Contents
1. Introduction
4
2. Literature Review
4
2.1 Service Area: Software-as-a-Service
4
2.2 Research Area: Communication Theory
6
3. Company Analysis
10
3.1 Slack’s Service Package
11
3.2 The Service Delivery Process
13
3.3 Strategic Analysis
16
4. Presentation of Findings
20
5. Appendix
22
6. References
28
1
Int. Service Management Project
1. Introduction
Earlier this year, Slack Technologies announced to go public in 2019. The North American
software company is a ‘Tech-Unicorn’, having secured a $1 billion valuation in only eight
months of existence (Griffith, 2015). Slack indeed has a short, yet very successful history and
is now being valued at $7 billion (Miller, 2019). But was is the reason behind the company’s
rapid success?
Firstly, a literature review is provided in this essay. It describes the technological, societal and
economic trends which enable Slack to exist. Then, communication theory is discussed.
Further, this paper turns to the changes in the business environment which created a demand
for communication and collaboration solutions. The evolution of these solutions will be
described, concluding the literature review.
Secondly, an analysis of the company and its service is conducted. The organisation is further
described, and its service processes examined. Lastly, the service strategy of the firm is
closely analysed. The results are evaluated and discussed in the final part of the analysis. The
conclusion ends this paper by summarizing the findings and providing strategic
recommendations to the company.
2. Literature Review
Several trends in technology, economy, and society made it possible for modern
communication and collaboration solutions to exist. Firstly, this section will briefly describe
those trends. It will begin with the technological trends and conclude with the societal and
business trends. Finally, it will turn to the evolution of the communication and B2B
landscape, providing a theoretical lens for the analysis.
2.1 Service Area: Software-as-a-Service
Technological Trends
As a thorough discussion of all technological trends enabling modern communication
solutions to exist would be beyond the scope of this paper, it is instead focused on two distinct
technologies: The internet and cloud computing. The internet is a cornerstone for most
communication services today and, thus, is a precondition for thousands of today's’
2
companies. It can be defined as an “interconnected network of thousands of networks and
millions of computers linking businesses, educational institutions, government agencies, and
individuals” (Laudon and Guercio Traver, 2019, p. 110). The internet’s history is complex, yet
very successful, influencing technology, business, and society and a very impactful way
(Leiner et al., 1999). After completing its innovation and initialization phase, the internet was
quickly commercialized, see for instance E-commerce platforms such as Amazon or eBay.
Additionally, online solutions such as search engines or messaging platforms are a direct
result of this evolution (Laudon and Guercio Traver, 2019).
However, “one should not conclude that the Internet has now finished changing” (Leiner et
al., 1999, p. 31). This can be observed by looking at recent technological developments
closely related to the internet, such as the mobile platform or cloud computing (Laudon and
Guercio Traver, 2019). The latter will now be further examined. Cloud computing can be
defined as a “model of computing in which firms and individuals obtain computing power and
software over the Internet” (Laudon and Guercio Traver, 2019, p. 124). The worldwide
market for public cloud services is projected to grow to a total of $206.2 billion in 2019
(Gartner, 2018). It strongly reduces the costs of operating websites and services, as the
necessary hardware structure can be licensed. This is because corporations can create large
and scalable cloud-computing centres and provide that computing power to both business and
individual customers, as Amazon Web Services does prominently (Laudon and Guercio
Traver, 2019).
The development of cloud computing directly led to the creation of a key service model for
modern software solutions: Software-as-a-Service (SaaS). It is focused on separating the use
from the ownership of a software (Turner, Budgen and Brereton, 2003). In contrast to
software as a product, e.g. selling boxed CDs to customers as Microsoft did for decades, SaaS
companies sell internet-based applications relying on cloud computing. The consumer, on the
other hand, does not need to provide the necessary processing power and data capacity for the
software, making it highly accessible. The downside of that concept is the potential
inaccessibility of data from the local device and the possible dependency on cloud service
providers (Laudon and Guercio Traver, 2019). SaaS is estimated to be worth around $64.5
billion in 2019 and to remain the largest area of the cloud market. Organisations seem to shift
their service offering towards SaaS (Gartner, 2018).
The Experience Economy
3
“Web 2.0 applications shift a Web user’s role from a passive consumer of content to its
creator” (Valacich and Schneider, 2015, p. 205).
Looking at economic and societal trends in the service industry, one can firstly look at the
changes which occurred with the switch to a post-industrial society. Information became the
key resource and centre of life moved towards communities and their interactions, explaining
the rise of communication services (Fitzsimmons and Fitzsimmons, 2006). Further, many
aspects of what Fitzsimmons and Fitzsimmons (2006) call ‘The 21st Century Career’
catalysed the demand for communication services, e.g. the need for flexibility and
accessibility at work.
In light of the experience economy at the B2B level, the trend of co-creation of value
emerged. It becomes evident when companies only provide the infrastructure and the
platform, while users are actively participating in the value creation process in order to reap
the benefits. One could say that B2B SaaS are similar to a gym membership in that regard
(Fitzsimmons and Fitzsimmons, 2006). Also, the tendency towards flexible access to
information was developed. Emails, for example, are read both on the laptop at work and on
the phone when on vacation. Finally, the experience economy has an enabling aspect.
Solutions often only act as an intermediary between two parties. For instance, WhatsApp acts
as such an intermediary between two sides exchanging information. These trends are strongly
reflected in
the 21st-century communication service landscape (Fitzsimmons and
Fitzsimmons, 2006).
2.2 Research Area: Communication Theory
Communication theories
While communication methods are as old as language, this paper will now be concerned with
communication theory. After that, it will then turn to solutions regarding communication and
collaboration in the modern workplace. In evaluating the effectiveness of different
communication channels, one could refer to the media richness theory as in Daft, Lengel and
Trevino (1987). It argues that face-to-face communication trumps technology-based
communication. This is because face-to-face communication is seen as a ‘Rich Medium’, i.e.
good at facilitating insight and rapid understanding (Daft, Lengel and Trevino, 1987).
However, other studies suggest that members of virtual teams can overcome the restriction of
low media richness by adapting their communication to be more clear, concise, considerate,
4
and complete (DeLuca, Gasson and Kock, 2006). Additionally, the ‘Channel Expansion
Theory’ indicates that the perceived richness of a medium can be increased with additional
experience and familiarity of the individual with the medium (Carlson and Zmud, 1999).
To explain why face-to-face communication is not always the communication tool of choice,
an individual’s motivation and ability to process information can be brought in. Through that
lens, messages can sometimes be preferred, because they increase the ability to process the
information (Robert and Dennis, 2005). Clark and Brennan (1991) augment that theory by
proposing that a medium may impose eight different constraints on communication between
two people:
1. “Revisability: A can revise messages for B”;
2. “Reviewability: B can review A’s messages”;
3. “Sequentiality: A’s and B’s turns cannot get out of sequence”;
4. “Simultaneity: A and B can send and receive at once and simultaneously”;
5. “Cotemporality: B receives at roughly the same time as A produces”;
6. “Audibility: A and B communicate by speaking”;
7. “Visibility: A and B are visible to each other”; and
8. “Copresence: A and B share the same physical environment”.
Evolution and Evaluation of Communication and Collaboration Tools
5
But how did the communication and collaboration technology evolve in order to, finally, be
able to satisfy the complex requirements of the modern workplace? It seems that solutions
change as the requirements shift (Lung et al., 2004).
“The modern workplace is inherently collaborative, and this collaboration relies on effective
communication among workers” (Turner et al., 2010, p. 1). Communication is thus key for
idea generation, conflict resolution and the building of personal relationships. The capabilities
of continues learning and collaboration are therefore regarded as significant in today’s
knowledge-based economy. As a result, leveraging knowledge is a major challenge in the
modern business landscape (Henttonen and Blomqvist, 2005). For instance, virtual teams,
meaning electronically communicating and geographically dispersed workgroups, are
becoming successively more common. They are an example of the increasing need for
communication and collaboration solutions. In fact, research suggests that communication is
important for trust building and, ultimately, for the effectiveness of all teams (Henttonen and
Blomqvist, 2005).
While traditional project management was narrowly focused on a single team in one specific
location, advances in project management solutions have shifted towards supporting virtual
teams. With the trend towards digitalization, collaboration may thus be one of the major
challenges in the project management space. Its successful implementation can, therefore,
increase productivity and reduce project costs (Romano, Nunamaker and Chen, 2002). A
plethora of different collaboration tools exist. In software engineering, for instance, Lanubile
et al. (2010) differentiate between seven standard collaborative tools (See Appendix 1). More
generally speaking, one can divide collaborative tools into three categories (See Figure 2)
(Valacich and Schneider, 2015).
6
Turner et al. (2010) provide a characterization of the communication and collaboration
ecology in the modern working space. Further, it discusses the general opinions participants in
the study had with a selection of tools. Face-to-face communication, which has been
discussed previously in this paper, is seen to be good at establishing common ground and
capturing non-verbal signals, for example. However, it is regarded as less efficient due to its
time-consuming nature. Physical notes, on the other hand, are easy to use and persistent. By
the same token, they are restricted to their limited bandwidth (Turner et al., 2010). A further
step in the evolution of communication methods examined was the phone. While immediate,
its drawbacks are its lack of non-verbal signal capture and the social downside of causing
interruption (Turner et al., 2010). Email, an early online communication solution still
commonly used at the workplace, introduced several advantages: persistent recording,
efficiency and effectiveness and non-intrusiveness. By the same token, it lacked in
immediacy, often creating a delayed discussion (Turner et al., 2010).
7
More recent developments in communication and collaboration technology are discussed in
Turner et al. (2010), too. Instant messaging was appreciated for its immediacy and
lightweight, yet was perceived as difficult in coordinating discussions and conveying detailed
information as well as distracting at times. Similarly, social networks were perceived as
highly suitable for observing and keeping up with others’ activities, but difficult in regards to
privacy (Turner et al., 2010). Wikis were looked at as effective tools for sharing and
conveying open and central information. Their decentralized and rather disorganised nature
was, by contrast, perceived as negative. Finally, Blogs are now also accepted methods of
collaboration and seen as useful for their effective communication of niche information and
trends. Still, they are criticized for their unreliability and transparency due to their large
number (Turner et al., 2010).
To negate the situational disadvantages of these communication tools, Turner et al. (2010)
suggest that today, workers use a variety of communication and collaboration technologies.
Each tool thus fulfils specific rolls and has different purposes in the workspace ecology.
Therefore, the addition of new communication technologies rarely replaces the use of
solutions previously adopted. Rather, according to Turner et al. (2010), they are integrated
within the communication landscape.
The latest technological developments have been indicating a higher degree of integration of
devices and connectivity. Looking forward, future communication solutions could become
more semantic, meaning more understanding of the meaning of content and able to give richer
and accurate answers (Valacich and Schneider, 2015). They can possibly move even more
towards mobile devices. Potentially, the upcoming solutions would be able to filter out the
immense amount of data for a specific context and once again change the way we
communicate (Valacich and Schneider, 2015).
3. Company Analysis
While Slack’s HQ is in California, the company currently operates at nine other sites around
the globe (Slack, 2019). Its namesake solution can be described as SaaS (Software &
Information Industry Association, 2001). Being cloud-based and encompassing multiple
functions, it is a set of team collaboration tools and services (Kumparak, 2015).
8
Slack provides a collaboration hub bringing the right people, information and tools together to
increase team productivity (Slack, 2019). Its goal is to bring all communication together in
one place. It does so by enabling real-time messaging, archiving, and search for modern teams
as well as multiple other communications functions. The solution is rather successful and
popular, e.g. 65 out of the Fortune 100 firms use it (Slack, 2019).
Additionally, Slack provides over 1,500 compatible apps and a robust API to facilitate the
creation of apps and integration by partners and developers. Slack actively promotes the
customization and modification of its software, partnering with over a thousand companies,
providing an app directory for its users, and supporting developers with a dedicated fund.
According to the company, the software has more than 8 million daily active users in more
than 150 countries as well as more than 3 million paid users.
3.1 Slack’s Service Package
Looking at Slack’s service package as in Fitzsimmons and Fitzsimmons (2006), it becomes
evident that the company’s service is very distinct from a ‘traditional’ service (see Figure 4).
The service package can be described through the lens of the B2B experience economy, as
9
previously discussed in the literature review. Critically for Slack, many parts of the service
are, at least to some extent, co-created by the customer. Additionally, the service provided has
an enabling aspect: it provides the frame and platform for its users, empowering them to
communicate.
Only a few aspects are part of the supporting facility of the service. Using the internet and
cloud computing, the storage and processing of the software are done through the company’s
server infrastructure. The user provides aspects of the supporting facility, namely the device
and the internet connection, typical for SaaS. This gives the service the advantage of
flexibility and accessibility, which is highly appreciated in the 21st-century business
landscape, reflecting the literature review. Similarly, the website and the software can be seen
as facilitating goods, while the user’s proficiency is necessary to make use of the service.
Also, while Slack provides basic information on the utilization of its service, arguably the
most valuable information is generated by the user himself: his communication activity.
Looking at the explicit and implicit services, almost all are at least co-created by the customer.
The explicit services are all the different ways the customer can use Slack for communication
and collaboration purposes. Slack encompasses multiple modern communication tools in one,
making it a ‘hub’ for communication and collaboration. Additionally, the most evident
benefits of communication are also part of the explicit service e.g. increased productivity,
especially in light of virtual teams. Further, by actively encouraging the development of apps
for Slack, the company promotes the integration of the tool in the workspace environment,
making it more accessible, flexible and productive.
The implicit services are the most far-reaching in Slack’ service package. They include
aspects of the communication and collaboration theory discussion of the literature review. For
instance, due to the combination of several communication tools, Slack can become high in
media richness. Further, a channel expansion can be potentially observed, as users become
more and more familiar with the medium. The eight constraints of communication, as
discussed before, are thus defied. Furthermore, Slack attempts to reap the implicit benefits of
multiple communication and collaboration tools while avoiding their downsides, as discussed
previously. It does so by simultaneously providing complimenting communication and
collaboration instruments for the modern workspace (Turner et al., 2010). For instance, the
inability of direct messaging to capture non-verbal cues can be negated by the function of
video calls.
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3.2 The Service Delivery Process
Slack provides a wide variety of services. Three specific service processes were selected for
this analysis. While the diagram format was adapted from Fitzsimmons and Fitzsimmons
(2006), additional colour coding was introduced. Activities in red were non-value adding,
activities in yellow were necessary but non-value adding, and activities in green were
value-adding, as in Lean Management theory, e.g. see Hines and Rich (1997).
Sign up Process
The first process is the sign-up experience of a user, from visiting the website to opening up
the (Web)App which is the ‘first moment of truth’. The prior search process can be seen as the
‘zero moment of truth’ (Aichner, 2012) (See Appendix 2 and 3).
11
Meeting Schedule Process
The second process analysed is a generic meeting scheduling which happens daily in the
business environment and could be seen as the second moment of truth (See Appendix 4 and
5). This makes Slack comparable to other communication tools, as in Turner et al. (2010).
12
Google Sheets Sharing and Vote Process (via Slack)
The last analysis is concerned with one user sharing a ‘Google Sheets’ document with two
other users (See Appendix 6). Slack offers a Google App, integrating the Google Suite with
the solution to ensure more effective collaboration. After the document sharing, a poll is
created in the process in order to survey in the opinion of the others on the document. The poll
is created using the company’s integrated polling bot. This process shows the integration and
customization power of Slack.
13
Process Analysis Discussion
Several observations can be made from the process analysis. Firstly, all processes can be
described as technology generated service encounters or self-service encounters, as in
Fitzsimmons and Fitzsimmons (2006). This is because there is no single (human) participant
from Slack’s side. Secondly, the enabling and co-creation aspect of the B2B service economy
can be clearly observed. Thirdly, it becomes obvious that the processes have been optimized
to become ‘lean’, as little non-value adding unnecessary activities are observed. Lastly, the
media richness, flexibility and effectiveness of Slack as a communication and collaboration
tool can be observed. As an integrated and holistic solution, it provides a communication hub
with distinct advantages over single communication tools described in Turner et al. (2010).
3.3 Strategic Analysis
In accordance with the previously stated, Slack’s strategic service vision is described below:
Service Delivery
System
Intuitive and
easy-to-use
(Mass) Customization
and Integration
Operating Strategy
Service Concept
Technology and
Innovation as key
Value Co-creation
factors
High Scalability
Freemium
Network Effects
Scale as Barrier to
Zero marginal Costs ->
Entry
SaaS
Central Communication
Integrating
Hub
Competitors’ Products
Target Market
Segment
Selling to teams, not to
individuals
Efficiency and
Modern companies of
Effectiveness
all sizes
Holistic Solution
Virtual Teams
Flexible pricing,
Intuitive use
depending on monthly
number of active users
Automation
Freelancers and
contractors
Competitive Service Strategy
With its Freemium and low-cost business model, Slack charges little for its service. It can
afford to do so because the marginal costs of an additional customer are virtually zero. In
addition, as seen in the process analysis, Slack heavily relies on value co-creation and
automation. This makes the company’s cost structure outstandingly low. On the other hand, its
price is above email and some messenger platforms, which are free. The company justifies
14
that pricing, however, by providing a unique offering to the user. Slack does so by creating an
intuitive hub, enabling effective and efficient communication and collaboration. Thus, it
differentiates itself from the competition, providing a unique and valuable service package.
Slack’s variety of offering is placed in the competitive landscape below:
Figure 5 - Slack's diversity of offering in the competitive landscape (Griffit, 2017)
Therefore, Slack’s competitive strategy can be seen as a combination of a low-cost and the
differentiation strategy: A fifth generic strategy called ‘Best-Cost Provider’ Strategy (Valacich
and Schneider, 2015). It relies on providing users with a high value for money by perusing
low-cost and differentiation simultaneously (Edwards, 2012). This tactic bears the benefit of
more flexibility and choice which is key in the dynamic industry (Bambang Baroto, Bin
Abdullah and Wan, 2012). By the same token, it is difficult to execute, as communication
differentiation typically raises costs (Edwards, 2012). This aspect, however, is negated
through Slack’s distinguished low-cost structure. Following the Best-Cost Strategy often
bears the threat of being ‘stuck-in-the-middle’, meaning having little to none competitive
advantage because of too little strategic focus. By the same token, one could argue that Slack
is pursuing ‘value innovation’ (Kim and Mauborgne, 2015). This is the concept of providing
additional value to the customer while maintaining a low-cost structure. Slack maintains it
due to its unique service package and service vision. Additionally, there is a
15
technology-strategy fit (Valacich and Schneider, 2015). Thus, Slack disrupts the traditional
structure of the industry. As a result, the company could find itself in an uncontested market
space, a blue ocean, allowing it to succeed in the market space (Kim and Mauborgne, 2015).
Discussion of Strategy - SWOT
The strategic strengths of the company have been described throughout the paper. Slack
leverages its superior technology and processes to create a competitive advantage in the
industry. Its service is scalable and automated, making it very low in costs. Additionally,
Slack provides an integrated and customized service to its users, creating differentiation.
Looking at the weaknesses of the company, one could say that the sources of the company’s
strengths bear downsides, too. For instance, the high dependency on co-creation means that, if
the user does not fully participate (e.g. when the use becomes too complex), the services lose
value. Additionally, Slack’s high-end technology is short-cycled, as new advances could
disrupt the existing structures. Moreover, Slack’s competencies, even though undoubtedly
strong, can be imitated. This is because any potential competitor could, in theory, create a
similar communication hub. As an effect, the barriers of entry for (powerful) competitors are
relatively low.
16
Slack has many potential opportunities going forward. It could, for instance, find new use
cases for its service, e.g. outside the work environment. Also, the company could further build
its app ecosystem or create new functions for its software to make it even more powerful.
Additionally, it could look into fortifying and nurturing its brand. The company’s strong
financial position enables Slack to pursue these opportunities, e.g. with mergers and
acquisitions (Griffith, 2015). Potential competitors or substitutes were identified as threats for
the firm. In fact, the company already has several strong competitors, e.g. ‘Discord’ (Ardent
United, 2017). In addition, the market is strongly innovative and has the potential to be
disrupted by emerging technologies (the innovator’s dilemma) (Valacich and Schneider,
2015). Market regulation or innovation were also identified as threats. This all makes for a
very fluctuated and unstable industry and market outlook for Slack.
17
18
4. Presentation of Findings
(The author had the opportunity to discuss the findings with a Slack employee within a short
interview (See Appendix 7))
This report contributes to the understanding of SaaS in the communications sector. Slack
harnesses advanced technology, such as the internet and cloud computing, in order to satisfy
the needs of the experience economy. Especially the wants for communication, co-creation,
flexibility and enabling are addressed by the solution. It answers the demands of the modern
workplace, which is inherently collaborative. Virtual teams, for instance, are a typical
reflection of the need for collaboration solutions. A wide variety of communication and
collaboration tools is described, ranging from email to instant messaging.
To understand Slack as a SaaS, the service package is analysed. It becomes evident that
Slack’s service is specifically tailored towards the needs of the modern B2B experience
economy. Most of Slack’s value is co-created by the user using the solution. Its service creates
a communication hub for the workspace environment, making it more accessible, flexible and
productive. The SaaS attempts to negate constraints in communication by combining several
communication instruments into one ecosystem, making it high in media richness.
Looking at the service processes of the solution, one can identify that they are mostly
technology generated, self-service encounters. Additionally, the importance of user
participation becomes evident. The processes are optimised and lean. Finally, the power of the
communication hub with build in tools and apps becomes clear.
Slacks competitive service strategy can be described as a “Best Cost” strategy. This is because
it pursues low cost and differentiation simultaneously. It can do so due to its distinguished
low-cost structure. One could argue Slack’s technological and process competencies enable it
to pursue value innovation, positioning it in an uncontested market space.
The coherent fit between Slack’s service process and its strategy was found to be a key reason
for the company’s success. It leverages its superior technology and processes to create a
competitive advantage. Furthermore, their service is customized and integrated, achieving
differentiation in the market. However, its strengths can also be seen as weaknesses. For
instance, Slack is dependent on the co-creation by the customer, is using high-end, yet short
cycled technologies and has imitable competencies, making the barriers to entry for potential
competitors relatively low.
19
Looking at its strategy, the company can leverage its opportunities and strengths to negate
some of its weaknesses and external threats. With an effective B2B marketing campaign, for
instance, it could use brand building to create higher barriers of entry in the industry. Also, it
would be possible to find new use cases for the service to combat potential market saturation,
e.g. the video game communication segment, to challenge Discord. Its app ecosystem and
functions can be further nurtured in order to build more inimitable competencies and a
competitive advantage. Slack can amplify its service by offering more physical evidence for
its quality through superior customer support. Because of its heavy reliance on co-creation,
Slack can invest more in teaching users how to utilize its software, making it more accessible
and productive, e.g. with tutorial videos. Further, M&As are an option to either diversify the
service or facilitate access to emerging technologies, lowering the threat of industry
disruption. Most importantly, continuous investment in technology and innovation could
make Slack not the loser, but the winner of future technological innovation. It could do so by
concentrating on the trends of the future, e.g. mobility and AI. Additionally, Slack can focus
on further building on the technologies it is using, making the service more integrated, easy to
use and powerful. This could enable the firm to maintain its leading position for years to
come.
20
5. Appendix
Appendix 1: Collaborative Development Environments in Software Engineering
(Lanubile et al., 2010)
21
Appendix 2: Slack Zero Moment of Truth
22
Appendix 3: Slack Sign Up Process Service Encounter (First Moment of Truth)
Website
FAQ
23
Appendix 4: Slack Dashboard (Second Moment of Truth)
Appendix 5: Call Set Up Process
24
Appendix 6: Google Sheets Sharing and Voting
Posting Link
Authorization
Google
Authorization
Slack
25
Polling
26
Appendix 7: Short Discussion of Findings with a Slack Employee
The author had the opportunity to discuss the findings with a Slack employee within a short
interview. During the conversation, the interviewee stated that Slack’s aim is to make people’s
life easier by making them more productive. It does so by providing a superior
communication and collaboration solution with a high product/market fit. Additionally, the
integration aspect of the solution makes it unique and accessible. The interviewee added to
findings presented by naming Slack’s strong corporate culture of as one of its strategic
competencies, describing it as smart, hardworking, empathetic and emphasizing work-life
balance. Indeed, Slack has been recognised as a ‘Great Place to Work’ by many sources
online. Concerning future challenges, it was discussed that the company would focus on
helping users to utilize the full potential of the solution. Further, the difficulty of competing
against free online solutions, such as ‘Microsoft Teams’, was commented on.
27
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