How we used outsourcing to solve a two-sided chicken and egg problem

business models pix How we used outsourcing to solve a two sided chicken and egg problem

When we first started to build lobangclub we were faced with a classic chicken and egg problem, we wanted users to visit and contribute product and price data, however the core motivation for users to contribute is reciprocation or participation in an existing community.   We were attempting to build a network effect scalable two sided market, by FAR the most difficult type of startup, a problem that we still haven’t solved.   In order to do any sort of testing of our assumptions we needed traffic and critical mass.

One of the classic strategies when faced with this problem is to provide standalone value that gets users somewhat engaged and then piggyback on top of that traffic to test out certain assumptions we needed to validate in order to achieve product/market fit.

The end result is that we were now in the content generation business even though we were not really in the content generation business.

We had to generate useful/relevant/timely content for consumers and shoppers and do so in a scalable way that also allowed us to test assumptions.  Also we had to do this very  cheaply cos we didn’t raise any money.  Luckily Singapore is still relatively unsophisticated in terms of SEO, so ranking new sites is still much easier than more mature markets like the US.  Witness for example how bad at onpage SEO sites like courts or gain city are.

1.  I had to figure out a way to generate fresh new content daily,

this was a consuming process that involved going to blogs like tualobang, Straits Times, Today, Facebook pages of retailers, twitter feeds, websites of various retailers, email subscriptions to mailing lists, forums, and good old fashioned walking around.  I had to cull all of this data down to the top few items per day that would make the front page.

Doing this allowed me to properly understand and document a) what users wanted and b) the most effective process in generating this content.

2.  I had to find a scalable way to get all this content produced

I had to find a way to scale the content production without scaling my time involvement.

Hiring locally was out of the question, first, because even at the bottom range of salaries it would be too expensive for us, and second, we had no where for the person to work, both of us founders working from our homes.   I gave a talk on geo-arbitrage outsourcing at barcamp 09 with Cody Mckibben based on my previous experiences, so for us,  a Singaporean company, the Philippines was a natural choice, because a) physical proximity means that if you ever need to expand, the flight is shorter b) timezone is exactly the same, c) filipinos speak good English.

For a pure data entry/admin sort of role where English is the only core skill needed, a decent salary is 10,000 PHP per month, that would be just under $300SGD.

There are a plethora of  sites to find workers on, from the freelancing sites like odesk, elance, to job specific sites like onlinejobs.ph, bestjobs.ph to specific outsourcing contractors like Agents of Value.  For basic data entry you will be inundated with applications.

I used the site onlinejobs.ph, the following ad received close to 100 job applications within 24 hours for a 8,000 PHP per month data entry job.

This is a long term full time position for a hard working intelligent writer. You will be writing content for our website and be given detailed training on how to do so.

You must have excellent English both written and spoken, have great work ethic and be a quick learner.

Pay Amount: starting at 8000 PHP
Work Hours: 40 hours per week

Requirements;

1. MUST have own space to work from where you won’t be disturbed
2. MUST have own computer and fast Internet connection
3. Fast and willing learner
4. Happy working in front of a computer 8 hours per day
5. Working hours are flexible, but prefer someone who starts work early in the morning(and finishes early afternoon)
6. You should be very comfortable using the Internet, posting on forums, searching google, etc…

If you’re interested and have the above qualifications, please email your comprehensive resume to jobs@lobangclub.com.

3.  Choose the right person, this is simpler and more complex than you think.

For these sort of entry level positions, attitude is really the only requirement, everything else can be taught.  At the same time, failure and success of geo-arbitrage outsourcing depends largely on the employer.  You can’t really treat an outsourced remote employee the same as a local hire,  a huge burden of communication and motivation falls on the employer to make the relationship work.

I filter for well written email, well formatted resume with no grammatical errors, this shows attention to detail and a modicum of professionalism.  I also send an email asking a question, and I expect a reply within 4 hours, this filters out people that are not regular users of the Internet.

I use the ycombinator model of hiring, I hire 5 people and expect one person to work out in the end, this places less pressure to “get it right” in the interviewing stage.

4.  After you hire;

I always send the employees an expectations email at the start of their tenure;

 

Hi xxx,

You will find that I am very focused on effectiveness in my work.  Consequently I want to coach you to improve your skills, so that you can be more productive for me and for your future.

Accordingly my expectation for your employment are as follows;

a)  It’s ok to make mistakes and it’s ok to not know how to do something
b)  When you get stuck on something that you don’t know how to solve, use your own initiative FIRST, but then if you are still stuck ASK me to help you.
c)  I expect you to work 8 hours a day and 40 hours a week, starting at 7am and finishing at 3pm
d)  I don’t want you to work 2 jobs or take on another part time job, because it will affect your ability to perform on my tasks.
e)  I will pay you 8000 PHP in this first month(bi weekly payments), and future pay increases will be based on your performance.  I will conduct regular performance appraisals.
f)   If you need time off for holidays/commitments, etc… that’s ok, as long as you tell me BEFORE hand.
g)  please tell me how you would like to be paid your salary; I can either pay to a bank account or pay cash for pickup at a Banco De Oro branch.
h)  It’s your responsibility to send me an invoice for your salary when I need to pay you.

And most importantly;

At the end of EACH day, I want you to spend 10 minutes, no more. send me a daily update that includes 4 sections.

1.  What results you achieved today.
2.  What problems and challenges you faced today.
3.  What questions do you have for me.
4.  What ideas and suggestions you have about your work.

It’s extremely important that you do this, I realise that Internet access is not that reliable sometimes and sometimes power blackout as well but DO send me an email everyday.

This email establishes the ground rules and clear expectations for the employment,  it also details one of the most common ways that outsourcing fails which is that the person does not know how to do something, does not ask questions and stops working because they get frustrated or embarrassed.

All emails thereafter are numbered lists, the reason is that this is by far the most effective way to convey deliverables, each deliverable is a number and the list format leaves no questions on what is needed to be done.  see the following email;

Hi xxxx,

1.  go and sign up as a user at http://www.lobangclub.com
you will need to be logged in as a user to add the lobangs that you will have researched and verified in to the website.

2.  please setup google alerts here http://www.google.com/alerts?hl=en
see my video on how to do it http://www.screencast.com/xxxx

and import the following queries in to it;

“xxxxx

3.  skype account is:

login: xxxxx
password: xxxxx

this skype account will allow you to make phone calls to singapore landline and mobile phones;
let me know when you start calling every morning so I can stop others from using that account since it is shared for all employees to make calls.
my personal number is +65 xxxxxxx which you can call me using that skype account if you need to or I ask you to.

4.
google reader xml file is attached, you need to import it – see my video on how to do that here
http://www.screencast.com/xxxxxxx

5.
Use google reader RSS feed to research the content at the videos below
http://www.screencast.com/xxxxxxx
http://www.screencast.com/xxxxxxx
http://www.screencast.com/xxxxxxx
http://www.screencast.com/xxxxxxx

6.
See this video on Insing http://www.screencast.com/xxxxx
and apply it to the below website.
xxxxxxxx

7.  Add all your research to www.lobangclub.com
see my video on how to do this http://www.screencast.com/xxxxx

You will notice that I use screencast a lot, it is an awesome way to share screen capture video, which is my prefered way to document processes.

Everything you have done at this point can be reused, if you need to bring additional workers on board, you now have the emails and videos that you can reuse to train them in the process.

Summary

Once you have found the right people that can work independently and produce acceptable quality work, you have a humming content factory for very little investment of cash and minimal time involvement after setting up this process.

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  • http://twitter.com/YetAStudio YetAnotherStudio

    This is a very nice one! Reminds me of what Tim Ferriss said, in more detail :)

  • http://www.lobangclub.com Guyi Shen

    Thanks, hope you can apply it in your own way :)

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