Article originally published on Inc.com Aug 25, 2014
What happens when an opportunity for growth falls outside of your core business model? Be ready to make big changes.
I learned an important lesson about growth after nearly three decades in business. Radically changing your core business model demands a radical change across all facets of your organization.
Maintain the Status Quo? No Way.
My 15-year technology services company, Tribridge, has experienced nearly all types of growth: acquisitions, geographic expansion, vertical integration and the addition of new product and service lines. Ours is a fast-paced culture of high achievers and problem solvers who anticipate growth, so much of the change has been easily absorbed and carried out as business as usual.
But what happens when an opportunity for growth falls outside of your core business model? Certainly Amazon and Apple were able to manage a successful pivot in growth strategy when they took on the cloud services and mobile devices markets, but the vast majority of us don't have the resources to scale change of that magnitude. As an entrepreneur, do you maintain the status quo or embrace the new idea head on?
Three years ago, we saw an opportunity to enter the cloud space by filling a pretty cool niche in the market. A long-time Microsoft partner specializing in enterprise resource planning (ERP) and other technology implementations, we recognized that organizations don't feel comfortable putting their sensitive data--think financials, intellectual property and customer information--in a public cloud. After diligent R&D and a significant investment, we launched our own private cloud under a new offering called Concerto Cloud Services.
It Wasn't Pretty Behind Closed Doors
Concerto was an instant success. Just like our other growth ventures, it felt great to meet customer and market demands. But it wasn't exactly picture perfect on the inside. You wouldn't think a tech company taking on cloud services would be a big leap, but it forced us to shift our role as a professional services firm implementing software to a technology services provider with an Infrastructure-as-a-Service business.
Aside from the identity crisis, we made the mistake of trying to run the cloud offering just like the rest of our business, with the same org structure, operations, sales and marketing, and even job titles. Everything about the cloud business was different, but we were trying desperately to force-fit it into the existing model. Despite the growth, our inability to rise above the conflict and get out of our collective way kept us from accelerating the pace. I knew something needed to quickly change, or else we would lose the competitive edge all together.
How Stella Helped Save our Cloud
One of our board members gave me a business book that helped bring everything into focus, How Stella Saved the Farm, by Vijay Govindarajan and Chris Trimble. It's a great, quick read written in a fable format about a farm in trouble and how the animals come together to solve the problem. I could easily identify each of the characters with members of our leadership team, and it opened my eyes to allowing our new cloud business to be innovative. I immediately purchased several copies and asked the team to read it. Then we set out to make the necessary changes.
5 Lessons Learned
Our cloud business unit looks a lot different than it did three years ago. We broadened our expertise and infrastructure focus from private cloud adoption to a comprehensive hybrid approach that also combines public cloud and third-party applications. Through trial and error, we now know that becoming a cloud company requires a complete business transformation. We took our best practices and launched a new channel partner program to help other tech companies move their offerings to the cloud.
Here are a few lessons we learned that I believe can apply to organizations looking to expand outside of their core focus areas. Since implementing these changes to the business unit, we experienced fantastic buy-in from our leadership team and more than 100% growth each year.
- Separate the new unit from the rest of the business. We made the mistake of having the new cloud division report into the existing business. Changing the org structure and even job titles to reflect the separate unit removed layers of management, and as the CEO I can focus my attention directly on helping the leader of the unit with strategy and other growth initiatives.
- Bring in fresh talent from the outside. Prior to launching the cloud business, we were brainstorming with the wrong people. Through no fault of their own, the team was thinking tangentially about the new unit as it related to the existing business, not as a totally different model. The game-changer was bringing someone new to the table with creative ideas and a strong cloud background. We continue to hire fresh talent to ensure we are staying innovative.
- Create a different brand identity. We invested in developing a new name and brand, Concerto Cloud Services, to help differentiate the unit from Tribridge. This exercise was as valuable to helping our internal teams adopt the new structure as it was for our marketing team to take our offerings to market. It also empowers the customer to clearly understand the unique selling proposition.
- Establish new measurements for success. A vastly different business unit requires its own business plan and metrics. A monthly recurring revenue model associated with the cloud is not easily comparable to traditional consulting services, and therefore we found it necessary to separate the financial goals and measurements. We also radically changed the compensation model for our business development team to reflect the different sales cycle, which made for greater success across the board.
- Continue to build a culture of innovation. Our company retreat theme a few years ago was "Think Big," which was as much a reflection of our culture as it was a challenge to continue building innovation. It was the act of thinking big that enabled us to boldly take the company in a new direction. Fostering an environment of open dialogue and fresh ideas allows us to keep and attract the type of talented people it takes to grow the business in new and exciting ways.