Company Overview

This case outlines a strategy for a fintech startup that has developed a unique procurement platform with embedded financing, tailored specifically to meet the unique demands of the construction industry. 

The platform's mission is to elevate construction productivity through specialized financial solutions and software automation.

It offers 3 primary services: 

1. Early Pay Program (EPP): This program pays contractors upfront, alleviating the risk of delayed payments, improving their cash flow, and allowing their business to take on more projects.

2. SaaS Platform: An automation solution for back-office tasks such as accounts receivable and prequalification processes, boosting productivity and cost efficiency.

3. Automated Procurement System: A cloud-based solution that streamlines workflows, reduces administrative costs, and minimizes project risks, thereby improving overall productivity.

Given the platform’s growing demand, a significant funding round, expansion of its team, and it's time to plan its next stage of growth.

Customer and Product Overview

The platform is designed for two key customer segments in the construction sector:

1. General Contractors (GCs): These are the main entities responsible for overseeing construction projects. They manage the overall project timeline, budget, and quality. GCs often hire subcontractors to complete specific parts of a project. The platform offers GCs a comprehensive procurement solution that integrates with their existing technologies, enhancing productivity and cost efficiency.

2. Subcontractors: These are specialized entities hired by general contractors to perform specific tasks or portions of a construction project. Subcontractors might include electricians, plumbers, or concrete specialists, each focusing on their area of expertise. The platform’s Early Payment Initiative is particularly beneficial for subcontractors, addressing their common cash flow challenges and supporting their business growth.

The Relationship Between General Contractors and Subcontractors

• Dependency and Collaboration: Subcontractors are crucial for the completion of specialized tasks in a construction project. General contractors depend on them for their expertise and timely completion of these tasks. In turn, subcontractors rely on general contractors for consistent work and timely payments.

• Financial Dynamics: Cash flow is a critical aspect of this relationship. Subcontractors often face challenges with delayed payments, which can impact their ability to take on new projects or purchase necessary materials. The Early Payment Initiative proposed by this platform aims to alleviate these financial strains by ensuring that subcontractors receive timely payments for their work.

• Operational Efficiency: By using the platform’s SaaS and automated procurement systems, both general contractors and subcontractors can streamline their operations. This leads to enhanced efficiency, reduced administrative burden, and better project management.

Key Benefits of Early Payment Program for Subcontractors

• No Long-Term Interest: Unlike a loan, the EPP does not accrue long-term interest. Subcontractors get paid within 48 hours of invoice approval without imposing an extended interest charge

• Limited Liability: Unlike traditional loans, the EPP is not recorded as debt on the subcontractor's balance sheet, thus offering a financing option that does not encumber their financial position.

• Opt-In Flexibility: Subcontractors can choose to opt into the EPP on a per-project or per-invoice basis, offering more flexibility than a traditional loan, which is usually a fixed, long-term commitment

• Integration with Cloud Platform: The EPP is embedded in the platform, streamlining general contractor and subcontractor project workflows. This integration sets it apart from traditional loans by offering a more seamless and efficient payment process

Problem Statement

The company needs a product strategy to increase product-led adoption of its Early Pay Program, transitioning from a sales-driven approach to a self-service model.

There's a clear product-market fit with the EPP product given the success of its sales-led motion. 

However, shifting to a product-led approach will be essential to their next phase of growth for the following reasons:

• Scalability: Self-serve offerings are not restricted by the number of sales representatives, allowing the service to extend its reach, including to different time zones or geographic locations.

• Cost Efficiency: Over time, self-serve models can considerably lower operational costs linked to staffing and training sales teams.

• Faster Feedback Loops: As the program scales, self-service offerings can swiftly collect feedback directly from users, facilitating faster experimentation to improve its core offering.

Our Approach

We developed our strategy in 3 stages:

1. Diagnosis: We need to understand the primary drivers leading to lower-than-expected adoption rates of the EPP. 

2. Identify Key Investment Areas: Generate hypotheses on customer needs that were not being met.

3. Define an Action Plan: Outline a sequence of coherent, prioritized actions according to a guiding policy.

Stage #1: Diagnosis

Diagnosis: There is a disconnect between platform users and financial decision-makers who ultimately decide to apply for EPP. 

This dynamic leads to two main issues

• Perceived Value Problem: Platform end-users may not recognize the EPP's benefits as they are not the financial decision-makers. Their firm getting paid earlier may not directly impact their day-to-day, despite improved cash flows benefitting the entire firm.

• Lack of Awareness: While financial decision-makers recognize the benefits of EPP, the company needed more effective non-sales channels to increase awareness to more customers. 

Stage #2: Identify Key Investment Areas

We’ll brainstorm key investment areas, each based on known customer challenges and hypotheses for how to resolve them. 

Addressing the Perceived Value Problem

Area #1: Improve EPP Package and Presentation

Customer Challenge: The current presentation of EPP information fails to capture user attention at pivotal decision-making junctures.

Hypothesis: By refining the messaging, timing, and presentation of EPP to make the program more compelling and salient, the platform can increase the likelihood that users sign up or evangelize the product. 

Tactics

• Dynamic Messaging: Tailor messaging based on the end-user profile created during onboarding, linking EPP's cash-flow improvements to the user's specific platform tasks.

• Integrated Comparison Tools: Offer real-time visual comparisons between payment timelines with and without the use of EPP during the invoicing stage.

• Strategic Timing for EPP Promotions: Pinpoint optimal times during the user's workflow to promote EPP (in a non-disruptive way), such as post-invoice upload or upon achieving project milestones.

• Dynamic Pricing: Investigate and potentially implement dynamic pricing for EPP based on subcontractor risk profiles and engagement levels to incentivize lower-risk subcontractors with more favorable rates.

Area #2: Elevate the Perceived Value of EPP

Customer Challenge: While users may be aware of the EPP, they don't believe the value is worth the effort in applying.

Solution Hypothesis: By layering additional value on top of the existing EPP, users will be more likely to apply and advocate for the program

Tactics:

• Premium Feature Access: Developed advanced features within the platform that are either only available with EPP or substantially more effective with EPP's enhanced cash flow.

• Loyalty Program: Formulate a loyalty program where repeated use of EPP accrues progressively better terms.

Addressing Lack of Awareness

Area #3: Streamline and Incentivize EPP Advocacy

Customer Challenge: Users see value in the EPP, but need more knowledge and incentives to effectively advocate for it

Solution Hypothesis: Through targeted incentives, special programs, and educational materials, we can increase the number of EPP advocates within subcontracting firms.

Tactics

• Revenue Sharing: Offer GCs a share of the revenue from EPP-related transactions they facilitate.

• Premier GC Program: Create a system to track and report the speed of invoice approvals by GCs, with rapid approvers gaining 'Premier' status, thus motivating GCs to promote EPP adoption among their subcontractors for faster approval times.

• GC Financial Modeling Tools: Develop analytical tools for GCs to assess the financial impact of EPP on their projects and subcontractors. Visibility into how project success increases would create more GC advocates for EPP.

• Optimize Referral Program: Implement a tiered referral program offering cumulative rewards for successive successful referrals, complete with real-time referral status tracking.

• Ambassador Program: Reward users for EPP advocacy outside the platform, incentivizing successful deal closures.

• Advocacy Toolkits: Supply resources such as slide decks, case studies, and financial calculators to aid end-users in convincing decision-makers about EPP's merits.

Area #4: Attract Financial Decision-Makers Directly to the Platform

Customer Challenge: Financial decision-makers are not actively engaging with the platform, resulting in minimal awareness of the EPP.

Solution Hypothesis: Offering features relevant to financial decision-makers will draw them to our platform and increase their exposure to the EPP program

Tactics:

• Develop Platform Features for Financial Decision-Makers: For example, the platform could introduce forecasting or accounting tools. The advantages of EPP's improving cash flow can be showcased within those tools. 

• Leverage Sharing and Collaboration: Develop tools or find opportunities in existing features to promote collaboration with financial decision-makers. This will organically draw this segment to the platform.

• EPP Integration with Accounting Software: Partner with widely-used accounting software to embed the platform functionally and the EPP into subcontractors’ existing financial workflows. This increases awareness and lowers barriers to adoption. 

Stage #3: Action Plan

Blossomer defines strategy as a sequence of prioritized, coherent actions anchored in guiding policies.

For this scenario, we developed 3 guiding policies that informed which projects to tackle and in what order.

1. Improving Customer Data Quality: Our current understanding of EPP adopters and champions is incomplete. Gaining deeper insights into their journey enables more effective, targeted solutions.

2. Prioritize 'Needle-Movers' Within a Diverse Portfolio: A portfolio of tactics and experiments will vary in complexity, predictability of results, and perceived impact. As high perceived ROI often biases teams towards less complex, predictable, and easily measurable experiments, we emphasize prioritizing high-impact experiments for discussion first before discussing constraints around complexity and bandwidth. 

3. Establish Minimum Viable Tests Before Expanding Investment: We aim to develop tests that quickly validate hypotheses, ensuring that our strategic initiatives are grounded in actual user behavior and needs.

Guiding Policy #1: Improving Customer Data Quality

We identified the following high-priority initiatives:

• Qualitative Research: Conduct interviews to identify common characteristics among users who adopt or champion EPP. This research is designed to uncover patterns that define successful EPP adoption.

• User Journey Mapping: Implement robust data collection on the platform to measure and analyze steps leading to EPP conversion.

• Profile Incentivization: Motivate users to provide detailed profiles by offering platform benefits, yielding insights into their business needs and challenges.

• Sales Process Enhancement: While focusing on creating a self-serve model for EPP, we also seek to enrich the existing sales approach using our new insights.

Guiding Policy #2: Prioritize 'Needle-Movers' Within a Diverse Portfolio

To ensure we’re effectively identifying and discussing the highest potential projects first, we asked ourselves the following question: Which hypothesis, if proven true, would lead to the greatest increase in EPP adoption?

Needle Mover: After extensive deliberation, we identified our 'needle-mover' as “Offering features relevant to financial decision-makers will draw them to our platform and increase their exposure to the EPP program.” 

Rationale: Other investment areas have yet to address the misalignment between end-users and decision-makers. Directly engaging financial decision-makers on the platform can effectively resolve the incentive and coordination issues holding the EPP program. Though other areas also offer substantial potential impact, our immediate focus is on prioritizing the strategy with the greatest potential. This doesn't exclude pursuing other strategies in the future, but it signals our intent to pay special attention to this area.

Guiding Policy #3: Establish Minimum Viable Tests Before Expanding Investment

Given the execution risk of building a new set of features for a new segment of users, we need ways to validate the underlying assumptions behind our recommendation. 

To construct our Minimum Viable Test, we asked ourselves: ​​Once we formulated that question, we asked ourselves: “What is the fastest way we can validate the underlying customer problem and solution hypothesis?”

Test Plan

We developed a 3-step plan

1. Create Simple Financial Tool: The team created a simple tool on the platform that allows financial decision-makers to see the projected cash flow and interest savings for their business with or without EPP.

2. Targeted Advertising: Build a landing page and run ads targeted specifically at financial decision-makers of subcontracting firms highlighting this feature and the EPP program

3. Gather Feedback: Get qualitative feedback and monitor platform feature engagement and EPP conversion rate of a targeted cohort.

Decision Criteria for Further Investment 

In addition to conducting customer interviews, we required metric-based evidence to validate pursuing this strategy further. We utilized in-product metrics from our minimum viable test to answer a few key questions to address key questions:

1. Can financial tools drive these users to the platform? (i.e. is this the right value proposition for them?)

• Metric: Platform signups and EPP signups from targeted ad campaigns

• By analyzing sign-up rates from our targeted ad campaigns and comparing them with other marketing efforts and organic channels, we assessed how effectively this new functionality can drive financial decision-makers to engage in the platform.

• If the ads weren’t leading to signups, it was a sign that we needed better ways to attract financial decision-makers. 

2. Are these users more likely to convert to EPP? (i.e. are we bringing in the right kind of users?)

• Metric: EPP conversion rate by cohort segmented by feature usage

• We tracked the Weekly Active Users (WAUs) of the financial tool and their subsequent EPP conversion rates. This allowed us to compare this new segment’s likelihood of becoming EPP participants versus other user segments on the platform. 

• If conversion rates were lower than other features, it is a sign that these users aren’t more likely to 

Results

Implementation of the strategic recommendations is still in progress. While we’re not yet able to share results, the execution of our approach has had a clear positive impact on the team’s execution in the following ways

1. Strategic Clarity: A well-defined, hypothesis-driven strategy, encompassing areas from enhancing user engagement to optimizing operational efficiency, has provided a clear direction for the team. 

2. Improved Prioritization and Resource Allocation: With a clear strategy and guiding policies, the team has been able to prioritize tasks more effectively, leading to a more efficient utilization of both human and financial resources. This has been crucial in maintaining momentum during the project’s ongoing phases.

3. Increased Agility and Responsiveness: The focus on quick, iterative testing has allowed us to learn quickly and course-correct whenever there’s an opportunity.