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Josh McCarter: [0:06] You hope that, if you build it, they will come. That's really where you start out in the early days, but without having the APIs and having that capability, nobody's ever going to come. Nobody wants to partner with somebody that has a closed ecosystem and is really difficult to interface with.

Dan Saks: [0:25] That's Josh McCarter, CEO of Mindbody, a leading technology platform that powers tens of thousands of wellness businesses, including brands such as OTF, F45, and Dry Bar.

[0:40] In 2019, Mindbody was acquired by Vista Equity Partners at a valuation of almost $2 billion. Josh became Mindbody's CEO in 2020. He has more than two decades of experience in wellness and technology. In 2010, he founded Booker Software, which grew to be the largest B2B SaaS marketing and management platform, servicing the wellness industry.

[1:06] Across his career, Josh has had a front row seat to how technology can disrupt an entire industry, changing where and how people exercise and how they understand fitness as a whole. In this episode, Josh talks about ecosystem in particular are revolutionizing wellness and how strong partnerships can help companies grow quickly.

[1:29] This is Daniel Saks, co CEO of AppDirect, and it's time to decode vertical ecosystems. Welcome to "Decoding Digital," a podcast for innovators looking to thrive in the digital economy. I'm your host, Daniel Saks, and I'll sit down with other founders, CEOs, and change makers to decode the trends that are transforming the way we work. Let's decode.

[2:02] Josh, welcome to Decoding Digital.

Josh McCarter: [2:04] Right on, Dan. Thanks for having me.

Dan: [2:06] I think the last time we met in person was in 2014. You were CEO and founder of Booker, and you've been busy since. Man, sold the company for $150 million, became Chief Strategy Officer at Mindbody, and now, CEO. So excited to touch base.

Josh: [2:22] Yeah, thanks, Dan. It's definitely been a wild ride, especially coming to helm at Mindbody as a CEO during the middle of the COVID pandemic.

Dan: [2:30] A lot going on in your life, but congratulations. It's truly an amazing story to be following. Maybe we could start by you sharing a little bit more about Mindbody, but also some of the examples of the customers that you're enabling to operate.

Josh: [2:43] Yeah, absolutely. Just taking a step back, Mindbody was founded in the early 2000s, so we've been around for a while. The core purpose of the business is really helping lead healthier and happier lives by connecting the world to wellness.

[2:56] We start off by doing that through offering a B2B software platform, and we have tens of thousands of wellness businesses around the world that are using that platform to really run, market, and grow their business.

[3:09] Then we connect those businesses to millions of consumers that are using the Mindbody app. They use that to discover and book in person and now virtual wellness services around the world. I know AppDirect's been around for a long time, and similar to you, we were one of the pioneers in our industry.

[3:28] We focused on four particular verticals, so fitness, integrated health, spa, and salon. Now, I think we've got more locations running on our software than most of our competitors combined. We work with customers that are really of all sizes.

[3:42] It could be a small mom and pop, all the way up to the largest chains like Orangetheory Fitness or an F45 or WellBiz Brands.

Dan: [3:50] You must see so many shifts in terms of innovative, new fitness and wellness startups and companies. What are some of the new trends that you've seen, particularly as the world's opening up, in terms of new wellness ideas and concepts?

Josh: [4:05] I think the big headline from COVID and coming out of COVID is virtual. Everybody knows the Pelotons and the Mirrors, but we really think that the local and authentic experiences that are delivered by our customers is really where the industry is going to go, and what call really a hybrid future.

[4:26] We leaned in during the early days of COVID back in March and April and pivoted some of our development teams to build what we call our Virtual Wellness Platform, or what I'm going to refer to as VWP.

[4:38] This was really way that we wanted to enable our customers to either do live stream or on demand, but have it be a much more custom and bespoke experience versus doing something by Zoom or Instagram live, or something like that, and have it highly coupled with our core platform.

[4:56] So that if you had a membership, you could then get rights to access this through your membership, or if you wanted to buy five classes, you could been able to do that. The CRM would know that it's you. It would know that it's you when it logs in.

[5:08] You get your confirmation messages just like you do. The payments processing is all run through the core platform. We saw thousands of our customers, and really tens of thousands of customers in the early days adopt it. Now, hundreds of thousands of customers are using it.

[5:22] As we look at the future, we think it's going to be hybrid, where people are going to want to do things in person, but they're also going to want to supplement with some type of a virtual component.

[5:32] In our research, about 50 percent of consumers say they want to do exactly that. "I'll go back to class for three days a week, but I'm going to add one day a week with virtual." The other thing that we saw that virtual did is it exposed people to classes and modalities that they might not have experienced before.

[5:49] Maybe you were really into yoga, but then you started trying spin at home, or you started trying Pilates. Another 50 percent of those people are saying, "Hey, I'm going to go do that in person." Again, we think that there is this kind of driving from virtual into location, as well as location back to virtual components.

Dan: [6:06] Got it. On Decoding Digital, we really want to focus on the transformative change that is ongoing. What I've noticed is not only has there been transformative change in the fitness and wellness vertical, but Mindbody itself has really evolved in the way that you've positioned and spoke in market.

[6:23] I think when I was first connected with Mindbody, it was very much so a B2B technology platform. Now, you speak to broader mission, that connects everyone around the world around wellness. Can you speak to the evolution of going from B2B technology to thinking about broader messaging and how to tell the story in a way that resonates with so many around the world?

Josh: [6:44] Yeah. One of our core values is consciously evolving. As part of that, you really have to assess, where's the market? Where are consumers? Where are businesses? We really pride ourselves on seeing where the market's going and then investing ahead of where the market's at today and driving that kind of innovation.

[7:02] From a B2B standpoint, we started out with a core software that was really focused on scheduling, CRM, the point of sale, and payments. Then over time, we expanded that with other features that were focused on marketing or other type of client engagement.

[7:20] Then also, as we started going upmarket, the needs of larger businesses whether it's a corporate owned location or it's a franchisor, have really different needs than the smaller businesses. We've had to pivot and extend the product in certain areas.

[7:36] Now, as you think about what we do, we're the ERP system, or the operating system of these businesses. Within that, we have access to their inventory. We see what classes or appointments are available.

[7:49] There's always been this view, whether it was Mindbody or Booker, that we envision connecting all of these business users on our platform with consumers that were looking to book wellness services, much like an OpenTable does for restaurants.

[8:02] Now, our SaaS solution is a lot more comprehensive in terms of really running end to end the business than OpenTable, but at the core, it's a scheduling component. That manages the classes and the appointments.

[8:14] You've got to think of that effectively as the inventory that these businesses sell, and it's perishable inventory. Meaning that, if that three o'clock class isn't filled, or there's a massage at 10:00 AM that doesn't get fulfilled, that inventory's gone.

[8:28] These businesses are constantly looking for ways to capture customers. Most of the marketing channels that are available to them just frankly aren't that great. With that in mind, we said, "Hey, let's build a marketplace where wellness seekers can come. They can view inventory, classes, and appointments across tens of thousands of businesses around the world."

[8:49] Then we can enable them to either book a single class, to buy a membership, or buy a series or a package. Now, as that product has matured over the last five or six years, we're literally processing millions of bookings per month, even in the COVID pandemic.

[9:04] We're also powering other companies, like ClassPass and PureFit, that are accessing that inventory through our APIs. Taking a step back, when you think about these trillion dollar industries it could be travel, food delivery, or car services there's a household name.

[9:20] It's usually one or two category leaders that doesn't just dominate that industry, but they really define. You can think of Uber and Lyft for ridesharing or Airbnb and BRBO for vacation booking. Really, what we want to build Mindbody towards is becoming the household name for these local and authentic wellness experiences.

[9:40] Really being that marketplace that consumers come to for discovering and booking their wellness experiences, and then the businesses which are running on our software platform want to be connected to, because they can tap into that consumer demand.

Dan: [9:53] Quite the transformation, and I know you've done a lot to educate on the wellness industry and other aspects of wellness. I know one of the concepts you talk about is the seven dimensions of wellness. Can you speak to what that means?

Josh: [10:07] The seven dimensions of wellness is really saying, "Take a holistic view at wellness." Historically, I think that wellness really has been viewed as fitness, depending on the segment. Broad based population, I think, thinks of wellness as fitness.

[10:22] One thing that COVID really did was shined a light on the fact that there are so many other elements of wellness. You think about the very early days, when unemployment shot through the roof, and we had tens of millions of people that were unemployed.

[10:39] One of the dimensions of wellness is occupational wellness. How are you as a person feeling well if you don't have a job, you don't have income, and you need to provide for your family? There's stress that's created around that.

[10:50] Another angle on their element of wellness is your mental wellness. This has been something that I think over the years has been fairly taboo. Now, everybody's talking about mental wellness. Companies are getting funded with hundreds of millions of dollars in the mental wellness space right now.

[11:05] I think that that's one of the really positive things that has come out of COVID, is thinking more holistically about wellness. One of the great things about Mindbody is that we have businesses on our platform that address most of the seven dimensions of wellness.

[11:21] We've certainly seen a surge in businesses going into integrative health, for instance, into acupuncture, stress management, and meditation. We expect that that's going to continue to be a trend as we exit COVID.

Dan: [11:34] Let's shift to discuss your tech platform. You spoke to the APIs that you're enabling in the community, and you spoke to the evolution of being a B2B booking and payments tool, to now an end user consumer brand.

[11:48] Talk about the maturity of the tech stack and what you need to do to innovate to get there.

Josh: [11:53] As I mentioned, Mindbody was one of the original vertical SaaS players. We have a combination of legacy tech and then bleeding edge tech. We've also grown through acquisitions. As you acquire companies, they're on different tech stacks.

[12:08] We don't view that we need to have a big bang approach, where we got in and go from 2. to 3., and it's a completely different [inaudible] system. We're taking more of what we call a room by room approach.

[12:20] One of our initiatives this year is called Strengthen the Core. By that, we mean the core of the software, as well as the core of the business, but in speaking about the software, it really looking at those features that people use 80, 90 percent of the time, and making sure that those experiences are new, they're modern, they're sleek, they're easy to onboard, they're easy to train people on.

[12:45] What we see, especially in the SMB segment, is that most of these customers look almost like consumer users. They want it to be as simple as using an iPhone or using their iPad. We have to adapt our technology to where the current users are.

[13:03] We're on a, what I call, a transformational journey right now to replace the legacy aspects of our software, all the way from the back end to the front end, with new technology.

Dan: [13:15] Beyond your own products, as well as some of the acquired products that you're integrating to the tech stack, I know you support many different partners, and you've built your own partner ecosystem. Can you talk about some of the challenges in evolving your partner ecosystem?

Josh: [13:30] Yeah, so the partner ecosystem for us is really core to how we view Mindbody.

[13:36] If you think about how other platforms like Salesforce have evolved over time, they start out with developing a generic set of APIs that are going to work for certain feature functions that you probably go, "Hey, that's not something we're going to build ourselves, so let's get the APIs in place so that we can extend that functionality through a partner."

[13:55] In some cases, you hope that, if you build it, they will come. That's really where you start out in the early days, but without having the APIs and having that capability, nobody's ever going to come. Nobody wants to partner with somebody that has a closed ecosystem is really difficult to interface with.

[14:15] Over time, what we've done is we've extended those APIs into different feature areas. If you think maybe in the early days, it was just about scheduling. Somebody could look in and see a schedule and pull appointment information out.

[14:29] Well, the road map for that then becomes, "OK, somebody needs to be able to book appointment and put it in." They need to be able to change an appointment. They might need to be able to change pricing, change a location.

[14:38] There's a whole body of work that then goes much deeper in a particular category that you start off with. Same thing is true with CRM. Do you want to allow somebody to access a customer that's only at one location or across the entire brand, across 500 locations?

[14:52] That's a very different API endpoint. We identify partners, then, that can help us extend feature function to better serve our customers.

Dan: [15:03] When you spoke to category leadership, like Uber or Airbnb, one of the things in B2B technologies we see is the ecosystem that's the most open and that has as many use cases, and has a cultivated developer community, is typically the one that becomes leading.

[15:17] It's incredible to see the types of integrations and partners that have evolved on your platform over the years. Can you speak to that strategy of how to start from just being Mindbody as a closed software system, to then really opening up and saying, "OK, I want to cultivate many different types of services across different verticals with best of breed, but also native capability"?

Josh: [15:40] Yeah, I think that it first starts with being oriented to saying, "Hey, that's actually something that we want to do," because a lot of businesses ultimately don't want to do that. They would want to have a closed ecosystem.

[15:51] When you make that conscious decision, there are a lot of knock on effects from that decision. Number one is, is your product and engineering team capable of doing that, and is there sufficient staffing that they could do that while still delivering on your internal road map requirements?

[16:09] If you check that box and say, "Yeah, from a technical standpoint, we can do it," then you have to think about, "OK, well, how do we organize the business around enabling that, selling that, and supporting that?" I think in the early days, our business development group was one or two people. Now, it's 10 people.

[16:26] As we think about the areas that we're going to invest in, we also want to make sure that we've got at least an ecosystem that there is to tap into to find those type of businesses. We have to make sure that, if somebody's inbounding, that when they inbound, there's somebody there to answer the email or answer the call, and then provide them with the API documentation.

[16:45] I think that that's one thing that historically was really underestimated, is the amount of support that it can take for some of these partners, because not everybody can just take a look at an integration doc and start writing code to that, especially for some of these more complex use cases that we see in service based businesses.

[17:04] Having support there, having technical support, having business support, and then also thinking about what your monetization strategy is. This is going to cost you millions of dollars to go build, and if you can't monetize it, then that's a pretty tough case to make to your board and your investors that you should go spend on a bunch of money on it, and you can't monetize it.

[17:23] It really requires an end to end thinking. It's not just, "Hey, we're going to go develop and publish APIs, everybody's going to write to it, 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.

[17:36] Then as you get into the monetization side of it, how does it feed into your billing system, how does it feed into your financials and all of your reporting as well as also then thinking about how do you drive value to those businesses that are integrating?

[17:48] Do you have an app store, like we have with you, or do you have other ways that you can promote that through emails or through different webinars or through conferences, so that people actually recognize, "Hey," this is a service that they can buy through a partner.

Dan: [18:02] You spoke to the monetization strategies and the app store being one of them. We're really grateful to be partnered with you there. Can you speak to how your desired evolution of the monetization strategy for your partners and how the app store might evolve?

Josh: [18:17] It has evolved, and it's different depending on the type of partner. You might have a huge partner, like let's take Constant Contact, who's one of our larger partners. That model looks different than a new startup that is only coming with five locations.

[18:35] Usually, our approach is that we have a per location, per month integration fee. That's the starting point. Then, if it's a transactional business, then we charge a per booking fee. Somebody that's tapping into our inventory and then going and reselling and monetizing that inventory, they pay us both an access fee as well as a booking fee.

[19:00] Those are the ones that we have consolidated around. There's been different pricing per user for this, and we really found that those two structures for us were the right structures.

Dan: [19:13] Fantastic. Clearly, you're known for building a culture around wellness. I've heard so many great things about your team members feeling so strongly about the culture that you've created for the sector that you've created. What are some of your lessons and secret sauce to cultivating a unique culture?

Josh: [19:29] I think the first part for us, we've been really fortunate to have a team that joins Mindbody for our core values. Our first core value is committed to wellness. We have for years preached that wellness is about the seven dimensions of wellness.

[19:46] I think people come to us, first of all, to think about their wellness and to be part of something that has a higher purpose. As I mentioned earlier, our purpose is helping people lead healthier and happier lives by connecting the world to wellness.

[19:59] You'd just be blown away by how many times, when I'm talking with new employees, they'll share with me some major health challenges that they had, or somebody that was in their family had. They go, "That's why I'm here, because I want to help more people in the world connect to wellness."

[20:13] I think that that's a starting point, is it really starts at the beginning. When you're recruiting people, you've got to have the right vision, mission, and core values that's going to attract people that are going to come in that are going to "fit" into the culture and really add to the culture over time.

Dan: [20:32] Just in wrapping up, as we look to the next decade and beyond for the fitness industry you spoke to the hybrid trend, but what are some innovations that people might not think of on a day to day basis that you think could evolve over the next decade or so?

Josh: [20:45] I think that there is definitely going to be more technology in our lives and not less. You see it with Apple Watch and Apple Fitness that's coming out. There's a lot of AI/ML work that's happening in the background.

[20:58] I think the connected devices in general, right now, you think of a connected device, "Hey, I can track my heart rate, and I can track my workouts." Over time, I think that those devices are going to be capturing a lot more data and then going into a repository that's collecting data from other parts of your world and then coming back and proactively recommending things.

[21:20] It might even get to the point where it's not just recommending, but it's saying, "You're scheduled in this 3:00 PM meditation class, because we've noticed that your biorhythms are off. Here's a virtual meditation class that you can go into."

[21:32] It could probably also starting pushing you nutrition plans based on how your body is reacting to something that you ate the day before or the week before. I think that that AI/ML on the back end is really going to become pervasive over the next 5 to 10 years. That's one to definitely watch out for.

[21:49] The other one, I think, is gamification. We've seen gamification work in the different industries, and we're starting to see it definitely in the fitness industry. The basics, like we own a company called FitMetrix, and that's one of the businesses that puts up the leaderboards in a spin class or in HIIT class, where you're tracking your heart rate or your output compared to everybody else.

[22:09] That drives people to come in, and they want to see how they're comparing and how they're competing. Other aspects of that, I think, will start filtering more into overall fitness. Even Peloton does gamification when you see how you could high five somebody that's riding, and also create different communities within that for people to engage in.

[22:29] I think that that will also become more pervasive over time.

Dan: [22:34] Josh, well, thanks so much for being such an industry leader. It's been great getting to know you over the last several years, and excited to test out all the incredible innovations that are to come.

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Josh: [22:43] Right on. I appreciate the time. Thanks for having me.

Dan: [22:48] On the next episode of Decoding Digital...

Mark Suster: [22:52] I would rather you have no influencers. I would rather you have no hype. I would rather you raise less capital and obsess with what is the product feature that's really going to resonate with a group of people, like the raison d'etre. What is it that they're waking up every day to use your product to do, and why your product and not other stuff?

Dan: [23:16] Managing Partner at Upfront Ventures, Mark Suster.

[23:23] Thanks for listening to Decoding Digital. Make sure you never miss an episode by subscribing to the show in your favorite podcast player. To learn more, visit decodingdigital.com. Until next time.

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