Technical Debt: Startups Silent Killer

There’s a condition that silently but relentlessly stalks startups and is one of their leading killers: technical debt.

Here are few of its symptoms:

  • General discomfort from the feeling that systems and processes were created quickly without considering the long-term objective or strategy of the business.
  • Agitation due to sloppily written code to appease a stakeholder or client.
  • Bloating from running 500 processing cores of SQL Server, when you should be able to do it on 50, or even less.
  • Sluggishness, disorientation and lack of agility due to frequent strategic pivots (primarily due to overuse of Agile development) in the attempt to be first to market with a new product or service.
  • Founder/CEO sleeplessness due to worry about scaling, downtime and slow-to-onboard programmers and the repeated doubt: “Did I build it right?”

Technical debt is just like financial debt: it must be paid off or it will suffocate to the point of bankruptcy.  In the tech world, this means a ground up re-write — or worse — hundreds of thousands of dollars a month in hardware and software licenses.

We have seen organizations crippled with technical debt.  If you are a founder or leadership executive and you are plagued with questions that keep you up at night regarding stability, scalability, and reliability and you are continually looking to your CTO or CIO and wondering why things are the way they are, then your CTO or CIO is failing you. If you are familiar with the metaphor Technical Debt, and you have been made aware of its dangers by your CTO or CIO, then you may have a blind spot in failing to recognize that this “debt” will most certainly be repaid.

Technical Debt can easily result from a lack of planning or clear long-term vision, and pulling yourself out of a mountain of debt takes time and focus.  A strong leader armed with a clear understanding of the product needs can guide the software team and company back on the right path and deliver a useful product to fulfill the needs of the clients.

How does an organization begin to tackle a mountain or even a small hill of technical debt?  Here are four steps.

  1. Admit the problem – The first step is for management to admit that the company has a technical debt problem and explain to the organization why it is important to resolve it.
  2. Estimate, Prioritize, Commit – After evaluating the requirements and work effort estimates, management must prioritize the remediation of the technical debt specifics and commit the resources to resolve it.  It is a tricky situation to manage technical debt while balancing client needs and new product enhancements.  Having an experienced leader with a fresh perspective to officiate competing priorities is critical to a favorable outcome.
  3. Break features into chunks – It’s easy – and not always fair — to punch holes in the Agile method as lacking adequate strategic planning.  The key consideration is to break out product and service features into chunks and shippable pieces and each part of the software should be well thought out and fitting with the long-term goals of the product. In order to have a successful implementation of Agile one must properly manage the backlog.
  4. Just simply stop writing bad code – This is probably one of the easiest ways to combat technical debt. Seems simple, right? Well, it’s not. There is a velocity cost in the short term, but a good leader will recognize that this is a cost that is worth taking. Just like financial debt, the longer any debt is ignored the harder it is to settle that debt and move on.

There is much more to be discussed regarding this topic, but it is safe to say that you know your debt is gone or extremely low when you can continually maintain high productivity within your R&D team in the face of changes, including goals and team members.

There are lots of ways to address this problem, and organizations that are crippled the most with it are the ones that are in their growth stages. They have built a product, found an addressable market, sold the product and just kept building.

If you are struggling with these questions, and wondering how you can get higher productivity out of your teams, then schedule a call with us here at TechCXO and we can assist you in a technical payment plan that will set your business up for success.

Disruption Response – Short and Mid-Term

TechCXO Disruption Response Resources

Management teams don’t need to “lock up”, no matter the severity of business disruption or the ensuing uncertainty. You can focus your teams around short-, mid- and long-term goals and objectives. Here is some actionable advice and the experts who can assist you.

Short-Term: People

Start with people.

Leadership, with the assistance of Human Resources, must appreciate how disruptive events like coronavirus can be. Cancelling all travel and scheduled events is startling. An even bigger cultural shock is quickly transitioning employees to remote work. A number of tech companies have moved completely to remote working in just a matter of days.  There’s a lot to communicate and adjust to. Where do you begin?

Business Continuity Planning

Elena-Carroll

Business Continuity Planning Resource: Elena Carroll

No matter what stage your business is in – startup, growth stage, mature – or what size your business is, a business continuity program is something that all businesses should have. The most common scenario facing most companies given the coronavirus outbreak is that office facilities become inaccessible due to travel bans or quarantines, or that less people will come into the office due to illness or fear of illness.

These impacts could last for months, and many companies may not be able to provide an alternative location so quickly. Since a pandemic has been declared, multiple sites can be impacted. At minimum, all companies should have team activation procedures with a call tree that gets kicked off by a designated leader when something occurs so that all employees are accounted for and can be reached to continue ongoing business operations.

It is important to assess the different operational areas of your company, and rate them in terms of how critical it is to recover that business function. Financial, operational, legal, and reputational risks should be considered as part of the business impact analysis. Based on these impacts, a recovery time objective needs to be established for each business area, from hours to days depending on the impact assessment. The most critical functions will require more in-depth plans and be addressed as a priority to recover versus other less mission-critical areas.

Back-up procedures and processes will need to be defined for critical and other business applications should they become inaccessible. A communications plan that notifies employees and customers of the situation, what to expect and what needs to be done should be available and ready. An important goal is
to minimize any disruption of service to customers.

Remote Work

Maria Goldsholl TechCXO

HR, People, Remote Work Resource Maria Goldsholl

Everyone works differently, particularly when working remotely. One of the key things leadership must do is set expectations and establish accountability standards. Ideally, the below tips will help managers replicate the in -office experience at home as closely as possible and as a result keep the team connected and productive and minimize disruption.

Communication and Accountability

    1. Set boundaries – Make it clear that work from home is still working at full force. To prevent business interruption employees should set boundaries on their standard work time.
    2. Overcommunicate – Managers should over communicate in the form of 1:1 meetings where goal setting, updates and feedback are given regularly (ideally 2 times per week). Slack is an excellent tool for constant real time updates (similar to an office drop in)
    3. Results – Employees should clearly show work output, deadlines, goals and objectives
    4. Virtual Shadowing – For some key tasks, using screen share options in video conferencing helps facilitate understanding
    5. Time Block – For some, working from home is distracting. It is helpful for employees to work in prescribed time blocks such as those outlined in efficiency tools such as the pomodoro technique.
    6. Meetings & Preparation – Meetings should run the same as in office with an agenda and video turned on for visual interaction. The chat function can be used so as not to talk over the person presenting.
    7. Leverage video conferencing – Use of platforms like Google Hangouts and Zoom can closely replicate face-to-face interactions ideally with the camera on.
    8. Virtual Watercooler – Create a channel in slack called #watercooler or #WFHdays and have people post the types of things they would normally talk about in casual conversation in the office (what’s for lunch, pictures of the weekend, pictures of the dog) this creates a connectivity and a levity that allows the work from home employee to feel connected to their team and is a great stress relief.
    9. Regular check in- If you are a manager, consider having a virtual coffee with your entire team once a week to check in on how work from home is going and what tools/help you can provide to continue to help the team be productive.

Short-Term: Financial Management

Financial and Cash Management Resource: Paul Sansone

The finance and accounting team can proactively take measures to optimize its cash management systems, work with lenders and even work with sales professionals in terms of the current sales pipeline and the impact pricing and discounts might have in the next upcoming months.

Cash Management

Your CFO can take a number of steps to optimize the proper management of cash.

Reconciling all bank accounts regularly

  • Prompt reconciliation of bank accounts will give clues on how to avoid delays in collection.

Creating a realistic revised cash flow forecast and sticking to it

  • Forecasting is the first step in attaining a workable cash flow. Moreover, regular reviews of the cash flow statement will highlight a possible shortfall. The statement will show if cash inflow was from an account receivable or other sources such as a credit line and if cash was released to pay for account payables, investments, and operations.

Tracking both current and projected revenues

  • Knowing the current and future revenue situation on a frequent basis will help understand the effect on cash flow and whether cash management needs tightening or there is enough cash to invest. Likewise, keeping sight of projected revenues will be the basis for potential resource allocation revisions.

Monitoring and prioritizing cash disbursements and other related business expenses

  • An analysis of the cash flow will help prioritize cash disbursements and unnecessary business expenses.

Implementing a timely collection of account receivables

  • Three kinds of float cause cash delays.  Mail float is a delay in receiving checks through the mail.  Processing float is a delay in the company’s internal processing of cash and checks.  Bank float is a delay due to the normal clearing process. Delays can also be due to customers deliberately not paying on time.  This may become an increasingly large issue due to business disruptions.

Mid-Term: Operations

brendan-cooper

Operations Resource: Brendan Cooper

During a disruption, operations tend to suffer serious effects due to an overnight drop in demand. The best time to deal with potential disruptions is yesterday; the second-best time is now. The characteristics of a disruption include a sudden drop in demand, excess supply and inventory, idle equipment and other assets, underutilized labor, unabsorbed fixed costs and sharply higher variable costs of operation. This all leads to declining profitability and crisis operations management.

The conditions brought about by industry disruption include excess inventory and falling prices as competitors with underutilized assets chase too few orders with ever lower prices. The battle to maintain share of a shrinking market, while production unit costs are rising, is punishing. Industries tend to be slow to react and over-produce in an uncertain environment which exacerbates excess inventory levels.

Four Key Steps to Improve Operations During Crisis

Four key steps can be followed to improve operations when such a crisis hits:

1. Gather

Recognizing that a business disruption requires a firm break with “business as normal” practice is essential. The faster this happens, the better. The first step is to gather critical resources, both internal and external to the company. Internal resources must include people who can, and will, affect change. External resources could include business partners with relevant experience or a vested interest in the success of the business. A crisis team of no more than six people is optimal.

In order to focus minds and hearts throughout the business, all non-essential activities should be (at least) temporarily suspended. A quick decision on which activities and projects are “mission-critical” must be made. Typically, items such as non-sales travel, projects with payback more than one year, and activities consuming significant resources are delayed or cancelled.

2. Diagnose

Using the crisis team’s collective knowledge, ideas which drive improved sales and lower costs are quickly collected. For manufacturers the biggest potential cost improvements are in raw materials and manufacturing overhead. These items typically make up most of the cost of goods sold for a manufacturer. Lean manufacturing practices can reduce the production cycle times and inventories needed to support sales.

Key areas to examine include:
• trim fixed costs
• reduce product lines
• lower production complexity
• shorten production cycle times
• reduce finished goods – hold inventory in semi-finished form
• lower raw materials inventories
• mothball / consolidate production
• reduce cost of raw materials
• reduce inventory
• lower raw material costs
• rationalize operations

3. Prioritize

Next the business must determine priorities and focus scarce resources on critical activities. The team can create simple Pareto diagrams and prioritize customers, raw materials, vendors, profitability, revenue, cash, transaction time, etc. As the business faces resource constraints, it can focus efforts on the 20% of the activities that generate 80% of the cash, profit, order completion, lead time, etc. Project work, for example, will likely be a much lower priority than order completion or activities that generate cash.

An easy exercise is to attach best estimates of effort, costs and benefits to each proposed activity and plot them on a Benefit-Effort 2-axis chart. In such an exercise the project priority list becomes easily visually apparent.

4. Execute

A “B” plan with an “A” execution is sufficient to pull most companies through a crisis. Lean techniques and principles can be used at an accelerated pace to achieve the needed results in a shortened time period. Iterative cycles of Plan-Do-Check-Act or Define-Measure-Analyze-Improve-Control bring the business closer to goals through logical steps.

Constant, clear and continuous communication is essential to an “A” execution. Having daily huddles and being clear on daily and weekly priorities are critical to making steady progress in operations improvement. Improving businesses must be prepared to change priorities, drop activities which have low yield, and support those which are providing a timely return. Simply being clear each day and week as things change will help everyone focus on the right things.

Mid-Term: Supply Chain

During a business disruption the protection, maintenance and improvement of the supply chain is critical for survival. For your manufacturing, supply chain or business processes, there are 8 key steps you can take to prepare:

Step 1: Identify Designates for all key functional areas

Many business processes, especially in your business software, are very similar. Screens and entries in one process often look very much like those in another. Also, connected processes might transfer familiar information. Each key person in your operations must have a designate. One person can be a designate for several others but you have to leverage organizational slack and move people to the areas to keep the business running.

Step 2: Document your critical business processes

All too often, businesses rely on the knowledge and expertise of individual contributors who know what to do but have never written it down. Using process experts (helped by your IT resource to speed creation), create screenshots with instructions or “how to” videos showing how to do key business transactions, allowing someone with more limited knowledge to step in as needed. Using pictures or videos will allow the instructions to be more intuitive and allow much faster completion than writing everything. Remember that transactions may likely take longer to process and you may have to do more monitoring for mistakes.

Step 3: Eliminate bottlenecks (including bureaucratic ones)

A process is only as fast as it’s slowest step. You probably know what these steps are but have not had time to deal with them. With constrained resources, you have to reduce or eliminate or move staffing to these bottlenecks in order to speed the entire process. You know this intuitively at a fast food restaurant; you might have the fastest order taker in history, but if the cash register is broken, or the fries aren’t ready or your drink machine is broken, you are going to be waiting and wasting resources. The worst of these are things like “approvals” or “policies” or “extra quality checks” – step in and make it easy and encourage people to make decisions not wait for approvals.

Step 4: Have regular conversations with your customers

Customers sometimes seem unreasonable, but they are the ones providing the revenue and cash you need right now. They also have a unique view of your business that you often do not have because the information you received internally is “filtered”. As a customer yourself, you know that the sooner you are told about an issue, the better off you are so that you can respond. For example, if a key raw material or supply chain item goes on allocation – and your purchases are limited – you should do a similar allocation with your customers. Share everything you know from your vendor(s) with them real time. They will not like it initially, but in a few weeks as your competitors run out of material, you will be able to fill orders (at a slower rate of course). This will give your customers ample time to communicate with their customers and so on. Another example would be to discuss ways to take cost out of the entire supply chain together through the crisis rather than simply ask for price reductions or better payment terms in a vacuum. Everyone is in the same situation and working together will facilitate the best supply chain possible in a difficult situation.

Step 5: Initiate regular conversations with your suppliers and vendors

Do not wait on your vendors – bring them together via a conference call (or select the 20% of vendors that make up 80% of cost or units) and have a high level strategy discussion with them. Get ideas on best practices and share them with each other. Again, this will not only improve communication, but you can be honest with each other. Each of you will see parts of the supply chain that others cannot. I remember the first time I did this, we found hundreds of thousands of potential dollars in savings across multiple products and vendors through this type of idea sharing. Your vendors will view it as a positive experience and they have a vested interest in helping you be successful.

Step 6: Find substitutes when possible

The pressure to differentiate has often created hundreds of versions of virtually the same product. How many different types of laundry soap or paper plates to we really need? SKU proliferation is rampant in companies. With slow supply chains, having some product is better than no product. Work with your customers on substitutes – you might even provide the “better” product at the regular price simply to avoid stockouts and lost sales. This might be the perfect opportunity to sell that obsolete inventory collecting dust in your warehouse – it will also generate some badly needed cash!

Step 7: Have your IT team expand your teleconferencing capabilities

Many significant supply chain interactions occur face-to-face which may not be possible soon. Companies often have limited tools or rooms for teleconferencing. Work with your IT team to expand bandwidth, upgrade on-line services and train employees on exactly how to use them effectively. They may have used the tools in your office, but have they conferenced in 20 people from 9 countries before? Do they have anyone they can speak to in IT for a problem with a 3am vendor call? Will their phone be adequate to show a maintenance vendor a problem via a telecall so that you can trouble shoot it remotely? Does the phone have good enough resolution? Don’t get overwhelmed but step-by-step provide the right tools to the key employees and help them use them effectively. Be proactive because they might think you expect them to know how to do this despite having only done it a few times in the past.

Step 8: Communicate often and clearly. Lead by example.

Having daily huddles and being clear on daily and weekly priorities (which will be constantly changing) is critical to Operations and Supply Chain. In a famous Supply Chain simulation, called “The Beer Game”, players try to move things through the supply chain (and operations) with no or limited communication. The result is disastrous order patterns (called the bull whip effect) where larger and larger (unnecessary) orders oscillate through the system, mostly due to poor communication. Simply being clear each day and week as things change will help everyone focus on the right things.

Mid-Term: Revenue Growth and Retention

Rick Nichols

Revenue Growth Resource: Rick Nichols

The marketing, sales and customer success teams can proactively take measures to reduce risks associated with possible business disruption in the coming months. An immediate human reaction in business disruption is the tendency to stop all buying and horde cash. Having the flexibility to offer flexible pricing and terms may alleviate this fear. Proactive communication further assures both prospects and customers that you have a well-thought through plan, as well as further contingencies if the disruption proves to be a longer-term issue.

Creating Interest and Demand

A key to ensuring ongoing interest and demand creation is through outbound multi-channel marketing. Creation of a value story must answer two key questions: Why do anything and why now? Two key questions.

Pipeline Growth and Health

Creating a healthy pipeline necessary to drive continued sales and revenue depends directly on the team’s ability to create and communicate a value story that is linked to how your solution links to mitigation of key challenges and achieves primary business outcomes. Aligning with legal and product teams gives the sales team to prospect with confidence.

Forecast Management and Predictability

Having a clear and accurate sales forecast gives Finance and other downstream business functions insights regarding two key KPIs: cash flow, resource requirements and allocation and current and future revenue. Ensuring increased confidence in the forecast may be accomplished with buyer alignment though measuring verifiable outcomes during the selling process.

Customer Satisfaction and Retention

Maintaining a sense of calm and assurance that your team has the tools, processes and means of collaboration backed by stringently managed security and SLAs ensuring 100% uptime while working remotely gives customers a high level of confidence in the fact their business won’t be interrupted and cause damage to their customer and supplier relationships.

Next: A discussion of long-terms steps to take in response to business disruption. Operations, Product and Strategy Executive Elena Carroll will discuss strategic shifts and building data businesses within your current operations.

The Data Business within Your Business

Unlocking Data with Care

There’s a business sitting inside your business… a treasure trove of data that may be even more valuable than your core business…. if you know how to access it.

These are the insights from TechCXO Partner Elena Carroll in her white paper entitled, The Data Business within Your Business: Unlocking the Dynamic Data Opportunity Inside Your Operations (PDF).

Understanding and unlocking this data takes extraordinary care, but the rewards of cultivating this information may open dynamic new revenue channels, products and services, as well as put your business on an exciting new trajectory.

Download the white paper now

Ms. Carroll writes: “As new companies have been built and have established a customer base, business leaders are seeing that they have amassed data assets as a byproduct of their core operations.”

She continues, “Is there value in that data that can provide a new source of revenue for the company, or enhance its existing business? As growing companies contemplate this question, there are eight fundamentals of a data business to be considered. These fundamentals start with strategy, then a review of how to develop a data infrastructure and a go-to-market plan.”

Part 1: Strategize

Ms. Carroll points out that, “Determining the data opportunity beyond the core business is the first thing for entrepreneurial leaders to define. A data strategy is not a stand-alone strategy, and it should only be defined once a company has a firm handle on its business strategy. The business strategy and the data strategy must be aligned to ensure successful execution.”

Part 2: Data Structure Fundamentals

data-business-fundamentals

What data do you have and how can it be used? The first thing to do is take inventory of the data you have. Based on your strategy, do you have all the data you need, or do you need to acquire some data?

Download the white paper now

Ms. Carroll walks the reader through eight fundamentals beginning with the Data Structure Fundamentals of how to Utilize, Anonymize, Securitize and Humanize your data.

Part 3: Go-to-Market Plan Fundamentals

She then continues with Go-to-Market Plan Fundamentals for your new found data assets. These fundamentals include Productizing your Data, Democratizing data by sharing it across internal functions, such as product managers, and finally Monetizing your data.

These are just some of the fundamentals inside the white paper.

Elena-Carroll
Elena Carroll is a TechCXO Partner and a leading strategic, product and operational executive within the FinTech and Big Data industries. See her full bio.

8 Guidelines for International Expansion

You have a pretty good business and things are growing nicely. If you have a Board or some advisors or even a relative living abroad, then someone has said to you that your business will absolutely work in another country. You recall that you noted international expansion in your original strategic plan, and you continue to bring that forward as a line item for the future.

What you may have failed to realize is that your business is already international.

The United States represents 4.4% of the world population. Your business has an Internet presence, which was developed with only a certain segment of the US population in mind. What you may have forgotten to factor in is that your website, and therefore your business, is accessible by 2.4 billion Internet users around the world, of which only 245 million live in the United States.

Just monitor the IP addresses visiting your website on Google Analytics and you will see how international you already are. Every now and then you receive an order or a request from someone in another country to join your service. Should you act on it?

The decision to expand physically into another country in not for the feint of heart. If you choose to follow this path, you will automatically increase your stat- ure and possibly your market capitaliza- tion in the eyes of others as they realize that your product is sought after by a wider audience.

If you are a smaller business, sub $25 million in revenues, then expanding internationally will put a significant amount of stress on both you personally and your organization.  A checklist as outlined below will give you something to think about.

1. PEOPLE

This is the key to the success of any international business. Parachuting one of your current executives into a foreign locale and saying go get it will not get you far.

Network for Trusted Resources. You need to search your current network including LinkedIn, Facebook or other professional networks such as an industry trade group or through your accounting and legal firms for local contacts in your chosen country of expansion. Then you need to network through them and find someone who you believe can be the point person to run an operation locally for you. Even once you find someone, you need to investigate him or her thoroughly as you are going to have to trust them with the crown jewels. Due to local ordinances, these individuals may have complete control over your foreign bank account and often will be able to sign and bind agreements on your company’s behalf. Your first fact-finding mission to that country should be to meet as many candidates or people as possible that may be of help.

2. CHOOSING A TARGET COUNTRY
Everything is relevant when choosing your location from pure market opportunity to infrastructure to whether or not English is spoken all the way down to intangibles such as, Do you enjoy traveling there? Sometimes opportunity dictates the location but everything is in play. Here are key variables:

Piggyback off Another’s Infrastructure. Be opportunistic by finding a partner or a supplier in a particular location that has a similar or complimentary business, and you can piggyback off their infra- structure, advisors, suppliers, etc.

Language is huge. If possible, find an English-speaking country or choose a country that is bordered by many other countries. The best known example is Switzerland because it borders France, Italy, Germany, Austria and, yes Lich- tenstein. Countries bordering many others are more accommodating to other languages and cultures.

A Good (not great) Locale. Finally, as you will be travelling there more times then you or your family want to recognize. You should make sure it is not a place that you absolutely detest visiting, although it should not be your favorite vacation spot either, but rather a sizable city.

3. CULTURE

Just as this plays a more then sizeable role in your US operations, so it will in your new operation. If your company culture is important to the success of your business, and more often then not it is, then you need to work on that from the get go.

Values Matter Everywhere. Hire leaders that as much as possible share your values and that of your company. That is not to say they wont have their own personal and country culture they bring to the table, but certain leadership styles cut across boundaries to some degree including morals and ethics, vision, empathy and servitude.

In Germany, a formal business tone will exist between people that have worked together for many years with them con- tinuing to address each other by their last name.

In China, you will always need to greet employees at a gathering by seniority and in England, politeness and restrain is admired and should not be taken to be rude when you are working in a group situation. Cultural clichés abound and are important to understand. This will impact how your worldwide teams interact with one another and more im- portantly how they speak to customers that may deviate from your home country playbook. Most importantly, do not think people from a foreign country that do not have the best command of the English language are somehow less intelligent, and just as important, because they have mastered the English language they are not necessary superstars either. You need to do your homework.

4. ADVISORS

Picking the right law firm is key.  Forming a company, opening a bank account and hiring people could not be more different from what you are used to. Paperwork takes an inordinate amount of time, often you need one approval before the other. If you do not have a company registration number stamped in triplicate, then that means no bank account, which means you cannot hire employees. Getting funds into certain countries is also difficult and can take time. Not surprisingly getting money back out is just as difficult until you are really established. In many cases you need various approvals and licenses to start actually running the business from a whole host of alphabet soup ministries and government departments. Intellectual property protection may be non- existent and trying to implement patents across multiple countries gets really expensive and may not be worthwhile. You may have to sit idly by as local com- petitors copy your website and cease and desist threat letters have little effect.

5. LOCALIZATION

Your website was not built for SEO in multiple organizations. You may show up on the first page of a Google search in the US but what about Google.com.au or Google.co.uk?  You will need a qualified translation house to help with your website translation and then it will need to be proofed and proofed again.

Many will perceive the company as culturally illiterate and therefore having inferior products if you spell color with- out a “u” as in colour. In some countries, the color scheme on your home page will be important. In China the color black is considered to bring bad luck while in Japan it is the color white. You will invariably need a content manage- ment system to manage your website so that local marketing teams can display information relevant to their home mar- kets.

Showing the next US trade show you plan to attend to someone resident in Paris is completely of no value and may make you seem parochial. Choos- ing the language of your website is also important as you continue to go global. Portuguese and Spanish in Europe is significantly different from that of South America. Making your website country specific rather then language specific is a decision you will face.

6. HR POLICIES

You need to pay particular attention to internal policies with respect to Human Resources as well as local laws. Employees can absolutely not be hired and fired at will. If you do not hire and fire in accordance with local regulations you will expose your company and possibly yourself to a significant amount of liability. Use it or lose it vacation policies or 15 days PTO in the US have not bearing internationally such as in Europe where six weeks vacation is the norm. Your US teams will need to be briefed beforehand as to why these exist in certain countries most notably those with punitive tax rates before bitterness arises on why their global counterpart has gone silent for a full month.  Paid leave after the birth of a child in the US is 3 months of unpaid leave, in Sweden it is as high as 22 months of paid leave.

7. INTERNATIONAL INCIDENTS

While the intent is to avoid these at all costs, invariably many things will not work as planned and will be a learning opportunity. The trick is to minimize these as much as possible. These include things like whether your name translates into the chosen foreign country language. Coca-Cola for example when written in mandarin reads like ko-ka- ko-la but this translates to “bite the wax tadpole”. Getting to know your employees and customers and eating at local establishments which they fre- quent rather then always choosing the American chain restaurant that is always up the street is important. If you need to feign dietary restrictions then do so but still find something neutral to eat while you are there. Also, unlike here, eating at your desk is generally not done. You also should not get upset when a waiter seems to be taking an inordinate amount of time to get to your table, meals in many countries are considered part of the overall experience and it is consid-ered rude to rush through these.

8. CULTURAL TO-DO’S

Some best practices include ensuring it is not just US based C-level executives that travel to the new country of operations. Have staff at all levels do this and do it both ways. Use Skype to break down communication barriers and have worldwide personnel join each other on LinkedIn, Facebook and other social media. Hold English speaking classes in your non-English speaking offices. Possibly hold foreign language classes in your US operating company. Encour- age sharing of ideas. Some of the best ideas will come from your international operations. Make sure you are culturally sensitive to their holidays whether public holidays or religious holidays and understand their sports and read the local newspaper when you are there and when you are back in the US.

You need to understand the pressures and opportunities your business and people including both employees and customers constantly face just the way you understand what happens at home. Most importantly enjoy the ride and the experience and you and your teams will be richer for it.

______

Sherwin Krug is a TechCXO Finance & Operations Partner (read his full bio here).  Sherwin was the Founder/CEO of AppointmentCity.com a funded internet start-up that enabled prospec- tive patients to book appointments with physicians in a real time setting. He was also the COO of MFG.com, where he led European acquisitions and the set-up of operations in China. Prior to that Sherwin was the CFO for Tectonic Network.

Sherwin spent the first 10 years of his career with Ernst & Young in both its Johannesburg, South Africa, and Atlanta offices, where he focused on entrepre- neurial growth companies including positioning them for successful IPO’s.

Top 10 Trends in Recruiting for Tech Sales and Marketing

Julie Johnson Carlock, one of the country’s top recruiters for sales and marketing professionals and executives in the tech space, has compiled a list of her 10 Trends in Recruiting for Tech Sales & Marketing.

Download the Top Trends Infographic (PDF)

Avoiding the 29% Club – Part 2: The Hunt for Deciders

71% or 29% Club?

You are a member if you are a hunter. Farmer, gatherer, inside sales, probably not. As you know, hunting has become a study in forensic sales: Strategic Sales, Relationship Selling, Value-Based Sales, The Complex Sale: these are all time-tested sales processes. But by the time the typical sales person hears about an opportunity, the influencers are already in place. It now becomes a matter of timing.

See Part 1: The Ability to Engage

The best hunters know that the one element of a deal that is still in their control is just that — timing. If they can get a seat at the table before it is set, they have a chance at helping to decide what is served. Real hunters do not waste time hunting where there is no game. They look for budget, ‘deciders’, urgency, and access. The most important of these is the decider, and how to reach him.

A recent survey by the Alliance Franchise Network concluded that 71% of the time, before the vendor comparison process even started, buyers knew who they were going to buy from. A third of the time, they had a ‘guy’ who they could ask for a referral. We all have network of ‘phone guys’, ‘tech guys’, and ‘car guys’ who are our go-to sources for warm referrals. Likewise, you need to be ‘in network’ for your potential client. Otherwise, you are in the 29% club.

Identifying the decision maker is relatively simple. Reaching them, not so much. If you can introduce yourself with a referral from someone the decision maker knows you’re well on your way. It starts with investigative work on your part. Big data and online sites provide myriad sources of potential references and referrals. You have a maze of data dots that, when properly connected, will lead to the referral name you need to pique a decision maker’s interest. Use that name in the subject line of an email and you are now a member of the 71% warm referral club.

Avoiding the 29% Club – Part 1: The Ability to Engage

It has been researched to the fifteenth decimal point. Millions of dollars have been budgeted trying to figure it out. In this age of all things digital, it is a strategic imperative for effective business communications, but most sales people do an awful job at it.

What’s the “it”? The ability to engage a potential customer via email. Giving them a nugget of info in the subject line that piques their interest enough to read further. Something that they won’t ignore, delete, or file before opening.

Here’s a clue as to what it should NOT be about:  You.  Or your company.  Or your service. It should be about the person you’re writing to.  And they have gotten a bit crafty at filtering out unwanted communications.  If it’s not about them or someone they know, your email will be deleted or ignored and you won’t connect – making you a member of the 29% Club. As a member, you reveal three things about yourself to potential clients:

  1. You do not know them
  2. You do not have a direct referral to them
  3. You are guessing at what that customer needs

According to a recent study conducted by a TechCXO client in the printing vertical, 71% of the time buyers already knew someone who provided the service/product they needed – or could get a direct referral from someone in their networks. Likewise, before any RFQs, I/Ps, buying process or decision timeframe is established, a buyer begins his research on where he can get reliable intel on his project needs. Demonstrating that you’re a member of the 71% Club can successfully start a conversation. In other words, you need to:

  1. Know your client
  2. Get a direct referral to them
  3. Understand their pain

That brings us back to the email subject line. The time-proven technique to get a buyer’s attention is a name — the name of someone they know and trust who has referred you for a brief, introductory conversation. You already have, or have access to, those names. Mining your contacts and conducting a little research into published information about your prospect, will result in a network of data dots that, when properly connected, will lead to a must-read subject line. Getting good at it qualifies you for the 71% club.

Chris Pariseau is a Sales, Strategy & Marketing Partner for TechCXO in Atlanta. He is a firm SME on prospecting.

Product Success – Post-Launch Checklist

The (Other) Only Thing That Matters for a Startup

Marc Andressen once famously wrote that in the great debate about what is most important for a startup: the team, the product or the market, that the only thing that matters for a new startup is the market. He crystalized his thinking by quoting Andy Rachleff, formerly of Benchmark Capital, by stating:

Rachleff’s Law of Startup Success: The #1 company-killer is lack of market.
• When a great team meets a lousy market, market wins.
• When a lousy team meets a great market, market wins.
• When a great team meets a great market, something special happens.

As Marc noted, you can obviously screw up a great market — and that has been done, more than once. So there is little debate that a great product-market fit will tend to equal success and a poor product-market fit will tend to equal failure. Product-market fit matters most. But building and launching a break-through product (or startup), is more than just getting the market right.

In fact if the goal is about finding a break-through product it is critical to think about the post-launch issues in the early days of the product design. Many teams tend to relax after launch but in my experience significant risk exists well beyond the initial launch. In fact, many of the elements that define a sustainable, scalable, break-through product are wrapped up in the product focus that happens after launch. You might be a bit skeptical on this but I want to focus on 3 primary areas that successful product teams focus on after launch that generate Break-Through Product Success: Go-Live, Retention, Grow!

Go-Live is the initial moment the customer or client Go-Live with the product. Retention is focused on minimizing customer churn and understanding if the solution is solving a real need or a perceived need. Grow! Is all about adding new customers, achieving scale, and maximizing value.

The common theme that all three of these product areas have in common is each provides an indication of how the market is receiving and understanding your product. How well your organization is equipped to receive, process and respond to what the market is telling you is the key driver for that Post-Launch success we are all looking for. This BLOG will focus on the Go-Live moment and in future BLOGs I will address these other categories of achieving post-launch success.

Go-Live:
So let’s start with the Go-Live moment, which I define as that first moment the customer or client comes into contact with the product. This is not Go-Live from you, the company, but rather Go-Live from the Client perspective. This is not a one-time moment, but an on-going moment your company must capture. This is the implementation or provisioning moment that as buyers we have all held our breath wondering if the experience will match expectation. Will the product be intuitive to use? Will the solution solve my problem? And how long will the implementation take?
Obviously we have made the purchase, so we have some expectation that our life is about to get better – but how much better? That moment of truth is here – whether a Consumer or an Enterprise Client; whether a SaaS solution or a Hardware solution – every time the product is launched by the end-user, at least one person is experiencing that “Go Live” moment. So the question for you and your organization, is how well prepared are you to capture this moment? How will the client communicate this experience back to you and your team? What product metrics have been designed to capture the experience and to measure the performance?

The core of a successful Go Live moment ties directly back to a product that is easy to provision. Hardware companies spend many hours worrying about the ease of making the device plug-n-play. This attribute becomes mission critical in the ever expanding world of IOT where devices proliferate throughout the edge of the network. In the connected-car world (think On-Star) the system is activated by pressing a button, usually on the visor or overhead. The product teams spent significant hours figuring out how to get the subscriber over the “Fear-of-the-Button” and to start the activation process by simply pressing a button. On one hand it sounds so simple, on the other never under-estimate the subscriber’s fear of looking foolish. To some extent, we have all experienced this uncertainty the first time we buy a new phone, worrying about how it will start-up and if our songs, pictures, and contact info will seamlessly load.

As you think through this experience you quickly understand how this process is even more critical for Mobile or Web Applications and for Software-as-a-Service (SaaS) based companies. Software based solutions have to make that early stage configuration intuitive, while minimizing clicks and launching seamlessly in your existing Operating System. How many of us have bought an App, and not have it integrate into an existing feature we already used (think Calendars), or have purchased software that takes too long to configure, or has a GUI (General User Interface) or CX (Customer Experience) that is not intuitive.

During the Product Design process the Provisioning / On-boarding / Implementation should be rigorously understand during the product validation stage, heavily vetted during the MVP stage, and constantly validated during the launch stage. All of the classic tools should be leveraged for capturing feedback on this moment. Some of those tools are:
• Product metrics built into the design that provide insights to the Go Live moment measuring such things as launch timing, sequence, experience. Time of day, & frequency of use can provide valuable knowledge to how the product is being used. Without getting user specific info, location data can also be insightful (indoors or outdoors, on the go or still, etc)
• Analytics should be used to process trend analysis for how this experience progresses over time.
• The call center or service center should by sensitized to questions actively searching out customers or clients in that Go Live moment. Product teams should sit with and monitor calls for major themes and insights into this “Go Live” experience.
• Social Media should be mined frequently for people who are capturing that Go Live experience.

From each of these areas, the positive experiences, measurements and trends will provide the product teams with the guard-rails of what to highlight and focus on during future releases. The negative experiences will provide a path forward on how to differentiate, invest, and improve.

The challenge for the product team in achieving that sustainable and scalable break-through product, is to make sure they have designed a method or approach or process or metrics around that initial customer Go Live moment. As we will see in future BLOGs this is critical step in hearing how the market is receiving your solution and if you are achieving that elusive product-market fit.

Product Rescue

Exactly what is a “Product Rescue”?

There is nothing that puts a knot in the gut of an entrepreneur than the struggle to scale a product solution. The Founder has received both market and technical validation by selling and delivering small scale solutions – whether a pilot, a MVP or an actual commercial sell – so they know the idea is needed and the technology is there to support it!

But moving to the next step in scaling the product to meet a broader market, creates new pain-points, and causes new problems. It is in this phase of growth where I frequently see either execution issues or product that needs to be rescued.

It is in this Product Rescue scenario, where the Founder or Investor begin looking for more experienced interim support, where the TechCXO Product and Technology team are called. I apologize if this sounds like Ghostbusters, “Who ya gonna’ call” but to many this is exactly what it feels like – chasing Ghosts!

How to Scale

Without an organized, strategic approach to scaling a product solution the whole organization can become very chaotic, and this is a key characteristic of what I am calling a Product Rescue.

Fear begins to set in as you worry that the beach-head that has been hard fought and won in the early days is going to slip away if the Product Execution does not step-up. While there are no cookie-cutter answers, experience shows the problems of scaling a tech solution usually requires addressing three areas simultaneously: People, Process, and Product-Technology.

People

We all know that our team-members are one of the greatest assets of an any organization, but the challenge is how much do we let our team members learn on the job verses bringing in new, more experienced talent?

As the organization grows, roles need to be defined, and communication methods need to be tighter. As Jim Collins, stated in Good to Great a Level 5 Leader understands how to evaluate the people in the org and understands how to get the right people, in the right seats, doing the right things.

Adding and evaluating people while not disrupting the culture is critical to scaling a solution. An interim TechCXO CTO / Product and Tech leader not only understands these challenges but has been through this evaluation multiple times.

Process

Of course, another reason for a Product Rescue, could be a lack of process, and this could directly effect the Team’s (i.e. People) ability to get things done.

While almost all of us get a little throw-up in the back of our throat thinking about our orgs becoming bureaucratic and bound by process, none of us can thrive in chaos.

Typically the process gaps are found in areas around portfolio management (prioritizing the Development work) so we don’t get stuck in the incremental improvements while also keeping the product fresh; managing change control so post-sales support can react to field issues faster; and strengthening the product plan so that we can plan out the path forward, and our “No” becomes clearer.

Typically the process gaps are found in areas around portfolio management (prioritizing the Development work)

Product-Technology

Finally, if there is one area that seems to come as a surprise it is the product-technology area, where the Founder either has technical debt or needs new tools to help keep up with scaling the product-solution.

This is another area that will impact the team and need process support to implement effectively.

Just the other day, I was working with a company that has hired three new sales-and-marketing people because they have to scale the client engagements. The problem is they do not have a CRM Tool – they are not ready for a large enterprise tool, but they need a way to reach prospects quickly, consistently, and make sure the same prospect is not getting hit with the same message from different team members.

Obviously, you can just implement a tool without having a process to organize team members input. While this simple example illustrates one type of product-technology problem in a product rescue, the technology challenges can pop up in many form factors that are ultimately affecting the customer experience.   The key to recognizing and solving this problem is having the experience to know what needs to be addressed and what can wait.

Determining how the people, process and product tech areas work in harmony is key to experiencing not only growth but a culture where employees thrive and customers want to continue to use the product over-and-over again.

Thoughts and Takeways from SaaStr 2019

For a second straight year, I attended the annual SaaStr conference in the Bay Area.  SaaStr is a community of thousands of people – Founder CEOs, VC & PE investors, operators, and service providers of all stripes – that focus their business efforts around the proliferation of software-as-a-service, which is arguably the dominant business model of our day, penetrating all corners of the economy.  There are so many rich takeaways from the conference that it’s impossible to do it justice in a short narrative — but three key learnings come to mind and are summarized below:

Viraj Parikh TechCXO

Viraj Parikh is TechCXO’s Managing Partner in Nashville

  1. Do not underestimate the value of a Business Operations leader: One of my favorite sessions was with the Co-Founder/CEO of Glassdoor, Robert Hohman, and Neeraj Agrawal of Battery Ventures, a leading Silicon Valley VC firm. Robert spoke about how critical it was to fill various ops roles, including sales ops and, most notably, “biz ops.”  Robert spoke about a conversation he had with one of his board members from Google about how critical this position was in Google’s early days; hiring for it ultimately transformed Glassdoor.  The Biz Ops leader’s function is to understand the key drivers of the business at a deep level, and work horizontally across every part of the business to answer questions.  Allowing this position to go unfilled will come back to haunt you.  It is not an obvious hire because there is often not an immediate payback.  When this position was filled at Glassdoor, about two years late according to Robert, it was not one big thing wrong with the company, but 50 medium things – and it took three months just to unpack it all.  Those 50 things can add up to be an existential threat to the company, since you know something major in the company is going to break, but it is impossible to even identify the break point.  Once identified, it  takes courage to make the necessary decisions to fix it, but the only way to make these decisions is to have a business operations leader who understands how everything in the business is tied together.
  1. The biggest challenge founders face in scaling up their organizations: Many of the sessions at SaaStr were devoted to the intricacies and hiring path necessary to scale businesses. Of course “scaling” means different things at different stages ($5mm ARR, $20mm ARR, $50mm ARR, etc.), but from a founder’s perspective, Hubspot CEO Brian Halligan’s paraphrase of Aaron Levie, CEO of Box, made the point perfectly: “Your success in the early days of your startup is largely a function of you getting very good at doing all the jobs that must be done, while the success factors in a founder’s scale-up is to get really good at doing none of those jobs.  You must get out of everyone’s way and allow people to specialize at doing their respective jobs really well.  Your superhero strengths in startup mode – being a control freak – becomes kryptonite at scale.  You must find a way to back out of the day-to-day, and find other things to do to add value.”  Your greatest strengths as a founder can often become your greatest weaknesses in the scale-up process of your company.
  1. Is your SaaS startup growing fast enough to attract venture capital?: Rory O’Driscoll from Scale Venture Partners gave a compelling argument that a “Mendoza” line exists for startups – essentially a curve plotted against various ARR and growth rates – above which a company makes for an interesting venture capital investment, while below it would imperil the chances for a VC investment and eventual IPO. This is not a hard and fast rule, but rather a handy rule-of-thumb as well as an aspirational goal:

 

A corollary to this rule is that best-in-class SaaS companies, after reaching $10 million in ARR, exhibit growth rates that decline at a fairly predictable rate: roughly 80%-85% of the prior year’s growth rate. Rory’s term for this rule is “growth persistence” – the above table uses a growth persistence of 82%. Although the vast majority of successful SaaS companies lie above this curve, faltering below it does not spell doom – it is possible to reaccelerate again, but recovery and maintaining at a high level is never easy once altitude has been lost. Rory’s blog post can be found here.

Conclusion
Software penetration into the economy remains in the early innings. As much as technology has been weaved into our everyday life, there is still a long way to go. One of the gratifying things about this year’s SaaStr conference was seeing the large number of non-Silicon Valley CEO founders and companies – not just getting funded, but prospering. World class business models and cutting-edge business practices are proliferating in mini tech hubs across the country and world. The abundance of capital will continue to fund countless new products and services, and the number of fortunes to be made will not abate for the foreseeable future.

Viraj Parikh TechCXO

Viraj Parikh is TechCXO’s Managing Partner in Nashville

SaaS Company’s Journey to Relevance

Recently, I attended the annual SaaStr conference where thousands of people in the SaaS community – Founder CEOs, VC & PE investors, operators and service providers of all stripes – descended upon San Francisco’s Hilton Union Square to learn, hear from, and network with some of the most exciting upstart software companies in the world.

This year, juxtaposed against the conference was the backdrop of a major stock market correction, where the Dow Jones Industrial Average (DJIA) dropped over 2,000 points in a single week amid concerns over rising interest rates. Having professionally invested through the 1999-2002 tech wreck and now as a CFO operator to my SaaS clients, the question running through my mind was “What are the implications for an industry that has seen non-stop growth over the past decade?”

Of course, a well-built business will survive, and oftentimes thrive – no matter the macro volatility. After attending about 20 sessions over 3 days and hearing from many inspirational and battle-hardened entrepreneurs, there were several common themes that emerged from the conference.

Below are my three (3) big takeaways:

1. Software penetration is still very low — it is in the early innings

Don’t let stock market volatility distract from this fundamental revolution. Tomasz Tunguz, a well-followed VC blogger, believes SaaS M&A will be very strong in 2018, after a weak 2017. Big cap tech companies flush with cash need to continue fueling their growth engines, and they are competing with PE funds that raised over $343 billion in 2017. That money will be put to work to continuously penetrate every corner of the global economy with cloud-based software. The median multiple is 7x forward ARR…growth is alive and well.

2. A SaaS company’s journey to relevance is an exercise in de-risking the company

To acquire a VC investment or become an attractive acquisition target, your company must begin with relevance. There are three stages in every start-up’s journey to a relevant state: a) product-market fit, b) search for a repeatable, scalable and profitable growth model, and c) scaling the model. Consider:

a) How does a CEO know whether they have achieved Product-Market fit?

The company must meet two criteria:
◦ The company has a number of referenceable customers who have purchased the product
◦ Customers are happy as evidenced by:
▪ Product usage
▪ A reluctance to give it up
▪ Expanded usage
▪ Low churn

b) After Product-Market fit is established, the startup must quickly transition to the search for a repeatable, scalable and profitable growth model:

◦ Don’t try to boil the ocean – pick one target market with a single use case and benefit
◦ Quickly close your early access sales
◦ Invest in customer success to ensure your customers are accomplishing their goals
◦ Build a buyer persona — what do they buy and what do they care about? — find a predictable and repeatable motion, and then begin scaling that process.  For example, predictable sales bookings can be simplified to the number of sales reps times sales productivity
◦ Understand your unit economics and make it profitable

c) Scaling the model through proper management of the sales and marketing function to achieve maximum sales bookings velocity, including:

◦ Hire enough sales people and pay up for the great ones.  Too many companies make the mistake of underspending here to conserve cash… that can be a big mistake
◦ Set ambitious but achievable sales quotas that inform and roll up to the company’s revenue objectives
◦ Regularly track the productivity of each sales rep, e.g. what % is achieving >70% of their quota, and >100% of their quota.
Accomplishing a, b & c will undoubtedly result in a terrific story, but in the eyes of an investor, it is fundamentally about risk mitigation. The lower the risk, the more likely you will attract capital.

3. Run your company around Annual Recurring Revenue (ARR)

This may seem like an obvious point to longtime observers of SaaS companies, but plenty of entrepreneurs still fail this basic test when pitching to venture capitalists. The first slide of every investor deck should include ending ARR (and its trajectory over time), which is the single most important valuation metric.
◦ Break down ARR into its component parts:
▪ Starting ARR
▪ New ARR bookings
▪ Expansion ARR
▪ Churn ARR
▪ Ending ARR – if this does not continually grow, it is a red flag that sales have stalled.
◦ Growing bookings is the key sign that you are making it as a company. For SaaS companies, bookings are defined as Net New ARR (New + Expansion – Churned). Never count bookings if it does not convert to cash within 90 days.

Conclusion

The SaaStr conference affirmed the industry’s abundance of capital, intelligence, creativity, discipline (through trackable metrics), and unwavering confidence that software will rule the world. Software remains the envy of every other sector of the economy. Entrepreneurs who are armed with the right toolkit, as outlined above, can and will be building great SaaS businesses for many years to come, irrespective of the business cycle and stock market gyrations.

Viraj Parikh TechCXOViraj Parikh
TechCXO, Managing Partner 
Nashville
TN
viraj.parikh@techcxo.com
(917) 523-6940

See Viraj’s full bio

Do we even need outside sales reps today?


Outside account executives are an expensive proposition whose statistical effectiveness is falling. Many CEOs and CFOs I speak with are frustrated with the results, and they resent the costs associated with salespeople often identified as “road warriors”, “big hitters” and “closers”. More and more frequently, companies are opting to replace outside account executives with channel partners and/or more (less expensive) inside sales resources. In fact, according to SalesLoft, inside sales is growing 15 times faster than outside sales. I’ve even seen major initiatives at Fortune 50 companies to develop the means to eliminate outside sales executives altogether.

Perception Problem or Real Issue?

As someone who has been and managed enterprise salespeople for over 20 years, I’m a little sensitive to this debate. The notion that you can eliminate highly skilled and experienced outside reps handling complex deals worth millions and even tens of millions of dollars, baffles me. However, whether you agree or not, let’s acknowledge that something is going on that is grounded in reality and not just an issue of perception – B2B sales and account executives aren’t working the way they have been for many years.  There’s a couple factors that go into it.

(1) Buyers are unimpressed – Buyers are frustrated and overwhelmed. About 75% of buyers say they want to skip face-to-face interaction with a sales rep altogether. They would rather rely on technology to close gaps in product and service knowledge and if they have to interact directly, are happy to do so via webinars and videoconferencing.  Further, they assert sales reps aren’t capable of understanding the problem the buyers are trying to solve and then how the product might address them.  What they’re doing is pushing their own agenda and pitching feature and function.

(2) These numbers don’t lie –  The percentage of account executives in B2B sales that are making their quota each year is dropping.  It’s been falling for five years and is now down to 53% of account executives making plan. In addition, inside sales teams often cite 40-90% lower customer acquisition costs. This data frequently winds up senior management.

(3) Perceptions feeds detractors – Effective outside sales reps have outstanding people skills and are typically ambitious, self-motivated and results-oriented. They see themselves as “drivers” as do others, which can certainly rub some people the wrong way. They are typically male (74% of outside sales reps are male versus a more even split of 56-44 male-to-female for inside sales) and have more than 5 years’ experience. They are paid significantly more than an average inside salesperson and close deals – on average – about 40% of the time.

With that in mind if you’re a senior finance executive or a senior leader it’s hard not to look at an outside sales organization and say, “Can’t we be doing something to make it perform better and take some cost out?”

What’s the Right Mix?

If you have a nagging feeling that you are too dependent on the big hitter with the million-dollar Rolodex (this already sounds impossibly dated as I write it) to bring in deals, you may well be right. Ask some of these questions.

Transactional or Transformative? Buyers don’t need face-to-face meetings to get more information. In fact, they resent it as a waste of time, particularly if your representative is hawking features and functions. If your buyers are small to medium sized businesses with lower price points, lower LTV (life time value), they are more transactional in nature and can likely be handled by inside sales for the entire sales process.  However, if your product or solution impacts many stakeholders (IT, engineering, marketing),requires integration of a complex technology stack, promises to deliver 10x better service or new business models, the game has changed. You need problem solvers who are capable of talking to executive level decision makers face-to-face, understanding the outcomes they need and winning their sponsorship. 

Non-Strategic or Strategic? Do you use strategic account planning?  Most companies have no formal approach for strategic account planning. These companies report their win rate on forecast strategic account deals was 7.7% lower than the average win rate for all forecast deals. You may not need strategic account planning if your business is not defined geographically or by size of buyer or the deal.  What would it mean to lose a renewal / expansion opportunity from one of your top 10 accounts? If you are like most companies, and the top 20% of clients yield 80% of revenue, you may need to look at strategic account planning more closely and an outside sales rep may be a better option to develop the relationship with those important buyers. 

Simple or Complex? Is your product and service provided customized or is it a standard offering? Do you use on-site assessments, interviews and collaboration or is your information gathering and fulfillment done remotely? Is your sales cycle defined by hours and days or weeks and months?  The answers to these should guide your mix of inside or outside sales reps, though in complex cases also point to the need for more solution architects.

What we’ve got to be focused on is increasing the effectiveness of salespeople, particularly the outside salespeople:

  • They’ve should be spending less time on tedious tasks.
  • They’ve got to have more data and tools (AI).
  • They must be problem solvers who are capable of executive level conversation.
  • They must be focused on the right accounts and opportunities.

Start Here

How do you figure out the right answer for your company?

Despite the desire, there is not one answer that fits all companies.  What has worked best for me is to start on the quantitative side of analysis.  What are the KPI’s for the organization and the sales reps? Examples of great starting points include win/loss/delay rates, close ratios, conversion rate for MQL to SQL, pipeline numbers and ages by stage.

By starting quantitatively, it provides a framework to dig behind the numbers and take a look at market conditions, whether you have the right people, their training, sales process, tools and overall sales management.

From there, it’s possible to understand the right size and mix of salesforce, what training and process changes are needed, where AI can boost effectiveness and how to deliver the performance that management and investors are expecting.

The key is not to make an up-and-down decision based on perception or even close rates. Look at your sales from a perspective of what you sell, to whom and how. From there, you can begin to engineer both the right sales organization and the right mix of people to meet your goals.

Andy Shober is a Partner in TechCXO’s Denver office. Send him a note at andy.shober@techcxo.com and see his full bio here.

AI for Marketers – 3 Critical Questions

AI… Artificial Intelligence may have a greater impact on business, communication and interaction than social media has today, according to Marketing Expert Jeffrey Whitney.

We ask him three critical questions for how marketers should be thinking about AI in the new year.

What impact do you think AI will have on marketing strategy in 2018?

JW: The debate is over. AI is already having a huge impact on marketing. Amazon, the company that wants to eat everyone’s lunch is driving a third of its business from an AI-powered function.

But, it’s not just large corporations that can benefit, AI can play a critical role in everything from building target lists for start-ups, to driving account based marketing, to keeping up with cross-channel buyer preference and next-best-action.

AI has the potential to revolutionize customer engagement, customer service, and marketing automation. It can enhance the way we communication with new, current, and inactive customers, and automate admin functions in the backend. In other words, it can help make marketing and marketing operations far more efficient and effective.

What kinds of skills and insight/intelligence will marketing professionals need in the future to work with AI?

JW: What marketing professionals need is a basic understanding of AI. AI systems shouldn’t require you to become a mathematician or a data scientist. Just like we don’t need to be a mechanical engineer to use cars with AI system, marketing professionals will be able to focus on the results not the process.

AI can have a far greater impact on marketing than even social media.

How should a marketing department get started with AI?

JW: In 2018, marketing departments should be using, testing, or at least strategizing for AI. Immediately, look for tools that solve real business problems, now. I have a small start-up client that’s using an AI tool to build its target list. Another client uses it to pull together all customer interactions across channels to better understanding them in real-time (rather than waiting 2-3 months for the IT group to analyze the data). A third is looking at AI tools to help with analyzing their account-based marketing targets.   These are just a few examples and none of these clients have massive IT resources or particular strengths in AI.

Then longer term, as you better understand AI, look for ways that can dramatically change your marketing paradigm.

AI Briefer for Marketers

Like my peers, as a longtime CMO, I’ve learned to deal with rapid technology change. But, each new technology can create fear, uncertainty and doubt until we understand it better. No doubt, AI, with all its hype and science fiction legacy, fits this bill. But to remain current and relevant, CMOs must quickly understand and begin to apply AI. To help, from one CMO to another, here’s a short AI CMO Primer.

Can I put off AI until tomorrow, next month, next year?

The answer is no, no, and no. AI is here. Waiting to deal with it risks putting you well behind the curve. As you can see below, leading businesses are already either using AI to great effect or actively planning for it.

• Amazon, the company that wants to eat everyone’s lunch, is already driving a third of its business from a AI-powered function: its recommended purchases.
• In a June 2016 report, Weber Shandwick found that 68% of CMOs report their company is “planning for business in the AI era” with 55% of CMOs expecting AI to have a “greater impact on marketing and communications than social media ever had.”

To wait is to get left behind. Fortunately, getting started doesn’t have to be painful or costly.

What is AI and how does it differ from machine learning, and cognitive intelligence?

Academic experts might hate my explanation, but differentiating between AI, machine learning and cognitive intelligence from a practical CMO perspective isn’t necessary. I use AI as an umbrella term that refers to software that carries out a task that normally requires human intuition, including learning and problem solving.

AI can be thought of as a set of repeatable steps, and so while AI doesn’t technically replicate free-will and decision making, it does map out these steps and uses computer processing speed to make its way through them to come to an outcome. And it often can do this much faster while considering far more relevant data than a human might.

Why is AI ready for marketing now? How can AI be applied to marketing?

AI has the potential to revolutionize engagement, customer service, and automation. It can enhance the way we communication with new, current, and past customers, and automate admin functions in the backend. In other words, it can help make marketing more efficient and effective.

AI can far more accurately predict next best interaction, by churning through (in seconds) all relevant data about the customers – purchases, interactions, social media posts, email exchanges and then learn from the results and do it on a scale not possible previously.

For example, let’s say you have a few million customers and want to communicate with them as if you know them very well, and offer them something of value – specifically to them. AI can enable that level of personalization at a scale of millions and in near real time.

In short, AI can save marketers time and bring companies far closer to our customers.

Do I need to become an AI expert?

The short answer is no. AI systems shouldn’t require you to become a mathematician. With good AI systems, you’ll be able to focus on the results not the process of churning through of thousands, millions or trillions of data points and arriving at the insights you need.

How much will it cost?

Surprisingly, AI systems can reduce costs and eliminate waste. AI systems can significantly reduce the number of data engineers and data scientists required today to prep data and create insights. I’ve seen AI projects deployed within weeks with yearly costs less than that of a single data scientist.

And AI can take wasted effort out of the system by providing a deeper understanding of what your customers want and how to interact with them effectively.

How do I get started?

First, start exploring today. Read, talk to other CMOs and marketing technologists), and evaluate first hand – select a contained, but impactful area. A subset of your customer loyalty system could make a great initial project. Loyal customers should be the life blood of your company, but often are underserved, because it’s so difficult to pull together and analyze all relevant data in a timely manner. This is a perfect fit for AI, as compared to prospects, there’s typically a lot more known data for AI to analyze. And it’s a project where you can start seeing high-impact results in weeks.

Summary

AI is unavoidable and should be desirable. Its critical to research and experience it first-hand. And the results might surprise you. Unlike other systems that can take months and cause havoc (e.g. CRM systems), working with ZyloTech, I’ve seen companies deploy AI in a matter of weeks, without needing technical expertise, and experience eye-opening results.