The Rise of SEANs

[00:00:00] Taylor: Yeah, so I'd like to say that like, Sean's, another way to say Sean's is like software with a point of view. So like if you think about Ads Manager, as an example, as a piece of software Ads manager is agnostic to your strategy. Like you can go in there, click whatever buttons you want, and it doesn't think you have a good or bad strategy.

[00:00:16] Taylor: It allows you to deploy the money in whatever way you want. Now there's little ways in which, if you wanna think about this idea's coming to life, think about like. Recommendations and suggestions as the beginning form of software declaring itself as needing to have a point of view. It's the humanization of the platform.

[00:00:35] Taylor: It's the attempt to provide it with an opinion on what you should and shouldn't do. And CTC has an opinion about a specific methodology about how you get to where you should go as a business in particular, that centers around the business. 

[00:00:53] Taylor: To a collective set of behaviors built through the lens of the financial plan of the organization to unify marketing and finance towards a cohesive set of goals that you can track and measure against every single day to increase your odds of getting where you intend to go. 

[00:01:06] Richard: Hey folks. Welcome to the eCommerce Playbook podcast. I'm your host, Richard Gaffen, director of Digital Product Strategy here at Common Thread Collective. And I'm joined today. It's been a little while, but I'm joined today by our CEO Mr. Taylor Holiday. Rocking the PLA today. Taylor, what's going on, man?

[00:01:21] Taylor: Nothing. This is a rare afternoon record, so I'm on the down cycle, so not, I'm gonna try and muster the same enthusiasm as the morning.

[00:01:31] Richard: Well, the afternoon pod record can is a little more low key, but it can be a little bit more unhinged, I think, because our brains have been spent. So we're gonna, we're gonna get into our topic of discussion today, which is the rise of Sean's. Now Sean's is, this is, I believe your Taylor's invented acronym for the software enabled agency.

[00:01:50] Richard: But there's a lot of exciting things that are kind of. Coming out of this conversation, but let's start off with this concept of Deshaun, the software enabled agency, and set up for us, Taylor why you're thinking about this, and then kind of why it's relevant to our discussion today.

[00:02:03] Taylor: Oh man, you're gonna, you're gonna send me on a long one here, but this is. 

[00:02:07] Richard: I.

[00:02:08] Taylor: the journey to CTC, becoming a software enabled agency. And then the overlap with what I see in the market are sort of two different things. One is our own journey to software. Software creates leverage to ideology, distribution of a singular instance of an idea many, many times.

[00:02:30] Taylor: If you think about someone created Slack, a single idea that gets deployed over like thousands of end nodes, right? The same product created once, distributed and deployed many times. And an agency at its core is a promise. You can take institutional knowledge gathered over many years, a single centralized repository of experience and knowledge and failures and wins and dollars spent, and turn that knowledge into a deployed in operationalized.

[00:03:11] Taylor: Experience across many different individual end notes, right? That's what, that's what an agency is promising its customers to do. Come to us, we've had all this experience, and therefore we can deploy that experience and knowledge on your behalf. Well, the problem with that, if it's just human is that that knowledge isn't actually contained in each individual in an agency.

[00:03:32] Taylor: The newest hire of CTC comes with none of the 12 years of history of our business. So what tends to happen in that case is that agencies develop this trope or experience from people that they are only as good as the individual you are interacting with. And that's where these stories get developed of like, oh, you get to meet with the CEO and the senior salespeople, and then you get put on a junior person, and the experience collapses because in those cases, those individuals are not able to deploy the institutional knowledge on behalf of the organization.

[00:04:06] Taylor: And that's where a lot of people will say, oh, you gotta evaluate, you know, you gotta meet the team that you're gonna be interacting with. Or yeah. This idea again, that agencies are just junior people masquerading from the sales process. But really all that illustrates is that the organization has not figured out how to create operational leverage on their ideology and experience.

[00:04:27] Taylor: And the reality is it's because that exists way better as an idea in, in practice, in software than it does in humans. And so for us, this began with this idea of like, we need a brain, we need a centralized knowledge center that everybody can tap into. And so first it begins with this idea of like kind of databasing knowledge.

[00:04:47] Taylor: You start gathering all the spend data, you gather all the revenue data, you gather all the docs that you've ever created, and you start to try and organize the information. And you think like that's, that's the key. And then anybody can sort of like. Ping the knowledge center and bring forth what they need.

[00:05:04] Taylor: But even that in and of itself is like wildly insufficient, but it tends to be Step one on this journey is database, the knowledge. But really what you have to do is actually. Applied knowledge. Applied knowledge, and, and, and that's where we began this journey into what STAT is, which is a tool and framework for guiding and operationalizing the shared ideology where when we make an update to what we believe works, we do it at the root systems level, that then everybody has to implement and follow.

[00:05:35] Taylor: And so you build, you basically raise the floor of the delivery of your service. By increasing the dependency on the tool and decreasing the dependency on every individual human. And so that's like what began the journey. So I'm gonna stop there because that, that illustrates how CTC ended up pursuing this idea of a software enabled agency.

[00:05:53] Taylor: What's happening in the market happens to be a secondary overlay of what that what is, what is a result of AI and other things that makes this convergence happen right now.

[00:06:03] Richard: Right. So a couple things to kinda pull out from that initial discussion here, or this initial discussion rather, is one I, I think this idea of. The, the piece of software establishing or bringing to life a philosophy, which I think is interesting and that's always been part of this sort of stats manifesto or whatever.

[00:06:21] Richard: Like what we're doing is bringing CTCs unique philosophy to life in the form of software. And that goes some way maybe to explaining why like just a tech stack of some kind is not sufficient for you to be a software enabled agencies. Now presumably those things exist. There's ways to sort of piecemeal.

[00:06:37] Richard: Build this type of thing. But there's, you know, software enablement, like I'm sure in and Out has their own program, for instance, for making sure you get your animal fries on time. Right. So kind talk to me about like, the thought work behind building. Why are we building our own thing basically? And then in what ways is our specific philosophy kind of brought to life within this software?

[00:06:59] Taylor: Yeah, so I'd like to say that like, Sean's, another way to say Sean's is like software with a point of view. So like if you think about Ads Manager, as an example, as a piece of software Ads manager is agnostic to your strategy. Like you can go in there, click whatever buttons you want, and it doesn't think you have a good or bad strategy.

[00:07:16] Taylor: It allows you to deploy the money in whatever way you want. Now there's little ways in which, if you wanna think about this idea's coming to life, think about like. Recommendations and suggestions as the beginning form of software declaring itself as needing to have a point of view. It's the humanization of the platform.

[00:07:35] Taylor: It's the attempt to provide it with an opinion on what you should and shouldn't do. And CTC has an opinion about a specific methodology about how you get to where you should go as a business in particular, that centers around the business. To a collective set of behaviors built through the lens of the financial plan of the organization to unify marketing and finance towards a cohesive set of goals that you can track and measure against every single day to increase your odds of getting where you intend to go.

[00:08:05] Taylor: Like, and that's, that's our organizational philosophy about how to help brands produce predictable profitable growth, which I think is sort of the holy grail of good business operation inside of e-commerce is the capacity to, with some. Clarity, look out into the future and understand what kind of growth you're going to get and the efficiency expectation of that growth such that you can ultimately put dollars in your pocket.

[00:08:28] Taylor: And so that's, that's what we're trying to help brands do. And we're actually not trying to give them an open-ended piece of software or tool that they get to choose how to deploy. Not even our people get to really make that choice. They are here to execute an ideology through using the tool.

[00:08:43] Richard: Right. So I mean maybe an analogy here would be something along the lines of really, I mean, the difference between a Mac and a PC in terms of like backend flexibility. Like the idea here is to guide you towards a very specific goal rather than to give you a sandbox to plan.

[00:08:57] Taylor: right. Android versus iOS. Yeah. Like there's lots of metaphors of different ways that these things have been approached. But I would say we even go a degree further. Which is I think, the most human thing left in the world of ai, and we're gonna get to that. And what's happening in the market is that we're willing to be accountable to the outcome.

[00:09:15] Taylor: Different than any software tool in the world who will give you the resource, they will not, and they actually will go through great lengths often to defer themselves from being responsible from the result and leave that up to you to give you that authority. But I think what brands are really craving is someone who says, I have a vision for where to go and I will take responsibility for your safety in the same way that like, you would never want to go to.

[00:09:37] Taylor: A whitewater rafting tour and have the guide say like, well, safety's up to you, but hop in. You know, like there's kind of this this, this declaration that I will provide you a pathway to. The thing I tell you we're going to do.

[00:09:49] Richard: Yeah. I think back to your analogy of Med Ads Manager, I think that's like a good place to start because, or, or a good illustration because it's not necessarily that Ads Manager is agnostic in terms of the outcome it wants. What it wants is for you to spend as much money as possible at the greatest volume possible, and.

[00:10:07] Richard: The platform itself is, is kind of constructed towards that. Whereas STAT is constructed towards creating an environment where you realize a contribution margin goal and we are held accountable to it, I guess would be maybe a way of framing that. But so let's then let's move on to the, the kind of next part here, which is talking about why the market is ready for this right now.

[00:10:27] Richard: So.

[00:10:28] Taylor: Yeah. So if you think about, what software represented to, let's say, the investor class and why it was such a powerful opportunity and why those businesses sold on a multiple of revenue. It's two core factors. One is revenue quality. So when you think about the value of a business it is the some present discount to future earnings.

[00:10:52] Taylor: Okay? So think about your value today. Somebody's going to assign to it a value based on what they think you're going to do in the future and some discount that they're going to receive the benefit on to that future value, right? So that's another way of just saying like, how much can I look out and forecast your business to drive future value?

[00:11:11] Taylor: And the thing about software revenue is like, it had really high net revenue retention, which led to really high LTVs. So there, there were three attributes I'm gonna give you. So one was really high revenue quality, like NRR net revenue retention was north of a hundred, 150%, sometimes in the best case is almost 200%, where.

[00:11:29] Taylor: If a customer was worth a dollar in year one, they would be worth $2 in year two, so that you could increase the value in entirety. The second is gross margin. So software, again, single build, deployed over many ed nodes. Every new instance of the software deployed doesn't cost that much money, so it has really high gross margin and then you can scale really, really fast 'cause there's no inventory.

[00:11:49] Taylor: It's like, again, these instances can be replicated really fast. So you have high revenue quality, good LTV, awesome gross margin. Very scalable for acquisition that you can deploy a forward facing sales force against, or even a self-serve acquisition where you can put product loops in it. And so those are really for any business in the world.

[00:12:06] Taylor: If you can do those things, get a bunch of new business really fast at a really high gross margin and keep them around for a really long time, you're going to build. And you can also like capitalize dev expenses. There's other things on a PL basis that make it really successful. So that was like software to the moon.

[00:12:20] Taylor: You can charge per seat, you can grow it really fast, but what's happening? In e-commerce in particular, but software more broadly is that the gross margin is a bit of a lie because what customers are demanding in e-commerce is not self-serve tooling. It's actually outcomes. They want results. And so what you're having to do to actually scale the deployment of the software is provide.

[00:12:50] Taylor: Customer success teams or have agency partnership programs where in reality, you have to develop a professional class of users of your tool to create value for the customer. That's whether that's a customer success rep or an agency partner. Somebody's making your tool valuable to the end customer. Your tool isn't doing it itself.

[00:13:09] Taylor: In which case I would contend that layer of customer success or agency partnership is in your gross margin. That's actually the cost of the deployment of the product. And so that's sort of collapsing. The other thing that's happening is the NRR isn't as good because there's like endless competition eroding, arriving in the form of ai.

[00:13:27] Taylor: And also brands are just eliminating any software that doesn't create real incremental positive revenue for them. That's a really high bar. And so the standard for a piece of software of the impact demands, a reduction in gross margin would also, which also makes scaling harder 'cause you have to hire real humans now in headcount.

[00:13:45] Taylor: So all of a sudden the attributes of these software businesses begin to to look and sound a lot more like a service business. Meanwhile, let's go back to the journey. I'm on my business. Starts to look a lot more like a software business. Our gross margin continues to expand as we reduce the dependency on every individual, increase the dependency of software. Our net revenue retention is going up as we learn how to expand the scope of the services that we're able to put into the tooling. We can add incrementality. We can add MMM, we can add creative strategy all through software deployment to bring new things to customers. So we have a similar NRR. We have expanding gross margin and then the only like sort of real limitation that we face is the rate of growth.

[00:14:32] Taylor: But because software started stalling too, all of a sudden the revenue quality of these two businesses started to look a lot similar, a lot more the same. And then AI is also creating this reality by which software can just be replicated. If it's all it is, is a tool and not value creation. You can build it in lovable or cloud code or anything else, and all of a sudden you have these.

[00:14:53] Taylor: Talented individuals or agencies within a point of view or an ideology who maybe weren't software developers before, are able to create their own tooling. And so the, the tool by itself is is being diminished, but so is the human by themselves. So what's happening is individual employees are also being diminished in value because a human without a tool is a problem.

[00:15:17] Taylor: The head of growth needs Ads Manager, the head of Growth needs North Beam, the head of growth needs house, so humans by themselves, inadequate tools by themselves, inadequate. And so the marriage here and what Sean's really are, are just humans embedded with tools.

[00:15:32] Richard: Right.

[00:15:33] Taylor: A point of view, which if you think about, if you could hire an employee, imagine if you could hire a head of growth that came with it, their own incrementality solution that, that you didn't have to pay for.

[00:15:42] Taylor: They came with an MMMM, they came with the ability to build an ads manager, a creative demand planning tool, a forecasting tool models built into that they brought with you to their company. And that's what's happening is instead of hiring employees, you're hiring people with their own software that they bring with them.

[00:15:57] Taylor: That's what's happening in the world today is that the labor profile, the labor percentage of revenue for e-commerce is getting compressed. There's margin pressure everywhere you need. OPEX has gone from 25% of revenue to 15% of revenue to now it needs to be like 10% of revenue in an e-commerce business.

[00:16:13] Taylor: 'cause C going up. So is cost of goods, tariffs, all these things. So labor leverage is the key. So you need humans and tools to become one.

[00:16:20] Richard: Right. Yeah. I was gonna say that the, the analogy that comes to mind for me anyway is the, like, you need to build, you need to dig a huge hole. You'd have to get a backhoe, and you also have to get somebody to operate the backhoe. One thing you can't do is. Hire a backhoe operator without one, or just get a backhoe and then try to figure out how to work it yourself.

[00:16:39] Taylor: Yeah, it's, I'm remodeling my house right now and it's, I have to hire a general contractor. I have to hire a designer, and then they sub out to all the vendors who do all the things, and the general contractor kind of sits in the middle of it. And that's like been the head of growth model forever. You hire a head of growth, they get a media buyer, they hire an agency, you give them their tools and they build what's called a growth team.

[00:16:59] Taylor: Right? That's what, that's what we did. And what, what we've watched happen is what I, there's a great post I did. Not my post is great, but Satya NA's Post was great about talking about how when he was at LinkedIn, he watched it go from. The idea that there was a development team that had a product manager, a designer, a front end engineer, and a backend end engineer into what were called full stack engineers. And what we're seeing is at CTC, it used to be a head of growth, a Google buyer, a meta buyer, and a creative strategy. And now that's becoming a profit engineer is that one person. With the built-in tooling, AI enablement can now do the job of all of those four people. The cost. And this one person also has a built-in incrementality solution forecasting platform and MMM.

[00:17:44] Taylor: And so the cost reduction here is like if each of these people are 10 to $20,000 a month and the tools are also five to $10,000 a month, you're talking about a hundred thousand dollars a month encapsulated in an individual. And that's what the future is. It's just more and more of that collapse while also increasing quality and savings.

[00:18:01] Richard: Yeah, so this is pointing towards then kind of where we're going with this, which is that, why are we talking about this now? Obviously STAT has existed for a while. But to your point, like what we're saying is that our service is now becoming a single individual with the expertise to, to do so operating a complex piece of machinery essentially.

[00:18:21] Richard: So why don't you set up for us exactly kinda like what we're moving into and like why we're talking about this right now.

[00:18:26] Taylor: Yeah. So the next, the coming weeks, you're gonna hear us start to talk a lot about the profit engine, which is a combination of stat lists plus an engineer. So Tools plus Person equals a profit engine, and this is, this is what we believe is the, like the modern growth team is actually that we think these four roles in particular, head of growth, meta buyer, or Google buyer creative strategy, that they are one thing and that one person.

[00:18:47] Taylor: Can actually do that. And, and really there's a finance function that you could probably drop in there too if you wanna replace your, whoever does forecasting currently in your organization that one person with our tooling is able to outperform the capacity of all of those people together. And and really this is just what we think is we're front running the trend that'll just happen everywhere is that the expectation of what every individual person in every company in the world is gonna be asked to output Now.

[00:19:13] Taylor: It's just gonna go up and up and up and up. And so we want to help brands navigate that and to care about building the tooling and solutions. And the other vector that we think we bring something really powerful is that we bring a point of view on how they should work together. Is that what they should help you as an organization do what the plan should be and how you should manage it every day.

[00:19:35] Taylor: And so if the head of growth was the, you know, the meta for labor for the last four years in e-commerce, we think the profit engineer is the future.

[00:19:44] Richard: Okay. Okay. So I think, and let's go into as much detail as we feel like we can at this point, but, so if the analogy here, let's say to go, to, go back to what I was saying before, is one man with a steam shovel can dig the same hole that six men with shovels can, or whatever. What's, what's the analog here specifically for what the profit engineer can do as opposed to how it's being executed now?

[00:20:04] Taylor: That's right. Great question. So the first thing they're gonna do is build a p and L level financial forecast with the sophistication of a data science team and a CFO. So they are going to build you a daily expectation of revenue, spend, contribution, margin, new and returning customer revenue. They're gonna help you set your channel level targets for every channel.

[00:20:27] Taylor: They're gonna build a media allocation plan. They're gonna help you build your marketing calendar and integrate it into the expected flow of revenue. They're gonna help you build a measurement roadmap for doing incrementality testing. They're actually gonna deploy the tests in analyze the results, deploy them back on your behalf.

[00:20:42] Taylor: They're going to also take lead in defining what we call the creative demand plan. How many ads do I need to make this month? What should I make in terms of the numbers of stills and videos versus focusing on which products and offers, and then providing a point of view on the kinds of messaging that you should support.

[00:20:57] Taylor: So you're gonna be able to enable the production side of the creative process entirely. And then as the ads come in, they're gonna be able to. Using what we call push to build, which is a system by which they can actually one click deploy ads into meta on your behalf. They're gonna act as the media buyer day in and day out.

[00:21:15] Taylor: Use our trackers to adjust bids and budgets, deploy and build new campaigns, all while tracking performance to expectation and reporting back to you every single day about progress progress and making adjustments. Interact with your email and SMS team that'll eventually be part of the system. Any other channels that you're managing all by themselves across more than one customer.

[00:21:35] Richard: So essentially what we're looking at here is one man being, or woman being your CF. O being your media buyer, being in some ways, like eventually sort of like your marketing, like email planner in charge of sort of like creative expectation and demand among other things, but in other words, the sort, sort of the, the breadth of an e-commerce team kind of distilled into one person

[00:21:54] Taylor: And I, I'd be careful to go as far as CFO, we're not gonna manage your cash. We're not gonna, yeah. So, so there are certain elements that we think right now are super important actually for the C ffo to go focus on. And, and in some ways we wanna create space for the members of the internal team to work on what we call like the longer counter cycle.

[00:22:10] Taylor: So we think that a lot of what we can do is take out the day-to-day functional execution of a growth team and allow you to go look bigger picture. To go you to build those peaks that we talk about, to think about new product development and to work off cycle where you don't have to worry about tomorrow 'cause we've got it covered for you.

[00:22:29] Taylor: And so you can go and do the kinds of things that will break our models and disproportionately affect the future. That's what we think your internal team should get freed up to go focus on.

[00:22:37] Richard: That's right, and we've, we've talked about this in my conversations with our accelerator team before and others with Luke as well, that the idea here is what we wanna be able to do with this is get you out of the mindset that feeling like the 24th of the month rolls around and you're freaking out and you're unable to focus on the long term because of that.

[00:22:54] Richard: What this kind of. Purports to do is essentially eliminate that altogether where you are able to think about six months, a year, two years, because you're never scrambling anymore because somebody else is figuring out for you. But 

[00:23:06] Taylor: and, yeah. And like I, I think that you know, we have this experience quite often with teams where you get on a call and there's sort of this diffused responsibility for outcomes across many different people. The head of growth feels like finance gave them a realistic goal. The paid media team is not getting the creative they need the Google.

[00:23:28] Taylor: Team is not allocating correctly 'cause they don't have the right measurement study. And so the business doesn't get where it's trying to go. And it's kind of like the Spider-Man meme where everyone's kind of pointing at each other and frustrated and then we see this all the time. Or there's just like this really slow chain of communication that goes something like Slack message.

[00:23:45] Taylor: Where are we at this month? Someone three hours later says like, oh, we're off by 12%. Someone asks four hours later in what channel? The next day somebody's like, I think it's on meta. The meta buyer says like, oh yeah, I'm waiting to launch this campaign, waiting on creative. And it's like the pace of information to the, to insight, to action is diffused across too many humans.

[00:24:11] Taylor: And, and it reduces accountability, it reduces speed, and we think the ability to get to where you're going is all about the pace, of course correction is that we're not gonna guess more, right? We're gonna be really fast. And when one person can sit in a control seat, sees themselves as ultimately accountable to the outcome.

[00:24:27] Taylor: Can instantly notice where they're off and then has the capacity. So we like to say we want clarity of where we are relative to where we're trying to go. And then we want accountability to the outcome and then we want the capacity to solve it. That's what you really need to be effective, and if you have those things, then you can go out and help businesses be really success.

[00:24:47] Richard: That's right. Yeah. One way we've been framing is it, it it moves you from the monthly scramble into daily transparency. So you sort of understand whether or not you're achieving the outcome on a day-to-day basis. And you also have some understanding of who's accountable for that outcome. And it's just one person and they're your profit engineer.

[00:25:04] Richard: So yeah. Anything else that you wanna hit on this before we

[00:25:06] Taylor: I would, I would just say like, now that you've heard this phrase, you're gonna watch this, like, I think come up a lot. And you're gonna watch two things happen is that one is your software partners are gonna start offering you more human interaction and driving towards more outcome-based pricing, like value-based pricing.

[00:25:21] Taylor: That's one trend. I think the, the example I use a lot. With this is House who's a incrementality platform, who positions itself as software. And I, I think the team over there is a bunch of really smart people who if you interact with them or you hired them, you're gonna notice you have a weekly call.

[00:25:35] Taylor: You're talking about strategy together. These are like very agency oriented behaviors. And then vice versa, you're gonna see more agencies bringing tooling to the table for what they do as they can develop the capacity to build and, and if you're hiring a person, I think there's also this question you have to ask now is like, what tools are you bringing with you?

[00:25:52] Taylor: Like, what are you gonna bring us? That's an asset that you possess. Because otherwise, like we're just gonna be able to offer you labor and tooling at a price that neither the software or the person's gonna be able to compete with. And so that's, that's the expectation is that you. As in as a consumer business should capture more labor leverage.

[00:26:12] Taylor: If you aren't getting the same or more output for less money, then your system of work needs scrutiny in this moment in time because the capacity increase across every point of the labor profile and tool stack is growing substantially in this moment.

[00:26:28] Richard: That's right. All right folks, well, a lot more to come on this, watch this space for more news as we roll this out. But until next time, everybody take care and we'll see you next time.