The Game-changing Economics of Fractional Availability

The tech world is in many ways like a large city. While we spend most of our time in a few neighborhoods, it doesn’t really come as a surprise to encounter an old friend or colleague that you haven’t talked to in years, hanging out in your corner café. So I was not surprised to hear that my old friend Antony Brydon had started a new company with a compelling value proposition, called Directly, and that he and his head of marketing, Lynda Radosevich, thought I’d like to learn about it.


Antony Brydon

I met Antony when he was CEO of Visible Path, an innovative social startup, one that was working to build the work graph — through email analysis — in the ‘00s. Visible Path was acquired by Hoovers in 2008. Perhaps they were a bit ahead of the market, but that’s a sign that Brydon & Co are generally ahead of the power curve.

I was also not surprised that Directly’s value proposition is very, very smart: helping other companies scale their customer support capabilities by breaking out of what I think of as the skills versus wages snare (see figure 1).

The snare is this: as the necessary skill level for customer support increases, the wages that must be paid increase. This is a fundamental aspect of supply and demand.


figure 1 — The Skills v Wages Snare

But Antony and his partners have come up with a way to break the snare, and Directly is the platform on which that magic happens.

I recently interviewed Antony about Directly, and why the company is growing so quickly.

The Interview

Stowe Boyd: One thing I’d like you to do is tell the origin story. In every superhero comic strip, there’s the story that they tell about how Peter Parker got bitten by a radioactive spider, or Steve Jobs visiting PARC. So, what led to the founding of Directly?

Antony Brydon: It was not as dramatic as Peter Parker and the radioactive spider, but it was interesting. And it was interesting because the company founding  and the initial  inspiration were probably 15 years apart. Back before Visible Path, I worked in a call center for a few years: back in ’98. I worked for a venture firm which invested in Genesis, Aspect, and Aurum: a lot of the early call center players.

Call centers was an interesting beat, but it was a little depressing because the customers were very rarely happy with the service they were receiving. – Antony Brydon

For the better part of three years, that was my beat. And I was looking at a lot of Fortune 100 call center buyers to figure out what products they needed. Call centers was an interesting beat, but it was a little depressing because the customers were very rarely happy with the service they were receiving.

The agents in the call center were a downtrodden labor force: modern-day galley ships. The call center managers were doing the best they could, but often saw themselves as sort going to war with the tools they had. Under equipped and underserved. Very tactical.

Genesis had some incredible skill-based routing that I used in a project. It could actually connect a customer to an absolute perfect agent. But that capability wasn’t being used very broadly. There were a lot of reasons it wasn’t. Some of the call centers didn’t want to hire the truly skilled agents because it could cost more money.

SB: Right, and I bet they didn’t want to test people to gather all that data, either. That was expensive, too.

AB: Yes. They didn’t want to break their agents down into different pools based on skills levels because utilization would drop. If you had one homogeneous pool, you could give a call to anybody. If you had 10 skills-based pools, utilization fell through the floor, so the economics fell down. A great example of really great technology that didn’t get applied anywhere near the degree that it should because of the constraints in the business model. And that, entrepreneurially, was pretty depressing to watch.

My diagnosis was that the problem wasn’t the technology. The problem was the talent side of the equation, and how that talent was being managed. There was no amount of technology to fix it. When you’ve had very low skill folks being hired at very low wages, who are being pushed to handle 60, 80, 100 customers a day and sort of being churned out 12, 13 months later once they met the learning curve, well that invariably put a low ceiling on customer experience. A depressing trend, and that was the reason I made a conscientious move to stop working on it

That wasn’t the inspiration for Directly, per se, but that was my diagnosis at the time. That was the real problem. It made me very unexcited.

For the last kind of 15 years, whenever Jeff [Paterson, the co-founder and head of product at Directly] and I sold a company, we would come back to this problem that had bothered me a long time ago and just started hacking to see if we had any new approach or insight that we had that we could bring to bear on it.

SB: You’re saying the obvious thing was being blocked by the business model, which led low-skilled people to become more skilled, and then their higher wages would become unaffordable.

AB: Yes, absolutely. Skilled workers could have been created very quickly. So, if you had a Samsung Galaxy question that was routed to a Samsung Galaxy expert, and that person was doing a normal number of inquiries for the day and wouldn’t have the boot on the back of their neck to get off the phone in 6 minutes. But that was blocked by the economics of the business model, and that blocked the talent model.

We looked at this in 2001 after eMusic had just got acquired. We looked at it in 2008 after we sold Visible Path. When we came back to it in 2011, we had the benefit of seeing a lot of these on-demand companies coming up. We saw Lyft coming up. And Uber coming up. And Airbnb. And all of these companies taking advantage of a kind of fractional availability.

When we applied that to the old problem, we saw for the first time we saw the potential of pulling together people with much higher skill sets than would ever sit in a call center. And then making them available for small fractions of time. When their skill set really matched a customer’s problem, and at levels where they could really opt in and delight a customer. With that combination of the ability to get more talent than had existed before, and then also to render that talent. Making the business model, the economics of it, work.

So that was the initial insight. That’s what started down that pathway quickly, building some quick primitive apps and starting testing that idea. It bore out very quickly.

We did some initial tests in kind of 6, 12 weeks of initial building. We got some very good signals back that we could attract very skilled folks and pair them with customers very efficiently and very quickly. It took a lot of work to actually develop the engines and all of the enterprise innovations. But those are the book ends. There was that insight in ’98 that no amount technology could fix broken talent model and a broken business model. Then there was that ‘aha’ in 2011 and 2012 that the on-demand piece would be a very elegant solution to this problem.

At that point in the interview, I started to sketch a 3D model in my journal, based on Antony’s use of the term ‘Fractional Availability’. In figure 1, the 2D model above, we saw the snare, the dead-end that Antony has described as an economic problem that technology couldn’t fix in 1998. But with the surge of interest in on demand platforms — like Uber, Lyft, and Airbnb — a new alternative appears.

An additional dimension appears, so that people with high skills can still be affordable, because they don’t have to be hired as full-time workers sitting in a call center. They can be paid only for the time that they are handling customer support requests, and they have gained their expertise at no expense to the company using their services on a part-time, on-demand basis. They’ve gained that skill as a power user, on their own time, for their own reasons.


Figure 2 — Fractional Availability

Here we see the 3D reality: it is possible to pay low ‘wages’ (perhaps ‘costs’ would be better) for highly-skilled customer support because of the wormhole that is fractional availability. (I think of it as something like the Guild Navigators in the Dune series, who can ‘fold space’ and travel ‘without moving’ from one star system to another light years away.)

So, if you take the 3D chart above and look at it end on — concealing the dimension of fractional availability, it would look like figure 3, below. Directly allows companies to shift the needle from high costs for high skills, by tapping into the game-changing economics of fractional availability.


Figure 3 — Back in Two Dimensions

Theories into Practice

In the next post in this series, I will dig into the specifics of how Directly has moved the needle at a specific customer’s call center operations, a case study based on the adoption of Directly at MobileIron. But behind that practical and tactical step-by-step adoption is the origin story of Antony’s frustration with call center economics in 1998, and the role that fractional availability is having on the world. Directly’s success has come from harnessing that theory, and making it do the heavy lifting.

Also, you might like to hear Antony and Jonathan Keane,
Director of Customer Service at Republic Wireless in a livecast on the topic: How To Deliver 2.9 Minute Response Times During A New Product Launch, Thursday, February 25 @ 11:00am PST/ 2:00pm EST.

Luxe is expanding quickly, but how are its margins?

Valet parking app Luxe, one of the newer on-demand entrants, is growing fast. On Tuesday it announced its most recent funding via a blog post, a $20 million round led by Venrock and Redpoint.

It’s finally launching its Android app, which it told TechCrunch it has had ready for two months. Luxe put off releasing it because it wasn’t sure it could meet the demand.

As an operational business, Luxe has a lot of moving parts. It allows people to order a valet to meet them anywhere they’re headed in the city. That valet picks up the car and parks it in a nearby lot that’s partnering with Luxe. The valets themselves, frequently traveling by scooter, have to be there before the person drops off the car in case it’s a busy intersection with nowhere to park. Furthermore, when the person requests their car to return home, they can do so anywhere in the city, not just where they dropped it off.

That’s an intricate system, far more so than just a car on demand, like Uber, or delivery on demand, like Postmates. Luxe doesn’t have it totally figured out yet, and when people drop a pin they’re sometimes told that no valets are available. It’s not surprising that Luxe chose to go slow before releasing its Android app.

This is what it looks like on Luxe if you request a valet when none are available in your area.

This is what it looks like on Luxe if you request a valet when none are available in your area.

Perhaps more importantly than funding or Android news, Luxe announced it will expand to three new markets — Chicago, Boston, and Seattle — by the end of April. That suggests that it’s starting to nail down its operational process. Despite that strong growth, the company is still lagging a bit behind its competitor Zirx, which was first to the on-demand parking scene. Zirx has received far less fanfare (no write-ups in the Wall Street Journal or New York Times, unlike Luxe), but with its head start it already expanded to Seattle and Washington D.C.

The big question for both of these companies is whether they’ll be able to make a profit. Both are venture-backed and charge a pittance of $15 to park a car for the entire day. That low price is a big part of the appeal for customers. But given that this fee includes the cost of a valet schlepping to and from wherever you happen to pull up, in addition to the parking spot itself, it’s hard to imagine that $15 covers the cost of the service.

SJ Sacchetti, a Luxe spokesperson, told me that they’re not losing money on every transaction. “Through scale and increased access to inventory, we’ve been able secure pricing below what a consumer is charged,” Sacchetti said. “Continued growth and new markets will continue to help us on both fronts.”

She did say that the pricing may vary in new markets, depending on the cost and availability of parking options for Luxe. I wonder if we’ll see the addition of surge pricing, as happened in the on-demand meal and delivery space with companies like Postmates, Sprig, and SpoonRocket.

On-demand parking app Luxe expands to Los Angeles

One of the more luxurious on-demand companies out there, valet parking app Luxe, is moving into Los Angeles come December. That’s its second market, only a month and a half since launching its first publicly in San Francisco.

Will Apple Build Cloud-Based TV?

Apple could be ready to upend the living room market in a truly revolutionary way. Analyst Peter Misek thinks Apple is just about ready to launch a new cloud-based video streaming service that could go well beyond what Apple TV already offers.

Hollywood Studios Place Bets on On Demand

Hollywood studios together with cable operators launched an ad campaign today aimed at educating consumers about on-demand video rentals available directly through their local cable providers — and making up for the shortfall generated by declining DVD sales.
20th Century Fox (s NWS), Focus Features, Lionsgate (s LGF), Rogue, Sony Pictures Entertainment (s SNE), Summit Entertainment, Universal Pictures (s GE) and Warner Bros. Entertainment (s TWX) have partnered with cable companies Armstrong, Bend Broadband, Bright House Networks, iO TV, Comcast (s CMCSA), Cox, Insight and Time Warner Cable (s TWC) for the national marketing initiative, which will include TV, print and interactive ads, as well as a dedicated web site at Altogether, the companies plan to spend $30 million on their “The Video Store Just Moved In” ad campaign.
Read More about Hollywood Studios Place Bets on On Demand

Why You Should Wait To Buy a Set-Top Box

Warning! This holiday season you will be tempted to purchase one of those set-top boxes that deliver movies directly to your TV set. You will be lured by the idea of having this content on a digital tap, serving it up without ever needing to get off the couch. Don’t be fooled! While these devices and services are definitely getting better — and even approaching awesome — this holiday season is not the time to buy.

There are a lot of entrants in the set-top box space, but big names you’re already familiar with will grab most of the attention this season. Apple, Netflix and now Blockbuster all have set-top box solutions ready to pump piping hot video content to your TV.

Apple TVOf the three biggies, the Apple TV has been out the longest. The box costs $229 for the 40 GB model and $329 for the 160 GB one. It plays content, which is purchased or rented on an a la carte basis from the iTunes store, as well as music and other content stored on your network. New releases are available for purchase (but not always rental) day-and-date with their DVD release.

Why you should wait: Apple makes excellent products, but $229 isn’t chump change. If you watch a lot of television shows — especially in high definition (HD) — sticking with your cable or satellite provider might be more economical. Plus, MacWorld is right around the corner in January. Even though my colleagues over at The Apple Blog say a hardware update is unlikely (Apple just did a software update for the device), why take that chance?

netflix_lg_bd3002Where Apple takes a surgical approach to its set-top offering, marketing a single solution, Netflix is blasting away with a shotgun — and that’s not a bad thing. The company has worked tirelessly over the past year to get its online streaming service up and running on a number of devices including the Roku ($99), TiVo ($149 – $299), Xbox ($199), and Samsung and LG Blu-ray players ($399). Movies are streamed (not downloaded) so there is nothing kept locally on your device — and HD streams are rolling out across most of the partnerships. Content is an all-you-can-eat smorgasbord included your Netflix subscription price.

Why you should wait: Netflix offers a subscription plan, rather than a la carte rentals. Because of complexities in the licensing and release windows, that meansit doesn’t get access to new releases. So no matter what flavor box you buy, after the novelty of it all wears off, there aren’t enough titles to choose from (unless you consider Improve Your Sailing Skills must-see TV).

mediapoint_angled_frontBlockbuster’s device, launched just last week, is the latest entry in the set-top box battle. The rental chain is using 2Wire’s MediaPoint hardware to power the service. Blockbuster says the box is free, but you do have to pre-pay $99 for 25 rentals. Boxes are available through and select retailers. The video chain also said that, like Netflix, it will be integrating its on-demand service into Blu-ray players and other devices such as game consoles and DVRs. Movies use progressive downloads (not streams) for DVD-quality video, and the device supports HD. Because the movie rentals are a la carte, new releases are generally available within 30 days of the DVD release, according to Blockbuster.

Why you should wait: The service just came out last week, so it hasn’t gone through a rigorous review process. Let other people find any aggravating bugs before you plunk down your money for one.

While I may come across as a Debbie Downer, dashing your set-top dreams for this holiday season, let me offer a bit of optimism. All of these options will only get better and cheaper in the coming months, so your patience will be rewarded.

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