(Cross-posted @ Horses for Sources)
By Phil Fersht on August 6, 2018
(Cross-posted @ Horses for Sources)
By Louis Columbus on August 6, 2018
These and many other insights into the escalating costs of security breaches are from the 2018 Cost of a Data Breach Study sponsored by IBM Security with research independently conducted by Ponemon Institute LLC. The report is downloadable here (PDF, 47 pp. no opt-in).
The study is based on interviews with more than 2,200 compliance, data protection and IT professionals from 477 companies located in 15 countries and regions globally who have experienced a data breach in the last 12 months. This is the first year the use of Internet of Things (IoT) technologies and security automation are included in the study. The study also defines mega breaches as those involving over 1 million records and costing $40M or more. Please see pages 5, 6 and 7 of the study for specifics on the methodology.
The report is a quick read and the data provided is fascinating. One can’t help but reflect on how legacy security technologies designed to protect digital businesses decades ago isn’t keeping up with the scale, speed and sophistication of today’s breach attempts. The most common threat surface attacked is compromised privileged credential access. 81% of all breaches exploit identity according to an excellent study from Centrify and Dow Jones Customer Intelligence, CEO Disconnect is Weakening Cybersecurity (31 pp, PDF, opt-in).
The bottom line from the IBM, Centrify and many other studies is that we’re in a Zero Trust Security (ZTS) world now and the sooner a digital business can excel at it, the more protected they will be from security threats. ZTS begins with Next-Gen Access (NGA) by recognizing that every employee’s identity is the new security perimeter for any digital business.
Key takeaways from the study include the following:
The IBM study foreshadows an increasing level of speed, scale, and sophistication when it comes to how breaches are orchestrated. With the average breach globally costing $4.36M and breach costs and lost customer revenue soaring in the U.S,. it’s clear we’re living in a world where Zero Trust should be the new mandate.
Zero Trust Security starts with Next-Gen Access to secure every endpoint and attack surface a digital business relies on for daily operations, and limit access and privilege to protect the “keys to the kingdom,” which gives hackers the most leverage. Security software providers including Centrify are applying advanced analytics and machine learning to thwart breaches and many other forms of attacks that seek to exploit weak credentials and too much privilege. Zero Trust is a proven way to stay at parity or ahead of escalating threats.
Posted in Business, Featured Posts, Technology / Software, Trends & Concepts | Tagged Centrify, cybersecurity, enterprise security, IBM 2018 Cost of a Data Breach Study, Louis Columbus, Next-Gen Access, security, Zero Trust Security | Leave a response
By Jason M. Lemkin on August 3, 2018
Filled with actionable insights and pro tips on how deliver better business metrics to the board, David Kellogg’s session on 10 non-obvious things about scaling SaaS was one of the most anticipated during Annual 2018. Want in on this awesome SaaStr content? Check out the full video and transcript below!
And in case you haven’t heard, we’re building a completely immersive experience for SaaStr Annual 2019! With 3 full days of sessions, featuring over 300 speakers from the best SaaS companies around the world, SaaStr Annual will be filled with actionable thought leadership to help grow your business. Get your tickets to the SaaS show everyone will be talking about!
David Kellogg: Thank you, thanks for joining our repeat session. So we did it at 9:00, so I’ve done it once now, so you get to see the more rehearsed version. Let’s just up. So I’m Dave, I’m CEO of Host Analytics, if you happen to be in finance and work in planning or budgeting, give us a call. Prior to Host, I was at Salesforce for a year, ran MarkLogic for six years from zero to 80 million, and was CMO at BusinessObjects from 30 million to a billion, quite a nice ride there. Board-wise, I’m on two boards right now, Alation, which is data catalogs, and Nexeo, which is next generation content management. Prior to that I was on the board of Glandular and Aster Data, and in my copious spare time I do write a blog that hopefully you’ll want to see after the presentation. A lot of the points, certainly not all, but a lot of the points of the slide, there is a blog post that really drills into the topic.
Our intent today, and it was the guys at SaaStr who came up with the title, which I like, because I like the non-obvious and they said, “Hey, cover 10 non-obvious things about scaling a SaaS company.” And I was like, “Well that’ll be fun.” And this guy yesterday tweeting, how are we going to do that in 30 minutes? And the answer is, with great difficulty and with a lot of speed. So my intent for the presentation, it’s really kind of tops of waves, it’s 10 things that’ll hopefully make you think. It’s more thought-provoking than question and answering. That’s really my goal. If you walk away with a few things going, “God, I didn’t think about it that way before, maybe I’ll think differently,” then at least I’ll be happy with what we’ve accomplished today.
So the first one, and you can accuse me of like, whoa, isn’t this a presentation about non-obvious things about SaaS companies, why are you saying you should run the company about ARR, and the answer is lots of people seem to think they do run their companies in ARR but they don’t. Just last night I met with a very smart entrepreneur, very cool company, he wanted to show me his financials, and the first was all about ACV that was mixing new ACV, upsell ACV, and renewals ACV. I couldn’t make heads or tails of it.
Another time, people show me gap revenues. I’m like, you’re a SaaS company, why is your first slide gap revenue? So everybody thinks they want to be ARR first, but you only know you are based on the answers of these three questions. One, if you ask someone how big a deal it is, do they answer in ARR? If they answer in any other unit, your company’s not ARR first. So if I ask the forecast for the quarter is, if you don’t answer in ARR, it’s about what I don’t say. If I just say what’s the forecast? Do you answer in bookings? What do you answer in? If you answer in ARR, that’s correct. Then you’re ARR first.
What’s the first line of the first slide of your investor deck or board deck? And if it isn’t ARR, then you’re not ARR first. So lots of people think they do this, it’s actually a dangerous form of denial in my mind, but if you want to be ARR first, make this the first slide of your board deck or of your investor deck. And it’s not only my opinion, I met a couple years back with Doug Leone, top guy at Sequoia, I showed him some financials in this format and he goes, “Every SaaS company should present their financials in this format.” So it’s not just me, I have a second opinion on it.
And what this shows you is what I call a leaky bucket analysis because a SaaS company is a leaky bucket full of ARR, right? Every quarter, sales pours more water in the bucket, every quarter, customer success tries to keep water from leaking out of the bucket, and therefore, you can say we started a period with 100 units of ARR, we added 50 units, we turned away 10, therefore we ended up with 140 units. Right? And I can tell you that the value of your SaaS company is determined by the water level in the bucket and by how fast that’s growing.
So, when you do this analysis, it’s very important, you can see things, like people who say they sell two million of new ARR but turn one five, it’s a big bucket and they’re having trouble keeping it full. Well that company’s not worth very much because it’s not growing the water level in the bucket. It’s got a big bucket, but it’s not growing. So that’s why we have the three growth rates down below.
New ARR growth, ending ARR growth, which really is the single most important thing for valuing your company and new new ARR growth, how much incremental did you do to the bucket? So, everybody agrees we should be ARR first, the question is are you? And if you don’t, if your default unit isn’t ARR and if you don’t show your financials with an immediate focus on the ARR bucket and what’s happening to it, I’m going to argue you’re not ARR first. And Lord knows, please don’t show up with a gap P&L. Right? These things will hurt you when you try to raise money. EC wants to know that you get ARR and you are an ARR first person.
That’s our first point. Second point, SaaS metrics are a lot more complicated than meets the eye. A lot of us are kind of intellectually lazy and we want to assume these things are simple and you can get yourself in trouble if you don’t take time to think about what goes into these calculations, so VCs are going to be looking at your company through a lens of these metrics, they’re going to look at LT, they’re going to look at CAC, they’re going to look at churn, and if you don’t understand and kind of have a logical argument for how you calculate them, you could get yourself in trouble.
Now, the purpose of this presentation isn’t to try and do a two-hour course in subtleties of SaaS metrics, but I do want to just point out a few things that maybe you didn’t think of that will hopefully make you realize, “Hm, I should dig into this.” For example, look, the CAC ratio seems simple. Prior quarter sales in marketing divided by new ARR in the current quarter. What could be easier? Well does that new ARR include upsell or not? Most people would say yes but some people want to make a new business focus CAC that didn’t. Is sales and marketing all of sales and marketing, is it just a variable like the sales commission and the marketing demand gen? Or is it the entire base salary, the PR team, the whole banana. For most people, it should be the whole banana, right? The question we’re trying to answer is how much does your company spend to acquire a dollar of ARR. That’s what the CAC ratio is.
So, typically, it’s all sales and marketing cost divided by all new ARR in the quarter. So, should it include upsell? Yes, but who does upsell at your company? If upsell is done by sales, then wait a minute, if you ask finance where do you put the cost of customer success, it’s in sales. Right, so you’re going to need to pull that out and say, “Wait a minute. My sales team does upsell, so therefore, when I do my CAC ratio I shouldn’t include the cost of renewals because my customer success team just does renewals in that.” Or vice versa, if your customer success team does do a lot of upsell and you’re including upsell ARR in the denominator, then yes, you should include their cost in the sales calculation because most finance departments will classify customer success as sales expense.
The other nasty thing about sales expense, and this is probably for slightly bigger companies, but commissions get amortized. So there is a question of whether or not you want to restate this on a cash basis. Just say, wait a minute, if I’ve got screwed up comp plans that are over rewarding sales, I’m going to take those and divide them over the duration of the contract and it’s going to be very hard for me to see this with a broken CAC ratio, right? So if I reset and do this on a cash basis, maybe I’ll see reality more clearly.
So these are just the little nigly subtleties that makes something that seems so easy difficult. LTV to CAC, I mean first, LTV to CAC is kind of the ultimate SaaS metric. What you paid for something on the bottom and on the top, what it’s worth. It’s kind of the grand balance. What you paid for it is the CAC ratio or how much you pay for a dollar of ARR, and on the top, you’re trying to say what somebody’s life time value in terms of subscription margin. So I have to run the service, so let’s do this on a gross margin basis, subscription gross margin basis, let’s invert the CAC rate to get the lifetime and then divide it by the CAC ratio and that will get me a number, the bigger that number, the more it’s worth relative to what I’m paying for it. It seems like a pretty simple metric, but the first question is, which CAC? I just talked to you about five different CACs you could do, so which CAC ratio do you use and I could make the same argument on churn. Which churn do you use? Because there’s a lot of different ways to think about churn as well and lord knows what do you do when churn becomes negative?
Because the idea behind churn rates is kind of like you use it as a discount rate in the next present value formula. Right, if I have this bucket of ARR, and imagine I have no upsell and every year 10% of it leaks out, well it starts out with 100 then it’s 90, then it’s 81, then it’s 72, right, and I’m kind of using it as a discount rate on the value of my annuity. Well that works really good except when churn is negative. And then all the sudden your lifetime value’s infinite and you can go tell a VC that, but they’re not going to believe you.
So what do you do? And if you exclude upsell it seems too pessimistic because wait a minute, we really do do upsell. I really do have negative churn, but it breaks your LTV-to-CAC math. So these are the things you need to think about.
Here’s an even more interesting case, which is most of the thinking about land of expand, in Silicon Valley is I sell somebody a $50 steak and then I sell them a $10 glass of wine and if I’m lucky, another $10 glass of wine that I have the big purchase up front and I’m getting these little things on the back end. Well, I met a guy last night who sells a $10 glass of wine and then sells a $50 steak then another $50 steak, then another $50 steak. Right, so he has a problem that looks like this, if he spends 100 units to get a customer, or 50 on that initial purchase, well it looks like his CAC ratio is 2.0, which is not good. A lot of VCs will run away if you tell them your CAC is 2.0. Or, is it CAC .33? Because I can tell you reliably that two quarters later, these guys who have spent 100 to get are now worth 150.
So, what is my CAC ratio here? And the question is really, what do you mean by acquisition? Because in this guy’s case, if you can reliably prove that that pattern’s going to happen, then I think he should count the sales and marketing divided by let’s just say the first year customer value, right? Which is an unusual way of looking at it, but if you have a small land, big expand model, maybe it’s the right way.
So here’s another example, this is just a churn example, my last metrics example to talk about how things can get confusing, but we’ll take a simple case, somebody buys nine units of product A and 10 units of B, six months into it, they buy 15 more units of A, they’re happy, and then the renewal comes up. Well, what are we renewing? What’s the denominator in the renewal rate? Is it 100 or 115? Right? Now, your inner fundraiser wants to say it’s 100 because you want to say, “Hey, I renewed 115 plus units off 100.” That’s what your fundraising side wants to say. Your operational manager side says it’s 115. I’m handing a CSM a customer worth 115 units, I want to get 115 or more units out of that customer, right? So there’s your first question, what do you do about kind of off-cycle upsell and how do you think about that and the answer is you certainly want to tell the CSM go renew 115 or more.
The 15 units of upsell, finance typically takes it when it comes, so you’re kind of thus far into the discussion of lost credit for it, it kind of went away because it went to offset churn into some other period. But more subtly, on day 365, is your company going to count that as 10 units of churn and 20 units of upsell or simply as 10 units of upsell? And most sales house people, if you talk to them about this, they look at customers on a contract basis and they’re going to say the value of that contract went up by 10 units, so it’s 10 units of upsell. So the underlying flows get lost and most systems don’t track them. Most companies don’t track them. So I call it account-level churn, you’re looking at it through an account lens, not through a product lens.
And what about those 15 units of upsell? How do I get credit for them? And the answer is that’s why they made retention rates. Because retention rates are cohort based and you say take all the people who bought in one Q 17, what are they worth now in one Q 18 in aggregate, and that’s my retention rate. And those are good. This is simple calculation and it actually shows what happens to customers and how they expand or shrink over time. So you don’t have to worry so much about the timing issues because you’re taking snapshots.
All this stuff though, and this is just tops of waves, hopefully points out that, gosh, there’s a lot more going on here than maybe I think and it’s worth drilling into these things because when you’re raising money, VCs and private equities guys are very familiar with these metrics and they’re going to ask those questions. And if you don’t have credible answers that are well thought out, you kind of lose a lot of credibility. On the flip side, take my friend who sells the $10 glass of wine, most VCs will kind of run away from him going, “Wow, you spent a bunch of money just to get this $10 order,” but if he comes in with a good story that says, “Wait a minute, they buy 50 then buy 50, then buy 50 again,” within one year, his CAC ration goes from two to 0.3 and they’re like, “Holy cow.” Right, it goes from unacceptable to amazing just based on how he was able to frame it. So this stuff matters and they do react to the metrics.
Third point, public CFOs may not get SaaS metrics. This was fascinating to me. I put it up here mostly as a bonus because one day I met with the CFO of a well-known public SaaS company and he started asking me all these questions about CAC and LTV and renewal rates and I’m sitting there thinking, how can this be? This person is a CFO of a public SaaS company and he doesn’t understand a lot of these metrics. Then a kind of light went off and I’m like, “Wait a minute, he lives in a world where investors look through a veil at the company, they can’t see all the metrics that you show VCs and private equity guys, they look at the company through a veil so he only understands these outside-in metrics, like billings.” So billings is revenue plus change in deferred revenue. It’s kind of a way to try and hack bookings. It doesn’t necessarily always work, but that’s what they’re used to.
So even though he’s the CFO, by virtue of his job, he kind of places himself outside the company and looks in because that’s what all his investors do and therefore, he doesn’t actually know much about all these internal metrics that the VC world gets to see. So first it was kind of amazing to see, and second I was just saying, look how this might apply to you is boards love to hire the CFO you need three years from now, and that’s great, as long as that person can do the job you need done today. And this guy can’t. This guy would not be a good CFO at a private company that needs to raise two more rounds before an IPO.
So my advice is don’t let your board push you too far ahead and hire some CFO who’s going to be wonderful at the IPO when you’re three years from an IPO and need to raise two rounds because you need somebody who can do the job right now. And it’s a fairly common pattern and this is just one example.
So, number four, multi-year deals make sense in certain situations. This is heretical so I kind of put the heretical warning on it because if you say this in polite SaaS company, you are likely to offend someone because hardcore SaaS purists think it’s all annual, multi-year deals are evil, you’re counting TCV and that scares me because TCV may or may not ever be realized, are you taking your ARR and multiply by five for a five year contract with annual payments, who knows if you’re going to get the money, are you inflating the size of your company 5X in the process, scary, scary, scary. That’s the thought process that happens if you talk about multi-year deals recklessly.
Now, the reality is, these contracts are effectively rolling the dice. Right, if you’ve got a 90% churn rate, I’m effectively exposing you to an annual dice roll where your contract comes up, we roll the dice, nine times out of ten it says renew, one time it says not. Right, that’s the way we should think about the renewal rate. So, if I were to offer you a discount that was less than that churn rate, am I better off? I could expose you to a 10% decay from the churn rate or I could expose you to a 5% decay from my discount. So my belief is whenever the discount I offer you for a multi-year deal is less than the churn rate that you win and I win. It’s actually a win-win transaction.
So at my company, we offer these to customers. We do it at the very end of the sales cycle, we say you’ve done a full evaluation, you’ve chosen Host Analytics, would you like to save a little extra money because you seem pretty sure it’s going to work for you because you spent six months evaluating it? If you’d like to do that, we can talk to you about a multi-year deal and here’s the kind of discount we can do. And about half the time people say great, about half the time they say no thanks. And I don’t mind because if I’m offering the discount at the right level, I’m actually fairly neutral. Go ahead, I’ll put you against the dice because that’s roughly the discount I was offering anyway. It’s kind of mathematically equivalent to me.
Now, the deal needs to be prepaid. Very important because I believe if you’re Salesforce and you sign a multi-year deal that’s not prepaid and the customer defaults on you, you’re probably going to sue them and you can collect that money. If you’re a 10 million dollar SaaS company, you’re not. You’re not going to have the money to sue them. So I believe that multi-year non-prepaid deals for small SaaS companies are a terrible idea. Why? Because they look a lot like renewals that are done by finance, not customer success.
Because if it’s on a one-year cycle, you’re going to tell customer success, “Go love this customer, make sure they’re ready for renewal, do all your normal love process so when that contract comes up, they’re ready to renew.” If you hand it to finance and say, “Hey, there’s a collection due in 365 days.” They’re not going to call anybody, they’re not going to be nice. They’re not going to treat it like a renewal, they’re just going to mail an invoice at month 11. If the customer’s unhappy they’re just not going to pay it. And all the sudden you’ve got effectively a renewal, and finance is going to say, “It’s a contract, you owe us the money.” And if the customer’s not using the software they’re going to say, “Pound sand.” And then where are you? You’re nowhere. You gave away a price lock, you gave away a discount and you got nothing in return.
So the argument is if you want to play this game, the deals have to be prepaid. Multi-year non-prepaid deals to me don’t make a lot of sense to small companies because your ability to collect those out year payments is virtually identical whether or not the contract’s in place because if they’re using the software and they’re happy, they’re going to pay; if they’re not, they’re not. It doesn’t matter what the contract says.
So they can make sense in certain situations. Now, another heretical idea is that bookings is not a four-letter word. Again, if you say the word bookings in polite SaaS company, you’re likely to offend so we must be careful when we say the B word, but if you define bookings sensibly then you can talk about it. And defined sensibly, bookings are things that turn into cash in 90 days. Everybody cares about cash. So, they’re going to like talking about something that turns into cash and as long as you don’t mean TCV bookings, which is not prepaid, see prior sermon. If you’re talking about something you’re going to get collection on soon, then people are happy to talk about these. So as our company, I said about half the time, somebody will do a multi year prepaid deal so we end up on average with two years prepaid.
So if you looked at a build of our financials I’d say in a period we did 100 units of ARR, we did 200 units of what we call new subscription bookings. That’s prepaid subscription bookings. Our NSB to ARR ratio is the average prepaid contract duration, in effect. Then we add renewal bookings to new subscription bookings and then that gets total subscription bookings. Then you add services bookings on top to get total bookings. And this is a great way to build this because if you’re smart, you put the focus on what I call TSB, total subscription bookings. Because if you care about cash, whether it’s a renewal booking or a new booking, it’s still going to generate if you have subscription gross margins of 80%, it’s going to generate 80% of that money in cash for you to go spend. But that’s not true for services bookings. As we’ll see in a minute, most of you, 50K of services generates zero K of cash. So let’s get that out of the way and let’s focus on subscription bookings.
Because if you’re off-setting deficits and subscription bookings with services bookings, you may feel great about hitting your bookings target, but you’re going to find yourself at a real cash short fall, right, because they don’t have the same gross margin. So, bookings is not a four-letter word, if you think about bookings as something that turns into cash.
Renewals. A lot of us feels like renewals is a proxy for customer sat and it’s not. It’s a pretty simple point, we lose customers who are very happy because they get acquired by a PE firm and the PE firm says, “Here’s our standard tool set.” Or they hired a new CFO and the CFO says, “We use Iperion because I’ve always used Iperion.” Right? That happens in our lives, and those were happy customers.
On the flip side, you often have unhappy customers renewing typically because they didn’t have their act together. They missed an auto renewal 60 day thing and a contract or they were trying to get a new system up and couldn’t get it done. So you can find both cases where unhappy customers renew and happy customers don’t renew. So let’s not pretend that renewals are perfect proxy for C-SAT. Let’s go measure NPS instead and then try and look at the relationship between the two.
So a pretty simple point, but the net of it is, go measure NPS, do it ideally four times a year with a quarter of your base each time.
This one’s fun. You can’t analyze churn by analyzing churn. This is a slide we show in our board meetings and this is what I call the churn taxonomy, it takes all the churn that happened in a period and talks about why. So, 1000 units lost to lost accounts, 300 to shrinking accounts, on lost accounts, 750 was business related, 250 was product related. It’s a way to show your board and to show your team kind of churn by reason. Like, what are the reasons people churn? Great slide, useful slide for any board deck. But the problem is it doesn’t actually answer the question you really care about because the question you really care about is what predicts someone churning?
I’m going to use an example here. Fairly well known example about World War II. As bombers came back from missions, they would put little dots for where they’ve been hit on these planes and at their first order, people said, “Gosh, these are where our planes are getting hit, so lets go reinforce them in those spots.” Let’s make them stronger in the places they get hit. And one day, a very smart person came along and asked a simple question which was what? What about the planes that don’t come back? Wait a minute. Shouldn’t we worry about what separates the planes that don’t come back from the planes that do come back and maybe the planes that don’t come back are the ones that get hit in the complement of this pattern, right, they get hit in an engine or they get hit where the pilot sits, basically survivor biases. We were analyzing how to make the planes stronger by only looking at planes that survived the mission when we should have been looking at what differentiated planes that didn’t survive the mission from those that did.
When you analyze a bunch of customers that churned, you’re doing exactly that. If you just grab … here are all the customers that churned last quarter, let’s go analyze the heck out of them, you’re making this mistake. What you want to do instead is go get a table of all the customers, those that churned and those that didn’t with a bunch of input variables, who did the services, how big is the company, how big is the ARR, what else? What industry are they in? Those sorts of examples that describe the customers. Kind of things about the customers in the first columns and the other columns are did they churn or not, were they happy or not, and then try and figure out the relationship between these inputs and those outputs to see what differentiates people who churn from those that did not.
So, that’s what I mean by saying you can’t analyze churn by analyzing churn, you need to analyze who churned and who didn’t and try to compare them.
Finding your own hunter farmer model is hard. You know, people do hunter farmer because they want to focus their reps on new business. And that’s a very noble intent, and they want to pay lower rates on renewals and upsell because that’s less hard work than winning new business. Now, something to know, if you don’t know it already, boards hate paying sales type commissions on renewals and they’re right to. Salespeople in SaaS make maybe 10 or 15% commissions, you don’t want to pay that on a renewal. And boards hate double compensation. Another word not to say in a board meeting is double comp because if you say it, everyone’s going to sigh and it’s going to be a bad meeting for the next 10 or 15 minutes, right? If you ever say those words. Never say double comp in a board meeting because boards hate it.
And sometimes they’re right and sometimes they’re wrong. In my opinion, we need to let intelligence, not dogma, drive this. The first thing, you need to be aware of the dogma, there is a lot of religion, but look, if you’ve got a standard fries with your burger cost sale, it’s not really hard to sell the fries if you’re buying the burger. That’s what a lot of hunter farmer is. So they say the sales guy go sell the burgers and the CSM will go sell the fries and it’s not that hard. So I can get a relatively low skilled CSM.
So that’s hunters and farmers. Well say the expand is more salesy. That it requires more sales skills. Those are people often called account management. So there is some salesperson-ship required to do that. Well, that might require a farmers with shotguns model we call it. So we still have hunters and farmers, but the farmers are armed. They’re more sales profile, they make more money, they come from a sales background.
Say it’s a really hard cross sale, like we have. We sell planning and budgeting to the FPDA people, we sell consolidations to controllers, different buyer, different product. It is definitely not fries with your burger. In that case, we for that sale will use farmers track for hunters. So when a customer success manager finds a consolidation opportunity, we send the salesperson right back in. Because if you don’t, if you send a CSM to try and sell consolidation to that controller, you’re going to end up with a dead farmer, right, because you put your farmer against somebody else’s hunter, and that’s something you don’t want to do. So you need to figure out how your competitor is treating these models as well.
And then finally, to beat the metaphor the death, if you have the kind of small land and big expand, like the guy with the wine, steak, steak, that person actually has an inside sales team that’s pretty cheap selling the wine glasses and all their enterprise reps are install based reps. So it’s a crazy model. He calls it hunters at a zoo because they’re in the zoo, they’re in cages, and he’s got these enterprise reps shooting at them and it’s a great model for that sort of business.
Number nine, you don’t have to lose money on professional services, I was shocked when I found this chart in the Key Bank Pacwest study, but only 20% of SaaS companies lose money on services today. I think it was a lot more in the past, so people have kind of figured this one out on their own, but to me, the right model is you have a relatively small team of high skilled, high priced people, you shoot for single digit margins and things should go pretty well. You’ll set a nice price point to lead your eco system of partners and you won’t have the problems you have if you have heavy losses. Because heavy losses cause two problems. One, they hurt your blended gross margins, which isn’t that bad because a lot of people will just look at subscription, but the real problem is, and I’ve seen this happen, a cleave PE or VC guy will look at your services losses and add them back to your CAC.
And that can be a very bad moment for you because you’re sitting there going, “Hey, I’ve got a pretty good CAC, but I’m losing 25% margins on services.” And they go, “Well, if it’s going to cost you 25% loss on services to sell that software, that’s actually acquisition cost.” And then you’re like, “Oh, damn.” Bad moment. So think hard about that. If you think you can fool somebody by subsidizing a lot of sales costs and negative professional services, there’s a lot of smart people out there who are going to correct for that error.
Finally, last point, look, you need not sacrifice long term team members [inaudible 00:28:55] talent. I’m a big believer that Silicon Valley boards are a little too quick to kind of kick out the people who helped build the company and they’re a little bit heavy handed with them. I think we’ve been in a more relatively founder friends era for the last five or 10 years, but as you face these moments where your VP of sales has been so good for the past two or three years and starting to run out of gas, what do you do? And the board will very quickly say, “Let’s bring in a new one and get rid of the old one. There’s no way we can keep them.” And I think if you’re creative, you can find a way to keep them. And Salesforce, I wasn’t there that long, but they were phenomenal at this. They valued people, they valued talent and if you scaled out of your job, they’d try and find you a new one. They’d try a couple times, typically because they wanted to keep you with the company and I think VC boards are a little too quick to kind of boot people out.
So I don’t think you need to make these sacrifices. These boards are correct in some ways, incorrect in others. I think the thing you can do to your company is create a culture of change, not a culture of statis because if everything’s the same every year, it’s very hard to take one person out and move them down. If every year, you’re kind of reorganizing and say, “You try this, you try that, you try this.” Then it’s much, much easier to do that and you can get to a place where you can get everyone in your company to understand that they’re going to have more fun and make more money if they worry about being on the right bus, your company, let’s worry about getting on the right bus. That’s how you make money. That’s how you have fun. It’s not all about the seat, it’s all about the bus.
So if I want the VP of North American sales to run central region sales for a year, and he or she doesn’t like that, just do it. In a year from now, we’ll see what happens, who knows what happens? I don’t know, but you’ll still be on the right bus, you’ll still be vesting your options and if you do great in that role and love it, great, and if you don’t, let’s talk in a year because we’re going to change everything anyway. And it’s a great way to retain your people which is really the most important thing you can do as you build a startup.
So thanks very much, follow me at Kell Blog and check out Kellblog.com. Thank you.
(Cross-posted @ SaaStr)
By Phil Fersht on August 2, 2018
The rise of RPA is nothing short of spectacular as the market closes on $2bn this year. It has captivated the attention of the digital operations executives with the promise of cost-savings beyond labor arbitrage, cost avoidance by extending the life of legacy IT, quicker implementation than traditional IT projects, business-user friendliness, auditability and compliance, straight through processing, and let’s be honest – terrific marketing!
However, confusion around RPA deployments is also rife. There are growing questions whether RPA can deliver on the promised ROI and outcomes. Most RPA initiatives continue to be small and piecemeal. Truly scaled RPA deployments are rare. The industry is still struggling to solve challenges around the process, change, talent, training, infrastructure, security, and governance.
With the mission to demystify this confusion and uncover the truth to successful RPA deployment, we conducted a first of its kind RPA CX research to develop the list of “HFS Top 10 RPA Products” (See Exhibit 1). The research is based on interviews over 350 clients and product partners across the ten leading RPA products across:
Key highlights from the HFS Top 10 RPA Provider assessment
Bottomline. RPA works but is not a magic wand. Best practices are emerging
Based on our in-depth conversations with the RPA clients, we developed a set of best practices that you need to keep in mind when implementing any of the RPA products:
Stay tuned for the full report… coming very soon
(Cross-posted @ Horses for Sources)
By Vinnie Mirchandani on August 2, 2018
Over the last few months, I have been collaborating with my colleague, Brian Sommer as he works on a book titled “Digital with Impact”. Both of us saw the practice of Reengineering start off with much promise in the early 90s, only to lose steam in a few years. Companies bought into the false promise, encouraged by SIs, that packaged software available then would give them “best practices” and “reengineering in a box”. Many are still stuck with circa 1970 business processes and the on-going burden of those expensive systems. Both Brian and I worry something similar may be happening with today’s digital projects.
As Brian says “Today, digital isn’t simply a replacement for analog, spoken or other aspects of consumer or business activities. Digital in today’s business vernacular is about BIG change – not small changes at the margins.
Business leaders don’t need more encouragement to ‘go digital’. No, they need a path to define and achieve their transformational goals. That path comes in four phases: They survey the landscape and get quite educated on new technologies, competitive threats, new opportunities, etc. (SEE). Next, they synthesize this knowledge into a new to-be vision of the firm (THINK). Their next challenge is to make a frank assessment of how well their firm can complete this vision and what new resources or adjustments they will need to make (RECONCILE). Finally, these firms acquire the people, funding and more to make the change a reality (TRANSFORM). “
He is a firm believer that doing a software replacement with today’s cloud technologies is necessary, but usually inadequate for impactful digital projects. Most enterprise vendors have not kept up with new trillion dollar markets that have emerged in the last two decades, and do not have a big enough digital “vision”. Here are some examples of their myopia:
Products have became smarter with sensors and satellites and software. Who has largely driven this? Contract manufacturers like Foxconn, Flex and Jabil. Foxconn itself employs many times the staff large IT services firms do. Consumers have become increasingly digital and social. Who has largely benefitted from this? In sheer dollars, it is Google and Facebook. Cloud computing has taken off. Amazon and Microsoft have taken over infrastructure markets that were IBM and Oracle and HP’s to lose. Mobile computing took off. Who benefitted? Players like Apple, Samsung and Google. Industrie 4.0 and IOT took off to the benefit of large asset makers like GE and Siemens. Enterprise vendors have done little to verticalize. CIOs are doing their own modernization with micro-services. These vendors claim to be process experts – talk of “best practices”. Guess what, the next wave of process automation is being led by customers who are trying out drones and robots and RPA with specialist solutions – read Silicon Collar to see how little a role these vendors have played.
So, a bold digital strategy calls for assembling a broad team of vendors, not just pinning hopes on those who have done well in the past with back office processes or with IT infrastructure.
It also helps to probe to see how vendors themselves are changing. Digital transformations at their customers significantly impacts their own product mix and business models – often traumatically. In the last few months I have had a chance to talk to two vendors – Cognizant and SAP – about their own digital transformations.
Rajeev Mehta, President of Cognizant, the outsourcing firm told me “We actually took our revenue guidance (to Wall Street) down in 2016. And we started seeing the impacts of our clients demanding, wanting to start looking at transformation. We started seeing our existing legacy footprint under threat.”
That led to a revisit of their 2020 go-to-market strategy. That turned out to be fortuitous as an activist investor, Elliott Management started clamoring towards the end of 2016 to implement what they called a “Value Enhancement Plan”.
I am working on a case study which describes the organizational, product mix and other changes at Cognizant, but one of the outcomes from their internal transformation is:
“Operating margins have improved steadily and the activist investor, Elliott Management divested their interest in Cognizant in May 2018, after a 50% jump in stock price just 18 months after they pushed for their reforms.”
I am working on a similar case study about the digital transformation at SAP. Christian Klein, COO and member of the Executive Board of SAP SE, told me “we are tackling the whole value chain of SAP. We are looking end-to-end, so marketing, sales, finance, service and support, cloud operations, the cloud infrastructure. All of this has to work in harmony end-to-end. That’s the first aspect of our transformation. Next, we are infusing machine learning, IoT, predictive analytics, all this kind of new technology to also bring the intelligence into play to scale and to also get some synergies out of that.”
“It’s about adapting business processes to the new digital age. It’s about fixing the data architecture. Last, but not least, it’s about change management, and taking the people with you because, at the end, everything that we do in the cloud, in system side impacts, in our case, our 90,000 employees and our 360,000 customers, so change management is a key aspect.”
Benni Blau on his staff shared with me details of ten projects they have internally worked on, and the success metrics they can show across marketing, sales, finance and other business areas.
There will be lot more on these and other case studies in Digital with Impact and SAP Nation 3.0 books in the next few months.
Long and short. Don’t just do small d – digital. Do it with a broad team of vendors. And prioritize vendors who have been doing their own digital transformations and can actually show results from such efforts.
(Cross-posted @ Deal Architect)
By Michael Krigsman on August 2, 2018
He’s also Associate Dean at the prestigious Barts Medical School in London. It’s worth noting that the Medical College of St Bartholomew’s Hospital (the oldest remaining hospital in the UK) was founded in 1123 and has provided medical education since that date.
Dr. Ahmed is also co-founder and Chief Medical Officer of Medical Realities, a company that uses virtual reality and other immersive technologies to “solve big problems in surgical training.”
And, crucially, he is a foremost proponent of using virtual reality for medical education.
Given this background, it was a no-brainer for me to invite Dr. Ahmed to episode 281 of the CXOTalk series of conversations with the world’s top innovators. The discussion explains how virtual reality is advancing both medical education and telemedicine.
Watch the entire video, which is embedded above, to gain insight into the practical benefits, challenges, and ethics of using this technology to train digital doctors.
You can also read the complete transcript and see edited summary comments below.
Dr. Shafi Ahmed: I initially was one of the Google Glass explorers. We used the Google Glass to live stream an operation around the world. I taught about 14,000 students across the globe in a single operation. They could see what I was watching, and they could text me during the operation, which would come off the Google Glass. I could answer in real time. It was a way of connecting people around the world in a way that hadn’t been done before.
That further forwards with the virtual reality, and we created our own kind of live stream using 360 cameras. Then we could bring people into the OR with me in virtual reality using a smartphone and a Google Cardboard. That was a different way of teaching the art of surgery. On that day, I taught 55,000 people in 142 countries in 4,000 cities. It just shows the impact that people have.
More recently, I’ve been working with holograms, avatars to connect doctors around the world to discuss patients, to perhaps educate people and to reshape the way that human traction is forming in medicine. I’ve also used social media, Facebook, Instagram, and Snapchat, which kind of had much interest around the world, reaching millions of people using this media because they’re free [and] they’re accessible.
Students these days, who are much younger than we are, they’re using social media in a way that we haven’t seen before. It empowers them, and you can teach 1,000 people in a single day across the globe just by the power of connectivity, Michael.
Dr. Shafi Ahmed: Surgery is often shrouded in mystery. It’s almost that secret society we’re in. We go into the operating theater. We wear masks. No one knows what happens. We want to be more open and transparent so that the public can see what we do. We’re only human. They can share our kind of work and look in to see not just the operation, but how the team works in the operating theater.
Also remember, regarding the students, they’ve been taught surgery for hundreds of years, in the same way, all crammed in together into the operating theater. For example, our medical school. We have six, eight, maybe ten medical students at a time who sit in the OR. Often, they don’t get a chance to see what’s going on because it’s busy and the team is around the patient in the OR.
If you look very carefully, the students in the back of the room are on their smartphones, on Instagram, on the Net going other things, not learning or engaging. They spend six to eight hours a day in that environment learning, so we’ve got to challenge that and say, “How can we teach it better? How do we use these technologies so that we allow you to get a good value for your training and teaching?” That’s been the remit of my work.
Dr. Shafi Ahmed: People are now using the web internet to learn themselves. I see both augmented reality and virtual reality just as an extension, as a continuum of platforms. We’ve got to figure out where AR and VR, for example, will allow us to teach people in a way that is validated, makes sense, and that adds something to their educational experience. That’s where we are regarding the platforms.
Virtual reality has an advantage, of course, because when you put your headset on, whether it’s a smartphone and a headset, or a tethered or a large device, more powerful devices, we’re immediately immersed in a 360 environment. Most of the time we’ve been training on videos and 2D interfaces. You can imagine having a cup of coffee, watching what’s going on on YouTube, trying to learn the fundamentals of a video operation.
Video has moved on. Now it’s going to be VR where you can see yourself in 360 degrees. You can see the whole team working and see what’s going on. We very rarely have been concerned with the soft skills, they call it, how the team is working, how the communications are going in the operating theater. What are you doing?
Rather than having the points of view, you see a total immersive area of learning. You know what? That’s quite important in surgery. People forget surgery is not all about the actual operation and doing it immediately in front of you. It’s how you’re communicating with the team to give the best outcome for the patient. If things are going wrong, how are you dealing with it? How is that team behaving? I think all of those things add more of intellectual stimulation for learning in that platform. That’s where VR is an advantage.
We’ve been playing around with virtual reality. We’ve played around with 360-degree video, and that’s been quite interesting. Many people now are thinking about storytelling, VR, and 360. Very early on, this was going back, Michael, about three years ago, we made our own 360 cameras, and 3D printed some platform for a few cameras like GoPro and things to stick together. We then produced some images and videos we stitched together ourselves because that wasn’t available at the time.
Very quickly, I learned that the 360 videos are one element of learning. It’s great. You can add other things like hotspots, like learning material. Make it into a learning package rather than just the operation. That’s what I’ve been working hard on the last two and a half years with my team, Medical Realities, to create a learning platform, content that is powerful and that is validated so that it becomes the way of learning in the future.
Then we’re looking at, what’s the real advantage of virtual reality? It is immersive. When you are in the headset, you do feel as though you’re there, which is different from watching a 2D interface on television, for example, or on a computer. That element of immersion where you feel that you’re physically in the same room adds a different dimension. You’re suddenly concentrating on the environment, looking around, and there’s more pressure on you. If you’re replicating operations or simulation, for example, there’s more realism attached to it rather than the traditional method of learning on a video screen maybe using traditional simulation models where it doesn’t feel as real. I think the realism certainly is an added value to this.
Virtual reality, sadly now, is hardware driven. A lot of companies out there are bringing headsets out one after the other. That’s not the answer. We have to find compelling content in virtual reality to drive the industry and also to drive the headsets to people’s houses and homes. The content that has to be compelling. It has to be validated and reliable, which needs to be shown in trials and projects to make the whole virtual reality kind of pathway more helpful to people.
Dr. Shafi Ahmed: We are still practicing medicine like it was 50 years ago with the same disciplines of anatomy, physiology, biochemistry, and clinical sciences, sometimes integrated, sometimes separate two and three years or three and three years, for example. That’s going to change.
Why does it have to change? Because much learning we do is unnecessary. We don’t need to learn every muscle of everybody, for example. I think it’s irrelevant. We can teach the muscles in different ways. We can teach in AR and VR in the future, so I think that will change.
The curriculum takes a while for things to move on. Remember, you must go through various regulatory bodies to evoke change. Even if it’s just an exam question, it takes a two- or three-year cycle. That’s the problem.
At our medical school, we are trying to create doctors of the future. If you look at where technology is heading towards, I call the future doctor the digital doctor or the connected doctor. We are looking at individuals in the next five to ten years who will practice medicine differently to we practice with the onslaught of all these technologies I described like blockchain, like artificial intelligence, like wearable sensors, big data, pharmacogenomics, nanobiotechnology, and VR and AR. All of these are coming together at the same time to impact healthcare, but we haven’t taught our medical students what’s going to happen or how to deal with these changes.
I think it’s the beginning of changing the way we teach our medical students of the future. You know something? They’re different from us. Doctors now don’t want the careers that we had before, the 120 hours of work every week, for example, for X number of years training hard. They want flexibility. They want to see the world. They want to travel. They want to be entrepreneurs. They want to challenge healthcare in different ways.
I often call them portfolio doctors now. It’s a new term again based on the career pathway. You can do more than one thing in medicine. That’s where we are at the moment, and that’s where I think we need to drive medical school education to produce the doctor of tomorrow, Michael.
(Cross-posted @ ZDNet | Beyond IT Failure)
By Phil Fersht on August 1, 2018
What is wrong with us old timers these days? We go to conferences where we make sure no one under age of 40 comes near the place, and we spend half our time bemoaning the lack of a “digital mindset” from our colleagues because we all have these world-class digital mindsets ourselves. And can someone please explain what the f*** a digital mindset actually is? And can someone explain why everyone blathers on about their company’s inability to change with the times, but never admit they don’t really want to change anything either…
But let’s be honest, we treat our beloved Millennials like some sort of obscure species whose members only communicate digitally with each other, like to wear these really big expensive headphones, drink far less than we did at their age, and no longer go to bad discos to find romance. Not to mention an unhealthy love of avocado toast that helps their quest for a purpose in life because of failed parenting strategies leaving them permanently depressed because of low self-esteem.
In addition, we’re now accusing them of lacking ambition and only caring about their next vacation. But how can we blame these poor folks from feeling like we stitched up the world before they came along… as most cannot come close to affording the cheapest shoebox in any half respectable neighborhood, the poor folks in the UK are going to get cut off from working in Europe soon, and the lost Millennial souls in the USA had to choose between two septuagenarians as their president, who hardly represent the emerging mindset of the digital youth (even though you do have to be impressed with the President’s twitter skills…).
So imagine the refreshing impact when HfS analyst Ollie O’Donoghue, a proud representative of the Millennial race when he’s not trying to annoy Amazon, piped up on LinkedIn with the following staunch defense of his species:
The Bottom-Line: Love them or loathe them, Millennials are the Future
So to quote Ollie directly: “Entitlement goes both ways. It’s just previous generations got what they were entitled to. They worked hard, bought a house, paid a mortgage, got relative financial and social security. The reason so many Millennials are checking out of the economy is because they work hard and get, well, nothing. Home ownership is the stuff of legend, even job security is a thing from a bygone era – and something a lot of ‘future of work’ commentators are making worse.” So let’s use this opportunity to bring Millennials into our inane conversations about a future of work with less need for people, about our businesses being persistently disrupted by imaginary digital competitors, about blockchain’s emergence to destroy whatever we have left… because if we don’t, we’ll have a big hole left in our corporate legacies that we’ll struggle to fill, as all the talent will be checked out on the beach dreaming of their next avocado latte.
(Cross-posted @ Horses for Sources)
By Paul Greenberg on August 1, 2018
I love the Yankees, really like the New York Giants, like the Rangers and the Knicks, though can’t tolerate the Knicks owner(ship), who are a blight on the game of basketball. In the latter case, thus, I, like other somewhat rudderless or at least broken-ruddered NBA fans, like watching the Golden State Warriors. I have a second NFL teams that I like beyond the Giants, though not as much: the Green Bay Packers and Los Angeles Rams, due to the love of those teams by a pair of my unrelated friends. Baseball, its only the Yankees. Diehard, Diehard 2, and Diehard 3 in my commitment.
Oddly, due to my CRM “reputation,” for the last six years I’ve been actively involved with the business side of (mostly) professional sports teams/leagues/venues via an association called the SEAT Community (Sports Entertainment Alliance in Technology), which are, if I had to characterize them, what you might think they are, the leading consortium of the technology buyers in sports. They are the ones who buy CRM systems, data/analytics systems, IoT systems — any systems that either operationalize their organizations and support the sales and marketing cycles of the teams or that support the engagement of fans. They were founded and still are led by the extraordinary Christine Stoffel, who not only has this community she created, but also was one of the first senior level women in sports back in 2007 when she led IT for the Arizona Diamondbacks.
Each year, at around this time, I attend the SEAT annual conference as a member of the Executive Advisory Board of SEAT. I do my job there: Speak on some topic or another, introduce people to each other, cross pollinate the tech world with the sports business world, etc. And I love every minute of what I do there, not only due to my love of sports, but because the attendees are these enormously engaging, highly skilled professionals, both young and somewhat older (though not many my age) who love, love, love what they do.
What’s not well known about sports teams (but germane to this post) is that they are not enterprises, though a few (Dallas Cowboys, New York Yankees, Real Madrid) can be classified marginally that way given their revenues. Most though are mid-sized businesses with small business sized staff. The business staff, including the people who make the decisions on which CRM, customer engagement, data warehouse, analytics, social media tools, and technologies that the teams are going to use, have small budgets for what are huge tasks and big choices. The reasons are the obvious ones. The markets aren’t all major cities, though are urban, for the most part, and more importantly, the players get paid far more than they are actually worth for the entertainment value they bring and thus the seats they fill and the ancillary revenues they help drive. Some of the larger entities, like the Yankees, built their own regional network to take more control over the ancillary benefits — and their YES Network is the most watched regional sports TV network in the US of any kind. But, more typically, in whatever sport they are in, they are getting a piece of merchandising and TV revenue that is due to the excitement that is generated around a good team and exciting players. But that means the expectations are so outsized and absurd that when a player has a bad year, you hear the media saying, “He only got a raise from his $3.5 million to $4.7 million,” as if that’s normal, when the only thing that a normal human being would get if he performed equally as poorly at his job would be fired.
But, even with these smaller budgets — the money effectively left over after the salaries of the players are paid — the sports business side is expected to manage the expectations of these millions of fans who love their teams. To compound this, the sheer quantity of fans and the sheer level of the expectations of each of these fans is breathtaking. Expectations are outsized, often even entitled, and enterprise scale. That’s because the fan’s perception of the team, aside from the romantic view, is that the team is as big as the salaries they pay.
You know that this is true. You know that because you’re a fan of some team somewhere — I assume most of you are — and you (and me too) have ridiculous expectations of what that team, which you have loved since you were little, should be doing on the field all the time and for you whenever you ask. Rarely would you demand that performance level from any other entity you interact or transact with — mostly because you don’t care as much, so you don’t bother.
This is the power and dilemma of sports. They (and maybe music or movies) have a unique problem. Most of us, most industries, and most companies would kill to have advocates and evangelists who are promoting and communicating about our brand nonstop and passionately believe in it. It is literally the optimal customer for you: They both transact and get others to do the same. Sports’ problem is not finding or creating advocates. They have millions of ready-made advocates per franchise. How to manage and communicate and embrace them in ways that ultimately satisfy both the team/league/venue and the fan is what their problem is now.
The power of a team lies in its ability to influence those millions of devotees. The impact a team can have on a brand — an external one – is enormous. It’s why companies in the tech world like SAP, NetSuite, Oracle, Salesforce, and others associate with the teams of their choice as sponsors.
This salient fact goes to the heart of why I’m writing this: Given the impact that these teams/leagues have on a brand and given the outsized love that fans give to teams, several of the technology companies — and I will be calling out some shortly — are doing something that I think is incredibly poorly thought through. Yet fixing it would take so little effort; the cost would be minimal and benefit exceptional.
Let me explain.
You know me… I’m not a hostile person and never will be. But I am straightforward, probably due to my New York DNA. I’m saying this to set a stage. Because I’m naming names soon for tech companies that are showing a disgraceful lack of support for an industry.
As I sort of said, I’m a member of the executive board of SEAT, and the only non-sports person on it.
For the record: I’m speaking on my own behalf here, as Paul Greenberg, CRM industry analyst and individual guy — not on behalf of the executive board at all. My opinions are my own, but then again, who else’s would they be?
I have attended six SEAT conferences, including the 2018 one in Dallas Texas that I just returned from. They are wonderful events where I speak on non-sports topics that have relevance to sports — this year customer engagement, but not fan engagement, per se. I interact and mingle with both the teams and leagues and venue folks and the sponsors who I often know from my “regular” life. It is relaxed, enjoyable, and the content is always valuable. What makes this particular event unique in the world of sports is its composition. The attendees are the people who buy all those systems that I mentioned before. In other words, the people making the purchasing decisions for whether or not to choose one CRM system or another are those who attend — roughly 1000 of them. They range in title typically, from senior manager to C-level executive. But they are the ones who decide that they are going to buy someone’s CRM system.
What I found out, non-scientifically over the years that I’ve been there, are numbers and inferences like this when it comes to what technology vendors are used by the teams, leagues, and venues (and these are numbers I was told, not from formal studies):
Yet, at SEAT — the SPORTS INDUSTRY CONFERENCE THAT HAS THE BUYERS OF THOSE VERY PRODUCTS — only Oracle, KORE SSB, and Thunderhead sponsored it and did what any sensible reasonable company in this situation should do: Show support for the industry that they are participating in, rather than being disrespectful, which is what it is, by not being there when this is a no brainer to attend. And the effort and cost are minimal by comparison to what they spend.
I applaud these companies for being there (of the tech companies that I know from the CRM, engagement, CX, ecommerce side — there were others).
Here is who attended but should have made a more significant effort, and I trust will next year:
Here are the scofflaws that didn’t even bother to send anyone (or, if they did, they certainly didn’t make their presence known nor did they appear on any attendance list):
The three latter companies should be ashamed of themselves — especially Microsoft and Tableau, which have majority percentages in sports market share in their respective domains. How do you not even bother to show up and show support for an industry that has given you the lions share of their business? I can’t fathom it. Especially if they (the vendors) have an organized sports practice at the company. This is the conference that the folks who buy their technology and make the decisions on whether or not to continue to buy the technology attend. Not MIT Sloan, which is a sports analytics conference and a place to hunt for a job in the sports industry. SEAT: Sports Entertainment Alliance in Technology. Get it? It’s in the name.
Let me make something clear — and again, this is my observation, not SEAT’s executive advisory board — the tech companies that don’t attend SEAT don’t go unnoticed. At one point or another, there were multiple conversations about the non-attending companies above. They took two roads. The first, and honestly, the lesser of the number, was the lack of attendance at SEAT and wondering why companies like Microsoft, which, to be fair, had sponsored SEAT in the past (and years ago, even sponsored a speech by me at one point — or, actually sponsored a session that I was going to be giving regardless), weren’t there. The other was far more prevalent and, portended far more issues than not attending SEAT – complaints about problems that the teams were having with all of the companies. These were complaints related to:
This is far more potentially deadly to the companies that could, by attending, have at least indicated a willingness to communicate by being there and to put out the fires in the making. But they weren’t, and since this is a conference where best practices and, like any other human endeavor, industry gossip got shared big time, wells started to get poisoned, as complaints were shared and thus reinforced. The good will — that the tech companies had — started getting reduced, and the lack of communications reinforced by the fact the companies weren’t there to support and respond.
It wasn’t all bad. Not at all. But I will say, what used to be a trickle, is now a stream, and if I was Microsoft or Marketo or Tableau, I’d do something before it became a river.
I can imagine their excuses — and one of them is actually somewhat valid, but shortsighted: “We don’t get enough revenue from them to justify support.” Its true, these are hardly the defining revenue streams for these companies. And, “Well, a few of us (Salesforce, Microsoft, SAP) pay millions of dollars (or hundreds of thousands) to be sponsors and we have suites at the stadium etc.” But that actually just bolsters what I’m about to say: It’s not an excuse at all. (And maybe they would be wise to not use that either.)
So, let me make this easy by addressing the no shows:
Revenue is not the reason that you work with a sports team — as you well know, because some of you do purchase skyboxes and sponsor walls at the stadia. The ancillary benefits, the marquee value, the brand equity, the willingness of a team to say that you provide tech that makes them work better etc., is a major plus. Think team endorsement of a brand like, say, Coca Cola. You think it doesn’t impact Coca Cola sales? You know it does. Brand association is the where the power is, and it impacts revenue in many places. So, don’t me give that revenue argument. You wouldn’t be sponsoring teams if you didn’t understand the immense value that the association with the teams and leagues and venues provide. To emphasize the point, studies done by the Sports Business Journal and Turnkey in 2017 found that:
“47 percent of the 400 fans surveyed correctly identified Gatorade as the league’s official sports drink, the highest recognition rate ever received in the study by any NHL sponsor.
Gatorade spent $4 million advertising during NHL telecasts last season, according to data from iSpot.tv, up 150 percent from the 2015-16 season.
Along with the NHL, Pepsi has league sponsorship deals with the NBA and NFL.
In another Sponsor Loyalty Study down by SportsBusiness Journal and Turnkey Sports, but this time for the NBA, Gatorade, a partner with the league since 1984, saw its fourth consecutive year of improved awareness among avid fans and continued to inch closer to its all-time high of 64 percent among that group, which it established in our inaugural study back in 2007.”
Look, I’m not trying to say this B2C example is the same as a B2B relationship. It isn’t. But it reflects the power of sports and the willingness of the brands that are consumer direct to pay out a lot of money over a long period to retain the relationship because they recognize the value of sports in influencing decisions to purchase. This has an impact on decision makers in B2B deals, too. I think you all know that. Think all the way back to the 1950s and 1960s. There was a reason that part of the courting of the decision-makers that went on then was taking them to ballgames. You’ve all felt that power. I know you know it yourselves.
This is also where you stop the poisoning by being available to answer questions and dissipate the rumors that are being reinforced by being shared when you are not there to answer them; show the teams that use your systems, that you actually care about the problems that they are having with your technology in their specific deployment by being responsive on the spot; and interact with the teams to show them that you are willing to support them.
This is where you stop viewing every conference in the universe as either worth it or not worth it due to its lead generation opportunities. Let me be crystal here: Conferences are never worth it as lead generation vehicles. If they happen, and a deal or two comes from it, its pure serendipity. They are valuable for the networking, the visibility, and the ability of someone who might become a lead down the road to have at least: A) seen what you have to offer; B) be aware that you are supporting the industry they are in (a big plus); and C) provide them with the ability to evaluate you in a first somewhat informal way with your competitive peers. That’s it. If a true lead comes out of it, you have a bonus. But it’s a bonus, not a reason to be there.
Another reason? Sure. The people who attend SEAT are senior management from those sports teams/leagues/venues. Many of them are part of much larger entertainment empires (e.g. Kroenke Sports & Entertainment) or are expanding their offerings far beyond the game and the merchandise itself (e.g. Golden State Warriors, Dallas Cowboys). There is a lot of opportunity due to the wide spread idea of sports being a leading experience in an experientially based environment. These guys are building empires, not stadia ,and if you are a tech vendor that can’t see beyond their own… tennis racket… then don’t come.
I hope that all the vendors I’ve called out read this and realize I wish them no malice as irritated as I sound. I see lost opportunity, disrespect for an entire, influential industry, and no apparent concern. It bothers me — despite the fact that I like Microsoft and Marketo. I don’t know Tableau as well, so I can’t say that I like them or not. But I also think that if you are going to be involved in an industry, and that you understand that we live in a digital world that involves not just software and services, but emotional responses, behavioral signals, a potentially viral response to the effort expended, which can go in either direction, and the power of an industry that rests well beyond the revenue it provides, then an effort should be made at a minimum to respect those you are taking the money from — and to some extent, to fear the consequences of that lack of respect. Also, if you can’t see that, think of the opportunity you are losing for sports brand support by the increasing disrespect that your disregard brings, as the relationship erodes over time.
I’m an industry analyst that makes literally no money from the sports industry. In fact, it costs me money to work with them, because I’m free to all them. But I’ve met some amazing and now lifelong friends and highly experienced practitioners, which makes it worth it to me well beyond the coolness factor that sports always provides. And even though its companies like Microsoft and Marketo who’s world I am a part of, considerably more than sports, I think that these tech companies need to be called to the carpet to fix their relationships with the teams/leagues/venues so that they aren’t in a position where there is nothing left to fix. I don’t mean to be harsh. I really don’t. I respect the companies I’m calling out. But its time for them to step up and support the sports community, which means, honestly, to support those very people who support them with their dollars and their use of their products. That means honor those who are honoring you.
In this case, that means, the SEAT community. Plus, simply, how smart is it to do it, and how hard is it to do it? Very and not at all.
(Cross-posted @ ZDNet | Social CRM: The Conversation)
By James Governor on August 1, 2018
In my twenties I was hard work: I was too clever by half. I questioned everything. I had problems with authority. I made things harder for myself and others than I needed to, or should have done. Hopefully I have mellowed a bit, but these characteristics certainly defined me then.
One of my bosses, a guy called Ambrose McNevin, once took me to one side, and gave me some excellent advice.
“You have to learn to play the game. Just play the game, James”
I thought of this advice at Google Next 2018 last week. Google has undoubtedly started to play the game, and if you want to succeed in the enterprise that’s what you need to do.
There was plenty of interesting technical news to cover last week – being able to run Google Kubernetes Engine (GKE) on premise is a huge marker, Google Cloud Functions is finally now a generally available product, Knative will almost certainly become the standard plumbing for functions as a service (FaaS) on Kubernetes, Google is determined to assert Istio leadership early in its lifecycle.
But in many ways what struck me more was the tone and tenor of the conversations Google is now having with the enterprise.
Case in point. Bjoern Petersen, president of Tyco Retail Solutions was talking on a customer panel about why the organisation had chosen Google.
“We asked for support [on some open source technology issues]. Some people have a tin ear, others don’t. The responses were very different.”
This point may not sound that telling at first, but Google has historically had a reputation for being somewhat high-handed when dealing with customers. Google as the best listener? That’s a very different Google. That’s a Google that’s going to win a lot more enterprise deals. Technical leadership with a touch of humility will go an awful long way.
Almost every enterprise we talk to is currently planning a major infrastructure overhaul, generally based on Kubernetes. They start playing with Kubernetes before making a vendor selection, but before long they start looking for help, service and support. Being helpful at this point in the process pays dividends.
Last year after Next 2017 I wrote about Google’s growing focus on Engineer to Engineer support – the approach is bearing fruit. In the era of the New Kingmakers, supporting and enabling effective communications between engineering teams at enterprises and vendors is a killer strategy because procurement and initial adoption have become fundamentally decoupled.
Target was one of the big customer wins announced last week. The company has gone through an incredible transformation over the last 3 years, hiring more than 1000 engineers, and flipping the ratio of external contractors to internal staff on its head, from majority external to solid majority in-house. The hires are developers steeped in open source culture and technology. It has 45 active projects on Github with 6k active commits and a significant amount of inner source (internal code sharing using open source tools and methods) work going on.
Target even offers transformation workshops to third parties at its dojo.
Tom Kadlec, senior vice president of technology said Target has been using Kubernetes for 2 years:
“To be able to tap into the organisation that invented k8s was incredibly important “
Then as Mike McNamara Target’s CIO later said during the keynote:
“At the end of the day it wasn’t me that chose Google, it was the engineers.”
Wait – did someone say New Kingmakers? Of course playing the game doesn’t just mean being more open to conversations about technology between engineers.
You have to have partnerships with the likes of Deloitte, Accenture and PwC – check. Google’s partnering model is interesting in respect to partners – it now has a commitment that 100% of its enterprise deals have a partner attached. The professional services org always engages with at least one partner. At the beginning of 2018 30% of deals attached a partner. Today the number is approaching 80%. Channels love this kind of consistency. If they know they’re not going to be pushed out of deals they win they’re far more likely to bring Google Cloud into their enterprise accounts.
You have to feature Oracle, SAP and Accenture logos in your keynote – check. That’s enterprise IT, baby. One area Google hasn’t made as much progress is in Windows support. AWS is way ahead there, and Google didn’t really mention Microsoft support this year, after claiming it wanted to be “the best platform for Windows” last year.
On the other hand, Google did talk about G Suite a lot. Productivity tools is not a core research focus for RedMonk, and I am still not completely convinced about the organisational fit between G Suite and GCP. But it’s easy to forget that for many enterprises adopting G Suite is a Big Deal, seen as transformational even. In this light, the fit makes sense, and can be seen as Google playing the game.
At the risk of diving into inside baseball, one of the ways vendors play the game in enterprise IT is to work with industry analysts. The analyst summit at Google Next 2018 was notable for its size. I would guess there must have been 150 analysts at the event last Monday. All of the major firms sent sizable teams. Google is of course playing on multiple fronts – security, cloud infrastructure, AI/ML, data warehousing and processing, PaaS, devtools and so on – so it is no surprise folks from various practices at these firms would attend. But the numbers were still notable. Google’s AR team did an excellent job with the material they had, and I think we’ll be seeing a great deal of positive coverage over the next few months. It’s not so long ago that Google’s global AR team consisted of essentially one person – the Stakhanovite Jennifer Kelly. Google Cloud didn’t even have it’s own staff. Over the last two years the situation has changed dramatically. Today the Google Cloud team is well staffed, and Sheri Matsuda did a great job marshalling resources.
Google used to have a slogan Run Like Google. But most organisations aren’t really much like Google, to be frank. Google scale is so absurdly big. There was also a danger that the slogan reinforced the idea of Google arrogance. At Next 2018 Google unveiled a subtle but powerful shift on that way of speaking – the idea of Bringing The Cloud To You. This language also informs the transition to going all in on hybrid.
Google now has a clean on prem story, and is aggressively talking up both hybrid and multi-cloud for customer choice. The keynote demo was excellent – first Google talked about the importance of a consistent operating model. It then showed off Stackdriver for monitoring GKE services. Finally it casually pointed out that one of the nodes being monitored was called Moscone, and was running in the conference center on a box running vSphere from VMware. Google also announced a partnership with Cisco, as you do when you penetrate the enterprise. Google’s on prem play will put its partnerships with Pivotal and Red Hat under stress, but all three vendors are playing to win. Google wasn’t going to stay away from on prem indefinitely.
I look forward to seeing more about the packaging and partner model going forward – the keynote demo used vSphere 6.5, with GKE on prem, now in alpha, running on a Google hardened Ubuntu instance. Google is now doing the work for multi-cluster support. We can expect network and storage support from partners. The vSphere choice will make it far easier for traditional enterprise partners and customers to get on board.
HSBC was already a solid reference for Google on the AI and ML side, and it has now emerged as a major customer for GKE as an app platform.
Of course in being enterprisey there are some downsides. In my opinion it was a shame there wasn’t more code in the keynotes on days one and two. Some crucial aspects of the Google engineering story (notably around Firebase) ended up relegated to the developer keynote, but were not so well highlighted in days one and two. It’s super hard to please both developer and enterprise audiences, but I would love to see major tech vendors run their developer keynotes on day one – with more code, starting a bit later. All that said, developers that matter clearly got the message.
Google’s Cloud Functions are starting to sound more appealing than AWS Lambda https://t.co/SQbUv1Riha — lots of built in libraries, in-cloud deps installed, env variables which actually make sense
— TJ Holowaychuk 🙃 (@tjholowaychuk) July 26, 2018
I wouldn’t say that #Knative is overly complex. I’d say that it is early. Even the team says that it is only a 0.1 version. There is a lot to like there. Let me use all the nuance of Twitter to try and put some color on it.https://t.co/4eFz0nEZj4
— Joe Beda (@jbeda) July 28, 2018
There is plenty more to be said about platforms and technology, Istio, Knative and so on, but the first thing I wanted to call out in first impressions from NEXT 2018 wasn’t the technology, but the lack of a tin ear. In competing with AWS and Microsoft Azure the new found listening capability and leaning in to enterprises will be essential. But as GCP CEO Diane Green says, it’s playing the long game.
What’s Next for Google (an excellent write up of the same event by my colleague Stephen, covering some of the same ground from his own perspective)
disclosure: Google is a client, and paid T&E for my attendance to the event, but this is an independent record of the event.
I totally stole the image above from the Google Next 18 site. I am assuming it’s the rack running GKE.
(Read this and other great posts @ RedMonk)
By Vijay Vijayasankar on July 30, 2018
Ask any room full of corporate types “Please raise your hands if you think you are above average”, and I will bet you a venti coffee that more than half the hands will go up. I have also asked and have been asked this question myself. As soon as we raise hands, we also realize that we don’t really know what the average is and neither can we rationalize how most people raised their hands. The next thought is “I see that Joe raised his hand too and he is absolutely below average – so there are some people here who think too high of themselves”. Generally – the point is well made every time this exercise plays out – but the collective “we” still think pretty high of ourselves . I think this is a good thing and even when misplaced , this element of confidence is what drives us all forward .
I don’t think anyone questions the idea that some amongst us have more potential than others – we just don’t agree easily by how much. We don’t (usually) hold a grudge against the ones who are unquestionably smarter than us – we generally admire them. However if we think they only have a marginal edge over us – there is a good chance that we don’t agree to treat them as a “high potential”.
At various points in my career across multiple companies , I have been tagged as a “Hi Po” . I have identified and groomed a bunch of HiPos myself . And I have listened to hundreds of colleagues tell me “there is no way that person is a HiPo” . And I have also fallen from grace as a HiPo from time to time – in cases where I agreed and in other cases where I disagreed with the assessment . My perspective has evolved on this topic along the way, and probably will change some more.
To begin with – I think organizations should rethink whether they have a logical way of identifying HiPos . This is one area where it’s a big mistake to lower the bar – even if that happens unconsciously. The obvious immediate risk is that you risk the business by giving critical role to someone not ready for it . Perhaps the greater risk is that other deserving candidates lose faith in the system and choose to put in less than their best , or worse – to jump ship !
Some critical questions could be raised on the people who make the decision and their process.
1. Are the people making the HiPo determination qualified to do so ? How were they selected ? Are they in tune with the market and what the future needs ?
2. How do they validate their decision ? Is the process audited from time to time and changes made ? Has bias crept in ? What happens when it is clear that a mistake has been made ? Is there an appeals process ?
3. Are candidates chosen because their peer group is pretty weak ? How do we know if they truly have high potential compared to the market ?
Sometimes it’s made pretty public on who are the high potentials in the team – and at other times it’s kept somewhat of a secret. Either way , over a period of time – everyone will come to know who these people are by looking at what assignments and promotions they get . In a transparent system – there is a good chance that others strive hard to be a HiPo . In an opaque system – there will just be a lot of frustration and corporate gossip. I have often felt that the reasons for lower transparency are in a large part because managers don’t want to deal with a large number of employees asking them why they were overlooked .
What if you think you truly have higher potential than the organization credits you with ? Everyone goes through this a few times in their career. Most of the time we attribute it to bad luck and try again and usually things even out for us over time. However , occasionally there is the case where you think you are repeatedly overlooked and less qualified people keep moving ahead of the pack.
Most of the time there is no sinister motive from managers and it is just a game of chance that didn’t do you any favors this time. But the true test of whether your organization is undervaluing you is to test yourself in open market.
A classic case in my industry is people who get stuck at a senior manager or an associate partner level and can’t seem to make it to partner level . They also see some others fly through the ranks and make partner at a relatively young age. It’s a tough pill to swallow. I think the partnership appointment process is a fair process in all the firms I know. I also know that a small percentage of people end up not getting through it for no fault of theirs. For such folks – my advice has always been “Go apply at another firm and see if they will hire you as a partner”. If you are a partner at one firm , there is a good chance you can make a lateral shift as partner elsewhere . But it’s an order of magnitude harder to do that if you are not yet at partner level . But it does happen from time to time – and unless you try , you won’t know if you were truly overlooked where you are or if you still have work to do . And the “still have work to do” might not be as big as you might think – usually it’s something as simple as signing up for a public speaking class. Or it might need you to build a better network – which is usually easier where you already work , compared to trying it in a new employer.
There is also the part of being more self aware. We need to realize that some people are smarter than us and deserve more success than we do. What we should not accept is any systemic bias – like “it’s because I am a woman or Indian or because I chose to raise a family ” . Those need to be fought !
This was all about what could go wrong in choosing or being chosen as a HiPo . But what about the great case of being chosen as a HiPo ?
I can say with no hesitation that being selected is generally the easier part. The really hard part is to continue to stay as a HiPo and realize that potential ! It takes very little effort to derail
To begin with, you are in a hard spot – knowing your management rooting for you and having high expectations , while some of your overlooked peers may play passive aggressive with you and team.
Staying grounded and humble is the best strategy . You also need to develop thicker skin – it can get lonely for a little bit while you find your feet . Your tone of communication will be put to test – it’s very easy to be interpreted by others as condescending or patronizing . And you have to resist the temptation of staying YES to everything – you are a HiPo , not a superhero!
But the most important – and perhaps the most gratifying part – is to help others in their journey to be HiPos . As you get bigger roles that are a stretch – your success depends on building a motivating your team. The ones that blossom as HiPos are typically those that quickly realized they need more HiPos around them to hit it out of the park . And you need to be ver comfortable with the chance that one of your protégés might end up as your senior somewhere along the way .
(Cross-posted @ Vijay's thoughts on all things big and small)