BrianRoemmele
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Nathaniel,
Really great insights here!
I especially agree that Google has been building a surprising ecosystem that left on the current trail, may very well take over some of the most active functions of iOS devices. They are well on the way doing this with the new Gmail, Chrome and Maps apps. Thus if Apple does not continue to innovate, the hardware platform will become more or less irrelevant.
As you rightly and bravely pointed out, the same can not be said about retail payments. The reality is that retail payments are not in any way are seen as "broken" by the vast majority of small (non mobile) retail merchants and certainly not seen as "broken" by a vast majority of consumers. The process, just works. I certainly understand that a number of startups are trying to pronounce the death of the typical cash register and typical credit card terminal based on 1970s technology. But the reality is Practical and Pragmatic small merchants do not view the systems, for better or worse, as most in the Tech world.
I have earned a PhD working with these merchants over the last 30 years and can not count how many times, early on, that I screamed out "there is better technology". By the 3rd year I was lucky enough to spend time with a number of very, very successful small merchants and I approached observing them from the point of view of a researcher and removed all of my assumptions. It was in this period I began to truly understand what the real issues are that drive the 95%. The 95% who are not like the 5% tech savvy and early adopters, they are quite Practical and Pragmatic if they last the crucial 2 year mark.
It turns out the 95% have become deaf to the grand ideas most of us have in the Tech world. There are many reasons for this, but I can tell you they are certainly not based in solutions that Tech companies are currently marketing.
I can say this, we, all of us in Tech have failed these 95%. They should not bend to our view of the world, we should bed to their view of the world. And thus far, it is clear that is not taking place with existing, small (non mobile) retail merchants on any large scale. There are endless opportunities for startups in this space, but understanding the true basic 20 needs these merchants have are a good start. Another good start is for tech companies to work with people that have empirical experience and not theoretical experience in this sector. And finally take in a good study of the history of business and retail sales from 1850 to 1980. This period is an absolute treasure trove of insights for 2013 tech companies selling to small businesses...
Michael,
Good points here.
Quite a lot of startup companies discover "real world" issues like this far too late in their growth. It is more magnified when the startup company is responsible for distribution of payments to small businesses and individuals. I can tell you from direct experience that it is hard for people to have a clear head when they believe or in fact are not receiving money that they have earned.
I have advised countless startups that if they are distributing payments they can not be a "light startup" and use twitter and email as the sole contact point when money owed is involved. This is not an issue with a social network or even an online data storage service. However it is a completely different universe when it comes to payments. Startup companies like Square are learning this lesson the hard way. It has had a material impact on how some merchants view the company and it is extreamly hard to fix "later".
It does not have to be this way. Startups that distribute payments need to just see the world through the eyes of their parents, relatives and friends that are not tech savvy. Or use themselves as a expression of how they would feel if they went to the ATM machine and expected $500 in the account and it has 5¢. You would not tweet the bank, no, you would not email the bank. At the very least you would personally spend some "one on one" time with the first person that you find that works there. If the bank is closed you would call and you would not want voicemail or a long wait.
This means that if you dream of inserting your startup company between the consumer and the merchant, you absolutely must grow the live problem solving staff to deal with this, DAY ONE. Hire and consult with people that have real world experience in payments go a very, very long way.
Anything less will impact the startup in meaningful ways.
http://www.quora.com/Brian-Roemmele
Sarah, Really great story! The illustrations do a great job showing the issues at hand! The great and unique insights along with Pando Monthly, you have really found you vibe.
I would like to add to this wonderful write-up. In dealing with small and medium sized merchants around the US for over 28+ years, I have discovered that the predominant philosophy is what I call Practical and Pragmatic. It is so very easy for us in the tech world to lose sight about how the majority of the 90% conduct business. My focus has been in Payments and rather recently quite a number of startups are discovering how some of the most amazing minds developing the most amazing products, fail to impact Practical and Pragmatic merchants. Adding frustration to this is the tremendous difficulty reaching these businesses. Social does not work, nor does Pay Per Click ads. Endless calls from telemarketers pitching the latest free product we in tech just thought up also gets no response.
One thing we can be certain of, if a business say, a small restaurant, survives in a typical market for more than 3 years, we can safely assume the business is being run by a genius in understanding the dynamics of the particular market they are in. These businesses are the example of Darwinianism where extreamly high competitive forces along with the numerous consumer options edit the focus on what has proven to work. This Practical and Pragmatic approach is the guiding principle that unites just about every successful business I have come to know. Understanding this point is the first step. The next steps require a tech company to really redress every point they think they are making to these businesses and toss them away to focus on one distilled and simple message that can be communicated in less then 1 minute. And finally finding the real way to successfully deliver this message. This is by no means easy, but it can be done.
I will say this to any startup. If you are telling the a business owner that you have a new "Free" product, be awake to the fact that you are talking to a person that charges prices for everything they sell and they spend a great deal of thought and research on doing so. Your message of "Free" may very likely meet with a cognitive disconnect at minimum and hostility at maximum.
Sarah,
Wonderful article! I think you have really cast light on the deminsions of building a large tech company in the post Facebook IPO world. Square has some spectacular potential and has some of the best talent in tech today, however they face many challenges.
The largest challenge they face is Apple's Passbook (and the future extension into payments). Like any company that rides the success wave of iOS devices there is alway the possiablity that the company that controls the successful platform will be your disruptor and this has just happend to Square. In many ways Passbook critically damaged the 'Pay with your name' wallet idea that Square just about bet the company on. I am sure you can agree no one wants to be in the position to compete with Apple and thus Square must now reset and paviot out of this potential messs.
Square also faces PayPal and the 500 million current merchants they have on file along with dozens of other companies that have direct access to the merchant. Gaining access and the attention of the Mercahnt is Square's largest challenge at this point and I can tell you from 25 years of experience of doing just that Square will not nearly reach these mercahts using pay per click ads, TV ads and business magazine ads. Square needs to reach these critically important merchants rather rapidly. This will be the largest challenge they face in the market.
An ironic postscript is Nordstrom Rack. When you face those long lines around the store, look for the friendly yellow shirt wearing floor staff. They are carrying the very same iPods that are known and loved at the Apple Store and you will experience the same sales experience. At any given time there are between 5-8 floor staff ready to do the transaction. The irony here is that the product is not Square. This solution was built on working with and not against existing merchant systems and processing relationships. There is a deep lesson Square can learn by this. All of the amazing talent at the company could have been directed at working with raer then against these systems. Innovation and interoperability will always win over the illusion of 'disruption'.
About a year ago I identified and predicted many of these and other problems Square now faces and will face. It is heartbreaking to see history repeat itself. This company has so much promise. But history shows that it is nearly impossible to win a 'two front war', that being trying to simultaneously try to get consumers (wallet) and merchants (payment card acceptance).
There are 10 things Square needs to do today to address these issues and ' heads down and iterate' is not one of them. A year ago if adopted, Square would have been in a far better position then today in relationship to Passbook, non US expansion and far more effective ways to reach the most valuable merchants. It is not too late but it will be more challenging. I for one would be cheering them on to greater heights.
http://www.quora.com/Brian-Roemmele
Sarah, Great posting. This is a story that needs to be told every few months. Sure in a wild dream some people would love to establish a company that does not need customer service people or sales people for that matter. However when these very same people have a significant problem they want to "talk to someone" . Thus is the duality of so many startup companies. I personally feel that if most startups grew customer service and sales people at the same rate as they innovate in engineering, we would see far more companies become truly successful.
http://www.quora.com/Brian-Roemmele
Sarah, Great interview. Please do more of these types of interviews, the tech industry does not have true journalists doing anything like this. This will be your voodoo to Randi Zuckerberg's TV show.
Sarah, Jon story is awesome. I can also personally verify that Quora is very active with professional recruiters, I have experienced this quite a number of times. But the real power comes from people with aligned interests. The way Quora allows the creation of a legacy of answers and perhaps questions really say quite a bit about a person. Since I have been on Quora I have dozens of people that may not be "recruiting" but maybe building on new ideas and new companies. There are also some I have met that are senior executives from older companies that personally discovered Quora and are trying bring in new perspectives. I am still very surprised just how far up Quora reaches into major corporations.
Brian, great insights as always.
Sarah,
Brilliant story, thank you! Adam and Charlie have crafted a place that is quite unlike anything that has come before. Quora in my view has not even reached 1% of its true potential. Not to discount what it already is: one of the most useful sites available. I know it may sound like the very same the hyperbolic presentation they are trying to curtail, but this is really the first time in human history that so many of the best minds have come together in one location. Far more than a "Q&A site", Quora has found a way to extract, in many cases first person accounts, on just about any subject one could think of. In many cases we can find insights that would have otherwise have been either lost or simply not made if Quora did not create a platform to extract this information. But it does not stop there, much more is built around this information as it branches in to the possibility of deeper insights or perhaps new insights.
As a tool for learning and research I am certain Quora will become the site of record. That would in itself be enough. However hidden behind all of these points is the fact that Quora has built an amazing community of people that share the love of knowledge. They want to learn it, translate it, curate it and share it with the world. This community is the most valuable hidden assets and Adam, Charlie, Rebkah, Mark, Kat and the entire team that craft Quora have made it a welcome home. This creates deep roots and just like a great oak tree it will still be growing and casting knowledge far and wide.
http://www.quora.com/Brian-Roemmele
Nathaniel, Great post! Over the last 10 years there have been so many great ideas in fast ordering systems. Some are amazing, others not so much so. I think PayDragon has a great plan. The largest hurtle will be in merchant adoption and not consumer adoption. This has been the unfortunately failure point for so many startups.
Companies like @square are trying to move to both side sides of the equation. Most startups in the Payments space began to loose traction once they have picked all of the low hanging fruit on the tree, that being the early adopter merchants. But that only is less than 12% of market penetration. The real tragic ground is the remaining merchants are extraordinary hard to reach, tweets and retweets, pay per click and even cable TV advertising does not work. It is even more tragic to think that some how social pressure from app uses will somehow motivate merchants to adopt a new system. There are a number of ways to reach these merchants, but thus far none of the new startups have not been able to solve the puzzle. This is really the Billion dollar answer.