Hello, everyone! Thank you for the fantastic response to the Turing Distinguished Leader Series. In this episode, we have Sandesh Patnam. Sandesh is the Lead Partner anchoring both the private and listed equities investing practice at Premji Invest (PI) in the US. Premji Invest is the primary investment office for Azim Premji, Chairman of Wipro Technologies.
Engineering leaders discuss hyper-growth post the unicorn phase. CEOs and their companies must be open to continuous change.
*Read the Scaling Unicorn’s interview here — or if you prefer to listen — the live interview is included at the bottom of the page.
Welcome to Turing Distinguished Leader Series. I am Jonathan Siddharth, founder and CEO of Turing. Today we’re talking about how to scale unicorns in a remote-first world.
And we have with us an extraordinary guest, Sandesh Patnam, VC at Premji Invest. Sandesh will share more about what he’s observed with companies going through this exciting growth stage.
Sandesh, you have a decade of experience as a Managing Partner at Premji Invest. You’ve guided several companies through this hyper-growth phase, i.e., the post-unicorn growth phase. And before we get started with specific questions, I’d love to hear more about how you got into VC. What excites you to stay in the industry for as long as you have?
Hi Jon. It’s good to be here, and thanks for having me. It’s a pleasure speaking with you. I’d say I’m an investor by chance, not by design. And if I go back to my early days in the mid-90s, doing engineering work, I was an architect thinking about high-end microprocessor design and looking at cutting-edge next-generation systems. I was at Stanford, doing my master’s and running a group called BASIS, the Business Association for Stanford for Engineering Students, and trying to recruit VCs to be the leaders in business plan competitions.
One thing led to another. So I tried to recruit a couple of VCs, and the interaction was great. Also, I was called upon to do diligence on a bunch of calm, focused IC companies. And then I did a startup that eventually got acquired at the peak of the first bubble to a company called KMC, Sierra in Canada. So I was trying to figure out what to do next. And one of the VCs that I interacted with said: “Look, we enjoy how you think about technology. Why don’t you try this for a few years and see how you like it?”
My company was around only for about two years, and we had a quick exit, and this was back in the day. So I thought: “Hey, this is kind of easy.” We would go in and define the idea and get a few customers. And everything that we did after I became an investor for the first year for investments had the same playbook. We made the investment, defined the architecture, and within maybe about 15 to 18 months, these companies got acquired.
So we never really experienced the scaling journey like what you have experienced today. And then the second bit would be the hard part of the next decade, of really building companies. So you learn venture in a way that I don’t think you would learn otherwise if you don’t go through a significant downside. So for me, the journey to venture was more happenstance at the end of the day, not by design. But once I got into it, I loved the entire journey.
I’ve had the opportunity of doing early, mid and late-stage ventures and then running public markets at scale on a long-biased fund and in a market-neutral format for many years before joining Premji Invest to build out a crossover strategy.
But look, I think the journey is phenomenal. I love the excitement of the entrepreneurs, new ideas, the scaling. I think you hit upon a great topic. I mean, people think about getting to become a unicorn, but what after, right? I believe that is the more challenging part. And to me, it’s phenomenal to kind of go through that scale piece.
That sounds great! And Sandesh, so let’s assume a company has reached the unicorn status, and now they are in that post-unicorn scaling phase. What do you find as the primary shift in the way companies that you advise?
And what do the founders and CEOs have to change in that post-unicorn phase versus the earlier stages of company building?
It’s a great question. There are so many elements. These are not in a specific order, but I’ll sort of walk through a few things in my observation that I’ve seen people do well. And I think the other side of the same coin is if you don’t do it. It is not the end of the road, but you have to pivot and move things around to get back on track.
So, what I would say is, valuation aside, the scaling journey has two elements to it. So, if you think about your market sizes as the first aspect, there’s a specific segment of the market that you’re good at. And let’s just hypothetically say, from the 100% of the market, the first 15 or 20 percent has specific exit criteria, right?
So you build a product that works for the first 10%, and you are prosecuting that path. And if it’s a large enough market, you’ve got tons of runway to access that market.
But generally, the remaining 70 or 80, or 90% of the market has some other issues. So whether it’s tied up in some fashion it’s attached to something else, it’s not easily accessible with this product suite. So your go-to-market motion needs to shift, and you have to start thinking about how you have to change the company on all of its elements: Product, go-to-market, and all of the other things you have to do to address the perks that are locked in some way, right? And so this could be price elasticity, it could be the scale economics, thinking about how you have to move up market or down market or side market.
You have to think about that. I find very few management teams and entrepreneurs who can prosecute these things nearly simultaneously. And you have to do it nearly simultaneously because when it hits you, you won’t realize it’s hitting you.
These challenges are not atypical, right? So you’ll go to the board meeting or have discussions with the team. And they’re like: “You know, our sales efficiency has come down. We probably hired the wrong people.” Or something like: “We had to respond to an RFP, and we have to change a few things in the product.” And it looks pretty linear, but it’s linear because you haven’t thought through what the other side needs to look like.
And then you’re trying to connect the dots, and you’re always a step behind. And the result is this: The margins profile breaks down, or your growth slows down for some reason because you have introduced this new product. So then, if your founders don’t see the vision on the other side, they start thinking about an exit.
So I feel like that journey of understanding what parts of the market you are addressing, being very maniacally focused on the understanding that and where the next segment lies, is important. So I think bridging those two things is something very few management teams do well.
And if you can do that near-simultaneously, you can have this growth rate that allows you to forget about evaluation. You get to the 100, then the 200, and the 500 or the billion. You can only sustain that growth rate if you think about both elements.
That’s one aspect of it, and I know it’s a very broad way of describing it. But if you double click on it, there are so many elements, right? It’s the people, the processes, the culture, how data-focused you are, and all these subtle things at the outset.
But in many cases, the processes and the people that get you to the first 100 typically are not the people who get to the next 200 or the next 500.
When do you feel like you’ve hired the guy that gets you to a billion or hired the guy that gets you to 500? And the answer to that question was you never hire that guy because you are always recruiting. You’re always recruiting for that next layer, right?
So the A-team is the A-team for now, and the A-team for the future is different. And you can do that in many different ways. The one thing I would tease out mostly is [thinking about] people, processes, and that next unlock.
Sandesh, that was super insightful. So [as you mentioned], continuous change is required. And whenever you have to make a change, what metrics would you look at [for that]?
It’s always in the go-to-market function, right? The first line of distress comes when your product and vision meet the customer. You have to pay very detailed attention to this feedback.
You will see many discussions [on this feedback] at the board level everywhere. When you hit this first kid, these are the questions you get asked.
But nobody asks the fundamental question: Is there something changing in your customer base? Is there something changing in the market? Are you moving upmarket? Are you moving into a new vertical? Are you going to new geo? What does that unlock? Does that require something else?
And so, you need to have an excellent understanding of what that next unlock is. If this first 20 percent gets you something, what does the next 50 percent look like? And I think drawing those two things in parallel will allow you to make those decisions much more pronounced.
That sounds good. What advice do you give to CEOs as they think through whether they have the right team and whether they need to make changes to that team? How to manage the shift during those phases when somebody needs to be layered or replaced?
This way of thinking may sound too capitalistic or too brutal. A lot of CEOs tend to be very loyal to that initial team. And I think there is no fault in that. That’s what engenders so much success and value. But you need to be very brutal about your thinking about scale, right?
So it’s always a hard decision because it’s the same thing in products and processes. It’s all about the people at the end of the day. So the first thing you may think about is coaching the existing team member. In some cases, I would say yes, it works.
But you know, you have so many battles, and startups are hard to do. It’s a lonely journey for a lot of founders and CEOs. So having that equal thought partner and the person who can do the execution at that scale is necessary. So if you are doing their job or have to think about it, you’re not thinking about something else.
Many CEOs say that they should have probably let that person go a year or six months earlier when they first had that thought. And so, I’d say that it is most important to make sure when to let go. So be a little more brutal about that.
In this pivot from early to late in the growth journey, you don’t think about processes as much as you do in the early journey. You’re trying to break things, and you have to have a fast-moving situation. But when you have $100 million or $200 of revenue, when you try to double or triple that, the kind of person who can do that is slightly different. They do focus on people development, they do focus on processes, and they do focus on repeatability. And I think those are the metrics.
I think that allows you to get to that next phase because you can’t have what worked in the first 20 or 30 and the first 50 customers work for the next 1000.
Yeah, and for me, one clarifying part is to remind myself of my primary job to grow business value. It’s my primary job to make sure the value of the business is maximized. And if I do that, I’m able to help everyone who has access to equity in the company, like employees, shareholders, and investors.
That’s great. I agree with that. There’s a book that I recommend sometimes. It’s a book called Seven Powers by Hamilton Helmer. And it talks about the potential value, market scale, and power, along with these seven things that one needs to think about.
It lays out the dynamic between strategy and power and how you can continue to think about potential value. It’s a book that is interesting. It’s a little dated, maybe five or six years ago, but it’s worth reading.
And are there any other books, blog posts, or videos that you consistently recommend to your CEOs?
There are lots! I listen to your podcasts. But, I think it depends as a lot has been written about culture, an owner’s mindset, or things of that nature. But I think this type of thinking about the built culture is critical.
I find myself recommending High Output Management by Andy Grove, Zero to One by Peter Thiel, and Blitzscaling by Reid Hoffman to a lot of my exec team.
Yeah, all great books.
That’s great! And for the next question, what are some common mistakes that you see companies make at this scaling stage? Any pitfalls to avoid for the management team and CEOs?
I think it’s sort of the same thing. But I would say something that I alluded to earlier. I think the business supports certain organic, linear motions.
There is no shortcut in terms of time, people, and process. So if you are trying to shortcut it in some ways and trying to fast forward things, that always creates holes within the organization. And the product and the go-to-market will eventually come back to bite you.
Often, you feel like you’ve arrived, and you’re already thinking about the next thing and trying to accelerate the process. And we’ve gone through the last two or three years where the speed with which we are doing rounds has led to what I would say no meaningful internal processes getting built or risks taken off the table in between rounds.
So I’d say don’t over-index on that and focus on the organic next steps while knowing what that end goal is and watching out for these big inflection points where your customer base changes and look at what that means as opposed to trying to fix a sales problem or something like that.
And could you share any examples of a shortcut that burnt you?
I think this usually ends up in product in many cases, at least in my experience, and it’s the organic versus inorganic question. We’re talking about unicorns at scale. I’m not talking about the companies that are probably getting there.
When you reach that stage, you feel like you have the equity value to do that. And in a lot of cases, that comes with so much downside. And whether it’s people processes, product integration, go to market, and I’d say a common error in many cases is like: “Hey, this is something that we should have the equity to go buy. And we should do these 1234 things to get to that next milestone quicker.
And I’m talking about a funding milestone, in this case, so I feel like the decision to do so has to be organic.
I feel like that is more common than you would imagine. So the quicker shortcut I say is to really [get that] organic was inorganic, and it always stems from the product.
Got it. So the mistake would be to make any aggressive acquisitions to beef up the product somehow, thinking that that will offer some inorganic growth acceleration. And more often than not, these types of purchases at this stage of the company don’t tend to move the needle positively.
What’s the most common piece of advice that you see Sandesh offering the boards of these companies at this stage?
I’d say culture. Culture is very, very important at this stage. You have to be very cognizant of pockets that may develop within the company. Maybe there’s this macro team like: “Hey, we’re doing this, and we’re this A-team, and we’re going to do that” And they do certain things that are different from the culture you are trying to build, and maybe they have success. And the hard thing to do is to understand that success comes at a cost.
And recognizing that and fixing it early because it eventually always comes home to roost you, and you don’t want the headaches. And culture stands on its own.
I think the type of people you bring into the organization, the learning aspects of it, matter a lot, and I think, for the ones that are sustainable and can build massive businesses, spend a lot of time thinking about that.
Yeah, thanks, Sandesh. We also have Kat from my Chief of Staff team here. So I’m going to invite Kat to ask you any questions about the state of company building.
Thanks, Jonathan. It’s great to meet you, Sandesh. So my question for you is, what traits or skills do you think are most important to develop for future founders who want to build successful startups?
Gosh, I think that question should be addressed to Jonathan. I would say it’s incredibly lonely. But, the most crucial trait is resilience and being able to understand your vision truly and stick by it. And, in the face of many things in the market telling you otherwise, to be able to power through it.
With some founders, we see that they’re willing to take on the challenge. And, for us, we’re looking at companies that can thrive in the public markets, not as a liquidity event, but mainly as a sense of quality and size of opportunity they’re pursuing. And we spent a lot of time listening to these great business leaders in the public markets that are creating tremendous value.
There are many subtle points, for example, how they talk about their business, the vision they portray, the delivery of that business model, and how they communicate that vision. So those are critical aspects. And the idea is to create that dot plot and potentially identify people who have that similar capability.
Everybody has a nuance, right? So, that is how we would think about it. I believe resilience in those cases is a key attribute in my mind.
Thank you, Kat and Sandesh. So, could you tell us a little bit about Premji Invest? What types of companies do you look for, and what kinds of founders should come and speak with you? And what’s unique about Premji Invest, and what makes the firm a good partner for companies at this stage?
The first thing is, as a firm, we are pretty mission-oriented, and we run a fund in the typical context of a broader crossover fund. We directly invest on behalf of an endowment or a foundation. The foundation focuses on enhancing primary education in developing countries, seeded initially by Azim Premji, the founder, and chairman of Wipro.
And since then, our goal has been to create a corpus, an endowment of a size that can continue that vision of the foundation’s aspirations in perpetuity. So at a high level, it will have a mission orientation to it.
That means that we want to partner with companies that have enduring value. So mission accomplished for Premji Invest, the fund that supports the endowment, is if we can hand back to the endowment, say 20 or 30 companies each worth many billion dollars each.
What that means, then, is that we want to invest in companies that can create a significant market cap and thrive in the public markets for an extended period. And so, we run a crossover fund for public markets and private markets in some ways. So we understand what a company that thrives in the public market looks like. And the idea is to create the dot plot and identify companies with similar aspirations and business models, the whole bit in the earliest stages, and partner with them through the entire journey.
So that’s where we are focused on. If, through our diligence process, we conclude that this is more like an M&A event, it’s unlikely that we will invest in these companies. And so, largely, I’d say that is the broader vision of the firm.
Thematically, we do everything tech, consumer healthcare, and fintech. And typically, I think the right stage for us is for companies that have achieved product-market fit and are going through that scaling journey that we just described. So the scaling journey is where we can be helpful, and the one distinguishing factor for us is we’re a very product-oriented firm.
So early-stage venture has many people that have that orientation, data stages. You have people that think about public markets and models and valuations. We do that as well, just as well as anybody else. But we have a strong product orientation. And the idea is to think of the product at scale.
What product gets you the first 100 million gets you the next 500 million? We’re thinking about that at scale. We’ve seen that journey now with a bunch of our companies. I believe that we’re singularly focused on that aspect, which is a differentiator for us.
Thank you, Sandesh, and if people want to learn more, how do they reach you or Premji Invest?
By design, we are largely invisible, but I think, you know, anybody can drop me an email at firstname.lastname@example.org.
Yeah, that sounds great, Sandesh. It’s been great having you. Thank you for sharing your lessons on scaling unicorns.
Cybersecurity Outsourcing: Principles of Choice and Trust
A few years ago, cybersecurity outsourcing was perceived as something inorganic and often restrained. Today, cybersecurity outsourcing is still a rare phenomenon. Instead, many companies prefer to take care of security issues themselves.
Almost everyone has heard about cybersecurity outsourcing, but the detailed content of this principle is still interpreted very differently in many companies.
In this article, I want to answer the following important questions: Are there any risks in cybersecurity outsourcing? Who is the service for? Under what conditions is it beneficial to outsource security? Finally, what is the difference between MSSP and SecaaS models?
Why do companies outsource?
Outsourcing is the transfer of some functions of your own business to another company. Why use outsourcing? The answer is obvious – companies need to optimize their costs. They do this either because they do not have the relevant competencies or because it is more profitable to implement some functions on the side. When companies need to put complex technical systems into operation and do not have the capacity or competence to do this, outsourcing is a great solution.
Due to the constant growth in the number and types of threats, organizations now need to protect themselves better. However, for several reasons, they often do not have a complete set of necessary technologies and are forced to attract third-party players.
Who needs cybersecurity outsourcing?
Any company can use cybersecurity outsourcing. It all depends on what security goals and objectives are planned to be achieved with its help. The most obvious choice is for small companies, where information security functions are of secondary importance to business functions due to a lack of funds or competencies.
For large companies, the goal of outsourcing is different. First, it helps them to solve information security tasks more effectively. Usually, they have a set of security issues, the solution of which is complex without external help. Building DDoS protection is a good example. This type of attack has grown so much in strength that it is very difficult to do without the involvement of third-party services.
There are also economic reasons that push large companies to switch to outsourcing. Outsourcing helps them implement the desired function at a lower cost.
At the same time, outsourcing is not suitable for every company. In general, companies need to focus on their core business. In some cases, you can (and should) do everything on your own; in other cases, it is advisable to outsource part of the IS functions or turn to 100% outsourcing. However, in general, I can say that information security is easier and more reliable to implement through outsourcing.
What information security functions are most often outsourced?
It is preferable to outsource implementation and operational functions. Sometimes it is possible to outsource some functions that belong to the critical competencies of information security departments. This may involve policy management, etc.
The reason for introducing information security outsourcing in a company is often the need to obtain DDoS protection, ensure the safe operation of a corporate website, or build a branch network. In addition, the introduction of outsourcing often reflects the maturity of a company, its key and non-key competencies, and the willingness to delegate and accept responsibility in partnership with other companies.
The following functions are popular among those who already use outsourcing:
- Vulnerability scanning
- Threat response and monitoring
- Penetration testing
- Information security audits
- Incident investigation
- DDoS protection
Outsourcing vs. outstaffing
The difference between outsourcing and outstaffing lies in who manages the staff and program resources. If the customer does this, then we are talking about outstaffing. However, if the solution is implemented on the side of the provider, then this is outsourcing.
When outstaffing, the integrator provides its customer with a dedicated employee or a team. Usually, these people temporarily become part of the customer’s team. During outsourcing, the dedicated staff continues to work as part of the provider. This allows the customer to provide their competencies, but the staff members can simultaneously be assigned to different projects. Separate customers receive their part from outsourcing.
With outstaffing, the provider’s staff is fully occupied with a specific customer’s project. This company may participate in people search, hiring, and firing of employees involved in the project. The outstaffing provider is only responsible for accounting and HR management functions.
At the same time, a different management model works with outsourcing: the customer is given support for a specific security function, and the provider manages the staff for its implementation.
Managed Security Service Provider (MSSP) or Security-as-a-Service (SECaaS)
We should distinguish two areas: traditional outsourcing (MSSP) and cloud outsourcing (SECaaS).
With MSSP, a company orders an information security service, which will be provided based on a particular set of protection tools. The MSS provider takes care of the operation of the tools. The customer does not need to manage the setup and monitoring.
SECaaS outsourcing works differently. The customer buys specific information security services in the provider’s cloud. SECaaS is when the provider gives the customer the technology with complete freedom to apply controls.
To understand the differences between MSSP and SECaaS, comparing taxi and car sharing is better. In the first case, the driver controls the car. He provides the passenger with a delivery service. In the second case, the control function is taken by the customer, who drives the vehicle delivered to him.
How to evaluate the effectiveness of outsourcing?
The economic efficiency of outsourcing is of paramount importance. But the calculation of its effects and its comparison with internal solutions (in-house) is not so obvious.
When evaluating the effectiveness of an information security solution, one may use the following rule of thumb: in projects for 3 – 5 years, one should focus on optimizing OPEX (operating expense); for longer projects – on optimizing CAPEX (capital expenditure).
At the same time, when deciding to switch to outsourcing, economic efficiency assessment may sometimes fade into the background. More and more companies are guided by the vital need to have certain information security functions. Efficiency evaluation comes in only when choosing a method of implementation. This transformation is taking place under the influence of recommendations provided by analytical agencies (Gartner, Forrester) and government authorities. It is expected that in the next ten years, the share of outsourcing in certain areas of information security will reach 90%.
When evaluating efficiency, a lot depends on the specifics of the company. It depends on many factors that reflect the characteristics of the company’s business and can only be calculated individually. It is necessary to consider various costs, including those that arise due to possible downtime.
What functions should not be outsourced?
Functions closely related to the company’s internal business processes should not be outsourced. The emerging risks will touch not only the customer but also all internal communications. Such a decision may be constrained by data protection regulations, and too many additional approvals are required to implement such a model.
Although there are some exceptions, in general, the customer should be ready to accept certain risks. Outsourcing is impossible if the customer is not prepared to take responsibility and bear the costs of violating the outsourced IS function.
Benefits of cybersecurity outsourcing
Let me now evaluate the attractiveness of cybersecurity outsourcing for companies of various types.
For a company of up to 1,000 people, IS outsourcing helps to build a layered cyber defense, delegating functions where it does not yet have sufficient competence.
For larger companies with about 10,000 or more, meeting the Time-to-Market criterion becomes critical. But, again, outsourcing allows you to solve this problem quickly and saves you from solving HR problems.
Regulators also receive benefits from the introduction of information security outsourcing. They are interested in finding partners because regulators have to solve the country’s information security control problem. The best way for government authorities is to create a separate structure to transfer control. Even in the office of the president of any country, there is a place for cybersecurity outsourcing. This allows you to focus on core functions and outsource information security to get a quick technical solution.
Information security outsourcing is also attractive for large international projects such as the Olympics. After the end of the events, it will not be necessary to keep the created structure. So, outsourcing is the best solution.
The assessment of service quality
Trust is created by confidence in the quality of the service received. The question of control is not idle here. Customers are obliged to understand what exactly they outsource. Therefore, the hybrid model is currently the most popular one. Companies create their own information security department but, at the same time, outsource some of the functions, knowing well what exactly they should get in the end.
If this is not possible, then you may focus on the service provider’s reputation, the opinion of other customers, the availability of certificates, etc. If necessary, you should visit the integrator and get acquainted with its team, work processes, and the methodology used.
Sometimes you can resort to artificial checks. For example, if the SLA implies a response within 15 minutes, then an artificial security incident can be triggered and response time evaluated.
What parameters should be included in service level agreements?
The basic set of expected parameters includes response time before an event is detected, response time before a decision is made to localize/stop the threat, continuity of service provision, and recovery time after a failure. This basic set can be supplemented with a lengthy list of other parameters formed by the customer based on his business processes.
It is necessary to take into account all possible options for responding to incidents: the need for the service provider to visit the site, the procedure for conducting digital forensics operations, etc.
It is vital to resolve all organizational issues already at the stage of signing the contract. This will allow you to set the conditions for the customer to be able to defend his position in the event of a failure in the provision of services. It is also essential for the customer to define the areas and shares of responsibility of the provider in case of incidents.
The terms of reference must also be attached to the SLA agreement. It should highlight all the technical characteristics of the service provided. If the terms of reference are vague, then the interpretation of the SLA can be subjective.
There should not be many problems with the preparation of documents. The SLA agreement and its details are already standardized among many providers. The need for adaptation arises only for large customers. In general, quality metrics for information security services are known in advance. Some limit values can be adjusted when the need arises. For example, you may need to set stricter rules or lower your requirements.
Prospects for the development of cybersecurity outsourcing in 2023
The current situation with personnel, the complexity of information security projects, and the requirements of regulators trigger an increase in information security outsourcing services. As a result, the growth of the most prominent players in cybersecurity outsourcing and their portfolio of services is expected. This is determined by the necessity to maintain a high level of service they provide. There will also be a quicker migration of information security solutions to the cloud.
In recent years, we have seen a significant drop in the cost of cyber attacks. At the same time, the severity of their consequences is growing. It pushes an increase in demand for information security services. A price rise is expected, and perhaps even a shortage of some hardware components. Therefore, the need for hardware-optimized software solutions will grow.
Featured Image Credit: Tima Miroshnichenko; Pexels; Thank you!
5 Signs That Indicate Your Startup Is Ready To Scale Up
Concerns surrounding the current changing economic cycle amid rampant running inflation, a tightening monetary policy, and an even tighter labor market has seen small business sentiment reach a new low against the backdrop of tumultuous conditions.
Across the board, small business confidence has plummeted to new record lows. According to an earlier August report by CNBC, The Small Business Confidence Index dropped to 42 points at the start of the third quarter, four points lower than the quarter before.
Today, more than half – 51% – of small business owners and entrepreneurs have described the current state of the economy as “poor,” a jump from 44% recorded in the second quarter.
The post-pandemic economy, which has brought widespread uncertainty to both business owners and consumers has left many owners signaling red as they try to shield themselves financially against a looming recession.
The tall tale that reads around 90% of startups fail, and 10% fail within the first year since inception is looking more and more realistic these days.
A lack of financial capital, consumer support, and appropriate services or products in a highly competitive market has driven many startup entrepreneurs further into the dark. But these and other conditions have been a persisting challenge for many startup owners, and for those who can upscale their ventures in the coming months or years or now left feeling more puzzled than ever before.
Despite the hard economic challenges, running from higher operating costs to troublesome labor conditions, there are still a number of startups – in several industries – that carry the potential to increase their capacity, whether it’s broadening their services or products offerings, onboarding new personnel, or even going public with a brick-and-mortar store.
Signs That Indicate That It Is Time To Scale Your Business
Regardless of the conditions, you’re operating, it’s time that you start noticing the signs that will help you realize it’s time to scale your business – and here are five of the most common ones.
You Still Have Ongoing Funding
Whether your startup was lucky enough to strike a few lucrative funding deals with credible investors, or you recently signed new backers that are willing to invest in your new line of products and services, startups that still have plentiful funding amid the turndown will potentially be ready to scale their ventures in the coming months or years.
It’s always best to consider how funding is used, and where most of its being allocated. If most of your finances are currently tied to research and development, you might want to still hold out before going too big too soon. If the funding is still there, it’s a good indicator that the startup is still in a good position and that the possibilities of scaling could be around the corner.
Sales have been booming, and the startup is finding it more and more difficult to keep up with the strong demand. If you notice that you need to hire or onboard new personnel to help drive revenue and growth, you might need to consider how you can scale your business in the months ahead.
It’s best to play it safe, as most of the time higher sales can be driven by market trends, and consumer shopping behaviors can change on a whim. If your sales strategy is still on track with startup goals, look to ways in which you can initiate optimized sales growth, while at the same time onboarding a talented team.
Sturdy and Loyal Customer Base
Startups that are more focused on rapid growth, and not consumer demands or building a loyal customer base tend to fail a lot quicker. This might not be the case for every startup, as industries do tend to differ, and consumer purchasing behavior.
Nonetheless, startups that have established a loyal and trusting customer base, and that have a clear value proposition within their business ethos might be ready to start branching out to other parts of the consumer market.
It could also swing the other way around. In the case where a startup has to start turning clients away, because of increased demand, and not enough physical hands to help the business cope, the business could start running into a bottleneck situation.
This is why it’s important to invest in a valuable core team that can help drive sales, and carry the potential to push further development of the business.
You Have a Strong Team
Although customers are a crucial part of the business, a strong and highly motivated team is just as important to the core of the business.
Any business owner will tell you that without the right people, a business is setting itself up for failure. Having a strong team that carries out the mission of the business day in and out will only help a startup become more successful in the long run.
If you notice that your team is capable of running projects by themselves, resolving issues without requiring executive intervention, or generating new leads that could potentially lead to new sales – your startup might be ready for the next step of its scaling journey.
Steady Cash Flow
Aside from investor funding deals and private backers, startups that enjoy steady cash flow might be in the right position to enter a new era of growth.
Although it’s possible that scaling your startup will automatically increase costs, it’s important to delay every outlay of cash as long as possible. This will help the business remain financially secure, even in the face of a sudden market downturn.
Generating revenue is a good thing, but having a steady stream of income coming and going through your business is a good indicator for any startup owner.
There are a lot of startup owners who need to consider before simply deciding they want to scale their business. Whether it’s bringing onboard new members, or launching new products and services to help alleviate a bottleneck demand – seeing the signs of positive business growth means that your startup is ready for its next phase.
Published First on ValueWalk. Read Here.
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The Role of Advanced Tech in Modern CX
While customer experience (CX) will always require a human touch, there’s something to be said about technology and its role in keeping customers happy and engaged. And if you look at the current landscape of business tools, you’ll see that there’s never been a better time to focus on modern CX.
What is Customer Experience?
Customer experience might sound like a buzzword or fancy term that Silicon Valley startups paste into PowerPoint presentations when raising a fresh round of capital. Still, it’s a tangible concept that has a real-world impact on your business (for better or worse).
According to HubSpot, “Customer experience is the impression your customers have of your brand as a whole throughout all aspects of the buyer’s journey. It results in their view of your brand and impacts factors related to your bottom line including revenue.”
Modern CX is especially important when you think about the sheer volume of options the average customer has to choose from. With so many similar services and products being sold by competitors, you need something that sets you apart. A positive customer experience can help you do this. Likewise, ongoing CX impacts loyalty, repeat purchases, customer lifetime value, and more.
Customer experience is created and influenced by two primary touch points within your organization: Your people and your products. If you’re going to enhance customer experience, start by thinking about (1) how you can improve the way your people interact with and serve your customers, and (2) the quality, utility, and perceived value of your products by the customer.
Exploring High-Tech Approaches to Customer Experience
If you want to elevate the customer experience and grow your business, you must reduce friction. And the best way to reduce friction is by streamlining your approach using technology and innovation.
Here are several technologies and approaches that successful companies rely on (and you can too).
1. IT Help Desk Software
If you’re still using a basic ticketing system to handle support tickets and IT requests, you’re playing from behind. Not only are your customers extremely frustrated with the slow pace and poor service, but your employees are drowning behind the scenes.
IT help desk software decreases end-user confusion, streamlines problem resolution, and makes quick use of pesky tickets. Some features of IT help desk software could include the following.
- Assign individual tickets to specific team members based on skillsets, certifications, experience, and availability. This ensures customers get the best (and fastest) support for their individualized needs.
- Automatically and intelligently triage support tickets so that simple fixes can be automatically addressed without requiring manual input from a team member.
- Get notifications and reminders on outstanding support tickets so that no customer request is left open for too long.
Most advanced help desk software is built on the cloud, which increases your team’s flexibility and allows you to provide customer support from anywhere (without being dependent on location or device).
It’s also entirely scalable, which makes it easy to continue providing great support, even as your customer base and volume of support tickets grow.
2. AI and ML Chatbots
People want as many different customer service options and channels as they can get. And they expect someone to be available to help them regardless of the time or day. From a company’s perspective, this creates a lot of pressure and expectation. Thankfully, technology comes to the rescue once again. This time, it’s in the form of artificial intelligence (AI) and machine learning (ML) chatbots.
AI and ML chatbots are essentially online chat technology with smart algorithms. Companies program them to understand and interpret customer questions. They can provide answers, suggest solutions, and/or triage customer support requests. Employees can then send tickets to the correct support person.
While some companies choose to develop their own chatbots, you can also leverage existing platforms.
3. 24/7 Social Monitoring
You can’t afford to clock out. While 9-to-5 may be standard work hours, companies with high modern CX scores are tuned into what’s happening with their customers 24/7/365…and you should be, too.
While 24/7 monitoring is important, you don’t have to physically park yourself (or employees) in front of a computer or phone around the clock. Using monitoring software, you can listen to what’s happening and gather insights about what people are saying on social media. You can also track, analyze, and respond to email and chat requests.
Some of the top 24/7 monitoring platforms on the market include Zendesk, Hubspot, LiveAgent, and Hootsuite.
4. Virtual and Augmented Reality
While maybe not as common as some of the other technologies listed in this article, don’t underestimate the rise of augmented reality (AR) and virtual reality (VR). We live in a virtual world where more of the buying process is happening at a distance. This is leading brands are always looking for ways to increase customer engagement and enhance the shopping experience. AR and VR are game-changers in this regard.
Amazon, which is always on the bleeding edge when it comes to modern CX – is a great example. Their new AR View technology allows shoppers to view items in their homes before purchasing.
Amazon’s technology allows prospective customers to view products in the setting of their own homes before they make a purchase. They can make their purchases based on how the product looks and fits their current setting, color scheme, and so forth. They no longer need to move furniture around once something arrives only to discover it doesn’t really work as they thought. Instead, they use a smartphone to boost confidence prior to purchase.
Aside from being interesting and unique, this “view in your room” technology serves the distinct purpose of reducing the friction that shoppers often experience when they don’t know what a product will look like in their home and/or if it’ll fit the space. Customers who use this augmented reality technology end up happier with their final purchases and are less likely to return the products they purchase.
Measuring Customer Experience
If you’re going to commit to strategically improving your CX, you want to make sure you’re measuring it. (This is the only way to track progress and know if you’re getting the results you’re searching for.) Again, there are several ways you can do this, including the following.
- Start tracking your Customer Satisfaction Score (CSAT). This is basically a measurement of how happy your customers are with your products and service.
- To calculate a CSAT score, you simply send customers a one-question survey after a purchase or support interaction that asks: “How satisfied were you with [company/product]?”
- Typically, you ask customers to rank their satisfaction on a scale of 1-10 (with 10 being the most positive).
- Over time, you can track your CSAT score and watch as it moves up or down. This will give you some context for how customers feel.
- It’s natural to have some churn. However, tracking customer churn rates will help you understand when and why customers are leaving.
- Dig in and analyze the data. Determine the reasons for the churn and any actions you can take to reduce future churn.
- Engage with customers and proactively gather feedback. If possible, meet with customers face-to-face or have extended open-ended discussions via phone or video conferencing.
- This allows you to measure both the experience and the sentiment. (You can tell a lot through tone of voice, inflection, word choice, etc.)
Adding It All Up
Customer experience is more than a buzzword. It’s a tangible measurement of the way customers feel about your brand and its products.
By prioritizing modern CX with the right high-tech investments, you can improve your results and experience success.
Featured Image: CottonBro; Pexels.com. Thank you!