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Defining Success for Technology Companies

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Editor’s Note: John Dillon has over 20 years’ experience in executive leadership positions and has delivered several successful exits as CEO of well-known technology companies including Salesforce.com, Hyperion and Navis. In this interview he discusses what technology success looks like and provides insights especially for startups.

SandHill.com: When defining “success” as a tech company, does it matter whose perspective shapes the definition — clients, shareholders, investors, analysts, for instance?

John Dillon: There are a lot of efforts by various constituents to define the use of technology and business benefits differently. My experience and observation is that people define it in terms that are self-serving. That’s not a criticism; it’s human nature.

SandHill.com: Does that also apply to measuring success and outcomes?

John Dillon: As a CEO or CIO, or as a software vendor, I think it’s important to step back and ask: Where are we making investments and what business and financial success are we getting from those investments? It’s rare that people make sufficient ROI calculations or that they go back after a project is done and hold people accountable for decisions.

SandHill.com: Is the definition of “success” different for a startup than for a more established technology company?

John Dillon: Yes, I think it is. The difference is that in a small company, if you don’t innovate and don’t define success right away, you die. In small companies, you do things on a shoestring, you fail fast, you’re agile, you don’t over-invest and you don’t let burdensome processes get in the way of experimentation. Large companies have a buffer of momentum and excess resource capacity; so the “change or die” or “success or complete failure” paranoia becomes less critical.

I think that established companies lose sight of some aspects in initiatives, motivations and objectives that give startups an edge. Studies find that many large companies are concerned that they’ve lost their ability to innovate. They can’t seem to apply technology effectively to implement new processes and new ideas.

SandHill.com: As you’re describing it, the definition of success for a larger established company essentially depends on not losing long-term customers.

John Dillon: Yes, that’s right. There have been some seminal books written on this. One of them was “Built to Last,” by Jim Collins. To last, you have to reinvent yourself and have to find ways to innovate. In the technology world, new technology now comes at us at a speed that’s unprecedented, and the ability to make sense of that technology and define ways to apply it without going down too many blind alleys is a challenge.

I think being able to reinvent yourself is an inherent cultural attribute. If it were easy to do, we wouldn’t have Silicon Valley and have all these startup companies. The ideas that young companies bring to market aren’t ideas that big companies couldn’t have. You have to ask yourself: Why did Google emerge? Why did Apple decline and grow again to become such a dominant company? Why did Amazon develop into such a retail juggernaut? Brick-and-mortar companies had the same opportunity to do the same things that Amazon did, but they didn’t do it.

SandHill.com: In your opinion, what are the key measures of success?

John Dillon: I think it’s two things. First, CEOs need to measure their business by market share and share growth as it relates to competitors or the share of their addressable market. In some cases, the addressable market is not served, so it doesn’t have to be a zero-sum game.

The second thing to measure is the amount of revenue that’s coming from new product initiatives. Or in the retail business, you might measure revenue increases from stores that have been open for less than a year.

These are the two things that measure the cutting edge of a business as opposed to the legacy edge. The reason I think that’s important is that, if you’re not growing, you’ll fall behind and make your company susceptible to “the innovator’s dilemma” or competition from your blind side.

SandHill.com: Some companies struggle with innovation. What are the main hindrances other than capital resources?

John Dillon: In my opinion, it’s usually politics and bureaucracy that slow us down, and we humans have a natural tendency to keep equilibrium. We are creatures of habit. That means we don’t take risks and don’t rock our own boat. So some people are very uncomfortable with change.

I think the challenge for executive management is to have a healthy amount of change in the organization — but not too much because you don’t want to break things that work. But you have to be able to challenge ideas and pursue innovation somewhat relentlessly.

SandHill.com: So the corporate culture that welcomes change is essential for success.

John Dillon: Yes, I think it all boils down to culture. You need a culture that embraces change and expects change. It’s somewhat antithetical to human nature, but that’s the key.

SandHill.com: There is a lot of new technology, especially in cloud and mobile, being introduced into businesses these days and a large number of startups. Who will be the bigger winners?

John Dillon: The winners will be organizations that find ways to employ technology to gain competitive advantage and entrance to new markets. The companies that are reticent to change will calcify.

SandHill.com: The corporate culture is shaped by top leadership. So company success and growth are highly dependent on having the right leaders.

John Dillon: That’s exactly right. Executive leadership doesn’t create the culture, but much of the culture emanates from there. You need executive leaders that are approachable, whose minds can be changed with logical argument, who are open to experimentation, as opposed to leaders that have reached the top and want to feather their nests or protect their established achievements and accept less change.

SandHill.com: If you were asked by a startup CEO or someone focused on innovation in a large company to describe the top actions they need to take to ensure they have the right culture for success, what would you say?

John Dillon: First is to have a sense of urgency about everything you do. Every small company has a window of time — a market window, a cash window, an execution window. All three of those are paramount to success. If you take 10 years to do something that other companies can do in one or two years, you’ll be dead. If you don’t have a sense of urgency about execution and about hiring the right people, building the right product and training the sales team, you’ll get killed. You need to be paranoid.

The second thing is don’t try to put a man on the moon. It’s easy to conceive. The brochure looks really sexy, but it’s very hard to accomplish. You need to walk before you run.

There’s a concept kicking around in our industry called “managing to a minimum viable product.” You need to focus on building the simplest, easiest thing you can build, whatever that is, for which someone will pay you. Make it simple and get it done. There is a tendency in companies to hide behind complexity because they pick a problem that is very difficult to solve and takes a long time. Often, the market appetite changes in the meantime or competitors come in with something simpler than what you’re trying to create. Again, you need to fail fast. Cut your losses and iterate. Don’t over-engineer things.

SandHill.com: Is there a third tactic they should take for innovation and success?

John Dillon: Yes. It’s related to what I call “temporal distortion,” which means getting confused by timeframes. Startups, or even a department that has an idea for innovation in a large company, need to make sure the idea is exciting, energized and able to attract investment, new employees and partners.

Often, the vision is big and complex and you can’t do the vision on day one. It might be that on day one of launching your product you can only sell to small businesses. If you try to execute your long-term vision on day one, you’ll fail. Do what you can today, but never lose sight of your vision. Steven Covey said to begin with the end in mind. I often see entrepreneurs try to execute on the high end of their vision when they don’t have the credibility or a product with sufficient quality. Crawl before you walk and walk before you run.

SandHill.com: How is the cloud impacting success other than the economics of innovating in the cloud?

John Dillon: The economics are powerful because they eliminate the bureaucratic, political and organization inertia against change. Cloud computing can be as simple as using your credit card to access compute resources that are sufficient to run a Fortune 500 company in a matter of weeks or months. No committees, no procurement department. If your project fails, you throw it away, and you’ve spent only a few thousand dollars or maybe a few hundred thousand dollars. The organizational inertia when doing it the old fashioned way is staggering.

The other aspect is that the cloud is a rich environment for innovation — there is investment capital, massive change and wide-open spaces. You don’t even have to be that good initially because you may be the only game in town doing your particular thing. It’s also great for big companies. Most of them are challenged to innovate rapidly because they’re stuck with a legacy product, legacy distribution models and legacy customers. This is one of the most exciting times we’ve seen in technology in decades. I think in the long run, everyone is going to win: investors, customers, innovators, entrepreneurs and big companies.

And among the big companies, there will be a lot of jostling. They will lead with marketing to create an impression that they have a story and an answer; but really they’re all scrambling. The cloud is a revolution with radical change, and big companies are going to have to embrace it. I think there will be some pretty big losers and some pretty big winners among the big guys. I think that’s going to be a very exciting story in and of itself.

SandHill.com: What about the startups? Who will be the big winners?

John Dillon: There are a lot of startups trying to participate in the cloud, and good ideas will eventually survive. Some may not survive in their existing form; but they’ll be built upon and we will get an outcome that will be staggering 10-20 years from now. There is room for a lot of companies in the cloud; and if they do something right, they’ll potentially be the next set of big companies five to 20 years from now. It will be fascinating to watch who the winners and losers will be.

SandHill.com: Do you have any other advice for software companies about innovation and tips for success?

John Dillon: It’s important to keep in mind that that we are all challenged by our own success. I think success breeds complacency. When an organization does something and it works, it emboldens the organization to pat itself on the back and believe they are not vulnerable to change or new competitors coming into the market. While all of us who have had some success in our career would like to take 100 percent of the credit, a lot of it is timing and market conditions and other things that are out of our control. I think to a certain extent, most of us should spend a little more time being thankful for our good fortune and remind ourselves that good fortune is not always going to be here.

John Dillon is CEO of Engine Yard. He has over 20 years of experience in executive leadership positions and has delivered several successful exits as CEO of well-known technology companies including Salesforce.com and Hyperion as well as Navis, the leading provider of shipping logistics software. Prior to his CEO roles, John held sales management positions at Oracle and Arbor Software and was a systems engineer at EDS (Electronic Data Systems).

Kathleen Goolsby is managing editor at SandHill.com

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