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Walter: [00:00:00] Phil, welcome to the show. Thanks Rob. Yeah, absolutely. So, so Phil maybe kind of give context to everyone listening. what is, alien works  what is your role? Can I give some context of where you’re at currently?

Phil: [00:00:14] Sure. So my technical title is head of solutions but like many small startups, we were a lot of hats.

I’m part of the operations team, basically where we make decisions on our sales, marketing growth everything that basically interfaces with the customer. And the strategy around it. So not necessarily just the day to day, but also kind of the longterm elements. ALM works makes a project and portfolio management tool.

We live in the, kind of the Atlassian ecosystem. So we are technically part of the marketplace. We’re one of the largest product sellers there. We’ve been there for over 10 years at this stage. And we’ve got a relatively mature product called structure. And that’s kinda how we got the, the magical product market fit.

And then basically taking that as our starting point and then finding ways to grow up from there. And that’s kind of where I came in. Basically we had a mature product and we wanted to grow into different areas.

Walter: [00:01:11] Okay. So currently Ellen works,  where would you say revenue range? Are you in the 10 to 30, 30 to 50, 50 to a hundred?

Phil: [00:01:20] So when I joined about three years ago, we were in the low seven figures range. We’ve roughly tripled in the meantime and one of the things that we’ve actually had to deal with in that. And that’s an interesting conversation. I think we’ll, we’ll probably dive into is the fact that we started as a pure product company.

Where you know, the beauty of having a product is that the fact that, you know, your variable costs are fairly low with scaling the users. And we’ve moved from an on-prem only solution to the SaaS version and with our next product deliver, which actually launches on Monday, which is fortuitous timing on our part.

We had a discussion around whether we want it to even go even further into say from, instead of just a product company, maybe we should also the discussion around tying a services side two things, which would basically flip our entire business model over. And we had to have all the discussions around, all right, what are the risks?

What are the rewards and make the decisions around, alright, do we do this? And do we commit, or do we kind of dabble our toes into that area? Or, you know, what on that spectrum do we end up doing?

Okay, I’m going to put a note on that. I definitely want to get back to that part. And for further context, how many employees locations are you

at currently?

So we have three locations. They’re kind of split mostly between St. Petersburg, Russia where a lot of the company’s problem in the development team is. And you’re in the bottom of the greater Boston area, which is where kind of the leadership and operations side is. And we’ve got a little bit in Brazil with some of the support group down there.

Walter: [00:02:50] Nice. Okay. And then and you said at this point, your, in the Attalasin adolescent kind of market place who that you serve, what’s the problem that

you’re solving.

Phil: [00:03:01] So simply put at last, we mix up a wide variety of products. And one of their genius marketing, or basically product strategies is the fact that they focused on the core element.

And depending on what your needs are, you can bolt on all these admins, right? So you’ll have this core element of basically just the ticket system or issues. And. Whether you need time-tracking you add on a time-tracking app, whether you need visualization, whether you need BI, whether you need, you know, whatever else you need.

And that marketplace kind of lives there. And you have the solution partners, which are basically the defacto sales arm of elastin, where they would do all this putting together common solutions and they would sell. Those are our particular contribution to this ecosystem is a visualization app that shows you not just one team, but how multiple teams are working together.

So basically once a company has grown to a certain size and they really need to develop their project and portfolio management discipline, that’s where we come in. And then we do both the tooling and kind of some help with the implementation side. Both. If there’s a partner in play, we’d help them support them.

If there’s no partner in play, we would do the support that we can offer.

Nice. Okay, cool. So full  lifecycle of a company going from product to SaaS. Possibly even adding service we’ll find out TBD. But it was not always like this. You were bootstrapping and things were you had to figure it out.

So let’s describe,  what did it look like in when you first started?  What, what did that look like

when we, so when the company first started it was actually a much smaller. The Alaskan ecosystem was before our last an IPO. And it was much smaller group of people.

And the challenge there was figuring out what we were going to do versus what it lasted. One was eventually going to build, right? Because if you’re going to offer something that eventually becomes part of the core product, you very quickly become obsolete. And what has happened essentially is we would track the feature requests that people were making a bit last year and that they would be, it was very public and they would basically add their own decision-making towards whether it was something they would add to the roadmap they explicitly said they wouldn’t do.

And we found something that turned out to be very valuable. We thought there was a market opportunity there, but Alaska had already committed to not doing that. They came back to that later, but that’s, that’s a different story. And that was that multi-level visualization right. Built in. You can do it for a team, but once you get more than that, there’s no real way to track relationships, dependencies, things like that.

So that’s where we started. And then once we became a staple and again, we had the same approach to that last Atalassian that we didn’t have sales. We didn’t have marketing, we just have relationships with these partners. The partners would add us to the solution and then it would be kind of defacto part of anybody who’s offering.

So a lot of people actually don’t know juror without say the structure add on because it’s just been there as long as they’ve been using it, which is kind of a neat position to be in.

Walter: [00:05:59] Okay. No, that is a very neat. So when partners are adding this in, how do they know about it?

Phil: [00:06:04] Well, there was, there was a few different ways we could do that. And we did all of them actually. One was the fact that as I mentioned, there was a feature request and there’s a whole bunch of people commenting under that. It’s like, Hey, we would love this kind of plus one.

However, the internet comment system works. And that gave us a very nice list of leads of people to talk to me and say like, Hey, we have a solution for this. We know you’d ask for it. So you know, try this out. And the other thing is that in the early days in particular, but now mostly, still there are some large apartments in the, some smaller ones.

And when you have a few of those tactical relationship, because you’ve been to the events and when it was really small, you kind of, you’ve got it on the ground floor together with them. Yeah. You can kind of leverage that and what’s really. Been the case for us in particular is that it’s not just a product.

That’s good, which I would like to say, but again, we’re biased. But it’s also the fact that there’s the relationship that comes with it. Right. You know, the support’s going to be there. You know, we answer the emails. If something breaks, we’ll be there to fix it. Our founder has even fairly recently as a year ago, he wrote one of the hotfixes for one of the, let’s just say it’s a company that makes certain phones that we all like to use because it broke.

And he was just the new product, well, enough to be able to fix it real quick. And that’s just a level of commitment to the customer that we try and adhere to it kind of embody everywhere, but it starts at the top obviously.

Walter: [00:07:28] Okay. Now has ego always been like very customer centric, solving problems?

Is that just always been a thing within the company from day one that you’ve been there?

Phil: [00:07:36] Yes. He’s very deliberate about embodying the company culture that he wants everybody else to see. And it’s obviously not always as easy. It’s interesting because he’s probably also the best developer we have.

Not that the other ones aren’t good, but they clearly look up to him from an engineering side. And as a former software engineer, that’s also an interesting dynamic to track, but he’s definitely always been there. We go the extra mile and a lot of cases even when there’s no dollar figures attached to it, which was an interesting change from how I saw things previously.

So when I joined there was the implicit kind of understanding like, Hey, you’re supposed to help people. And the point is to convert obviously, right? Yeah. There’s no point talking to someone if they don’t end up buying anything for you, but you were never reprimanded for spending a couple hours with a customer.

That helped them, even though it didn’t help them by because , there’s still that reputation that you have and reputations are built over years and you can destroy them very, very quickly. And so we tried to make sure that all those things are in play. And even though. You didn’t contribute to the sales.

You still contributed to the reputation we have.  I’ve been here long enough that you can see these people come back. And the last few questions about like, Hey, I’m looking for this other thing and I value your advice. So I would love you know an introduction here, whatnot.

So our relationship has also expanded towards other products. And so we’ve got the relationships there where we can actually introduce each other back and forth. So we would say like, Hey, if you need a time-tracking app, I know folks over at this company called tempo and vice versa, they would do the same for us when they talked to someone that needed something outside of the realm of what they offer.

But they, I know a guy that kind of thing, you know? Right. Yeah.

Walter: [00:09:09] Let me, let me go talk to my, my buddy, Phil. He he’s a click away

Phil: [00:09:14] basically. Yeah. I mean, it’s, it’s almost the, how I met you mother, you know, have you Mitch, you know, Phil, whoever it is in this particular case, but yeah, that’s, that’s kinda how it works.

Walter: [00:09:24] Okay, that’s how you met your demand and then the way that you started to capture it?

.The product?

Phil: [00:09:30] So when it, when it first started, we didn’t have marketing, we didn’t have sales.

We, we worked through the partners almost exclusively and to this day, partners are still probably 70% of our revenue , there’s a serious benefit to this because. They can do the sales, they can do the marketing and they can do the implementation as well. And so once we train them, they’re basically self-sufficient and they can run on their own.

And then their success becomes our success and vice versa. We’ve been able to to basically capture a lot of insights, both in customer behavior, really understanding what their needs are from a prodder and as well as the niche that we’re in and we can pass that onto the partner. So there’s a lot of back and forth communication consistently with them about the way the market’s evolving

Once you get to that kind of critical level where you have a reputation and you got enough people talking about it we have enough inbound leads we can’t even handle all the inbound leads that we talked to. So we have to have create services that allow them to self-serve in a lot of cases.

So we try and talk to people and if they ask us like, Hey, can we have a demo? Can we do this? Can we do that? Well, help them as best we can obviously. But sometimes we’re just like, look, we can’t get to it for another two weeks just because , we’re not able to handle the demand. So we introduced them to partners at that stage too.

And, and that has that beneficial effect too, because for them, it’s not just the lead for selling the product because they get a discount on the marketplace and they make a little money off the margin there. Right. But for them, they’re looking for these service contracts. And so that’s where the money is for them.

So there’s a lot of, kind of win-win scenarios where they can do these longterm implementation contracts. And at the same time they can sell our product.

Walter: [00:11:09] Yeah. No. So when you were bootstrapping, was it  at that point of maturity your partner relationships?

Phil: [00:11:15] They kind of went hand in hand. One of the main benefits  getting really lucky with the product market fit off the bat because we’d had a validated problem before we started was the fact that every bit of feedback from a revenue perspective was, pushed right into product. If you look at say, I believe it lasts humans, current split is like engineering makes about 17% of the head count.

Sales is just under 10 things like that. We’re still over 50% from an engineering perspective, which is kind of unheard of, but it’s an engineer. A lot of us on the inside side are former engineers, but. Even that it’s a very engineered driven company and there’s some drawbacks to that obviously, but we value a lot of the product being rock solid.

And so that’s where most of the reinvestment happens. And we see a lot of that in, you know, the reputation of the introductions that we make, the network effects that we see amongst our customers. It starts there.

Walter: [00:12:10] Yeah.

With your partner relationships, how do you keep the training, the mind share up with the partners?

Phil: [00:12:17] So there’s there’s three ways we could break that down. So one is the new partners through standardized the onboarding for new partners that come to us and say like, Hey, we’d love to learn how the product works. And there’s, the product requires a little bit of service.

To get up and running fast, . So we’ve, we standardized the process for new partners, so they can be as engaged with us as they want, but there’s no kind of obligation of saying like, Hey, let’s think of every month or every quarter or whatnot.

At the other extreme there’s the guys that have been with us for the, you know, the jury, the whole ride the relationships that they’ve had with you know, my CEO, the CEO my direct boss is head of operations. Eugene has been around for probably eight years at that time. Like these guys, they know each other.

And so you’ll have VP of something at this, you know, 300, 500 person company who knows RVP, they talk and then the information percolates from there. And then a lot of these things also just kind of happened by revive with we have the benefit of working kind of in the agile space and very simply put, there’s not a lot of all space just because not that level of intensity.

Yeah. One of the downsides of no travel is we don’t get to go to all these events, but it’s so much fun to go to them because everybody wants to help the customer. And it’s it’s gotten to that stage where, the sales side has often taken care of itself.  It didn’t need as much trimming the fat and being super lean and all that stuff.

Because when you’re that committed to helping the person out at the end of the day, when you say like, by the way, here’s the bill, they’re at that stage where they’re actually happy to pay, which is kind of weird, but it is kind of the, the world that we ended up living in. Yeah. I

mean, yeah.

Walter: [00:13:50] Obviously you’ve creating a value that they see it and they’re, you know, people are happy to pay for it yourself and their problems. So, and now that makes complete sense. So what, what are their problems are, what are the challenges do you face like with the partners? Because I would imagine that there’s got to be some difficulties about that have happened along the way.

Phil: [00:14:10] Well, absolutely. So we were the first PPM solution in the Alaskan space at this stage. Obviously we’re not the only one anymore. There’s three large ones of which we’re one of them. And they approach the problem a little differently. So there’s also that kind of subjective element of like, you know, I kind of liked the way this works.

And as I hinted earlier, one of those solutions is made by a lasting themselves. They bought up a company that was offering one of these things and they thought , all right, here’s a natural solution or add on to them JIRA. And. We can’t keep up with any of the marketing, then the last thing to throw out this, obviously.

So we have to be careful how hard we want to compete with something that literally it’s not just the big fish in this pond. Like they control everything in this pond, right? So there’s an, it’s not as hard a competition either, which is nice. A lot of these things kind of work well together because you’re part of the problem differently.

But we know a lot of partners that, for example, they just happen to like one of the other problems, products better than ours. So they kind of naturally drifted away. There’s a services component attached to this, right? You, you basically say like, Hey, this is the solution I’m offering you.

It involves these tools, this amount of training, and this amount of consulting. There are people in this ecosystem , as I like to say, Muppets they mean, well, but they’re not as capable as they sell on the ability. Cause again, as the industry and ecosystem grew, a lot of people wanted to get into and you have that kind of dilution of talent that has seen, we’ve seen it with some of the partners that grew really quickly.

And so they had to add bodies and that basically dropped the level of service they could offer. Yeah. Sometimes we run into the problem of we made agreements because we would back them up to a certain degree and we’d be like, Hey, let’s, let’s do the implementation and we’ll do the training and the onboarding and you do the other thing.

And we ended up doing more and more of that because the other person just wasn’t capable of holding up their end. And so we’ve had some difficult conversations with partners around like,  we’re carrying more of our weight here and we’re not getting paid and we’re not charging hourly for these things.

So , let’s, let’s talk about restructuring this or figuring out some other way around it. Now  at this stage now we also have a services arm, but it’s different than what they do. So it’s not a direct kind of like, Hey, we’ll supplement, we’ll do the agile coaching and all the other stuff  we’ve stayed very, very niche because we didn’t want to compete with those partners.

Because like I said, they’re three quarters of our revenue. So try not to bite the hand that feeds.

Walter: [00:16:30] What about like your direct sales team? Who do they go after?

Phil: [00:16:34] So mostly the inbound leads the way the marketplace works is you can start an evaluation of a product and it returned for that.

You get to use it for free for a month, but we get your email address. Now we don’t always get the right email address, but we get something to reach out to.  And so we’ve got the sales qualified leads that automatically come in because they basically said, Hey, I’ve heard this product. I went out and looked for it.

I downloaded it. I clearly have some kind of need. And so most of our sales team is inbound sales. We handle the ones that come in that way. We do a lot of partner events as well, where we try and partner up with a specific group. And whether it’s per industry per vertical per country, and if during the discovery phase we realized like, Oh, wow, this is like a 60 hour contract that they need. What’s introduced them to Mike or whoever it ends up being, right. Yeah.

Walter: [00:17:22] Okay. . So a rep takes them all the way through it contract.

Do they stay with them and try to find additional uses or do they hand it off to  customer success team?

Phil: [00:17:33]  They’ll hand them off to customer success.

And that is assuming we own the entire thing. When there’s a partner, there’s a partner’s customer success team involved. So we don’t have even have to worry about it. There is however, the situation where they need more than just a product can help them. And then one hour of work, right? So there are these nice situations where we actually end up offering some of the consulting and we’ve kind of done everything we could to avoid the stage.

And we’ve done this from a like, Hey, we’ll introduce you to all three partners that we know in the area. We charged three times as much as the partners hope to incentivize them to like, Hey, maybe you should talk to these guys. But there are some ways that we just can’t avoid it. And so we ended up doing them that was the solutions team that I run the subject matter experts that very narrowly focused, so we kind of live in that drone when it comes to the onboarding. And then once we’re done again, back to CSM, right.

So, so if I’m hearing you correctly, your ACV is lower on your direct side then versus your partner side,

typically. Typically. Yes. It’s again, it’s not always that case. It varies and it’s interesting. Cause sometimes it varies very much seasonally. And we haven’t been able to find exactly the reasoning before that, but sometimes like a big event happened or some part that inspire them to do something, but it’s, they don’t need that yet.

They just want 30% of it. And so they still end up with us.  There’s an element of, we’re kind of tossing in the wind and the best we can do is adjust our sales, but we don’t have control over the way the wind blows, obviously. Yeah.

Walter: [00:19:03] So currently , is that a big focus right now being on the operational side of trying to narrow that down to kind of get that more instinct so you can make that more predictable or is that not

top priority for you.

Phil: [00:19:16] It’s not really the top priority right now. Cause like I said, there are times where it just, it drops and we don’t have to worry about it too much. Yeah, it’s, it’s small enough percentage of our time that we do it and we don’t have to worry about it. And when it starts to become a significant portion of our attention, then we’ll probably start addressing it a little bit more.

But right now our main focus has been with Atlassian announcing not just the move to cloud, but basically the emphasis there. They’ve also announced end of life for the on-prem server version, which was a good chunk of our customers. So we’ve focused our attention to basically retaining our position that we had an ecosystem on the cloud, which SAS versus the on-prem thing and the new product deliver.

We’re about to launch. We’ve done a lot of the partner enablement. We had an early access program that we ran for the last nine months. And there was a lot of. Well, operational strategic decisions that went into that. Because every time we learn new things, we’re talking to large customers like we’re talking to the whales of the organization the fortune 50 type size people.

One of the considerations we had , do we become more of a services oriented company, the potential for contracts and the potential value we can add is so much bigger that , we had to actually give that a bit of a try let’s focus on doing this for  a couple months.

See if we can actually get them to commit. And even if in the beginning it ends up being some of these one-off contracts , one-off contracts of six, seven figures adds up really quickly, especially if you’re still in these seven to eight figure range of, of revenue. So that was mainly where my attention has been these last nine months.

Walter: [00:20:48] Okay. Very interesting. When you have those types of customers that are very enterprise, the feedback loop is very slow.  How did you define your criteria success? And then how did you measure knowing going into it that it’s going to take a while before, you know, this is going to be something that was successful or not.

Phil: [00:21:10] So the route two things that we had going into it one is we had this call it a vision of what we could offer on top of our current product. That was that half product, half services offering that we talked about. The other thing was actually this outside force that. I don’t want to say it forced our hand, but it definitely indicated like, Oh, wow, there’s a lot more demand out here because the outlasting again site.

So the context for that is about a year and a half ago, when we roughly started developing this, we started basically trying it out. At last thing, bought a company called agile craft, and they recently renamed it to JIRA line, which services those fortune 50 companies. Now the most expensive single license you can get.

So the unlimited tier for structure is, you know, mid five figures as your align. The most expensive version for the same tier of users is $4 million. So there is something in between there that is demand, right? And we knew agile craft. Wasn’t like they weren’t selling thousands of licenses. They were selling a couple of dozen maybe.

And so we wanted to live somewhere in between there in the sense of like, we’d already started looking there, there’s something. Way over there that eventually the companies will need, but maybe we can help them get to that stage, right? Call it line light, whatever you want to call it. So that was where we ended up being kind of by happenstance.

And so when we started rolling this out, when we had enough of an MVP where we said, all right, let’s expose this to the customer data. It’s explosives to customer demand and the questions they have. We’d had those formulations already in our mind, right? Do we compete directly with Dura-Line and say, we’re going to have a services arm.

We’re going to offer this at a higher, like a premium for enterprise customers. And we’re going to go after smaller numbers of contracts, but larger dollar figures. Or do we say, you know what, that’s not what we do. We’re going to stay and be a product company. It will still be a step in that direction, but it’s only like one step.

And so we’ll go after a larger group of customers , Lower dollar figure per contract, but we’d have more contracts. Right? So step one was validating, which customers were coming to us when we basically raised this flag and seeing where they fit on that spectrum. Because if we only talked to fortune 50 companies that was already dictating limited amount of people, we need to start charging for this.

But the other thing we did  we initially started charging for this to see if they would basically buy the problem was they didn’t know what they were getting and no one is going to buy enterprise software at six, seven figures without having screenshots to start with.

So we very quickly access that from the equation. Right. We were like, okay, let’s, let’s have more conversations with people. We’ll validate pricing later. Let’s see if there’s enough demand here. And then also make sure our value winds up, right? Because the whole point of pricing is to capture some of the value.

Right. If the only value we bring is say in the 10,000 range, we can’t charge you a hundred grand for this. Yeah, it exactly. So that was kind of what we were doing. We’d see how many people we would get through the funnel, how long it would take. Cause we knew the sales cycle was indeed going to be longer.

We just didn’t know how much longer. And then lastly, we were we time box this, basically we said, look, we’re at MVP right now. We expect to be at 1.06 to nine months out. So that was the time box we were given to run this program and it could be fully informational, but it needed to eventually lead to these are the parameters under which we’re launching.

Are we launching a service? Are we launching a product? Are we launching it at this price point or much closer to the 4 million? And so we basically tried to be as open-ended as possible. And we tried to take all the, the standard approaches that, , you learn about from lean business

treat it as an MVP, treat it like we don’t have any other revenue. We’ll listen to them. Open-ended questions. See how many of these things line up and use that to inform the decision-making.

Okay. So what was the final decision

 So let me take one step back and walk you through how we got here, because I think it’s more important to also realize that we actually ended up between two options that were very extreme.

And every time we tried to evaluate something in the middle we realized like the risk reward. Doesn’t work for anything in the middle, either we commit to one or the other, and there was there, there’s no kind of middle ground. There’s no Goldilocks zone here, which was interesting.

Walter: [00:25:37] I would imagine that there’s gotta be a good mix of, either or , why wasn’t it? Yeah.

Phil: [00:25:43] So basically part of it may just be the framing that we had for how it was. So option one was stay where we are, right. We’re a product company. We make a product, we will enable our partners to do most of the implementation.

We’ll talk to a small group and kind of grow it out, just like we did with our core product. And we won’t charge multiples of what our product is currently for. Right. The way it works for us is we have several extensions and we have a Gantt chart extension a confluence extension, and they are a percentage of the base price of the product.

Right. So you can never end up being. You know, if you buy all the extensions, you may be paying double what you would if you just had the core element. Right? So option one is basically stay in our lane. We’re a product company. We have all these relationships in place. This is low risk, but the potential for reward obviously was much smaller because you already kept also B you could ask realistically for what is now a smaller product.

Yep. We thought originally the middle ground would be launching a new product. Cause that gave us enough freedom to say, let’s charge something else for it. It can be much higher. We don’t necessarily have for it to be a services thing. But we’re not as tied to the core product as we were before.

Right. We didn’t handcuff ourselves to our past in that sense. And we still got to leverage the partnerships and all that stuff. The problem was we had built. Both our expertise and reputation on everything that we did in the PPM market. So everything lives and tied to that product. So I’m also the development of this.

Everybody looked at it only in the light of the reputation we had with that structure corporately. And so we couldn’t decouple it. And then when we also ran into technical challenges of saying like, well, it builds on the stuff you could do with the core element. We were tied to it that way. So the extreme end of that was another thing the natural evolution in the product and the ecosystem we see is that you either will grow past the stage.

We are now to about twice the size we were. And that’s kind of a stable position as a product company, or you become a services company as well, and you basically have two arms and they work independently. The challenge there is that you no longer have that neutral position with regards to  other partners you’re competing with them now.

And the risk is higher because you have to hire the consultants to do it. Right. Right. Now we have a team of people, but we can’t service every possible demand that comes along with a new product, as well as the existing demand for the old product. So instead of hiring an unknown amount of consultants, because we didn’t know what the demand would be, right.

When it slowly grow at launch or would it just explode and be like, Hey, everybody wants this product. And so we basically came down to the fact that we’ll do some of the services, just like we do before we’re relatively ad hoc. We’ll enable the partners we’ll stay in our lane, but we will make sure that we have some different agreements in place, we’ve become more niche.

We’ve kind of really narrowed down into where we are . The services that we end up offering, whether it’s through the partners and so we’ve got a little bit of both probably not going to be sell to the whole ecosystem.

We’re probably going to end up selling this to a subsection of our existing customers that have reached a certain size which means that we can better understand them. They’re already part of our kind of relationship. And so we can address them that way. And it becomes more of an upsell opportunity than this completely new business model, because we’d have to completely revamp everything we did, right.

If you become a services company, now you also need marketing for the services side. You need sales that actually hand, not just inbound leads, but actually go prospect. So we needed more outbound. And we needed to have the sales side of it. We needed the extra insurance. We needed the people that understood that, Hey, we’re billable now.

So you need to look at  the amount of time you’ve been allocated you might also need to make some ruthless decision. And in terms of like, Hey, we hired six people. We only need the three, well, you know, pick your three favorite . You’ve been here the longest.

You have to cut the other guys because financially it just doesn’t work.  The risk versus the reward, because the, the argument was always like the big piles of cash, right? The, the Oracles, the Microsoft have gone in this direction. I was much larger than we are right now.

And so there wasn’t enticing element, but we just didn’t know what the size of the cash was there. And we realized , even if we give most of that potentially to our partners, They win. We still win every time. And so we thought say 30% of a relatively known quantity that is good for everyone. And we don’t have to put in a hundred percent of the effort is better than a hundred percent of the bigger pie, but we have to do all the heavy lifting.

We have to do all the things. And there’s the risk of maybe the pie isn’t really that big, because remember we were competing against the last year, in their own ecosystem. They will occasionally throw a curve ball at you, which can completely upend your business model. There might be someone else in the ecosystem that says, well, for that money, let’s throw our hat into this game as well.

So we decided to play it a little safer and launch it with the partners and basically see how it goes, but we’ve left the door open because we still do the consulting. We still do the specialist elements of it, but we can grow at a pace that we can control. And I think that that’s also taking the lesson from some of the partners that we’ve seen.

They grew out of control. They grew too fast, they needed bodies and their reputation also suffered the quality that you’re delivering has dropped. And so certain people will go to other partners, they’ll find other people to talk to because they’re not getting what they expected from you, right?

The expectation level hasn’t changed, but where you could deliver has. And so this allows us to keep more control over the rate of growth that we have. And so we can make sure it’s sustainable as opposed to spiking and potentially not being able to maintain that level.

Walter: [00:31:28] What was some of your takeaways on going through that whole exercise? .

Phil: [00:31:32] we had, certainly, we had a lot of debates internally about the assumptions we were making the people that knew the ecosystem or thought they knew that ecosystem because the, this was eight years ago is not the same we have today.

And so we did a lot of modeling from all right, these are the potential outcomes. This is what it will look like. Both from a pricing perspective, . At whatever 50% of the base price or whatever it ends up being here are the the elements that we need to have in place, because there’s also the engineering side of it.

 You can get away with a smaller core product. If people know it’s an add on to something else versus if this needs to be standalone, it needs to service all of the other requests. And so you have to have a complete product in some way. And so sticking to the smaller thing we knew we could have a smaller MVP, so we could try things faster, get feedback more, and use that to inform our decision making.

And I think that that probably was a larger I don’t want to say self fulfilling prophecy, but it definitely allowed us to say like, okay, let’s try it this way. Let’s see if customers will tolerate taking their own screenshots to compare last week’s results. This one, versus it needs to be a core feature.

Let’s see how they handle this versus that. And so it allowed us to iterate a little bit more And we could talk to people in depth. And even though we weren’t getting to the decision makers we had very limited access to the, what we originally thought were going to be the people that we had to sell this on, which was like the VP level and above we managed to stick with the people that were arguing for our product that had enough budgetary discretion to be able to say, Hey, we’ll take this.

And so we could leverage so much more of our reputation, our experience and everything else there that we realized that there was a lot less friction to the sales side of it, the sales cycle shortened, because we’re no longer talking about a six-figure sale, we’re talking about an add on. And when you talk about it, that way, it’s much less of a hurdle to get it through the internal processes either.

There’s a lot of little things that way, but we started this process two and a half years ago, I think. What does this look like from a business model perspective. What is it going to look like from an IP perspective?

Do we have to , bring new people on which we ended up doing. And so there’s, there’s a process that goes into it and it very much accelerated once we started getting the customer feedback ideally one of the learnings I would have had is get customer feedback sooner. But because, and this is the double-edged sword of being an established company, you can’t show up with screenshots, you need something working

so we needed actually a much higher level of. This is a working product. Then if you were like a small company or just two dudes out of college and be like, Hey, I’ve got this idea. I’d love to pitch it to you guys. Here’s the, you know, wire frame. And this is what will happen if you click the button, you know, flip over in the notebook and the thing we can’t do that.

So the expectations obviously kind of go both ways, but eventually they ended up becoming much more worth it because they ended up lubricating, everything else. The conversations were like, Oh, you remember these guys? So yeah. They built that tool that we use all the time. Well, that’s a great introduction to get to someone that you didn’t know previously.

Yeah. , we made the right decision,

Walter: [00:34:35] which is super interesting because when you think about customer feedback, it’s probably the most vital thing when you’re talking about just growth in general, especially as you’re trying to find product market fit or where you may be, what was the communication cadence?

With your customers and how open were those individuals

Phil: [00:34:56] So there are a few learnings here that I in retrospect are really obvious, but I didn’t know going through it. One is we originally basically put this on our website and through several other kinds of marketing avenues where we said  Hey, we’re doing this, this is the thought behind it.

This is what it’s going to look like. This is our kind of the thinking behind it. And we tried to have that thought leadership aspect to it as well. If you’re interested in being part of this really extra program, sign up here. Yeah. The ability for customers to self-select based on these things is not very good.

And you shouldn’t assume that just because you think you explained it correctly, everything is being received the way you intended to. So we learned a lot of lessons around positioning about the expectations that people have, because even though we tried to describe it as something different, because remember before we started this, we weren’t sure yet if this is gonna be standalone services or just the product, as soon as they knew it was associated with us.

So they just automatically tied it to our existing reputation. So again, that double-edged sword of are there, these expectations have been set. And so it was very hard to get people to start thinking in a different sense.

 We were specifically looking at people that had this problem. And we thought, if we ask, Hey, if you have this problem, they will come. They did. But a lot of other people did as well. So we had to do a filtering out during the early access program that very difficult for us to really understand how many people we’re talking to because out of every hundred that sent us email and said, Hey, I’d love to try this out.

60% never replied to our outreach. So even though they initially said like, Hey, I’m interested in doing this. They weren’t that interested because it was such low effort to sign up to this potentially. And then on top of that, the remaining percent that did reply, you’re starting to lose people through this attrition of your own qualifications.

Do they have a certain level of usage? They have a certain level of knowledge because while we’re doing this people program .We will be there most of the time, but we’re not going to be there all the time. We’re not going to sit in every meeting that you’re going to use this for.

So we needed to have a certain level of faith that these people could handle the changes that came up. they knew it was beta software, but also like they already understood the concepts of what we were trying to do and they would describe it to their colleague correctly.

And we were looking for subtle signs, when you’re describing it to them, if they do a lot of nodding, we think, Oh yeah, they understand they’re really on board. But some people just do that out of habit. So it was a really bad attract them. And we made a few false starts with that too, where we thought like, Hey, this guy really gets it because he was parroting back.

All the things we were saying, we thought in our own enthusiasm to get this out there, we weren’t having that critical filter every time. We definitely went down a few dead ends with people where we thought it’d be right. And they described the situation exactly.

As we thought we would need it, but the situation wasn’t as they described it .They thought they were at further, along with their agile maturity, they thought their data was cleaner than it was things like that. So we ended up having a lot of internal feedback loops of like, okay, what are our qualifying criteria for these people?

What, how can we objectively measure these things? How can we help them? Self-qualify because the more we can have them do for us, obviously the less we have to do ourselves. And so manpower being the limited resource in most, all of these endeavors, that was key. And so those are a lot of the problems that we ran into.

And then there’s the hurry up and wait element.  We were talking to financial institutions insurance banks,  because those are the big companies that we were targeting. But they are slow to try new things. Even though you have one guy super enthusiastic, he has to his boss and his colleagues to try this new thing.

And you have that inertia or that, element of trying to get these dominoes to fall internally you arm them with all the enablement material that you could muster, and then you have to wait for this guy to do the presentation .

Right. Run into things like that, where I wish I could do it, like tag me in I’ll I’ll sell your VP. Don’t worry about it. Whereas I’m just like, no, no, like this is something internally I can’t even invite you .You realize that some people were ideal candidates. There just wasn’t enough.

No secondary tertiary things that disqualified them. We talked to a bunch of defense contractors that had this exact problem, but they couldn’t install third-party software that wasn’t already validated on the marketplace because everything on their servers was confidential. So they would have been great success stories, they couldn’t try it out until we were ready to launch.

So no early access program, but they still submitted, they still like, yeah. We’d love to try this out not thinking two steps ahead and be like, Oh yeah, we can’t do that for you this

Walter: [00:39:32] all right. Cool. Thanks. So through that process, did you come up a qualification process that.

You were able to identify these are ideal candidates and then these are people who are going to be able to sell internally and  sense create this sales methodology that you can now teach your partners, your direct sales team.

Phil: [00:39:54] Oh, absolutely. So during all these let’s call them failures to comfort in these conversations during the early access program or for whatever reason it was learning opportunities. Well, yeah, that’s the thing. Every time we failed, we learned something that didn’t work, whether it was a criteria that wasn’t wasn’t either renumerated in our initial brief, it was just a thing we didn’t think of.

Or it was just something where the bar that we were selecting on wasn’t set high enough or low enough. Right. I mean, it goes both ways add the new lesson .We also had to learn that the hard way, right? The first month we did this, we thought let’s get as many of these conversations as we can. And we don’t even know what we’re looking for. So we just tried to write everything down. It wasn’t until like two months. And we said, all right, we need to have a more structured approach.

And we need to track these things and track these specific things that we already knew what we were tracking at that stage. But the first few conversations, we were smart enough to record them. So we could go back and backfill them, . But you can’t go back and ask those three other questions.

Like you’ve already told them this wasn’t working out. So you have incomplete information there, but that’s how we tracked it as best we could.

Walter: [00:40:58] Okay. Now go back to, how did you leverage your learning opportunities to now create your sales playbook that you’re teaching your partners and direct sales team?

Phil: [00:41:08] So  we had this list of questions that we had and we went in with A hypo hypothesis in terms of like, all right, this is what we’re looking for from an ideal customer. And this is the amount of wiggle room on each of these variables that we have, right? From size to revenue, to the amount of people involved in this particular department to the amount of tickets in their GRI and to the the cycle of their projects, like how long would these things?

And we realized very quickly, like certain things don’t matter. Certain things mattered much more. So they ever bars kind of went down. And when we initially established, this is what our ideal customer looks like after we went through the AP, we started to review a lot of these things with the ones that made it through it should be filters.

And we realized that a lot of these things have also changed progressively, because no one stays still and is the same where they were six months ago. what we’ve been able to do, and this is a big benefit to our partners is the fact that. We can identify customers that are not ideal candidates yet, but they will be in six months.

We can also identify exactly what avenues they need to grow in to become set ideal customers. So we’ve already gotten not just a pitch for the partners, but they can already basically say like, Hey, we can estimate roughly what this amount of effort and this amount of time we can get you to this position.

And then we can offer you this really awesome product and here’s all the sales material. And so we’ve actually been able to use the lessons that we learned in the early access program to make the net that the partners can cast wider than what was self servicing purely for this launch, because they still make money getting the customer to that stage.

And that’s where I think it helps to.

Walter: [00:42:48] It makes sense. Cause your original business model is sales and marketing is through your partners. That’s 90% of it. You provide a great product through a great engineering team and you provide the opportunity for additional demand gen for things that are outside of your lane.

And in return, your partners know , Hey, like this is a great product. What you’d now like doubled down in  a couple of areas . . So through this like process of you creating this new product, is there conversations taking this same concept and just say, two years from now, we know that we’re going to want to create something else.

You got the firewall created or you’re going to do it again.

Phil: [00:43:27] There’s definitely a reuse potential year. , we’ve moved from the on-prem side to the SAS model and There are some technical and architectural differences there.

So we’re not recreating the exact same thing as we had before. So some of the challenges also present new opportunities, the way we learned in terms of our use of the interactions we had, this is how we we process these. This is how we fed this back to our product team. This is how we identified the opportunities.

We’ve actually taken that and institutionalize that in a sense. So we’ve taken the, a subsection of the engineering team that worked on this and worked on the SAS product and said, you guys are now kind of our R and D team. You’re going to try a bunch of these things. And what we really want is to shorten that loop, right?

It took us nine months to get through the AP and it took us about a year of engineering to get to the stage where we could actually sell this. Let’s get that shorter. Let’s let’s make the EAP three months. And we can do a lot of these in parallel, right? Because now we know what questions to ask where to find these people.

And so we’re doing that now for the SAS opportunity to be able to say like, Hey, here’s a potential value add here’s another potential add on here’s another loose product. And we’ve been gathering a lot of the feedback in terms of the Hey, these are the things we have. This is the  limitations that we’re running into.

And we’re using that to basically feed our own R and D department that ideally we’ll start putting out MVPs regularly. There’ll be buggy, there’ll be imperfect, but we can take those because they’re already at that stage that when YouTube and I start talking to customers and if we start to see that excitement with them, cause we did see that, but they said, Oh, I need to have this.

And they don’t even ask about price. They don’t even ask about when it’s ready. They just like, give me this. I don’t care. You know, if I have to refresh this page three times for it to get the thing, to work it out,

Walter: [00:45:08] or,

Phil: [00:45:09] That’s what we’re looking for. And yeah, we know it won’t heal it every time. Cause we, we got lucky the first time with structure core component, we already knew this existing.

Now we’re basically trying to find more of these because we want to leverage that growth these each individually can become their own sustaining loops of revenue generation. And if that works great, we’ll use the revenue that comes out of it. Build out an engineering team.

We know the lessons with the partners, they’ll sell it. And then off we go and we read that several times.

Walter: [00:45:40] It’s amazing. Cause then you, you create this multiple revenue stream your cost of acquiring a customer is nil.

As you’re going back who you’re already solving those problems for. And you’re a trusted

Phil: [00:45:51] advisor. Exactly. And it also allows us, everything also builds on each other. Right? So, because this is part of structure, you have that same element that appealed to juror, because you can add on whichever section you want and I can do with our core products.

And everybody’s going to say like, Oh, if I get that, I still have the opportunity to get more or less. And so those, those feedback loops are positive for every aspect of the company.

Walter: [00:46:17] One thing we haven’t talked about is churn. So do you have a leading indicator, X amount of features are being used or X amount of tickets to say that they understand it, or is there something else within the product that they’re more likely to turn.

Phil: [00:46:33] Not yet. We have a few things that we we know to look for , so, our core product that’s on-prem, we don’t have access to it, right. It runs on the customer’s software, hardware, whatever. Oftentimes we had to VPN, so we don’t get diagnostic data or anything there. And that means that we don’t have the insight to turn from a data perspective that we would like the SAS, this product on the other end does have that.

So we’ve started to build out the ability to track, which features are getting used with the average day users. And, that allows us to track like, all right, if this customer, how sticky is the product right now? And we’ve, we’ve got a few throughout the States right now where they’re still being validated, but we start, we have a few good theories these are indicators that they’re not quite ready yet.

They’re not getting. The most out of the product that the ROI for them internally makes sense. And we’re using them for our CSM team to go in and say, Hey you know, I’ve noticed this and we try and do it in a non-creepy way, obviously. But let’s, you know, we try and review them this because we realize that a lot of people default to just, you know, let’s set up a drip campaign, they’ll buy it and then they’ll get an email every day and that’s, that’s not getting to the customer, right. Because it’s usually the admin that gets sent the billing, responsible person is the contact person have there. What has become very important to us now is that the product identify a lot of these things automatically. So for example, there is a core functionality in structure that if you don’t use that, you’re not getting any of the other functionality out of it.

But if you don’t press that button, none of the other things appear. Right. So that becomes a very simple trigger If they get to that stage, they’re using the product and there, the rest of it kind of cascades from there. If they don’t for whatever reason so we’re trying to add product driven elements to it you opened this for the first time, everything else blanks out, and this thing gets highlighted and says, Hey, start here. And then there’s a getting started option and there’s, there’s all these other stuff, but a lot of it isn’t quite at the level where we would like it to be.

Right. Cause we have to build on it and we have to iterate on it. So most of it hasn’t been validated. It’s just decent hypothesis, you know, based on experience from all the other conversations we had with people. Right. But we’re trying to make most of those self-serving because we can’t always talk to the customer.

We have software, that’s supposed to be HIPAA compliant, SOC two compliant. And so you don’t have these personally identifying bits of information and we can’t go in and target users. Because it’s 600 users, there are a thousand there. And from the perspective of who’s not using it, it’s hard to track those down.

Or we don’t know who the user is. That should be using it versus just someone who happens to have access, but they’re not really going to be a power user. It needs to be as, idiot proof and self-starting as possible. Yeah, no, that’s

Walter: [00:49:17] interesting. That’s good. All right. So we’re getting close to the end of our time here.

I’m going to ask you the two questions I do with every guest. First one is what habits routines have helped you the most professionally?

Phil: [00:49:30] The thing, this is what I’ve started telling my brother who about to graduate with his PhD say no to meetings. I’ve it was hard for me at the start.

I get invited to something and be like, Oh, that’s important. I should be here.  If you say no and suggest a new time, most people don’t ask you why you said no. And so you can say no to the five o’clock meeting on Friday because it’s inconvenient to you. Like odds are no, one’s going to say that.

So you have the ability and you have it earlier than you think from a seniority perspective to have that ability to guide your, your schedule and having been able to do that. I’ve been able to block off port or chunks of time where I can do the deep work that allows me to really kind of get more done, because you can do more in one block of four hours than eight blocks of half an hour.

Right. And so I started to very jealously guard that time. And saying no to meetings is the first thing. And it doesn’t mean I’m not stuck in meetings all morning, but you know, I don’t say no. Yeah, no,

Walter: [00:50:26] absolutely. Well, I appreciate you taking this media on a Friday afternoon

Phil: [00:50:31] it was beer involved.

So that was easy.

Walter: [00:50:34] I love it. All right. Last question. What’s the message you want to leave with the listener? It can be anything.

Phil: [00:50:40] I think that the only thing that, that I’ve learned over my period here is that being maniacally customer focused pays off, even though it doesn’t pay off right now, it pays off in so many other ways.

They’ll tell you things they’ll come back to and everything comes from there. And so many people are so focused on getting to that annual recurring revenue, run out number, hitting their sales goal, hitting the marketing, getting so many leads, but spending time with the different customers, the things that don’t scale.

Ended up having these compounding effects that you don’t even realize that at the end of the day, we’ll help you much more than anything else, because it’s still about the relationships it’s not. Can I talk to 10,000 people this week? It’s can I make a major impact with 10 and they’ll talk to the other thousand.

That’s awesome,

Walter: [00:51:28] Phil,  thank you so much for your time

Phil: [00:51:30] today. Absolutely. Thanks for having me. Absolutely.