Startup Lessons For Logistics
You’ve probably read that WhatsApp, a mobile messaging platform, was recently bought by Facebook for $19 billion dollars. That’s roughly five years worth of profits for Maersk, the carrier giant that carriers 15% of the world’s containers, owns over 1000 ships and has a capacity for 2.6 million TEUs. For it’s part, WhatsApp has about 350 million users, about 50 employees and six mobile apps.
We set out to figure out what makes a startup grow. How does a small messaging app build up such a dedicated user base and create so much value? And, most importantly, what can freight and logistics businesses learn from those lessons?
We spent a lot of time researching what makes a successful start-up, until we came across this post by Sangeet Paul Choudary, a startup wizard with experience at Yahoo, Intuit and RSG Media, as well as literally hundreds of interviews and articles under his belt. We are going to break down two of Sangeet’s suggestions and bring it home to the freight world.
#1: Identify an Inefficiency
Sounds simple. Every industry has built-in problems that make you grind your teeth when you encounter them. These generally stem from three factors:
- Inefficient Gatekeepers – The person who controls access or dictates pace is slowing down the system. Maybe you could only SMS to certain companies without paying a huge price. Maybe you couldn’t SMS internationally. WhatsApp solved that by letting you bypass the mobile carriers
- Privileged Access – Only privileged companies have certain access. Before smartphone apps came around, mobile carriers could dictate the terms and no one could say otherwise.
- Fragmentation – Industries frequently have many uncoordinated actors that slow down the works. How many times have you had to go to three or four stores when on an errand run? Amazon solved that.
These three problems all represent the OLD. They are problems created by long-functioning industries that used to work…but could much better. Let’s take a look at how these three inefficiencies carry over to the freight world:
- Inefficient Gatekeepers – If a shipper wants a quote, they request a spot-quote from their go-to freight forwarder. But whether it’s a busy sales team, insufficient coverage, complex quote requests or gigantic Excel spreadsheets, quote requests can take hours, or even days. Trust me, we tried! If you are a freight vendor, you probably experienced the same thing when requesting a quote from an agent.
- Privileged Access – The top 15 freight forwarders in the world corner about 44% of the market. With offices around the globe, they can provide comprehensive coverage that smaller freight forwarders can’t always keep up with. Plus, the scale of their business helps them get far better rates. The other 56% are left struggling to create smaller freight networks that help them keep up. But even those networks don’t always operate well, or have large gaps in coverage or value.
- Fragmentation – If you’re reading this and have spent more than one month in logistics, you don’t even need me to explain this. The mess of carriers, 3PLs, forwarders, ports, custom brokers, security personnel and others all make even the easiest FCL shipment quote take hours.
#2: Provide Value
Let’s see what Sangeet has to say:
Building technology is definitely a critical part of running an internet platform, but a startup’s work doesn’t end there. Enabling users to create value and interact with each other is an extremely important and poorly understood part of building internet businesses with network effects.
Basically, provide your users with value that keeps them coming to you (and away from your competition).
To expand your logistics business (or any business, for that matter), it’s crucial to make sure that your customers are getting value from your product. Right now, you can ship freight for your customers. But can’t you do it better? How can you provide more value for them? Can you do it while still making a product? And can it differentiate you from your competition?
The Bottom Line
Take a page from the startup world. Identify inefficiencies in your processes and differentiate by providing more value for customers.
- Kill the gatekeeper by leveraging technology to work faster than ever before, with more vendors than ever before.
- Overcome fragmentation and privileged access with better networking and communications, whether EDI, XML or cloud-based solutions.
- And, like any business, provide better customer service, so that so that your customers know that they can trust their business with you.
Hey, it worked for WhatsApp!
PS – Do yourself a favor and read Sangeet’s entire post. It’s worth your time.