Author Archives: Dave Ghosh

FOUR REASONS WHY ONLINE TRAINING EVENTS DELIVER LEADS

FOUR REASONS WHY ONLINE TRAINING EVENTS DELIVER LEADS

Whether it is a user conference, trade show or job fair, gathering people means that time, money and logistics are involved. Scheduling travel, catering and A/V are just the tip of the iceberg for overtaxed event folks, and budget is always an issue. By carefully examining the costs/benefits of each event in a marketing plan, and evaluating the time and cost savings that can be achieved with a virtual alternative, training marketers can leverage significant audience engagement via online training.

Here are four key reasons why:

  1. Convenience: Presenters and audiences can attend from their laptops, tablets or phones, and on-demand access allows registrants to revisit content at their convenience.
  2. Low Participation Cost: No travel time or expense; forget about paying for airfares, meeting rooms, etc.
  3. Easy Interaction with other Participants: Instant chat and networking opportunities allow interactions, and social sharing allows sharing of “bright ideas,” extending the training event’s reach and the value of its content.
  4. Powerful content management/distribution: Virtual environments, with live and on-demand webcasts and resource downloads, extend content’s reach and accessibility by re-purposing it and making it continually available.

For example, using Slideshare as a training content delivery tool,  visitors peruse around 1,140 slides in total;  that’s a lot of potential for creating engagement! As a consequence, content marketers everywhere are extending the benefits of online training into new and unexpected areas. Marketers can use online training to turn any channel into a lead generation tool. Content marketers can add pop-up lead-forms at any point in a presentation for a variety of purposes, such as building an email list, collecting demo requests, or soliciting other actions the company considers to be a next step in the path to conversion. In addition, embedding training content in websites and blogs can provide a huge lead-capture advantage. For instance, if marketers want their  blog to look clean and uncluttered, a presentation enables them to include multiple calls-to-action (such as an email sign-up box and links to related content directly within the content) without adding bulk to the blog-page.

HOW TO CREATE A STEADY STREAM OF LEADS

There are four steps that help bring in leads:

  1. Segment the Training Content: Strong segmentation is crucial for lead generation success, and content/training marketers should be looking to segment their lead forms by audience type or customer’s sales funnel stage.
  2. Add and Customize a Form within the Content: Assigning specific categories to training content ensures it will appear in front of people who have declared an interest in those topics. In addition, global organizations can choose to target their audience by country of residence. And for content that appeals to more than one segment, marketers can add custom questions to their lead forms to ensure leads go into the right bucket. For example, a drop-down menu for a lead to indicate the specific role he/she plays in their organization. Advanced segmentation may split content into buckets based on where leads are in the sales funnel. (Lead form timing is important here.)
  3. Position the Form Appropriately: Where the lead form will appear in presentations is an important lead-gen consideration. Generally, marketers have the option to place it at the front, part-way through, or at the end. For brand exposure, thought leadership, reach, and lead generation, visibility is crucial, particularly when it comes to B2B marketing. Because most site views come through organic search traffic, a training audience will typically enter presentations from a position at the top of the sales funnel. For a newly engaged audience to get through a piece of content, keep the form at the end of the presentation. (In general, follow the 80/20 rule: Leave 80 percent of your content un-gated and include an incentivized call-to-action at the end e.g. ‘Fill out this lead form and get a free trial of our product’ or ‘Fill out this form and we’ll send you that eBook.’ ) The other 20 percent of the content can be gated or require a lead form part-way through.
  4. Qualify more Leads with a Marketing Automation System: Utilize Marketo, Eloqua, or some other automated content delivery platform, and ensure that training leaders can integrate their presentations with marketing automation, CRM, and data-focused tools such as these. Remember, an informed customer is a customer for life, and the best form of information is education!




Work 2.0

Work 2.0

One consequence of the digitization of the enterprise and it’s subsequent redesign is that enterprises are opening up their boundaries, and are searching for purpose beyond simple profit. In recognition that employees are motivated by purpose, mastery and autonomy (Pink, “Drive”), enterprises are redefining their place in the lives of their employees and are looking to unlock their creative potential. This means that enterprises are now prioritizing culture first, resulting in massive changes in how work, management and leadership are organized. In this new work-space, sometimes called “Work 2.0”, enterprises now view boundaries not as edges but as areas of overlap;  they enable employees to see and measure the impact of their work; and they are redesigning their cultures so as to linking their culture inextricably to their brand. Enterprises and employees alike are recognizing the need to maintain an individual identity in a distributed world, and to adhere to core principles while adopting to rapidly changing conditions.

Some of the macroscopic trends affecting enterprises today include:

  • Economic corrections
  • Networked globalism
  • Displaced market equilibrium
  • New business models
  • Community power structures

In response, enterprises must respond by leveraging the following resources as a way of optimizing outcomes:

  • Networks as a source of value
  • Cultivation of innovation at the “edge”
  • Accumulation of social capital
  • Alignment of employees instead of hierarchy

We explore each of these below:

Networks as a Source of Value

Networks can be of value to organizations in at least three major ways: via the outsourcing of work to skilled specialists available over the network (microtasking/crowdsourcing); by opening up innovation in products and services to an extended network of stakeholders (open innovation); and by leveraging “emerging properties” and “network effects” for the generation of entirely new categories of products, services or processes (generativity):

Cultivation of innovation at the “edge”

Working at the “edge” can be a scary place for managers of the digital enterprise. Traditional forms of management strategy, as exemplified by the teachings of business-schools and others, have little or no value in the fast-paced, rapidly changing world of the hyper-connected enterprise, where the only constant is change. Paradigms that would be considered anathema in the ivory towers of academia and the large consulting firms are routinely practiced by cutting-edge technology firms. Examples of these include the following mantras, not to be found in any textbook on business:

  • “Stay focused & keep shipping; Move fast & break things; What would you do if you weren’t afraid?” (Facebook)
  • “Still in beta; Let the data speak.” (Google)
  • “If you’re not embarrassed by your product release, you waited far too long.” (Netflix)

The fact that leading-edge digital enterprises such as Facebook, Google and Netflix can adopt these design characteristics and be tremendously successful without adhering to the business-school/consulting firm rubric illustrates how much the world has changed, just in the past few years. The principles of “Management 2.0” can be thought of as the fostering the following attributes across the enterprise:

  • Openness
  • Community
  • Meritocracy
  • Activism
  • Collaboration
  • Meaning
  • Autonomy
  • Serendipity
  • Decentralization
  • Experimentation
  • Speed
  • Trust

Methods for “hacking” Management 2.0 are to recombine the old-fashioned tools of management with new agile, “scrum”-based management principles:

Old Hierarchical Management Theory New Agile “scrum-based” Management
Macro-level control and stability Micro-level agility & control 
Business-case driven Business-need focused
Board, stakeholder, shared responsibility Cross-functional, self-governance
Management by exception, tolerances Collaboration
Project start, middle, end; Project planning Focus on Quality
Product-based Planning Build incrementally and refine iteratively
Work Packages Timeboxing
Quality Assurance Continuous Communication

A new methodology of management is Management by Holocracy (www.holocracy.org). Here management is an organic, purpose-driven process, governed by distributed authority, rapid processing and resolution of tensions within the group, a meritocratic governance scheme, and tactical, data-driven meetings. Holocractic management demands clear work, clear structure, and the rapid sensing and feedback of any tensions within the project as soon as they arise. With its emphasis on iterative governance, adaptive processes, and self-organization, holocratic management draws its inspiration from agile software development principles and lean manufacturing processes. While holocratic management may not be appropriate for every organization, it is an interesting example of implementing “Work 2.0” into organizations.

Accumulation of social capital

Enterprises can accumulate “social capital” from implementing Work 2.0 strategies by exploiting intra-enterprise networks in the following manner:

  • Business Value: Informing customers, partners and suppliers of new products and services
  • Innovation Value: Getting customer feedback and enhancements to product features and benefits
  • Collaboration Value: Placing social collaboration into all business processes

With the formation of the “3D” workforce (Distributed, Discontinuous, Decentralized), social networks for enterprises become essential as a capital creation tool, both directly (launching new products; getting insights into product enhancements and features); and indirectly (finding new collaboration partners, recruiting, talent management, “over-the-shoulder” training and education.)

Alignment instead of hierarchy

Just as enterprises adopt to “Work 2.0”, they must also come up with new management practices in order to co-ordinate the activities of their workforce. These new practices include:

  • Coordinating communities of practice will require new forms of managerial skills (such as data analytics and efficiency.)
  • Managers will need to manage cooperation, competition and conflict, simultaneously
  • Data will be critical for decision making, risk assessment, and new product development
  • Instinct, gut-feeling and tacit knowledge will still be able to uncover patterns and insights that data analytics might overlook.

As a result, Human Resources and Talent Management have become essential facets of the modern multi-faceted enterprise. Measurement of employee progress is now driven more by focusing on Objectives and Key Results (OKRs), than by hierarchical planning processes, or by yearly or quarterly reviews. OKRs are managed by the following principles:

  • Have employees Define their OKRS
  • Focus on a few Objectives
  • Delineate 2-3 key Results
  • Make them Available for everyone to see
  • Make them Omnipresent in all conversations

Summary – from Work to Network

The rise of the digital enterprise has resulted in a dramatic change by which companies engage with their employees. In an “mobile-first, anywhere-anytime” extended culture, management structures must change to respond to the new network dynamic.

Bessemer’s 10 Rules for SaaS-based Enterprises

Here is a short summary of Bessemer’s excellent document (first released in 2010, revised in 2012) for any cloud-based SaaS company. (Read/download the full article here.)

1. Drink Your Own Champagne

Drink it, live it, love the cloud. Use your own product, and that of your customers, partners, and peers.  You need to understand the issues, challenges, and opportunities with cloud deployments – starting with your own. If you have a product that touches end users, then end users within your company should be power users of the product. You should all become experts in the strengths and weaknesses of your product, and be able to discuss customer issues and roadmap priorities in some detail. Most of our cloud portfolio companies are power users of their own products and even those of their competitors. Similarly, you should leverage the cloud for your internal systems. This will not only give you a direct understand- ing of the customer experience and best-of-breed strategies of cloud businesses, but it will free up your technical resources and balance sheet to focus on your core product and customers.

2. Build for the Doer, Build Employee Software

Employees are now powerful customers themselves, and not just through their managers. Customers use rich internet applications including Facebook and Skype to communicate with their friends; LinkedIn to manage their business networks, Google or Wikipedia to find accurate online content, Yelp to find restaurants, and Travelocity to book flights. Your customers are now looking for similar “cheap and cheerful” products in an open revolt against the years of oppression by the likes of SAP and Oracle. You should therefore beg, borrow, and follow: take inspiration from the best online products you can find and leverage the fact that you’re naturally smaller and more nimble than the incumbents to provide the best user experience imaginable.  Individual employees and mid-level managers can now take out their corporate credit card and expense products, and are becoming direct consumers in the process. The best possible way to land a large enterprise customer is to call up the CIO and say “we’re excited by how much you like our product and we’re happy to note that we now have several hundred users of our product within your corporation. We wondered if you were interested in rolling these into an enterprise license with the administrative dashboard, integration to your other systems, coordinated billing, provisioning and security?”

3. Death of the suite; long live best-of-breed/best-of-feature 

Since the internet is the common underlying infrastructure, deployments can now be done in days or weeks, and service ratios are a small fraction of the software subscription costs. This means that with Cloud Computing, the pendulum is swinging back to best-of-breed, and away from integrated suites. Better APIs are now allowing users and developers to literally leverage only the best product services, including the ultimate consumerization of software down to the “best-of-feature” level. This fragmentation means more choices and more pricing transparency for end users and application developers alike. For the foreseeable future, companies won’t claim to address all (or even most) of the application needs of an enterprise, but will instead carve out multiple vertical slices for an enterprise and then highlight preferred ecosystem partners to fill the gaps. The entire software landscape is now open. It’s the great land rush.  Now’s your chance to plant your flag and claim a valuable plot of land in the software landscape, while the incumbents are giving it away.

4. Grow or Die 

In technology, very few things remain constant. As a result, you either grow up to become a dominant company in your category, or get passed by and killed off by someone who does accomplish this goal. Not surprisingly, growth rate is often the biggest driver of valuation multiples in both private and public markets. Investors, employees, and partners aren’t buying into your current company as much as they are investing into some future version of your business, and growth rate determines the size of the business, at that future period. The power of compounding numbers is straightforward but still surprising, when you consider that a $1M business that grows 100% each year will be a $1B revenue business within 10 years, whereas the same business growing at 10% per year will reach less than $2.6M in revenue a decade later. As a senior executive of a cloud business, you will likely want investors to pay you a huge valuation based on current financial metrics, and you will need to convince prospective employees to walk away from rich cash compensation packages from others in exchange for the potential upside of options for your stock. How do you do this? Present a credible plan for capital efficient hyper-growth.

5. The 5 Cs of Cloud Finance 

1. CMRR, ARR, & ARRR – Committed Monthly Recurring Revenue, Annual Recurring Revenue, and Annual Run Rate Revenue. Many 1st generation cloud businesses turned to TCV (Total Contract Value) or ACV (Annual Contract Value) as their top level metric as a carry-over from the legacy software world of tracking “bookings.” In the Cloud Computing world, these metrics can be easily manipulated and are often misleading, and therefore we recommend much more focused metrics around the recurring revenue in a normalized time period. TCV and ACV are flawed for many reasons, most notably with regard to duration and services. If your renewal rates are strong, then contract duration isn’t a major variable, whereas cash collection and the size of the monthly subscription will massively impact your business (see points on Cash Flow and Churn below). Therefore, a focus on TCV has a tendency to encourage sales professionals to focus on longer term (often multi-year) deals to push up TCV, instead of pushing on the more important elements of monthly subscription value and cash pre-payments. ACV does help to reduce this over-emphasis on duration by just focusing on the first year of the deal, but shares the second major flaw that TCV is also burdened with, which is an over-emphasis on services revenue as part of the “contract value.”

For example, here are two deal options, which would you pick?
Deal A: 6 month prepaid contract; renews monthly; $10k monthly subscription; $10k services. (TCV: $70k,
ACV: $130k, CMRR: $10k)

Deal B: 3 year contract; 3 months prepaid; $5k monthly subscription; $80k services. (TCV: $195k, ACV: $140k, CMRR: $5k)

Despite lower TCV and ACV, Cloudonomics says you should pick Deal A every time. Deal A will gross ~$370k of revenue over 3 years, whereas Deal B will only gross ~$260k. Deal A will also likely be much higher gross margin given the lower services ratio. In fact, there are only two reasons to even consider Deal B and they are related to Churn Risk and Cash Flow, but we also attempt to correct those misconceptions later in this paper. In almost every case, CMRR is the single most effective metric.

CMRR: This single metric gives you the purest forward view of the “steady state” revenue of the business based on all the known information today. The monthly focus also tends to drive many positive behavioral changes within a team in- cluding a monthly sales and development cadence, better sales compensation plan and cash flow alignment, reduced customer price sensitivity, and heightened awareness around small MRR changes. Many leading cloud companies therefore use CMRR as the basis for everything from the financial model to the sales commission plan. This is the single most important metric for a cloud business to monitor, as the change in CMRR provides the clearest vis- ibility into the health of any cloud business.

ARR; ARRR: For external purposes, you will likely want to highlight slightly different versions of these metrics: the Annual Recurring Revenue (ARR) and Annual Run Rate Revenue (ARRR). ARR is simply the currently recognized portion of this, multiplied by twelve. ARRR is the ARR, plus any non-recurring revenue related to items such as professional services, transactions, and implementations. These external “vanity” metrics can help drive home the run rate scale of your business, especially when used to describe the forward business model. Your current CMRR may be $1.75M and projected to grow to $2.17M at year end, so for external audiences you may get maximum impact by summarizing the business plan by saying: “As we exit this year our Annual Run Rate Revenue (ARRR) should cross $30M, which includes $26M of Annual Recurring Revenue (ARR).”
2. Cash Flow – Start with Gross Burn Rate and Net Burn Rate, then hopefully turn to Free Cash Flow over time. CMRR gives you a great sense for the revenue health of the business, but can very often be disconnected from the “cash health” of the business. As any scrappy entrepreneur will tell you, a business will live or die based on its cash management in the early days, and therefore detailed cash metrics are also needed.

Gross and Net Burn Rate: (Cash flow) metrics are critical for cloud businesses because the working capital require- ments are higher and the payment terms are often back end weighted. Gross Burn Rate is all of the expenses paid for in the month including debt and finance charges. Net Burn Rate is simply all cash received during the month minus all the expenses, which nets out to the cash burned in the month. These numbers are obviously lumpy based on the timing of collections and payables, so many companies further refine this by adding a “rolling 3 month average” Burn Rate set of metrics. Cloud businesses typically show significant positive Free Cash Flow (FCF) long before they turn GAAP EBIT positive, so hopefully you will be able to flip your Burn Rate (negative cash flow) metric to a positive one as you grow, and start tracking FCF instead.

CAC – Customer Acquisition Cost Payback Period. The CAC Payback is a statement in months, of the time to fully pay back your sales and marketing investment. This is worthy of much more detail and therefore broken out further in Law #6 later in this paper.

CLTV – Customer Lifetime Value. CLTV is the net present value of the recurring profit streams of a given customer less the acquisition cost. Part of the attraction of Cloud Computing business models is that once you have repaid the initial Customer Acquisition Costs (CAC), the cash flow and profit streams from customers can be quite attractive. However, whereas the CAC ratio can at least ensure that you recover your incremental sales and marketing costs on each customer, it still doesn’t tell you if these customers are highly profitable over time. To measure this, many customers have modified the consumer internet concept of lifetime value, into a similar cloud CLTV metric.  To simplify the calculation, let’s assume that a customer generates $10,000 of annual re- curring revenue for a company with a CAC Payback ratio of 12 months, a 70% Gross Mar- gin and 10% each of R&D and G&A costs. The $10,000 of revenue will generate $7,000 of gross margin and $5,000 of profit each year ($7,000 less $1,000 of R&D and $1,000 of G&A costs). Over 5 years, this customer will generate $25,000 of profit (5 years x $5,000/ year). A CAC Payback ratio of 12 months means a $7,000 upfront acquisition cost, making the CLTV equal to $25,000-$7,000= $18,000 Obviously if the retention period is longer, and/or you benefit from net positive CMRR renewal rates that actually grow your average customer relationship over time, these numbers can be much larger.

 Churn & Renewal Rates – Logo Churn, CMRR Churn, and CMRR Renewed.

Cloud executives need to track renewal rates in detail to capture “logos lost” (lost customers) as well as the percentages of CMRR renewed and lost. The standard approach is three key sub-metrics, all related to this concept of renewal rate:

Logo Churn %: This is a percentage calculation of all your customer names (“logos”) that have churned over the measured time period. If you started the year with 500 customers and 460 of them were still paying customers at some level at the end of the year, then you have churn of 40 customers and your annual Logo Churn is 8% (40/500).

CMRR Churn %: This is a percentage calculation of all your customer CMRR that has been lost over the measured time period. If you started the year with $500k of CMRR for your same 500 customers, and the 40 customers that churned represented $30k of CMRR at the start of the year, then your Base CMRR Churn Rate is 6% annually ($30k of starting CMRR churned/$500k of starting CMRR).

CMRR Renewal %: This is a percentage calculation of the total CMRR of your renewed customers at the end of the year, divided by the total CMRR of your existing customers at the beginning of the year. Of your 460 renewed custom- ers, if they have been upsold on new products and grown in their usage of the product during the year to the point where their CMRR equals $550k in total, then your Total CMRR Renewal Rate is 110% ($550k end of year CMRR just from customers who were on board at the start of the year/$500k CMRR of all customers at start of year).

6. Only invest aggresively if you have a short CAC Payback Period 

The CAC Payback Period is now a statement in months, of the time to fully pay back your sales and marketing investment. This single number is the key to determining your level of sales and marketing investment. It can be calculated simply by dividing the sales and marketing costs of the previous time period (typically a month or a quarter) excluding any account management costs attributed to your “farmer” organization, divided by the new CMRR gross margin added during the same time period (forget the effect of churn and upsells for now).

As an example, if your company added $100k of CMRR in a quarter with 70% gross margins, the denominator would be $70k. If your fully burdened quarterly sales and marketing costs were $770k then that would be the numerator. The CAC Payback Period would equal an encouraging 11 months.

For SMB customers with higher churn rates and thus shorter monetization windows, CAC Payback Periods of 6-18 months are typically needed, whereas enterprise businesses with high upsells and long retention periods may be able to subsidize payback periods of 24-36 months in some cases. A CAC Payback Period of 36+ months is typically a cause for concern and suggests you may want to slam on the brakes until you can improve sales efficiency, whereas a Pay- back Period of under 6 months means you should invest more money immediately and step on the gas (and please call Bessemer immediately because we want to fund you!) as your customers are likely very profitable within the first year.

The Sales Learning Curve
The Sales Learning Curve (SLC), a concept Mark Leslie helped pioneer at Veritas, is that software organizations often fail because they staff up their sales efforts too quickly, before the sales model has been refined. This concept is even more critical for cloud businesses, given the large upfront investment required to acquire customers. Ramping up too quickly will burn precious cash reserve and may fool the product team into missing some critical elements of the real product/market fit that will be important to go big over time. This typically means you should hire sales reps slowly up front, only focus on your core geography until your business starts to scale considerably, and separate your “hunters” and “farmers” as you start to ramp. For an enterprise-oriented direct sales business, it typically takes at least $300,000 CMRR to climb the Sales Learn- ing Curve. You should tune your model before you scale, which typically means stopping at three field sales reps until you hit at least $300,000 CMRR or at least two of your reps are making their ~$100,000 CMRR quotas.

7. Make online sales and marketing a core competency

You’re a cloud business, so by definition, your sales prospects are all online. Savvy online sales and marketing is a core competency (sometimes the only one) of every successful cloud business. Numerous studies show that your customers are now doing most of their primary research online, and this should not surprise you.You should therefore be aggressive in marketing to them online. This is a clear example where business-to-business (B2B) marketers need to learn from their business-to-consumer (B2C) counterparts. The most innovative B2C companies are lead generation machines, leveraging social media marketing, search engine optimization (SEO), viral marketing, search engine marketing (SEM), email marketing, and other technically-advanced methods.  Whether they use an automated product like Eloqua or a team of marketing analysts and spreadsheets, online marketing and demand generation is a “must have” for cloud companies. At the marketing executive’s fingertips should be detailed reports showing pipeline sources, costs per lead, funnel conversion rates by stage, costs per acquisition by source and campaign, effectiveness by channel, and so on. If you are the CEO or a Board member, you should review these reports closely and make them the basis for assessing marketing effectiveness and performance.

A strong head of online marketing will also be able to give you detailed demand generation forecasts based on different budget levels. It’s important to understand the natural limits of organic traffic as well as the slope of the supply curve for each of your various paid lead sources. Your blended cost per lead may be very attractive, but if a large portion is organic/free traffic and your marginal cost of an incremental paid lead is quite high, then you may not be able to scale marketing spend in an efficient manner. If SEM is a lead source, you should study the quantity and pricing of your main keywords and do burst testing to validate the assumptions before dramatically increasing budgets. If these data are good, highlight them to your prospective investors. We love to find businesses with 6 month CAC paybacks and the capacity to absorb 10x more marketing spending.

8. The most important part of Software-as-a-Service isn’t “Software” it’s “Service” 

There are also service events that are significant negative events for you and your customers, but can be turned into positives if handled correctly. Outages are the most notable, but bumpy product upgrades, faulty product configurations, and weak integrations can all create similar issues. Amazon Web Services (AWS) is a fantastic IaaS platform, but has ex- perienced several very public outages in its availability zones with very direct impact on customers.
Professional services groups are getting smaller in modern cloud companies – and even non-existent in some – but can still play a vital role in customer onboarding, configurations, and integrations when needed. The goals and objectives of these three func- tions are very different, and the skill sets of the top performers in these functions are typically very different, so it is likely a cloud company will want to split these functions out into 2 or 3 different organizational groups as you scale from 50 to 100+ people and can afford to hire specialists. Each of these functions should work with the technical team to enable proactive monitoring of the product for likely churn or upsell opportunities. You can easily check who logs into your product, how often, what they do inside the product, and what results they achieved. So now you need to track the key usage metrics and measures, and create internal dashboards to know which customers are getting the most value (potential upsell candidates) and which are likely to churn (time to intervene proactively).

9. Culture is key as you build your dream team 

In terms of the other elements of talent management, three personality traits that we see our best CEO’s repeatedly screen for are: 1) a clear pattern of success 2) a will to win and 3) self critical and accepting of failure. In terms of success, it often doesn’t matter as much where the candidate is coming from previously as that they have been a part of success. This often includes the obvious (Salesforce.com, VMWare, etc.) but increasingly includes success in other industries or fields such as Google, NASA, Cal, sports, or the military.

10. Cash is (still) king – Cloudonomics requires that you focus on cash flow above operating profits, and plan your fuel stops very carefully

Understanding the cash flows of your business – including Gross and Net Burn Rate – is critical to survival in the early days and critical to your dominance in the long term. There have been many promising cloud startups that stepped on the gas too early and were wiped out as a result. Always model the business with a comfortable cash cushion and recog- nize that most cloud businesses paradoxically consume more short-term cash as growth accelerates. As a business, it is critical to weigh forward investments carefully. Cloud businesses typically require multiple rounds of investment and a good amount of capital. For example, it took $126M for NetSuite to go public, $61M for Salesforce.com, $41M for Eloqua, and $45M for Cornerstone OnDemand.

Training and Long-Term Behavior Change in Enterprises

Training and Long-Term Behavior Change in Enterprises

Sunil Maulik, Ph.D., Mylo Solutions

Overview

The study of learning and behavior change has a long and broad history, which recently has included a specific sub-field termed “persuasive technology”. One key insight from these studies is that behavior change often follows a pattern of stages and that different kinds of behavior-change challenges exist at each stage. (This has traditionally been referred to as the behavior-change lifecycle.) The key to using training and education to make significant and sustained behavior change is to understand these challenges, and to develop specific techniques to address the challenges at each stage.

Studies of Behavior Change

A brief summary of psychological and neuroscience research into behavior change and habit-formation has shown the following general principles that are essential for organizations to understand before they can successfully implement a change-management system or process.

  1. Behavior change proceeds through phases: According to the transtheoretical model of behavioral change(1), we move from a pre-contemplative stage (not thinking about it), to a contemplative stage (thinking about it), to preparation (getting ready to do it), to the action (doing it), and finally to maintenance (still doing it.) Unfortunately, with most types of behavior change the final possible phase is relapse and we can fall back to any of the previous phases. (In fact, at any point we can technically revert back to an earlier stage in the process.)  Fogg (2) has extended the transtheoretical model to an understanding of the triggers (internal and external) that either initiate or inhibit a new habit, as well as the barriers to motivation. Fogg has broken down the precise variables involved in precipitating a behavioral action, namely motivation, ability, and trigger. In the Fogg behavioral model, a behavior B is a combination of all of these, or B=mat:


Fogg

Figure 1 – The Fogg Model (2) : A behavior occurs when triggers, motivation and ability are sufficient to produce action

  1. Stages of change are not personality traits: It’s important to realize that stages of change are not traits of people in general. While they might seem to be stuck in the preparation stage this doesn’t mean that they will never progress to the next stage. More importantly, it doesn’t mean that they don’t want to change. Stages vary in length, but they are not unchangeable.
  2. People can be in different stages for different behaviors at the same time: For example, it’s entirely possible for someone to be in the action stage with regards to exercise, but in the precontemplative stage with regard to nutrition. Also, a major change in work or family life can push someone back to the precontemplative stage for a behavior they were previously implementing. When people decide to move back into the action phase again, motivations and triggers must be first on their mind.
  3.  Moving through stages is not just about education: In the Fogg model, the role of triggers is critical, since typically the change-agent has little or no control over the motivation or ability of the user. Triggers may be extrinsic (external cues or factors), or intrinsic (subconscious beliefs or desires), and Fogg has pointed out that unless the triggers are strong enough to overcome barriers to motivation or ability, the desired behavior change is destined to fail.
  4.  Belief is a major driver of change: Self-efficacy is defined as the belief that one is capable of performing in a certain manner to attain a certain set of goals. If someone is not confident that they’ll be able to stick to a plan for change they are often unable to commit to action. This is where ongoing training for competency and mastery is critical. Pink (3) has shown that the major drivers of motivation in work are mastery, purpose and autonomy. Trying to change a major behavior can lead to low self-efficacy and a failure to adopt any changes at all. By setting up small successes and delivering the action one small change at a time (and providing immediate positive feedback) employees can achieve success while they feel a growing sense of mastery and purpose.

Behavior Change in the Enterprise

To compete in today’s business environment, companies must be constantly scanning the environment for threats and opportunities and taking action to drive business results. However, organizations often struggle with implementing specific, strategic change initiatives that improve business. Often the key challenge is in successfully executing strategies that require people to change their behavior. For example, a new strategy may require salespeople to call at higher levels in their client organizations and to take a more consultative approach. Alternatively, teams may need to collaborate across geographic and functional lines in developing and marketing a new capability. Often, managers must increase the innovation and productivity of their teams by creating an engaging environment. Creating and sustaining behavior change is thus a critical strategic issue for most companies. In a survey of 223 companies, Forum group (4) has found the following results:

  • Strategy execution requires behavior change.
  • Companies have difficulty sustaining behavior change.
  • Lack of management commitment and measurement are one of the main reasons change initiatives fail.
  • Respondents rated the sustaining phase (the time after the initiation of a change-management event) as the most important phase in creating lasting impact.

Despite the acknowledgement that the sustaining phase is the most impactful, organizations invest relatively little time and resources to it. The true value of training and education is realized in the ongoing process (beyond just one-time events) that allows for sustained behavior change.

Enabling the Enterprise through Continuous Training

Once leadership is able to articulate a successful change strategy, their change efforts often provoke resistance rather than engagement because many leaders think change is something they do to their people. Research shows, however, that organizations who execute better than others understand that change is done by people. In order to be successful, leaders need to equip employees with skills for self-directed change. These skills enable employees to recognize their individual role in changing their own habits in support of organizational goals.When individuals have both the motivation and ability required for change to happen, it does. Implementing the Pink model (3) of organizational change by fostering autonomy, mastery and purpose amongst employees is key to employee buy-in. Ongoing training and education, both formal and informal, can help employees recognize the personal, social, and environmental forces of influence currently working against them—and turn them in their favor. By doing so, they can take ownership for the role that they play in the change management process, and are more likely to engage in it. The right form of training, whether via classroom, online, formal or ‘over-the-shoulder’, combines to provide the needed intrinsic triggers and motivations that help make behavior change stick.

 

  • Sales transformation: When a company designs and implements a new strategy for their go-to-market and sales process, processes  and technologies change. Ideally, desired results and growth follow. Focusing on behavior change for the sales team, via e.g. gamification, and for the customer, e.g. via marketing training events designed to better educate the customer, are increasingly seen as critical components to a sales transformation process.
  • Plant operations: Companies periodically launch an analysis on the operations of their plant to in order to optimize and reduce waste. They also focus on safety. Typically results of such an analysis produce recommendations for leaner processes in the plant as well as implementing new applications for logging safety issues. However most plant managers have little or no experience with change management, learning and performance support. By leveraging strategies, methods and tools already in place from other projects, adoption of the new ways of working will be a lot easier, effective, sustainable and affordable.
  • Enterprise Change Management: There are structured and repeatable practices in a proven change management effort, which can be combined with specialists who facilitate the process with leadership. The combination of formal and informal methods is also reflected in the ongoing training and education. Enterprises can  leverage these resources by taking advantage of these specialists and the practices and expertise they bring to the organization. Once their expertise has been internalized, it can be rolled out broadly via a combination of formal and informal ongoing training processes.
  • Performance Support: Innovation in workforce performance support occur when the enterprise leverages all content and assets targeted for learning.  Employees often need support at point-in-time in order to master a discrete activity. Methods and tools used to streamline the development and deployment of learning can be leveraged effectively to support high-performance organizations.
  • Enterprise Collaboration: While there is currently a lot of discussion and debate about the value of social networking and informal learning in enterprises, it should be noted that employees have been sharing knowledge and expertise around the water cooler for years.  Enterprises need to enable that sharing electronically across borders. The effort and investment to be leveraged in forming communities of practice and enabling their collaboration is an essential part of an ongoing learning performance system.

In Conclusion

Companies can be more effective in sustaining behavior change and ensuring successful change management strategy execution by being aware of the following:

  • Sustaining behavior change takes investment in time and resources. It is necessary to take action after training to sustain change in order to realize lasting impact, and not just focus energy on delivery. For example, providing users with certificates, badges, points and other rewards (gamification) leads to a more sustained effort to sustain behavioral change. Having a system to manage certificates, badges and points is critical for maintaining employee motivation.
  • Sustaining behavior change requires a disciplined approach to learning and measurement. Leaders can demonstrate to management that their change initiatives are producing results based on clear outcomes from ongoing training and education. Reporting on the outcome of training initiatives in support of change-management processes via a single, integrated system is key to measurement, analytics and return on investment.
  • Sustaining behavior change requires buy-in from management. Being able to demonstrate results, and investing time and resources in follow-up, is essential for managers to motivate employees to applying training on the job in a way that generates lasting business impact.

References

  1. Prochaska, JO; Butterworth, S; Redding, CA; Burden, V; Perrin, N; Leo, M; Flaherty-Robb, M; Prochaska, JM. Initial efficacy of MI, TTM tailoring and HRI’s with multiple behaviors for employee health promotion. Prev Med 2008 Mar;46(3):226–31. Accessed 2009 Mar 21.
  2. Fogg, B.J.: “The Behavior Grid: 35 Ways Behavior Can Change.” In: Persuasive 2009, p. 42 (2009)
  3. Pink, D.H. “Drive: The Surprising Truth About What Motivates Us” (2011) Riverhead Books
  4. Rowe, G. Peter Design Thinking (1987). Cambridge: The MIT Press. ISBN 978-0-262-68067-7.
  5. Kelley T., and Kelley D., “Creative Confidence”, Crown Business, (2013), ISBN 978-0–385-34936-9
  6. Wendel, S. “Designing for Behavior Change: Applying Psychology and Behavioral Economics” (2013) O’Reilly Media

 

Training Programs in Today’s Enterprise

2014-08-20 15_04_32-Company Overview

With the myriad choices available to the training professional, there is more technology and more tools available today than ever before to create the most relevant and impactful training possible, which can be tailored to a learner’s preferences. Learners know enough now to expect these technologies to adapt to their workflows and preferences, not the other way around. In the recent past, these technology cycles have only continued to accelerate and have consequently allowed organizations to have immediate access to an arsenal of tools.
For example, over the last five years there has been a two-fold increase in the number of Cloud and mobile tools for learning – highlighting that these are no longer nice-to-have for learning programs but they need to be a strategic part of any comprehensive learning plan (Aberdeen Research). We’ve reached a point where training professionals need to begin looking at technology and asking not, “Can the (tool) do this?” but “What is the best tool to use” This simple shift will help get to the root issue: media habits have changed, and outdated approaches will generate increasingly poor results. Training leaders need to make sure that their technology choices are not only the best for the job at hand but also allow their learners to access their programs however they need to.

Treating Learners like Customers

The distinction between training and marketing is becoming more blurred. For example, associations compete to create perceived value and then need to sustain this value, often through member-training programs. Similarly, technology, service, and product-based companies use free and (some are not-free) training opportunities to create more valued touch-points and to help maximize their customers’ usage and benefits from their respective products and services.

In all of these cases, creating training programs and training events helps drive company awareness and branding and is essential to build customer loyalty. Since the value and effectiveness of customer education and training so significantly expands marketing reach and effectiveness, learning professionals and marketers need to stop thinking of marketing and training as two separate engagements that happen at different times. Marketing can use training events to improve their outcomes, and training professionals can use marketing approaches and tools to improve their program’s effectiveness.

Changing Workforce Demographics
By 2025 the workforce will be dominantly made up of Millenials. These Learners are more comfortable with technology and expect more. Simply put, learning audiences are getting more familiar with advanced technologies and strategies. They see sophisticated technology and thinking incorporated into everything from smart phone apps to web design to social media. This integration of learning, branding, and point-of-need training is a primary driver of change.

Moving forward, we anticipate a business environment with sophisticated learners who expect instructionally sound techniques, paired with rich-media content and social interactions. However, research is showing that only 39% of firms plan to increase that budget in the next 12 months to emphasize employee engagement and meet these demands (Aberdeen Research). With smart strategies and the right technologies, you can often improve employee and partner engagement without additional costs.

Are You Still Doing Too Much By Hand?

Primary research with clients and prospective clients shows that this particular business process is still ripe for automation: surprisingly, over 72% of businesses still manage and administer their learning programs manually, based on a 2013 MarketsandMarkets report. Other syndicated research by Wainhouse Research and IDC has calculated that businesses spend over $25, on average, to manually manage and administer each registration for their Learning Programs; a total market cost exceeding $100B annually!

Businesses are wasting significant resources, both financial and human, to manage and administer their training, education and learning development programs, including learning programs for the Extended Enterprise: educating customers, users, and partners, etc.

The most successful companies approach training with real business results in mind, a plan to map and measure the impact of training, and a performance sustainment model that allows for real-time assessment of the program. Rapid training responses can then be implemented when any metric drops below certain standards. Training leaders play a key role in the successful execution of the overall business strategy. A responsive, intelligent training strategy is key to staying competitive in today’s hyper-connected 24×7 market.

Training Challenges Affecting Technology Companies

Most technology companies claim a shortfall in qualified employees, despite persistently high levels of unemployment. Despite employers’ complaints about the education system, college students are pursuing more vocationally oriented course work than ever before, with degrees in highly specialized fields like pharmaceutical marketing and retail logistics. However, companies do far less training of new employees than they did in the past, expecting them to “hit the ground running” when the join the organization. Most apprenticeship programs have disappeared, along with many management-training programs. And the amount of training that the average new hire gets in the first year or so could be measured in hours and counted on the fingers of one hand. The shortage of opportunities to learn on the job helps explain the phenomenon of people queueing up for unpaid internships to get access to a situation where they can work free to get access to valuable on-the-job experience. Interestingly, only about 10% of the people in IT jobs during the Silicon Valley tech boom of the 1990s had IT-related degrees.

Community colleges in many states have proved to be good partners with employers by tailoring very applied course work to the specific needs of the employer. Candidates qualify to be hired once they complete the courses—which they pay for themselves, at least in part. For instance, a manufacturer might require that prospective job candidates first pass a course on quality control or using certain machine tools. Going back to school isn’t just for new hires, either; it also works for internal candidates. In this setup, the employer pays the tuition costs through tuition reimbursement. But the employees make the bigger investment by spending their own time, almost always off work, learning the material.

Many companies rely primarily on buying the talent they need, often at a high premium and with marginal retention rates. Most technology companies develop a “make-buy” strategy that included both buying key talent to fill immediate gaps and utilizing a longer-term approach of developing highly capable leaders. Companies recognize that the leaders they need to meet the demands of the more challenging world of the 21st century would have to be cross-functional, people-centric leaders. Technology companies today are global, and their development programs must focus on high-potential (HIPOT) early career leaders across the company and across all major functions, ranging from college graduate, entry-level communications, contracts, and finance recruits to Master’s-level graduates in business development, HR, information technology, and supply chain. Programs that are built around a development curriculum that includes experiential learning in the form of rotational assignments, executive-level involvement, and functional and cross-functional learning opportunities are the ones that have the most likelihood of succeeding.

 

The Role of Employee Certification in Manufacturing

Manufacturers are now actively participating in the development and training of skilled production workers they need to remain competitive. They are also engaging partners like community colleges, manufacturing organizations, training providers and government resources. The National Association of Manufacturers-endorsed Manufacturing Skills Certification System, and the NAM-affiliated Manufacturing Institute, training organization ACT Inc., the National Institute for Metalworking Skills and the president’s Jobs Council are all providing certification systems for qualified candidates. Manufacturers have also reintroduced the apprenticeship, which once had been commonplace among machine tool makers. MAG’s reinvigorated apprenticeship program mirrors some aspects of the training programs employed by large manufacturers such as Permac and ArcelorMittal.  Troubleshooting issues with newly manufactured products is one critical skill that apprenticeship programs provide.  “It is one thing to be able to assemble a product and apply the electrical and all the elements to the product, but it is another thing when you build a product and it doesn’t operate the way you want it to. To troubleshoot the product and understand why it is doing what it is doing, takes a lot of skill and experience”, says Bill Horwarth, president, MAG Global Services.

The Manufacturing Skills Standards Council (MSSC) began providing skills standards in 2001, focusing on  the major concentrations of manufacturing:  Production; Quality Assurance; Logistics & Inventory Control; Maintenance, Installation and Repair; Health, Safety & Environment; and Product Process Development.  It subsequently began credentialing in 2005, and endorsed the instructor certification program developed by the IN Labor Institute for Training and Amatrol in 2006. In 2009 MSSC launched a new, industry-led training and credentialing system for front-line material handling workers in supply chain logistics at the International Logistics Show organized by the Material Handling Industry Association. More recently, in 2012 ANSI announced its accreditation of MSSC’s certification programs under the Institute’s Accreditation Program for Personnel Certification Bodies.  Accreditation by ANSI created a valuable distinction for MSSC’s credentialing programs.

The American Society of Quality (ASQ) is the leading authority on career-boosting certifications for quality professionals and provides a wide range of certifications for manufacturing quality staff.  Finally, the Manufacturing Institute is working with manufacturing certification organizations who are the world market leaders in skills certification programs. This collaborative effort resulted in an organization of the certification programs, and the credentials they offer, into a system of “stackable credentials” that can be awarded in post-secondary education.