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Hyper Growth…Do You Know Your Company CTL Level?

December 22nd, 2016 Comments off

ctl-chartFor my friends and colleagues that know me, they know that I am fiercely driven both in the office…and on the bike. While I’ve tempered the shoulder and elbow bumping criterium racing these days in favor of career preservation, there is no decreased focus in the pursuit of achieving the best results I can on the bike. In fact, it was a laser focus and a very defined training plan that allowed me to achieve a 2014 title win for the SoCal Time Trial Series, which covered more than a dozen races. Some would think that this is a futile pursuit and an endeavor not worth the investment of time. However, I continue to realize the correlations between what happens on the bike and what happens in a corporate environment. It comes down to disciplines, awareness, proper planning, and executing on the strategy that you put in place. There’s no cutting corners, there’s no accidental or chance success…it’s about appropriate planning and execution. Period.

For me, getting out on a bike ride doesn’t mean just heading out for 3-5 hours, plugging in some music, and getting some good exercise. It’s about have a specific plan for that day. It’s about having specific time execution in specific power zones with specific cadence output…and REST in between those efforts. How does this even relate to corporate execution? We don’t go into the office and hope that the Quarter comes together in the last 5-10 days…although we all know this seems to be the case in just about every industry. HOWEVER, we do head into the Quarter with a blueprint that is typically part of a larger annual plan, that has Quarterly quotas, quotas that are supported by the necessary Sales headcount, as well as a host of other preplanned Marketing and operational support elements. While I commit to a daily training plan and see the immediate measurements of that output, that same realization doesn’t happen in a corporate environment. We continue to put in the “training” on a daily basis, but sometimes the runway to actually see the benefit might take a few months…or possibly a few Quarters on a more significant deal. It’s about having a plan and executing against it. A plan that is achievable. You break that plan down into its core elements and you execute against it. Period.

How does this all relate to hyper growth and corporate performance? Very simply…it’s the ability to maintain a sustainable pace that doesn’t overheat the engine, doesn’t waste resources in an inefficient way, and will allow the individuals, and ultimately the team, to cross the finish line…together. In cycling and the tracking of fitness, there are two lines that are followed during the course of executing a training plan…the CTL and ATL lines. The CTL line, or Chronic Training Load, measures your cumulative output of a trailing 28-day period. The ATL line, or Acute Training Load, measures the short term extreme spikes in training that indication your ability, or inability, to continue putting in sustained efforts. Think of the CTL line as a 200-day moving average for a company stock. You don’t want wild fluctuations in this line, and when there are, it typically isn’t healthy. You may have shorter term efforts that bring your CTL line up…but the ATL line realizes an extreme divergence away from the CTL and starts to indicate potential exhaustion and the need to rest. It’s the same concept at a corporate level, but drawn out over multiple Quarters than multiple weeks. Just like the cyclist, employees can put in a hell of an effort, but continued redlining will lead to that overextended ATL line, an unhealthy and unsustainable spike in the CTL, and eventually a condition of overtraining where either the team gets sick or rest is mandatory.

Knowing how to pace yourself and your team is critical to maintaining a path and a cadence that can continue driving a level of hyper growth. It’s taken multiple lessons for me to learn from others that it’s necessary to know and understand all the inputs that help maintain the pace. I don’t know how many times I was told to slow down and get some rest in the training by my coach. REST?!?!? Are you joking?!?!? “I’m feeling great and I don’t need to rest…”. Follow that with either getting sick or starting to see a drop in the performance level. “What do you mean rest…this isn’t the first time I’ve ridden a bike and I’ll know when I need to rest.” is what I might convey to my coach dismissing his feedback and experiences. I’ve since come to appreciate his valuable feedback and it was his feedback that was a major factor in securing a regional title.

Coming back to a corporate environment and the link to cycling…it’s all about the plan and managing all the necessary inputs to achieve that plan.

Revenue.    Corporate…what’s the Quarterly and Annual Plan? Cycling…what are the major event goals and the power level necessary to achieve the result?
Cost of Goods.    Corporate…what are all the elements necessary to produce? Cycling…what are the dietary needs to stay properly fueled, recover, and continue building on the achieved results?
Operating Expenses.    Corporate…what is the necessary cost structure to support the Plan & the resources available to achieve the plan? Cycling…what is the cost of nutritional supplements, tires, tubes, equipment, travel, etc.?
Net Income.    Corporate…with consideration to all the inputs, is the company achieving it’s planned result? Cycling…are you making progress towards achieving the wattage goals and distance goals? If not, is there a tweak to the inputs that can be made that may result in the same outcome?
It might be a bit simplistic of an analogy, but you can see the correlation between the two. While some might see my quantitative view on cycling as a bit unfortunate, it’s what makes me tick and it’s what I love about my career. For the same reason that I can’t just show up in the office and put in 8-9 hours and collect a check…nor can I get on my bike and just go for a ride…at least not with any frequency. I’m completely driven by performance and performance doesn’t happen without a strict plan in place, a set of metrics to track the plan, and the commitment to deliver. Period. In a situation of hyper growth, you need to be keenly aware of the elements and their impact on, and contribution to, delivering performance. You also need to realize that an excessive use of resources, which may ultimately be waste, will not necessarily deliver the desired results. There is no set formula…but it’s all about having the experience to know how to balance the inputs, drive a sustainable cadence, and deliver on what you promise. Changes to the plan? They happen, but don’t introduce a new race to the calendar next week, load up at the buffet with a ton of carbs, and hope that is going to get you through with a successful result…

Thanks for reading…

Jeffrey Ishmael

Off To The Races & Billion Dollar Valuations…

December 13th, 2016 Comments off

With the original Cylance team established in July of 2012, the orchestra came together and at that time there as a unified vision to transform the security market and change the way that corporations were thinking about their security infrastructure. We were less than a dozen people working in the living room and bedrooms with a goal of security transformation, and in the eyes of our founder, achieving a billion dollar valuation inside of 4-5 years. When you’re starting on fold-up tables there is no blue print to getting there…only a bit of a dream. However, that’s exactly what the team was doing in those early weeks and few months…creating the blueprint on white boards and oversized post-it notes. The team was sparring on a daily basis on what approach would achieve the best commercial results. It was all about specifically identifying the value proposition behind the vision of the tech that had been decided. While we were not trying to build a new company in a high growth sector, we knew the security sector was dominated by dinosaurs and there was billions in revenue that were ripe for disruption. Cylance was going to be the disrupting force in the equation and that exactly what the team was focused and unified on accomplishing.
We also knew that we could accomplish the goal while being very surgical in our spend and that our success would be based on a breakthrough tech and not spending tens of millions on advertising campaigns, spending ridiculous amount early on trade shows, non-value add events, as well as keeping our hiring cadence under strict control. The company cash burn was extremely minimal in the early stages and it was nearly 18-months before the company received its second round of investment in February of 2014. As we continued to bolster our headcount, invest in the Services team, and gradually moved into new offices, the original $15M investment lasted that first 18-months. Again, we were extremely surgical in our spend and spent every dollar like it was our last dollar. A philosophy that managed to last the better part of almost 4-years…
While the Research team was focused on developing the product there were a host of other operational issues to address as we started to grow as a company and would need a foundation for the first few years. First on the list was to find commercial space as we would definitely need to move out of the house. While a remodel was imminent, we were also working in a space where there were water leaks, open beams with exposed nails, and all the other fun elements of a home start-up! You can imagine the response received when you’re trying to meet with The Irvine Company on a commercial lease, as a new company, no revenue, and you want to sign a 5-year lease and then have them pick up all the buildout and incorporate into the lease rate so as to minimize any immediate cash burn. On top of that…and as a start-up…you’re also asking them to have certain restrictions on competitors worked into the lease as well. Suffice to say that we had a pretty weak position and it took more than a few meetings to get them to buy into our vision and the growth we were looking at achieving. At that stage, it was a huge accomplishment to get our lease signed with The Irvine Company, in a premier location, with building top signage on both sides….and all with a minimal security deposit. Score one for Cylance!
Even with our new lease, we kept our spend to prudent levels that were consistent with our philosophy. Rather than spend six-figure amounts on furniture, we committed to a new entry level offering from Steelcase that could easily be added to as we grew…but not before staying on fold up tables for many months before getting into our new space. We all tended to joke that fold-up tables had become part of the Cylance DNA.
Next on the list was our corporate insurance portfolio. Rewind to the start-up that had no revenues, still had less than a few dozen employees, had actually been turned down by Marsh for being “too small”, but seeking coverage in the low 7-figures. I looked to a prior relationship and again found a partner that believed in our vision as well. Fast forward a few months later and securing our first few customers and we were already going back to ask for additional increases in coverage to the mid-seven figure range. This drill continued on almost a quarterly basis until a final larger customer pushed the coverage limit again…to a point that exceeded our billings on even a cumulative basis. Again, transparency and strength in our relationship got the coverage in place. While there was certainly some raised eyebrows, they believed in Cylance and continue to realize the benefits of the relationship, which now extends on a global basis. Again, it came down to relationships, communication, and a mutual respect on both sides to manage the expectations on such a hyper growth path.
Marketing? The first few shows were an absolute kick to plan being the new kid on the block. Our burn was primarily aimed at headcount support, but we also knew we needed to start getting the Cylance name out there. For the first few RSA and Blackhat shows we had the luxury of being an unknown and used it to our full advantage as the team rolled out a full guerrilla assault on the show. With everything from custom napkins dropped in bars, to rented suites to meet with potential customers, to other similar means, we made a huge impact in those early days and clearly got the Cylance name out there. Not immediately recognized post-show, but we established the open ended question of “Cylance?”. We were clearly on the radar at that point…and already starting to create discomfort with our competitors.
At this point, there was still a unified team, all engaged in the same direction, and we knew the end play we were headed for. We knew we were going to be able to achieve our objectives without putting excessive spend in place. What I appreciated at this point, which was similar to the philosophy we had in place at DC, was that we were operating in a brand first capacity. There were no decisions made in the best interests of a person, department, or other agenda…it was all about Cylance. With this philosophy politics were still being avoided and there were no silos in place. We all bled green. Along with this approach was the continued prudence in spend throughout every level in the organization. We were pacing well, the product was coming along, and all indications was that once product was commercialized in 2014 we were going to start eating our competitors lunch. What our competitors didn’t hear was the increasing sound of the Cylance war drums and their sunset turning a bright shade of green…
Thanks for reading.
Jeffrey Ishmael

Exceptional Value Is In The Sum Of The Parts…

December 2nd, 2016 Comments off

The original goal when I started my blog was to bring an insight into financial strategies and operational disciplines that often drive the actions of the Finance team and why they often wanted to be involved in so many other parts of the organization. More involvement than just reporting what was happening in the other functional areas we work with. Quite simply, exceptional value is almost always created and driven by the entire sum of the parts and not just the actions of a single individual, department, product concept, or operating division. It’s all about the sum of the parts…the team that has been assembled to execute on a commitment made to the Board, Executive team…or a commitment to employees.
My point of view isn’t just based on a single company or a single experience of corporate success, but the pattern I’ve seen played out over a number of companies. Whether it’s been most recently at Cylance, strong financial and brand performance at DC Shoes, or aggressive EBIT initiatives during my time with a division of Schneider Electric, the exceptional results could not have been accomplished without the strength and commitment of a competent team. It always started with defining the mission and breaking down that mission into a set of directives that would shared across the functional areas. It was NEVER about closed door initiatives, secret meetings, or selective transparency on key topics. It has to be about clear communication, transparency, and honesty with the team on the direction that everyone is moving and the expected outcome. Measured, achievable, and sustainable changes to the business. There’s no room for short term thinking or decision making that alienates key team members.
In the case of MGE UPS Systems (Schneider Electric division), we were moving into some key periods for the company and were starting to see compression in our margins, our operating metrics, and ultimately the results we were reporting to corporate in France. All this while we were seeing massive fluctuations in just about all of our raw material prices, which at that time were primarily copper, lead, and steel. As a larger Executive team, and under the direction of our Chairman, we identified approximately 15-20 initiatives that ranged from increasing Services utilization rates, to improving battery pricing, to improving revenues in underperforming segments, as well as headcount related metrics and expenses. Additional initiatives included balance sheet management for the improvement of A/P terms, improving DSO metrics, and bad debt expense. None of these in any sense were a smoking gun, but as a collective and through the commitments of all the teams involved, we’d be able to make some very material improvements to our EBIT results. This overall initiative spanned the course of approximately 9-months and we met on a monthly basis, with our Chairman in attendance, and reviewed the progress being made on all initiatives. The reviews were not done on a 1:1 basis, but as a collective in a larger conference room. It was the purest form of group accountability. While a significant grind during that period, it was amazing to see that the team not only achieved the originally targeted results, but exceeded the commitment made. Still an amazing accomplishment by that team in what was a very mature / static company that was not experiencing anything close to hyper growth. It was about absolute efficiency in execution.
Fast forward to DC Shoes and this was about a huge amount of uncertainty. I walked into a situation where there was a heavily entrenched culture that was operating under the Quiksilver corporate umbrella, but operating completely independently and in a different location than the rest of the organization. A truly independent team and company. The goal going in was to partner with the new President for DC, as well as the likely relocation of the company to Quik HQ since the DC lease was expiring. At this time, barring some selective improvements, DC was a high performing brand, had tremendous additional potential, and was highly accretive to the overall corporate results. Corporate results that were driven primarily by the Quiksilver brand, DC Shoes, Quiksilver Retail, Roxy, as well as a host of smaller brands. DC’s continued results were so strong that it was a near impossibility to sell the brand due to the deleveraging it would create in the corporate P&L for what would remain and the subsequent results that would be reported moving forward. There was also the development of a full 5-yr Plan that had the DC brand growing to almost $500M, which in the few years after the brand was moved to HQ, would have exceeded the market cap of the entire company. The unfortunate part for DC is that while the brand was performing exceptionally well and aggressively growing market share, the sum of the corporate parts were anything but a synchronized and collaborative team. There was infighting between brands, selective support from corporate oversight teams, key executives making decisions they weren’t qualified to make for other brands, and ultimately, a complete scarcity of financial resources after extended periods of poor spending decisions and declining results. We know the unfortunate position that Quiksilver found itself in.
Cylance…a completely clean slate. No baggage. A complete blue ocean scenario to chart a path as a team and to start executing. We had a CEO & Founder who had an incredible security vision after decades of being told it wasn’t possible. We had a Chief Scientist that is probably one of the most brilliant folks that could have been chosen to head up our Research team. We had a CTO that was a CISO for a top telecom and moved his family from Australia for the crazy dream. An SVP of Product that was laser focused on building out the entire product team, while also building the product! We had a CMO that had a strong pedigree in security and did whatever it took to get the Cylance name out there…and in brilliant fashion. An SVP of Business Development that delivered on whatever was asked…including the collaborative and successful closing of the Dell OEM agreement. We had a VP of Professional Services that started generating revenue in our first Quarter. We had a VP of Legal that kept us out of the courtroom and played a key role in our corporate foundation. We had an SVP of Global Sales that partnered with everyone on the team to deliver the first $1M order…$10M order…crazy sales growth every Quarter, domestic team expansion, and international expansion. We finally got our first CPO that in just one short year oversaw employee growth of over 500 employees. I can’t imagine Cylance experiencing the level of success we did without the team and their amazing contributions. I can’t imagine that the team would have been able to share in the extreme success we did absent any of these individuals. Would there have been success, absolutely…but at what moderated level? Truly exceptional team results…and in the case of Cylance, exceptional value was in the sum of the parts.
Thanks for reading…
Jeffrey Ishmael