Harvard Business School’s former faculty chair of Building New Businesses, Bruce Harreld described Keith Krach as “A category kingmaker, building four game-changing companies from robotics to engineering software to e-commerce to e-signature and digital transaction management,”
I talked with Keith about becoming a market leader through category creation and digital transaction management. He’s generated significant shareholder value in the four companies he has built and is now creating a new market category with his Virtual Mentor Network.
M.R. Rangaswami: Tell us about the last two categories you created with Ariba and DocuSign – what was common about both of these categories – what was different?
Keith Krach: It always surprises me that category creation isn’t better understood – so let’s start by being clear about what category creation is: Category creation means going beyond incremental innovation—making improvements to existing solutions—and instead inventing whole new ways of solving customer problems, it’s using new technologies, and creating new business models.
The beauty of creating a new category is that you’re automatically the leader and being the leader brings tremendous advantages. It dramatically increases your ability to de-position your competition, to attract great talent and partners, draw investment, and deliver unprecedented customer value.
Category creators experience much faster growth and receive much higher valuations from investors than companies bringing only incremental innovations to market. The objective of the game is to be the “Category King”—the company that dominates the market. These companies receive 80% of the resources and market capitalization.
DocuSign and Ariba both followed the same “built-to-last” playbook to create and dominate new categories. At both companies, our competition was a slow, paper-based, manual process. Our ultimate weapon was speed. We had a highly quantifiable value proposition. We turbo-charged the market with a “Switzerland” partner strategy. We built industry credibility with large hi-powered advisory boards and increased barriers to entry by facilitating industry-wide standards.
At both companies we leveraged technology paradigm-shifts: Ariba was the first enterprise application written on the Internet. DocuSign tapped new cloud and mobile e-sign technologies. Both companies used aggressive acquisition strategies as defensive and offensive weapons. We offered open platform solutions and were obsessed with ease of use, customer satisfaction, growth and market power.
We also focused on a noble mission—profoundly impacting GDP per capita, while delivering fast, frictionless global commerce and improving the sustainability of our planet.
To solidify our dominant market leadership positions, we built extensive 2-sided networks. The objective was to maximize viral effects by creating a series of industry, departmental, partner and international networks built on our open platform that was easy to use and trustworthy.
Our 3-part strategy consisted of: increasing the number of nodes (businesses and consumers at DocuSign, and buyers and suppliers at Ariba), reducing the friction between the nodes (ease of use and trust) and adding value to each node (payments, AI, value-added services).
What makes Ariba and DocuSign different is this:
At DocuSign, we rewrote the playbook on strategic pre-public equity financing. Our strategy enabled us to block potential competition by securing equity partnerships with the most powerful tech companies in the world. In contrast, Ariba only utilized $4m of equity financing to go public.
DocuSign was also both an enterprise and a consumer product, while Ariba was strictly enterprise.
Also, at Ariba we went public after just 2 ¾ years, while at DocuSign we held off to stealthily gain global power.
From a marketing and messaging standpoint, we focused on turning DocuSign into a verb. DocuSign facilitates two parties coming to an agreement. It’s that magical moment of truth, closure and elation all rolled into one. The bold objective was to capture the magic and bring it to life by being the cognitive referent for the industry. The strategy was – turn the company name into a verb by consistently articulating in every type of medium: “Just DocuSign It!” It became the rallying cry, reinforced by users’ absolute love for the product and the religious fervor of DocuSign evangelists.
The objective for DocuSign, the noun, was the essence of the value proposition: “DocuSign simplifies your life. Securely.”
M.R.: The Harvard Business School Alumni association just named you 2019 Business Leader of the Year for your Transformational Leadership in Business, Technology, Education and Social Causes. How would you describe what a transformational leader is?
Keith: “Transformational leader” isn’t a title or a credential. It is an array of actions, traits and values aligned to make a positive difference in people’s lives. Transformational leaders are a special breed. Smart, principled, visionary leaders who can dream big dreams, challenge the status quo, motivate and empower people to transform our world in ways that inspire us to improve quality of life and living standards for everyone on the planet.
Perhaps the best way to understand it is in contrast with other leadership styles. For example, a Transactional Leader is a person who’s more focused on production—keeping things running, maintaining the status quo. These are people who tend to be more hierarchical, who value conformity, and whose goals tend to be more tactical. In contrast, a transformational leader is more focused on overall impact than on maintaining production. They motivate and empower diverse teams to tackle difficult challenges, inspired by a noble mission to reinvent the future.
Is everyone “supposed to be” a transformational leader? It’s not for everyone, but I do believe we urgently need more people to take up the mantle of transformational leadership to begin shaping our future. We face big challenges today with technologies changing our world at breakneck speeds and increasingly complex world problems. Important institutions like liberal democracy are under attack and we seem to be a more fractured and divided society today than at any other time in modern history. These challenges all cry out for principled, visionary leaders who can mobilize people to dream up new solutions, and shape the future in ways that will benefit us all.
I guess that makes it sound like you’ve got to be doing something really big to be a transformational leader, and I wouldn’t say that. We have big challenges ahead, and we need people to take them on. However, in the end, I believe transformational leadership is for anyone with an honorable mission who wants to make a significant impact. Because everyone has a noble cause burning within them, it’s all about making a difference—a small difference, a big difference, but most importantly, a meaningful difference in other people’s lives.
M.R.: You are now focused on mentoring with your Virtual Mentor Network—why will this be a new category of mentoring?
Keith: Our objective is to develop the next generation of transformational leaders that this world urgently needs. This stuff is not written in a book. I’ve been privileged to have learned some great lessons in life. Some from hard personal experience—with scars to prove it—and some from the experience of others.
I’ve been fortunate to have had some world-class mentors. That experience leads me to believe that mentorship is the most effective and expedient way to develop transformational leaders.
However, I see three challenges to accessing mentors. First, there are not enough mentors that have all the wisdom, knowledge and character it takes to train a whole new generation of transformational leaders. Second, I’m convinced it takes multiple mentors to enable mentees to create a hybrid model for themselves by taking the best characteristics, skills and pattern recognition from each mentor. Third, mentoring new leaders the old-fashioned way, one-on-one, doesn’t scale. Not enough to meet the challenges we face.
We’ve created the Virtual Mentor Network to draw on the experience and wisdom of other great leaders—the greatest I know—to teach what they’ve learned, lessons from their successes, and their failures, that have helped mold them into great transformational leaders.
There are 3 reasons why the Virtual Mentor Network will define a new category of mentorship: First, is the focus on building transformational leaders. This is our mission. Second, is the inclusion of a very diverse set of multiple mentors from the private, public and social sectors—all with unique insights and experiences to draw from and contribute. And third, is the more scalable, online delivery mechanism we use to connect, the better we can mentor, and build tomorrow’s great leaders.
Essentially, we’re taking the lessons learned in category creation, network building and the leveraged growth model from Ariba and DocuSign and applying them to the social sector–identify a gap in the market, create a new category of service and systematically build a network.
We have a huge need for next-generation transformational leaders. But, we lack role models–this is a market gap that needs to be filled. By using technology, we can expand mentoring opportunities for young people with the Virtual Mentor Network. I believe this is the formula for building the ultimate pay-it-forward category.