Confessions of a Successful Entrepreneur: Dan Rodrigues

10 02 2016

Kareo 2The other night I was asked by a colleague who had a question from a reporter at INC Magazine what are some success tips for entrepreneurs and additionally what are some tips when you run into trouble.   I have written about tips for budding entrepreneurs in my blog on The Business of Business in the past and have written on behalf of the TechCoastAngels as well.

Serendipitously, the day after I wrote my comments to the reporter, I had the opportunity to listen to an interview by Andrew Bermudez of Digsy (www.getdigsy.com, www.meetup.com/OCfounders), of Dan Rodrigues, CEO and founder of Kareo (www.kareo.com).   Dan’s company, Kareo, has raised more than $100 million and is the fastest and largest growing company in Orange County, CA.  His company provides a cloud-based platform for independent medical practices and currently has more than 35000 providers served by more than 500 employees.

I want to share Dan’s perspective on how he grew his company and the road he had to travel.  Let’s lay out the journey in three chapters: Genesis and Euphoria; Reality of Funding and Growth: and the Path to Success.   And in each chapter there are lessons to be learned and tips for the entrepreneur.

Genesis and Euphoria

After Dan sold his first company, Scour, he started a software development consulting business.  During this time, he worked on a project for a client in the healthcare space. Through this project, he learned about healthcare IT.  Yet he also applied his knowledge of the consumer, gained from his stints at Vizeo and Real Networks, to the business.   He took the knowledge and the project and built the beginnings of Kareo and the first customer was the company for whom the original project was designed.

Lessons  learned:

  1. An inquisitive mind can yield interesting insights into new ideas. In this case, Dan used an inductive process to define the requirement to serve one customer and used that platform as a base of expansion to other similarly situated companies.  Entrepreneurs can take a custom project and move it to a generalized solution which might give you an immediate customer base.
  2. Integrate different perspectives to develop your business. Dan leveraged his prior experience in a different market space and was able to apply that knowledge to make Kareo different than other software companies in the same space. In a later chapter, Dan directed Kareo to be an online provider of SaaS services to this market.
  3. Build relationships as they will be valuable for funding as well as support and resources. Dan was able to use past relationships built over time to get to VCs on Sand Hill Road and High Net Worth individuals to help provide the initial funding.

Reality of Funding and Growth

Initially, Dan bootstrapped Kareo and now with some funding and the opportunity to gain more, the business seemed off to a solid start. And while you might read about Dan’s story thinking that it was all wine and roses, the truth is that Dan had some tough days early on with Kareo. In 2008, Dan received a difficult call from an investor who was unable to deliver a promised next round of funding. With no time to find another investor and significant bills to pay, Dan made a very tough decision. He reduced the company from 35 employees to 7, and found a new path for Kareo. During the entire year after, Dan did not take a salary as CEO so that others could be paid.  The goal was now survival and the focus was getting customers, reducing product expenditures, and finding more efficient ways to support existing customers to reduce cash burn.

Lessons Learned:

  1. Never take anything for granted. An investor can change his mind and funding may no longer a certainty.  The business environment might change too and entrepreneurs need to be fast, fluid, and flexible.
  2. Spend wisely and carefully. Kareo built a company and moved into expensive office space.  How many of the readers can relate to the euphoria of getting funded and spending lavishly with those funds?  I know I have been in companies that did not spend wisely and had to retrench.
  3. Learn the way to manage the business in the most efficient manner.
    1. Develop good solid cash management and make that a core competency
    2. Build a support infrastructure in synch with the services your company provides and find ways, at least initially for minimizing spending on infrastructure. Try to build a solid online help solution, provide excellent documentation, a good knowledge base.  But also have an additional second layer of support if needed.  Train people to do double duty.
  4. Learn to sell online. Other software in the healthcare market was sold through VARS.  Selling online gave Kareo an edge and reduced the cost of acquisition.

Path to Success

With revenue ramping to $3 million, and cash flow positive, Kareo was on the path to success.  During this phase, the goal was to grow the business through disciplined growth using the lessons learned during the prior chapter.   Over time, Kareo started adding back employees, expanding its product set, and increasing sales.

Lessons Learned:

  1. Maintain the discipline of cash management. Remember the lessons from when growth and cash flow were hard to come by.
  2. Define metrics for success. Share these metrics with your team and manage them religiously. Metrics used by Kareo included cost/customer, payback on margin, return on cost of customer acquisition, churn rate, and lifetime value of a customer.  Note: these are very similar to other SaaS and technical service companies that use subscription services as their business model.
  3. Hire the right talent. It is difficult in some ways for a small company to recruit good technical talent in Orange County vs. in San Jose.  There is frankly more talent there by virtue of the number of companies in the tech space.  Don’t let that be a daunting task.  Dan created a culture in Kareo and a solid reputation of being a progressive company which attracted talented individuals.  On the flip side, retention might be easier in OC and probably is for Kareo given their culture, the fact that the smaller company can provide a solid platform for growth of its employees, and Dan’s vision and leadership style.

According to Dan, when the company had fewer than 50 people it was easy to attract a great talent pool because of the excitement.  When the company had between 50-200 people, Kareo started to compete for talent as employees looked for other exciting opportunities or felt they had the ability to move out on their own.  After growth to 200 employees, Kareo had established its reputation and talented individuals wanted to work there.

Lessons learned:

  1. Recruit a top level executive team. Building the team is critical to any company and is especially true for start-ups and growing companies.  Some of the executives were recruited from outside of Orange County and complemented those from the OC.
  2. Find leaders who know others and can attract talent and capital. This makes it easier to sustain growth.
  3. Change the culture with changes in the business. Dan indicated that culture changes at different stages of growth.  When you have between 1-10 people you are in survival mode.  As his company grew, it felt more like a family.  At a certain point as additional employees were on-boarded and new geographic locations were opened, the culture changed because not everyone knew each other nor worked with each other on continual basis.
  4. The company is a platform for growth for its employees. Reinforce and support educating employees, building their skills, and adding to an employee’s competencies.  I know many executives who don’t want to invest in employees because they are fearful of losing them to competitors.   I personally believe Dan’s approach is the better one and creates a culture and brand that ensures talent will stay with Kareo.

Dan was asked what he would do differently if he could do it over again.   After reflecting Dan accepted that there were mistakes and missed opportunities.  So let’s frame them.

Additional tips and lessons:

  1. Build a business first and a product second. This means don’t normally chase individual customer requests and spend money on unique features and services for different customers.
  2. You need to keep the lights on even if the product stands still for a while.
    1. Under invest in the product and invest in the business side. From my viewpoint, this is a difficult lesson for many engineer-founders.  Therefore make sure you have a good solid business partner as the ying to your yang.
  3. Companies need to be agile and reorganize at transition points and at changing stages of growth.
  4. Companies need the right advisors and investors. While the CEO is focused on growth and getting the product into the market, advisors and investors have the opportunity to look forward and may see minefields ahead.  The CEO needs to heed them.

On behalf of TechCoastAngels, Andrew Bermudez, and Dan Rodrigues, I trust you find this blog and its contents useful for entrepreneurs in their own quest for success.  Please share and forward to others.

Let’s work together to build a strong entrepreneurial eco-system in Orange County.   And if you want to talk further feel free to contact me at dfriedman@clevelpartners.net.  Hope to see you at our March 10 event on celebrating entrepreneurship at the Segerstrom (www.techcoastangelscelebration.com.)

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The New 7Ps of Marketing: Disregard at Your Own Risk!

7 12 2015

Marketing CloudI was reading an article in the recent Forbes online CMO Network by Kimberly Whitler entitled: What are the top predictions for marketers heading into 2016?   Ms. Whitler surveyed some experts, including CEOs, Presidents/GMs, CMOs, authors and executive recruiters.  In a different but recent article, Forbes CMO also ranked the top 50 CMOs.  To me, I would have rather heard their predictions.

I always enjoy reading “predictions” because they keep me on my toes- maybe I missed something- and makes me challenge what I believe are the upcoming trends.  As a businessman and marketer I certainly don’t want to be caught short.

I found the article very interesting and certain worthy of consideration.  I feel after reading the comments that each person is looking at the “elephant” from their unique vantage point.  And frankly, I am not sure they are predictions or wishful thinking based on the viewpoints of the interviewee. Nevertheless, they are certainly food for thought.

From a holistic view, my prediction – or wishful thinking – is that marketers need to start with the customer and realize that marketing has become multi-channel and multi-dimensional.   The smart CMO must orchestrate the new marketing mix. That means they need to simplify messages sent to consumers through whatever channel is relevant to them i.e. digital, small screen, large screen, Point-of-Purchase.  And they need to determine which is most relevant for the target personas.   Moreover, the smart marketer should consider all the tools in his/her toolbox and select those tools that are most effective for getting the right message and INTERACTION with the customer.

When I put this together, i find that the old model of 4P’s is antiquated.  I believe the new prediction is that good CMOs are now considering 7Ps in a holistic view: the original 4 (product including product/service development, price, promotion, placement (digital or traditional), and the new three consisting of process (including customer engagement, referral and loyalty), people as brand messengers at point of purchase or via customer care, and personalization (through technology).

The “traditional” 4Ps of marketing are well known.    In the day, marketing was about creating demand, and to a large degree it still is today.  But the focus was on selling a product to meet a need.   In general, promotion was based on advertising push.  The marketer’s mantra was to shout out the virtues of the product by mass advertising. To some who read the history books, the “soaps” on TV were called that because the consumer goods manufacturers such as Tide, All, and Fab were sponsoring and advertising on the TV shows aimed at the housewives and other stay at home folks.

Pricing was simple.  Manufacturer’s set price and used a price point philosophy of good, better, best. Placement represented where the consumer could buy the product i.e. at the neighborhood store or a mass retailer or even door-to-door sales and home delivery.

Because of technology such as the internet, and the movement away from a manufacturing to a service company, even the original 4 P’s have changed.

FROM                             TO

Product         –>       Solution

Promotion    –>       Information

Price               –>       Value

Place               –>       Access

 

Consumers and businesses want solutions to their problems and want to understand how the product/service will perform.  Due to the internet, both as catalogs of information and online reviews that are omnipresent through a myriad of sources, information has replaced pure promotion.   Certainly consumers and businesses want to find the right product at the right price, yet price by itself has been replaced by value with the value add sometimes being generated by service agreements and extended warranties.  And primarily due to the internet, place (distribution) has increased to a multi-channel access.  Think about the changes from the 1990s when e-commerce was first getting started to today.  Consumers and businesses now have electronic exchanges and other online venues from which to buy goods and services.   And now, coming full circle, we see Amazon opened its first brick and mortar store in Seattle.

Now let’s add the new three elements to the marketing mix.  First is the element of PEOPLE.    When I was head of marketing at US Cellular, we changed our brand and positioned our company using the tag line “the way people talked around here.”   Why did we do that?  In part, we recognized from our research in the late 90s and early 2000s that customers in our market wanted something more than what other cellcos offered.  We were not going to be the most technologically advanced (although our network and engineering were superb), nor were we going to cover the most customers in the country.  What our customers wanted was a relationship with our company, represented by our front line sales and customer service people.  They wanted a company they could trust.  At that point, we realized that people were the brand messengers and in our touchpoint marketing system, represented a way to affect the relationship and alter the buying habits of our consumers.  And it worked.  Our retention rate i.e. loyalty, was the best in the in the business.

The second new element is PROCESS. Many companies loathe the word process because they feel it is bureaucratic.  To me, process is the mechanism for repeatability. We want processes to help the customer in building its relationship with the company and also empower the employees to do their job to satisfy the customer.  Clearly, it is a tricky balance!   The processes today – mostly enabled by technology- relate to tools that help the company serve the customer.    There is a dizzying array of tools that the marketer has to understand and use.  See Marketing Technology Landscape by Scott Brinker or some of the Lumascapes by Luma Partners.  Some of these tools include ways to mass customize a product or service to the customer needs.  Witness the new companies entering the market to build relationships with consumers and business buyers.  There are processes enabled by digital and web technologies that enable social engagement and the marketers use these new tools to build and maintain relationships with their customers.   This improves value through new services and interactive engagement in the eyes of the buyer.

The final area is PERSONALIZATION. Several of the interviewees pointed out that understanding the customers’ persona is critical to segmentation.  Once you understand who they are, the company has to satisfy their unique requirements.  I have always been a fan of mass customization (read Joe Pines original work) or macro-niching as I use to call it 5 years before mass customization became vogue.   Personalization is easy today with technology.  You can see it when you buy a car.  Go into a BMW or Jaguar dealer in their store or online and the system will build the car for you.  Buy a house from Toll Brothers and you get a platform and options to tailor the house to your needs.   Go on the web and find a case for your smart phone and you can easily customize it with your school logo and colors.   Consumers want to feel special and that ensures a solid on-going relationship with their customers.

Traditional and Social Media MarketingMarketing has changed and will continue to evolve over the next several years.  Clearly there will be a natural bonding between the CIO and CMO as marketing technology has become more important in defining the marketing mix.  While Ms. Whitler did not ask my prediction for 2016, I will share it with my readers.    I predict that marketing will be more about the customer and the great marketer will find the right combination of the 7 elements to build and sustain relationships with that customer.  At least I hope so.

I would be glad to continue the dialog or share additional thought.  Feel free to visit us on our web at www.clevelpartners.net or contact me at dfriedman@clevelpartnes.net.





What Can You Do to Make a Difference in 90 Days?

18 01 2015

As an advisor to executives that recently were promoted, I have been asked how to get off to a good start in the new job.  This new job can be within the existing or for an entirely new company.  I am sure many of you faced the same questions as you progressed in your careers and many of you who are currently in job search mode have been asked during interviews by company executives about your short term plan to achieve success.  The plan can also be used as a “restart” plan where either the strategy of the organization has changed, the competitors have changed, or the management and vision has changed.   It gives an executive an opportunity to pause and rethink of the best path forward.  One of my favorite pictorials is the following and this blog will address how not to be confused.

If youi see a fork in the road

I want to share with you some thoughts and a high level template that can be used to develop your plan.   Additionally, I would like to suggest a book by Thomas Neff and James Citrin called “You’re in Charge- Now What?” as a nice complement to this blog.  Neff and Citrin are recruiters with Spencer Stuart and their book focuses on an 8 point plan for the most senior executives.  But their plan can be adapted to executives at any level.

Why a 90 day plan?  In 90 days, the new executive should have enough time to understand the new environment in which he or she operates and begin the process of executing a plan to makes changes.  Most companies have a relatively short term view and public companies report on a quarterly basis.  This plan can dovetail with the reporting systems and be used to tell the market (or customers or partners) that there is change coming.   And within this 90 day period, I believe that an executive can always find one or several different areas that can be improved and that can affect the top or bottom line of a company… or at least move in that right direction.

Let’s focus on a newly appointed executive in a new or expanded role.     While the specifics may change based on the individual executive, the type of company, and where on the growth curve that company lies, the following principles and templates can be used and modified.  The executive needs to detail the major proposed activities to be accomplished in the first 90 days, the major tasks and accompanying rationale;   Information required , tied to each task, and the rough timing and budget to perform the task.

The objectives of a 90 day plan are to:

  • Learn about the strategic initiatives, culture, customers, and suppliers to the company.
  • Build strong relationships with peer group within the company and with customers
  • Build trust among the team (executives, peers, and employees)
  • Set a strategic and tactical plan in motion.
  • Design a plan for future growth and profitability, cost efficiencies, manufacturing excellence, better customer support, better margin growth or other functional attributes.
    • Determine ways to drive the organization to realize its full potential through existing programs– benchmarking and process management, execution
    • Develop ways to grow the future business significantly through new products or expansion of our eco-system of suppliers and partners
  • Communicate the plan and the expectations to the constituents and  execute to the plan

The template to do this is as follows and specific activities, some of which are outlined below- are shown.

Flow of 90 day plan

Discovery:

Discovery is the most critical in my opinion as it sets the stage for the agenda and the tactical plan.   Included in discovery are the following elements:

  • Review general company, industry, competitor, customer, supplier material
  • Establish productive relationship with my boss
  • Face to face meetings with your team, top customers, sales/field VPs, other stakeholders to build trust and “seek to understand”

> Determine biggest challenges and opportunities

> Hot button issues (things that I call landmines which if not immediately acted upon                   can derail your success.)

  • Establish relationship with peer group: lunch, attend their staff meetings
  • Set expectations and convey those expectations to your team and other constituents.

I have always found that a written “discovery” document works wonders to get people on the same page and to ferret out where differences might lie.

Set the Agenda.

To set the agenda, there are two parts: drive to full potential and planning for the future.   The agenda is based on your specific objectives, the company strategy and the ability to start getting some meaningful results.   For a marketing person who is trying to bring their team to realize its full potential the agenda might include quick wins on revenue generation, or the execution of a product introduction plan or even defining a more cogent business or marketing strategy.  For a COO, the plan might include quick wins on operational efficiency, curing issues that customers deem important and where the company has failings.  In either case, part of driving to full potential is an analysis of the team and a plan for improving skills and changing or adding appropriate team members

In some companies, and for some positions, the focus is on growth.  Planning for the future might include things such as redefining growth objectives or planning for new customers or new applications or new eco-system partners or forming new strategic, operating, marketing and sales plans.

Execute the Plan.

The final –part of the plan is to communicate and execute the plan to perfection.   Focus on three or four major objectives at the most.   The key issue for success for the executive is FOCUS- focus on those areas most important and that will have the greatest effect. Once you gain credibility you will have the chance to do more.  Regardless of the specific tasks and the plan to execute, make sure you have a clear battle rhythm i.e. how you will manage your function or the business unit and memorialize that in a clear operational dashboard which can be shared.

Flexibility is key during the transition period and will change based on “discovery,” input from the board, executive bosses, peers, team, customers, and suppliers.  However, it is a roadmap that will put you on a path to success.

Glad to get your take on the plan.





Customer Jujitsu: Leveraging Customer Needs for Strategic Imperatives

28 10 2014

I am a New York Yankees fan and grew up with Mickey Mantle, Whitey Ford, and the incomparable Yogi Berra.  Now, many people think that Yogi is known for his Aflac commercials, yet many don’t recognize that he is the holder of the record for a player who won the most World Series (10) and who has the most hits (71).  Yogi is also famous for his statements of the obvious.  The one that strikes a business cord is depicted in the following diagram.  Yogi said, “if you see a fork in the road, take it!!”

If youi see a fork in the road
Another business person very conscious of the competitive environment sees what the competitor offers and chases after solutions to outdo the competition.   After all, if a company can outdo the competition on items such as features, benefits, and technology, wouldn’t that company achieve share gains?   Maybe, although features and benefits and even pricing by themselves will not necessarily win customers or their loyalty.Normally, a business executive sets strategies in one of three directions, or combinations of the three.  These degrees of freedom include: competitor, competencies of the company, and customers.    Unfortunately, many business people, especially those who are driven by sales, “pivot” or change direction so rapidly as if they are taking Yogi’s advice literally.    It is not always advantageous to do so.  A new technology based on what R&D has discovered may be immediately thought of as the way to certain riches.  Remember that the greatest inventions have created some of the largest companies with rewards reaped by the business and executives.

A third, however, thinks about the customer and satisfying his/her needs.  This is a customer intimate or customer focused philosophy and if done right is the essence  of customer Jujitsu.   It may not work all the time for various reasons, yet I believe that there is a higher probability of success in sustaining profitable revenue growth by leveraging the knowledge and preference of the customers.   You engender trust and build relationships and isn’t that the fundamental platform of good business?

Over time, in these newsletters and blogs we will cover various aspects of technology and competition and how we can grow profitable revenue through each of these elements separately or in combination.   It all starts with the customer, however, and we want to share some tools to understand the customers’ needs and drivers which can be leveraged for developing strategic initiatives as well as tactical plans.   We call this attribute, Customer Jujitsu, because you, the business person, can leverage the understanding of the customers to refine and augment your business strategy.  It seems simple but the tools and discipline needed are keys to success.

Here are some of the tools ranging from simple to more complex.

  1. Pulse surveys. Normally for the B2B market, these are simple questions asked of the customer on a regular basis to find out how things are going?   This is different from a sales call and the agenda is strictly to understand how well your company is doing in various areas to help the customer succeed.  It results in building better communications and trust.  If you ask enough customers, you can get a good perspective on how well your company is doing.
  2. Bounce back cards/online surveys/follow-up calls. These are effective in understanding a specific transaction.   Through the data you gather, you can discern trends and issues that might arise.   You might be able to notice a trend but generally this information is not used to set the strategic agenda for the company.  As we say, it is necessary information but not sufficient.
  3. Customer surveys via tools such as Survey Monkey. This is a great, simple on-line tool and very inexpensive (or free) to ask questions to customers on a sampled and regular basis.  There is a wide variety of questions that can be posed and the output can be graphically displayed.  If the surveys are performed, say quarterly, companies can see trends in certain areas.  Those negative trends can be corrected via functional or business strategies and those positive trends can be highlighted in marketing and business material.
  4. Mystery shopping. This can be performed for both business companies but normally performed for consumer oriented companies.   Either a third party or the marketing department performs mystery shopping, acting as a real customer in buying your products.  These mystery shoppers can “shop” your stores (online or brick and mortar), your customer service, and operations departments to find out problem areas vs. your own standards or vs. the competition.
  5. Customer Satisfaction Studies. This is probably the most complicated way to get information from customers and it takes time to set up the right questions as part of a continual program.  Yet the information obtained is very valuable.  If done correctly, the business person can get a feel for items that are IMPORTANT to a customer as well as how well the company has PERFORMED.  Those areas in which the company has performed well and are important to the customer can be leveraged as part of the company’s brand.  Those areas which are important to the customer yet performance has been lacking, form the basis of a strategic initiative for the company.

Having gathered the information is part of the equation as they say.  The information must be shared and discussed – particularly at the executive ranks – to see if there is something missing in your strategy, your development work, your distribution, customer service, training, price plans, logistics and similar items.   The ultimate goals are twofold:  First, and most importantly, to find out the temperature of the customer (i.e. customer satisfaction), and whether the customer will buy your products or services again and whether the customer will refer you to a colleague or business acquaintance (the ultimate question).  Second, if customer satisfaction isn’t where management believes it should be and the company is underperforming in areas important to the customer,  then management’s responsibility is to determine what is required to improve satisfaction – and the most cost-effective means of getting there.  This could include the development of new products, or process improvements and even the potential for partnerships, mergers or acquisitions.