Outcomes are sometimes less important than the vehicle used to drive them.

As many early marketplace operators likely know, the very beginning can feel like working for a staffing agency. Whatever the transaction is, you (as an individual) play a huge part in clearing it. One way of thinking about “scale” is to think about the levers you have on impacting the business.

Lever 1: Conversations

When you get an outcome (better performance, more availability, higher activity, etc) as a result of a conversation, it can feel great. Imagine you’ve noticed a business in your marketplace not performing well, and, since you’re in the early stages of running the business, you jump on a call with the business, provide some feedback and encouragement on how to find success in the marketplace, and as a result, they begin to perform. This is one way (Lever 1) of getting an outcome.

Lever 2: Platform

Using feedback loops within your marketplace to drive desired outcomes is another, better, approach. Now imagine that your conversation above revealed a key finding about the supply-side; they didn’t realize you were even tracking success metric A. Metric A, through your prior research, leads to more happy customers, so it’s not only very important, but you’ve found out that your supply-side can actually bend the curve pretty quickly; they have a high level of control over it (unlike many others). As a result, you’re now ready to build a feedback loop into the platform where all businesses on your supply-side receive impersonal communications when metric A is slipping alongside a drop in rank in your marketplace.

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This all seems very basic and obvious, right? 5-star ratings, reviews, etc in order to influence behavior have been around long before online marketplaces. The hard part is making the transition from Lever 1 to Lever 2 when the outcomes you get from Lever 1 are good! If it ain’t broken, don’t fix it, right? Not so fast.

The value in Lever 1 is not the outcome, as it may seem when in the midst of it. The value is the insights you get through it. If those insights aren’t transformed into Lever 2, then Lever 1 is close to useless. I’ll go even further here (just to be controversial); the positive outcomes via Lever 1 actually have a negative impact on the business as a whole when you consider the cost to “undo” any outcomes down the road.

In reality, needs of the business change over time and so do the priorities. For instance, if you’ve used Lever 1 to persuade businesses in your marketplace to prioritize quality above all else, what will happen when cost slides ahead of quality in priority? The undoing cost is high; you’ll need to re-use Lever 1 to change the habits of your supply-side (and we know how hard that can be). If Lever 2 is used, you can tweak the feedback loop, and game theory will do it’s thing!

Can’t I use Lever 2 to undo outcomes via Lever 1? In short, no. Once your stakeholders understand there’s a human behind the curtain, things, in their mind, become negotiable or persuadable. Humans, after all, are subjective and emotional and if your carrots and sticks are delivered by humans, it’s very hard to change that mindset.

My overall point here is not to avoid Lever 1 completely. My advise is to suss out Lever 1 loops in your business and work quickly to turn them into Lever 2. The longer you wait, the harder it will be to break through stages of scale.