In the next instalment of her on-going series, Finding Your M.O., Áslaug Magnúsdóttir, co-founder and CEO of fashion-tech start-up Moda Operandi, addresses the importance of collecting, mining and reviewing data. Nosafashions would like to state that we claim no rights to the copyrights of this material. This is strictly for educational purposes.
NEW YORK, United States — As a founder and CEO of an e-commerce company, I have come to appreciate the importance of tapping data to drive decision making. Now, that may seem obvious to some, but many of the fashion businesses I worked with previously did not effectively collect and harness data to help steer their business. In the early days of Moda Operandi (M’O), we lacked adequate systems and people to properly track and analyse data. Today, data is a big focus within the company. We are constantly collecting, mining and reviewing data to check and adjust our strategies and consumer offering.
But why is data so important to an e-commerce company? What kind of data should be tracked and analysed? And how often should data be reviewed? As I often say, there is no right or wrong answer. Every company is different and will have different data needs. Here’s a snapshot of how we look at data at M’O as a key input to decision making.
WHY IS DATA SO IMPORTANT?
Clearly, companies need data to stay on top of key performance metrics, such as revenue, margins, operating costs and cash balance. But why is it important to track other types of data?
Business trends. Data allows a company to assess, on a rolling basis, whether the business is performing better or worse in a specific area than previously. You need trend data to react and adjust course accordingly. For example, one of the key things we track at M’O is the total number of unique visitors to the site in a given month. Since we know our business is, to some extent, cyclical, this metric helps us stay on top of how we are doing compared to seasonal expectations. For example, we might see a significant spike in the number of customers visiting our site during the months of October and March when we have the most merchandise available from the runways of New York, London, Milan and Paris. And we would not be concerned to see a drop in unique visitors in the off season, from October to November. But we would be alarmed if we saw a drop in unique visitors from October to March, or in March of this year versus March of last year. So data keeps us on top of whether we are performing according to our targets.
External benchmarking. Data also allows a company to compare its performance to other companies that are considered best of breed in specific areas. External benchmarking allows a company to spot key opportunities and areas for improvement. For example, we find it useful at M’O to compare our conversion rates (purchases made as a proportion of unique visits per month) with other e-commerce sites. If a company discovers its conversion rate isn’t competitive with other best-in-class businesses, it needs to dig into the data to understand why and respond accordingly. Could the issue be the product mix? The price points? The user experience? The data can often reveal this.
But to be clear, data can also be misleading. You need to make sure you are comparing “apples to apples” when performing external benchmarking vis-a-vis other companies. For example, comparing the cyclical rhythm of M’O’s unique visitors to that of other fashion e-commerce sites would be an “apples to oranges” comparison due to the unique nature of our pre-order business model.
Objectivity. One of the beauties of data is that it doesn’t lie. As a result, it can help bring objectivity to decision making. For example, data can help determine what to do when team members disagree on how to approach a certain aspect of the business. At M’O, the question came up recently about whether inventory purchases should be based on historical sales information versus editorial purview. A simple data-driven analysis of the performance of each approach can be implemented and measured to help guide buying in future seasons.
Accountability. Because data tells the truth, it can also help create clarity and accountability among team members. At M’O, our performance management system contains both quantitative and qualitative metrics. Having clear quantitative metrics helps focus individual team members on priority areas of the business. And since team members can tap data to stay on top of how they’re doing, they can leverage it to perform their roles well. For example, as the CEO, I might intuitively sense that the team is getting faster at processing product into our warehouse. But by looking at the data, I can quantify how much better we have gotten at doing this within, say, a given 24 hour period of time versus, say, the same period of time last month. Having this data helps me ensure we are staffed with enough team members in the warehouse. And having this data helps our operations team feel empowered and responsible for their jobs.
Reporting to investors. Although the primary reason for tracking data is to use it to drive business decision making, having data readily available also makes reporting to investors much easier. Investors tend to like quantitative updates that include myriad metrics and facts. They want to look at the company’s performance from lots of different angles, so the more data, the better. Similarly, when it comes to fundraising, data is king. Preparation of the investment deck and any follow-up due diligence is much easier when you have key data points compiled and at your fingertips in advance.
WHAT DATA SHOULD BE TRACKED?
The kind and volume of data tracked by a typical e-commerce company should be sufficiently diverse and extensive, so as to allow the team to stay on top of all areas of the business. And while the data a company monitors is often standard across a given industry, some data requirements need to be specifically built for that company’s unique or special line of business.
Here are some of the key metrics we track at M’O.
Of course, these metrics are only a subset of the total volume of data we track at M’O. We also track operational data (such as time for inventory receipt, shipment and return processing), technology performance data (such as average upload time per page), employee related data (such as retention rate) and much more.
The bottom line is: data is invaluable to any e-commerce business. It provides companies with a brutally honest self-awareness that is ultimately empowering. The fact that data may be underutilised in fashion should incentivise companies to collect and harness data to best less savvy competitors. But to be clear, data can only serve as one part of a company’s overall decision making process. Human thinking must temper even the most telling data analysis. Indeed, sometimes objective facts must take a backseat to subjective gut. But it’s only by pitting hard cold data analysis against industry instincts that best of breed business decision making is made.
In the next instalment of her on-going series, Finding Your M.O., Áslaug Magnúsdóttir, co-founder and CEO of fashion-tech start-up Moda Operandi, provides tips on how to overcome the cultural disconnects of doing business in the US. Nosafashions would like to state that we claim no rights to the copyrights of this material. This is strictly for educational purposes.
NEW YORK, United States -- I’ve had the opportunity to live and work in many different places around the world. I grew up in Reykjavik and Los Angeles, two cities that could hardly have been more different. I went to law and business school in the US, then, for six years, was based in London. During my time at McKinsey, I lived and worked in the Middle East and in many parts of Europe, including Holland, Germany and Belgium. These experiences gave me insight into the pronounced cultural differences that exist between various countries, both in terms of personal and professional interactions.
And despite all of that insight gleaned in the US, after a cumulative 15 years spent here as a child, student, adult and wife of an American, I still run into cultural differences all of the time. I often find myself laughing or crying about the mix-ups I experience that stem from my being, well, foreign.
While every day I learn a little more about how to conduct business in America as an American would, I still find myself smacking into situations where my foreign-ness is the culprit.
Today, as a foreigner and non-native English speaker living in the US, I want to share some of the lessons I have learned. There are no easy rights or wrongs when it comes to cultural differences. But being aware of the areas of potential disconnect can provide for a much higher likelihood of happiness and success when working (or playing) in America.
Formal or casual
One of the most recent examples of my foreign-ness getting the best of me occurred the other day, after a Moda Operandi (M’O) board meeting. One of our investors commented on the fact that I referred to the people who work at M’O as “employees” instead of members of “the team.” He delicately explained that this difference in word choice could be perceived as a lack of appreciation for the hard working people in the company. As a European and non-native English speaker, I was surprised by this distinction. In my home country of Iceland, for example, the word for “employees” doesn’t have a positive or negative connotation — it just literally refers to the people who work in a company. At dinner that evening, my British mother-in-law confirmed that using the word “employees” might be interpreted as suggested by my investor. I started thinking about what other words I tend to say at work that could be interpreted differently than intended.
The takeaway: when in doubt, be extra careful about your word choice. I have learned that in the US, it’s probably good to err on the side of being more casual than formal. That doesn’t mean you should be lobbing ‘F-bombs’ liberally in the boardroom, but that corporate Americans tend to gravitate more towards relaxed language choice; inclusive rather than exclusive, team-oriented rather than hierarchical. Said simply, American corporate speak is less formal than in Europe and other parts of the world.
How you make your point when speaking
Ironically, if a relaxed language choice is best for an American business meeting, your tone — how you make your point in that meeting — should lean more towards bluntness than diplomacy. This is different from my experiences in other countries. For example, when I lived and worked in England, I learned that it might be considered impolite or inappropriate to make unequivocal statements in a business setting. “This analysis is terrible,” raises eyebrows in London. Instead, the Brits love to ask questions which provoke the same point: “Would it perhaps not be a good idea to look at this analysis differently?” For the English, in business, as much as in life, it’s often more about what you don’t say than what you do say (and, of course, saying the opposite of what is meant: if a point made in a meeting is determined to be “interesting,” it may be of zero interest at all!).
Conversely, American business people generally like to state a point directly and clearly. Don’t leave any room for interpretation.
A Starbucks in-store advertisement in England might read: “Why not transport yourself to Tuscany with our new rustic Mocha Frappuccino?” In New York: “Try our new Mocha Frappuccino!”
How you make your point when writing
Getting to the point quickly applies to writing as well in the US. In 1997, having practiced law in Iceland for three years, I moved to North Carolina to do my LLM (masters in law) at Duke. I immediately learned that I had to adjust my writing style. In the US, when writing a report or sending an email, you state your conclusion up front and then go through the analysis that got you there. In Iceland (and many other European countries), it’s generally the opposite: you start with the analysis and end with the conclusion. If the analysis is compelling, the reader already knows and understands the conclusion before reading it.
The lesson: In America, start with your key takeaways. People want to get to the point fast. If you’re presenting something lengthy, this is particularly true, as busy schedules may prevent your readers from delving into all of the details.
There is no “I” in “Team”
As a Scandinavian who grew up with a commitment to social welfare, taking care of your family is a priority. At home, for example, I always supported the notion of providing flexible work hours to parents with young children. This can be looked at differently in the US, not for a lack of love for family or children, but due to respect for your fellow team mates at work. It can for example be perceived as unfair to the overall group to allow one employee to work fewer days than others, even if that employee is being compensated accordingly. This example came up in our office recently and it made me think about the issue at hand.
The lesson: It’s a team effort in the America workforce, period, even if other life priorities have to take a back seat to the needs of the group. This is particularly true in a start-up culture, where everybody is expected to wear multiple hats and to give 100 percent all of the time. It’s not personal, it’s cultural.
Culture and morale
Culture and morale building in corporate America can be different from that in Europe. While I was working at Gilt Groupe here in New York, at an all company meeting, members of the senior management team got up and sang a song they had written that promoted Gilt company culture. While the song was silly and there was a lot of laughter, the goal was to send a serious message that Gilt is big on culture and morale, starting with senior management. People responded to it.
In Europe, we promoted culture and morale not through songs at company meetings, but through company lunches on Fridays, where wine was served and people chatted one-on-one. We emulate this approach at M’O, with drinks at the end of the day on Fridays. Often issues that haven’t been resolved during the day are resolved then. Ideas are exchanged, groups intermingle. Most importantly, people step back from their day-to-day work and focus on the bigger picture: we are all part of a larger company with an overall goal.
The point: Culture and morale building is important everywhere, but particularly in the US. If you’re working or doing business in the US, you need to get on board and be part of the fun, whether it is a company song or drinks after work. Be proactive in supporting and fostering company culture and morale. In the US, sometimes a less subtle approach is suitable.
When to conduct business
When I first moved to New York, I would often ask people I met in a business context to meet after work for a drink to discuss business. Previously, in London, I was used to many of the most important deals being negotiated at the pub. In New York however, I sometimes got funny responses. While in Europe this was normal, some Americans found it a strange request to go out after work to discuss business when you are first getting to know somebody. Business was to be conducted during business hours.
The American preference? Breakfast meetings. My time working with the late Marvin Traub taught me this lesson. Every day, we had a breakfast meeting with a different person from the fashion industry or financial world. When it was somebody he knew well, we might do a lunch meeting instead. But time after work was reserved for his friends and family. Business was conducted during business hours.
The bottom line is be perceptive about cultural differences when working abroad, whether it be in the US or elsewhere. Try to ferret out the little things that are done differently and embrace them, even if it puts you outside of your comfort zone. Sometimes the fact that you are making the effort to adjust to how things are done in a different part of the world is even more valuable than overcoming the disconnect itself.
Finding Your M.O. is an on-going series on The Business of Fashion penned by Áslaug Magnúsdóttir, co-founder and CEO of Moda Operandi, on her experience at the helm of a fashion-technology start-up. Last time, in Part 15, we looked at customer loyalty. Today, we examine the advantages and disadvantages of bringing in strategic investors. Nosafashions would like to state that we claim no rights to the copyrights of this material. This is strictly for educational purposes.
In the next instalment of her on-going series, Finding Your M.O., Áslaug Magnúsdóttir, co-founder and CEO of fashion-tech start-up Moda Operandi, examines the advantages and disadvantages of bringing in strategic investors.
NEW YORK, United States -- People often ask me why we brought strategic investors into Moda Operandi (M’O) so early. Just months after our launch, in our Series B round of financing, our first strategic investor, Condé Nast (Advance Media), became a minority stakeholder in the business and obtained board observer rights. Then, in our Series C round, last summer, two additional strategic investors — LVMH and IMG — came into the business as well. LVMH was granted a board seat.
There are advantages and disadvantages to bringing strategic investors into a company. Some start-ups avoid bringing “strategics” on board in the early years, if not all together. But sometimes, in order for a business to grow and succeed, it’s important to add select strategics to the investor mix. Today, I’ll address the pros and cons of adding strategic investors to your company — as well as how and when to do it.
Industry knowledge and relationships: One of the key benefits of partnering with a large strategic investor in your industry is their deep knowledge, expertise and network of relationships. Founders who do not have extensive experience in their company’s area of business may find the involvement of a strategic particularly helpful. Few, if any, founders will have the robust relationships, nevermind the industry wherewithal, that a large strategic can bring to bear. For example, at M’O, I have valued the ongoing insight and advice offered by our LVMH board representative. His deep knowledge of the industry sometimes provides a very different perspective from those of the other financial investors on our board, which helps to bring balance to our analysis and strategy.
Access to shared resources and business terms: Often start-ups can take advantage of shared resources that strategic investors extend to the company. These may relate to finance, HR or even logistics. In other cases, start-ups are able to enjoy better terms due to the larger negotiating power the strategic wields. For example, a strategic can help secure lower costs from third party vendors on everything from insurance premiums to credit card processing fees. But beware. Extending a strategic’s negotiated terms across a company’s multiple business units can sometimes be tricky. And the integration of a strategic’s back office functions with that of a start-up partner — even if quick and frictionless — may cause problems in the long run if the start-up eventually decides to move in a different direction.
Synergistic collaborations: This is one of the real benefits of a start-up aligning with a strategic, as it often leads to a “win win” for both parties. Case in point: M’O’s partnership with Condé Nast also meant an alignment between M’O and Condé Nast’s flagship fashion brand Vogue. Around the time of Condé Nast’s investment in M’O, we negotiated a partnership between M’O and Vogue, creating direct links from Vogue.com’s runway coverage to M’O’s store, where featured looks could be bought. For M’O, this has led to increased traffic from a customer base that loves fashion and has a propensity to buy. For Vogue.com, this partnership provides a turn-key sales solution that keeps its readers happy and engaged, while delivering a revenue share against sales from its customers back to the company at large.
Industry credibility: Not to be undervalued is the fact that an investment from a major strategic player in your business bestows an immediate stamp of approval and credibility upon it that might take your company months or years to amass organically. Sometimes dropping a partner’s name can be a really useful thing when that partner is a 800-pound industry gorilla.
Competitors may be hesitant to work with you: If a strategic investor owns a meaningful part of your business, there may be understandable concern from other strategics about doing business with your company. For example, at M’O, when we took on LVMH as an investor, we wondered whether this partnership would impact any of our existing designer relationships. Moreover, we wondered whether it would make it more difficult for us to work with a brand owned by a rival major luxury group. Fortunately for us, so far, this has not proven to be a problem for M’O as LVMH’s stake in the business is relatively small and we already had a large number of non-LVMH vendors working with us prior to the investment.
The strategic may want to integrate you too deeply into its organization: Many strategics invest in a business because they eventually want to acquire it in full. Therefore, the strategic may exert pressure on your company to heavily integrate with its back office features, so that you are indirectly locked into working with the strategic. Prior to the launch of our business, Lauren and I spoke to one strategic investor who wanted to “take care of all of M’O’s backend operations” so M’O wouldn’t need to worry about these things. Had we agreed to this, this may have made us employees of the company and limited or prevented our ability to realize the full value of our start-up’s standalone potential.
Bias to work with the strategics’ products: Certain strategics may expect you to work with them on one or more of their products. To be clear, this may be a boon and exactly what you are looking for. However, this may also reduce the flexibility your company has to make changes to its business.
It may be harder to maximize value at exit: If a strategic investor has a large stake in your business, there may be an external perception that the strategic will be favoured in the exit strategy your company pursues. This might possibly dissuade other bidders from coming to the table if and when your company goes into play. Furthermore, in the event of a competitive bid for your company, a strategic may have negotiated a position that grants it a significant advantage over other suitors. The negative effect of this upon the founders and other investors and equity holders is that they may not be able to maximize the value of their investment. However, by the same token, the very involvement of the strategic in the business in the first place may have made the business’ likelihood of success and perceived value (and its stakeholders’ ultimate exit value) much greater.
So, should you accept money from strategics? And, if so, when?
There really is no right or wrong answer. Each company needs to weigh the pros and cons of bringing in a strategic for itself. In the case of M’O, we felt strongly that our chances of success were increased, not hampered, by bringing on strategics. We believed that, in our competitive industry, having a large strategic group as a backer increased our competitive advantage and areas of differentiation significantly enough to counteract any potential downside. But to be clear, each company needs to look at its own situation. And, in the end, the specific terms of a strategic’s proposed deal – balanced against the longer term goals of the company’s founders, executives and other investors — will help determine whether or not a particular partner makes sense.
Now, if you are going to take money from strategics, timing is important. My advice is to not give up a meaningful stake of the business to a strategic until your company has established momentum and independence first. Without a separate vendor base, customer base and basic infrastructure, taking on a meaningful investment from a strategic could mean losing control of your company. Get yourself up and running, work out the kinks, build a presence, then talk to strategics.
How do you manage against disadvantages? If you decide to take money from a strategic investor, there are things you can do to mitigate potential downsides.
Avoid having too much of your business with one strategic group: As you know, it is a good rule not to have all of your eggs in one basket. So don’t make your strategic investor (or anyone else for that matter) such a dominant force in your business that, if the relationship sours, your business goes down the drain as a result. For example, at M’O, we have been thrilled to work with many of LVMH’s brands, including Marc Jacobs, Loewe and Fendi. However, we have been careful to make sure that LVMH and its brands do not constitute such a meaningful part of our business that it would cause us significant damage if we had to part ways. This is your basic “diversify the portfolio” thinking.
Avoid contractual terms that provide preferential treatment:Strategic investors will inevitably ask for preferential treatment when it comes to the next round of financing or the sale of the company. Try to avoid agreeing to this kind preferential treatment. You never know what the dynamics and requirements of that next round might be and you don’t want to be hindered from doing what might need to be done due to preferential treatment clauses.
Don’t integrate core functions that can’t easily be built out separately: You want to integrate some functions with a strategic; that is part of the reason you get into bed together. For example, basic back office functional integration can achieve meaningful cost savings. But make sure that you do it in a way that allows you to separate easily if necessary. More importantly, be sure to develop and manage your core skill sets and functions on your own. These are key to your competitive advantage and so you want to own and protect these, in case you need to go your own way.
Full disclosure: LVMH is a minority investor in The Business of Fashion.
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