유저가 앱을 발견하도록 유도하는 마케팅 구조

대부분의 개발자들은 디지털 마케팅을 단지 웹사이트에 배너를 설치하거나 검색엔진에 컨텐츠를 최적화하는 정도로만 한정짓는다. 이러한 단편적인 마케팅으로는 장기적인 효과를 기대하기가 힘들다. 장기적인 효과를 보기 위해서는 체계적이고 통합적인 마케팅 전략을 추진해야 한다. 유저가 앱을 검색하고, 다운받고, 지인에게 추천하는 일련의 과정에서 제공되는 콘텐츠들이 통합되어 시너지 효과를 일으켜야 한다. 국내 앱 관련 스타트업과 마케팅 전략 프로젝트를 진행하던 중에, 다음과 같은 마케팅 프로세스가 효과적임을 발견하였다.

Exhibit 1: The app discovery model

이 모델은 모바일 앱 창업 기업들을 위해 만들어졌지만 대부분의 온라인 사업에도 적용이 가능하다. 우선 전반적 웹 트래픽은 유기적(무료) 및 무기적(유료) 전략의 합작으로 유도된다. 시작은 풍부한 웹 컨텐츠로 틈새시장으로 대변 될 수 있는 웹 커뮤니티를 공략하는 것이다. 이러한 틈새시장 공략을 통해 증가한 방문자수를 측정하기 위하여 방문자들이 랜딩페이지라는 또 다른 웹페이지로 이동하도록 유도한다. 그리고 랜딩페이지에서는 방문자들의 앱 다운로드를 유도하는 다양한 방법들을 실험한다. 이 때, 웹 분석 툴이 방문자들의 정보나 방문 경로를 추적하기 위해 랜딩페이지에 설치된다. 분석 결과를 바탕으로 회사는 마케팅 자원을 가장 효과적인 마케팅 방법에 집중 투자할 수 있게 된다. 본 모델은 또한 앱 사용자들과의 쌍방향 의사소통을 위하여 해당 앱의 페이스북 페이지를 사용할 것을 장려한다. 회사의 블로그 및 다른 소셜 미디어 사이트들 역시 브랜드 충성도를 높이고 유저들 간의 추천 수를 늘리기 위하여 페이스북과 통합되어 사용된다.

틈새 마케팅에 집중하여 웹트래픽 올리기

첫번째 단계는 타켓으로 정해진 웹 트래픽을 증가시키기 위한 여러 웹 소스를 시험 해 보는 것이다. 이상적인 소스로는 웹사이트, 블로그, 포럼 등의 커뮤니티들이 있으며, 이들은 높은 웹 트래픽, 낮은 비용, 높은 전환률 이라는 세가지의 기준을 모두 충족해야 한다. 개발자들은 잠재적인 소스들을 종합하여 목록으로 만든 후, 아래 표에 나와 있는 유기적 및 무기적 방법을 모두를 고려해야 한다.

Exhibit 2: Tactics in boosting web traffic

유기적 마케팅은 유저 간 소개 및 추천과 구전효과에 의해 일어난다. 유기적 마케팅이 성공적이기 위해서는 웹 커뮤니티의 틈새시장을 찾는 것이 매우 중요하다. 개발자들은 타켓으로 정한 유저집단이 주기적으로 이용하는 블로그, 웹사이트, 소셜 미디어, 그리고 뉴스 등의 소스가 무엇인지에 대하여 고민을 해야 한다. 이 때 단순히 많은 이용자 수를 가지고 있는 소스보다는 이용자들이 매우 활발하게 상호작용을 하고 있는 소스가 적합하다. 유익하고 흥미로운 정보를 게시하면서 유저를 랜딩페이지로 이끄는 홍보용 링크를 함께 걸게되면, 이러한 틈새시장을 효과적으로 활용할 수 있다.

타겟 방문자들이 랜딩페이지를 방문하도록 유도하기

랜딩페이지는 사이트에 도달한 웹 트래픽 수가 어떠한 행동으로 전환되도록 최적화된 곳이다. 이미 출시된 앱을 예로 들어보면, 이러한 행동은 랜딩페이지 방문자들이 앱 다운로드 버튼을 클릭하도록 유도를 하는 것이 된다. (아직 개발 중인 앱이라면 방문자들이 이메일 주소를 적도록 유도를 할 수도 있다). 랜딩페이지의 구성요소인 글, 이미지, 또는 버튼 등은 방문자가 이러한 행동을 하도록 유도한다. 각 요소의 효과는 A/B (그림 3) 테스트를 통하여 측정될 수 있다.

Exhibit 3: A/B test of landing page

혹자는 웹트래픽을 앱스토어로 바로 연결시키지 않고 랜딩페이지로 보내는 이유에 대하여 궁금해할 수도 있다. 랜딩페이지로 방문자들을 안내하는 것은 우회적인 행동으로 보이기 때문이다. 그러나 랜딩페이지를 이용하면 방문자들의 데이터를 쉽게 수집 및 분석 할 수 있다는 장점이 있다. 구글 애널리틱스나 다른 분석툴을 이용하면 웹트래픽의 경로 뿐만아니라, 각 경로의 비율 또한 쉽게 알아낼 수 있다. 그리고 나서 개발자는 방문자 수와 각 채널의 광고 비용을 비교하여 마케팅의 효율성을 측정할 수도 있다. 그 결과, 파레토의 법칙(80%의 결과는 20%의 인풋에서 온다)에 부합하는 소수의 효과적인 채널을 추려낼 수 있을 것이다. 이러한 채널들에 마케팅 자원을 집중할 경우 마케팅 ROI를 극대화 할 수 있다.

모바일 앱에서 페이스북으로 유저를 이동시키기

유저들이 앱을 다운로드하고 사용한 후, 앱의 페이스북 페이지를 방문을 하도록 유도하는 것은 매우 중요하다. 앱 자체에서 유저들이 피드백을 제공하거나 지인들과 앱을 공유하는 경우는 거의 없기 때문이다. 페이스북 페이지를 방문하도록 유도하는 효과적인 방법 중 하나는 앱 내에 페이스북 연결 버튼을 설치하여 유저들이 호기심을 가지고 클릭을 하도록 하는 것이다(그림4). 만약 유저 인터페이스상 이러한 요소를 집어넣는 것이 힘들다면 앱 내의 포인트제도 등을 통하여 페이스북에 들어오도록 유도할 수 있다.

Exhibit 4: Creative in-app Facebook levers, by courtesy of Alarm Mon and Ipet Brand

페이스북을 주요 마케팅 플랫폼으로 활용하여 브랜드 충성도 높이기

모바일 앱 유저들이 특정한 목적을 가지고 앱을 지속적으로 이용하는 시간은 대부분 단 몇분에 불과하다. 즉, 개발자들은 앱 그 자체만 통하여 브랜드 가치와 유저들의 충성도를 높이기는 매우 어렵다. 반면 많은 사람들이 큰 목적없이 페이스북과 같은 소셜미디어에서 많은 시간을 보낸다. 이러한 현상은 컨텐츠를 통하여 개발자와 이용자들이 앱 밖에서도 상호교류를 할 수 있는 하나의 기회로 활용될 수 있다.

페이스북에서 두꺼운 팬 층을 형성함으로서 앱 개발자들은 신속하게 플랫폼을 업데이트하고 테스트할 수 있다. 새로운 기능을 더하거나 특정 마케팅 아이디어를 테스트하고 싶을 때 페이스북의 유저들은 즉각적인 피드백을 제공한다. 개발자들은 또한 앱의 페이스북 페이지를 물건 판매와 크라우드소싱에 이용할 수도 있다. 예를 들어, 반짝세일을 통하여 상품을 팔거나 팬들에게 문제의 답을 찾아햐 하는 과제를 내어줄 수도 있다. 페이스북에서의 팬들이 증가하고 이들의 참여가 높아질 수록 앱을 홍보해주는 충성유저들의 수도 증가한다.

페이스북 초기에는 팬들이 앱에 내장된 페이스북 버튼을 통해 유입될 것이다. 이와 함께, 페이스북의 “포스트 홍보” 기능이 팬 수를 올리는데 이용되어야 한다. 포스트 홍보는 현재 페이스북 페이지 밖에서 특정 타겟 유저들에게 포스트가 게시되도록 하는 기능이다. 인포그래픽처럼 정보를 제공하는 그림이 포함된 포스트를 “홍보”하는 것이 가장 효과적이다. 웹 유저들은 시각적으로 흥미롭고 정보를 제공해 주는 콘텐츠에 반응한다. 앱에 있는 페이스북 내 버튼의 디자인을 주기적으로 바꾸어 주는 것 또한 좋은 방법이다. 몇몇 개발자들은 심지어 짧은 시간에 많은 팬들을 불러들이기 위해서 유저들이 앱을 사용하려면 반드시 페이스북 페이지를 “Like”해야만 하도록 설계하기도 했다.

회사 블로그 등을 페이스북과 통합하기

페이스북은 광고 효과 및 상호 추천 건을 높이기 위하여 다른 소셜 미디어들과 통합 운영되어야 한다. 페이스북의 콘텐츠들은 다른 소셜 미디어의 캠페인의 내용과 어느 정도 관련이 있어야 한다. 예를 들어, 패션 관련 앱을 사용하는 페이스북의 팬들이 디자이너들의 옷에 관한 게시글에 매우 활발하게 반응한다면 그러한 콘텐츠들이 Pinterest(이용자들이 사진을 자신들의 핀보드에 보관할 수 있게 해주는 사이트)에서 공유되는 것이 바람직하다. 교육 관련 앱의 경우에는 콘텐츠들이 Youtube나 Vimeo같은 비디오 사이트에 게재할 수 있으며, 사교활동 관련 앱의 경우 Instagram (사진공유 서비스)를 이용하는 것이 좋을 것이다. 이처럼 상호보완적인 소셜미디어 플랫폼을 찾아내는 것은 타겟 유저들을 끌어모으는 데에 중요한 역할을 한다.

공식 회사 블로그 역시 검색엔진에서의 노출을 높이기 위하여 소셜미디어와 함께 통합 운영되어야 한다. 구글에서 앱을 검색하면 대부분 구글플레이나 앱스토어에 올라온 그 앱 자체만 검색이 될 것이다. 게다가 페이스북에 올라간 콘텐츠들은 페이스북 하나의 이름으로만 검색될 것이고, 이는 결국 다양한 검색 결과를 만들어 내지 못할 것이다. 그에 반해 블로그는 콘텐츠와 키워드를 직접 검색해서 방문해야 하므로 검색 엔진에 매우 적합한 플랫폼이다. 블로그를 운영하는 것은 검색엔진에서 앱의 검색 순위를 높여주고 웹으로부터의 앱 다운로드 숫자에도 매우 좋은 영향을 미친다.

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개발된 앱을 실제로 사용하게 되는 과정에 있어서 “만들면 사람들이 알아서 다운받겠지”라는 안일한 태도는 다수의 개발자들에게 심각한 문제점으로 남아있다. 앱은 단지 소프트웨어로서 그 자체만으로 퍼져 나가지 않는다. 구두를 통한 추천이 구시대적 홍보의 중심이었다면 이제는 소셜 미디어가 그 중심에 있다. 그러므로 창업자들은 모바일 앱을 잠재적 유저들에게 알리기 위하여 반드시 모든 마케팅 플랫폼을 적극적으로 활용해야 한다.

The latest issue of the Finnish “Talous ja yhteiskunta” magazine featured one article by Per Stenius on the competitiveness of Finland. Even though the article is Finland-centric, it goes into a universally important discussion about the drivers of competitiveness of a country and brings more fact-based elements to the current political debate at least in all of the EU. The original article is written in Finnish, but an English translation is available here.

Those adopting a more strategic approach have emphasized understanding of the company’s value levers, with constant cost structure management both directed from the top but also managed within businesses. In this article, we explain why the more strategic approach should be considered, and how companies can build a more systematic approach to cost management.

Restructuring has become the new norm in many industries

In many industries, the impact of economic downturn has been exacerbated by macroeconomic trends like digitization, consumerization, globalization and sustainability, changing the dynamics of not only these industries but whole value chains. For example, content development is now an entirely different industry due to information technology, which also affects the media and paper industries. Similarly, sustainability and renewable energy sources are impacting the energy industry value chain, and cloud services and consumerization are transforming the IT industry, only to name a few examples.

Due to globalization, the changes affect not only multinational corporations but also SMEs that face global competition all the earlier. The trends also drive demand from developed to developing markets, contributing to overcapacity in the former, and due to the unbalanced structure of some industries have led to price erosions of up to 5-10% per annum, squeezing margins from both sides. All of this has resulted in a situation, where companies need to constantly restructure their businesses to stay competitive. Ever changing industry dynamics, with new entrants and substitutes introducing disruptive business models, call for more strategic cost management than what many companies have traditionally been used to.

Often, the incumbent companies with traditionally profitable business models are reluctant to change because of good historical performance that has enabled a heavy overhead structure fiercely defended by the managers. Employees accustomed to managing their own cost centers do not see the need to change behaviors, which ultimately leads to a culture of tolerated underachievement, until the situation is bad enough to justify a major restructuring.

Also, in the face of changing industry dynamics, the business and operating models of incumbent companies tend to be under-optimized, with blurred value creation logic, overlapping functions between businesses and even subsidization of underperforming businesses. Therefore, as the industries evolve, revising company value creation logic is needed to adapt to the changing landscape.

Companies have responded through cost-cutting programs, but risk to sacrifice their differentiation

To defend their positions, incumbent companies have initiated restructuring programs with ambitious targets. This has borne fruit, as for example in the Helsinki stock exchange the average EBIT of companies on OMXH list excluding Nokia has increased from 5% to 6% in 2008-2011, with the average headcount in the same sample decreasing by 3% (Orbis).

However, at the same time the average revenue of these companies has dropped by 7% (Orbis), whereas the compound average global GDP has increased by 4.5% during the same period (World Bank). Despite the improved short-term profitability, in longer term companies executing continuous restructuring without much growth may risk losing their differentiation. Acknowledging that this period has been one of the fiercest in the modern corporate history, and that restructuring has clearly been needed, too many companies have approached it through “across the board” cost cutting. Companies with global operations, for example, may continue streamlining their site operations to a point where there is no critical mass, even though it might be more sensible to reinvent the business model and focus operations on few key sites while utilizing subcontractors for the rest.

For a more strategic impact, understanding of company’s value levers is the key

A more strategic approach to cost management starts from understanding the company’s value levers. A clear understanding of the value creation logic helps to avoid cutting the foundation for competitiveness and future growth. A pre-requisite for this is adequate industry foresight to build understanding on how the value levers are affected by the changing industry dynamics. For example, understanding and utilizing IT better in company’s core would likely enable huge productivity improvements for most companies. Similarly, a better understanding of the impact of globalization may lead to changes in the definition of a company’s core business and operating model.

With good industry and market foresight, companies can build a more solid view on future sources of value creation, helping them prioritize both costs and investments. Also, with a well-defined core, a company’s business portfolio may look entirely different, allowing more structural cost savings like outsourcing or divestments of non-core operations. The proceedings can then be used to further strengthen core business productivity and competitiveness. Managing an unrelated business portfolio without critical mass easily disperses company’s assets too widely, leading to an inefficient cost structure.

To ensure a long-lasting impact, cost management must be ingrained in the organizational culture, where systematic performance management plays a key role. This is emphasized for example by Bloom et al. (Harvard Business Review, November 2012) who found that the only common nominators for high performing companies are how they set targets, follow up and manage target realization, and reward for performance. Performance management begins from aligning key performance indicators (KPIs) with the value levers. KPIs should include both leading and lagging and input and output based indicators to allow proper management. The true impact is achieved when KPIs are cascaded throughout the organization with clarity on targets, accountabilities and consequences. One company, for example, has decided to review and act on costs monthly instead of annual cost saving programs to instill cost consciousness to the businesses, and signal that underperformance is not tolerated.

Combining top-down and bottom-up approaches to build momentum

Sometimes, due to changes in the industry dynamics or to turn around the company performance, a more thorough restructuring program may be needed in addition to the general cost consciousness. Then, the best practice is to combine top-down and bottom-up approaches to validate actions and reach broader buy-in. Traditionally companies have tended to direct restructuring from the top, planned by a small group of people, which may lead to inaccurate cost saving impact and lack of buy-in among the managers responsible for execution. Therefore, an initial analysis at the top should be elaborated through bottom-up estimations by these managers.

Companies may also use restructuring to shake up the power balance within the organization. After structural changes and revised performance management, barriers to cultural change are lower and can better be implemented. For example, a company building new service business may face strong opposition from product businesses even though their performance has decreased and there is an understanding that a combined approach increases the whole company performance. By redefining company value levers and shaking up the structure and accountabilities the company can find a new business model with a lower cost structure.

Possible restructuring approaches include wider cost saving workstream-based approaches, and more specific cost saving directives. Benefits of the workstream-based approach include a more consistent view on the whole cost structure. It is better used to drive bigger changes to the business or operating models and accountabilities, while more specific programs focusing on for example administration or sales costs serve better when the big picture is clear and reaching the desired impact requires digging deeper into the topic.

Driving results through a proactive program management office

Regardless of the approach, an important part of any cost saving program is a well-functioning program management office (PMO). Instead of a “coordinate and report” type of PMO, the best practice is to make the PMO accountable for the program deliverables, driving real business impact. This makes the PMO not only follow up that activities are completed, but ensure that they are enough to reach the targets. This requires a more comprehensive approach to understand the dependencies and sensitivities of the actions.

Another important PMO task is to build metrics to monitor progress. These metrics should be aligned with the overall performance management, while being specific enough to the program. One common pitfall is to create program metrics without connection to P&L. For example, following up how many persons have been cut is different than following up total headcount, or even better employee costs in the P&L.

Third important task for the PMO is to communicate about the progress in a transparent and fair way. Like in any transformation effort, communicating why the program is needed and what is the long-term target, how it proceeds, and what has been the progress reduces uncertainty among employees, allowing them to focus more on executing day-to-day activities driving business impact. Likewise, presenting quick wins is important to demonstrate progress and to build momentum in the organization.

***

Overall, companies with clear understanding of their value levers and value creation logic are better positioned to manage costs strategically. This understanding helps companies to make continuous choices on where to save and where to invest. However, sometimes a restructuring program is needed, and should be driven by the top management and managers responsible for execution together, to build broader buy-in and validate the savings estimates. Also, an active PMO is needed to drive results, follow up progress and communicate to the organization. Lacking in one of these areas may undermine the outcome of the program.

A digital marketing architecture for organic app discovery

Most developers understand digital marketing to the extent of placing banner ads on websites and optimizing content for search engine crawls. This often leads to a fragmented marketing effort with poor coordination and short-term wins only. In order to maximize user acquisition rates for the long-term, an integrated marketing engine must be set in place. It should coordinate rich and relevant content across the user’s entire experience with the app, from initial search to actual download and referral to friends. Through our extensive work with app startups in South Korea, we have found out that the model presented in Exhibit 1 produces very good results for app discovery.

Exhibit 1: The app discovery model

The model is built for mobile app startups but the technique and logic is applicable to most online businesses. General web traffic is first built through a combination of organic (free) and inorganic (paid) tactics—with a focus on rich content generation in niche web communities. This stream of web traffic is brought to a landing page to test conversion of casual visitors to actual app users. Elements on the landing page are then tested to measure their effectiveness in promoting visitors to click the download button. Web analytics tools are also placed on the landing page to extract data on web traffic demographics and referral sources. Marketing resources are then focused on web sources which provide the highest number of targeted users at the lowest cost. Users are incentivized to engage with the corporate Facebook page to open a two-way flow of communication. A corporate blog and other social media sites are also integrated with Facebook to promote brand loyalty and referral rates among users.

Focus on niche marketing for web traffic

The first stage involves testing multiple web sources for large streams of targeted web traffic. Ideal sources are websites, blogs, forums and other communities that match three criteria: high volume of web traffic at very low cost with a high conversion rate. Developers should aggregate potential sources into a short list and then consider both organic and inorganic methods as shown in Exhibit 2.

Exhibit 2: Tactics in boosting web traffic

Organic marketing is based on referrals and word-of-mouth recommendations. One success factor in organic marketing is finding niche web communities. Developers need to find blogs, websites, social media and news sources that their target user group interacts with on a regular basis. Sources which have a large number of users are not as useful as sources which have users that are highly active and interact within the source. Leveraging these communities requires uploading engaging informational content onto them that users can benefit from and placing a promotional link to direct traffic to the landing page.

Drive targeted web traffic to an optimized landing page

The landing page is optimized to drive a specific call-to-action from incoming web traffic. For apps that have already released, this action is to click the download button. (In the case that the app is still in development, the call-to-action could be filling out an e-mail form). Components of the landing page such as text, images or buttons should promote users into performing the action. The effectiveness of each component can be measured with an A/B test, as presented in Exhibit 3.

Exhibit 3: A/B test of landing page

Developers often ask why they should not simply direct general traffic to the app store directly. This is a great question as it seems like a round-about way in downloading the app. However, a landing page can serve as a data extractor for the inbound stream of web visitors. Google Analytics or other web analytics services provide insight into referral sources of the web traffic as well as the percentage of traffic that comes from each source. Developers can then compare the amount of web traffic generated from each source against the cost of advertising on that channel. A good rule of thumb is to apply Pareto’s principle (80% of output is generally produced from 20% of the inputs) and identify the few channels that are generating the larger portion of traffic. Focusing marketing resources on these specific channels should maximize the marketing ROI.

Utilize a creative lever to migrate users from the mobile app to Facebook

After the users have downloaded the app and experienced the product, it is critical to extend the engagement with them on Facebook. It is difficult for users to provide feedback or share app content with friends from within the app itself. A crafty way to migrate app users to the app’s Facebook page is to insert a creative in-app Facebook lever. Curiosity often entices users to click through this lever (Exhibit 4). If adding elements to the user interface is not optimal, the action of liking” the Facebook page can be incentivized through in-app rewards such as currency or points.

Exhibit 4: Creative in-app Facebook levers, by courtesy of Alarm Mon and Ipet Brand

Leveraging Facebook as a primary marketing platform for building brand loyalty

Mobile users engage with an app for a specific purpose and the duration of the engagement is often limited to a few minutes per day or week. Thus it is very difficult for developers to build brand equity and loyalty through just the app itself. On the other hand, users around the world spend countless hours browsing aimlessly on social media sites like Facebook. Developers can leverage this as an opportunity for brands to engage users through content and deepen their bonds with users outside of the app.

Building up a large Facebook fan base provides app developers with a platform for quick market tests. From development features to marketing ideas, it enables getting immediate feedback directly from the users. Developers can also leverage their app’s Facebook page as a tool for monetization as well as crowdsourcing. They can for example organize a “flash sale” to sell merchandise or challenge fans to help find an answer to a problem. As the Facebook fan base grows larger and engagement increases, it is possible to develop a strong group of brand advocates that will help amplify the reach of the app.

The initial inflow of Facebook fans will come from the in-app Facebook lever. This lever should be complemented with “promoted posts” to continue building up the fan base. Promoting a post enables the post to be displayed to a specified target audience outside of the current fans. It is a best practice to promote posts with an info-graphic image. Web users respond well to informative content that is packaged in a visually appealing manner. It is also a good idea to periodically change the design of the in-app Facebook lever. Some developers have even created Facebook apps that require users to like the Facebook page in order to amass a large amount of fans in a short period.

Integrate a corporate blog and other social media services with Facebook

Facebook should be integrated with other social media channels to benefit from cross-promotion and referral traffic. The content of the Facebook campaign and its fit on other social media sites should be analyzed to enable this. For example, if an app is related to fashion and its Facebook fans respond very well to clippings of designer clothes, content could be shared from Pinterest, a service which allows members to “pin” images to their pinboard. If an app is educational, material could be published and shared on video publishing sites such as Youtube or Vimeo. If an app involves social sharing, leveraging the large community of Instagram, a photo-sharing service that enables users to take pictures could be beneficial. It is important to search for complementary social media platforms that fit the target user base.

An official corporate blog should also be integrated into the social media mix for increasing search engine visibility. A Google search of an app will most likely return a single listing in Google Play or App Store. Content uploaded in social media sites like Facebook aggregate under a single listing and do not provide optimal search listing results. On the other hand, blogs provide an easy platform for search engines to crawl for content and keywords. Blogging helps to increase the app’s search listings and improves app discovery on the web.

***
App discovery will remain a core issue as many developers continue to build their app with the “build it and they will come” mentality. An app, at the end of the day, is a software product and it will not distribute itself. Social media will remain at the forefront of app discovery as word-of-mouth recommendations have been the primary driver behind past successful viral apps. Entrepreneurs must leverage every marketing platform they own and coordinate content across channels to make sure that potential users know about their mobile apps.

PMO’s responsibility is to ensure successful execution of the program

The ultimate target of the PMO is to ensure that the program is able to reach the business objectives that have been set for it. The PMO can help the program in achieving its objectives by:

• Ensuring that all projects have sufficient plans and resourcing for implementation
• Setting up follow-up mechanisms to track the progress, including KPIs (key performance indicators), weekly routines and monthly reporting
• Identifying and removing bottlenecks of different projects, preferably in a proactive and pre-emptive fashion
• Supporting individual programs in execution when needed by providing an extra pair of hands or specialist resources
• Intervening and instigating corrective actions when the original approach is not having the desired impact

Before establishing a PMO, the program must have clear, tangible and measurable objective against which the success of the PMO can be tracked. Measurable objectives are often related to financial improvements but operational performance indicators like time-to-market can also be used. The PMO should not be established only for providing reactive reporting – the PMO should always be proactive in project planning, solving problems before they occur. The purpose is to identify upcoming bottlenecks and lack of impact, by using leading indicators, before they start affecting progress. By pre-emptive intervention the program can be kept on track and progress maintained. In larger projects, for example software related, leading indicators can be supplemented by quality gates, which are used to determine that the necessary pre-conditions to move into the next stage are in place.

A typical failure of the PMO is “keeping it busy because it is there”. We have seen a PMO that employed several people who only provide reporting for each other, without any clear objective or mission. The reporting was not tracked by anyone in charge and there was no follow-up on the project business cases or impact. It seemed that the PMO was in place only because “it was supposed to be there”. This type of working mode undermines both the transformation program, and the motivation of the people involved.

The PMO should have resources that are capable of tackling different types of business issues that the program can face. The management should be ready to give the PMO the mandate to intervene in the execution of individual projects when needed. If these pre-conditions are in place, the PMO can be set up. While the PMO does provide front line support, it is important that it is also supported by a powerful senior guiding coalition. Having solid ownership and support on the top management level is a key pre-requisite for any change, and the PMO by itself cannot replace that.

Establishing a PMO has eight standard steps with many caveats

When someone has a mandate to establish a PMO, a certain minimum set of actions should be conducted in order to get a grip of the program. We can structure the PMO establishment into some well defined steps:

1. Ensure there is senior ownership and a powerful guiding coalition that sets and supports the overall direction
2. Structure the program to projects and assign responsible project managers
3. Define operative and financial objectives and milestones for each project
4. Set up operative KPIs to track the progress, including leading indicators for pre-emptive intervention, and quality gates in case there are serious dependencies between consecutive phases of a project
5. Build business cases and financial follow-up for all projects (make sure your figures measure real impact – ideally the impact should be visible also in the company’s regular financial reporting)
6. Identify cross-dependencies, risks and mitigating actions
7. Setup weekly and monthly routines both for follow-up, support and intervention
8. Define in advance how intervention will take place in case there is lack of progress, and what the decision criteria are for intervention (this may also include formalized alternatives, “plan B’s”)

All these sound trivial, but mistakes occur too often. The first caveat relates to step one and the need for top management support. Without a guiding coalition of senior managers, projects might seem to progress well temporarily. But ultimately the change effort comes to a halt when the resistance in the organization mounts up. Senior managers can drive the change and play an important role in leading by example. A crucial element in developing the guiding coalition is the establishment of a need for change. This is often initiated by a (potential) crisis or a great opportunity. Only if maintaining the current status is perceived as riskier than exploring new ways, organizations are willing to do things differently.

The caveat related to step two is the most dangerous: if the projects are not structured properly by using the common “mutually exclusive, collectively exhaustive” principle, we can either have overlapping responsibilities or a responsibility gap. The best way to avoid this is to create a simplified operating model which shows the interdependencies between the planned actions and split projects in a way that roles and interfaces are clear. Keep in mind that this is no easy task and it should be given proper attention: we have spent as much as a month just structuring the projects in the right way.

The caveats of the third step are related to details: you should not underestimate the need of defining objectives and milestones explicitly. Quantifiable objectives should always be preferred: for example, the objective for a project could be to reach 10MEUR EBIT improvement or reach five percentage point market share improvement in selected markets. However, these statements are still missing couple of elements needed for a proper definition of an objective: when the improvement should be reached, is the impact a one-time item or continuous improvement and what are the assumptions related to market conditions. The same level of detail should be in place for all milestones of individual projects: they should have verifiable targets and a clear deadline. In one of the PMOs that we have seen, the overall objective was not clear enough and especially the milestones were not defined. This resulted in confusion when defining the objectives for the projects, and eventually led to a situation where project managers were reluctant to take on the projects because of the lack of clarity in the assignment. The PMO had a very slow start and lost some of its credibility, which took a long time to regain.

If the overall objectives of each project are clear, steps four and five are much easier to conduct. The caveat related to these steps is to mix them and their roles. The nature of operative KPIs should be more forward-looking, because the financial KPIs are by default backward-looking. For example, if target is to increase sales, the operative KPIs can be related to the number of customers in different sales phases. If KPIs and business cases are not defined, we end up in a situation when it is impossible to say which parts of the program are progressing and which are not.

In step six, the PMO should define cross-dependencies, risks and mitigating actions. Even though the projects should be mutually exclusive, there will always be some cross dependencies that can become serious bottlenecks at some point. When defining the cross dependencies, project managers and the PMO should not think only about internal issues, but also dependencies related to customers, suppliers and other stakeholders. The risks of project delays increase always when there are dependencies to external stakeholders.

Developing good plans is not sufficient if the structures for following-up on progress and for providing support are missing. Without regular routines for monitoring progress, projects can go off-track unnoticed. Project managers try to fix the problem on their own or are too focused in their perspective while the problem grows out of hands. Established routines and frequent milestones will show needs for support and intervention early on. In order to work efficiently, the routines should be standardized as much as possible. Material should be distributed before meetings as a pre-read. Preparing the material facilitates a fact-based and action-oriented discussion that goes beyond explanations. Some standard items should always be included in the material: 1) challenges, their impact and mitigation actions. 2) Successes and lessons learned to be shared with the organization. 3) Next steps and upcoming milestones. Establishing these routines early is important to shape the working habits and to take the program to a good start.

Without clear objectives and frequent milestones (step 3) the PMO will find it difficult to determine in which cases intervention should take place. Identifying these cases, however, is crucial as they allow the PMO to intervene at an early stage. Explicit, at best quantified, objectives make measurement of success easy and fact based. Quantified thresholds for intervention define clear criteria for the need of intervention. Clearly defined criteria are important as negative developments often do not appear sharply but in a gradual manner over a long time horizon. In such cases, action is delayed as decision makers are waiting for things to turn to the better. Defining quantified targets with their calculation principles will be helpful in understanding why the actual numbers deviate and in creating action plans.

Running a PMO and taking it to the next level

If all the steps of the PMO establishment process are done properly, running the PMO becomes much easier. The routine work the PMO should do with the project managers are:

• Updating KPI reporting, progress against milestones and financial impact
• Adjusting long-term plans according to the progress and potential new targets
• Planning concrete actions for coming weeks

These tasks should be done 1-4 times per month depending on the urgency and nature of the business. The PMO should continuously invest part of its time in automating these routine tasks in order to free up time for supporting those projects which are not progressing according to objectives. The first step to automate these tasks is to create a weekly standard agenda and reports for a weekly meeting with the project owners. A standard monthly reporting format is also important, as well as an established routine to communicate with the executive management and other stakeholders of the PMO.

The PMO should actively work towards avoiding the need for intervention in the projects altogether. This is crucial to ensure that the PMO does not become a function that only provides reporting. When the PMO has set up all the routines, it should move its focus to solving front-line issues, conducting post-project analyses and sharing lessons learned through documentation and trainings. In addition to the weekly reporting and meeting routines, the PMO personnel should for example do some of the analyses to keep an understanding of the substance and talk with the project owners over coffee and in other informal situations to share information and get status updates. However, as discussed earlier, the PMO should have the mandate, the capabilities and the willingness to make deep dives to certain topics by going to the front line to solve bottlenecks. Gathering front line experience is needed to ensure that the PMO can add value in the long term. The more front line experience the PMO has, the better it can support and challenge project managers in problem solving and drive the program towards its objectives.

If things go wrong in one of the projects of the PMO, it is important to keep accountability and resourcing in mind. Only in very exceptional cases the right corrective action is to change the project manager. Usually, it is much more beneficial to let the project manager stay accountable and just ensure that she gets the required resources and support to fix the issue. The role of the PMO in these cases is to allocate those resources and put more focus on following the project by for example requiring daily reports on the progress.

Paavo Räisänen, paavo.raisanen[at]reddal.com
Roland Morath, roland.morath[at]reddal.com
Per Stenius, per.stenius[at]reddal.com

***
References
John P. Kotter, Leading Change: Why transformation efforts fail, Harvard Business Review, pp. 59-67, March-April 1995.

SNS 르윈디의 윈키스트 대표(38, 이하 윈)는 최근 사업을 접기로 결정하였다. 본 인터뷰에서는 윈키스트 대표의 지난 일년 간의 경험을 바탕으로 아이디어에서부터 베타 런칭까지의 사업 발전과정을 살펴보고자 한다. 윈키스트 대표는 이 경험으로부터 배운 점을 바탕으로 새로운 사업 기회를 모색하고 있다.

레달: 대표님의 배경과 르윈디의 창립 배경에 대하여 말씀을 해주시겠어요?

윈: 알토대학에서 산업공학을 전공한 대다수의 동기들이 그랬듯이 저 또한 직장생활을 컨설팅펌 맥킨지에서 시작했습니다. 맥킨지에서3년을 보낸 후, 노키아에서10년 동안 재직하며 전략과 사업 개발에서부터 영업, 그리고 생산 계획 까지 망라하였습니다. 노키아를 떠나기 전, 제가 맡은 일은 노키아의 미고 플랫폼과 관련된 것이었는데, 이 일을 마치고 나니 새로운 기회를 찾아 떠날 때가 왔다고 느꼈습니다.

노키아 재직 중에 플리커와 같은 기업들과 접촉을 할 기회가 종종 있었습니다. 사진과 동영상을 공유하는 서비스의 인수 작업에 관여한 적도 있었습니다. 취미가 사진 촬영이기도 하고 노키아에서 이미징 작업도 해본 제가 노키아에서 받은 퇴직금과 여타 자금을 모아, 사람들이 시각적 스토리를 공유하는 방식을 완전히 새롭게 정의할 수 있을 것이란 열정을 가지고 르윈디를 창업한 것은 어쩌면 당연한 일입니다.

레달: 사업가로서의 삶을 택하신 특별한 이유가 있으셨나요?

윈: 오랫동안 회사 생활을 해본 지라, 창업을 해보고 싶었습니다. 또, 노키아와 정부로부터 지급받은 자금이 있었기에 저는 재정적으로 도약을 할 준비가 되어 있었구요. 창업을 할 생각은 전부터 해왔습니다. 기회가 왔을 때 잡았을 뿐이죠.

레달: 르윈디의 사업 모델에 대하여 설명을 해주시겠어요?

윈: 사람들은 페이스북 등에 업로드하는 사진이 타인에게도 똑같은 의미를 가질 것이라 생각합니다. 하지만 스토리가 없는 사진은 무의미합니다. 르윈디는 사진에 스토리를 부여했죠. 간단하면서도 실용적이었던 르윈디의 초기 기능들에는 말풍선과 테마 추가 기능 등이 있었고, 이를 바탕으로 새로운 기능들을 추가해 나갔습니다. 염두에 두고 있던 수익 모델은 스토리북 인쇄 서비스와 같은 오프라인 유형 컨텐츠를 이용하는 형식의 프리미엄(Freemium) 모델이었습니다.

레달: 사업의 발전단계를 설명해주시겠어요?

윈: 르윈디와 함께한 12달 동안에는 참 많은 일이 일어났습니다. 창업 전 준비단계는 2011년 12월부터 2012년 2월까지, 2달 정도였던 것 같습니다. 이 시기에는 아이디어를 발전시키고, 팀원을 모집하고, 초기 투자를 받았습니다. 저희 팀은 CEO를 맡은 저, 노키아 출신 디자이너, 그리고 다수의 창업 경험을 가진 개발자, 총 3명으로 구성되었습니다. 그 해 6월에는 알파 버전을, 7월에는 베타 버전을 발표했습니다. 베타 버전의 목표는 이용자수를 늘리는 것이었습니다.

레달: 대표님의 목표는 무엇이었나요?

윈: 탄탄한 이용자 기반을 마련하고, 이를 바탕으로 다음 단계로 발전하기 위한 투자를 받는 걸 목표로 했습니다. 이미 훌륭한 경영인들에게 자문을 구한 우리는 소비자를 대상으로 하는 사업의 특성상, 실리콘 밸리에 진출하는 것이 좋겠다는 결정을 내렸습니다. 헬싱키의 수요량으론 부족했습니다.

일단 어떻게든 15만 유로를 구하고 TEKES(핀란드 정부 산하 기술 지원 기관)에서 또 15만 유로를 지원받으면 실리콘 밸리로 진출할 발판을 마련할 수 있을 것이라 생각했습니다. 150명 이상의 엔젤 투자자와 만났는데 그 중 50명 정도는 따로 만남을 요청할 정도로 저희 사업에 관심을 보였습니다. 여름에는 직접 실리콘 밸리로 가서 다양한 기업인들, 인큐베이터, 그리고 전문가분들을 만나고 왔습니다. ‘500 Startups’나 ‘Y-combinator’와 같은 유명한 인큐베이터에 진입하는 것을 당시 목표였습니다.

레달: 그래서 어떻게 되었나요?

윈: 아시다시피, 르윈디와 같이 소비자를 대상으로 하는 기업에게는 우선 앱을 꾸준히 이용하는 고객 백만명 이상을 확보하는 것이 중요합니다. 이를 달성하지 못한 채 초기 투자금을 소진해버린 것이 문제였습니다. 처음 얼마동안은 다섯 명의 엔젤 투자가들이 있었지만, 추가적인 투자자가 나타나지 않자 우리를 떠나버렸습니다. 핀란드에서 더 이상의 투자자를 찾는 것은 불가능했습니다. 결국은 사업을 접을 수 밖에 없었죠.

레달: 개인 재정에는 타격이 없었나요?

윈: 영업 비용은 투자금으로 해결했고, 저에게는 노키아에게서 받는 퇴직금이 있어 큰 문제는 없었습니다. 아내가 열심히 일한 덕택도 있고요! (웃음)

딱히 큰 재정적 어려움은 없었습니다. 시작이 미약했던 것에 비해 의외로 지출이 적었지요.

레달: 이 일을 통해 얻으신 교훈이 있으신지요?

윈: 후회하지 말 것! 저와 제 팀에게 있어서 이 경험은 많은 것을 가르쳐주었습니다. 회사에 다니는 것과는 비교도 안 되게 많은 것을 경험했지요. 따라서 창업을 한 것에 아주 만족합니다.

대기업이 신생 기업들로 부터 배울점이 많다는 것도 깨달았습니다. 신생 기업에서의 모든 것은 집중적이고 효율적으로 진행됩니다. 대기업에서 근무할 때에 비하면 모든 게 눈 깜짝 할 사이에 지나가죠.

운영적인 측면에서 볼 때, 이용자수의 측정이 중요하다는 것을 배웠습니다. 측정 방법과 목표를 정하고, 측정을 하고, 이를 바탕으로 개선을 함으로써 제품과 서비스가 발전하게 됩니다. 이것은 중요한 만큼, 매일 실천되어야합니다.

레달: 인터뷰에 응해주셔서 진심으로 감사드립니다.

윈: 감사합니다.

***

윈키스트씨는 현재 컨설팅 산업으로의 복귀를 고려하고 있기는 하지만, 새로운 창업에 더 많은 관심을 갖고 있다고 말했다. 기업가 기질이 다분한 윈키스트씨는 다시 대기업으로 취직할 일을 없을 것이라며 말을 맺었다.

First encounter – “why are you here?”

Analysing the potential of Korea, we found multiple reasons for seeking to enter this market. Seoul being a city of 10 million people, and Korea having 50 million, we were entering a market of significant size in its own right, let alone considering the opportunities offered by neighboring countries Japan, China and Russia. Further, Korea, and in particular Seoul, provides a great logistical hub into Asia. We have daily flights between Helsinki and Seoul, the infrastructure in Seoul is great, and from Seoul it is easy to get around whether one’s destination is within Korea, Japan or China. Korea has actively pursued free-trade agreements with EU, China, Japan, US and Latin America, that are now ratified or about to be ratified, and it holds the title of the fastest growing economy in the world when looking across past decades. Thus, for a company like Reddal, whose mission is to drive growth in companies of all sizes, one can hardly imagine a more interesting place to be in. The whole country seems driven by growth and ambition, described locally as their “han” spirit. Currently Korea is having an entrepreneurial boom especially in mobile apps, driven by its advanced wireless infrastructure and the advances of the iPhone and android phones, and of course the rapid rise of Samsung to a dominant mobile handset and consumer electronics manufacturer.

A closer inspection reveals further opportunities. Korea has several top notch universities, including Yonsei, Korea University, Seoul National, KAIST and POSTECH, and many of the students have US education as well. The country also attracts a large amount of international students, both across Asia as well as from Europe and the US. Thus, finding talent with multicultural and multilingual skills is straightforward. The time difference to Europe allows us to run “work with the sun” operations, and the cost of top talent is also somewhat lower than what we see in Finland.

It is perhaps descriptive of the Koreans’ desire and need to prove themselves to the world that despite all these advantages and opportunities the country has, the most common question we got from the Koreans themselves when we explained our interest in expanding there was “why?” Seemingly, it was odd that a western company would be so interested in starting operations there, rather than at the major neighboring countries. Contrary to this, European companies have in fact already for quite some time shown interest in Korea. In terms of foreign direct investment into Korea, EU has since mid-2000 taken a leading role ahead of both Japan and the US.

Certainly, there are features of the Korean market that make it difficult for a company like Reddal to expand there. The chaebols are vertically integrated multi-sector conglomerates. Our principle of not serving competitors definitely restricts our ability to operate with the major corporations who all seem to compete with each other fiercely. Other challenges include the highly inwardly networked management culture of Korean companies. In addition, when we entered in early 2012, Korea was rapidly feeling the impact of the global financial crisis while simultaneously speeding toward an internal banking crisis driven by overinvestment in real estate. However, we deemed these issues as less important than the opportunity to work with a selection of companies focused on regional or global growth. In addition, our existing clients’ interest in Asia, including Korea itself, convinced us that seeking to enter this tough market would be a good strategic move. If we could survive and prosper here, we certainly would have proven the strength of our model and our company.

Getting going – leverage local knowledge in all its forms

Setting up a company in Korea is surprisingly easy. The process can be done in a matter of a few weeks, and government institutions like KOTRA are very helpful offering free of charge support. Through local people with experience in Korean business, we were able to find a good accounting firm to help with the formalities. If one works with a good local company, rather than the large international firms, the cost of setting up a company is only about two thousand euros or less. With international brand name firms, the cost can amount to ten times that, with no difference in the end result.

Reddal has always emphasized good relationships with universities and students, and in preparation of our Korean entry we sought the help of KOSAFI, the Korean Students Association in Finland. Through this, and some of the people we had met during our initial trip to Korea, we quickly learned the details of the market and how to position our company. However, to truly enter the market, local resources are the key and thus four months before we set our office up we had already started to recruit Korean staff members through Yonsei, one of the top universities. The recruits where then taken to Finland, where they were trained working alongside with our Helsinki office staff. This was an important stage, since the Korean culture has some differences when compared to the West, such as how junior people work in the presence of seniors, and both sides needed to learn from each other. This phase was also crucial to build the necessary personal relationships for good collaboration between our European and Asian operations.

In terms of local costs, an office for 4-6 people can be rented for about 1000€/month in prime areas such as Gangnam. There is plenty of real estate available in Seoul currently, and in our case we found a nice office on the top floor of a smaller commercial building within one week. Contractual matters require care, as usual, and again a local accounting firm is useful. The one we used provided valuable advice and helped to ensure that all papers were in order. Salary costs, at least in our field of work, are about 35% lower than in Finland for graduates. The experience of employees may be somewhat more limited, but in general the skill levels are fairly comparable with Finland at least when it comes to graduates from the top schools. Internships are very common in Korea, and usually serve as a stepping stone to a permanent position. In some cases interns do not even get a salary (internships are highly coveted), and 1000USD/month is already considered good. Internships can last anywhere from a few months to half a year. Korean students have a summer break like Europeans, but in addition there is a winter break of two months in January – February when many of the students are looking for internships. The historical background for this is apparently that schools were closed to save heating costs!

Picking up speed – network, network and network

Before you can do any business in Korea, two things need to happen. You need to demonstrate your knowledge and capabilities in real life, and you need to be part of the business community networks. The extent of Korean networks is far more intricate than what we are used to in the West. Executives, professional service people, university professors and various organizations all form an intricate mesh where everyone has their place. The network is vibrant and active – evenings in Seoul are notoriously unpredictable, as various events take place around the city and ad hoc meetings over food and drinks are often arranged on a very short notice.

For us, it was natural to start the networking from within the universities, due to our emphasis of thought leadership and since this is where we normally recruit. However, we quickly also built connections into various AMPs (Advanced Management Programs), which play a key role in educating top executives. Lifelong learning is a rule in Korea, and even senior executives continuously seek to learn new things. Presence in these fora, and presenting thought leadership at lectures and seminars, allowed us to gain ground in the various business communities. However, networking takes a lot of time, not only in the week due to events and dinners but also in weekends when discussions take place over a friendly game of golf. Weekend games are sometimes massive events, with tens of executives attending.

The time spent on building a network has been important to us, both in gaining familiarity with the local culture as well as in understanding the details of the issues the companies and their executives are facing. It is perhaps good to set the expectations right – although networking is time consuming, it is a mandatory first step. And more importantly, despite its challenges, it is by far easier than selling anything to a Korean company or executive! Success in Korea truly requires a long term view from the start; it is a marathon rather than a 100m sprint. Prepare to spend at least six months building trust before a business relationship starts. On the other hand, once a relationship is in place, it seems to last for a long time.

A key aspect of Korean culture is the hierarchy and importance of social status. For an outsider, the culture can sometimes look very hard and militaristic, where subordinates must submit to their superiors’ orders and behavior, no matter what. When two Koreans meet, they spend the first few minutes building a view on where the other person stands in terms of education, experience and age. A position in the social hierarchy is then defined, and is hard to change afterwards. One’s behavior must then follow this slot one has been assigned. However, this apparent strict hierarchy can be misleading. While there are strict norms in social structure, the Koreans are also very interactive people. Discussions may not always be held in public, but opinions are exchanged and managers spend time trying to understand what the people in their group think about the issues they are facing. When it comes to building relationships and networks with the Koreans, it is good to understand that we westerners do not usually fully understand the dynamics going on among the Koreans. Taking time to understand the Korean culture is an important investment up front, in order to learn how to work locally.

The toughest customers on earth

Doing business in Korea requires hard work, no matter what industry you are in. As part of our work, we help our clients enter the market, and have through that gained experience in sales not only in the professional services sector, but also in high tech, industrial equipment and various consumer goods. In all cases, potential partners and customers have an infinite list of questions which need to be answered, and discussions often drag for months. In the high tech area, it is common that a sales meeting turns into a Q&A where you need to be prepared for an onslaught of several PhDs, all persistently digging deeper and deeper into what you have to sell, and what the advantages – and secrets – of your solution are. This is often combined with stints of “palli palli”, which means hurrying up. The deadlines for providing a proposal are often short, only to then lead to a stalled situation where the next step can take months.

In terms of pricing, Koreans drive a hard bargain. Only the most luxurious or well-known brands and leading edge technologies can command a premium. And even so, one always has to be prepared for long discussions over the price and scope. Price competition is hard, so be prepared for tight margins. However, there is one area where Koreans seem to spend quite freely, and that is their children. When it comes to their children’s education or anything that supports their success, no expense is too high. Of course, the parents look for high quality here as well, but many foreign educational institutions have found good opportunities in Korea.

Looking back, and ahead

Looking back at our first 9 months in Korea, things have not been easy, but at the same time we have been pleased with the support and enthusiastic comments that we have been receiving. The talent pool we are tapping into is an enormous resource, and the market insight we have gained through our local operations has been a tremendous asset for our existing European clients, as well as for ourselves. We have also been able to demonstrate our capabilities and insight, and we have built our first local client relationships.

The strategy that we have employed, taking small but steady steps and meanwhile keeping costs low so that we can build our presence for the long term, has been good. There may be better approaches, but for our company this has worked well. In helping some of our European clients to analyze opportunities in Korea, at times we have had to recommend that they do not enter, and at times we have been able to move forward with the market entry. In all cases, the progress has been step-wise, demonstrating that in this market it is very hard to get quick wins. Entry into Korea, just like into any Asian market, must be considered carefully. Once a commitment is made, you must be ready to invest time and effort in building the presence and all the elements that long term success requires.

Perhaps the biggest benefit of our expansion has been the learnings from the process, and the eye opening effect that seeing the activity here has had on all of us. While we still have a long road ahead of us to build a truly successful operation in Korea, the experience has given us a hunger for further global expansion and confidence that such expansion is possible. Perhaps the ambition, entrepreneurship and drive for success of the Korean han spirit has reinforced our own ambition and given us more determination. Watching Korean companies, both small and large, continuously strive for new business opportunities is certainly inspiring!

Although valuation is complex, in some situations a quick review is adequate to get an idea of the company’s value, key drivers to increase value or what is fundamentally expected of a business’ performance given a certain value, for example an asking price of a business up for sale. This article discusses the approach for conducting a quick basic valuation of a business. We start by discussing the overall challenges of the valuation process, then move on to giving tips on how to accomplish a 30 minute valuation and to discussing the applicability and limitations of this approach. If you are interested in the theory and details, in the end we have reviewed the main valuation methods and the logic behind them. For those of you interested in how to conduct a quick valuation to support decision-making or help in focusing analyses, please read along.

Typically business valuation is complex and requires extensive data analysis

Valuation methods can be divided into two main types: multiple-based and fundamental value, or discounted cash flow (DCF), based methods. Although other ways exist, these dominate the practice. The multiple-based models are based on market data or on data for precedent transactions. The idea behind these models is that you calculate a multiple like company value to sales on comparable public companies or precedent transactions and then multiply this multiple with the valued company’s sales. It is thus a very simplistic approach where the market is assumed to value companies correctly and it is not based on company-specific forecasts. The DCF models on the other hand, are based on company-specific forecasts and no comparable companies or precedent transactions are necessarily needed. The company value that is generated by these approaches is called the enterprise value (EV). The enterprise value is simplistically defined as market capitalization + debt – cash items. The reason for deducting cash is that it could be used to repay some of the debt.

Multiple-based models are widely used even by practitioners since they have the advantage of essentially using the market’s wisdom to infer value from the current situation and all information available. Comparing price-to-earnings (P/E) ratios and such across companies in an industry is also a rather simple exercise provided the information is available, and the relative differences are easy to understand. The challenge is that multiples produce a wide range of value estimates based on which measures are used, in what industry, and in which timeframe. Especially for larger corporations, it is also very difficult to define the industry and find the right reference companies as most corporations have very different business portfolios. Although fundamentally based on mere market sentiment, multiples are the easiest way to justify the business’ value as they do not require forecasts about the future.

DCF valuation models, as their name suggests, derive the value of a company from the estimated concrete cash flows a company generates in the future. In other words, the more free cash flows a company generates the more valuable it is. It is also good to note that these models are not based on the profit or loss found on the profit and loss statement. The reason for this is that a company can make accounting decisions that affect the bottom line in a desired direction and therefore these figures do not illustrate a company’s ability to generate positive cash flows. The cash flow based DCF-model is thus the theoretically correct way to calculate the company’s value, but the array of inputs and their correct estimation is hard; estimating a company’s revenue generation, profitability, investment schedule and the discounting rate is needed, to name a few. A big uncertainty factor is usually the terminal value (TV) of a company, which is the part of a company’s value expected to form of the cash flows after a period of individually forecasted years (usually 5-10 years). It depends on market growth rates and interest rates, and more importantly, on the company’s ability to continuously evolve to keep up with the market.

All in all, valuation is a challenging task requiring extensive input, and making correct forecasts is impossible. Due to this it can be very informative to do a quick and rough valuation where you get some an estimate of a company’s value that is in the ballpark, compared to trying to do an exhaustive valuation where you still have to do several simplifications and assumptions.

Even with its limitations, the 30 minute valuation has many uses

While limited in depth, the 30 min valuation approach can still be applied in the fast screening of acquisition targets and making a quick estimate for indicative offers when a bid is requested. It is also beneficial in estimating the fundamental value of own businesses in their existing forms, understanding the value impact of improvements in own business units and questioning or verifying existing valuations. In essence, the approach can be used both to get indicative valuations of external targets and to internally assess the value of own business and development initiatives, as well as to identify the most important value drivers. All of these can be one-time or continuous efforts.

For screening, the approach comes in handy when there is an existing short list of potential targets, but no valuation numbers for all of them. The method can be used to quickly compute initial valuations in a simple and comparable way; if the process would be too heavy, it might end up not being used at all or existing valuations from a range of sources could be used, which would not be comparable with one another. The method can also, to an extent, be used to come up with rough figures for indicative offers in a situation where a potential target comes up and a bid must be left quickly. In this case, extra caution is needed.

When it comes to internal use, one can use this method to see what value it gives for the own business, and whether this is in line with the expectations. The resulting differences and their sources can then be examined: are they the result of shortcomings in the approach, is there a discrepancy between your expectations and those of the market or is there something wrong in the strategy of the business? The results can prove valuable. We also suggest using the method to see how operative improvements affect individual BUs’ values. You might, after splitting the company into BUs and valuating them separately, realize that some investments are unwise given their profitability and cash flow impact. Or there might be for example overinvestment in some Bus, when taking their revenue streams into account.

The multiple valuation is very rough, but even the DCF model has its limitations

Different valuation methods obviously have different pitfalls. Multiples, in general, are simple to use and to understand but can be too simplistic, and can create an illusion of accuracy. The “bullshit in – bullshit out“ principle should never be forgotten: the multiple-based valuation is only as good as the judgment when choosing companies for peer groups and adjusting the multiple values that managers often intentionally try to sugar-coat.

DCF-models, on the other hand, require a pretty deep understanding of financial analysis and the operations of the company that is being valued. They also neglect all facets of value that are not reflected in cash flow generation, mainly non-operative assets such as spillover patents, recreational facilities, art and exceptionally valuable property. The models also do not take into account the physical condition of the assets. DCF models require simplification, and one variable where this is apparent is the treatment of interest tax shields on debt: in a straightforward DCF valuation, the tax shields’ benefits are modeled into a reduced WACC, assuming constant profitability and a stable capital structure during the forecast period. This is especially true in leveraged buy-outs where the capital structure is built to change. Information availability can also become an issue: SMEs for instance are seldom listed on stock exchanges and it can be hard to separate business units’ financials from the consolidated financial statements of their parent companies.

While there are many limitations, these limitations also imply increased ease of use. To make the valuation as easy as possible, there is now a “30 minute valuation” toolkit available in Reddal Share. The model is constructed using the methodology presented in this article and we challenge the interested readers to estimate the value of a business, be it your own or a company that you are interested in investing in. To further help you, we have the WACC toolkit that helps you estimate the WACC for a business to be used in the DCF model.

The theory of valuation is quite simple but estimating the inputs is not

When conducting a quick valuation, most of the needed input data can be found from the profit and loss statement and the rest can be found from the balance sheet. In multiple valuation, the most commonly used measures are the enterprise value to Earnings Before Interest, Taxes, Depreciations and Amortizations (EBITDA) or the enterprise value to Earnings Before Interest and Taxes (EBIT). When calculating free cash flows, the starting point is usually EBIT or EBITDA. What this naturally implies is that the figures needed from the profit and loss statement are those related to the operational costs and income and other figures like financial costs and income found below the EBIT are not of great importance in this simplistic approach.

Multiple analysis

To start off with the most simple approach, when conducting a multiple analysis you will have to gather the operational performance measures EBITDA and EBIT. In a multiple valuation analysis typically both of these are used to calculate the enterprise value of the company by multiplying the EBITDA or EBIT with suitable multiples. Other multiples that are frequently used in valuation situations are the Price to Earnings (P/E) ratio and EV/Sales to name but a few. Of these multiples, however, the EBITDA and EBIT multiples are more commonly used as the EV/Sales multiple generally yields very differing results and the P/E ratio includes financial and extraordinary items that are not related to the operative performance.

Extracting the EBITDA and EBIT is usually not a difficult task, especially if the operations have been stable without larger structural changes or one-off costs or income. These can naturally be cleaned out to represent operational figures so you do not have to use the figures from the profit and loss statement as they are given. The more difficult task is finding suitable multiples for the analysis. The EV/EBITDA and EV/EBIT multiples are industry-specific and getting a suitable multiple range can be tedious. Generally, multiples are obtained by calculating the multiple values for several publicly listed companies in the same industry. Other multiples can be obtained from precedent transactions where similar companies have been acquired or divested and the transaction value and financials are known. The challenge with both of these approaches is that the data is rarely available to private persons or companies that do not subscribe to related financial databases. A call to an investment banker might thus be the easiest approach to get some multiple estimates for the company or a business unit. In a quick valuation the multiple range only needs to be indicative and a large amount of time should not be spent on this. After the multiple range is determined, you just need to multiply the EBITDA or EBIT values with the multiple to get a preliminary valuation for the company. Considering figures of different years or an average may be helpful especially if performance has varied a lot.

In the table below you will find some examples of industry-specific EV/EBITDA multiples based on material from Valmetrics, which is an independent business valuation company serving parties in the M&A field. As these multiples are industry averages in very broadly defined industries, individual cases can vary a lot, especially if there are valuable intangible assets such as brands or IPR involved.

Valmetrics, EV/EBITDA multiples

In the Valmetrics reports you will find further break-downs into specific industries. These multiples serve as an excellent starting point and by applying a range of +/- 1 or 2, you will have a good multiple range. For other multiple estimates, including EV/EBIT multiples, please refer here (under updated data).

DCF valuation

The multiple approach will yield a preliminary value for the valued entity and it is a good starting point and sanity check for the discounted cash flow analysis. The DCF analysis requires some more data from the balance sheet in addition to the data acquired for the multiple analysis. The formula used for calculating the free cash flow can take a variety of forms, but in a simplistic form it can be modeled as follows:

Calculation model, free cash flow

As mentioned earlier, these metrics give a better view of the company’s ability to create value compared to the profit or loss figure on the profit and loss statement. The EBIT illustrates the company’s ability to run its core operations efficiently and profitably. By deducting the taxes straight from this item and not after deducting interest expenses and extraordinary items you assume that the company only pays taxes on the profit generated solely from its core operations. The change in Net Working Capital (NWC) implies that if you increase your inventories or give customers more favorable payment terms or your suppliers require quicker repayment, more capital will be tied up. This will thus be financed by the cash flows from profits, and an increase in the NWC will thus decrease the free cash flows. The Net Investments imply that if new investments exceed the depreciations there will be a cash outflow as non-current assets are being increased.

The free cash flows must be explicitly forecasted some 5 to 10 years into the future and this is a very difficult part of the DCF analysis. When conducting a simple 30 minute valuation the best estimates can be found in internal budget figures or forecasts if available. When forecasting the NOPLAT you basically need to know two components; the sales growth and the profitability level or EBIT margin. Base case estimates for these can be found in the historical figures and you can for instance calculate the historical sales growth over a couple of years and the EBIT margin for these years. The averages or medians for these figures can then be used in the forecast. In order to get an estimate for the change in NWC you need to calculate the NWC a couple of years back. Then it is straightforward to calculate the historical NWC as percent of sales and this figure can then be used in the future estimates. The net investments can be calculated easily by comparing the investments to the Depreciation and Amortization (D&A). If you expect the company to grow significantly the investments should exceed the D&A and if the company is not expected to do any major investments these can be estimated to equal the D&A.

Discounting the future values to the present

As the forecasted cash flows are in the future it is vital to account for the time value of money by discounting the cash flows to the present with a suitable discount rate. The rate used to discount the free cash flows is the weighted average cost of capital, or WACC. WACC represents the rate of return that the shareholders and bondholders (creditors) of the company should get as remuneration for the money they have put in the company, and is calculated as an average of these two components – hence the name. WACC is calculated as follows:

Calculation model, WACC

As you can see, estimating the WACC requires several input parameters, of which the cost of equity is the most challenging to estimate. The proportions of debt and equity out of total financing can be found in the balance sheet, and the cost of debt is just the average interest rate the company is paying, which you know already (in the case of your own company) or can infer from credit ratings and current debt costs. The applicable tax rate is also easy to plug in.

When conducting a 30 minute valuation, you do not really have time to estimate a theoretically correct WACC as it requires some effort if it has not been done previously. For some WACC estimates, here you can calculate the cost of capital by industry sector. Based on the material on the above mentioned site a good WACC range could be 7-10% with current interest rates. Keep in mind that publicly available data is based on publicly listed companies and that SME’s and unlisted companies tend to have higher costs of both equity and debt and thus higher WACC.

Estimating the cash flows beyond the explicit period

After the explicit forecast has been made for the period of 5-10 years, the company’s terminal value must be estimated. The terminal value is based on the fact that the company most often is assumed to generate cash flows in perpetuity and a value for this time period has to be estimated. The methods for doing this are numerous but in our model we have chosen two methods; namely the perpetual growth method and the exit multiple method.

The terminal growth is formulated as follows:

Calculation model, terminal growth

Of these parameters all but the growth rate have been covered and this is a very critical input when calculating the company’s enterprise value. Since it is a terminal growth rate, the rate should not exceed the long-term economic growth as that would imply that the company would grow larger than the entire economy in perpetuity. Thus, the rate should as a rule of thumb lie in the range of 0-3 % as a larger growth rate would clearly outpace the economy in the long-term. Having estimated the growth rate it is straightforward plug and play, but note that the terminal value still must be discounted to the present.

The other method is the exit multiple method. This model is based on the assumption that the company is sold after the explicit forecast period at a given multiple. In our quick valuation toolkit you can make an assumption that the company is sold after the explicit period at a multiple of your choice. The method is thus basically a multiple valuation approach but with an added explicit forecast period. As is the case with the terminal growth, the estimated terminal value must be discounted to the present.

Having estimated the terminal value and discounted it to the present, it is just a matter of adding everything up. Thus, the present values for the explicit forecast period are added to the present value of the terminal growth estimate.

Sensitivity analysis

As you have probably noticed, the required input for the forecast model is far from easy to obtain and there are no correct answers. Therefore, it is vital that you do a sensitivity analysis where the valuation is done by using different estimates of the key parameters. In this way you will not get one single correct answer but rather several ranges of the company values and by calculating an average or median of these you will get a more robust figure. You can even consider estimating different scenarios and giving probabilities to them, and calculating the weighted average of the results.

전 세계의 기업가들은 새로운 시장에 적용시킬만한 좋은 사업 모델을 찾기 위해 실리콘밸리와 유럽 시장을 주시하고 있다. 그들은 새로운 시장에 이러한 “복제품”을 판매하는데, 때로는 모델로 삼았던 기업에게 이 복제품을 되팔기도 한다. 사업 모델의 특허 작업에는 많은 비용과 시간이 필요하며, 한 국가에서 얻은 특허가 다른 국가에서 사용되기는 어려운 경우가 많다. 이 때문에 사업모델을 복제하는 것은 합법적일 뿐만 아니라, 손쉬운 일이기도 하다. People & Co.의 이혜민 대표는 지금 유럽 시장에서 활약하고 있는 복제의 달인, Rocket Internet의 투자를 받아 한국에 초기 공동창업자(co-founder)로써 성공적으로 성장시킨 경험이 있다. 본 인터뷰에서는 그 경험에 대해 논의하고자 한다.

기업가로서의 이대표의 여정은 순탄치만은 않았다. 그녀는 고려대학교 서어서문학과를 졸업한 후, 굴지의 조선업체 STX에서 경력을 쌓기 시작하였다. 사업 개발 부서에서 5년동안 내공을 쌓은 그녀는 국제적인 창업기회를 찾아 MBA 진학을 고려하던 중, Rocket Internet을 접하게 되었다.

레달: STX에서의 전도유망한 회사 생활을 그만 두시고, 사업가가 되시기로 결정한 이유는 무엇이었나요?

이대표: 결정을 내리는 데에는 친구들과 동료들의 영향이 컸습니다. 제 친구들 중 많은 분들이 사업을 운영하고 계신데, 이분들의 경험담을 듣고서 저 또한 사업을 제 유산으로 남기고 싶다는 생각이 들었습니다. 자신보다 더 큰 무언가를 창조하고 싶었고, 이를 다른 사람들과 함께 나누고 싶었습니다. 이것은 제 인생의 비젼이기도 합니다.

레달: 첫 창업 아이디어에 대한 영감은 어디서 얻으셨나요?

이대표: 매달 고급 화장품 샘플을 배달해주는 서비스인 Birchbox에 관한 TechCrunch 기사를 우연히 읽게 되었습니다. 그 후 잡지 구독료와 같은 구독 기반의 사업 모델을 분석했고, 이것이 한국 소비자에게 꼭 맞을 것이라고 생각했습니다. 한국에는 현재 50여개의 유명 고급 화장품 브랜드가 존재하는데, 이들의 유일한 유통 채널은 대형 백화점 뿐입니다. 그런데 화장품이 매우 비싼 가격으로 팔리고 있는 데 바해, 샘플은 매장에서 무료로 나누어 주고 있습니다. 저는 대형 화장품 회사와 접촉해서 무료 샘플을 얻기 위한 협상을 하기로 마음먹었습니다.

레달: 이 아이디어를 실제 사업으로 발전시킨 계가 있었나요?

이대표: 친한 친구의 소개로 참석한 IT 이벤트에서 Rocket Internet 직원분을 만났습니다. 저는 Rocket Internet이 사업 모델 복제에 초점을 맞추고 있다는 것을 알고 있었는데, 이는 제가 Birchbox 모델에 대해 생각하고 있었던 점과 일맥상통했습니다. Rocket Internet 직원분을 통해 저는 그들이 한국에서 파트너를 찾고 있으며, 투자가치가 있는 사업 모델에는 2백만 유로까지 투자할 용의가 있다는 정보를 접했습니다. 그 후, 저는 Rocket Internet과 꾸준히 연락을 했고, 얼마 후에 독일에 위치한 Rocket Internet 인큐베이터를 방문하게 되었습니다. 이는 좋은 기회로 이어져, 각 분야의 유능한 분들과 함께 사업을 시작할 수 있게 되었습니다.

레달: 대표님께서 언급하신 것처럼, Rocket Internet은 성공적인 인터넷 스타트업 모델을 복제하는 것으로 유명합니다. 여기서 복제품이 의미하는 바가 무엇인 지, 그리고 Rocket Internet이 이러한 모델을 활용하는 방법에 관해 좀 더 자세하게 설명해 주시겠습니까?

이대표: Rocket Internet의 공동 창립자 중 한 명인 Oliver Samwer와 가까이서 일할 기회가 종종 있었습니다 . Oliver는 뛰어난 비즈니스 모델을 식별해내는 데 있어 매우 날카로운 시각을 가지고 있습니다. 간단하게 설명해드리자면, Rocket Internet은 성공적인 미국이나 유럽 회사를 발굴해서 이를 곧바로 다른 국가에 복제합니다. 복제의 원형이 된 기업은 대부분 국제적인 경험이 없는데, 그렇기 때문에 자신의 복제품을 매수하는 것이 국제시장으로 사업을 확장하기 위한 매력적인 방편이 되죠. GlossyBox 또한 독일을 시작으로 한국을 비롯한 여러 나라로 사업을 확장함으로써 원형 기업에게 매력적인 인수 타겟이 되었습니다.

레달: 포트폴리오 회사로서, 이러한 비즈니스 모델을 가지고 있는 인큐베이터와 함께 일하는 것의 장•단점은 무엇이였나요?

이대표: 특별한 비교 대상이 없기 때문에 답변을 해드리기가 어렵네요. Rocket Internet은 제가 처음으로 접한 인큐베이터였거든요. 하지만 다른 인큐베이터에서 일하는 분들의 이야기에 비추어 보면, Rocket Internet은 자신이 인큐베이팅하는 기업들에게 굉장히 구체적이고 일관적인 요구를 하는 편이었던 것 같습니다. Rocket Internet이 가장 중요시한 점은 기업들이 매주 목표한 핵심 성과 지표 (KPI: Key Performance Indicator)와 월간 성장률을 달성하는 것이었습니다. 자연히 기업들에게도 목표한 핵심 성과 지표를 달성하는 것이 중요해지죠. 물론, Rocket Internet의 이러한 요구는 사업가들에게 엄청난 중압감으로 다가옵니다. 하지만 Rocket Internet의 신속한 업무처리 덕분에 기업가들은 중압감을 견디면서 이들과 함께합니다, 스타트업 기업에게 있어서 Rocket Internet의 가장 큰 장점은 신속한 예산 결정과 자금조달입니다. Rocket Internet의 임원들이 한 기업의 사업을 검토하고 운영자금을 조달해주기까지는 불과 하루이틀 밖에 걸리지 않았습니다.

레달: Rocket Internet이 요구한 핵심 성과 지표에는 무엇이 있었나요? 또, 이를 어떻게 달성하셨나요?

이대표: 가장 중요한 핵심 성과 지표 중 하나는 월간 판매량입니다. GlossyBox는 매 달 제품 배송률을 2배로 성장시켜야 했습니다. 첫째 달에는 500개를 배송하였고 그 후 3달동안 각각 1000, 2000, 4000개를 배송했습니다. 이는 결코 쉽지 않았으며 굉장한 집행능력을 요구하는 계획이었습니다. GlossyBox는 웹에 기반하고 있기 때문에 웹 방문자수 또한 중요한 핵심 성과 지표였으며, Rocket Internet은 이 또한 월간 판매량과 비슷한 비율로 증가시킬 것을 요구했습니다. 신입사원의 주된 의무는 이러한 방문자수의 변화를 모니터링하는 것이었죠. 어떠한 수치를 지속적으로 2배씩 성장시키는 것은 쉬운일이 아닙니다. 그렇기 때문에 웹 트래픽을 증가시키기 위해 연계 마케팅을 적극적으로 활용했습니다.

레달: 핵심 창업자로서, 회사를 떠나시기로 결심하신 이유는 무엇이었나요? 현재 GlossyBox의 상황은 어떻습니까?

이대표: 앞서 말한 핵심 성과 지표를 달성하는 것은 제가 사업을 하는 궁극적인 이유가 아니었습니다. 매번 단기 목표치를 달성하는 것은 지속 가능한 성장 전략이라고 할 수 없습니다. 저는 회사를 다른 곳으로 이전시키고 싶었지만 Rocket Internet인큐베이터가 아이디어 도출 단계에서부터 사실 상 거의 모든 자본과 자원을 제공해왔기 때문에 저의 작은 지분으로는 별달리 할 수 있는 일이 없었습니다. 이는 사실 처음부터 예상한 사태였습니다. 창업자들이 가져가는 수익은 주식 공개 상장이나 M&A를 통해 확보한 현금의 극히 일부분입니다.

레달: 복제하여 한국에서 성공할 수 있는 사업 모델에는 어떠한 것이 있을까요?

이대표: 이미 알고계시겠지만, 한국으로의 성공적인 진출사례로는 소셜 커머스로 유명한 Groupon의 복제본인 Ticket Monster가 있습니다. 하지만 이 질문에 대한 포괄적인 답은 드리기는 어렵네요. 제가 이전 사업을 통해 얻은 개인적인 깨달음을 나누자면, 구독 기반의 모델은 아직 한국 소비자에게 익숙하지 않다는 것입니다. GlossyBox는 한국 시장에서 성공을 거두었지만, 우리나라 소비자는 일반적으로 월간 또는 연간 단위의 구독보다는 일회성 구입을 선호했습니다. 또, 한국 소비자는 새로운 트렌드와 제품을 발 빠르게 찾아내는 편이고, 이 때문에 오랜 기간동안 한 상품이 지속적으로 인기를 끄는 경우가 극히 드물었습니다.

레달: Rocket Internet에서의 경험은 현재 경영하고 계신 기업인 People & Co에 어떻게 적용하셨나요?

이대표: 스타트업의 주요 성공 요인은 훌륭한 팀을 꾸리는 것입니다. 저는 이것이 성공의 열쇠라고 확신합니다. 혼자서는 모든 능력을 갖출 수 없을 뿐만 아니라, 아이디어에서부터 시작하여 실제 사업을 진행시키기까지의 모든 업무를 해결할 시간적 여유도 없습니다. 좋은 팀은 일반적으로 뛰어난 기술, 충만한 에너지, 그리고 디자인 능력을 갖추어야 합니다. 팀이 우선이고, 펀딩은 그 다음입니다!

레달: 창업 경험을 통해 얻은 교훈이 있으신가요?

이대표: 일과 삶 사이에서의 균형이 중요하다는 것을 깨달았습니다. 대부분 개인 사업가들은 장시간 근무를 성공으로의 지름길로 생각하여 자신의 모든 것을 희생합니다. 성공한 사업가가 되기 위한 긴 여정은 많은 시간과 노력을 필요로 합니다. 이 여정에서 살아남기 위해서는 일과 삶의 균형을 맞추는 것이 필수적입니다. 이는 특히 팀을 이끌고 있을 때 더욱 중요하구요.

레달: 대표님의 귀중한 시간을 할애해 주셔서 감사합니다. 공유해주신 대표님의 식견에 감사드리며, 한국은 물론 전 세계의 경영인과 예비 사업가들에게 가치 있는 정보가 될 것입니다.

이대표: 감사합니다.

***

People & Co는 Bebe & Co.의 지주 회사이며 웹 기반 구독 사업을 통해 유아 제품 및 유기농 음식을 판매하고 있다. People & Co는 현재 Bebe & Co.와는 별도로 새로운 서비스 개시를 준비 중이며, 자세한 사항은 곧 공개될 예정이다. 한국 시장에서 이혜민 대표가 성공할 수 있었던 이유는 스타트업 커뮤니티의 다양한 글로벌 비즈니스 모델을 경험했기 때문이다. 새로운 글로벌 사업 모델에 일찍 노출된 사업가들은 향후 다른 지역으로 진출하거나 다른 수익 구조를 모색 할 때 유리한 점이 많다. 앞으로 많은 창업가들이 경험의 장을 넓혀 국제적으로 성공하는 스타트업 기업들이 많아지길 기대해본다.

Christoffer Winquist (38), the CEO of Rewindy, recently decided to close the shop. In this interview he shares his one-year experience of building the company from an idea to the beta launch. While deciding to give up was a hard decision, he says that he has no regrets. The learnings from Rewindy last a lifetime, and he is now looking for new opportunities, potentially as an entrepreneur.

Reddal: Tell us a bit about your background, and how you ended up founding Rewindy.

Mr. Winquist: I have a background in industrial management at Aalto University, and like so many graduates from that department, my first job was with a consulting company, McKinsey & Co. Having done a three year stint there, I then moved onto Nokia where I stayed for a total of 10 years with tasks ranging from strategy and business development to sales and product planning. My last job at Nokia was with the Meego platform, and when that came to an end I felt it was time to look for new opportunities.

During my time at Nokia I had come to close contact with companies such as Flickr, and was also involved in an acquisition of a service for sharing photos and videos. Photography is my passion, and I had been working with imaging for a while at Nokia. When my job ended, I got a package that gave me some financial independence, and in addition Nokia was willing to give seed money to spin-offs. I gathered a founding team for Rewindy, with the ambition to change how people do visual story sharing.

Reddal: What was the driving force that made you become an entrepreneur?

Mr. Winquist: Basically, I had seen enough of the corporate world, and wanted to try my own wings. Also, given the funding Nokia provided (together with a government agency, about 50k€), I had the financial means to take the leap. So I guess that in the end, it was something I had always wanted to do, and when this opportunity came I seized it.

Reddal: What was the basic problem that Rewindy sought to solve?

Mr. Winquist: You know how on services such as Facebook you post a picture? People always think that others see the picture like they see it, but of course that is not true. Without the story behind the picture, the picture easily remains meaningless. So we wanted to bring the storytelling aspect to pictures. Our initial “minimum viable product” was a service that allowed people to share pictures with the story, in form of speech bubbles and themes, and from there we built on. The revenue model we had in mind combined freemium characteristics with physical products, such as a storybook printing service.

Reddal: Can you tell us something about the phases that Rewindy went through?

Mr. Winquist: The overall period was relatively short, 12 months, but a lot happened. The initial phase, let me call it “pre-founding”, took about 2 months. This was in December 2011 – January 2012. I developed the idea, gathered a team, and got the initial founding. The team had three people; I took on the CEO role and in addition there was a designer (also from Nokia) and a technical founder who actually was a serial entrepreneur. The alpha release was done by June, and we went up to beta in July. With the beta, our primary focus was on building up the user base.

Reddal: What was your ambition?

Mr. Winquist: The objective was to build a sufficiently credible user base to get funding for the next round. We already had a very good advisory group with experienced entrepreneurs on it, but we also realized that given our B2C focus our next step would most likely would be to Silicon Valley. We felt that Helsinki just did not have that B2C experience around.

So, we were trying to raise about 150k€ and have that matched by another 150k€ from TEKES (a government technology funding agency), which we felt would be enough for the next step. I met with a lot of angel investors, I would say perhaps over 150, and had serious 1-on-1’s with about 50. During the summer, I also went to Silicon Valley and met with entrepreneurs, incubators and various experts. Working in a brand name incubator like 500 startups or Y-combinator was what we had in mind.

Reddal: What happened?

Mr. Winquist: You know, in the early stage, the first critical step for practically any B2C company like us, is reaching a loyal user base on the order of 1 million users. We simply did not manage to push across this milestone, and in the end the initial funding dried up. We had five angels on board for about a half of the round , but their commitment depended on our ability to find the other half to complete the round. Within our home market, we just were not able to find this funding. So, in the end, we had no option but to fold.

Reddal: How did this affect you financially?

Mr. Winquist: The initial funding we received had covered our running costs, and the package I got from Nokia when I finished working there kept me afloat. Oh, and my wife is a hard worker! (laughs)

Well, seriously, things were fine. I really had not depleted all my savings, given the starting point we had.

Reddal: What was your lesson learned, what advice would you give to other entrepreneurs?

Mr. Winquist: Well, first of all, no regrets! This was a great learning experience and a very interesting time for me and the team. The amount of things we experienced cannot be compared even closely to what a regular corporate job provides. So I am very happy that I seized this opportunity.

I also feel that there is so much that large corporations can learn from smaller startups. I mean, things in a startup simply have to be effective and focused. Comparing to my corporate career, things happened at lightning speed.

From an operational perspective, a big lesson was the importance of disciplined user metrics. Defining the metrics and targets, measuring, learning and improving the product based on the findings. This is really crucial, and you really have to push yourself on this matter on a daily basis!

Reddal: Thank you very much for sharing your story!

Mr. Winquist: Thank you!

***

Mr. Winquist is now looking for new opportunities in entrepreneurship, although he admits also considering work in consulting. He still considers himself an entrepreneur at heart, and doubts he will ever be able to return to a corporate job.