The Future Of Retail Over The Next Five Years: “Get ready for the subscription economy” with Dr. Zee Aganovic

The ‘subscription economy’: Consumers are increasingly comfortable not owning things. This concept is not compatible with many traditional retailer’s business models and they will have to find ways of adapting to this new expectation. I had the pleasure to interview Dr. Zee Aganovic. Zee is the CEO of HiConversion, Inc. which he started in July […]

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The ‘subscription economy’: Consumers are increasingly comfortable not owning things. This concept is not compatible with many traditional retailer’s business models and they will have to find ways of adapting to this new expectation.

I had the pleasure to interview Dr. Zee Aganovic. Zee is the CEO of HiConversion, Inc. which he started in July of 2006. HiConversion is a Florida based company that provides a game changing website optimization solution that is dramatically faster, easier to use, and delivered via software-as-a-service (SaaS) model. Zee is a serial entrepreneur whose last two startups were acquired by Ricoh and Microsoft. He has a Ph. D. in Optimization Theories from The Rutgers University in New Jersey. Zee’s career encompasses 15 years of leadership roles in the IT industry. Zee was one of the pioneers of the ASP business model and founding member of the ASP Consortium. Zee is passionate technologist and business strategist with extensive experience in Software Development, Business Strategy, Internet Marketing, Business Development.

Thank you so much for joining us Zee! Can you tell us a story about what brought you to this specific career path?

I can describe it as becoming an accidental entrepreneur. All along I was dreaming about academia and science and the goal was to get advanced degrees and teach at university. During the graduate school I needed extra income, so I work part time for a startup company. During summer, I offered to work as a piecework subcontractor. They agreed and that started my entrepreneurial journey in life. Within weeks I started to get my own projects and something that started as a small summer job become my first start up business. By the time I graduated my partner and I were generating millions of dollars in revenue and employing over a hundred employees.

Can you share the most interesting story that happened to you since you started your career?

With the prior startup Walt Mossberg, a technology columnist at Wall Street Journal, wrote a glowing story about our PC migration software. The most amazing thing was that he did it on his own without us even knowing that he will do it. In technology business, if Walt writes about your product than means that your company has arrived. Soon after we got a call from Microsoft asking if we are interested to meet with them. After month of conversations they said that the purpose of their inquiry was to make a build-or-buy decision for the product like ours, and that they decided to build it. They also told us that their product will be available in the next version of Windows, a year from now, for free. In essence they gave us a year to do something else or die.

Being idealists, we decided not to give up and instead we worked even harder to innovated more advanced features and to focus on a higher end enterprise market. In meantime, a consumer version of our product with unforgettable name AlohaBob was gaining mass market traction and industry accolades. Four years later Microsoft called again. This time they bought the company.

Can you share a story about the funniest mistake you made when you were first starting?

HiConversion was started with the vision of innovating the most advanced self-learning algorithms to help eCommerce brands adapt to visitor preferences in real time and generate new revenue from the existing traffic. We believed that once we demonstrate the revenue lift that all merchants will rush to our doors. Who can say not to more revenue?

A partner in the equity group that just acquired a well-known consumer fashion brand called asking if we can help them grow the eCommerce side of business. We engaged with a 3-month pilot. I was not directly involved but was told along the way that we are producing excellent results, like 2,000% ROI relative to the cost of the pilot project. We all expected that this pilot will lead into a long-term contract. Instead, a bombshell, we got fired.

A VP of eCommerce at the brand agreed to debrief and share the reasons for not continuing with us. The conversation started with statement that our technology is great but that they did not continue because we did not listen. That was a surprise. I know our services team and how they always go beyond normal call of duty. I asked for an example of what we missed to hear. They told us that their plan was to run 10 A/B tests and that instead we delivered only one. I was relieved thinking that this was a misunderstanding. I quickly explained that we actually delivered a large multivariate campaign which is equivalent of more than 12,000 individual A/B tests, hundreds of times more of A/B tests than what they expected to get. To my surprise the VP responded with ‘see you are not listening either.’ You performed only one test campaign and I promised to my boss 10 A/B tests. Trying to salvage the situation I asked VP if he is aware of the fact that we made them over $2M in new revenue over period of less than 90 days. Yes. That’s fine. But I promised to my boss 10 A/B tests. The call ended and I did not know if I should laugh or scream.

Can you tell us what lesson you learned from that?

Big lesson. We realized that we were not paying attention to our customer, a VP or manager of eCommerce. More revenue is the high value for the company but not necessarily for the person working with us. If his performance is measured by activity or any other
metric, we must be able to deliver such value.

What do you think makes your company stand out? Can you share a story?

We are perceived to be a technology innovator. From our point of view, we think that our partnering culture is the main difference. We believe in collaboration with other companies in the technology eco system. In particular, we are passionate in helping other business to succeed.

A year ago, we were approached by a system integrator who desired to use our technology to perform a pilot project in order to win a business with large technology company. They were asking if we can allow them to use our software on a temporary basis and for a low cost so that they can compete and win that potentially very lucrative relationship. We said that we will give them right to use our software at no cost and that even more we will assign few our technical people to help them win that opportunity. 12-months later we both won. First, it was a system integrator who impressed the big company and won the relationship first. Then, the big technology company learned about our technology that was instrumental in that success. Today we are also a strategic partner with that very large technology company.

Which tips would you recommend to your colleagues in your industry to help them to thrive and not “burn out”?
Let’s be honest. Being an entrepreneur is an addiction. It does not take much to ‘overdose’ on what you like to do and to lose sight of other things that are equally important in life. Building a startup business is a marathon. That’s why is essential to surround yourself at work with other talented people who will share the workload and more importantly to have after work family and a social environment to help you better balance your work and personal time.

Are you working on any exciting projects now?

Growing and nurturing community of merchants, system integrators and technology partners has become a huge part of HiConversion’s work the past year or so. It’s effectively a new business model and requires a counterintuitive approach — we are trying to encourage merchants to behave in new ways in response to big changes in their world rather than simply ‘sell’ them our technology.

Can you share five examples of how retail companies will be adjusting over the next five years to the new ways that consumers like to shop?

1 — Mobile becomes the new normal: Online retailers will have no choice but to have a mobile optimization strategy; from marketing to shipping, every kink in the buying experience is magnified on mobile devices.
2 — Mission Centric Brands: Consumers are no longer making decisions based solely on product selections or price; they’re assessing how a brand acts and what it stands for. This is a chance for retailers to develop more differentiated, authentic and ultimately profitable relationships.
3 — Amazonification of retail: with successes such as Prime, Amazon has redefined expectations about speed and frequency of shopping. Consumers now expect this as default. Regular retailers have to try and match this or out-think Amazon’s aggressive innovation pace.
4 — Abundance of choice: There’s never been more choice for consumers, available in so many places. This presents a growing challenge for retailers; where do they buy and how do merchants make sure they are the choice.
5 — The ‘subscription economy’: Consumers are increasingly comfortable not owning things. This concept is not compatible with many traditional retailer’s business models and they will have to find ways of adapting to this new expectation.

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