This is how to make your company more disciplined with the Rule Of 40

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Kyle Coleman

SVP Marketing at Clari

Published: May 1, 2023

You can also listen on Apple Podcasts or Spotify

Transcript
Transcript

Kyle Coleman:

Andy, I’ve heard you talk about the Rule of 40 quite a bit. Give us a quick definition.

Andy Byrne:

Yeah, so Rule of 40 fundamentally is about building a durable company and being able to look at your business differently in a more multidimensional way. What does that do? It causes all of these companies to be more disciplined and more efficient. And when they’re more efficient in driving revenue that produces free cashflow, the market’s going to be looking for that. You’ll start to see the IPL window open, and what will happen is you’re going to have a stable of companies. Their business models are going to be so much more attractive.

Speaker 3:

The market is changing rapidly. 18 months ago, companies were riding high, flush with funding. Hiring and growing and going public at astounding rates. Today, not so much. It’s a very different world now. The information a CEO needs to confidently bring to the board or to Wall Street, has changed and it has significant impacts on leading a company and a revenue team. Now companies are no longer optimizing for growth at all cost. Instead, a new level of rigor is being applied to all areas of the business, with a focus on growth and profitability. This week on the podcast, Kyle is joined by not one, but two CEOs who share experiences of leading through uncertainty.

Alex Atzberger is the CEO of Optimizely, formerly Episerver. Before his time at Optimizely, he spent 14 years in various revenue critical roles at SAP, culminating in his top line revenue growth focused role as president of SAP customer experience.

He’s joined by CEO and co-founder of Clari and Prime Minister of Revenue, Andy Byrne. Andy has been leading Clari in evangelizing the power of a connected revenue platform for the past decade. They’re here to teach you about why your business needs to be following the Rule of 40, proper prep for every step of the revenue cadence, and finding your board superpowers. Let’s kick it over to Kyle.

Kyle Coleman:

I’m Kyle Coleman, sales pro turned SVP of marketing at Clari. Run Revenue is the show where revenue pros learn to stop revenue leak, achieve revenue precision, and grow their companies and careers.

Speaker 3:

This is Run Revenue Show with Kyle Coleman.

Kyle Coleman:

Hello everybody, and welcome to this episode of The Run Revenue Show, a very exciting episode because I’m joined today, not by one guest but by two guests. We have CEO of Optimizely, Alex Atzberger. Alex, welcome to the show.

Alex Atzberger:

Thank you Kyle. Great to be with you.

Kyle Coleman:

And we have my CEO, my dear friend, Andy Byrne, CEO of Clari. How you doing, Andy?

Andy Byrne:

Ready to go, Kyle. Let’s do this.

Kyle Coleman:

All right, we are talking all about boardroom priorities, getting both of your perspectives. Not first time CEOs here. Y’all have seen this movie before. You’ve seen recessions before. We want to understand what are the shifting boardroom priorities happening today, and how should leaders adapt to change. But before we dive into that, I want to give people a little bit of a framing on Alex, where you’ve been, what you’ve seen. Just make sure people understand who you are.

So I’ll give a 30-second rundown on Alex, and you can feel free to fill in anything that I missed. 10 years at SAP and you end up as the president of SAP Customer Experience, and this is in the 2018/2019 timeframe. Then you move over to become the CEO of Episerver. You’re the CEO at Episerver for about two years, and then Episerver is acquired by Optimizely. You’ve been at Optimizely for about two and a half years. And all of these tech credentials are very impressive, but possibly the most interesting thing to me, we were talking about it right before we started recording. You started a hot chocolate company. Talk to us a little bit about your adventures in tech, and also tell us about the chocolate company.

Alex Atzberger:

So Kyle and Andy, one thing to clarify is actually EpiServer acquired Optimizely. But then I chose to take the name Optimizely for the combined business. Because there was really a reflection about what companies really want to do, which is optimize their results, content needs to improve their digital experiences. So there was an important move for the name recognition of the business. And then for the hot chocolate business, I believe good products rule the world. And hot chocolate is typically pretty bad when you drink it made out of powdered chocolate. And so we decided to actually melt chocolate rather than just chocolate powder, and it creates a rich flavor. And so we believe that’s a product that has a long future.

Kyle Coleman:

Absolutely love it. Okay, let’s dive into today’s topic, and we’ll start with you Alex. Start at the really high level. Which is let’s just talk about how the changes that you’re seeing in the market, obviously not a surprise to anybody that the macro environment, is a bit challenging. So how are you changing your conversations with your board members?

Alex Atzberger:

Yeah, so I think what really has happened is if you go back 18 months, probably was November 2021, the height of the market in tech, you could basically not find salespeople any longer in the market. The market was expanding and I think everybody started 2022, which is again pretty amazing that it’s already 15 to 18 months ago. With a very, very aggressive point of view in terms of what was feasible from a growth perspective.

And then suddenly you saw the market just changed very dramatically. And I think in that moment any company needed to decide like, “Look, it’s no longer growth at all costs. It’s now how do we actually balance growth and profitability going forward.” And it meant for companies that were burning money to understand how much cash burn can they still absorb. And it was obviously for companies that were already profitable to ask themselves, “What is our balance between growth and profitability?”

In our boardroom, we talk about the Rule of 40, we talk about the balance of growth and profitability, and how to manage the business. And what we talk a lot about is just really predictable results. And if you add a very unpredictable environment, it’s about how do you drive predictability? And that’s something that’s so important for me as a CEO. And one of the reasons why I also spend a lot of time, and your solutions from Clari is ultimately about driving predictability in the results. I think that’s a big part of the bottom conversation.

And then obviously you come quickly to the conversation about what return on investment you get for different investments you make as a company. And as a CEO, you spend a lot of time suddenly looking into areas that you might have not looked into for a while, because it was really not that important. But suddenly you do look at every marketing dollar that you spend, suddenly you do look at your gross margin. So suddenly the conversation starts to be quite different. And that requires a different level of rigor, but it also requires you to do more with partners that you have. And see how can you actually ensure that you set yourself up for growth in the future, while not putting the future at risk. While you’re actually looking at deriving profitability across the business.

Kyle Coleman:

So many areas to dig into there, Alex. Andy, I want to kick it over to you. Alex, you mentioned the Rule of 40. Andy, I’ve heard you talk about the Rule of 40 quite a bit. Give us a quick definition, and then tell us about how your conversations are changing with the board. And specifically what I think you do a little bit differently, Andy, is you have what you call board calls happening throughout the course of the quarter. These are not board meetings, these are less formal check-ins, updates. So I’m curious to hear about A, what is the Rule of 40, and B, what are you discussing on these board calls that you have?

Andy Byrne:

Yeah. So Rule of 40, very simply put, it’s looking at the combination of grow and free cashflow, and putting that together and coming up with the math around that that equals around what they call the Rule of 40. So that was a financial philosophy that was out the window during this whole era of quantitative easing that was led by the Fed really starting post-financial crisis. As we were in this mode of just growth at all costs. Now what’s happened as you hear the likes of Frank Schopman and others say, “Hey, never ever let a great crisis go to waste.” As we think about what some younger employees would think is more of a dramatic environment. I think a lot of CEOs that are older in their careers like myself and Alex, I think that we see that we like these environments. Because it drives more discipline.

Rule of 40 fundamentally is about building a durable company, and being able to look at your business differently in a more multidimensional way. Not just growth, but actually going and forcing you to unpack the different department envelope spend of each department, looking at it as a percentage of revenue. That actually reveals a lot of things that you didn’t really think through in terms of additional insight and rigor. That then is going to allow you to force a more challenging conversation that I think is healthy with that department head. That has them not just making their growth targets, that actually trying to drive more efficiency through their department. That leads to on aggregate, us actually having a better cost ratio against our total revenue.

Over time, what does that do? It causes all of these companies to be more disciplined and more efficient. And when they’re more efficient in driving revenue, that produces free cashflow. That we’re all looking to produce over time, the market’s going to be looking for that. And you’ll start to see the IPO window open. And what will happen is you’re going to have a stable of companies that their business models are going to be so much more attractive. So I actually like where we’re at. I like the additional rigor that we’re putting in place. And I think what’s going to happen is over time as we get through this recession and every down cycle has an up cycle, you’re going to see a beautiful trend towards great companies going public again. And it’s driven by Rule of 40, it’s driven by good growth, and world-class CEOs.

Kyle Coleman:

It’s really well said, Andy. And both of you mentioned this need to really put the magnifying lens on different areas of the business that perhaps you hadn’t before. And Alex, the way that we think about this at Clari is that, what you’re trying to do with respect to revenue generation, is you’re trying to spot the areas of revenue leak. Where are you inefficient? Where are the handoffs getting missed? Where are the areas of revenue that are leaking out of any stage in the funnel? And so I’m curious for you to tell us about a time that you looked into an area that perhaps you hadn’t looked into recently? And you made a change or a different business decision, a different business strategy as a result of that inspection?

Alex Atzberger:

Yeah, I think a couple of examples, and there are certain pet peeves that I probably have. That after a while you look into it and you’re like, “Wow, it’s interesting how companies are organisms in some ways, and sometimes they get out of control.” And then you, as Andy said, I think very astutely, you kind of look really into an area, and you find out again what really has happened. There’s a couple of areas, if you look at spent areas, take IT costs and application growth inside companies. It’s shocking to me how many applications companies need to run their business. And for a company our size, when I look how many apps we use, it’s pretty incredible.

And oftentimes solutions have a large overlap in terms of what they actually do. And when you actually look at the adoption of which solutions are actually truly being used and really drive outcome in the business, it’s really not that many. And the MarTech space where we compete in as Optimizely is one of those areas where marketing has just acquired tons of different solutions. But if you ask somebody how much demand does it generate, how does it help you in terms of actually converting your pipeline? I don’t know why we need five different providers to tell us if JP Morgan is a financial institution or a bank.

I mean, how many different systems do you need to tell you some very basic information that you should be able to expect? And that’s just the [inaudible 00:12:38]. But over time, when people change, people come in, they have their favorite solutions, it just grows exponentially. So that’s just one area. When you look at areas like revenue and when you really look at how effective is a team, what you tend to do as a company is you tend to look at things at a quarterly basis, or based on board meetings, et cetera. And by the way, we also introduce monthly calls with our board that are just touch bases. So that’s also very, very common.

But what’s really amazing is when you actually change it, and you actually manage information like this constantly rather than just at a quarterly basis. And for instance, the ability to see how much pipeline do you have by territory or by rep? How does this pipeline age, how does it convert? How does it actually move across the funnel? What stages are you at and how does it scan that predictability? That’s for me, something that really changes the way you operate. Because then you simply are much more refined and actually saying like, “Oh, it’s the market is doing this or that.” Because the question that I always try to answer, how much is market versus how much is us? And it’s very difficult to answer that question, but it is very feasible suddenly to actually get much, much more precise on where you action and the specifics really matter.

And so a lot of times, especially as CEOs, we do collected statements, it sounded really good, but actually the specifics really are different. And it might very well be that if I look at our past quarters, our European business performed better than the US business. But then within the US business, one market might perform better than another market. And then you are able to actually go back and understand what happens to the demand that you created. Then you suddenly can tie it to an enablement of sales people for instance. And then you have a narrative that’s actually much further than just to say like, “Oh, the market was good or bad.” And I think that sort of deep dive into each of the areas is I think what Andy mentioned. To have conversations with your different functional leaders because now you can actually go far deeper in actually coming up with the root cause and what you can actually do about this. And suddenly it’s no longer just you being a function of the environment, but you actually have function of your own doing. That’s a great place to be.

Kyle Coleman:

So one of the best answers I’ve ever heard to that question, and Andy, I think that there’s a lot that you’re going to love about that. Because Andy, something you said to me about a year ago is that a lot of companies focus on cutting costs as a means of surviving any sort of economic downturn, but cutting costs is only half a strategy. The other half of the strategy is mastering revenue. And that’s exactly what Alex just stepped us through. So talk to us now Andy, a little bit about how you can think more about the instrumentation, the rigor, the visibility that’s required to master your revenue process.

Andy Byrne:

Yeah, what I’d say is that, Alex, your commentary, it’s a new level of think that was different from previous CEOs. Think if I go back to the .com crisis or the great financial crisis that happened, it was really around cost-cutting. Now it’s really about thinking about every drop of revenue matters. And it starts with understanding where do we have leakage across our revenue process? And most of the commentary that folks are talking to me about, I was thinking about two meetings I’ve had this morning. And then yesterday with two board members of [inaudible 00:16:17]. The breakfast I had yesterday was three publicly traded boards and today two publicly traded boards that this women sits on. They are talking about two things, revenue collaboration and revenue governance, and it’s new topics that are being discussed. Collaboration is, “Hey, does the board understand how the company is running their 13-week cadence? How they collaborating around revenue?”

That is to say that you have a 13-week cadence and how effective and how efficient is that? Now that’s how they’re running the revenue process. In a lot of cases, boards don’t have any idea about that. They know that there is a number that gets rolled up into board flash reports and in board meetings. But they’re starting to do a deeper level of inspection in this environment, Kyle, around how we’re running revenue. So that’s what we call revenue collaboration. The other piece I find fascinating is revenue governance boards are trying to control the outcomes, the behaviors, the accountability, more discipline, more in this environment. More rigor around how they’re running revenue to get to a state of what the industry’s calling full revenue precision.

So from this pervasive revenue leak where on average companies are leaking up to 15% of their revenue they’re losing every year. That’s based on Boston Consulting Room and also moving to a world where they have full revenue precision. That is the ability to have predictably, repeatedly nailing their revenue every quarter, having a beat and raise cadence. Or in this case, in a down market, it’s being able to actually understand where that drop is going to occur.

To Alex’s point in understanding, “Hey, where might we decide not to invest and know now to be a good fiduciary over time? If I’d have total revenue precision, I can be making better decisions earlier in my operating rhythm as a fiduciary.” And boards are really focused on that these days.

Alex Atzberger:

And maybe to build on that, I think Andy, the big change that I’ve seen as we kind of went from a place where we talked about being [inaudible 00:18:38] data informed, where I feel that the big mega trend today is really thinking scientifically about how we do things. Because everything that you just mentioned on being predictable, understanding the process, these are all words that come from a science place. In some ways they are, because science basically helps you predict what the outcome will be. And there’s always this notion about also in the marketing space between art and science. Of course you want people to be creative, come up with ideas, et cetera. But I do want to know what works in marketing for instance, and what actually drives outcomes.

Because the creative part is expensive. I don’t know what the outcome is. And I think the same applies to how many times are you with a sales leader who tells you the art of selling and there’s an art to this, but there’s also a science aspect to this, and you do want to see repeatability of the science. And one of the things that I for instance find personally fascinating and was for me, a big flip moment over the last, probably last year, was when the AI predicted the forecast better than the human prediction at one point. And I think this is the moment where you suddenly feel like, “Wow.”

And I think the same happens today with general with AI all around us, et cetera. But it is this moment where science matters when we do the same power customers, for instance, on testing, where again, people want to embrace scientific method of working. But what you really need to do is you need to really trust the process and the steps behind it. And you’d speak about a 13-week cadence, which I think is amazing. But how many times people start with two weeks in and then say suddenly like, “Oh, I should probably be off from it.” But you do need to follow the process and trust the science come to predictable results. And I think that’s for me, the big change that’s happening.

Andy Byrne:

I would say Alex, Kyle, if you don’t mind, I’m going to pile on on this one. Is that I think the interesting thing about art versus science is that the reason why it was art is because they didn’t have the new technology. I feel horrible that in for the last 30 years of my career, I should say 20, before I started Clari, I was in what the industry calls the three-headed Hydra. I was working a CRM trying to design it to run the entire revenue process, and then it didn’t do exactly what we wanted it to do. So we exported into Excel and I’d have Excel from rep all the way up to the boardroom, and then that would break when you’re aggregating data. And so we’d say, “Hey, let’s deploy Domo or Pablo, and we are bouncing in and out of all these interfaces.

And so therefore what that drove is this frenetic way to run revenue. And I had to guess, I had to use my gut, because I didn’t have a purpose-built system that was designed for me. Whether I’m a rep, a manager, a geo lead, a regional director all the way up. Now they have a system to be scientific and to use machine learning and all degenerative AI that’s coming out. It’s going to be profound what happens in terms of how we think about the most important business process in any company on the planet.

Yet it was not fully instrumented like you would a network or an application, where you can know every packet that’s being lost. You can know latency and utilization, and they have the notion of five 9s in reliability. Why isn’t that happening across the end-to-end revenue process? Which is the most important. So I think you’re going to see some wild advancements. Yes, we’ve gone to a science-based approach that drives more efficiency, growth and predictability. But I think the next 24 months is going to blow people away in terms of the amount of innovation that comes out across the revenue process.

Kyle Coleman:

It’s really well said guys. And I want to go back to the board topic here for a moment. And say what you two are talking about is all about confidence. The CEO needs to have confidence in the number, of course, in the business strategy and everything walking into a board meeting. And it sounds like, and I want to put words in your mouth here, Alex. But it sounds like this move from art to science or rather maybe finding the right balance between art and science, is a means of giving you that confidence to walk into a board meeting. Is that a fair statement?

Alex Atzberger:

And I would even go so far that I think for many years we always talk about finding the balance between art and science. But my board cares for the science part because it does want to know, I know the number, not just the art. For whatever reason, I was just recently rereading Kitchen Confidential by Anthony Bourdain. And he talks about the fact that when you have a line chef, you don’t want them to be an artist to come up with their dish every time. You want them to actually produce the same dish every time. And the same is true for a sales manager. I don’t need a sales manager to be an artist. I want the sales manager to deliver the number every quarter. One is obviously the presentation into the boardroom, but the other one is for how you manage the business and how you actually also communicate internally.

And so for me, this is really important that this goes hand and because that confidence that you have about your results towards your board, ultimately it needs to be grounded in a really good understanding of the metrics of the business. But also what you see in the market. And that’s where you combine the art and the insight in terms of what’s happens in deal cycles, et cetera. But that’s what you need to combine both in terms of how you speak to your employees, how you speak to your teams, as well as to the boardroom. So that’s perfectly consistent.

Kyle Coleman:

That command that you have of the business, and Alex, you mentioned it before, you want to be able to look at every industry, every segment, all the way down to the individual rep. And that gives you that command on the business that perhaps you never had in the past, or rather getting it, as Andy said before, with the three-headed Hydra. Was a weeks long endeavor with an outcome that you could never really trust. So Andy, back to you. How do you think about, or how do you prepare for a board meeting to make sure that you have that full command of everything that’s going on? That you can predict the questions they’re going to ask in advance and have useful answers?

Andy Byrne:

Yeah. Well, what I’d say is that because of Clari, and our board has access to Clari and they’re in Clari and there’s no surprises, ever. So we’re never really looking at, “Okay, why did this happen or why it happened? Why is this particular pipeline conversion happening in this segment and not in that segment?” So that’s an always on interface. What does that do? That allows us to no longer have to create the news and report it, and we talk less about the tactical, how is the business performing, to more strategic dialogue. And we’re always thinking about, okay, what are the not three but only two topics? So in my case, I always think about, I just want to talk about two topics only. And what are the most important topics that matter and what time horizon are those topics going to explore? So I think having the science, having Clari, knowing where we’re going to land not just this quarter, but next quarter. And have a really good sense of how we’re trending toward the year, it allows you to actually flow in more strategic space and less tactical updates.

So, then what we do is preparing for that board meeting, I do actually go through a process whereby every department head has to write an essay that is about what is going on in their department. It can be anywhere from three to six pages long. And so we do have a fairly significant stack of stuff that’s coming through to the board. And yes, they are ripping through all of that data. I expect them to go through that data, but it’s also a calibration point for my team. So one of the nice things about these board meetings, it’s a forcing function to stop from doing all of the mechanical performance, the tactical work that we need to make on numbers in our GMTs or our OKRs and zoom out a little bit. And once that executive writes their note and every other exec has read it, we then start to drive a discussion and that reveals interesting things that other execs did not realize that were happening.

As we start to get to this level of scale, the rigor and discipline that we now have, pre-board meeting, is significant. And it’s actually more for my e-staff than it is for the board. And at first when we turned this on, it was brutal. People were saying [inaudible 00:27:43], there was all kinds of pushback as you now Kyle, on this. But the level of alignment and speed at which we’re operating now, because those exacts know that they carve out that time, they go deep, they cross collaborate, they co-create, and then it’s one, two big topics at the board meeting. And that makes the board meeting more interesting because it’s not an update. These are arguably your most important breaks that are helping you think through long-term strategy. So I’m always thinking about, let’s talk about these topics and I want to actually spur debates in the board meeting.

I might have a board member that says, “That’s a great strategy, Kyle.” And you’ve seen me do this,. I love that. That’s great. Totally. And I’d say, “Jim Gatz, can you please counter that?” And let’s just try to drive discussion and that will reveal new things that my team has not thought about. So a lot of it is a good board meeting is not, “Wow, everybody liked what we said.” A good board meeting is, “Wow, we learned a fricking ton and we had not thought about that topic that way.” That’s a good board meeting.

Kyle Coleman:

It’s really well said. And that common thread that you hit on there, Andy, in two ways is no surprises for the board members with respect to the pipeline position, the revenue outcomes. All of that is transparent, shared in an always on way. And then the second thing you said is no surprises for other members of e-staff. You want to make sure that the other executives on the team know what’s going across departmentally so that they’re not surprised by something they learn in a board meeting, and they can contribute to a strategic conversation. Super helpful. Alex, over to you. How do you prepare for board meetings? How do you prepare the board? How do you prepare your executive team? Do you share any similarities with what Andy just stepped through?

Alex Atzberger:

Absolutely. I think the hope process for a board meeting is in itself running experience. The board meeting itself is an outcome or a point in time versus the work that’s done beforehand to take that alignment is so important. I had made a mistake in 2022, 2021, which was I didn’t bring my leadership team always in person together every quarter. Because it was the whole post pandemic time period. I think it was a mistake In hindsight. We are now always getting to about a month before we have the board meeting. That’s when we actually start to really talk in person about key topics. That’s when we start to look at some additional data across margin and other performances. The part that’s really nice is that on the revenue side, again, the entire team is already up to speed. So it’s not like, “Okay, you need to come in now.” One of the things that was vastly important, and that obviously has nothing to do with what you do in your Salesforce system and other things, is that you really split the business by region, by products.

So we are multi-product company, we have multiple regions we cover, et cetera. So for us, all these cuts really make a difference. And it really is important to be able to drive deeper into each. And having that as an input in real time when you need it, that makes a huge, huge difference to actually have a really conversation. And so what we do is we come together in person and that’s really for me from a open dialogue perspective, really, really important. Because I do the same thing as Andy said. I ask people one point PowerPoint, not in the pages, but basically tell me what work, what didn’t work, what’s your next quarter goals, what help do you need? That’s like my four quadrants basically.That’s really helpful for everybody to [inaudible 00:31:29]. But it is important to get to some of these topics where there are different points of views.

And I think sometimes being in person to debate these points of views is far more effective than what I’ve experienced virtually, even though we work virtually well together. It does get to the next level of conversation. And again, the data piece and having that transparency and understanding. And we have a couple of really power users also in Clari for instance, because I think what makes the solution so powerful is that you can explore so many different views. And also the comparisons. I care a lot for year-over-year comparisons. I care a lot for being able to say, “How did we convert? What’s the funnel capabilities one year versus the other? What differences do we see?” Really remarkable was just seeing how much longer deals took to close. And the data actually told you that exactly. So those are the sort of things that are really helpful.

And then also to, again, predictability for the future quarters out and how do you need to correspondingly think about your spent levels versus your revenue levels. Because I think the reason why revenue is such an important process is because it ultimately tells you how much you can spend. So that’s obviously the component here where it comes together. But to actually have that dialogue in an effective base, again, my management team is totally distributed globally. Really then makes a difference to wing people together. That’s what we do the month beforehand. Then we really build the content for the bot meeting and then you want to have the dialogue. But a lot of the dialogue happens in preparation of the bot meeting itself. And that’s also where a lot of the good debates happen, and that’s really the most important part.

Andy Byrne:

Kyle, one thing just piling on Alex’s flow, I think it’s great that the way he’s organizing, the way he runs his meetings is between meetings. One thing I was just going to share, as you mentioned the beginning of this show, was how is the CEO leveraging the brain power of the board between the board meetings? And a lot of younger CEOs, they’re just in the fight and they’re just trying to get through and then all of a sudden they’re saying, “Oh my gosh, I get a board meeting coming up.” That maturity move is knowing that you have a board cadence. And setting up the meetings with your board members and knowing, “Hey, what topics am I going to discuss?” And we have all the cart menu of topics that our chief of strategy owns. We have in our one-on-ones, we’re saying, “Okay, what board calls are coming up?”

Okay, we’ve got Stephanie Buscemi, we’ve got Jim Gatz, we’ve got Steve Singh coming out, Enrique Salem, [inaudible 00:34:20]. And we’re looking at, “Okay, what’s their superpower?” And we actually will line up the topics and we’re just explore that one topic with them and then get a harvest out of that and say, “Is there anything that we might do with this thing?” And in that process, we’re also updating them saying, “Hey, how are things going? Et cetera, board meetings coming up, what do you want to talk about? What’s on your mind? What do you see in the competitive landscape?” And so it’s kind of an always on. I think a lot of boards and a lot of CEOs, it’s kind of off until 30 days before the board meeting and then they’re making calls. If you have that connective tissue that’s always on, actually think that you perform better as a CEO. They perform better as a brain trust and the company is the beneficiary of that.

Alex Atzberger:

Two things to under Scott and that I love Andy as the notion of cadence. I think just learning a business in a cadence. I do a [inaudible 00:35:19] quarter plan always with my team, because ultimately you need to get into a cadence that’s consistent. I have a cadence with my top employees every first of a month after quarter to just share the results holistically as a business. There are certain things that people expect to happen at certain times and you want to set that expectation. And then the other one that I can just underscore is the continuous dialogue rather than a 90-day dialogue. Very good point.

Kyle Coleman:

Alex, take us inside one of those calls, not the board meeting itself, but maybe one of the monthly calls. It’s a one-on-one between yourself and a board member. I’m curious to hear about not exactly what transpired in that phone call, but maybe some ideas that came up that you wouldn’t have had before. And how it led to some behavioral change, some strategic shift that you said, “Wow, that’s an insight,” to borrow a term from Andy. “That’s a nugget. We have to explore that.” And then you and your executive team went off and did something differently. Does something spring to mind for you?

Alex Atzberger:

Yeah, I mean, first of all, building on what Andy said about the superpowers on my board, I have some people then operate us themselves versus some people who might have more of a strong financial bend. So it depends a little bit on where you are, on who you’re speaking to in that sense, in terms of where that superpower lies. But the part that is important is that people give you a different perspective on how to actually think about something. And let’s say for instance, you have a specific area of the business that you’re discussing, you might actually start thinking about it differently, about what are you actually trying to solve. And for me, that’s typically where when I have those conversations, Kyle resets my mind in terms of, “Okay, I’ve thought about it going down this way, but I should actually start looking at it that way.”

And that’s really where the value comes in. Recent example, product decisions we make around our product roadmap decisions and having really a strong sounding board there. But then saying have we considered engaging certain customer groups in our conversation about certain decisions? And it’s just sometimes simple things where you just didn’t think about that angle because you were so focused on solving it a different way. That’s really the most helpful way. But I do look at the topics and two other board members who can again be most helpful in that sense. Even when Andy went through the names Steve Singh was my boss when I ran the Ariba business at SAP. So I can imagine that Steve has good advice for Andy along the way as well. You find amazing human beings who have just an enormous amount of context. And when I work for Steve, every time it gives you a different angle. And that’s really where you get value from.

Kyle Coleman:

Andy, you’ve been very intentional with the composition of the board members and both of you have used this phrase, the superpowers that each board member has. So Andy, just looking at the board that you’ve architected, you have marketing specialists, product specialists, go-to-market strategy specialist, you have finance, of course. You have different folks that have different focus areas. Same question over to you. Any particular conversation with any of those people with various superpowers, that have been really influential in Clari’s strategy this year?

Andy Byrne:

If I look back over the last 18 months, I think about some of our successes in M&A have been fabulous. And we’ve leaned on Jim Gatz at Sequoia and we’ve leaned on Steve Singh as well. And Ahjay, I would call out Enrique Salem, who ran Symantec, publicly traded company for 10 years. He’s one of the world-class operators in our industry. And just the amount of acquisitions he did. I think we learned landscape and strategy from him, but also these young corp dev departments that you’re building, these small corp dev muscle, it’s really about PMI, the post merger integration work. If you don’t know what you’re doing after you’ve acquired the company of how to get it into your cadence, get it into your motion, think about the joint websites, think about the branding, think about the culture moves that you need to do.

Enrique and Salem was really, really helpful in having us think through that because he’s seen the good ones and the bad ones. He’s experienced that and that was super helpful. So that’s a specific example of a superpower that we leveraged that allowed us to, over the handful of acquisitions that we’ve done, we’ve just absolutely crushed them. And that’s giving us more credit with the board to maybe think about doing more acquisitions on a bigger scale. And that’s fun. And so we’re raising that level of conversation and in this environment we like the environment to do more M&A over time.

Alex Atzberger:

Two topics that come up a lot right now, and I think for a lot of tech companies. One is how do you get closer to your ICP and get your ICP even better defined? And I think the other one is just in terms of the market change to blend of net new business versus existing base business. And I think you do find folks who have a lot more experience about how to actually think about the existing base and what are motions that actually work.

And I think that’s where our board and advisors can become super helpful that actually have that experience. Because again, we come out of this place where, you spend all this money on acquiring new customers at any cost, et cetera. And it’s a completely different muscle to think about expansion of customers and how to do that versus just acquiring new customers. And the same on the ICP, you can get super, super specific about who you sell to and get very, very detailed and others. So that’s another area where I think, again, advice really helps and being able to change quickly and adapt quickly becomes really, really important.

Andy Byrne:

I would also add Alex that I think about, just go to superpower and then value, detailed value examples. Think about Stephanie Buscemi, former CMO of Salesforce. She is such a world-class board member, Kyle, all of the guidance that she’s given us. Talk about her superpower and she’s so far beyond a CMO, she is just a savant on go-to-market. And also on enterprise or upmarket segmentation, having you think it’s through pipeline creation. So that’s a superpower that’s been incredible. Kelly Battles, Kelly sits on, I think it’s three or four publicly traded companies. She actually, as we were maturing and scaling, she’s now running our audit committee. And that’s such an important role. And I’m learning and coming up to speed on, we’ve now got comp committee, we have a non-gov committee, we have an audit committee. These are formalized groups of people that are doing their fiduciary duty to make sure that we’re operating as directors in a way that is in service of shareholder value.

And Kelly Battles working with our CFO Adam Meister, she’s been remarkable. That’s her superpower. Ex CFO sits on publicly traded boards, showing us the whole movie, working with our CFO and then coming in close session and just having her walk through all of these topics of which I am not an expert. So you’re adding this expertise to your board, you just see the company start scaling in maturity over time. It’s really fun as a student of this game to watch it all go down. And I just feel grateful to have board members like that at Clari.

Kyle Coleman:

Great stuff. We are almost at time here, so I’m going to give Alex the last word and my last question to you, Alex has more to do with advice to other CEOs. We’ve talked about managing the board, we’ve talked about communication, keeping an eye always on cadence. Now let’s talk about adapting to change. There is a lot moving maybe faster than it’s ever moved for many CEOs who maybe haven’t seen this movie before. Haven’t seen .com, haven’t seen great financial crisis, whatever it may be. What advice would you give to CEOs right now to navigate the constantly changing environment?

Alex Atzberger:

I mean, first I want want to say what Andy just said, being the student of the game is just a beautiful expression. I think you do need to enjoy the journey. That would be always my advice to any CEO. You live through lows and highs, always. Oftentimes people ask me, “What do you think is the end game for a company like Optimized?” And I don’t believe there’s an end game. I believe there’s a continuous game. I’ve been in public companies, I’ve been in private companies, I’ve been in startups. The challenges are varied and different every time, but you have to enjoy what you do. You have to enjoy that journey. There’s a saying that being a CEO is a lonely job. I actually don’t think so. I think there’s a lot of people who give you advice.

Kyle Coleman:

Agreed.

Alex Atzberger:

And so I think we are very blessed to have the opportunity and we should be humbled by the task to lead people. And to ultimately derive successful outcomes, hopefully for everyone who is involved. But ultimately, I want people to be part of the work that they do when they are at the company. And afterwards to say like, “Look, this was a defining moment in my career and my life.” Life is too short. So, and time is the most precious thing we all have, so we want to spend it on something that makes a difference for yourself and the people around you. And so that’s the only piece of advice I could add, Kyle, is to enjoy the journey, to remain curious, to keep learning. And we are in such an exciting time right now with everything that goes on. The fact that probably the biggest tech innovation is happening right now in this very moment, is phenomenal for us as a society. And I always believe the best days are ahead.

Kyle Coleman:

Wonderful. Be a student of the game and enjoy the journey. Alex Atzberger, CEO of Optimizely, Andy Byrne, CEO of Clari. Thank you gentlemen so much. This has been fantastic.

Alex Atzberger:

Thank you.

Speaker 3:

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