 degrees the other way where it wasn’t
growth that was the number one
metric that was important, it was your margins,
your customer retention, your cost of acquiring service
providers. Essentially, can the
business be profitable? And so, you know, it was a
tricky, sort of, transition from growth, growth, growth, to
thinking about all these other
far more nuanced metrics, but it was, sort of,
the right thing to do. And, sort of, we spent,
I’d say, the better part of maybe 2016 and 2017 really
focusing on the business internally. – Okay. And then, you know, so
do you still feel you’re in that phase or have you, sort of, transitioned?
– I think we’re… Yeah, it’s a good question. I think the way we think about
Handy now is we feel like on the core business, it
is, sort of, profitable, it grows at a healthy rate. And on that part of the
business, we feel like we’re out of this phase of proving the
economics and it’s just continuing to grow
it. What I think we’ve started
to understand as a business at Handy is all the
different parts of what we do are actually somewhat
independent businesses almost. And so you can have part of
the business that you feel like is almost mature, it sounds crazy because we’re
only, sort of, seven years, but, you know, where you don’t
wanna necessarily spend crazily
on customer acquisition or you wanna maintain your
margins, and that to us is our core B
to C business, essentially, where if you go to the site or
the app, you can book home cleaning,
furniture assembly, painting, things like that, that part
of the business, I think, is very sustainable and
profitable, but where we’re really investing
now, we work with partners, you
know, the Wal-Marts, Wayfairs of the world, Crate & Barrel etc where when they sell products, everything from furnitures
to TVs, to lights, to plumbing equipment, we, sort of, do the service
component. And because we made it
easy to buy these services like product, you can do
it at the point of sale. So if you walk into a Wal-Mart
or you buy online on Wayfair, you’ll usually see a Powered by
Handy and you can add furniture
assembly, your TV mounting, for a fixed price. And so that part of the
business now is what’s really, we’re sort of investing– – It’s a sort of an interesting
progression you describe because there seems to be,
sort of, a good template for, like, the phases that a
platform business goes through. Like proving the idea,
then growth at all costs and then unit economics, and then, you know, in some
ways, you know, expanding scope, like, you know, envelope
(murmurs). And, you know, if I
think about Uber today, they’ve certainly gone
through phases one and two. They’re sort of doing a mix of
phase three and four right now, right? They’re still proving the unit
economics while expanding the scope. AirBNB is probably in phase four ’cause they’ve proved the unit
economics. So, you know, I, you know, the
focus of this conference is platform
strategy and, you know, we’ve, you
know, just as a quick plug to, sort of, the talent at NYU
Stern, we’ve got some of the world’s
leaders in platform strategy here, including Melissa
Schilling, who’s in the
audience, Natalia Livina, who was very
humble in her introduction of herself but whose
research on this front is like really fabulous but one of the questions Hanna
Halaburda, who hopefully is in
the audience somewhere, who works on questions of
scaling as well, but one of the questions that,
sort of, we really struggle with when we’re trying to
explain to executives is strategies for
scaling. ’cause, you know, as
you said, in phase two, you have to grow. You have to grow at all
cost and people say like, you know, offer deep discounts but is there more nuance to it? I mean, like, you know, how did you guys go about
thinking ’cause, you know, you
came up with a strategy, clearly it worked because,
you know, you won, you became the biggest platform. Like, what were the key things
that really worked for you? – Yeah, absolutely. I think there are some very
important decisions you make at that point where you say, okay, you think you’ve got a
business but now you need to grow, do you think about a platform
as a sort of horizontal, we could’ve thought of,
sort of, more services. And that was something
we seriously considered, which is, okay, it sort of
works in, let’s call it, five cities or ten cities in the
US, is the next step now, you know
we’ve got customers using it, people are starting to
understand what the brand is, should we just launch a
bunch of other services? And that’s, sort of, almost a
horizontal platform approach. And the other way we were
thinking about it is, okay we sort of understand home
cleaning and furniture assembly,
should we stick to that and should we just, like, launch
as many cities that we can and just go deeper, and deeper? And that’s almost your,
sort of, more of a vertical but not integrated (mumbles) but you’re sort of a much deeper
platform in a different sense and, again, there’s no necessarily right or
wrong, that’s a critical decision, I
think, you make as a business, that can lead to very different
outcomes. And so, for us it was the deeper
for sure. We thought, look, each
service takes some amount of understanding how
supply and demand works, how did digital product even
looks like? And so, that was a big decision
for us, which is, I think you need to
be very clear about, sort of, who you want to be and because you’re scaling, the last thing you should
be doing is scaling on every dimension because I
think that’s where it gets very, very tricky,
so– – Sort of the appropriate scope of focus.
– Exactly, in some companies. So you can move really fast, but if you move fast in one
direction, this sounds obvious, it’s obviously much easier than,
you know, we’re expanding nationally,
we’re launching a bunch of different services, we’re
buying different companies, and you’ve seen some companies
do that and then come back to, shit, that’s not our core
business, and I think that’s a very,
very important, sort of, platform decision to make, is
who you are. The other are unintended
consequences, like, we have this crazy story
where, um, um, I guess I can share it, we used to, like I said, we
used to overpay on supply because we didn’t have enough
supply. So let’s say we launched in a
city and, hypothetical, we have
just a hundred handymen in that city but we have way
more jobs and, for a while, we can’t
keep up with the supply and demand, and balance of that
city, and so what we would do
is we would just overpay to get supply to,
essentially, do more jobs than maybe they would usually
do. And, at some point, we were
a young company, you know, you’re just prioritizing growth. We were overpaying like crazy. Like, you would literally, like,
you know, you’re doing a cleaning job
and you’re getting paid $180 to just show up to the job. We’re getting charging like 50
bucks, which is crazy, right? Like, that doesn’t make sense. And, in our head, it
logically made sense back then because we’re like, look, at
some point, we’re gonna stop. The problem is people get used
to it. Like, we had built our supply
base who had just gotten used to doing jobs at that high rate, and we, literally, like a
gradual, we, this is crazy, but we essentially, one fine
day, just decided we have to take the pain and we just
stopped, and that was really hard. It wasn’t a gradual because the gradual
weaning off wasn’t working, and so, one fine day,
we literally were like, no one’s getting 180, it’s
now 45 or whatever it is. And it was a painful
transition where you don’t know whether you’re like shooting
yourself in the foot. Is this the right or wrong
thing? But again, in that scaling
piece, just unintended consequences
of some of your early decisions if you magnify that, are very
hard sometimes to unwind. – Yeah, and this is, I think,
probably, a frequently encountered one,
right? I mean, you either get your
customers used to deep discounts or you get your hosts or
drivers, or providers, as the case may be, used to,
sort of, this gravy train and when you’ve got to, sort
of, wean them off a bit. So as you were, sort of,
scaling, or even, like, you know,
as you were going through these four phases, can you
give us a sense for, like, you know, many startups
have told me that, you know, as they, many platform
startups have told me that as they grow their
platform, there’s, sort of, one metric
that really matters, you know. Like, you talk about,
sort of, lifetime value and cost of acquisition and, you
know, you’ve got these websites
with 50 different metrics that matter, but you realize that
one, sort of, is critical and that sometimes changes
at different stages, so did you guys have a similar
experience? – We did. And, again, from a
beyond platform, sort of, very simplistic, sort of,
running business point of view, for the first few
years, this is some advice we got, which is keep it very simple. Like, decide what is the one
metric that you care about, get everyone in the team to
understand. The simpler the metric, the
better. Get everyone in the team
to understand that metric and you can always, as the
business grows, make it more nuanced and we sort of took that to
heart where, for the first couple of
years, it was really simple. Almost to a fault. Where it was bookings,
and you could tell by how I was talking about
discounting and things like
that. We were optimizing for bookings and it wasn’t for the sake of
it, it was to the point of network
effects. Like, we had more bookings
on the Handy platform. We truly believed, and I think
it did bear out that way, again, at a cost, but it did
bear out, which is the platform would be
better. It would be the best experience
for customers and providers than anywhere else they
could go if we had a lot of bookings, essentially. Transactions moving through the
platform. And so, in the early
days, it was very simple. It started to get a lot more
nuanced as we started to think about sustainability of the
business and how we can obviously be
around for many, many years, and, hopefully, continue to
grow. And I’d say, to boil it down,
there are a ton of metrics. Like, literally, we now do
a management meeting, like, once a week, and the deck
is embarrassingly long. Full of metrics and numbers
that no one on the outside, it’s embarrassing, can
understand. We have, like, smart people
join and it takes them a month because they’re like, “what
are all these acronyms “that you made up that
actually make no sense “to anyone on the outside?” But if I had to boil it down, I think most consumer
businesses, this is obvious, are a function of, largely,
customer retention. I think it’s probably,
if I had to pick one, like, as someone tweeted
yesterday, like, what are the lessons
from Blue Apron, for instance? And it’s, largely, the lesson
is the customer retention, which is there are only that
many customers in the world. Like, you can, you know,
if you have a leaky bucket, where you’re not keeping
customers long enough, then there’s only that far,
essentially, you can go. And that was a lesson
for us as well, you know, once we went from that
bookings at all costs to customer rete… To thinking about the unit
economics, the single biggest metric we
narrowed in on was essentially
lifetime value for a customer over, call it a three year
period. And that then dictates
how much you can spend on customer acquisition, that then dictates how big you
can become. It then dictates, like, a number
of things that you work backwards from. But I’d say for most, maybe
not just consumer business, most businesses full stop, LTV over a, call it, 36
month period is probably the single biggest, just,
metric to keep in mind because it really does then go
back. If your LTV is great,
you can just spend a lot on customer acquisition,
your cap can be higher, you can continue to,
sort of, fund the market because you know every
customer is sticking around and you can then stop
discounting. You can stop doing a bunch of
stuff. But if, you know, I think
that was one of the issues with Blue Apron, which
is in the early days, they were growing so fast and so many new customers
were joining them that growth looked amazing, but, you know, if they weren’t
sticking around long enough then, at some point,
your cap starts to go up because there’s only that
many people out there that you can keep acquiring, and if your old people start to
churn, then there’s only one… You know, it’s hard to
grow a business very fast. – Yeah, and this is, um… So I wanna save a few
minutes for questions, so if you have questions,
sort of, start preparing them. But, like, one final question to
you and then we’ll transition
into questions, you know. And it has to do with governance ’cause, you know, we’ve
heard a lot about the choices that different platforms,
like Facebook and Google, have made over the last few
years, and some of the consequences
of those choices and, you know, I’ve begun to
believe, like, over the last three years that, you know, the governance
choices that a platform makes are gonna
be central to its future resilience. I mean, this is sort of, like,
a corporate governance choice you’re making but it really, you have to take into account,
not your shareholders, but, sort of, the different
stakeholders in your ecosystem. But I’m also increasingly
convinced that this is not just a business decision,
it’s a societal decision. The platforms are
important societal actors and, you know, have sort of a
greater and greater societal
responsibility. And so, you know, sort of with
that back, this is one of those extremely
long professor questions that, you know, sort of a
mini-speech any speech followed
by so what do you think? But like, you know, my
question is, you know, I’m sure Handy has, sort
of, thought about, you know, has made some governance
choices along the way so is there any one that,
luckily, you can share that you felt was a tough one to
make or was an important one for the
business? Or that you’re still grappling
with? – Yeah, I’d say, probably, a
few. And I think that’s a lesson you
learn, which is platforms, as they get
to scale, just carry a lot of, res… This sounds cliche, like, just a lot of
responsibility, and I think we had to learn that and everyone who works at
Handy had to learn that, and what I mean by that is when you have multiple
stakeholders, to your point, you know, we have our
professionals, our customers, and then there’s the
business that, you know, you’re trying to build
a sustainable business, that every decision you
make has a trade-off that’s impacting someone. And I think one of the bigger
lessons we learned was not to see things just cleanly
as black and white. You know, people would
just come into the room and be like, “we have to, I
don’t know, “we have to charge customers
less “because that’s how we’ll grow.” But then does that mean you
have to pay providers less because, otherwise, then
the business suffers, right? And so, everything just has
these constant trade-offs, and specifically, to answer your
question, some of the, you know, the early or decisions in
the middle that we made that were truly important
for us were things around, do we let the same person go
back to a customer, right? This is not Uber. Like, if you have a service
provider that you like. And that was a huge,
like, it shouldn’t be. It’s not controversial (murmurs)
but like, people were like, “no, you trust
Handy. “Handy should be the person. “It doesn’t matter who you
get on the Handy platform.” And then there’s another
side of, sort of, thought. Like, literally, which was
like, okay but this is not Uber. This is home services, the
person is inside your home. And so, yes, you may trust
Handy, but you also built a
relationship with whoever it is, comes every two weeks,
potentially, to clean your home. And so, can I now get
that specific person back? And we ended up going with the
latter because it was just
overwhelming. It wasn’t clearly to us
initially but then, that people do
want the same person back in their home and that, sort of, decision has pretty wide
impact on what the platform is and how it runs because incentives change, you
know, how people get paid change, which is now, that’s probably
the single biggest thing, at least on cleaning where
there is high repeat usage, a professional on the platform
probably optimizes for, which is just to have a roster
of clients, which mirrors the non-Handy
world, the way it works and that was sort of a,
internally, a big decision that could’ve changed, sort of,
how we go and what we think about as Handy that, you know, we made
a couple of years ago, and I think it was the right
decision. – I know, it’s a common,
again, like, you know, it’s sort of an instance
of an important choice that platforms make about, in
some ways, the level of control you’re
giving your customers over their providers,
the level of ownership you’re giving providers over
customers. Yeah, you’re right, there
are no right answers here. It’s always a trade-off. I think different companies
make different trade-offs. I think Sidecar, which was
one of the competitors of Uber and Lyft, for a while,
was allowing customers to choose drivers, and it turned out that that
market didn’t really value that so much. It was just, sort of, you know,
send me a car with someone in it and gimme a ride. Okay. So before we get into
questions, another quick plug, which is Marshall Van Alstyne is
somewhere in the audience here and Michael Jacobides and
I actually wrote a report for the World Economic Forum about platform strategy and
governance. Marshall wrote about revenue
models and business models, Michael wrote about ecosystems,
growing the ecosystem, and I wrote about governance and so there are copies floating
around, so, you know, if what
we’ve been talking about, sort of, strikes a cord,
grab a copy on your way out, and with that, we’ll open
it up for a few minutes of questions. Yes, Rob. Rob is another of our
leading lights on platforms and automations here at Stern. – Thank you, Arun. We’ll see what our visitor
thinks after my question. So, this is a two part question. A soft ball then hopefully
something a little harder. – [Arun] This is another
professor. – Yeah, that’s right. Oh, I haven’t even
started with my question. The question will come in
about five minutes or so. I’m kidding. So I was struck by the story
that you told about overpaying, if you will. Quote unquote, overpaying
on the supply side initially then having to drop the
price, so two questions. First, the easy question
is I’m sort of curious to hear about your backer, like, the venture capitalists,
about their take on that and whether they got what
you were trying to do and the extent to which
they were supportive. The hard question is, and this
isn’t meant to be critical, but you can imagine that
some of the suppliers, right, the handymen or the handywomen, they had really good outside
options, maybe they were employed
part-time or full-time somewhere and this great opportunity came
along, Handy, backed by wealthy
venture capitalists, and they gave up those jobs
and they started working on your platform, perhaps full-time or something
approximating full-time, and then suddenly the rug is
pulled out from under them and they’re getting paid a lot
less, but now they’ve, sort of,
already left this other job, what to make of these folks or what to make of this
situation. Perhaps there wasn’t really
stuff like that happening but I would just be curious
to hear a little bit more from you about the effects of
your very wise business choice on the actual suppliers of a
service to your company.
– [Arun] Okay so, and hold your thoughts on that. Let’s take maybe two more
questions and then we’ll answer all of
them at once. There’s someone who has the mike
here. – Hi, I was wondering
if you can speak to some of the activities that you
engaged in off the platform, particularly in the early
stages, and how might those activities
have changed over time. – [Arun] Okay, so that’s
question two. Activities in the early stages. Melissa. – I’m also really loud. I have easy questions, two easy
ones. First of all, what did you do… Hey, they turned me on. What did you do–
– [Arun] Melissa is also a professor, clearly.
– Yes, sorry. – [Arun] (mumbles)
– It shows. Was there any risk of people
side-contracting with cleaners and people that they wanted to
come back? Because that seems like
an obvious thing to do if you like the person who’s
coming and then, that way, the
cleaner’s
keeping more of the money. And the second question I have
is what do you do to create
stickiness so that, you know, people who work for
Handy aren’t also working for TaskRabbit and others? Is there anything you do
to encourage exclusivity? – Okay, so we’ve got, sort of, Rob’s question about, you know, including Handy people
losing their businesses. Question from, what was your
name? Okay, Christina, about early
activities on the platform and then side-contracting and
stickiness so take them in whatever way. – So, I can try taking
it in that order itself. So the first question is a great
question, to the two parts where our VCs
were. Yeah, I think the VCs,
I mean, they were great and they’ve been super helpful but they work largely
off pattern recognition. Like, have we seen this
play out somewhere else? If we have, what were
our lessons, good and bad from wherever else we’ve seen
them? And some of our investors
are shared investors in AirBnB etc, so they were
just, sort of, applying some of what they’ve seen. And I think they got
instinctively the, sort of, winner-takes-all or
winner-takes-most, sort of,
angle to this business. Again, I don’t know the
counterfactual. Maybe, like, if we had gone the
other way, where we hadn’t gotten
growth at all costs, or maybe we’d gone the other
way, and I said this once in your
class, where instead of four years
in when we were, like, deeply unprofitable, we had said
instead of trying to becoming
profitable, we had said forget it! Let’s take another ten years
of just deep discounting, like, who knows? Maybe that would’ve ended up in a potentially even better
place. The counterfactual, you
don’t actually know. But they were, they were fully
like… You know, ’cause obviously,
even though I’d started a smaller business before, it
never got to Handy’s scale, so it was, sort of, new for me and they were very much on the
same page and pushing us to think more
about scale in the early days, and less about… You know, and that meant
discounting, that meant, what I’m calling
overpaying on supply. To the second question about
how, it’s a great question. I think what we’ve always
tried to do at Handy is we don’t do, unlike some
of the ride-sharing, there’s no, you know, in your
first X weeks, guaranteed XYZ. And then that suddenly
somehow goes away or may, you know, I’m not fully
sure how exactly it works. We don’t do that, we’ve
always even in, I guess, marketing material or
when we put out ads etc, we usually anchor to a hourly
rate, which was never the rate at
which we would bonus up to. So you’re right that someone… No one would join the platform
expecting to get paid $200 at a job because that was
never, essentially, our angle, to go out and get people. That was almost, like,
we didn’t wanna do it– – [Arun] Spoke truth in your
advertising. – Correct, and we would end
up doing it because literally, like, call it seven out of
10 jobs couldn’t be filled and then the three jobs
that, obviously, too high to cancel on a customer and
we wanted to do those jobs, we would just overpay like
crazy on those three jobs. And so, yes, the net
effect over, you know, once you were on the
platform, may have been that you took one of
those high paying jobs and slowly those crazy jobs
that just didn’t make sense, and largely they… There was a reason I would
say that we were overpaying those jobs, you know, we may have launched in just New
York City but that job was in Jersey, and, you know, we had to, we just didn’t have enough
supply there and so we were trying
to incentivize people. And so, at least, the
way we approached it was always to try and have
the rate be the rate, and that was very clear and
then there was bonusing, essentially, what we called it
on, for lack of a better word, not attractive jobs. And slowly, as we got more
supply, they became attractive to someone else. – [Arun] From early activities
(mumbles) – Right. I just, for at least, just so
I understand that question, was it related to
disintermediation question or
no? – (murmuring) – Got it. On both the supply and demand
side? Yeah, on the demand side,
honestly, when we launched, we didn’t have
a lot of, just, customer acquisition
dollars and we had to get creative
on both supply and demand, and how, you know, when
you’re an early stage company, you’re not gonna go out
and spend a lot of money on subway ads or whatever it is
that you could do once you have some
scale and you’re raising
venture capital dollars, and so a lot of our early
operations, customer
acquisition, were happening… To the customer, it may
have felt very digital and, for instance, you
would make a booking and we would, essentially, it
was just a front-facing site. There wasn’t much, like,
algorithms in the backend doing
matching or any of that. It was, literally, we would get
a booking and we would try and make
sure we could find supply. Whether it meant being on the
phone, whether it meant using text
message, whatever it is. How we thought about customer
acquisition? Similar, you know, we, literally one of the first
ways we acquired a ton of customers was by putting,
essentially handing out flyers and putting door hangers
on people’s doors, and they would come back and
they would see the door hanger, like a hotel, essentially, like, “do you wanna book a house
cleaning?” And that just ended up
being much more cheaper way, again, it’s not scalable. You can’t put flyers
on everyone’s doors all around the country all the t– – [Arun] You also have
the jugglers and the– – Yeah, and we built… We got really good. I think one of the
things we did was we had these street teams and if
people, in 2012, lived in the West Village, like, there is no way you couldn’t see
us. We were like, we had like
seven or eight people who were all, like, actors and
musicians and, like, juggling experts, we would just, sort of, get them and we would put them,
essentially, at very nice… Not like, people handing out
random flyers in the street. Our goal was, how do we
create, like, a spectacle? And we would just do it
on the side of the street for, like, six weeks straight. And so every single person
on the West Village, by the end of it, knew
what Handy was and, again, it was a very localized
customer acquisition strategy, so a lot, I guess short
answer is a lot happened, you know, off the platform just because the technology wasn’t
there or we hadn’t invested in it by
then. – See, but you’re leaving
out the best part of that acquisition story, right?
– Yeah, (mumbles). So what we used to do is
we used to put dog food, as part of the thing we would
set up, we would put dog food under the
table, and so dogs would just
gravitate, like pull the folks who were walking them straight
to us, and they would be like, “why are we, like, right
in front of you here?” And we were like, well, let
me tell you about Handy, and the dog is just refusing to
leave. So that was our customer
acquisition strategy
essentially. – Okay, well, I know
we’re running out of time but just maybe, like, one
minute on Melissa’s points on stickiness and on, sort of
like, how do you prevent the providers from side contracting.
– I think disintermediation is a real problem, let me just
start there. I think, you know, for a
lot of platforms, it’s real. You hope and, you know,
that’s been our hope. There are two things. One, you make it as seamless as
possible that you hope, at least,
for the majority of people, they see value in being on the
platform. That’s the, you know, insurance. That’s the convenience of
rescheduling, canceling, which is hard to do in a
one-on-one relationship. You know, so you try and do a
lot and then on the supply
side, the same thing. You know, if you go back to the
home, you get paid more, etc etc. So you try and do a lot to
make the platform just work and you see people see the value
in it. And then the second thing is
you make platform decisions. So we, on cleaning, are
largely a subscription service, which limits the market
size potentially, for sure. You know, it’s probably… But is the better business
decision and so, very upfront now, when
you book a cleaning booking on Handy.com, it’ll ask you,
like, “do you want a weekly,
bi-weekly or monthly?” and rarely is there a one time
option. Sometimes we do a, sort of,
higher priced one time option. But again, that’s a
decision we had to make because we had to understand
that for our market, which isn’t necessarily like
Uber, it’s hard to disintermediate an
Uber but a Handy, or a home
services in general, it is a thing. And so you make some decisions
that hopefully, again, may not let you tap
into every customer type but are the right, sort
of, business decisions. And then, to your latter
question about supply and thinking about the platform, honestly, they can work across
platforms. We’ve, you know, we… I think the average person
on Handy’s platform is doing somewhere in the region, it’s a
range, like, 10 to 20 hours a week. They’re not treating
it as a full-time role. They’re on multiple platforms. Obviously, we hope that
when they think about, let’s say, home cleaning,
they get the most value and they start there. So (murmurs) they look at,
they open the Handy app to see the available jobs
before they do anything else, but, essentially, they’re
free to work across platforms. – All right, Umang I’m gonna
take a selfie because I don’t trust
professional photographers. All right, and thank you. That was really fabulous. (audience applauding) (rousing music)

Author: Stephen Pender

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