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Pipes and Dashboards

Pipes and dashboard companies

In the realm of development tools, particularly those targeting corporate environments, a thought-provoking way to categorize companies emerges when we view them through the lens of 'pipes' versus 'dashboard' companies. This framework, intriguing in its simplicity, sheds light on the nuanced differences in adoption, integration, and impact of these tools within organizations. It's important to note that this analysis sidelines tools geared towards individual users, such as IDEs like JetBrains, browsers like Arc, or CLIs like Warp, focusing instead on tools that weave into the fabric of corporate operations.

A pipe company develops tools that, despite their limited direct user base within an organization, have a pervasive impact on the entire company's workflow. These tools are often crucial yet operate in the background, unnoticed by the majority who benefit from them. Think of CI providers, log management tools, and databases like PlanetScale. They're like the underground utilities of a city - essential but invisible.

Advantages of Pipe Companies:

  • Rapid Scaling in Revenue: With a company-wide integration from the get-go, revenue growth can be explosive.
  • Focused Sales Strategy: Targeting a narrow decision-maker profile simplifies the sales approach.
  • Low MVP Requirement: The backend nature of these tools allows for a less polished MVP, focusing on functionality over form.
  • Billing Flexibility: Consumption-based billing models are often more attractive, growing stealthily alongside the company.

Challenges Faced by Pipe Companies:

  • High Churn Risk: A change in opinion from a few key decision-makers can lead to swift replacement or abandonment.
  • Vulnerability to Competition: The focus on infrastructure over user experience can make these tools more easily replicable or replaceable.
  • Commoditization Threat: The 'out of sight, out of mind' nature can lead customers to opt for the cheapest viable solution.

The Dynamics of Dashboard Companies

Contrastingly, dashboard companies necessitate active and regular engagement from their users. Each user needs to be individually convinced of the tool's value, often leading to a more gradual adoption process across an organization. Prominent examples include GitHub, Figma, Slack, and Notion - tools that become a daily staple in the professional lives of their users.

Advantages of Dashboard Companies:

  • Sticky Adoption: The individual user investment in these tools makes them less susceptible to rapid churn.
  • Investment in UX: A strong emphasis on user experience and design makes these tools more unique and harder to replicate.
  • Data as a Value Enhancer: The more data entered into these tools, the more valuable they become, creating a virtuous cycle of increased utility and adoption.

Challenges for Dashboard Companies:

  • Slow Initial Growth: Developing a polished, user-friendly product can be a long, arduous journey.
  • Complex Market Fit: Achieving product-market fit in a crowded or mature market may require an initial focus on quality and user experience.

Examples and Exceptions

  • Pipes: CircleCI, Segment, Snyk, PagerDuty, Twilio, AWS
  • Dashboards: Datadog, GitHub, Notion, Atlassian
  • Hybrids: Companies like Datadog, which blend elements of both models, but often lean towards one.

The biggest mistake I see with early founders is not building one type of company or another - but rather a lack of awareness as to which type one is building. Each has its unique set of challenges and advantages - but building a hybrid business shouldn't be undertaken unintentionally.