Slack Case Study: How They Made It

Before it became a beloved and well-known team collaboration tool, Slack (which stands for Searchable Log of All Conversation and Knowledge) was known as Tiny Speck, and was used by a group of developers working on an online game called Glitch. However, it wasn’t long before Stewart Butterfield (co-founder of both Slack and Flickr) and the rest of the team started to become more interested in further developing Tiny Speck, and less on the (now defunct) game.

Slack as we know it was officially launched in February 2014, and after only a short while (in October that same year), it set a record as the fastest-growing startup ever, with a $1 billion valuation. Today, Slack has $200 million annual recurring revenue (according to data from 2017), 8 million daily active users, and 2 million paid accounts, with 500K organizations using Slack as their collaboration tool of choice.

Image Source: slack.com

The burning question on everyone’s mind was (and probably still is): how did they do it? After all, Slack wasn’t the first app to be used for team chat within a company—Skype, Campfire, and HipChat had already been available for quite some time at that point. So what made Slack stand out from its competition?

In Slack’s early days, Butterfield was clever to notice that a lot of companies were using different tools, for different purposes, and constantly jumping between emails, Skype, IRC, Hangouts, and other apps in order to manage their teams and workdays. With so many apps in play, things were bound to get incredibly chaotic, really fast.

However, that’s not the (only) problem Butterfield was focused on solving.

Selling the Innovation

As Butterfield said in an interview, “Somewhere between 20 to 30% of our users—and this is just an estimate—come from some other centralized group-messaging system like HipChat, Campfire, or IRC. When we asked the other 70 to 80% what they were using for internal communication, they said, ‘Nothing.’ But obviously, they were using something. They just weren’t thinking of this as a category of software.”

Slack and similar messaging systems hadn’t been around for all that long at the time, so people didn’t really understand why they needed them at all. Because of this, in addition to selling their solution, Slack’s main focus was on helping their users realize that they had a problem that needed solving and why they actually needed something like Slack.

As you can see, Slack achieved its early growth by doing two things:

  1. Creating a market where there wasn’t one before,
  2. Making people aware of a problem they didn’t know they had and then selling their solution to them.

As far as growth techniques go, Slack’s most effective one was concentrating on “selling the innovation, not the product”. Although this concept wasn’t anything new, it was critical to Slack’s success. So, instead of simply selling a software product, they sold “making decisions, faster”, “75% less email”, and “all your team communication, instantly searchable, available wherever you go”.

However, seeing that more than half of Slack’s user base didn’t think they needed internal communication software, Butterfield and his team had to find a way to appeal to this group. They did this by creating a high-quality product that’s easy to use, simple to set up, and compatible with a wide range of other tools, and that would help teams and companies be more productive, organized, and less stressed out. This attention to detail and dedication to making a truly useful product was just as important a factor as “selling the innovation”.

Perfecting the Most Important Features

This is a concept that really inspired Butterfield and the Slack team while they were working on the app. Basically, Buccheit’s point was that there was no need for every little thing to be perfect, as long as you did a couple of things really well. Keep your focus on important features, and move on to minor ones at a later date.

Naturally, this didn’t mean that Slack didn’t care about its minor product features—they simply chanelled their energy into perfecting a few core features first. They were convinced that their users wouldn’t notice what was missing from Slack’s early version if they managed to deliver the key features perfectly, which were (in their case) search, file sharing, and synchronization.

Why these three features? As Butterfield put it, people had come to expect a lot from search, thanks to Google. People wanted to know that they didn’t have to worry about labeling or storing certain files after they’d read them. They wanted to be sure that they could find them again, later, when they needed them.

When asked about synchronization, Butterfield commented that the main problem with other platforms was that they couldn’t function across multiple devices, which is how Slack came to the idea of “leave-state synchronization”. The aim of this feature was to allow users to continue working on their tasks exactly where they left off, no matter the device they were using.

Last but not least, the reason Slack opted for focusing on file sharing was that they wanted their users to be able to have everything in one place and share important files with the rest of the team. A simple, intuitive UI was meant to please everyday users, helping them quickly paste images or drag and drop their files.

Preview Release and the Importance of User Feedback

Image Source: web.archive.org

By March 2013, the team behind Slack was using the platform for themselves, but they were keenly aware of the fact that they needed to see how other people would react to it, which is why in May that same year, they recruited a number of companies to help them test their product. Butterfield said that this included a lot of “begging and cajoling friends at other companies”, but that ultimately they were able to observe how Slack functioned for teams of different sizes and needs. This gave them enough feedback to be able to work out the initial kinks.

Butterfield and his team finally shared Slack with a larger audience in August 2013. They didn’t want it to be referred to as a Beta, because they were under the impression that people would believe their platform was unreliable, so they simply called it “Preview Release”.

On the very first day of their “Preview Release”, Slack got 8,000 invitation requests. In the next two weeks, that number had grown to 15,000 requests. This Beta phase lasted for just over six months, and in that time, Slack received a lot of press coverage, from a number of famous online news portals and magazines, including TechCrunch and VentureBeat. The platform was even referred to as “email killer”, and it’s this buzz from news sites and fans on social media networks (Butterfield attributed a great deal of positive buzz about Slack to Twitter) that helped the company gain this large number of initial requests.

Of course, it wasn’t just about getting users to sign up for their platform and start making the most out of it within their own companies. Slack new that the key to improving their product and overall user satisfaction depended a lot on listening to, learning from, and responding to the feedback they received. So, this influx of first users was what truly helped them become what they are today.

Image Source: https://bit.ly/1ESVVTf

Butterfield and the team all looked at their customers as testers, and when these users reported that something wasn’t working, Slack’s top priority was to fix the problem as soon as possible. When the platform launched, three of Slack’s team members were solely in charge of “customer experience,” and they dealt with everything from reading and analyzing customer feedback to making the right people know which bugs needed fixings.

Other Factors That Contributed to Slack’s Success

Believe it or not, “selling the innovation”, listening to user feedback, and focusing on perfecting core features of their product were not the only factors that helped Slack get to where it is now. Effortless user onboarding, hooks and rewards, and a freemium business model all played huge roles throughout Slack’s history.

  1. Freemium—Just like a number of other SaaS companies (e.g. Dropbox), Slack is a freemium platform, which means that you can use basic services for free, and those more advanced ones for a certain fee. Despite the free option, by November 2014, more than 73,000 Slack users were paying for the premium service, which came with a full message archive. At 22 cents per day, the ability to find specific details and conversations via search was more than worth it. In November 2014, Slack’s free-to-paid conversion rate was 30%.
  1. User Onboarding—Simple and rather effortless onboarding was one of the key factors that contributed to Slack’s tremendous success. All a new user had to do was enter their email address, click on the link they receive, and fill out a registration form. Afterwards, new users were prompted to add other team members and other apps to Slack.
  1. Hooks”—Changing user behaviour isn’t easy, so instead of trying to do just that, Slack created a habit-forming product which simply made the existing habits and behaviours of their users easier. They achieved this with the so-called “hooks”, i.e. triggers and consequently rewards. It was these rewards and their sporadic nature that hooked Slack’s users to the platform. The finishing touch was having users invest in Slack, e.g. having them send invitations and messages to coworkers, add integrations, and at some point, pay for Slack.

As you can see, Slack’s journey over the years has been nothing short of remarkable, and it can definitely serve as an example for other SaaS companies looking to succeed in the harsh world of startups. By focusing on being great at three things alone, listening to their users, selling the solution to the problem and not simply features, and making their product as user-friendly as possible, Slack managed to achieve fantastic growth in a short span of time, and become what it is today: a company worth $5.1 billion.

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