A glimpse into Cisco's ex-CEO's playbook

💡JC's Newsletter #87

Dear friends, 

In JC’s Newsletter, I share the articles, documentaries and books that I enjoyed the most in the last week, with some comments on how we relate to them at Alan. I do not endorse all the articles I share, they are up for debate. 

I’m doing it because a) I love reading, it is the way that I get most of my ideas, b) I’m already sharing those ideas with my team, and c) I would love to get your perspective on those. 

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💡Must-read

👉John Chambers (ex CISCO CEO) - Pattern Matching, Playbooks, and Winning Product Categories (JoinColossus)

Leadership in crisis:

  • They will develop more during stress than the good times.

  • We were using both data, but a lot more time with customers asking about trends.

  • As you fall into these challenges, you focus on what you can control and influence.

How to make a difference:

  • Knowing when to focus on market transitions, not competitors and technology transitions again, not competitors, when you get the two combined, that's when you can really break away.

It is interesting to spend time on technology transitions and market transitions and what it enables us. 

About acquisitions:

  • First is don't do an acquisition that isn't really strategic to you. They're really hard. Secondly, understand what you're acquiring and protect at all costs.

  • When you're in high tech, what you're really acquiring is engineers and market positioning.

  • So, we would only do an acquisition where we felt we could keep the people.

  • So we walked from acquisitions that as we got into the evaluation process, we realized that their culture was different than ours. 

  • And I tell every acquisition, I know you've got ugly spots. We'll probably find them, but don't let us be surprised. So, tell us where the problems are and we're going to acquire you anyhow. But don't let us find it ourselves. 

Pricing:

  • My competitors usually were 10% to 20% less expensive than we were with good margin. So, we competed on architectures outcomes and benefits to customers.

Interesting thought on positioning. I do think it is more powerful to be more competitive and have the best experience, to gain market leadership. That does not stop us from focusing on benefits to customers.

Culture:

  • He taught me to be more patient with people that perhaps I disagree with.

  • Culture has to be owned by the CEO, not by human resources, owned by the CEO. Human resources is the one who implements it for you. Don't kid about your culture.

I tend to agree here, even if I think it should be more a ping-pong.


🏯 Building a company

👉Brain Food: The Middle, Sinking Sevens, and Control (Newsletterest)

  • "Sevens kill companies. When someone has a four, you just know they’re not doing the job, they’re not up for it, and let’s take them out of the system. But the problem with a seven is that you don’t get to that point, because that person will have glimmers of being able to do the job … They’ll have these things that are redeeming. But because they have those things, two things happen. One, there’s an opportunity cost of that seat. When someone that’s a seven is holding the seat, it means you don’t have a nine having that seat. Two is that, and I see this all the time, the execution of a team is often brought down by the weakest link. An entire team can be brought down by that seven." — Sarah Tavel

👉How to figure out what stock options to offer (Sifted Newsletter)

  • Remote work makes admin more complex.

  • There are phantom stock schemes which work and pay out slightly differently in a liquidation event.

👉Soundtrack the World (Not Boring)

  • At 40% music streaming market share, the labels need to play ball with Spotify. 

  • Without explicitly saying it, Spotify is slowly increasing its power over the record labels to whom it pays out the majority of its revenue.

  • Adding to the complexity, as part of its early licensing deals, Spotify gave 18% of its equity to the record labels. Most of the labels have sold off their stakes, but Universal Music Group still owns roughly 3.5% of the company. If it sells, it will split the money with its artists. 

  • The more Netflix spends on original content, the better its margins get. In 2012, its gross margins were 26.5%. According to Atom Finance, its gross margins are expected to hit 43.3% this year

Super interesting to dig into the margin trends of both Spotify and Netflix who have made massive investments when they reached scale to significantly improve it. 


🗞In the news

📱Technology

👉The markets

  • Eurozone inflation rose again in August as consumer prices increased by an estimated 3% last month from a year ago.

  • France reported its highest inflation rate in almost 3 years.

👉TikTok's miniature ambitions (Plateformer)

  • TikTok announced Jumps — miniature apps, written in HTML5 by third-party developers, that extend TikTok’s functionality from a destination for entertainment into something potentially much more robust.

👉Shopify Lowers Developer Fees, Scaling Digital Suppliers, The Power of App Stores (Stratechery)

  • Shopify, the ecommerce platform companies can use to host online stores, announced on Tuesday that it’s lowering the share of revenue it collects from developers that publish apps on its app store. Developers will keep 100% of their revenue from the first $1 million they make on Shopify’s app store, starting Aug. 1. The benchmark will reset each year, the company said.

  • Shopify made the announcement during its annual conference for developers, Shopify Unite, which ended Tuesday. During a presentation, Shopify President Harley Finkelstein said the company is also cutting its commission rates for developers who make more than $1 million annually to 15% from 20%. That’s “half of what other popular app stores cost,” Finkelstein said.

  • Last year our partner ecosystem generated $12.5 billion in revenue, and that number is up more 84% since 2019.

  • It follows, then, that in digital markets it makes perfect sense to charge a lower rate to smaller developers, the better to get more developers on your platform, and a higher rate to larger developers who, because they are dependent on the platform to reach end users, and now have significant business to lose, don’t have much choice in the matter (platforms usually only provide personalized support to large developers also, which actually means, in an inversion of the offline world, they are more expensive).

🏥 Healthcare

👉Warby Parker Inc (S1 commented by jcs)

Context:

As we looked for explanations, we discovered a massive industry that maintained high prices, high margin, low customer satisfaction and little innovation- and we thought we could do better.

Product & Features:

We offer everything our customers need for happier eyes at a price that leaves them with money in their pocket, from designer-quality glasses (starting at $95, including prescription lenses) and contacts, to eye exams and vision tests—and they can meet us online, at our retail stores, or even at home

  • Home Try-On refers to a program that allows customers to pick five pairs of frames on our website (or get tailored suggestions after taking a quick and simple quiz) and try them at home for five days for free

    • The Home Try-On program is very unique to our business. It is a viral brand awareness program that pays for itself as we maintain an exceptionally high conversion rate from Home Try-On purchases.

  • Virtual Try-On refers to a feature within our mobile app that uses a proprietary method we call “unique placement” to allow our customers to try on glasses and sunglasses with an iPhone X and above.

    • Our Virtual Try-On tool allows you to try on glasses and sunglasses—seeing the realistic color, texture, and size of each style—with an iPhone X and above. 

  • Augmented Reality:

    • Digital PD Tool: Piloted in retail stores in 2019—and officially launched in May 2020—this technology aids customers who are missing a PD on their prescription. 

      • A PD (pupillary distance) measurement is necessary to fulfill a glasses order, but it is often missing from a prescription. Leveraging a proprietary algorithm, the Digital PD Tool measures a customer’s PD with an iPhone X and above. 

      • As a fully automated vision-powered process, it’s a quick solution for customers looking to measure their PD from home.

  • Virtual Vision Test refers to a mobile app designed to enable eligible customers to take a series of vision tests from home and renew their existing glasses prescription with an iPhone and a current pair of glasses

    • Eligible customers can with just an iPhone and current pair of glasses, and the process is designed to take around 10 minutes. 

Numbers:

  • $487M Net revenue

  • 83 net promoter score

  • 2M+ active customers

  • 60% gross margin

  • Acceleration of e-commerce penetration: E-commerce penetration is largely nascent in the eyewear industry, representing approximately 5% of sales in 2019 and 8% of sales in 2020. 

  • For the year ended December 31, 2020 we generated 60% of net revenue from e-commerce. For the six months ended June 30, 2021 we generated 50% of net revenue from e-commerce

  • more than 70% of our customers interacting with our website or mobile app before placing an order

  • nearly 100% Sales Retention Rate over 48 months

Vertical Integration:

  • Vertical Integration. We design and sell glasses under our own brand name. Our integrated supply chain consists of owned optical and fulfilment laboratories as well as third-party manufacturing and laboratory partnerships that we have built over the years and gives us control over product quality and fulfilment speed. 

Social impact:

  • We partner with nonprofit organizations like VisionSpring to ensure that for every pair of glasses sold, a pair is distributed to someone in need

  • Over eight million people now have the glasses they need because of our buy a pair, give a pair program

💚 Alan

👉We’re ranked as the best startup to apply to in France by LinkedIn 💚🙌🎉

  • Alan is leading the top-10 ranking of start-ups attracting the best talents and the most investments in France

  • We were #3rd two years ago, #2nd last year, and are #1st this year 🚀

  • I am proud to have witnessed the continuous work that has brought us to this top spot, and very humbled in front of the work ahead of us to maintain the best candidate and employee experience 

  • Congratulations to Swile, Frichti, Back Market, PayFit, Qonto, Big Mamma, Agicap, Ledger, and Cajoo! 

👉Last call! (Today @ 4pm CET) Is the company responsible of taking care of its employees mental health?

We believe it is. Want to understand why and make your company stand out?

Register here to our Alan Check-Up ’21 event (Today @ 4pm CET)

  • We will provide an update on mental health, discuss corporate awareness, and outline our vision of talent well-being

  • We will share some super, super exciting news about what we are building for our members in that space


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