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Decoding Vertical Ecosystems: Josh McCarter on Disrupting the Wellness Industry
Episode 2921st September 2021 • Decoding Digital • AppDirect
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Tech hasn’t just disrupted the wellness industry ­– it’s revolutionized it. Long before the global pandemic forced health and fitness businesses to pivot to virtual experiences, Mindbody was a key player in enabling wellness organizations to thrive through tech. Mindbody CEO and founder of Booker Software, Josh McCarter, has more than a decade’s experience at the forefront of digitally transforming the wellness industry. He joins this episode to share how the vertical ecosystem connects the world to wellness.

Press play to hear Josh’s thoughts on…

The Necessity of APIs

“You kind of hope that if you build it, they will come. And that's really where you start out in the early days, but without having the APIs and having that ability, nobody's ever going to come, right? Nobody wants to partner with somebody that has a closed ecosystem and is really difficult to interface with.”

Going Beyond APIs

"So it really requires an end-to-end thinking, it's not just, 'hey, we're going to go develop and publish APIs that everybody's going to write to, and that's going to be the end of it.' There's always some component of partner management and technical integration work that's going to be there." 

Satisfying User Expectations

"What we see, especially in the SMB segment is that most of these customers look almost like consumer users, right? Like they want it to be as simple as using an iPhone or using their iPad. And so we have to adapt our technology to where the current users are."

Transcripts

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You hope that, if you build it,

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they will come. That's really

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where you start out in the early

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days, but without having the

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APIs and having that capability,

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nobody's ever going to come.

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Nobody wants to partner with

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somebody that has a closed

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ecosystem and is really

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difficult to interface with.

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That's Josh McCarter, CEO of

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Mindbody, a leading technology

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platform that powers tens of

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thousands of wellness businesses,

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including brands such as OTF,

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F45, and Dry Bar. In 2019,

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Mindbody was acquired by Vista

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Equity Partners at a valuation

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of almost $2 billion. Josh

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became Mindbody's CEO in 2020.

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He has more than two decades of

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experience in wellness and

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technology. In 2010, he founded

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Booker Software, which grew to

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be the largest B2B SaaS

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marketing and management

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platform, servicing the wellness

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industry. Across his career,

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Josh has had a front-row seat to

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how technology can disrupt an

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entire industry, changing where

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and how people exercise and how

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they understand fitness as a

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whole. In this episode, Josh

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talks about ecosystem in

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particular are revolutionizing

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wellness and how strong

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partnerships can help companies

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grow quickly. This is Daniel

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Saks, co-CEO of AppDirect, and

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it's time to decode vertical

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ecosystems. Welcome to "Decoding

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Digital," a podcast for

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innovators looking to thrive in

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the digital economy. I'm your

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host, Daniel Saks, and I'll sit

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down with other founders, CEOs,

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and change-makers to decode the

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trends that are transforming the

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way we work. Let's decode. Josh,

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welcome to Decoding Digital.

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Right on, Dan. Thanks for having

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me.

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I think the last time we met in

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person was in 2014. You were CEO

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and founder of Booker, and

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you've been busy since. Man,

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sold the company for $150

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million, became Chief Strategy

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Officer at Mindbody, and now,

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CEO. So excited to touch base.

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Yeah, thanks, Dan. It's

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definitely been a wild ride,

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especially coming to helm at

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Mindbody as a CEO during the

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middle of the COVID pandemic.

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A lot going on in your life, but

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congratulations. It's truly an

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amazing story to be following.

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Maybe we could start by you

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sharing a little bit more about

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Mindbody, but also some of the

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examples of the customers that

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you're enabling to operate.

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Yeah, absolutely. Just taking a

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step back, Mindbody was founded

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in the early 2000s, so we've

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been around for a while. The

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core purpose of the business is

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really helping lead healthier

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and happier lives by connecting

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the world to wellness. We start

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off by doing that through

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offering a B2B software platform,

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and we have tens of thousands of

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wellness businesses around the

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world that are using that

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platform to really run, market,

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and grow their business. Then

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we connect those businesses to

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millions of consumers that are

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using the Mindbody app. They use

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that to discover and book in-

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person and now virtual wellness

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services around the world. I

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know AppDirect's been around for

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a long time, and similar to you,

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we were one of the pioneers in

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our industry. We focused on

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four particular verticals, so

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fitness, integrated health, spa,

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and salon. Now, I think we've

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got more locations running on

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our software than most of our

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competitors combined. We work

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with customers that are really

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of all sizes. It could be a

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small mom and pop, all the way

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up to the largest chains like

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Orangetheory Fitness or an F45

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or WellBiz Brands.

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You must see so many shifts in

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terms of innovative, new fitness

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and wellness startups and

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companies. What are some of the

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new trends that you've seen,

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particularly as the world's

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opening up, in terms of new

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wellness ideas and concepts?

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I think the big headline from

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COVID and coming out of COVID is

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virtual. Everybody knows the

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Pelotons and the Mirrors, but we

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really think that the local and

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authentic experiences that are

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delivered by our customers is

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really where the industry is

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going to go, and what call

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really a hybrid future. We

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leaned in during the early days

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of COVID back in March and April

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and pivoted some of our

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development teams to build what

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we call our Virtual Wellness

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Platform, or what I'm going to

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refer to as VWP. This was

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really way that we wanted to

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enable our customers to either

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do live stream or on-demand, but

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have it be a much more custom

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and bespoke experience versus

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doing something by Zoom or

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Instagram live, or something

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like that, and have it highly

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coupled with our core platform.

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So that if you had a membership,

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you could then get rights to

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access this through your

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membership, or if you wanted to

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buy five classes, you could been

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able to do that. The CRM would

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know that it's you. It would

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know that it's you when it logs

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in. You get your confirmation

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messages just like you do. The

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payments processing is all run

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through the core platform. We

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saw thousands of our customers,

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and really tens of thousands of

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customers in the early days

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adopt it. Now, hundreds of

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thousands of customers are using

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it. As we look at the future,

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we think it's going to be hybrid,

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where people are going to want

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to do things in person, but

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they're also going to want to

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supplement with some type of a

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virtual component. In our

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research, about 50 percent of

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consumers say they want to do

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exactly that. "I'll go back to

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class for three days a week, but

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I'm going to add one day a week

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with virtual." The other thing

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that we saw that virtual did is

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it exposed people to classes and

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modalities that they might not

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have experienced before. Maybe

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you were really into yoga, but

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then you started trying spin at

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home, or you started trying

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Pilates. Another 50 percent of

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those people are saying, "Hey,

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I'm going to go do that in

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person." Again, we think that

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there is this kind of driving

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from virtual into location, as

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well as location back to virtual

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components.

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Got it. On Decoding Digital, we

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really want to focus on the

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transformative change that is

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ongoing. What I've noticed is

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not only has there been

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transformative change in the

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fitness and wellness vertical,

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but Mindbody itself has really

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evolved in the way that you've

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positioned and spoke in market.

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I think when I was first

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connected with Mindbody, it was

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very much so a B2B technology

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platform. Now, you speak to

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broader mission, that connects

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everyone around the world around

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wellness. Can you speak to the

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evolution of going from B2B

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technology to thinking about

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broader messaging and how to

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tell the story in a way that

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resonates with so many around

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the world?

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Yeah. One of our core values is

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consciously evolving. As part of

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that, you really have to assess,

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where's the market? Where are

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consumers? Where are businesses?

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We really pride ourselves on

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seeing where the market's going

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and then investing ahead of

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where the market's at today and

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driving that kind of innovation.

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From a B2B standpoint, we

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started out with a core software

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that was really focused on

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scheduling, CRM, the point of

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sale, and payments. Then over

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time, we expanded that with

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other features that were focused

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on marketing or other type of

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client engagement. Then also,

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as we started going upmarket,

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the needs of larger businesses

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whether it's a corporate-owned

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location or it's a franchisor,

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have really different needs than

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the smaller businesses. We've

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had to pivot and extend the

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product in certain areas. Now,

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as you think about what we do,

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we're the ERP system, or the

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operating system of these

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businesses. Within that, we have

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access to their inventory. We

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see what classes or appointments

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are available. There's always

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been this view, whether it was

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Mindbody or Booker, that we

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envision connecting all of these

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business users on our platform

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with consumers that were looking

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to book wellness services, much

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like an OpenTable does for

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restaurants. Now, our SaaS

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solution is a lot more

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comprehensive in terms of really

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running end-to-end the business

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than OpenTable, but at the core,

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it's a scheduling component.

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That manages the classes and the

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appointments. You've got to

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think of that effectively as the

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inventory that these businesses

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sell, and it's perishable

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inventory. Meaning that, if that

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three o'clock class isn't filled,

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or there's a massage at 10:00 AM

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that doesn't get fulfilled, that

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inventory's gone. These

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businesses are constantly

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looking for ways to capture

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customers. Most of the marketing

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channels that are available to

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them just frankly aren't that

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great. With that in mind, we

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said, "Hey, let's build a

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marketplace where wellness-

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seekers can come. They can view

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inventory, classes, and

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appointments across tens of

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thousands of businesses around

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the world." Then we can enable

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them to either book a single

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class, to buy a membership, or

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buy a series or a package. Now,

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as that product has matured over

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the last five or six years,

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we're literally processing

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millions of bookings per month,

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even in the COVID pandemic.

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We're also powering other

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companies, like ClassPass and

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PureFit, that are accessing that

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inventory through our APIs.

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Taking a step back, when you

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think about these trillion-

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dollar industries -- it could be

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travel, food delivery, or car

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services -- there's a household

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name. It's usually one or two

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category leaders that doesn't

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just dominate that industry, but

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they really define. You can

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think of Uber and Lyft for

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ridesharing or Airbnb and BRBO

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for vacation booking. Really,

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what we want to build Mindbody

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towards is becoming the

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household name for these local

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and authentic wellness

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experiences. Really being that

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marketplace that consumers come

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to for discovering and booking

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their wellness experiences, and

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then the businesses which are

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running on our software platform

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want to be connected to, because

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they can tap into that consumer

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demand.

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Quite the transformation, and I

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know you've done a lot to

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educate on the wellness industry

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and other aspects of wellness. I

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know one of the concepts you

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talk about is the seven

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dimensions of wellness. Can you

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speak to what that means?

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The seven dimensions of wellness

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is really saying, "Take a

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holistic view at wellness."

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Historically, I think that

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wellness really has been viewed

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as fitness, depending on the

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segment. Broad-based population,

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I think, thinks of wellness as

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fitness. One thing that COVID

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really did was shined a light on

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the fact that there are so many

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other elements of wellness. You

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think about the very early days,

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when unemployment shot through

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the roof, and we had tens of

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millions of people that were

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unemployed. One of the

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dimensions of wellness is

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occupational wellness. How are

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you as a person feeling well if

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you don't have a job, you don't

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have income, and you need to

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provide for your family? There's

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stress that's created around

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that. Another angle on their

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element of wellness is your

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mental wellness. This has been

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something that I think over the

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years has been fairly taboo. Now,

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everybody's talking about mental

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wellness. Companies are getting

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funded with hundreds of millions

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of dollars in the mental

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wellness space right now. I

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think that that's one of the

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really positive things that has

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come out of COVID, is thinking

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more holistically about wellness.

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One of the great things about

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Mindbody is that we have

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businesses on our platform that

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address most of the seven

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dimensions of wellness. We've

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certainly seen a surge in

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businesses going into

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integrative health, for instance,

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into acupuncture, stress

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management, and meditation. We

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expect that that's going to

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continue to be a trend as we

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exit COVID.

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Let's shift to discuss your tech

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platform. You spoke to the APIs

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that you're enabling in the

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community, and you spoke to the

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evolution of being a B2B booking

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and payments tool, to now an end

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user consumer brand. Talk about

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the maturity of the tech stack

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and what you need to do to

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innovate to get there.

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As I mentioned, Mindbody was one

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of the original vertical SaaS

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players. We have a combination

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of legacy tech and then bleeding

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edge tech. We've also grown

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through acquisitions. As you

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acquire companies, they're on

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different tech stacks. We don't

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view that we need to have a big

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bang approach, where we got in

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and go from 2. to 3., and it's a

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completely different

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system. We're taking more of

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what we call a room-by-room

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approach. One of our

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initiatives this year is called

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Strengthen the Core. By that, we

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mean the core of the software,

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as well as the core of the

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business, but in speaking about

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the software, it really looking

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at those features that people

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use 80, 90 percent of the time,

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and making sure that those

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experiences are new, they're

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modern, they're sleek, they're

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easy to onboard, they're easy to

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train people on. What we see,

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especially in the SMB segment,

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is that most of these customers

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look almost like consumer users.

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They want it to be as simple as

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using an iPhone or using their

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iPad. We have to adapt our

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technology to where the current

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users are. We're on a, what I

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call, a transformational journey

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right now to replace the legacy

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aspects of our software, all the

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way from the back end to the

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front end, with new technology.

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Beyond your own products, as

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well as some of the acquired

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products that you're integrating

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to the tech stack, I know you

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support many different partners,

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and you've built your own

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partner ecosystem. Can you talk

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about some of the challenges in

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evolving your partner ecosystem?

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Yeah, so the partner ecosystem

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for us is really core to how we

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view Mindbody. If you think

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about how other platforms like

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Salesforce have evolved over

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time, they start out with

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developing a generic set of APIs

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that are going to work for

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certain feature functions that

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you probably go, "Hey, that's

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not something we're going to

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build ourselves, so let's get

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the APIs in place so that we can

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extend that functionality

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through a partner." In some

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cases, you hope that, if you

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build it, they will come. That's

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really where you start out in

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the early days, but without

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having the APIs and having that

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capability, nobody's ever going

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to come. Nobody wants to partner

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with somebody that has a closed

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ecosystem is really difficult to

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interface with. Over time, what

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we've done is we've extended

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those APIs into different

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feature areas. If you think

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maybe in the early days, it was

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just about scheduling. Somebody

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could look in and see a schedule

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and pull appointment information

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out. Well, the road map for

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that then becomes, "OK, somebody

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needs to be able to book

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appointment and put it in." They

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need to be able to change an

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appointment. They might need to

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be able to change pricing,

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change a location. There's a

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whole body of work that then

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goes much deeper in a particular

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category that you start off with.

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Same thing is true with CRM. Do

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you want to allow somebody to

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access a customer that's only at

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one location or across the

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entire brand, across 500

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locations? That's a very

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different API endpoint. We

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identify partners, then, that

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can help us extend feature

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function to better serve our

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customers.

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When you spoke to category

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leadership, like Uber or Airbnb,

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one of the things in B2B

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technologies we see is the

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ecosystem that's the most open

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and that has as many use cases,

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and has a cultivated developer

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community, is typically the one

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that becomes leading. It's

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incredible to see the types of

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integrations and partners that

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have evolved on your platform

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over the years. Can you speak to

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that strategy of how to start

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from just being Mindbody as a

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closed software system, to then

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really opening up and saying, "

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OK, I want to cultivate many

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different types of services

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across different verticals with

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best-of-breed, but also native

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capability"?

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Yeah, I think that it first

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starts with being oriented to

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saying, "Hey, that's actually

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something that we want to do,"

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because a lot of businesses

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ultimately don't want to do that.

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They would want to have a closed

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ecosystem. When you make that

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conscious decision, there are a

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lot of knock-on effects from

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that decision. Number one is, is

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your product and engineering

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team capable of doing that, and

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is there sufficient staffing

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that they could do that while

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still delivering on your

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internal road map requirements?

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If you check that box and say, "

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Yeah, from a technical

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standpoint, we can do it," then

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you have to think about, "OK,

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well, how do we organize the

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business around enabling that,

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selling that, and supporting

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that?" I think in the early days,

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our business development group

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was one or two people. Now, it's

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10 people. As we think about

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the areas that we're going to

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invest in, we also want to make

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sure that we've got at least an

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ecosystem that there is to tap

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into to find those type of

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businesses. We have to make sure

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that, if somebody's inbounding,

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that when they inbound, there's

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somebody there to answer the

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email or answer the call, and

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then provide them with the API

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documentation. I think that

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that's one thing that

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historically was really

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underestimated, is the amount of

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support that it can take for

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some of these partners, because

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not everybody can just take a

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look at an integration doc and

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start writing code to that,

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especially for some of these

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more complex use cases that we

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see in service-based businesses.

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Having support there, having

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technical support, having

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business support, and then also

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thinking about what your

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monetization strategy is. This

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is going to cost you millions of

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dollars to go build, and if you

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can't monetize it, then that's a

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pretty tough case to make to

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your board and your investors

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that you should go spend on a

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bunch of money on it, and you

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can't monetize it. It really

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requires an end-to-end thinking.

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It's not just, "Hey, we're going

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to go develop and publish APIs,

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everybody's going to write to it,

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and that's going to be the end

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of it." There's always some

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component of partner management

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and technical integration work

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that's going to be there. Then

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as you get into the monetization

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side of it, how does it feed

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into your billing system, how

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does it feed into your

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financials and all of your

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reporting as well as also then

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thinking about how do you drive

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value to those businesses that

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are integrating? Do you have an

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app store, like we have with you,

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or do you have other ways that

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you can promote that through

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emails or through different

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webinars or through conferences,

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so that people actually

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recognize, "Hey," this is a

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service that they can buy

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through a partner.

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You spoke to the monetization

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strategies and the app store

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being one of them. We're really

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grateful to be partnered with

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you there. Can you speak to how

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your desired evolution of the

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monetization strategy for your

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partners and how the app store

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might evolve?

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It has evolved, and it's

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different depending on the type

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of partner. You might have a

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huge partner, like let's take

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Constant Contact, who's one of

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our larger partners. That model

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looks different than a new

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startup that is only coming with

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five locations. Usually, our

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approach is that we have a per-

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location, per-month integration

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fee. That's the starting point.

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Then, if it's a transactional

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business, then we charge a per-

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booking fee. Somebody that's

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tapping into our inventory and

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then going and reselling and

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monetizing that inventory, they

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pay us both an access fee as

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well as a booking fee. Those

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are the ones that we have

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consolidated around. There's

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been different pricing per-user

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for this, and we really found

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that those two structures for us

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were the right structures.

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Fantastic. Clearly, you're known

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for building a culture around

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wellness. I've heard so many

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great things about your team

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members feeling so strongly

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about the culture that you've

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created for the sector that

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you've created. What are some of

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your lessons and secret sauce to

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cultivating a unique culture?

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I think the first part for us,

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we've been really fortunate to

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have a team that joins Mindbody

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for our core values. Our first

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core value is committed to

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wellness. We have for years

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preached that wellness is about

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the seven dimensions of wellness.

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I think people come to us, first

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of all, to think about their

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wellness and to be part of

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something that has a higher

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purpose. As I mentioned earlier,

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our purpose is helping people

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lead healthier and happier lives

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by connecting the world to

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wellness. You'd just be blown

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away by how many times, when I'm

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talking with new employees,

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they'll share with me some major

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health challenges that they had,

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or somebody that was in their

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family had. They go, "That's why

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I'm here, because I want to help

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more people in the world connect

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to wellness." I think that

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that's a starting point, is it

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really starts at the beginning.

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When you're recruiting people,

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you've got to have the right

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vision, mission, and core values

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that's going to attract people

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that are going to come in that

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are going to "fit" into the

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culture and really add to the

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culture over time.

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Just in wrapping up, as we look

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to the next decade and beyond

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for the fitness industry -- you

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spoke to the hybrid trend, but --

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what are some innovations that

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people might not think of on a

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day-to-day basis that you think

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could evolve over the next

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decade or so?

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I think that there is definitely

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going to be more technology in

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our lives and not less. You see

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it with Apple Watch and Apple

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Fitness that's coming out.

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There's a lot of AI/ML work

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that's happening in the

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background. I think the

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connected devices in general,

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right now, you think of a

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connected device, "Hey, I can

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track my heart rate, and I can

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track my workouts." Over time, I

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think that those devices are

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going to be capturing a lot more

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data and then going into a

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repository that's collecting

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data from other parts of your

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world and then coming back and

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proactively recommending things.

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It might even get to the point

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where it's not just recommending,

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but it's saying, "You're

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scheduled in this 3:00 PM

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meditation class, because we've

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noticed that your biorhythms are

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off. Here's a virtual meditation

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class that you can go into." It

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could probably also starting

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pushing you nutrition plans

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based on how your body is

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reacting to something that you

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ate the day before or the week

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before. I think that that AI/ML

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on the back end is really going

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to become pervasive over the

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next 5 to 10 years. That's one

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to definitely watch out for.

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The other one, I think, is

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gamification. We've seen

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gamification work in the

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different industries, and we're

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starting to see it definitely in

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the fitness industry. The basics,

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like we own a company called

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FitMetrix, and that's one of the

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businesses that puts up the

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leaderboards in a spin class or

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in HIIT class, where you're

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tracking your heart rate or your

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output compared to everybody

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else. That drives people to

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come in, and they want to see

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how they're comparing and how

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they're competing. Other aspects

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of that, I think, will start

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filtering more into overall

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fitness. Even Peloton does

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gamification when you see how

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you could high-five somebody

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that's riding, and also create

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different communities within

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that for people to engage in. I

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think that that will also become

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more pervasive over time.

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Josh, well, thanks so much for

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being such an industry leader.

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It's been great getting to know

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you over the last several years,

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and excited to test out all the

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incredible innovations that are

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to come.

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Right on. I appreciate the time.

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Thanks for having me.

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On the next episode of Decoding

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Digital...

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I would rather you have no

Speaker:

influencers. I would rather you

Speaker:

have no hype. I would rather you

Speaker:

raise less capital and obsess

Speaker:

with what is the product feature

Speaker:

that's really going to resonate

Speaker:

with a group of people, like the

Speaker:

raison d'etre. What is it that

Speaker:

they're waking up every day to

Speaker:

use your product to do, and why

Speaker:

your product and not other stuff?

Speaker:

Managing Partner at Upfront

Speaker:

Ventures, Mark Suster. Thanks

Speaker:

for listening to Decoding

Speaker:

Digital. Make sure you never

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miss an episode by subscribing

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to the show in your favorite

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podcast player. To learn more,

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visit decodingdigital.com. Until