Want to build a successful mobile enterprise company? Consider an industry-focused approach.
By Kevin Spain, General Partner, Emergence Capital
One of the biggest opportunities for enterprise entrepreneurs today is in mobile. The reason? Mobile makes it possible to deliver business applications to the 80 percent of the global workforce that is “deskless,” meaning they do not sit at desk at work. These deskless workers have often relied on manual, or paper-based processes, to do their jobs. Now a vast number of global workers have a smart, connected device with them at all times, there is a huge opportunity to replace analog work processes with digital applications for the first time.
The first wave of mobile solutions tended to be broad-based, “horizontal” apps that attempted to meet the needs of all employees in all industries. Now, we are seeing an increasing number of mobile enterprise solutions that are specific to industries, particularly for verticals with a heavy concentration of deskless workers. For example:
· In healthcare, doctors and nurses are on their feet more than they are at desks, and a mobile messaging app enables workers to communicate with their colleagues more effectively. A broad apps like Slack might initially seem like a natural fit, but neither is HIPAA-compliant, which makes it difficult to gain endorsement from health system CIOs. Instead, 70% of U.S. physicians are now using a HIPPA-compliant option, Doximity, which is tailor-made for healthcare workers.
· In construction, a mobile document management solution allows all workers on a job site to have the latest blueprints with them at all times, reducing the chance of a building error. A general-purpose file sharing solution like Dropbox is a great first step, but it is missing key, construction-specific collaboration features, such as punchlists that link to specific locations on a blueprint. An industry-specific app, such as Fieldwire, is gaining market share in the industry, in part because of this feature.
These are two of the many ways we are seeing industry-specific mobile enterprise apps emerge. In fact, based on research we have done at Emergence, nearly one-third of mobile enterprise app companies funded to date are targeting a specific industry.
What does it take to build a successful industry-focused mobile enterprise company?
To get a better idea of what it takes to build a successful industry-focused mobile enterprise company, we worked with McKinsey & Company’s Growth Tech practice to survey hundreds of current mobile enterprise entrepreneurs. Based on what we saw in the resulting analysis, and Emergence’s deep enterprise investing experience, here are some thoughts:
1. Sell high into the organization: In industries with large deskless worker populations, it is difficult, if not impossible, to sell directly to the end-user. Workers on a manufacturing plant floor or retail salespeople often do not have individual budgets to make app purchasing decisions. Instead, it is necessary to target the executive-level from the beginning of the sales process. In our recent survey of mobile enterprise app companies, top executives made industry-focused purchases 80 percent of the time, compared to 64 percent for horizontal, or department-specific, applications. For industry-focused mobile enterprise company, it may be necessary to build a sophisticated, high-level sales infrastructure early in the development cycle.
2. Push for greater revenue per user: Companies that sell industry-specific mobile apps are able to capture greater annual revenue per user than their horizontal counterparts. According to the Emergence/McKinsey survey, 47 percent of companies with an industry-oriented value proposition had annual revenue of more than $500 per user, compared to just 15 percent of companies with a horizontal focus. This may be because industry-specific app companies are more likely to sell to executives, which have larger purchasing budgets than lower-level employees. Obtaining higher, per user revenue may be necessary to building a large, sustainable company in an industry-specific app market since there are fewer potential users compared to cross-industry offerings.
3. Have deep industry expertise on the team: Successful, industry-focused companies often have a co-founder or senior executive with extensive experience in the targeted domain. For example, Glen Coates, Co-Founder and CEO of Handshake, a mobile enterprise company that focuses on the wholesale trade industry, spent several years with a wholesale company before starting Handshake. He created Handshake to address the problems he experienced during his time in the wholesale industry and is now using his expertise to service thousands of customers. This same pattern has emerged in successful, non-mobile enterprise app companies such as Veeva Systems and Athenahealth.
4. Heavily leverage customer referrals: One of the most compelling aspects of industry-focused solutions is that many buyers in an industry know each other and run their businesses in a similar fashion. Industry-focused mobile companies have the opportunity to quickly build a reputation within an industry and capitalize on a high percentage of reference selling. For example, HotSchedules, a provider of mobile scheduling solutions for the hospitality industry, sells to restaurant owners and managers. Many of these individuals first hear about HotSchedules from their peers at other restaurants. Conversely, there is little margin for error when it comes to customer satisfaction, and news travels fast about poorly performing apps.
At Emergence, we are incredibly excited about the opportunity for entrepreneurs in mobile enterprise. Industry-focused applications have incredibly potential to capitalize on this new market. In order to succeed and build a sustainable organization, entrepreneurs must capture the unique approach required for industry-specific applications. With the right application and sales model, the opportunities for entrepreneurs are endless.