Full Stack Publishing:
The accidentally brilliant business model we've created at Lost My Name
At Lost My Name we love to talk about our magical, personalised books.
We’re really proud of them, our customers love them and they are the foundation of our growing success as a business.
However, behind our innovative products lies a second important and connected innovation - the design of our business model.
We call it ‘full stack publishing’, which is a snappy way of saying that we run a very vertically integrated operation, closely controlling all aspects of product development, marketing, sales, operations and customer support within one firm.
It’s this business model that has enabled us to grow the month on month sales of our products 10x in the past 12 months, our team 3x and permitted us to invest significantly in a range of new R&D projects - all while remaining profitable on a monthly basis.
There's a lot written about 'full stack-blah' at the moment. I know. But if you'll bear with me hopefully you'll see why this is more than a soundbite for us.
In this post I’m going to outline the history of this business model design, provide some thoughts on why it’s so totally powerful and some reflections on what it means for the future of the firm. I hope it will be inspiring for anyone thinking about these questions at their own startup
We were born full stack
The business model design behind Lost My Name has emerged quite naturally from the requirements of our unique product.When our co-founders Asi, Tal and David dreamt up the concept for a series of interconnected stories tied to the letters of a child’s name they weren’t thinking about business design. They were thinking about how they could create an amazing, magical, personal story.But when it came to getting that story out to the world a few things became clear.Firstly, in order to create the books they were going to have to build an interface to allow customers to input the letters they wanted - the name - to create their book. This would require a custom website of some sort. It made sense that on this site you could also preview and pay for the book. This led to the inevitable conclusion that for the best experience, the book would have to be sold direct, via their own website.
Secondly, to then get the book printed they realised they were going to have to print each book individually.
Using Print-on-Demand technology was of course implied from the start, but what wasn’t clear was how it would get printed.
Well, it turned out there wasn’t an existing solution for managing the production of high quality multi-part stories, so they had to build the systems to manage the high resolution rendering of the books and send them to print at a print on demand facility.
Thirdly, because the book was previewed and purchased on a proprietary website and manufactured in a unique way in a non-traditional setting, there was no way to use the existing distribution and publishing channels to tell potential customers about the book.
So they were going to have to build a marketing operation from the ground up to drive traffic to the site.
Fourthly, because the product is innovative and relatively complex (and, of course, mistakes are made in the printing and delivery process) and there are no other partners involved, they realised they’d have to build their own customer support services to handle questions and issues.
All this added up to a simple reality - to get this product in the hands of customersthey were going to have to build every single part of a publishing operation from scratch.
Writing and illustrating the book, marketing it, selling it, printing it, shipping it and supporting it. They had to do the lot. Because if they didn’t, they couldn’t create their amazing product.
At the outset this felt a bit insane.
I’m good friends with Asi (our CEO) and although we weren’t working together at the time I remember at the time when they were starting out how much schlep was involved in getting all these different processes to work together.
But in hindsight it’s been a huge advantage and has led to a unique business design that we now call ‘full stack publishing’ that has a wide range of unexpected beneficial externalities.
What’s great about Full Stack Publishing from a business perspective?
The full stack publishing model borrows some of the best bits of various business models, throws in some extra new ingredients with the end result being a very profitable operation. Here’s what’s great about it for both our customers and our investors:#1 - We get to keep all the money and decide on our margins - this is the key to the whole thing. Unlike the rest of the publishing industry who have to divide up revenue between a complex mix of rights holders, publishers and distributors we get to keep all the money we make because we own all parts of our operation.
As a result we’ve sometimes described our business a bit like ‘The Apple of Publishing’ - we invent, make and sell a premium, high margin, mass appeal product through a vertically integrated operation. Meanwhile the rest of the market sells a cheaper, undifferentiated product using IP owned by other players.
#2 - We own the customer relationship - this is also crucial. Because we sell direct we get to own the relationship with our customers which means we can sell to them again, and it leads to the next point…
#3 - We control all parts of the customer experience - because we’re in control of our whole operation we can design unique customer experiences that others cannot replicate and thus build brand loyalty. This also lets us pursue complex, cross cutting product and service innovations.
#4 - We’re global from day one - another important benefit of owning everything is that we don’t have any legacy territorial distribution or IP nonsense to navigate. We can sell to anyone, anywhere that has an internet connection and a credit card.
#5 - We operate with zero inventory and very low operational overheads - this is perhaps the biggest operational innovation to flow from personalised, print on demand publishing. We don’t hold any stock at all. In fact, we only have exactly the number of products that our customers want to buy from us. This means we don’t have any warehousing or stock buying costs putting pressure on our balance sheet.
#6 - We’re profitable from day one - because we’re zero inventory, we control our margin and we charge customers money for our products it means we can be … profitable! A rare thing for a company experiencing the kind of 10x year on year growth we’re undergoing right now, but a great position to be in when it comes to raising investment and staying in control of our business.
#7 - Our NPD process is incredibly lean - as we remain close to customers and control all our production processes we’re able to stay very lean as we develop new products and product improvements. This is in marked contrast to other content driven businesses who have to make big bets on products before they see any customer contact.
When you look at these benefits in the round I think you can see some of the best elements of three different business models - content, Ecommerce and SaaS.
ContEcomaaS - a three headed business beast!
In my opinion you could say we’ve found a new kind of business model that sits (sort of) at the intersection of three existing business models - Content, Ecommerce and SaaS - and takes the best bits from each while leaving the worst bits at the door.
It’s not a perfect analogy, but let me explain.
Why we’re like a content business - like all content businesses we create emotional products. This allows us to charge based on value rather than price. Why we’re not like a content business - Unlike other content businesses, we control every part of the system behind the content that gets it in the customers hands, which means we don’t have to share our revenue with others or worry about how our content can be distorted by other brands and experiences.###Ecommerce Model
Why we’re like an ecomm business - we’re like all ecommerce businesses in that we facilitate a transaction with our customer and make money (and profit) when they buy from us. Why we’re not like an ecomm business - we’re unlike an ecommerce business in that we have no stock, no warehouse and no unsold inventory, ever. ###Sass Model Why we’re like a SaaS business - we are like a SaaS business in that we’re very close to customers, indeed, we co-create our product with our customers, and our product (our books) can be updated constantly to make it more relevant and useful to different categories of customer in close to real time. Again, this makes us not like most content businesses.Why we’re not like a SaaS business - we’re not like a SaaS business in terms of our business model in any way. Yet. We don’t play a LTV game.
What does this mean for us going forward?
We’re pretty excited about this accidental yet inevitable business model we’ve discovered. It’s going to power our business forward in all sorts of useful ways going forward. The first thing is that we’ve now built a solid platform to make launching our next books easier and faster. Which is great. And because we’re profitable we can afford to invest in this next round of products while continuing to grow at breakneck pace.Our operations team can easily produce new titles and make them available to customers all round the world. Our marketing team can tell our customers about them directly. Our website can sell them. And we have fantastic relationships with hundreds of thousands of families to help us create even better products going forward.
As you can tell, we’re pretty excited about it all. If you’d like to come and help out - we’re hiring!
Thanks for reading.
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