This section contains an in depth analysis of Slack by applying different market analysis tools including (i) SWOT (ii) PESTLE (iii) VUCA and (iv) Porter's Five Forces as a form of strategic and marketing analysis. Each section will conclude with an objective summary from the perspective of a prospectus analyst with regards to Slack's current situation. This section is not designed to convince readers to invest in Slack but rather inform them about the overall picture and assists them in making informed decisions.
SWOT Analysis
Strengths
Product Innovation
In 2018, the brand innovated through 3rd party connected apps that are installed into the workspace. It also enhanced its search functionality and incorporated predictive abilities, chat room layouts and faster messaging speed, updated interfaces, channels, star responses and other features to increase the "fun" in communication and learning. On average, Slack tends to consistently release monthly updates which contains product improvements as a form of product refinement. It is crucial that Slack invests in continuous innovation to maintain its product life-cycle, increase revenues and profitability.
Pricing
Adopting a Freemium Business model, Slack is basically a free product. This strategy is very attractive to price-sensitive markets that are the majority of it’s users and highly suitable for educational purposes and students on a limited budget.
Strong Product Design
Slack provides incredible ways for teams to communicate. It is faster, more secure and organized. The product provides more integration of numerous services in a single place to address the hassle of switching between different applications and platforms. The product offers real-time messaging and archiving. It is compatible with all platforms and mobile devices. As a coherent product, Slack offers a strong product vision that can provide solutions to the real needs of businesses, educational institutions and workforces.
Strong investments from trusted/large business groups
Slack Technologies went public on the New York Stock Exchange in 2019 via a direct listing and was acquired by Salesforce for 27.7 billion USD in 2020. The company also managed to attract strong investments in the past including $120 million in venture capital led by Kleiner Perkins and GV in 2014, $160 million in 2015 from Social Capital, $200 million in 2016 by Thrive Capital and $250 million from Softbank’s Vision Fund. (Browne 2019).
User friendly and easy to use for class communications compared to e-mail
Slack is designed to be straightforward and simple to use. Setup time is minimal and educators can quickly create online classes through a range of devices. Slack’s product design promotes effective communication between teachers and students. Most importantly, it ensures classes can continue even if everyone is physically located away from campus. (Couwenbergh 2021)
Weaknesses
Limited Features
While Slack is primarily a free service, the majority of the critical features needed for optimal experience are paid for. Unfortunately, this can turn out to be expensive, particularly for educational institutions/individual staff expenses and start-ups that may not have large budgets. (Friedlein 2019)
Limited Product Portfolio
Slack is a great product but limited in its features such as the absence of a default calendar used for scheduling meetings and due dates. Additionally, with the shift to hybrid workspaces, Slack’s product becomes limited in that it fails to offer such functional features like virtual meetings (eg: Zoom) and related features. The reliance on 3rd party apps could be risky as the identified gap in its service offerings could see the company lose its customers to more robust and complete substitutes on the market.
Dependency on third party vendors for data centres
Slack currently relies on Amazon Web Services and Redis as its main hosting server. While these are established solution providers, Slack experienced two instances of large scale service outages in 2015 and 2021. (Yadav, Smillie, Demmer & Johnson 2018)
Operational expenses
Slack currently enjoys revenue growth but incurring losses with $283.1 million GAAP operating loss (31.4% of total revenue) compared to a $588.3 million loss in fiscal year 2020 (93.3% of total revenue.) (Manjesh & Saxena 2019)
Not robust enough and lacks features
Slack currently lacks features such as grade entries, submission uploads and academic calendars to serve as a replacement for established LMS platforms such as Canvas, Moodle, Google Classrooms. Its organization will depend on how well planned the user/teacher is as this could lead to an incoherent learning experience.
Opportunities
Further technological expansion and growth
Technological innovation holds great leverage for the growth and expansion of Slack as it offers more ways to bridge the identified gaps in its portfolio to offer much-needed additions and updates. Slack could take advantage of growing 5G networks, include more quality of life improvements such as mobile learning, content streaming, interactive experiences or incorporate emerging technologies such as AR/VR support into its services. The key is differentiation as Slack will need to carve out a niche within the educational technology sphere to identify itself in the growing future.
Post Covid Work/Study Culture
With the advent of Covid-19, workspaces experienced drastic changes that have created more opportunities for communication tools to support learning from remote locations. Analysts perceive that demand for communication tools will continue to increase, Slack needs to strategically position its product for this opportunity to remain competitive and present itself as an attractive option for remote learning.
Strategic Acquisitions, Partnerships and Collaborations
Strategic acquisitions and partnerships are key ways that help provide synergies for Slack in expanding its horizons in the market and in enriching customer experience. Being part of Salesforce is a good boost in terms of resources and capital. Slack could consider making strategic investments to address shortcomings in its current portfolio or form partnerships with various Universities as a form of endorsement partnership.
Threats
Direct Competition
Slack faces fierce competition both directly and indirectly. Examples of direct competitors include Google Workspace, Microsoft Teams and Discord. It is important for Slack to grow its product portfolio in the near future to effectively compete with the competition that currently offers solutions which customers might find more appealing. Schools have many options to choose from and Slack needs to gain a distinct competitive advantage in the education sector. (Mykhoparkina 2021)
Speed of Technological Changes/Disruptions
Technology is changing at a rapid pace which renders the technology we currently use becoming obsolete within a short period of time. To guard against this change, Slack should invest in continuous innovation to ensure they remain relevant and competitive in the education market.
Privacy related issues due to security and data privacy changes
Depending on which country you reside in, the current climate favours Legislation aimed at addressing deficiencies in existing Data Privacy Laws which have not been updated for a long time. Depending on how Legal developments change regarding cyber security, communications and privacy, Slack will need to be prepared to comply with the updated Laws for different markets and countries.
Analyst’s opinion
The SWOT analysis has reflected that Slack is in a position to take advantage of its strengths to future proof its product offerings. Resource wise, Slack is in a decent position as there are potential areas which it could grow and differentiate itself from direct competitors. Slack could strengthen itself by establishing a stronger presence for educational markets as their current approach is arguably over passive. The good news is most of Slack’s weaknesses can be solved internally but it’s unknown how long it’ll take before actual changes are made or even considered. The threats it faces affects the entire market and not just Slack exclusively. It’s especially important for technology companies such as Slack to have the resources and roadmap to grow. From a ventures and investments perspective, its unlikely major changes or revamps will be introduced anytime soon as stability and refinement of its existing product remains the main focus. Regardless, the SWOT analysis reflects a healthy prospectus for Slack and potential investors could keep its development on their radars.
Product Innovation
In 2018, the brand innovated through 3rd party connected apps that are installed into the workspace. It also enhanced its search functionality and incorporated predictive abilities, chat room layouts and faster messaging speed, updated interfaces, channels, star responses and other features to increase the "fun" in communication and learning. On average, Slack tends to consistently release monthly updates which contains product improvements as a form of product refinement. It is crucial that Slack invests in continuous innovation to maintain its product life-cycle, increase revenues and profitability.
Pricing
Adopting a Freemium Business model, Slack is basically a free product. This strategy is very attractive to price-sensitive markets that are the majority of it’s users and highly suitable for educational purposes and students on a limited budget.
Strong Product Design
Slack provides incredible ways for teams to communicate. It is faster, more secure and organized. The product provides more integration of numerous services in a single place to address the hassle of switching between different applications and platforms. The product offers real-time messaging and archiving. It is compatible with all platforms and mobile devices. As a coherent product, Slack offers a strong product vision that can provide solutions to the real needs of businesses, educational institutions and workforces.
Strong investments from trusted/large business groups
Slack Technologies went public on the New York Stock Exchange in 2019 via a direct listing and was acquired by Salesforce for 27.7 billion USD in 2020. The company also managed to attract strong investments in the past including $120 million in venture capital led by Kleiner Perkins and GV in 2014, $160 million in 2015 from Social Capital, $200 million in 2016 by Thrive Capital and $250 million from Softbank’s Vision Fund. (Browne 2019).
User friendly and easy to use for class communications compared to e-mail
Slack is designed to be straightforward and simple to use. Setup time is minimal and educators can quickly create online classes through a range of devices. Slack’s product design promotes effective communication between teachers and students. Most importantly, it ensures classes can continue even if everyone is physically located away from campus. (Couwenbergh 2021)
Weaknesses
Limited Features
While Slack is primarily a free service, the majority of the critical features needed for optimal experience are paid for. Unfortunately, this can turn out to be expensive, particularly for educational institutions/individual staff expenses and start-ups that may not have large budgets. (Friedlein 2019)
Limited Product Portfolio
Slack is a great product but limited in its features such as the absence of a default calendar used for scheduling meetings and due dates. Additionally, with the shift to hybrid workspaces, Slack’s product becomes limited in that it fails to offer such functional features like virtual meetings (eg: Zoom) and related features. The reliance on 3rd party apps could be risky as the identified gap in its service offerings could see the company lose its customers to more robust and complete substitutes on the market.
Dependency on third party vendors for data centres
Slack currently relies on Amazon Web Services and Redis as its main hosting server. While these are established solution providers, Slack experienced two instances of large scale service outages in 2015 and 2021. (Yadav, Smillie, Demmer & Johnson 2018)
Operational expenses
Slack currently enjoys revenue growth but incurring losses with $283.1 million GAAP operating loss (31.4% of total revenue) compared to a $588.3 million loss in fiscal year 2020 (93.3% of total revenue.) (Manjesh & Saxena 2019)
Not robust enough and lacks features
Slack currently lacks features such as grade entries, submission uploads and academic calendars to serve as a replacement for established LMS platforms such as Canvas, Moodle, Google Classrooms. Its organization will depend on how well planned the user/teacher is as this could lead to an incoherent learning experience.
Opportunities
Further technological expansion and growth
Technological innovation holds great leverage for the growth and expansion of Slack as it offers more ways to bridge the identified gaps in its portfolio to offer much-needed additions and updates. Slack could take advantage of growing 5G networks, include more quality of life improvements such as mobile learning, content streaming, interactive experiences or incorporate emerging technologies such as AR/VR support into its services. The key is differentiation as Slack will need to carve out a niche within the educational technology sphere to identify itself in the growing future.
Post Covid Work/Study Culture
With the advent of Covid-19, workspaces experienced drastic changes that have created more opportunities for communication tools to support learning from remote locations. Analysts perceive that demand for communication tools will continue to increase, Slack needs to strategically position its product for this opportunity to remain competitive and present itself as an attractive option for remote learning.
Strategic Acquisitions, Partnerships and Collaborations
Strategic acquisitions and partnerships are key ways that help provide synergies for Slack in expanding its horizons in the market and in enriching customer experience. Being part of Salesforce is a good boost in terms of resources and capital. Slack could consider making strategic investments to address shortcomings in its current portfolio or form partnerships with various Universities as a form of endorsement partnership.
Threats
Direct Competition
Slack faces fierce competition both directly and indirectly. Examples of direct competitors include Google Workspace, Microsoft Teams and Discord. It is important for Slack to grow its product portfolio in the near future to effectively compete with the competition that currently offers solutions which customers might find more appealing. Schools have many options to choose from and Slack needs to gain a distinct competitive advantage in the education sector. (Mykhoparkina 2021)
Speed of Technological Changes/Disruptions
Technology is changing at a rapid pace which renders the technology we currently use becoming obsolete within a short period of time. To guard against this change, Slack should invest in continuous innovation to ensure they remain relevant and competitive in the education market.
Privacy related issues due to security and data privacy changes
Depending on which country you reside in, the current climate favours Legislation aimed at addressing deficiencies in existing Data Privacy Laws which have not been updated for a long time. Depending on how Legal developments change regarding cyber security, communications and privacy, Slack will need to be prepared to comply with the updated Laws for different markets and countries.
Analyst’s opinion
The SWOT analysis has reflected that Slack is in a position to take advantage of its strengths to future proof its product offerings. Resource wise, Slack is in a decent position as there are potential areas which it could grow and differentiate itself from direct competitors. Slack could strengthen itself by establishing a stronger presence for educational markets as their current approach is arguably over passive. The good news is most of Slack’s weaknesses can be solved internally but it’s unknown how long it’ll take before actual changes are made or even considered. The threats it faces affects the entire market and not just Slack exclusively. It’s especially important for technology companies such as Slack to have the resources and roadmap to grow. From a ventures and investments perspective, its unlikely major changes or revamps will be introduced anytime soon as stability and refinement of its existing product remains the main focus. Regardless, the SWOT analysis reflects a healthy prospectus for Slack and potential investors could keep its development on their radars.
Chart: Datanyze
PESTLE Analysis
Political:
Economical:
Social:
Technological:
Legal:
Environmental:
Analyst’s opinion
Compared to the previous SWOT analysis, PESTLE is used as an external tool to conduct a strategic analysis and gives an overview of the different macro-environmental factors to be taken into consideration. Slack can leverage off growing opportunities in the Social and Technological areas to strengthen its market position. The conditions are present for growth on a short term level and Slack should continue to ride the trend of shifting working cultures and improved internet access as a way to make its product attractive. Political and Legal trends are beyond Slack’s control but luckily most of the identified factors listed won’t impact Slack immediately. However, there are signs that Legislators are starting to amend rules regarding Data Privacy as this will most likely become a global trend in the coming years. (Crane, Buchanan, Franks & Chance 2021). Economical should be considered as a wait and see factor as projections for the job market in 2022 onwards remains volatile. (Rockeman & Smith 2022)
- Provincial and Central Government policy reforms regarding data protection regulations
- Ontario considering updates to Personal Information Protection and Electronic Documents Act
- Each province has it’s own political legislations regarding data privacy (eg: BC and Ontario uses FIPPA)
Economical:
- Inflation and less customers willing to pay due to industry wide layoffs and job reductions
- Less students enrolling in courses due to economic conditions and financial priorities
Social:
- Rise of remote working culture gives Slack an advantage as a Solutions as a Service (SaaS)
- Negative industry news could easily sway Slack's user base away (eg: Whatsapp's change to it's privacy policy)
Technological:
- Users have better quality internet connectivity that enables remote learning and working at home
- Cloud service applications integrated with Slack allows easier data retrieval and content distribution for learning.
- Many devices can access Slack, schools have 1 to 1 programs for less privileged students to access laptops and tablets
Legal:
- Impact of international data protection and regulation Laws
- As a emerging growth company, Slack enjoys exemptions and reduced disclosure requirements
- Legislation and Laws might be revised frequently as most are outdated
- Current lawsuit with Microsoft regarding anti-trust issues with Microsoft Teams, outcome uncertain
Environmental:
- Remote working has positive contributions to environmental sustainability and pollution emission
Analyst’s opinion
Compared to the previous SWOT analysis, PESTLE is used as an external tool to conduct a strategic analysis and gives an overview of the different macro-environmental factors to be taken into consideration. Slack can leverage off growing opportunities in the Social and Technological areas to strengthen its market position. The conditions are present for growth on a short term level and Slack should continue to ride the trend of shifting working cultures and improved internet access as a way to make its product attractive. Political and Legal trends are beyond Slack’s control but luckily most of the identified factors listed won’t impact Slack immediately. However, there are signs that Legislators are starting to amend rules regarding Data Privacy as this will most likely become a global trend in the coming years. (Crane, Buchanan, Franks & Chance 2021). Economical should be considered as a wait and see factor as projections for the job market in 2022 onwards remains volatile. (Rockeman & Smith 2022)
VUCA Analysis
Present: Environment Conditions and Less Control
Future: Decision Making Outcomes and More Control
Volatility (Rate of Change)
Uncertainty (Unknown Direction)
Complexity (Decisional Factors)
Ambiguity (Intended Outcome)
Analyst’s opinion
The focus should be on future decisional making outcomes as in Slack’s case, it’s more important to grow its brand value and reduce the level of ambiguity within its internal decision making strategy. Balancing between the two outcomes, it’s easier for Slack to have more control internally. The positive news is the education market is relatively stable with lower ambiguity involved as the needs and interest of students do not flux within short periods of time. It's more about an issue of improvement and refinement rather than constant innovation.
Future: Decision Making Outcomes and More Control
Volatility (Rate of Change)
- Demand Supply Disruption: Hardware used to run Slack could be disrupted due to global logistics crisis, lack of manufacturing components and delivery delays. However, Slack as a service is not affected by supply distribution. Student numbers will also be stable as there will always be a demand for higher education.
Uncertainty (Unknown Direction)
- New competition rules and changes to business process models should not heavily affect Slack. There is also no risk of extinction due to solid active user base.
Complexity (Decisional Factors)
- Slack’s leadership board should future proof the strategic direction of the company by ensuring there is a differentiated strategy compared to market competitors, securing stable monetization avenues and consider the opportunity to collaborate with other tech companies in the form of strategic partnerships. Being proactive is important in this environment while having a healthy list of alternative/contingency options
Ambiguity (Intended Outcome)
- Slack has a vision for the future which aims to replace offices with Slack. The goal to become an inclusive app which caters to all educational and professional needs is a massive goal. Some areas which are vague and unpredictable include Post-Covid working culture and whether the jobs market will be more eager to hire or lay off workers. The economy is also constantly being touted to be crashing and it’ll probably take a while before most people’s usual life is restored to normal and back to pre-Covid lifestyles.
Analyst’s opinion
The focus should be on future decisional making outcomes as in Slack’s case, it’s more important to grow its brand value and reduce the level of ambiguity within its internal decision making strategy. Balancing between the two outcomes, it’s easier for Slack to have more control internally. The positive news is the education market is relatively stable with lower ambiguity involved as the needs and interest of students do not flux within short periods of time. It's more about an issue of improvement and refinement rather than constant innovation.
Porter's Five Forces Analysis
Threat of New Entrants
Threat of New Substitutes
Bargaining Power of Suppliers
Bargaining Power of Buyers/Customers
Industry Rivalry
- LOW-MEDIUM: Currently it’s rather difficult to disrupt the market with new entrants due to high numbers of existing competitors and overall market saturation of the competition. The current barriers to entry also ensures that the pressure of new rivals emerging will be low as investors are unlikely to fund new SaaS ventures unless it includes a groundbreaking aspect into their product. SaaS messaging is a market which demands stability and security, to which Slack and its competitors excel at. If anything, the current marketshare is already highly competitive as it would be a massive challenge for new entrants to steal the marketshare held by leaders such as Microsoft Teams.
Threat of New Substitutes
- MEDIUM-HIGH: There are many similar products to Slack and users can simply jump ship to another one while retaining the same user experience. For reference, widely used products that are similar to Slack includes Microsoft Teams, Google Workspace, Discord, Mattermost and Rocketchat. There are at least a dozen more substitutes which I did not list out. While the inner technologies for each substitute might differ, the key point is they’re in the same market as Slack and all of them are attempting to address the same product need. Users essentially have no switching costs if they prefer to use another competitor’s product as there are a high number of substitutes available on the market for a lower cost. In general the ease of substitution is quite high. There are many alternatives for collaboration software, some of which even better, in terms of speed, complexity, and affordability. As Slack operates on a freemium model, educators can technically change their preferences depending on the course or user experience. Slack should be aware that brand loyalty is an issue in this situation.
Bargaining Power of Suppliers
- LOW-MEDIUM: While Slack centralizes itself and uses 3rd party data vendors to house its servers, there are many choices available on the market to which Slack could choose from in terms of pricing. Distribution channels are also stable as Slack has various ways for users to access and download its app. Its acquisition by Salesforce also brings advantages as due to its increased economies of scale, Slack has more resources to create direct distribution channels.
Bargaining Power of Buyers/Customers
- HIGH: As pricing is extremely volatile and sensitive within the SaaS market, customers have a very high degree of power to put Slack under pressure. Students and educators have many alternatives to Slack which fulfils their educational needs.
Industry Rivalry
- HIGH: Slack will need to innovate in order to sustain itself through competitive advantage (price alone won’t work) and engage itself with basic levels of advertising as a method to gain market exposure. Other possible methods to sidestep direct rivalry includes adopting a differentiation strategy, engage in strategic partnerships or ensuring it has a firm concentration ratio in its current marketshare.
Analyst's Opinion
Porter's Five Forces reflects the risky situation Slack faces as the threat of being substituted remains a possibility, The main issue is, customers have many other alternatives to choose from and even if they suddenly decide to change SaaS platforms for remote learning, technically it wouldn't disrupt or heavily alter the way they interact with these platforms. As competition is intense, even with the acquisition from Salesforce, chances are Slack will need to pool its resources and find a strategic area to excel in. As Salesforce primarily deals with Cloud technology and solutions, perhaps Slack could consider investing resources into creating a quality Cloud based learning solution or diversify and offer educational institutions the technology for Cloud enabled classrooms.
Porter's Five Forces reflects the risky situation Slack faces as the threat of being substituted remains a possibility, The main issue is, customers have many other alternatives to choose from and even if they suddenly decide to change SaaS platforms for remote learning, technically it wouldn't disrupt or heavily alter the way they interact with these platforms. As competition is intense, even with the acquisition from Salesforce, chances are Slack will need to pool its resources and find a strategic area to excel in. As Salesforce primarily deals with Cloud technology and solutions, perhaps Slack could consider investing resources into creating a quality Cloud based learning solution or diversify and offer educational institutions the technology for Cloud enabled classrooms.