Slack: how the messaging app could change after an IPO

Slack: how the messaging app could change after an IPO

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Slack is especially popular in the tech world.
Farzad Nazifi via Unsplash, CC BY

Paul Levy, University of Brighton

Slack, the collaboration platform favoured by designers, developers and an increasing number of companies, is rumoured to be planning an IPO. In similar fashion to Spotify, it is reportedly considering going direct to market instead of using one of the household banks as an underwriter.

One suggested reason is that Slack’s investors can get out fast. A direct listing is a way for the company to grow and attract funding in the most direct and least expensive way.

Slack fans have reason to be concerned. We are not talking buyout and takeover (yet). But we are talking a move that may bring shareholder pressure and influence, and with it the quest for short-term returns at the expense of longer-term creativity and innovation.

The current figures show how quickly Slack has grown. One estimate by financial news watchers Barron’s is “US$300m of annual recurring revenue which has more than doubled in the past two years”. In 2018 it was estimated to have reached 8m daily active users with 3m paid users.

For many individuals, groups, communities and entire large corporations Slack is becoming a core process for team meeting, product and process development, core decision making, information sharing and is even replacing email as a default mode of communication. A lot of people love the platform because of its independent roots, its independent spirit of innovation, its culture of plug-in tools and collaborative values. The company will have to be careful not to lose this appeal as it grows and gains more outside influence.

Success is not a given

With growth comes opportunity and the suggestion that Slack will publicly float this year isn’t surprising. The question that arises is, as with full acquisitions, will the landscape of shareholding quickly change and pressure the company to go for quick income, and drive risky and exciting innovation off the radar?

Success is not a given for any growing company. IPOs and buyouts can bring new opportunities, open up markets and enable investment in new product innovation. But the innovative, often boundary-pushing spark of smaller disruptive startups can be snuffed out as they become more established and try to appeal to a mass market.

There are, of course, risks from bigger competitors with established reach into larger corporations such as Microsoft’s Teams program, which was built to directly compete with Slack. Growth that comes from a public listing may be inevitable, but it comes with risks, and there may be a price to pay, depending on who invests and why. Private investment does have the advantage of being able to seek backers that align more with a company’s ethos and values.

Many innovative digital startups have been acquired by larger corporations who gobble up their originality and innovative capability. This is often to the horror of grassroots, early-adopter customers who feel these digital pioneers have sold out to mediocrity and risk-averse dinosaurs. And the evidence is certainly growing that, as shareholder influence from outside becomes more prominent, innovation can get sacrificed in the pursuit of corporate mediocrity and shorter-term gains.

This is a classic story of how digital startups can get eaten up – as happened with the social network Yammer. Another oft-quoted example of how innovative initial products can become scuppered is Skype, which was bought by Microsoft in 2011. From independent-spirited, game-changing startup, Skype is now a product set within the rules and desires of a big corporation and has lost users as a result.

Value extractors vs creators

There are no definitive studies of how public listings of digital firms either stimulates or stifles innovation over time, though there is certainly anecdotal evidence. The view that “prevailing stock market ideology enriches value extractors, not value creators” is increasingly stated. It can indeed suppress and even kill off innovation.

For platforms such as Slack, this relates to being proactive and responsive in relation to its current and potential user base, taking risks, being bold, creative and boundary breaking. Will a public listing attract those looking for more guaranteed rewards? Much will depend on the level and type of new shareholder influence and interference.

What we do know from the research is that when shareholders intervene more, this tends to block innovation and ultimately impacts the bottom line. For Slack, this could look like underfunding for innovation and limiting risk taking and creativity. Or if higher revenues are sought through selling user data or partnerships with corporate interests, for example, this could hurt the brand’s popularity with users.

This is a risk for those who have committed to Slack in order to change their workplace culture towards something more collaborative and smarter working habits. Slack reaches deeply into that culture and that commitment could prove to be damaging if the product is diluted or changed in ways that stifle that culture change.

There is no evidence that this will happen with Slack, but it is worth posing the question: will Slack lose its grip on its founding values and innovative roots as new shareholder interests start to take hold? Those who have embedded Slack into their company cultures might just need a Plan B.The Conversation

Paul Levy, Senior Researcher in Innovation Management, University of Brighton

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Internet giants could strangle the smart tech revolution at birth – here are our options

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Candy crush?

Martin De Saulles, University of Brighton

Google is digesting its third whopping antitrust penalty from the European Commission, having been fined €1.5 billion (£1.3 billion) for abusing its market dominance around online advertising. The case concerned web publishers embedding a Google-powered search engine on their site, and being prevented from letting third parties place search adverts at the top of search results.

Margrethe Vestager, the EU’s competition commissioner, said this “denied other companies the possibility to compete on the merits and to innovate – and consumers the benefits of competition”. It takes the EC’s total antitrust fines against Google to €8.2 billion in two years, following previous findings in June 2017 and July 2018, respectively about Google unfairly advantaging its Shopping service and Google Chrome browser.

Elizabeth Warren: break-up call.
Kelly Bell

The European Union is not the only one gunning for big tech. UK chancellor Philip Hammond has hinted about tightening digital competition policy following an independent report which raised concerns that the sector was anti-competitive. And US presidential hopeful Elizabeth Warren wants the likes of Google, Amazon and Facebook broken up to unleash a new wave of digital innovation. In an echo of the EC’s Google findings, Warren cites various examples of these companies using their market dominance against smaller rivals – Amazon creating own-brand versions of goods being sold on its platform, for instance.

I broadly agree with this growing movement. Yet my main concern hasn’t come into focus – even though it’s arguably the biggest threat these companies pose to the future. They are standing in the way of the next big digital revolution, and need to be reined in before it’s too late.

The smart future

The first computing revolution started in the 1950s as mainframe computers slowly entered the workplace and began to automate basic back-office functions like payroll and accounts. The second revolution, in the 1980s-2000s, centred on the PC and the migration of computers to the desktop and then to our homes. Third came the mobile revolution, which put those computers in our pockets so we could take them wherever we went.

The next shift has started already. In our homes, smart assistants like Amazon Echo and Google Home are steadily colonising personal spaces, along with the likes of smart lighting and security systems. Smart home devices shifted some 640m units last year, and will be doing twice that by 2023.

Over the same period, we can also expect something like 50% growth in unit sales of wearable devices like fitness trackers and smart clothing – a huge market for Apple – to approaching 300m a year. As for the workplace, an equivalent flurry of sensor technology, underpinned by AI, is now transforming factories and production lines. Sometimes known as industry 4.0, the sector is forecast to double to over US$150 billion by 2023, and over a trillion dollars by the early 2030s.

From despair to wear.
Kaspars Grinwalds

Hand in hand with this will be an explosion in smart services. Tech companies will increasingly seek to improve our lives by crunching sensor data from all this hardware, as well as from all the activities that we do on our phones. Alongside the tech giants, numerous start-ups are staking out territory in this frontier.

In the US, a company called Notion has raised US$16m towards smart home sensors to alert owners via a phone app about water leaks, intrusions and temperature fluctuations. British start-up McLear has launched a smart ring which can electronically unlock doors and authenticate payments in retail outlets. If you look on start-up databases like Beauhurst or Crunchbase, you come across thousands of similar companies.

But if there is a rapidly growing ecosystem, there is a competitive imbalance. Just like Notion, many smart devices rely on smartphone apps as the interface through which users control them. With almost 3 billion smartphones in use globally, almost three quarters are Android devices, controlled by Google, and one quarter are iOS, controlled by Apple.

Apps distributed via these two gatekeepers’ app stores must comply with their regulations. In many cases, the giants themselves will be competing in the same marketplace. We already knew that Apple was betting heavily on health-related wearables services, for instance; the Apple credit card announcement shows it also has finance in its sights.

Similarly, Amazon last year spent US$1 billion on smart doorbell maker Ring. Type “smart doorbell” into Amazon’s search box and, perhaps not surprisingly, its own products show up first. As innocent as this might be, one can imagine the temptation for such companies to give preference to their own devices and services when presenting search results.

There will be blood

Yet search is actually something of a side issue in all of this. Between them, Amazon, Facebook, Google and Apple hold detailed data on the interests, health, social connections and purchasing habits of billions of people. This data will be an essential input for the AI systems that will power the coming generation of smart services. This, therefore, is the greater threat to competition and innovation.

Oil be darned.

If “data is the new oil”, as many have argued, then the US break-up of Standard Oil in 1911 into 34 companies because of its dominance on oil production and supply is something we should be studying closely. Whether the answer is to break up some tech giants, force them to open up their data assets to new entrants, prevent them buying start-ups in this sector, or allow users more control over their personal data, this is a debate we should have urgently. Calls in the UK for big tech to make its mapping data freely available are almost certainly the shape of things to come.

The open nature of the internet over the past 20 years created an environment where innovation could flourish. It is vital that this continues, but legacy monopolies from the previous revolution threaten to slow the process down. Unless digital data is liberalised, smart services could still fall a long way short of their potential. As we saw with the electric car throughout the 20th century, vested interests are more than capable of impeding progress to keep their own business activities alive and well.The Conversation

Martin De Saulles, Principal Lecturer, Centre for Digital Media Culture, University of Brighton

This article is republished from The Conversation under a Creative Commons license. Read the original article.