a platform isn’t a solution, and other takeaways for mobile start-ups from mit enterprise forum
In the fast-growing playing field of mobile, the business prospects seem infinite. But developing a viable, scalable business amidst all the possibility isn’t easy. This is something Mitch Thrower knows all too well. As the CEO and founder of BUMP Network, Mitch is facing some serious business challenges. That’s why he opened up his efforts to the MIT Enterprise Forum San Diego community and asked nearly 100 of us to offer advice and ideas at the Forum’s event last week. The evening’s discussion produced some important takeaways for any aspiring start-up in mobile — and really in any sector.
Let me start with two pieces of background. Mitch explained that BUMP Network is a PaaS company – platform as a service. This means BUMP uses mobile and social technologies to provide cloud-based transaction, membership, and communication services. BUMP also employs advanced license plate recognition technology which is capable of tracking where a car is and sending messages based on that information. Currently there are two sides of the BUMP business: 1., enterprise – selling to and running membership programs for companies including The Grove in Los Angeles, Xterra, and others; 2., consumer – providing a membership program in which it provides services like the Auto Club from AAA.
Other background is that MIT Enterprise Forum promotes the formation and growth of technology-oriented companies through a special executive education format. At each forum, a company signs up to present its business challenges to a panel of experts and audience members including established business leaders, entrepreneurs, and advisors. The event I attended last week included a roundtable time in which audience members discussed in small groups the presenting company’s challenges and potential solutions and then tweeted ideas, which were discussed by Mitch and the expert panel. The forums are always stimulating and I’ve served as a panelist and participant previously.
After Mitch concluded his introduction to the group, he laid out two of BUMP’s challenges:
On the enterprise side, the company needs to reduce its costs and resist its clients’ demands to provide an increasingly broad range of services and benefits. For consumers, the company struggles to identify the benefits that best take advantage of new mobile and social capabilities and drive increased sales, redemptions, and renewals.
It was clear to me, however, that the company faces far more fundamental challenges. These questions are mere symptoms of more deep-seated issues at BUMP. Here’s what I believe are the real problems and the takeaways that should help Mitch and many others:
1. A platform isn’t a solution. The fundamental issue for BUMP was clear from the start of the presentation. Mitch’s description of the company focused on the platform, essentially saying the company was designed around a “how” not a “what.” The problem with basing a business on a “how” is that customers don’t value how’s. As legendary Harvard professor Theodore Levitt put it, “People don’t want to buy a quarter-inch drill. They want a quarter-inch hole!”
Moreover, without a clear problem to solve, you don’t have a focus — you only have a tool. Entrepreneurs need to ask themselves, “What is our purpose? What burning need are we driven to fulfill? What idea keeps us up at night?” If you start with a “what” — a solution — it’s much easier to get clarity on what you should do and what you shouldn’t.
2. Scope clarity prevents scope creep. This is a corollary to #1, in the sense that the company as a whole can reject a host of potential products and services if it’s clear about what it’s made to do. But scope creep is also a problem when you have multiple divisions or parts of your business. You need to be absolutely clear about the role and value of each part.
Mitch described BUMP’s consumer division as the company’s “sandbox” – meaning, it serves as an R&D lab for the membership services it develops and sells to enterprise customers. So, Mitch and his team should stay true to the consumer business charter — set it up and run it as a testing panel, where members are recruited and rewarded for generating ideas, giving feedback, and voting for their desired benefits with their behaviors — instead of looking for ways to optimize the division as a profit center. It’s smart to design part of your business to be used as a learning lab – it’s smarter to keep it that way.
3. Understand the movement behind the trend. Several times Mitch explained that affinity is the new loyalty. He pointed to VCs who now refuse to hear from start-ups that present a loyalty concept and he relayed that many companies are shutting down their loyalty programs in favor of offering membership clubs.
Loyalty may indeed be dead, but it’s not because loyalty clubs drain companies’ profits while affinity programs present new revenue potential, as was Mitch’s explanation. Loyalty is dead because consumers no longer see the benefit of pledging their loyalty to businesses; instead they are looking for brands that they can identify with and that help them express and experience the identities they aspire to. This is the cultural movement that is behind the trend toward affinity. With this understanding in mind, Mitch and his team would think about the benefits and services BUMP provides differently. They would be less focused on which types of rewards people are looking for, and more focused on the brands and categories that form their members’ desired lifestyles.
4. Younger customers aren’t simply older customers who are more mobile and social. This may seem obvious but there are plenty of companies who are trying to sell old products with new features to Millennial consumers. For example, BUMP’s roadside assistance service is modeled after AAA’s and the company is trying to bundle it with other benefits to make it attractive to younger customers. But such a service may no longer be relevant to younger drivers. Armed with a smart phone, a connected network of extended “friends,” and navigational services, many Millennials may be able to solve a flat tire problem more quickly and easily on their own than relying on AAA.
So why not focus on the needs that these new customers would look to a membership club to fulfill?! Managing their networks, accessing personalized offers, and getting help in “emergencies” with their mobile devices are just a few examples of new needs that come to mind. Generally speaking, when designing services for Millennial consumers, it’s better to start with their unique needs and design new services to meet them instead of starting with services provided to older customers and trying to adapt them.
5. Exploit your uniqueness before expanding your sameness. Building out a unique small idea is more powerful than building on an undifferentiated big idea. In BUMP’s case, its uniqueness is its license plate recognition capabilities. Mitch seemed to downplay this aspect of the business, calling it an “enabling technology” and explaining that all the attention it has gotten overshadows the rest of the company’s capabilities. But there’s a reason why so many people find it so interesting – it’s new and different. Certainly the applications that the company initially used it for are not really compelling, but it’s clear there are plenty of potential valuable uses. And it holds far more potential for differentiating BUMP than its other capabilities which are simply better than existing options.
If you’ve got a unique capability or technology, you should lean into it and figure out how to exploit it to its fullest potential. Providing a new service that’s better, cheaper, faster, etc. than an established one will only produce short-term gains. Positioning your brand as “-er” brand is a dangerous strategy. Not only does it relegate your brand as being subordinate in status to the brand used as your reference point, but it also tells customers that your brand possesses only comparative value, rather than having its own inherent value. Your value proposition becomes, “just as good as Brand X, but _____-er.” Your success relies on your ability to out-do the competition, which is not a prescient approach to innovation – and it’s not a sure thing.
Of course, these observations are from an uninformed outsider and I don’t mean to suggest that Mitch and his team haven’t thought through these issues themselves. But I do hope these takeaways are helpful to all aspiring entrepreneurs — and I wish Mitch and BUMP Network the best!
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