Can enterprise software sell itself?

You are forgiven if you missed last week's most interesting IPO on the American markets - the debut as a public company of the Australian technology provider Atlassian, makers of popular enterprise tools like Jira, HipChat, and Confluence. For folks who might not be familiar with Atlassian, they have a kind of unique and really successful story.  And the uniqueness as a new tech IPO comes from a couple of distinctive elements in the Atlassian journey.

First, Atlassian is profitable and cash flow positive for something like the last 10 years. Lots of early stage tech companies never reach profitability prior to an IPO exit. Second, this success and profitability has enabled Atlassian to avoid taking (or needing to take), any external or VC funding in its history. Again, just about unheard of for any tech company, let alone a successful enterprise tech company. And finally, and what I really want to talk about in the blog, Atlassian has also eschewed another really common and almost necessary strategy for growing enterprise technology companies, namely the hiring and deployment of a large, expensive direct sales force.

What does this lack of a direct sales force mean for Atlassian, and indirectly, its customers? 

First some context from Atlassian's recent IPO filings:

Unlike traditional enterprise software vendors, who rely on direct sales methodologies and face long sales cycles, complex customer requirements and substantial upfront sales costs, we utilize a viral marketing model to target new customers. Through this word-of-mouth marketing, we have been able to build our brand with relatively low sales and marketing costs.

"We do not have a direct salesforce and our sales model does not include traditional, quota-carrying sales personnel. Although we believe our business model can continue to scale without a large enterprise salesforce, our viral marketing model may not continue to be as successful as we anticipate and the absence of a direct sales function may impede our future growth."

Atlassian spends about 21% of revenue ($68M on revenue of about $320M in their last full fiscal year) on sales and marketing. Does that seem like it is high? Well not for enterprise technology companies that you could include (broadly), in Atlassian's peer group. Salesforce spent around 51% of revenue on sales and marketing expenses in their last full fiscal year. Workday spent about 36% of revenue on sales and marketing in their last fiscal year.  And at the revenue levels these companies have reached, these kinds of differences are substantial.

One final thought about sales and marketing expense for software companies - it is the type of expense that drives the least amount of benefit to existing customers. Every dollar your vendor spends chasing the next customer is a dollar that is not spent on making the product you have purchased and are using any better. Keep that in mind when you review the annual financial statements of the companies that supply your technology.

So back to Atlassian and the question raised in the title of this post: Can enterprise and HR software sell itself? 

I think it only can if a few critical elements are in place. First, the technology has to be relatively inexpensive. Million dollar purchases, heck, even purchases of as little as a $10,000 often require (usually) skeptical customer executives to sign off. And very often these execs won't sign off unless they can speak directly across a table from some high-ranking sales exec from the vendor. It can be pretty tough to sign off on a really large purchase without that person-to-person interaction.

Next, the technology has to be relatively simple and fast for the customer to implement and begin using. When there is no direct sales/account management people on the vendor side, then that first point of contact for issues, bugs, problems, etc. simply does not exist, and the customer is left to deal with standard customer support to resolve issues. And that often is not good enough for many demanding clients.

Finally, the technology solution needs to be pretty widely adopted, and have generated a decent base of customers and fans. There needs to be a fairly substantial amount of publicly available information and comments from existing customers. When there is not a direct sales team to rely upon for information about the product, prospective customers have to be able to obtain satisfactory answers to their questions by other means.

Atlassian has built a profitable and growing enterprise technology business largely on the basis of great technology that is easy to adopt and deploy and has generated tens of thousands of customers and fans. There is really no reason why this kind of model could not work in the HR technology market as well.

In fact, it might be pretty cool if it did one day.

Have a great week! 

More on the performance curve

About a year ago I published a piece called 'The Performance Curve', a quick look at how in professional baseball decades of analysis of player performance reveal a very typical average performance curve. Player performance, (hits, home runs, wins for a pitcher, etc.), almost universally 'peaks' at about age 29 or 30, and almost always begins to decline, sometimes steeply, at about age 31. The chart I used in that post is below:

The specifics of the Y-axis values don't really matter for the point I am after, (they represent standard deviations from 'peak' performance', but simply looking at the data we see for both the original study sample (veteran players with 10+ years of data), and 'less restricted' players, (more or less everyone else), that performance peaks in the late 20s and declines, predictably, from there. Keep this data in mind the next time your favorite team drops a 7-year, $125M contract on your best 31 year old slugger. 

Last year my point in running the post was that these kinds of performance curves likely exist, and are becoming more discoverable, in all kinds of jobs due to the increase and improved capability of tools and technologies to better manage, track, and analyze performance. I still think those conclusions to be true a year later.

But what got me thinking about that post from last year was yet another chart I saw this week, this one excerpted from the bank HSBC on the macro-impact of changing demographics, particularly in the workforce of industrialized countries. Take a look at the chart below, on the generalized productivity (as defined by output), across the typical worker's life-cycle:

According to HSBC, and unlike the data we see with baseball players, 'performance', (again, in this case limited to a measurement of productivity), continues to climb during a worker's life, peaking at around age 50 or so. And worth noting, even though the productivity peak hits at about 50 and this average worker still has about 15-18 more years of work ahead, that the relative productivity in that last decade+ is still relatively high.

Said a little differently, HSBC is saying that a workforce made up of 50 - 65 year-olds would be, on aggregate, more productive than one made up of 30 - 45 year-olds, all other things being equal. Obviously, this is data that should be taken in a very general sense, as we have seen from the baseball example, there are many roles whose physical requirements negate the increased productivity effects of age/experience have on other roles. So while a 55 year-old first baseman will never be able to compete physically with a 28 year-old one, change the role from 'first baseman' to 'accounting manager' and we may have a very, very different outcome.

Last thing I want to leave you with on this, and the thing to take away and really think about is what is happening, (again, in a general way), in labor forces across the industrialized world, and what will continue into the next 10 years or so. Here is another chart that shows how the workplace and workers are skewing older, courtesy of Jed Kolko:

The combination of more rapid population growth and increasing labor force participation among older workers are expected to result in about one-quarter of the workforce by 2024 being aged 55+. That is a huge increase from only 20 years prior, (1994), when the percentage of workers aged 55+ was only about 12%.  And workers 65+ are expected to make up almost 10% of the workforce by 2024, up from less than 3% just 20 years prior.

There is plenty to think about here for sure, and as usual, no simple answers. The workforce is certainly skewing older, that seems to be indisputable. But what that means to organizational performance is not as clear, unless you are managing baseball players. For the rest of us, thinking about how these changes will or at least should impact how we hire, develop, coach, train, and mentor employees in the next 10 -15 years is probably one of the most important human capital challenges we will face. Think about it.

Ok, that's it - I'm out. I need to get back to being super-productive (judging on where I sit on the curve).

What should we be working on?

My favorite things to do on Winter weeknights are to watch NBA basketball, (thank you NBA League Pass), and plow though the seemingly thousands of unread items that accumulate each day in my Feedly feed reader. So in case you really care, and I am pretty sure you don't, this piece is being drafted (who am I kidding, on the blog there are no 'drafts', it is ship or don't bother writing around here), while watching LeBron and company take on Lance Haun's Portland Trail Blazers.

But I digress.This is not Lance Haun

While grinding through my Feedly looking for some inspiration for the blog, I came across this excellent compendium of product development prioritization techniques and approaches called 20 Product Prioritization Techniques: A Map and Guided Tour. The piece is a fantastic collection of strategies and methods that are employed by product managers and developers when faced with the fundamental and critical questions of 'What product features should we build?' and 'In what priority order should we build these features?'

Both questions seem kind of easy on the surface, but for product managers and leaders they are not only very often quite complex, but how successful product leaders are at answering these questions plays a significant role in how successful (or not), their product will be. Build the 'wrong' features and current customers may defect and acquiring new ones may prove impossible. Build the 'right' features but in the 'wrong' order and risk making customers wait too long for features they need and end up losing 'bake-offs' for new customers when needed product features are not yet available.

Like I said, simple sounding questions that are often really hard to answer. And really, really important to get right. 

That's where the list of the 20 product prioritization techniques makes for a really useful starting point not just for 'product' people, but anyone that needs to assess and prioritize work efforts from a range of options, or what always seems to be an impossibly long 'to-do' list. Let's pull one example from the piece and see how it can be relevant and useful for both product and non-product, (I suppose that is just 'service') leaders. This is one I liked a lot and I think also can be pretty easily applied to say any internal HR or talent function.

Technique: Feature Buckets

The Feature Buckets technique by Adam Nash is also very popular on Quora.

Adam believes that feature prioritization varies a lot across different product types and industries and that’s why he emphasizes that this technique was thought specifically for consumer internet products.

Feature concepts should be placed in one of four buckets:

• Metrics Movers — Features that will move the target business and product metrics significantly. There should be specific goals and strategies behind the decision to invest in a product or feature (things like AARRR metrics come in handy here);
• Customer Requests —  These are features that have been requested directly by customers. They are usually incremental enhancements, but it’s important to consider them or else risk alienating users or miss important feedback coming from their usage of the product;
• Delight —  Innovative features that are internally generated based on insights in design or technology. Working on surprising and exciting features is important to delight customers and create a differentiated position in the market (c.f. Kano Model for more on this);
• Strategic – Features that are included for strategic reasons related to learning or future goals (e.g. experimentation and data gathering.)

A well balanced product release should typically include features from all of these buckets. The framework is not explicit as to the appropriate distributions among these buckets and to how to prioritize internally within each. These implementation details are left up to the Product Manager to define.

Breaking down the four components or buckets helps us see how if you could consistently deliver across all four that you would have an increased likelihood of customer (both internal and external customer) satisfaction.

In this technique you address your fundamental, internal goals, (the Metrics Movers), as well as direct customer feedback, (Customer Requests). But you also showcase your innovation, and give your team opportunity to work on exciting stuff that your customers will be surprised by, (Delight). Finally, you continue to strengthen your position as market, product, and service leaders by building towards the future, (Strategic). 

And I think you could just as easily apply the Four Buckets approach to any HR or Talent or Recruiting organization's quarterly plan as you can to a product development organization's list of potential features for the next product release. 

If you are in product management, or just have the important, (and tough), job of figuring out what the organization should be working on today, tomorrow, next week, next month, etc., take a look at some of the prioritization techniques in the above-linked piece.

No one can do everything we are asked to do. The most successful organizations know this, and they get really good at deciding what to do and what not to do.

Ok, I am out. 

Back to basketball.

Have a great day!

CHART OF THE DAY: We can FINALLY stop talking about millennials

In what has to be interpreted as a signal to the tens of thousands of workplace/leadership/management professional speakers and pundits out there that it is time (finally), to update those PowerPoint decks from 2009, it looks like we need to stop or at least slow down our collective fixation with Millennials.

Take a look at today's Chart of the Day, courtesy of the fine folks at Goldman Sachs and let's together pour one out for the Millennials and raise one up for what is coming next. Here's the chart and as you have persistently demanded, some comments from me after the data:

Awesome looking chart, right? And from the looks of it, it is time to stop worrying so much about the Millennials and start thinking about Gen Z! What might this mean to the rest of us - besides all the 'Generations in the Workplace' people that need to update their slides I mean?

I have three quick takes, then like the Good Gen X-er I am have to go make the donuts...

1. Technology - this is the first 'post-internet' generation. They have never known a world without almost constant connectivity, ubiquitous wifi, and life attached to their devices. Waiting for any kind of information is something they are not used to, nor will tolerate very well. Everything has to move faster, be more easily consumable, and actionable. If you thought the Millennials were annoying, just wait until your first set of Gen Z employees comes through the doors, (very soon), and laughs at your antiquated set of systems and processes.

2. Diversity - In line with the increasing diversity in the population overall, Gen Z will be the most diverse generation in US history. According to Goldman, the majority of Gen Z will be non-white by 2020 or so. And with this diversity in composition, it seems likely that Gen Z-ers will also be the most accepting of diverse workplaces and teams. In fact, many of them will not even consciously think about 'diverstiy' in the ways that Gen X and Boomers always have, (and have needed to). To Gen Z, the team won't really seem 'diverse', it will just seem like 'the team.' I am not smart enough to know exactly what that means for corporate diversity and inclusion efforts, but I bet it will mean something.

3. Backlash - In about three minutes from now, someone will take a shot at me or at this post for 'generalizing about the generations'. This person will probably be an older Gen X-er or possibly a Boomer. These people are cranky and should be ignored. Yes, I know not every Gen Z-er is the same and not every Boomer is some kind of Luddite. EVERYONE knows this. The point of talking about generational groups and trends is not to try to explain the motiviations and actions of EVERY SINGLE PERSON IN THE WORLD. The point is to try and make sense on a macro-level of how the shared experiences and enviroments of people who grow up in similar cultural, societal, and economic circumstances impact how they see the world and what that means for the world. And I think having that kind of understanding, or at least having the discussion, is important and valid.

Ok, that's it from me. What say you? Do you care about Gen Z at all? Or are you happy (like I am), not to have to figure out how to spell 'Millennial' all the time?

PODCAST - #HRHappyHour 226 - BetterWorks and Modern Performance Management

HR Happy Hour 226 - BetterWorks and Modern Performance Management

Recorded Friday, December 4, 2016

Hosts: Steve Boese, Trish McFarlane

Guest: Kris Duggan, CEO and Co-Founder, BetterWorks

LISTEN HERE

This week on the show, Steve and Trish were joined by Kris Duggan from BetterWorks, a leading HR technology solution that helps organizations create and align individual and team goals, drive improved performance through increased conversations and coaching, and provide a platform to support what could be called 'modern' performance management.

A 2015 trend, and one that is likely to continue in 2016, is organizations moving away from the traditional and annual performance review and employee rating and moving towards the adoption of more frequent, ongoing, agile, and coaching-oriented performance management platforms. Kris shared his thoughts on the topic from his perspective working with BetterWorks customers and partners. This conversation is one that can help HR leaders as they think about evolving and modernizing their performance management processes in 2016.

Additionally, Trish talked about her recent trip and keynote presentation at an HR event in Dubai, Steve shared the important Pantone 'Color of the Year' selections for 2016, and in a 'big' announcement, the HR Happy Hour twitter account passed 20,000 followers this week!

You can listen to the show on the show page HERE, or using the widget player below (email and RSS subscribers will need to click through)

This was a great conversation and show - big thanks to Kris Duggan for joining us this week.

And be sure to subscribe to the show on iTunes or your favorite podcast app - just search for 'HR Happy Hour' to add the show to your playlist and never miss a show.