BootStrapping Strategies Part 5: The Power of Information Transparency

One of my favorite movie scenes is from the comedy Office Space about the miserable culture of Initech, a software development company.

When the company brings in two so-called “efficiency experts” to restructure its operations, the experts start by interviewing each employee to determine who essentially needs to be replaced.  One of their interviews focuses on Tom Smykowski, the long employed manager, who they expose as adding no value or even negative value to the company’s operations.

One of our earliest employees at Ubiquiti (and our head of hardware design) came up with a term I often use to describe these no value added positions.  He calls them “impedances.” And interestingly, they are everywhere.

At Ubiquiti, when we are in the planning phases of a new hardware design, we typically start with a selection process of integrated circuits vendors.  Usually we are self-sufficient enough to understand how to integrate vendor components into our designs; we just require basic application notes, pricing, and delivery information.  Unfortunately, when we inquire with a vendor for this information, our inquiry often sets-off a frustrating circus of middlemen — from marketing, sales people, and executives to 3rd party distributors and representatives — wanting to meet and understand what we are trying to do.  We have little interest in these meetings; we only want delivery of the parts and pricing to proceed and get our product to market.  Sometimes these “Impedances” become so irritating, we will look for alternative vendors just to avoid them.

When it comes to our own sales, we take a polar opposite approach.  Instead of compartmentalizing sales with process, middle-men, and “information control”, we believe in complete transparency.  At Ubiquiti, we do not have sales people, marketing teams, or a bureaucratic process for disseminating market information.  We use what I like to call “applied social networking” where  we have over the years fostered a community of end-users that we freely allow to interact directly to each other and with our engineering teams.  This community uses various open forums on the Internet as well as our own official forum at forum.ubnt.com

I believe there are several benefits to this transparency:

  1. Operations become more efficient:  Without the overhead of sales and marketing, operating expenses are significantly lowered.
  2. Engineers become empowered when given direct customer access:  When engineers feel like they “own” their projects, they feel a deeper sense of responsibility to deliver a great user experience to the customers.
  3. Brand Loyalty can increase:  Contrary to traditional thought, if the company makes mistakes out in the open, it is not necessarily fatal. The mistakes just need to be addressed quickly and if you can show a history of resolving them and improving, then a transparent market approach will eventually build end-user trust and loyalty in the brand.
  4. Leverage expands:  As the “open” community grows, it can become self-supporting and self-growing.  In our case, Ubiquiti customers provide support to other Ubiquiti customers.  New product launches are virally marketed throughout the community and beyond.  And, new ideas and feedback are provided back to our R&D teams to help further evolve our platforms.

The key to succeeding with a “transparent” market strategy is to recognize that the customer is irreplaceable.  If the customer can be convinced that you exist to serve them and loyalty can be established, then a transparent market approach will become predatory to competitors with traditional sales strategies and operating models.

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