TechExec 11: Super Apps, Attention Residue, and the Rule of 40

(Total read time: 6 minutes)

Hey there,

Welcome to the 11th edition of TechExec - the newsletter that turbocharges your growth to become a Tech Executive!

Every week, I share a new set of BLTs, where BLTs stand for:

• 💼 B - a Business concept/theory/story

• 💝 L - a lifestyle advice

• 🤖 T - a Tech explainer

This week’s BLTs are:

💼 B - Super Apps

💝 L - Attention Residue

🤖 T - Rule of 40

Now to the main content …

💼 B - Super Apps

If you are not from China, you probably haven’t used a true Super App like WeChat. But you have definitely heard of the term, right? Well, Elon Musk has been talking about converting Twitter to an “everything app” a.k.a. a super app. So what exactly is a super app? They are like the Swiss Army knives of the digital world, where you get to do so much within one app that you literally don’t need another app. That sounds amazing, isn’t it?

Consider the rapid growth of WeChat to 1.4 billion users! Since its 2011 debut, WeChat has morphed into more than a messaging app! It started with payments and gaming (thanks to its parent company, Tencent, the gaming maestro). Then it turned itself into a super-powered digital universe. Need a taxi? Check. Craving some grub? Done. Bills to pay? Sorted. Videos to share? Easy peasy. Heck, you can even flaunt your government ID! In China, WeChat is the digital gateway to everything imaginable. It's like the internet, but with WeChat as the almighty overlord.

Now you must be wondering, how do these super apps work? Through a secret weapon called mini-programs. These mini wonders are like lightweight apps that live inside a larger app. There is no need for tedious downloads or tiresome upgrades through app stores. They're like magical portals that allow one app to wield the powers of countless others.

While WeChat reigns as the Asian super app superstar, its success has ignited a game of "Who Wants to Be a Super App?" across continents. Alibaba's AliPay joined the Chinese party, while Southeast Asia spawned Grab and Gojek from a ride-hailing app and a delivery service, respectively. Africa showcases M-Pesa and TemTem, strutting their super-app stuff. And Latin America flaunts Rappi, its own creation. But nothing sort of a super app has come from the likes of the USA, Canada, or Europe! Why is that the case, though?

Well, the super app model in Asia happened because:

• a big segment of unbanked population skipped directly to mobile payments

• app marketplace regulations were stringent in parts of the continent, e.g. inaccessible Google Play Store in China and Apple and Huawei offered limited apps

WeChat and Alipay filled in those gaps by allowing third-party developers to add mini-programs for other services, making them into Super Apps. The US hasn’t had similar issues, but that may change with increased data privacy and security concerns. Also, many of the country's large industries have an economic structure dominated by oligopolies. This could make it difficult for a potential Super App to gain traction, as the oligopolies may see themselves as potential creators.

💝 L - Attention Residue

Ever wondered why you can't focus on writing that report because you're still thinking about that tennis game you lost earlier? That’s attention residue! It is a phenomenon where your mind keeps wandering back to a task you were previously engaged in, even after you've switched to another task.

This fantastically insightful term has its origins in the research conducted by Sophie Leroy, a business professor at the University of Minnesota. Leroy discovered that people experience a significant decrease in performance when they switch tasks because their minds remain stuck on the first task. It's like trying to run with a heavy backpack—you just won't get as far! And you might have guessed it already—this sneaky attention thief is a productivity killer!

So how do we conquer Attention Residue? First, it's important to limit task-switching as much as possible, i.e. we need to complete tasks one at a time! It sounds simple, doesn't it? But in our multitasking world, it's easier said than done. You will have to dedicate blocks of time to single tasks, and finish what you start before moving on to the next task. And don’t forget to take short breaks to let your mind reset and prepare for the next task. Also, practicing mindfulness and focusing fully on the task at hand can work wonders!

Despite your best efforts, you might still fail. But fear not, there is a solution for that too. If a task is going to be interrupted or left incomplete, make a plan for how to handle the rest of it later, which can help reduce the lingering thoughts about it.

🤖 T - Rule of 40

In the dynamic world of software as a service (SaaS), there exists an influential dictum known as the Rule of 40. This rule serves as a litmus test for the financial health of a SaaS company, balancing the delicate equilibrium between growth and profitability. The Rule of 40 is premised on the notion that a company's growth rate and EBITDA (earnings before interest, tax, depreciation, and amortization) margin should sum up to 40% or more, illustrating an optimal balance that positions the company for sustainable success.

Rule of 40 --->

YoY Revenue Growth Rate + EBITDA Margin > 40%

Imagine a balancing act on a financial tightrope, where on one side you have growth, and on the other, profitability. Too much emphasis on one can lead to a perilous tilt towards instability. This is where the Rule of 40 comes into play. If a SaaS company is growing at 20%, then it should aim for an EBITDA margin of at least 20%. If it's growing at 30%, then a 10% EBITDA margin would suffice. This is great, right? But aren’t there so many high-growth yet loss-making companies i.e. they have a negative EBITDA margin? Yes, there are! VCs love rapid expansion and that often requires significant investment, which can momentarily exceed earnings. But that might be okay too. For example, a -20% EBITDA margin when taken in the context of an impressive 60% growth rate still respects the Rule of 40.

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Until next time!

Gaurav