- Annand Sharma
💕💘💕Build a lasting relationship (with your software)
We’re officially one month into 2023. New year, new me right?? So how are those new year’s resolutions going? If you’re anything like me you’re doing great at avoiding the gym for another year. There’s something about a new calendar year that tends to focus our minds on the longer term. Let’s take some of that focus and aim it at our business. As faithful subscribers to this fine newsletter, you know how much we value the ability of software to create your business system.
In our previous post, Revving the Engine, we described how a software-defined business system consists of tightly integrated software applications constructed to power your business functions. Every core business function from sales and marketing to FP&A to customer service should have a core software application. Even if you’re a software engineer, more often than not you will look to leverage off-the-shelf applications. While that comes at a cost, you really need to view the construction of your business system as an investment not an expense. To ensure you receive a return on that investment it’s not enough to just pay for a software license. The application itself is only a means to an end. You have to implement that software and then the right people have to define and follow new processes.
In a past blog post on Build or Buy, we outlined some high level software evaluation criteria around technical features like data and APIs. Once you’ve created your shortlist of vendors there are a few more areas to dig a little deeper: the ROI model, their broader community or ecosystem, and their product or development roadmap. Choosing the right vendor is more than just an evaluation of price and features.
You may be wondering, how am I supposed to measure a return on a monthly expense? It’s best to reframe your mindset to consider the business system as an asset. It’s not an industrial machine that you depreciate annually, but you do have to invest time and effort in using the software otherwise the purchase will go to waste. If you’ve identified a problem that software can solve then it is likely you can generate a measurable outcome from solving that problem.
If you’re looking for some inspiration to measure ROI, many vendors will have case studies based on their existing customers. A well done case study should outline what steps a customer took using that software. It should conclude with the measurable gain that they achieved. Ideally you can find a case study in your industry. Caveat emptor: this is marketing. Numbers in a case study may be cherry picked or may be on the highest end of what is possible. Using their story and data, however, you as a business owner can determine if this is applicable to you. Important to this exercise is determining whether you view this purchase as a “cost-out” exercise or a “cost avoidance” opportunity. The ROI for a “cost-out” purchase should be pretty straightforward based on the cost savings you expect to generate monthly or annually such that you can calculate the payback period on your investment.
The ROI calculation for a cost-avoidance purchase can be much more nuanced. There is no immediate cost savings you can count on, only additional burden. Yet, making the investment today establishes an efficiency in your process, allowing you to scale. Software scales in a way that doesn’t require hiring additional employees to handle the new load. This may require you to look out 5 years or more to see the return on your investment. This may mean less take-home pay in the near-term, but the long term benefits accrue to the enterprise value of your company. These calculations can seem fuzzy and imperfect – they most certainly are. Despite that, you must go through the thought exercise. Test your assumptions, and try to determine what you have to believe in your future outlook for this investment to make sense.
If you’ve followed our recommendations, your short list of vendors should have an API or a similar “platform.” A software platform, like a physical platform, is something you can build upon. Great software platforms enable any software engineer to build…anything really. To encourage and maybe even reward this work, the best software companies work to create and manage a community or ecosystem. In other words, the company will invest their own time and staff into managing and participating in a community of builders. The company may leverage mailing lists, forums, or even public Slack channels to build this community. A strong community will showcase interesting use cases, listen to issues, and even provide support. Other community members may share their own industry insights, you may find great networking opportunities, as well as other proofs of value from these mediums.
Going one step further, large companies may have an entire ecosystem. Salesforce, as an example, has thousands of integrators, vendors, and consultants. These can be an additional resource for education, implementation, or to further tailor the product to your needs, at a cost of course. Salesforce and other large “platform” companies find tremendous value in their broader community, and their customers do as well. A robust ecosystem will have a strong network of 3rd party service providers, system integrators, custom developers, etc.
The best software companies continue to invest in the quality of their product and service offering. Others will engineer their sales or contract terms, or specifically not offer tools like API’s, to create lock-in, making it hard for you to leave for a competitor.Be sure to ask your salesperson to share what’s on the roadmap. Even if the vendor you found has every feature you want, you should ask what the future looks like to them. This will give you an idea into how the company is thinking about this problem space, your industry, or the world in general. Are they customer-centric, problem solvers or just a sales machine? Is your industry relevant or important to them? Do you fit their ideal customer profile? These are all important signs. As we’ll discuss shortly, implementing core software is no small task. Picking the right vendor that will be there with you in the long haul is crucial.
Every once in a while you’ll find a startup selling a shiny new toy. If you decide to go this route, just be eyes wide open that there’s more risk involved. The company may turn out to be a tremendous success or a total failure, but there’s also a lot of room in between those two outcomes. Sure there can be cons, especially if a business goes under, but there can definitely be pros too. Early stage companies should be more flexible on pricing, contract length, and support. Ask for a proof of concept or a long trial period. Startups typically need their early customers to be successful as reference points for future customers so you may get a lot more TLC (in addition to bugs).
Additionally, do some homework on the company. Find out everything you can. For example, how much money have they raised, who are their investors, who do they think their competitors are, how many people work there, any customer references etc. The more informed you are about their position and lifecycle, the better decision you can make.
Purchase completed, now you have to take it out of the box and deploy it. Implementation is a loaded term. Complex software, like ERP’s, almost always require 3rd party developers or implementors to work on the ground with you and your team. Off-the-shelf software, like a new CRM, can be set up by your in-house team. In either case, before you finalize the purchase, make sure you have identified and budgeted for the necessary resources.
As the business owner you are obviously a critical stakeholder in this project since you are making the ultimate financial decision, but you aren’t the only one. A functional manager and individual contributors are also key to the process. Software dictated to the staff from on high is generally not a winning strategy. Lest not we forget our “crap in, crap out” mantra. Software doesn’t turn waste into water.
Now that you’ve identified the critical stakeholders, who’s going to bring the energy and the desire to succeed? Have you identified your “champion?”
A “champion” should be someone on staff, who will be directly affected by this new system. This person should become an expert in the system. Someone who will help others get up and running and someone who will help management make sure the system is being used properly. Even if an external party will be performing the implementation tasks, remember it is your team left to make use of the software. Find a champion. Empower that person to meet with the vendor, any 3rd party implementers, and anyone else in the organization who can help drive adoption.
If you can, include the champion in the evaluation process. This way they can understand the differences, make sure the implementation includes all of the right people on the team, and take ownership in the decision.
Ostensibly you purchased software to improve, or replace, certain processes within the business. Now that there’s a system, and the right people have implemented the system, the whole organization may find they have to follow a new process. Software should make that process simpler and measurable. The champion should help define, document, and finally drive process adoption.
Replacing processes are hard. Most people are satisfied with the status quo as long as it’s good enough even if that is far from ideal. To prevent this rut, consider a hard switchover deadline where work done following the old process will no longer be acceptable. Positive incentives work too. Rewards or bonuses for early adoption can help build excitement for the change.
Upon defining the process, the champion and the stakeholders should define the remaining goals together. The goals should include sticking to an implementation timeline, defining and hitting usage targets, and finally identifying and measuring key performance metrics. These goals should help inform the continuous development of the actual process. To the extent possible, show the goals and progress around the office. This could be an internal web dashboard or even on large screens around specific teams.
Beyond the success of the initial roll out, the stakeholders and champions should regularly assess progress. With targets set, it’s important to have regularly scheduled check-ins with the team. These check-ins should have consistent, straightforward agendas which is to qualitatively and quantitatively understand how the new system is performing. If something is underperforming the group needs to understand why and develop a plan to rectify it.
With the right software systems and people, the process can push the limits further than before. Develop a process where you can redefine what’s possible. Even in failing to reach new heights, there are lessons to learn and areas to grow and develop.
A process is only good if it is followed and used. After all, how will your business handle a few, key people moving on? Enter - documentation. Documenting the process opens a whole new set of opportunities that could be their own post. We mention documentation here because any time you introduce new tools or new processes is a great time to start keeping track of how work gets done. Building a culture where processes are documented, and those documents are accurate and available, will make any personnel changes less risky to the overall health of the business.
Documenting the process goes beyond training new staff or keeping institutional knowledge in house. Well documented processes enable your business to periodically revisit business processes looking for improvements. It’s possible that you make a tradeoff in process today that your software vendor may address on their roadmap in the future.
A strong, software defined business process should be constantly evolving and improving. Think of it as building another moat for your business. Yet another aspect of your business that sets you apart from your competitors and can add enterprise value. A well documented process is an important step on the path of continuous improvement.
In past blogs we’ve discussed how the process of collecting and using data is always moving. Selecting the right software system will provide even more relevant data. The final puzzle piece is your people. Getting the people using the software to its fullest extent possible will be an ongoing challenge. The time spent on this should produce measurable results. That could come as time saved, employee satisfaction, margin, or something else entirely. Whatever those metrics end up being, measure them and learn from them.
With that said, there is power in simplicity. Don’t develop a process just for the sake of having one. That could lead to fatigue or even worse, burnout. Use the vendor materials and community as a guideline to understand what is possible. Give staff the opportunity to shape your business system further. With the right goals and vision, your staff can execute and know how success will be measured. Dare to be great!