Southern SaaS – It’s a wrap

lanyardSaaStr Annual is the biggest event in the B2B SaaS calendar each year.  ​​If you haven’t heard of it, or seen the rich content that flows out each year, you should. ​ With 12,000+ SaaS founders / execs / investors from all around the world attending each year in the hopes of powering up their journey to $100M ARR with less stress and more success, the reliable feedback is that the experience really does exceed the hype.

Kiwi SaaS players have been making the trek up to the Valley for a few years now, and as the interest grew, Callaghan Innovation jumped on board to spread the experience.  Having taken a group up to San Fran for the last two years, they had the idea of replicating some of the vibe for learning and connection right here down under.

Southern SaaS was born.

A whole day immersion in the SaaS business model with expert speakers plucked from their daily growth journey here in NZ or flown down under from the wide blue yonder, ~250 SaaS founders / execs packed into the top of the Auckland Museum yesterday with open minds and a thirst for actionable insights.

Highlights from the day:

  • Rich Mironov, Valley product guru, shared his wisdom with trademark humour and approachability. My moment of the session was Rich calling out that being a 7 year startup is not a claim to fame.  Something I hear repeated from international angels and VCs.  Our startup ecosystem here in NZ is not quick enough at killing off the unsuccessful and weak.  “Quick in, quick out.” Was his wise advice.
  • Marvin Liao, Partner at 500 Startups, delivered his 16 tips on pricing with that brutal honesty that Kiwi’s love.  “Discounting is STUPID and COWARDLY.  Don’t do it.”  He also pointed out that people put more effort into designing their interior office spaces than they do into pricing, a fact that rings a little too true!  “The moment you make a mistake in pricing, you’re eating into profit or reputation.”
  • Josh Robb: VP Engineering at current industry darling Pushpay was a shining example that everyone in the business needs to care about the performance of the business, not just their functional area.  If the business isn’t successful as a whole, there won’t be a product to build, or a customer to support or sell to.  The comment that stuck with me; when you’re growing fast and everything is on fire, “run to the fire that will kill you, and not the fire that won’t.”  You need awesome data and metrics to know the difference and to prevent those fires from happening again.
  • MC, David Downs was a delight, expertly guiding the energy and flow.
  • Topping it all off was the networking, sharing, and connections made.  As with all these types of things, knowing that others face the same challenges, or feeling like you have been able to share some of your own wisdom gained along the way with those just starting out, is the real value.

So with a notebook full of advice and expertise, the challenge is now to share the best bits with the team back at work and continue to drive forward as we grow towards that $100M ARR.

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The Innovate Debate #twnz18

Thanks to a tip from a colleague, I stumbled into my absolute favourite event of tech week this year – the Innovate Debate hosted by Pixel Fusion.​

The moot: Startups are the key to corporate innovation.

The propostion team:

  • Scott K Bishop, Chief Innovation Officer, Z Energy
  • Sonya Crosby, Chief Innovation Officer, SkyCity
  • Teresa Pollard, International Customer Advisor, NZTE
The opposition team:
  • ​Lisa Miles-Heal, GM & CTO, Unleashed Software
  • Paven Vyas, CEO, Rush Digital
  • Hamish Nuttall, Chief Digital Officer, ThinkLazy (& founder Naked Bus)
(It is worth noting that the teams were randomly assigned, as with any debate, the team they were on does not necessarily reflect their own personal belief!)
For me, the mark of a great debate is a notable demonstration of intellectual agility, clear points, witty remarks and just the right amount of heat.  This event certainly delivered!
The positive relationships across the innovation ecosystem were evident with just enough knowledge and respect amongst the speakers to fire shots without getting too personal.  The broad range of experiences led to a truly informed commentary and all speakers managed to strike the balance between making their own argument and a spirited rebutta​l.  There were also a wealth of real life examples from right here in our own NZ Inc.
Opinion aside, the clear winner on the day was the opposition team, taking down the moot artfully with a laser like attack on it’s binary nature.  Their argument was that whilst startups are part of the picture, there are many keys to corporate innovation.  The first speaker laid the ground work for this argument by making the point that startups are not inherently innovative.  Instead they are inventive with 9 out of 10 failing, over half of those due to lack of market need for their invention.  Innovation is the art of creating value in a way that has not been achieved before, and so with the majority of staretups not delivering value, they are not by definition innovative.  Whilst partnering with a successful startup can help drive innovation, the opposition team made the point that this is just one of many keys on the key ring in the corporate pocket.
The opposition argument was then developed by honing in on a factor that they felt had more impact on corporate innovation: leadership.  Quite rightly, they made the case that without trust and safety instilled by “ambitious, authentic leadership,” innovation is doomed.  If the leadership does not create a culture in which it is safe to fail, the team, no matter how talented, will not take the risks required to truly challenge the status quo.  They added to this, the strength of having diverse teams.  Without diversity of thought, the status quo reigns supreme.
The mic drop moment of the night went to the final speaker of the opposition team, who pointed out that middle aged folks who date hot young things, are made more cool or sexy by doing so.  Ergo, ‘dating’ a startup is never going to make a corporate cool or sexy.
It should be noted that points were awarded to the proposition team for their description of the complimentary strengths and weaknesses of startups and corporates; startups needing capital, capability and connection, corporates needing innovation and agility.  Each able to deliver what the other seeks.  There were also some good points about partnering when it make sense to do so for the betterment of both, and winning together.

This debate was not only highly relevant for corporates, but also ex-startups, long past the search for a sustainable business model and very much in the midst of middle age. This is a complex stage where the essence of the startup culture still lives on, but the hurdles of a larger organisation begin to slow the cogs.  By leveraging partnerships where it makes sense and promoting diversity and a ‘safe to fail’ culture, external innovation can be utilised as a part of an innovation portfolio, but not the only key.

Measuring Success – the perfect 10.0

Once upon a time, a very long time ago, I was a young gymnast on the elite development track spending 30+ hours each week in the gym training.  This was back in the day of the perfect 10.0 and I distinctly remember watching early morning TV and seeing Lavinia Milosovici being awarded a perfect 10.0 in the final of the floor exercise at the 1992 Barcelona Olympics.  Her passion and energy carried the crowd in her favour, and her performance was mind blowingly close to perfection.

I know all too well the countless hours spent working towards perfection, the extreme repetition for fractional gains to go from a 9.90 to a 9.95.  Despite having lived about 70% of my life in this context, I am not a perfectionist, in fact I suspect it is partly this experience that taught me the value of the 80:20 rule and beat into me the idea that perfection was a dream not a reality.

I am a firm believer in the concept of doing as much as needs doing to get the result you want, and no more.  More is wasted time and energy.  More is pointless.  In the world of gymnastics perfection was once the goal, because that was what was required to win but in most contexts, 70-80% will get you there.

Having both a clear picture and a measurable metric of success is what counts.  In gymnastics we knew the picture from watching others, and the metric was clear, it was perfection.  But the time and energy cost of that perfection was enormous.  So my challenge to you is if you know what the goal is, business , sporting or personal, what is your picture of success and what is your measurable metric?  Most of all when can you sit back and know that enough is enough and further improvement will come at too great a cost?

Landing whales and inherent tensions

Landing whales takes time, effort and a leap of faith.  The benefit to the business is clear, but the path to get there can cause significant tension in a product shop.

Product people are passionate about meeting the needs of the market by creating solutions that address the pains of the majority.  Acquisition teams are passionate about meeting the needs and addressing the pains of individual prospects and customers.  Neither is right or wrong, they are just different perspectives that create an inherent tension: Do we prioritise the many or the few?  Do we force an ‘off the shelf’ solution or allow heavy customisation?  Do we build features / integrations specifically for that large and important prospect?

Tension can feel uncomfortable, but as long as we understand where the tension is coming from and the implications of our decisions, it can drive us to a place of comprimise that optimises the benefits for both.

Solutions customised specifically for individuals are better known as ‘Services’.  Generic solutions taken ‘as-is’ for the many are better known as ‘Products’.  

Services can generate high revenues (if charged for) but lower gross margins over time.  They are significantly less scalable and far more consumptive of resource as the solution is customised towards 100% of the customer’s need.  The individual customer always takes priority in this scenario.  This makes it’s hard to find the time and resource to work on the product for the many.  Services are about the opportunity today, the immediate value creation.

SaaS products create compound benefits.  This means they generate high gross margins over time lifting the business value and ability to invest in future products.  In a product business, market needs always take priority and can cause challenges in the acquisition cycle where the solution only meets say 80% of an individual customer’s needs.  Products are about the opportunity of the future, the long term value creation.

You can see where the tension arises – if both teams are fully focused on what they’re passionate about, they are being impeded by the other and working to competing priorities.

In a SaaS business, the answer tends to be somewhere in the middle.  There is no long term value creation without a product approach, but no short term benefit without an acquisition focus.

So how do we balance this?  Each team must understand the context of the other, and respect that everyone is acting in the best interests of the goals of the business.

By taking inputs from the acquisiton teams, the product shop can finance specific builds with customer sponsors – there’s a real and immediate return as the whale lands and the whole business celebrates.  The product team just need to be consious of validating the underlying problem and potential solution with a wider group to ensure it will have benefit across the many to create that lovely high margin recurring revenue of a product shop.

Both teams then need to know when to draw the line.  

When the customer has selected an ‘off the shelf’ product, icnreasing levels of customisation creates ongoing resource drain and erosion of margins, as well as putting in place an ever increasing financial burden for that customer to evolve their unique application in line with the changes to the generic product.

The product people are best placed to identify when the customisation becomes too specfic or prevents the allocation of resource to future value creation.  This is where they say no.  Just as the product people need to respect the inputs that lead to opportunities for broader value creation, the acqusition team need to understand and respect this line where the inputs are not creating value in a sustainable way.

In short, there’s a win-win from landing and feeding whales, for both product people and acquisition teams, but it is not easy and definitely requires high empathy for each other’s context.

It needs understanding and a team approach.

Book Review: The Innovator’s Dilemma, When New Technologies Cause Great Firms to Fail

Book review
The Innovator’s Dilemma, When New Technologies Cause Great Firms to Fail
by Clayton M. Christensen (1997)

There is far more than schadenfreude at play when reflecting on our cultural fascination with why the mighty fall. Instead, it is perhaps rooted in our desire to avoid a similar fate. If that big and successful company over there can fail, then what does that mean for the business that I’m in?

The theory and concepts introduced in the Innovator’s Dilemma is an absolute must understand for anyone facing the task of continuing business growth. If you noticed that I have written “must understand” rather than “must read” you’ve already picked up on one of my key reflections on this book. It’s not an easy read. If you’re not an attuned technical reader that flies through academic texts, or don’t have a keen fascination with disc drives and the history thereof, you’re going to struggle with this one. That being said, if you can persist, the reward is worth it. The way you think about growth, success and innovation will be forever changed.

This book is actually pretty old these days, first published in 1997, it was perhaps ahead of it’s time as the explosion of tech startups in the recent years has brought the word ‘disruption’ into the common business vernacular. There are plenty of historical examples of disruption, the examples of disc drives and mini mills being described at length in this book, however, never has there been a time where the pace of change was so rapid, and so present in everyday consumer life. It’s all around us. How we consume media, how we buy books, where we stay when we travel, how we get from place to place, how we connect with friends and family, the list could go on and on! The up shot is that The Innovator’s Dilemma is as timely and relevant now as it ever was, both for established companies looking avoid the mistakes of the former greats, and for the up and coming startups hoping to be the next great disruptor.

The first half of the book reads like an extended history of the disk drive. The same story many times over, 14 inch, 8 inch, 5.25 inch, 3.5 inch, 2.5 inch and 1.8 inch. On and on. Technical, detailed and pretty tough going. To be honest, I got bored a few times, put it away, read something else and then came back to it. I did keep coming back though!

By the end of this section the lesson is clear, new technology is usually simpler, cheaper and lower performing. It often has a lower margin, doesn’t meet the needs of existing customers and those whose needs it does meet are so niche, they’re not worth pursuing. If you are only focused on current markets, current customers and improving profitability, it’s never going to be a priority. More than that, you’re not just going to leave this new technology that you may even have developed in house on the shelf, you’re going to bury it and ignore others playing in this space, writing them off as a non-threat due to your own lens on the competitive landscape.

The problem with this is that by carving out a strong spot in a niche market, a disruptor then has the ability to invest in incremental improvement on this new technology, which quickly sees them surpassing the original in both performance and cost. They move up market, often with disastrous consequences for the incumbent.

This is the dilemma: “the logical, competent decisions of management that are critical to the success of their companies are also the reasons why they lose their positions of leadership.”

With the pattern and framework established, the second half of the book is where it gets really interesting. With the point made, the examples become more varied, and the writing style switches from historical recount to thesis, case studies and advice. The distinction between sustaining innovations that help progress existing technologies, and disruptive innovations that chart new waters becomes clearer, and there are some positively fascinating snippets addressing questions like “When does a product become a commodity?” (Answer: When the features and functionality exceed what the market demands.)

Christensen also uses these case studies and examples to discuss good and bad strategies and posits the beginnings of some solutions to the dilemma – each presented with their potential challenges. In complete contrast to the first half of the book, I barely put my kindle down at this point!

For those that want the cliff notes, the video below gives a nice little 4 minute summary of the basic principal of disruptive vs. sustaining innovation and the dilemma itself. But if you can keep yourself motivated by the promise of the second half, do take the time to read the full book.

 

In short, the Innovator’s Dilemma is definitely on my list of books to revisit and read again in the future as it has a wealth of highly relevant principles and considerations for modern management, but first I’m going to give The Innovator’s Solution a go.

Striving for High Performance?

High performance, what does it actually mean?

Having significant experiences within the world of High Performance Sport as an athlete, a coach and selector, a researcher, and also as my area of academic qualification, my brain immediately jumps to this space when I think of high performance.  At the simplest level, high performance is the quest for greatness.  The drive to do better, be better and be judged against the best.  In the sporting arena, those that are part of high performance programmes are those that have the unique combination of ability, mental toughness and desire or ambition.

When selecting young gymnasts for competitive training groups on the path to high performance, it was my responsibility to select those that showed this combination then help them develop in the areas where they were weak.  They didn’t have to be the most talented, or have the highest resilience, or the greatest ambition, but all of these traits had to exist at a base level for them to be successful.  In fact, often those who started at 70-80% on each of these factors would outperform a peer who was stronger on a single attribute; more talented, more resilient, or more ambitious.  It the combination that counts.

If you get it right, they pour themselves into their training, giving it everything they’ve got and amassing significant hours so that movements become second nature.  In learning theory this is the transition from a learned skill to an automatic skill.  They don’t have to think about what to do, they just do it.  But more than that, they practice at a standard that results in that automatic skill being at a significantly higher level than others around them.

The translation of this into business is obvious.  If you are seeking high performance, you need high performing teams.  These teams need to be made up of high performing people.  People who have a winning mix of capability, experience and commitment.  They don’t all need to be 100% on everything, but there needs to be a combination that lifts them into that high performance arena.

Most critically, the team must be matched to the needs of the competition or playing field.  I wouldn’t send high performance 8 year olds to the Olympics.  They don’t have the right capability or experience despite their great ambition.

Having played in the startup arena for a number of years and as a peripheral Angel Investor, I’ve seen a lot of startups grow through purely capability and commitment.  I’ve also seen those that bring experience in concert and watched as they almost pick the money straight from the trees.

The challenge for startup businesses as they become more mature is that the capabilities and experience required become more niche.  Sometimes you just need someone for whom that missing skill is automatic.  The ‘been there done that’ factor.  Someone who knows what high performance in that niche actually looks like.  I could have an Olympic gold medalist track athlete, but if I ask them to perform a Tsukahara in a gymnastics competition, they’re going to look at me with a blank stare, as might an accountant asked to implement an affiliate advertising campaign, or a digital marketer asked to develop a hedging strategy.

Over the years I’ve seen many companies at many different stages of growth an all sizes and structures that state a desire for high performance, but for a variety of reasons, they haven’t the been able to make the team selections (and deselections) that will lead to true high performance. They haven’t gotten the right players on the right field at the right time.

Very simply put, if you don’t have the a team behind you with the right experience and capability for the particular competition and activity in which you’re engaged, then you are never going to do better, be better and be judged against the best.  You will never achieve high performance.

 

(Note that picture is of the amazing Samadiana who I coached as a young gymnast and who is now a NZ representative.)

Balance and diversity of thought

People often say, opposites attract.  For my husband and I, that couldn’t be more true.

I am a risk comfortable, high energy, extrovert.  I think fast first, trusting my gut with an overlay of slow thinking to test to the minimum level required.  I love the company of people I know, but hate small talk with strangers.  I create tension by challenging the status quo.  I see a box as an opportunity to push the boundaries.  I am happy in the big and unknown.

Hubby is risk averse, contained and introverted.  He thinks slow first, with an enormous attention to detail that drives me crazy.  He loves the company of anyone, and can talk the ear off a donkey, but when he is with those he knows he feels safe enough to withdraw and take some time out for himself.  He smooths the way and tries to accommodate others.  He sees a box as a boundary within which to operate.  He is happy in the detailed and certain.

Neither of these are better or worse.  They just are.  We are both strong in our own right, but it is by combining these differing strengths that we create a whole that is better than the parts.

Where I want to leap into a decision, he makes me consider the risks.  Where he moves into paralysis by analysis, I push us forward.  He covers me when we are with strangers, and I cover him when we are with family.  Where I challenge our children, he supports them.

A strong management team is the same.  It is through diversity of thought, different approaches, a balance of strengths and an ability to push each other forward through the tough decisions that success occurs.  As long as you build a culture of trust where the team are able to have a constructive disagreement but maintain the relationship, differences will only make you stronger.

Stretch goals and motivation; watching from the side

My husband is going to run a marathon this year.  To take that statement at face value, you would assume that he is a runner, that he is the fit and healthy type and that he has probably done a half marathon before.

None of these assumptions would be accurate.  To be fair, when we met ten years ago he would go for the occasional run.  He even entered a few fun run type events, although the furthest distance he’d ever achieved was circa 10-12km.  Fast forward to present day and he is essentially going from zero to hero.  From couch to marathon.  From directionless and unmotivated, to single minded and driven.  Whilst this may be a sign of a midlife crisis, it is most definitely an achievement worth celebrating.

Upon winning an entry to the ASB Auckland Marathon event, he umm-ed and ahh-ed about the distance to enter.  A half would have been impressive, ‘Go for the full,’ I flippantly said.  Go for the full he has, and not just in distance, but in fundraising too.

By setting a big hairy audacious goal, a significant stretch for distance and funds raised, he has had to be significantly more disciplined in his approach.  With 42.2km to run and $4,220 to raise, he has had to understand the gap that existed between current and ideal states, then create a clear path to get there.  He has had to develop a comprehensive plan that has had to flex and bend obstacles arose.  He has had to create tactics that align with both his fundraising and training strategy for maximum efficiencies.  He has built awareness, created interest and converted his followers to capture donations.  I have never seen him more focused and so clear about the steps that he needs to take to achieve a goal.

His last training run was 28km, his donations are surging ahead at $3.5k.  Come the end of October he will have not only run a marathon and made a huge difference to Starship Children’s Hospital, but he will have knocked his BHAG out of the park.  Something that at first glance he thought was unachievable.

This to me is a story of the power of a goal.  Not just any goal, but a stretch goal, a BHAG.

The discipline and focus required to achieve something that borders the unachievable is one of the most powerful tools in the strategist’s toolkit.  What can seem scary at first forces you to think in a way that you would not have otherwise.  In business, or in life, what is driving you?  What is your stretch goal?  What sits at the outer edge of what you think is achievable?

To see more about Howard’s journey and donate: https://aucklandmarathon2016.everydayhero.com/nz/howard

Quick Read – Rituals reinforcing culture

Workplace culture is one of those things that is oft talked about, rarely fully understood.  Culture does not reside in a poster on the wall, the launch of a new set of corporate values, or an employee handbook.  Culture is not what we put on a piece of paper, it’s what we say and do, the accepted norms of the group we belong to.

Workplace culture is most evident in the seemingly unimportant rituals that send an unspoken message about what we really value.  Publicly announcing and celebrating a work-iversary shows that tenure is valued.  Hitting the gong for big deals shows that sales and revenue generation are valued.  An annual team charity work day shows that community is valued.  ‘Staff of children’ Christmas parties show that your family and life outside of work is valued.  These are all norms of groups that I have belonged to in the past, the rituals that send a message to those new to the group about what is valued by that group, and therefore, the culture of that group.

One of the interesting reads in my inbox this morning was an article proposing that rituals can be designed to strengthen culture.  So obvious, and yet so often overlooked when trying to figure out how to change a culture for the better.  If workplace culture is on your thinking list, give it a read, and then consider; what are your unspoken rituals, and what message are they sending?

‘Want to Strengthen Workplace Culture?  Design a Ritual’

 

Traction: Getting unstuck

A few weeks ago my Facebook memories reminded me of the day that I got the car stuck on the front lawn.  I’d decided to try to drive out across the wet and muddy grass to avoid an obstacle in the driveway and about halfway through the process the wheels started spinning and I was going nowhere fast.  I knew in that instant that I’d lost traction.

stuck in the mud

Traction is the act of drawing or pulling something over a surface, it is the grip of a tyre on the road, but it is also the extent to which an idea gains acceptance.  The question is, when you get stuck, how do you regain traction?

If you’ve ever been stuck you’ll know that pushing harder on the accelerator only causes you to sink more deeply into the quagmire.  The quicker you can identify a loss of traction, the easier it is to regain it.  If the ground is steady enough and you’re not completely dug in, easing off and giving a gentle push can sometimes do it, but in some cases, you need to get out of the car and lay some groundwork.

If you’re alone it’s harder.  The ideal solution is a team, a couple of people to dig out the tyres and underpin them with some solid foundation, a couple to push from behind, and someone to sit in the drivers seat and gently edge forward.  You may even need to ask an external party for a helping hand in the form of a tow, but even then you still need someone to hold the wheel and steer.

To succeed, the whole team need to communicate with each other, anyone out of synch, or not doing their bit and everyone could end up covered in mud.

The reward for an enormous effort can be a small movement forward, a moment of traction.  You cross your fingers that the traction will be sustained and the motion will continue.

The moral of the story, if you plan to drive out across uncharted territory, test the ground and pick the path that looks most stable, if it is all pretty rough and you’re still convinced it’s worth doing, lay some groundwork in advance.  Finally, make sure you’ve got the team and tools for the journey so that if you do lose traction, you’ve got the means to get unstuck.