Why we distribute directly
JC’s Newsletter #192
Dear friends,
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Why we distribute directly
At Alan, we want to control our distribution and relationship with customers.
To quote Bernard Arnault: “the key is to control the factories and hence the quality, and the distribution and hence the perception.”
Member-first: Always start with customers’ view
There are many hidden costs associated with working with intermediaries. It is essential to identify these so that we can make the best decisions for ourselves and never find ourselves in a situation where we don’t control the relationship with our customers.
1️⃣ Category creation
We want the money to be invested into health services improving our members’ lives, not in intermediaries .
We want to pitch members and admins new products, new services, and new offers to make them understand how they can benefit from them.
We want to become the one-stop health partner, the key player in health, the one within which others develop their solution.
2️⃣ Trust & incentives
Intermediaries have often the wrong incentives (pushing the offer where they have the strongest fees)
We want companies to trust us so that they don't need intermediaries anymore.
To become this trusted partner, we rely on offering fair and transparent prices (the 100% Loss Ratio Model), convincing companies that we are the best HR investment.
In order to be successful, we have to build this trusted relationship as an “advisor”.
We think and build for the long term.
Thinking short-term, working with intermediaries can appear attractive, because it could accelerate short term growth with more “ volume” because they have an existing customer base.
At Alan, we believe that we should avoid letting another company insert themselves between us and our customers.
It not only weakens us to have an intermediary, but also deprives us of valuable signals about what our customers want.
💡 Sam Walton, founder of Walmart:
“When you own and manage your distribution and logistics channel, you have a great competitive advantage over companies that rely on third-party suppliers. It automatically shortens your lead times, but also you can constantly look for ways to improve your operation and try to make it more efficient. You never have to rely on what’s going on in somebody else’s shop.”
We understand the second-order consequences of our decisions.
There are many hidden costs associated with working with intermediaries. It is essential to identify these so that we can make the best decisions for ourselves and never find ourselves in a situation where we don’t control.
Customer Signals are Key to Cracking the Market
💡 ”Avoid letting another company insert themselves between you and your users. It not only weakens you, but also deprives you of valuable signals about what your users want.”
”Avoid Faustian bargains (deal with the Devil) with companies that promise you users, but on their terms.”
These quotes from Paul Graham perfectly analyze the risk of placing an intermediary between your company and your client.
Understanding members’ and customers’ behavior is key to continuously improve our product and develop personalization. We must deeply understand:
How our members use our product
The features they like/ dislike
Their pain points
The reasons why they want to stay/ leave
Their willingness to pay for the services we develop
Alan’s first product was developed after deep discussions with people and admins, understanding their pain with their health insurance at the time. This closeness to our members, and to the admins, is at the heart of Alan's success and must never be sacrificed. We should always remain focused on creating value for our members and customers.
Controlling our Distribution, we Master our Destiny
📆 It might take a bit longer without intermediaries to reach the customers & members, but when we do, we are in a lot strong position.
Not working with intermediaries forces us to develop our own distribution capabilities. There's huge value in mastering and controlling our own distribution. We own our destiny.
If you try to farm out your distribution, you're beholden to another entity, which is an unwise bet.
That's how a dynamic power changes, our leverage comes from having a strong product, a strong brand, and a formidable ability to sell it.
That’s what we have been doing since the beginning of Alan, and it makes a huge difference in our LTV to CAC and our capacity to keep growing at a very fast pace.
Some articles I have read this week
👉 Justin Mares (founder of TrueMed) - The US Health Crisis (Join Colossus)
“If you don't feel your best from a health standpoint, there's no way that you're doing your best, most productive work. You're not your happiest version.”
“Americans are sicker, fatter, more depressed, infertile, all these sorts of things, worse than we ever had been before” ➡️ applies to Europe
In nutrition, what research can you follow if it is all sponsored?
“food is medicine, lifestyle is medicine, sleep is medicine, exercise is medicine.”
“Letter of medical necessity that enables you to fully compliantly expand your HSA-FSA tax-free dollars on a food supplement, fitness, wellness, sleep product that is going to help treat or alleviate one of the conditions that you struggle with.” ➡️ is it possible in Europe?
Can we do the same in terms of marketing ideas to test new products?
👉 Airbnb’s Brian Chesky. Leading through uncertainty: A design-led company (Config)
I found their organisation's change to ship more product interesting and inspiring (I shared a bit about it in the past).
Some key elements:
Put everything on one roadmap
Do a few really big things
“AB testing is abdicating your responsibility to the users.”
If we do AB testing, you're only going to do it if you have a hypothesis.
Shipping things that you're proud of. Be proud of putting your name on it.
when you love it and you're proud of it, now you're ready to put it out to somebody else.
There has to be a sense of craft, obsessing over every single detail.
The designers are equal to the product managers.
You can't develop products unless you know how to talk about the products. ➡️ what I shared in my 0 to 1 product building
Doing big releases twice a year ➡️ for us, I think it should be every quarter, but to be discussed.
Design challenges technology, and technology inspires art
Design systems: you should design whatever you want and you put it in the design language system. If you can only pull from the system, you're never going to be able to take a giant leap, if it breaks the system.
Start thinking about what a marketing campaign could be to elevate this product, because a lot of products fail because they're not well marketed.
"Every single screen a user sees, put it on one wall." It turns out there's 150 screens.
👉 Tweet from Aleksa Gordić on how GPT4 was trained (Twitter)
Overview of the size of the models and the methodology to train
GPT-4 is more than 10x the size of GPT-3 (175 B). We believe it has a total of ~1.8 trillion parameters across 120 layers.
👉 Restaurateur and Unreasonable Hospitality author Will Guidara on elevating mundane moments to magical experiences
cultivate a culture where employees become passionate about showing generosity to others.
Understand why the work matters.
The three tenets of Unreasonable hospitality can apply to every product:
Being present—caring about someone so much that you stop caring about all the other things.
Taking what you do seriously, but also stop taking yourself so seriously.
Hospitality is all about making people feel seen, and the best way to do that is to not treat them like a commodity, but rather a unique individual.
Unreasonable hospitality means one size fits one.
👉 🇫🇷 Le plafond de la sécurité sociale devrait augmenter de 5,4% en 2024, selon le rapport de la commission des comptes de la Sécurité sociale. (News Assurance Pro)
👉A guide for finding product-market fit (Lenny's Newsletter)
Close to what I shared on building 0 to 1 products
Product-market fit
“Start your PMF journey by becoming obsessed with getting one company to love, use, and continue to use your product. Do whatever it takes to make them successful.”
“Stop thinking of product-market fit as a yes or no question—but instead as a process of finding fit with more segments of the market.”
“From a working product to feeling PMF typically took 9-18 months. Expect to spend a year or so iterating before you finally have something people want”
“Most companies got an alpha product out the door in 1-3 months. Unless you think you’re the next Figma, get your V1 out quickly.”
“Surprisingly, no founders I spoke with used retention as their signal of PMF. One of the biggest recurring lessons from my conversations is to talk to customers more. I know you hear this a lot, but you are probably still not talking to customers enough.”
👉Geoffrey West (British theoretical physicist) (Farnam Street)
I very much agree that scaling invariably is nonlinear.
The more we will grow the more we will see:
Strengthened brand, network effects, capacity to have leverage on the supply in non-linear ways
Likely exponential explosion of hedge cases we need to manage
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