Cornering the "Market" on Logistics Innovation
Welcome back to the 12th edition of The LogTech Letter, a weekly look at a particular aspect of the impact technology is having on the world of global and domestic logistics. Last week, I discussed how shippers need neutrally-derived data to evaluate service providers in a QBR process. This week, I’m going to drill into an overlooked aspect of why startups in the logistics space tend to garner an amount of attention that’s not usually in line with their industry traction.
As a reminder, this is the place to turn on Fridays for quick reflection on a dynamic, software category, or specific company that’s on my mind. You’ll also find a collection of links to stories, videos and podcasts from me, my colleagues at the Journal of Commerce, and other analysis I find interesting.
For those that don’t know me, I’m Eric Johnson, senior technology editor at the Journal of Commerce and JOC.com. I can be reached at eric.johnson@ihsmarkit.com or on Twitter at @LogTechEric.
There’s an intrinsic tension in any industry that finds itself being challenged by new entrants. That tension is particularly pronounced where technology is involved, because it can be hard to decipher true and meaningful innovation when it comes to something as intangible as software.
A warehousing provider can easily point to an expansion in square footage as a tangible example of growth. A 3PL can note a growth in the number of customers it has. A carrier can delineate better margin based on an increase in rates and a decrease in operating costs. These are measurable metrics. But measuring innovation? That’s a tricky one.
What ends up happening is the market gets flooded with messaging, from startups to mid-stage companies to entrenched incumbents. All those messages trumpet innovation, usually tied to the use of a few topical buzzwords. That sows confusion among potential customers, since it’s a pretty laborious process to actually sort through who is telling the truth and who is exaggerating the extent of their innovation. For a buyer in any particular technology market, that discovery process takes time, and it takes bringing in people with technology expertise and logistics domain expertise. Sometimes those people are in-house; often they are not.
So great, the logistics technology landscape is confusing. Tell us something we don’t know.
Let me get to my main point here. The tension in the market is overwhelmingly directed at startups, who generally lack industry traction and market penetration early on. Thus, their messaging is seen as hollow, and gives rise to terms like “vaporware,” or “fake it until you make it.”
But much of the consternation you’ll find addressed toward prominent startups in the logistics industry comes down to a simple, often overlooked reality: startups the past decade have come to the party equipped to market themselves in ways that logistics companies never were before.
In other words, a startup with a handful of customers and negative profit margin can use a bevy of marketing tools to make itself seem larger and more impactful than it actually is. And startups to have emerged the past few years understand that marketing themselves is a key part of the equation from day one.
This dawned on me during a session I was involved in with an early stage technology company in the domestic freight space. I was asked, what’s been the biggest technology advancement in logistics the past decade. My response: companies are better at marketing themselves in this cycle than companies that emerged in previous cycles were.
That’s not to say that all startups hire chief marketing officers and spend a bomb on ads and sponsorships and booths (remember those?). It’s more that there’s an in-built understanding that guerrilla marketing is part of the deal these days, whether through an engaging social media presence, clever branding of products that incumbents might see as ordinary, and frequent appearances on podcasts and video events. It all builds a footprint in the collective psyche of the industry.
In that panel, I further broke down the tension of the new marketing-adept cadre of companies and incumbents that have big marketing functions but struggle to get a corresponding level of industry attention when it comes to innovation: a startup will let the market know about every incremental advance, whether a legitimately new product or a simple platform update. But a large 3PL or software company is likely not going to do the same, because those businesses are so large, they would literally be sending press releases every hour.
The advantage startups have is often described as agility over incumbents with more complexity and baggage. But I’d argue startups have another advantage: it’s easier to discern a tiny bit of progress at a small company that it is that same bit of progress at a massive company. That gives the small company an inherent marketing advantage.
So, to sum things up: the market is confusing to buyers because everyone is yelling all at once; current startups are more adept at guerrilla marketing because it’s intrinsic to building a company these days; and small companies have an inherent marketing advantage in that incremental progress is more discernible than at larger rivals.
Here’s a roundup of pieces on JOC.com the past week from my colleagues and myself (note: there is a paywall):
🚨 Shameless plug time. One week to go until Part 1 of JOC LogTech20 Webcast Series: Does Logistics Want to be Self-Service is open. Each session is 90 mins long and will be well worth your time (in my unbiased opinion).
Click here for Day 1 (Oct. 22): https://event.on24.com/eventRegistration/EventLobbyServlet?target=reg20.jsp&partnerref=W201022Home&eventid=2421239&sessionid=1&key=307D0CE15FC0CE8D9D3B66A7CA19D62E®Tag=&sourcepage=register
Clicke here for Day 2 (Oct. 29); https://event.on24.com/eventRegistration/EventLobbyServlet?target=reg20.jsp&partnerref=W201029Home&eventid=2421324&sessionid=1&key=69071024A6D1B4F1A53E7C233794FC8B®Tag=&sourcepage=register
Disclaimer: This newsletter is in no way affiliated with The Journal of Commerce or IHS Markit, and any opinions are mine only.