I find it interesting to follow new business formation in the “staffing industry ecosystem” (consisting of staffing firms, ICMs, MSPs, VMSs, software solutions, online recruiting platforms, et al). In most cases, a firm is formed/started-up for the purpose of doing business in one of these category segments. So, for example, someone may choose to start a healthcare staffing firm, or build a VMS or front office solution, or develop an online recruiting platform. They will start with some “white space,” some ideas, some resources; and they will build it. They will build it up as a standalone business in that particular category segment, with certain investment requirements, a certain cost structure, etc. Most successful staffing industry entrepreneurs around today know what this is about.
In December 2012, Care.com Recruiting Solutions suddenly emerged as a new player in the “staffing industry ecosystem”-- a new “online recruiting platform” serving a particular, quite underserved and rapidly growing market segment (a set of businesses providing care-related/human services ranging from meeting the needs of the elderly to tutoring young aspiring students). These care-related businesses require staff to provide their services, and Care.com Recruiting Solutions is helping them to find and put that staff to work.
One way to look at Care.com Recruiting Solutions is as something very similar to what we would regard as a “job board” or “job site” (online recruiting platform), like early-days Careerbuilder or Monster, but for a specific vertical market segment: care-related businesses (ranging from small businesses to large national franchises) and the people who work for them (nurses, elder care-givers, helpers, tutors). There are other ways in which Care.com Recruiting Solutions may vary from our typical view of a “job board/job site” (including more “online profile”/less resume, more candidate “engagement” capabilities (such as messaging, et al), background checks (through “the safety team”), and a subscription pricing structure that has been gauged to take account of the reality of Craigslist (free) and the cost/value issues that recruiters sometimes think about when using online recruiting platforms and job boards. The Care.com perspective seems to be: If I am the very busy owner or manager of a care-related business, I need an easy, supportive, cost-effective way of finding the people I need (not lots of resumes, Boolean search, etc.). A more detailed snapshot of what Care.com Recruiting Solutions is about can be found here.
So, in late 2012, where did Care.com Recruiting Solutions come from (springing almost like Minerva out of Zeus’ head)? The answer is: the “mothership,” Care.com (in which Recruiting Solutions is the newest line of business).
Care.com was started in 2006 by Sheila Lirio Marcelo (the current CEO) as an online platform that would connect people and families in their homes with people wanting to work/meet their needs for elder care, babysitting, tutoring, house cleaning… even dog sitting).
Today, just 6 years later, the company describes itself as follows:
Care.com (www.care.com) is now the largest online care destination in the world with 7 million members spanning more than 15 countries. Care.com provides a forum for families seeking care support to easily connect with millions of care providers, share caregiving experiences and get advice. The Company helps families address the unique lifecycle of care needs they go through - child care, including special needs, senior care, pet care, housekeeping and more. Care.com also provides e-tools and information to help families make safer and more informed decisions throughout the search and hiring process, including monitored messaging, access to background checks, recorded references, and an online safety guide. Fortune 500 companies, educational institutions, technology companies, and professional services firms offer Care.com memberships as a benefit to employees through its Workplace Solutions program
After starting to attract and build-up a caregiver/worker network by serving people and households in need of services, in 2011 Care.com launched its Business Marketplace line of business which added care-related “businesses” to the supply side of the platform in order to provide people and households with other choices beyond “individual caregivers.” Also in 2011, Care.com launched another line of business, now referred to as Workplace Solutions: essentially an employee benefit offering that businesses/ organizations can provide for their employees (effectively giving their employees—those busy, stressed people and families—access, at preferred pricing, to the Care.com network of care-related service providers). With Business Marketplace and Workplace Solutions, Care.com had now become a B2B (business-business) platform, grown from one that started by connecting families with individual caregivers, but now serving enterprises.
To the present time, Care.com, still a privately-held company, has continued to significantly expand its platform/services business (offerings and markets-served) by way of a number of acquisitions, entry into international markets, and a series of private equity rounds (the most recent for $50M in mid-2012).
Among long-time investors in Care.com are some the great platform business strategists and builders of the early 21st century, Brian Swette, former COO of eBay, and Reid Hoffman, co-founder of LinkedIn (Swette is now a board member, and Hoffman an advisor).
Clearly, from 2006 through 2012 and the spawning of Recruiting Solutions, the development and incredible growth of Care.com has not been guided by the strategic architecture of a conventional, traditional “service delivery” business. Instead it appears this business has been guided by platform thinking, as reflected in the deliberate use of digital platforms to create value and enable exchange (make markets) among different widespread populations with common or related needs and resources (i.e., achieve network effects). A key part of such a strategy (and business model) is to build assets (often in the intangible form of relationships with targeted populations) and progressively realign and leverage those assets to grow and create new value (and markets). Not only can a platform business grow and expand rapidly in this way, but it can also do so with superior “economies” (of investment, cost structure), where the marginal cost of business growth or extension can be very low, promoting high ROI and valuation.
In the case of Care.com, some of its major assets consist of relationships with people and businesses that need and provide care-related services. Care.com has, step by step, built its business (to where it is today) by building up those assets and re-leveraging them in different ways to create new value and markets among the “economic populations” it has increasingly gathered unto itself.
Care.com Recruiting Solutions is the latest extension of this now massive platform (connecting millions of people and businesses world-wide); it is a new business launched to addresses the talent acquisition needs of the care-related businesses that must find and employ care-giver workers. The beauty of such a business is that it is launched on the basis of keystone assets that, to a great extent, have already been created by the firm. Such a way of starting a new business, entering a new market, would seem to come with many advantages.
Care.com Recruiting Solutions will be interesting to watch as it takes its place and develops, within the staffing industry ecosystem, as an online recruiting platform business serving the enormous and growing care-related vertical segment. Over the next few years, I am looking forward to watching this unique platform business grow, expand its platform-based services, and (who knows?) perhaps extend its platform-based services into related/adjacent segments (healthcare?).
OK—it’s all good for my own entertainment and Care.com’s prospects for success as a business. But what are my key take-aways as a Staffing Industry Analyst?
- Clearly, online recruitment and other “talent exchange” platforms continue to evolve. While even fairly conventional job board models (like Care.com, at least now in its initial stage of development) add value in segments that have not been served (that is, just as early job boards did in other segments), it is clear that these platform models are evolving, achieving greater fitness, and expanding their niches in the ecosystem (one need only look at LinkedIn and maybe now Facebook, or oDesk and Elance, etc.).
- Returning to the matter of “new business formation” in the staffing industry ecosystem: we are accustomed to seeing new innovative startups “pop up” or “pop into” the staffing ecosystem (this happened with job boards and VMS , and it’s lately been happening with all forms of talent acquisition solutions/apps). So we might come to see this kind of “organic” innovation process as the norm, an ongoing process that releases change in small, localized bursts into “the system,” introducing instability and adaptation, but not massive disruption. However, the case of Care.com (and perhaps more so, LinkedIn) suggests a different exogenous mechanism at work. “New business formations” as well as “innovation agents” may not only enter the staffing ecosystem in the form of small, localized, young “start-ups,” yielding a kind of “inoculation effect.” They may also enter the staffing ecosystem as a kind of “alien life form,” that developed and became viable and massively established outside of our ecosystem, but which can spawn new species (in other words, different business models) within the ecosystem (species/business models that may have significant competitive advantages: both new methods for creating more value as well as being able to share/leverage the resources of a massive “mothership”.
My point here in presenting the example of Care.com--despite my provocative rhetoric—is not to represent Care.com Recruiting Solutions as an intruder or shape-shifter entering the staffing industry ecosystem. On the contrary, my point is to suggest that innovative models for growing staffing markets may not only come from “small start-ups” growing-up into something innovative and industry transforming. Rather such innovation and change may come from more massive platform businesses developed outside of the ecosystem, but then entering/extending into it (the best example thus far, LinkedIn). My other point is: try to understand these businesses not just “in your own image,” but pay attention, extensively observe, and come to grips with these models and understand their new approaches and methods to create and serve new staffing markets. Doing so may give you new ideas about how you can address new markets or better serve your own.