Work Coordination
Since the 1980s, value differentiation has shifted from machinery and hardware to knowledge, services, and software. As a consequence, industry entry barriers have been lowered, leading to greater competition. Hence, firms have needed to ditch Scientific Management and adopt fluid approaches guided by OKR (Objectives & Key Results) philosophies, if they wished to be adaptable and survive. The ones that didn't adapt are the ones that have been marginalised, or even worse, liquidated.
Though, adopting OKR is not easy. If employees are guided by end goals instead of processes, it requires company-wide coordination, or else everything falls apart. The likes of Google and Meta have the software skills to build internal coordination tools in order to execute OKR management. Over the decades, others have had to rely on MS Office, like Excel and Outlook, which were revolutionary in the early days, but have become dated and restrictive over time.
In recent years, work coordination software vendors have emerged - like monday.com, Asana, and Airtable. These vendors empower the typical org with slick software to coordinate themselves like the big tech names. No longer do firms need to adapt legacy systems to execute OKR. If MS Word was 1.0 digitisation, and MS Excel was 2.0 digitisation, then work coordination software is the 3.0 digitisation. Hence, we believe that leading vendors in this space are riding a secular theme and can deliver substantial value over the long-term - enabling any org to level the playing field and increase their output.
There are two distinct advantages that work coordination players have over many other types of software vendors:
1) Network effects: these vendors deliver solutions for work coordination, so in essence, they are targeting all knowledge workers within an org. When their platform achieves a critical mass inside an org, it makes the vendor incredibly sticky. For a parallel, imagine trying to replace Windows with another operating system at your workplace. Furthermore, there is opportunity to achieve networks across different entities - with customers, suppliers, etc.
2) Own software usage: most SaaS vendors will use their software internally, in addition to selling it to customers. However, there is a different internal usage intensity with work coordination vendors. Work coordination software can be used by every team and every department, and that is what is happening at the likes of monday.com and Asana. They are using their own software to continually build a better version of that software. This creates high-velocity feedback cycles because they don't need to wait for customer feedback - they feed back to themselves. The manifestation of this distinct dynamic is the rapid new feature and product releases achieved by leading work coordination names. Always being in tune with the end user perspective is great for continuous improvement and sustaining competitiveness.
Monday.com is a market leading work coordination vendor generating hyper-growth at present. Similar to other coordination software, monday.com allows cross-functional teams to collaborate on projects. The vendor's differentiation is that it also specialises in specific domains (e.g., CRM, Marketing, Finance), providing no-code options for workers to create customised automation workflows.
Asana is the other standout market leader. It has substantial overlap in capabilities with monday.com but has more focus on making org-wide project management easier. Rather than offering no-code programmability for specific domains, Asana is designed more for higher-level coordination. It provides a vast number of integrations with third-party applications, making the platform as inclusive as possible; ideal for company-wide collaboration.
Airtable is much more of a blank canvas, providing far fewer pre-defined workflows than the other two. It loses the competitive edge in collaboration but gains it back in programmable creativity. With Airtable, there is less guidance but as it is essentially a generic no-code/low-code platform, there is a lot more that can be done with it. Rather than being structured around projects, tasks, or workflows, its core element is tabularised data. Therefore, Airtable is more appealing to people that spend a lot of time working on spreadsheets - which is why it has developed the name of the next-gen Excel killer.
There are many other vendors in the work coordination space. The entry barriers are low, which has made the landscape very competitive. This is why it's important for investors interested in the area to consider culture, product innovation, GTM, and ultimately the progress with network effects. The first few vendors to reach critical mass will likely smother out the less aggressive names.
Lastly, such vendors have gross margins close to 90% thanks to their favourable unit economics. Therefore, the eventual winners that solidify their moat will likely become very profitable, even by software standards.
For institutional investors (public and private), on request, we can do tailored research for your requirements. For all types of investors, here are individual reports you can purchase related to work coordination:
For institutional inquiries please email [email protected] for more information.
Reports
monday.com: Beats Q1 2022 Expectations And Demonstrates Enterprise Appeal (May 2022) - Free
Follow-Ups: Asana - Still Early In The Journey (January 2022)
Monday.com: Strong Rivalry But Greenfield TAM With Attractive Valuation (March 2022)
Dropbox: Value Play With Turnaround Upside Potential (July 2021)
Tailored research requests - price negotiable