Looking into why Slack is so successful


Workplace productivity tools are nothing new; as companies changed their policies to be more inclusive of connected technology and third party tools, a large number of products have entered the market designed to improve process and workflow in the office. The inclusion of more mobile technology into the workplace has led to increased focus on using the cloud to store, render and transform content as a model of providing smarter tools. But while there is no shortage of ideas –the Apple App Store alone boasts thousands of productivity and process apps– few have caught on in a big way outside of traditional products like Salesforce which had a presence prior to the smartphone boom.


Slack is a team collaboration tool co-founded by Stewart Butterfield, Eric Costello, Cal Henderson, and Serguei Mourachov. Emerging in August of 2013, the product exploded in the fall of 2014 (growth has been consistently strong throughout its life, but a profile by Wired certainly catapulted it into the spotlight) and now boasts 1.1 million daily active users, with 300,000 of them paying for premium features, such as unlimited chat history and third-party integrations. It’s won several awards and has a fascinating history from a group of people heavily involved in making Flikr a success. By all accounts, Slack is doing what other team collaboration and productivity tools have been unable to do: getting people honestly excited about enterprise software.


Looking into the history of Slack points to interesting origins. Butterfield was the co-founder of Flickr, and that connection certainly helped lend credibility to his new venture. But Butterfield and his team originally were working on an online game when they changed course and built Flickr. After Flickr’s acquisition, Butterfield and team returned to gaming to create their vision of an MMO. But midway through development shelved the product and instead poured their energy into Slack. In interviews Butterfield cites the difficulty in team communication and collaboration while building the game as a problem they wanted to solve, and thus Slack was born. There’s an entire conversation to be had at another time around recognizing when the product you’re building is destined to fail and how to know when to change course… the important thing to note for now is that Butterfield did recognize that moment and the resulting product has been astonishing.


Today, Slack is valued at $2.8 billion with an estimated $25 million in annual recurring revenue, a staggering amount in such a short time and is a model of how to build and grow customers of enterprise software right. To give it some perspective, if you take the 500,000 active daily users and estimate the user value based on the valuation of the company user winds up being worth about $2,500… blowing away any similar product. Using the same metric LinkedIn comes in at $282 per user, something that’s still impressive in the market but pales in comparison to what Slack has accomplished.


Now, all of the traditional disclaimers apply: Slack is a new company and certainly the current darling of the tech world. Fortunes can fall as quickly as they rise, and time will tell if Slack can continue to hold onto such dizzying numbers. It’s also almost a certainty that this number will decrease over time as the market finds new ways to analyze and measure the full value the product is bringing to the market. Yes, there’s also no doubt that a flood of similar products will emerge over the next twelve months, some of which will chip away at Slack’s user base. The other factor worth considering is that Slack’s value only holds as long as it can continue to boast such an amazing combination of growth rate and daily usage. But tech users are often fickle and move onto new products frequently, and retaining the usage over time won’t be a simple task.


But with all of that out of the way, Slack is profoundly different and here’s why:


While most team process and collaboration tools focus on creating different ways to measure and read data, Slack focused instead on an inclusive strategy of bringing in products you’re already using and centralizing them. Then, once information became easier to search and digest, use the centralized space to streamline communication… not increase it. This is the key point where many enterprise tools based around collaboration fail: no matter what services they provide, they ultimately increase conversation. Slack does the opposite; it certainly provides a way for people to chat and communicate, but because the information is well collected, combined and searchable the communication becomes much faster, more precise, shorter and effective. Slack would never market itself as a system designed to reduce conversation (it markets exactly the opposite) but if you use it regularly in your office you will notice a decrease in email and an overall efficiency in communication. To companies that increasingly bemoan the amount of email chatter, Slack becomes a powerful antidote.


Using Slack (honestly committing to using it) for a few weeks will quickly explain far better than any article or blog why the product is different from other enterprise software. It follows very basic tenants that seem incredibly obvious, but are rarely replicated in software. As mentioned above, it works to connect services you’re already using together rather than replace them. As far as product mentality goes, this is a masterstroke; Slack avoids having to convince people to adopt something new as much as get more out of what they already have. Without having to convince people to change their tools, they can instead focus on helping people change their behavior in a passive manner, rather than direct way. Upon implementation of Slack you won’t notice an immediate reduction of email. But you will notice it’s easier to find things almost immediately. Slack’s combined searching system is one of those obvious yet dramatic improvements that once you start really using it every search outside of Slack search feels slow, confined and painful. In this Slack accomplishes something that very few other enterprise services can boast: it makes everything outside of it feel worse.


Once you’re searching effectively you email less. Communication starts with information, not searching for information. It sounds like a trivial point, but the impact to your productivity is profound. You search smarter, you ask smarter questions, and the answers you get are more immediate, precise and focused. Slack subtly removes email filibustering by making the act of writing long novels of communication painful, if not impossible. Think of it like a phone call versus a text message on the phone. People don’t write long text messages, not because they can’t but because it’s more efficient not to. Slack also does a good job of juggling private conversations and questions and group conversations. The result is a big increase in transparency without the noise that large group emails or all-hands meetings bring with them.


Slack is relatively cheap; the first paid option starts at $8 monthly per user. Large organizations might feel the pinch of the software fees, but unlike other enterprise software offerings you actually can quickly feel and measure the cost reduction in other areas. It’s also a product that once committed to it’s hard to walk away from. As mentioned before, when you go outside of Slack you feel the pain of inefficient searching and silo communication almost immediately. Because the benefit is felt by staff and management equally, it’s also not a hard sell to convince your employees to use it. Unlike time tracking products, sales tools or other process software there is an immediate and clear benefit to every user out of the gate.


Slack’s continued growth and all-but certain huge dollar acquisition will be interesting to watch over the next several years… if it even takes that long. Apple’s desires at moving into the enterprise space feel far more aligned with Slack than other products, something sure to catch the notice of many companies. What will be even more interesting to watch is how Slack’s very different approach of building enterprise value will be adopted by others. Slack’s success is clearly owed to looking at product value, what to own and not own, and how to change behavior in a modern way. It’s a template for how other product companies should look at their ideas and grow, and is sure to spawn several interesting products across the market.

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