Lisa Murton Beets is Research Director for the Content Marketing Institute. Prior to joining CMI, she was the Principal of Murton Communications, a firm specializing in writing and editing content in business books, feature articles, profiles, and case studies.
Perspectives: A Conversation with Bill Conroy
Perspectives: A Conversation with Bill Conroy
Bill Conroy is a highly regarded technology executive with a wealth of experience in corporate strategy and operations. He served as CEO, president, and board member at Initiate Systems, Inc. — a pioneer in the Master Data Management market — until he orchestrated the sale of the company to IBM in March 2010. Bill joined Initiate, which was founded in 1995, in 2002.
During his tenure at Initiate, the company grew revenue by 700% with a compound annual growth rate of 50%. Initiate Systems became a dominant international company and thought leader in healthcare, serving more than 2,500 healthcare sites, 50 health information exchanges, and healthcare payer organizations, in addition to servicing other industries including financial services, high-tech, intelligence, and retail. Bill was named CEO of the Year by the Illinois Technology Association in 2009.
Prior to Initiate, Bill served in executive roles at IBM, Oracle, and Click Commerce. As Group VP of Sales at Oracle, he ran the central and western U.S. divisions and was responsible for approximately one-fifth of total company revenue. He also served as a partner with Insight Capital Group, where he provided in-depth assistance to CEOs and sat on several boards.
Please describe the situation when you joined Initiate in 2002. What were the first steps you took?
When I joined the company, sales were at $7M, entirely in U.S. hospitals. Growth had slowed to single digits. Initiate had done an awesome job at getting those first customers, but it had become stagnant. The primary challenges were to dramatically increase growth in the existing U.S.healthcare markets, define and expand into new markets, hire brilliant people, and develop a solid operating model. To execute, I knew I had to bring in a new executive team capable of executing a high growth operating model. I’m a big operating model guy. If everyone doesn’t know who does what and when – and how to reach and execute decisions – you’re going to have a lot of churn. You cannot reach hyper growth with churn.
How did you approach long- and short-term planning?
Long-term, we had a mission statement, a three-year model, and key initiatives. The mission statement was focused on giving our customers high value but also stated our goal to be a fast growth leader in our market. It was a nascent market — master data management was a new term — but we believed we were clearly in the right market at the right time. The three-year model focused on performance metrics that would increase valuation. We plotted our metrics against industry leaders and modified it annually. The mission statement and three year model drove strategic initiatives that we reviewed annually. We never had more than five or six key initiatives. They focused us on growing existing markets, opening new markets, building world-class infrastructure, and delighting our customers and employees.
Short-term, we had six-month objectives that aligned with the key initiatives, so we could change direction quickly if we needed to. We had about a dozen to 20 six-month objectives. Every individual contributor’s six-month objectives aligned with a corporate six-month objective. I don’t believe in annual objectives. In a fast-growth market, anything other than six months is a total waste of time.
How did you go about building your team?
I got the board to agree that we needed to hire excellent managers early, rather than wait to justify the expense, and let them build their own teams. We paid them in the top quartile — yes it was expensive and the board hollered a little, but it worked. We were growing so rapidly – in one year we went from 100 to 200 employees. It was a complex, new market; we had a complex process and business model so we needed exceptionally gifted people.
Also, from the cultural perspective, we wanted nice, fun people. People you would want to go have a beer with and that would attract other brilliant nice people. Many of them had worked with me before. We had a written culture that boiled down to 1) hire really special people and manage them using the Golden Rule – treat others the way you’d want to be treated, and 2) follow through on your commitments.
Precision execution requires making commitments and following through. Every software company has specific processes … probably about seven of them … for sales, professional services, support, product, engineering, etc. They are a part of that operating model I was talking about. If they’re not written down and agreed upon, again, you’re going to have churn. Things change quickly. If you don’t have a written process for dealing with change, you churn.
How did you keep everyone aligned?
The operating model kept us aligned. In addition to what I have already discussed the model included something we called ‘huddles.’ For the huddles, we’d get together share what we knew about a sell cycle, a product decision, an implementation crisis … anything that required collaboration. Rather than a zillion emails and phone calls we would get on the phone and actually make decisions on our next moves go off to see how things worked, and then huddle again to review and decide our next moves. They took about 15 minutes. The basic requirements were that they were frequent as opposed to long and that everyone required for the decision had to be on the call. If you said ‘I commit,’ that was a big deal. Someone would be waiting for something you promised and you had to be on time or there was a bad ripple effect.
What operating metrics did you focus most on?
Operating metrics that drive valuation change with the economy. It seems like in a good economy growth is everything and the focus shifts more toward profit in a bad economy. Ask your bankers about metrics you should track. That’s what we did. And we added metrics of our own, even if the bank didn’t use them. For example, we liked to focus on productivity … metrics like bookings per headcount, and specific metrics about how we were doing in each of our market segments as well as customer and employee retention metrics. We created a ‘control book’ with all the performance metrics and base financial reporting that all the managers walked around with and it was how we reported to the board. The control book is a monster part of the operating model because it is the only source of numbers … it keeps the team aligned.
The short answer to your question is we focused on bookings growth. Ours was not a saturated market, it was a land grab market, so we didn’t even try to get profitable until 2008; and even then, we focused on investing in the company and being barely profitable. We believed top-line growth cures all other evils. It feeds the beast. We were always really, really focused on growth.
What were some of the primary challenges you faced while orchestrating the sale to IBM?
Getting their attention was the most difficult thing. People think that the HPs, Dells, Oracles, and the IBMs have large corporate development groups, but they don’t. We were at $100M and IBM barely noticed us until we took the initiative. If a large company doesn’t think you’re strategic and they can’t literally see who you would report to, they won’t pursue it.
I talked to many, many groups within IBM, many, many times – over a long period of time. I took the time to understand them, to share with them why we were strategic, and to show them where we would fit. If you rely on the acquirer to do all of that, it’s a mistake. They are just too busy, especially for small companies. And I really think this effort has to come from the CEO – the CEO is the person uniquely suited to show ‘why you should buy us and how we can integrate within your company”
Any key lessons learned that you’d like to share?
Keep trying to get into new and different markets. Broaden your markets early – that way, if you fall in one, you have others. And by broaden your market, I mean by industry, geography, new products, partners … anything that can give you greater predictability and growth Take some chances. As an example, we started with 100% of our revenue in healthcare and when we were acquired we still were enjoying fast growth in healthcare but 50% of our revenue came from other industries. We also went into international markets very early and it paid off. Being in multiple industries in multiple geographies helped us substantially in our eventual valuation, but at the time they were very tough decisions.
Also, focus maniacally on product management. You need to have the ability to know what the market wants before they even know it; if you wait for your customers to tell you, you’re done. The head of product management is a very key person – and one of the most difficult hires.
You should follow agreed upon management practices … have an operating model! I know I am a broken record, but if you don’t spell out for your people how decisions are going to be made they churn, focus internally, and get frustrated. Focus on providing process and demanding precision execution so your team can focus externally.
Finally, create a culture that focuses on retaining customers and employees and watch your retention numbers. Customer and employee intimacy is critical.