The Perks Of An Unconventional Partnership: A Case Study

Sometimes, when you’ve had a 40-year career, you think you’ve seen it all. But when that 40-year career is with entrepreneurs in the tech industry, there’s always something new.

Recently I saw an innovation that surprised me all over again. One of the things that interests me most is hacking the way we work to eradicate pain points — so people don’t have to commute to an office, or deploy onerous business software, or can have mentors beyond the confines of their company. And now I saw a new hack that I think can benefit any company: a partnership between a company that’s starting out and a company that’s scaling.

Not long ago, Sanish Mondkar, a seasoned operating executive and most recently the chief product officer at SAP, came to me with an idea to use Artificial Intelligence to help retailers improve how they schedule workers and change how they manage labor. Sanish looked at labor like a big supply chain — probably the biggest in the world — but one that was wildly inefficient. Unlike the super sophisticated supply chains he worked with at Ariba and SAP, this one was “in the Dark Ages.” Employee churn was high. “It was really broken,” he said.

With the changes in how we work, increased opportunities for flex work due to the growth of Uber and Lyft, and the fact that employees are desiring more control over their schedules, companies need a new way to manage their workforce. Sanish’s vision was to build a software company that could provide compelling work options for employees and greater efficiencies for businesses.

In order to successfully build the product, Sanish needed to be put in touch with retailers to really learn about their pain points. Immediately I thought of Jacob Jaber, the CEO of Philz, the fast-growing coffee chain. Like many retailers, most of Philz’s employees were hourly workers and attrition was high. Compiled data from employee exit interviews at Philz found that about 30–40 percent of turnover is due to employee availability limitations resulting in them not being able to commit enough hours. (Philz is not alone in having to deal with turnover; in 2016, the turnover rate in the hospitality sector was more than 70 percent, according to data from the Bureau of Labor Statistics’ Job Openings and Labor Turnover (JOLTS) program. All of this comes at a great cost to companies.

“Would you like to meet Jacob?” I asked Sanish. (Disclosure: I’m an investor in Philz, and my investment firm WIN invested in Sanish’s company.)

That meeting led to something incredible. There was a total mind meld. After talking for 10 minutes the two CEOs decided they would develop the software product in concert. Philz gave Sanish’s startup, Legion, office space and full access to its team. They used seven stores as a “lab” and the two companies spent a lot of time together, not just on the tech side, but on the people side. That was how they could learn about patterns that would enable them to forecast future work schedules and automate the process.

While it’s not unusual for startups to do a beta with another company, it is unusual for the CEO of that company to be the one to invest immense personal time to develop an idea and even help launch a new product that is not their own. It’s even more unusual to have the CEO champion the product and quickly deploy it enterprise-wide. But twelve months after starting this skunkworks operation, Philz rolled out Legion’s new machine learning-based scheduling and operations tool to the more than 1,000 people who work in Philz stores around the country.

It was met with success. The Philz team members gained more power over their schedule and store leaders gained more time due to Legions automated scheduling capabilities. That means that managers can spend more time focusing on proactive activities that positively impact their customers and growth. With Legion’s technology, Philz has been able to offer a wide spectrum of opportunities to its team members. It was transformational for the workforce. One Philz worker was able to adjust their scheduling preferences to pick up shifts in Santa Monica while on vacation.

Working so closely with Philz enabled Legion to go farther faster. “It was very impactful,” says Sanish. “We would not have been at this point.”

How can any leader apply the lessons of the Philz and Legion case study?

Look for help in not-so-obvious places. The best leaders are creative and seek out non-traditional ways to solve pain points that could not have been done in the typical manner.

Invest in the unusual. In this case, Jacob, a very innovative CEO was willing to commit precious time to an idea that was not yet a product and that paid off.

Collaboration and innovation go hand-in-hand. Winning in today’s world means asking ‘can we win together?’ Innovation is difficult to achieve alone. Find help in the right places.

Think bigger. Sanish was smart and didn’t make the product too narrow to meet the needs of Philz exclusively. He ensured the product would be applicable to others and it has, evident by new customers including CREAM and Barry’s Bootcamp in the Bay Area.

This is a story of win-win. Both Philz and Legion are both further along because they took a risk and made an investment and built trust — and with that, magic happened.