There are some honorable businesses out there that take a noticeably short-term view. I have nothing against these companies—in fact, I met my fiancée through one such company (more on this later)—but I’d never start a business that falls into the short view category. Their issue is that they suffer from misaligned long-term interests with their own customer base.
At first glance, it’s not so easy to spot a short-view company, because their short–view approach doesn’t always come at the expense of the customer. Instead, it’s usually the company that bears the brunt of the short-term thinking.
Let’s look at some examples:
For a monthly fee, ClassPass users have access to up to a certain amount of fitness classes per month at participating gyms, barre studios, spin clubs, etc. ClassPass pays the participating gyms a negotiated rate for each class that a ClassPass user attends.
This means that the success of ClassPass is inversely correlated to the success of its users, because ClassPass’s income from a user is the same each month, whereas it’s cost for that user depends on the number of classes the user attends. So, ClassPass makes less money when its users exercise more, and more money when its users exercise less.
What’s worse for ClassPass’s long term prospects is that when the user has achieved ultimate success (e.g., finds a gym through ClassPass that they want to join), they may very well drop ClassPass altogether.
The success of the company is not aligned with the success of its users. It’s a win-lose situation.
My fiancée found a gym through ClassPass that she joined and now goes to six days a week. She loves it and wouldn’t have found it without ClassPass. Unfortunately for ClassPass, the service was so great for her that she no longer needs it. For her sake, I’m happy that ClassPass exists. But I’d never start a company whose interests are misaligned with those of its customers.
My fiancée and I met through a dating site, which is another type of company that I’m really glad exists but that I’d desperately avoid starting.
In the case of the dating site, the business model itself is less flawed than that of ClassPass, because the dating site doesn’t suffer from the variable costs that a ClassPass-type of company suffers from.
But the dating site is constantly swimming against the current in its quest for new users due to more misaligned interests, which are pretty obvious in this case: a successful dating site user finds the person they want to spend their life with and immediately proceeds to cancel their subscription to the site because they no longer need it. (If they don’t, their newfound partner should be a little nervous).
The better an experience a dating site provides, the more it churns through users. Granted, there will always be a huge market of people looking for love.
Incidentally, my fiancée and I met through Tinder, which at the time was completely free. Once our relationship started, Tinder didn’t lose out on revenue at the time (because they didn’t have a revenue stream yet), but they did lose two users.
The thought of a company having misaligned long-term interests with its customers sounds like there’s something shady going on. But in both examples above, the companies are not being evil to customers. If anything, the companies are being evil to themselves to the benefit of their customers. While that’s very honorable, it’s not the type of business I’d ever want to start, because it’s a business that is setting itself up for extra difficulty or even failure in the long term.
In any company I get involved in, I’m going to make sure that the company wins (and all other stakeholders win) when the customer wins.