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Posts Tagged ‘Management’

Questions From Colleagues & Preserving Sanity…

April 24th, 2017 Comments off

It’s always interesting to me how cycling manages to work its way into professional conversations, even with a population of folks that don’t participate in the sport with any frequency, if at all. However, there’s a certain curiosity to people when they learn that you are actually spending 350-400 miles a week “on that little seat”. Most often they say nothing, might make a passing comment, or sometimes ask how the training is going with an obvious sincerity.

I’ve always talked about how strong a correlation there is between the disciplines I practice in my personal life and those I practice in my professional life. Very seldom are the two very far apart from one another. However, I was asked a very interesting question by one of my prior colleagues at Cylance. Knowing how much I ride, and that my training rides usually started at 5.30a, I was asked “if the effort required for those hours and rides were worth it and did it provide some balance to the turmoil of life at a start-up?” It was a great question and one that I had discussed with folks on my direct team, as well as friends and vendors.

Simply answered…YES. It really is too easy to get caught up…or I should say buried in the weeds and lose your perspectives when the pressure is high, there is change coming at you from every direction, and there is usually a loosely defined direction that is dependent on tracking against a business that is difficult to predict. You can really get caught in an escalating pace of analysis paralysis. Analysis that has you running every possible scenario, discussing every possible outcome with trusted folks on your team, balancing the hourly or daily interruptions that occur “because you need to be in this meeting…” while never really reaching conclusion or final decision. I learned very early on during my time working in equity research to quickly synthesize information, inquire with a few trusted colleagues, and make the necessary decision…and move on. Not all decisions can be made in that manner, but the vast majority can. Exceptions occur when they are going to have a material and lasting impact on the P&L….hiring, capital expenditures, etc.

When those decisions tend to be more prolonged I always found that my time on the bike, in the early morning hours, would give me the opportunity to weigh the alternatives and think about my decision without the inevitable interruptions that come in the office. When you have hours on the bike you sometimes you pass a certain business, recall a pertinent conversation, or simply realize a new idea that would have never materialized in the office. When you are on the bike, and in the dark, the only thing out there is your commitment to achieve specific performance objectives on the bike…and the thoughts of what you need to accomplish in the office. As I mentioned above, those two are seldom far apart. One moment your making sure you are tracking against the wattage number your supposed to maintain for the 40-minute block you’re in the middle of…and the next minute your thinking about the utilization rate that was just reported by Services, what effect that is going to have on their margins for the Quarter, and recalling the last Quarters activities and the contributions to the performance of that group. Was there a specific project where billing was delayed…was it not properly quoted at the beginning? How are the two large Product opportunities progressing with only two weeks left in the Quarter…and there hasn’t been an update in the most recent few days. These are the things going through your mind in the predawn hours of that ride…

Sometimes those hours in the saddle can be with a key member of the team that might be struggling with a certain decision. Very early on our CEO was faced with making a decision to fully replace the first generation Sales team and basically start from scratch. He and I had know each other for years before he made the commitment to start Cylance so bikes were nothing foreign to the two of us. If we got out on the bikes it was never predicated on having a meeting or certain discussion…but only to get out for a training ride. Inevitably it usually went in the direction of business, as it had that day. There was a long discussion about the challenges and potential risk of making the change, but in the end he knew the decision that had to be made…it was only the process of rolling along at 20mph discussing the subject that made it a bit of a therapy session.

That’s exactly what cycling is for me relative to my chosen profession…it’s part therapy, part challenges, part perspectives, part bonding with friends…and one more way for me to quantify & measure my efforts. The conversation I’ve had with colleagues is not about the specific activity of cycling, but to choose any activity that can give you a similar parallel with your activities at work, provide those perspectives, and allow you to avoid getting so embedded in the weeds that you are unable to make effective decisions that are in the best interest of the company, your team, and the objectives that everyone is working towards. Whether it’s running, rock climbing, cross country skiing, or swimming….what’s that activity that is going to keep you healthy, your brain engaged, and sharp for the next stretch of hurdles that you face at the office?

Thanks for reading…

Jeffrey Ishmael

Anaplan…& Implementing a Robust Forecasting Platform: Billings & Revenue

March 24th, 2017 Comments off

For the first few years at Cylance there was not a huge reliance on our forecasting platform and the need to put a pricey tool in place. There was simply no need to spend a six-figure amount when our business was still an entirely domestic story and the core revenue stream was still Professional Services. While we implemented NetSuite within our first few Quarters as a company, we opted for the NetSuite as our core platform so we could then bolt on additional modules as needed. We opted for their forecasting module almost immediately, but for a very basic forecasting function. As a Professional Services story, we only had a basic need to forecast gross labor hours, utilization rates, hourly cost rates, as well as estimated billing rates. At this point, we still did not have any consideration to Product revenue, and in the absence of, did not have any considerations for revenue recognition at that point. Considering that our Services revenue was not invoiced until completed, it was a very straightforward modeling exercise.

Fast forward to the launch of our Product offering and we knew it was going to necessitate a jump to a new platform as we were already starting to see some weakness in the NetSuite module. This new phase required an entirely different level of forecasting considerations for which there was no historical activity and for price points that had not been previously seen in the security sector. Would we actually realized, and stabilize, at a pricing level that would be many multiples over the incumbent first generation AV offerings. With consideration to the Product forecasting;

  • Average price per node on an annualized basis
  • Billings distribution by contract length…12, 24, and 36-months
  • Flexibility to easily adjust the anticipated weighting of billings
  • Subscription or Perpetual agreements (very few perpetual, but still present)
  • Robust deferred revenue modeling as a result of signed contracts
  • Sales staff hiring and assigned quotas.
  • Implementing any “seasonality” consideration into the model
  • Existing quotas, annualized growth, as well as ramp up period for new hires.
  • OEM, Consumer, and Government assumptions.
  • International entities & expected exchange rates for a consolidated USD view
  • Contra revenue accounts

It’s pretty easy to see that, even the short list above, there was going to be an entirely new level of complexity to our forecasting efforts, which could not be accommodated in our original module. After meeting with one of our key investors and discussing some of the options available, Anaplan seemed to emerge as a strong candidate and we made the decision to move forward. It was time to put a more robust tool in place as we started moving towards 9-figure revenue goals.  Even with the move to a new forecasting tool, we also had an entirely unique challenge as in developing a the components of this Forecast without a wealth of historical performance metrics. This meant that we would be constantly updating the Forecast as we compiled more Product transaction data. Fortunately for us, we saw a relative level of stability in our average PPN and our contract lengths. The two most difficult elements we had to work through during the implementation was the buildout of the deferred revenue forecast and the buildout of the revenue forecast that was supported by a detailed hiring plan and the assigned quotas for each one of those individuals. This was not going to be a simple spreadsheet exercised based on modifying a few cells and voila’…you have an annual number! The goal was to build a platform that would hold up to the scrutiny of our investors as well as easily identify & bridge any performance shortfalls that were realized versus planned.

In taking one example of where Anaplan excelled was in the modeling of our domestic revenues through the quotas that were assigned to each of our sales staff. While a painstaking exercise, there was an itemization of every existing sales staff, as well as those who were recently hired, or planned to be hired. There were individual quotas assigned to each one of these individuals. For those new hires, there were additional considerations to a ramp up period as they learned our tech, the inner workings of the Company, as well as seeding their existing network in their new employment. While these assumptions were usually conservative to reflect a few Quarters of nominal contribution, most were ramping extremely quickly. However, were we going to see the same level of immediate success as we scaled from a few dozen to sales staff to a multiple of that? That’s where we would have flexibility in Anaplan to adjust the model accordingly. From a billings and revenue modeling perspective, the only limits in Anaplan would be those that we placed on ourselves. However, we also had to be careful that the levels of planning detail we opted to incorporate would be important in the planning of the business and not turn into an exercise of planning paralysis.

The second painstaking, but worthwhile effort, was the buildout of the deferred revenue model. With the help of one of Anaplan’s premier implementation staff members, this was efficiently tackled and resulted in a clearly mapped Forecast that was easily trackable after any changes were made to new sales hires, quota modifications, or changes to average contract lengths. It was no longer the “black box” that we were challenged with on our prior platform. The additional benefit of the new Anaplan deferred revenue forecast is that it was easily audited and reviewed against the underlying assumptions. This would have played a pretty key role in our prior financing round in which there was a divide between the models presented by investors and our internal view…on the older platform. As one investor had noted during those efforts…”We’re familiar with that module and it is a bit of black box…”. A nice affirmation of our decision to move to Anaplan, but we were not yet fully deployed on Anaplan to supply the new view.

With respect to our choice to move to Anaplan, we also chose to work directly with the Anaplan implementation team as we wanted to keep our entire efforts and focus inside the Anaplan camp. I opted not to risk having a point of weakness between Anaplan and the efforts of a 3rd party reseller for implementation. It was a great decision and the Anaplan team was fantastic. In the end, the primary goal of moving to Anaplan was to be able to provide complete transparency to our investors, provide them the confidence that there was a robust set of underlying assumptions in the Forecast, and to allow for an intelligent dialogue on the integrity of the underlying Forecast. That once unbundled, it would be easy enough to see where any weakness might be occurring if there was a shortfall against Plan. We’ll jump into the cost of goods and operating expenses in the next round…

Thanks for reading.

Jeffrey Ishmael

Do You Stay On The Gas With “Unlimited” Resources…?

March 20th, 2017 Comments off

     It’s been just over four months since I made the jump to start a self-imposed sabbatical to “recharge” and look to define the next chapter after 4.5 years in a hyper growth start-up. In essence, it was 4.5 years training at a redline pace that ultimately demanded a level of moderation, but at a pace that wasn’t mine to control. But what does a hyper-driven and intensely competitive individual do to “recharge” the batteries and spend some much deserved down time do? Well of course you decide to set your sights on doing one of the longest paved climbs in the world, as well as deciding on racing two of the most notable Classic races in Europe that will have no less than a combined 100 kilometers of cobbles between the two events. Those are natural next steps in getting some rest…right?

I’ve always made some pretty strong comparisons between the training for my cycling and the disciplines that have to be practiced in a Corporate environment. While some may balk at the comparison, it comes down to managing the resources you have available, using those resources in an effective manner, while accomplishing the goals or commitments you’ve made to yourself…or others. Let’s look at the very macro comparison of the resources available at a Corporate level versus Personal level. At the Corporate level, imagine having complete open access to the checking account of your favorite VC and being able to deploy those resources in any way you could to your business…ANY way. You can spend anything from $1 million…to $100 million…or more if you felt you needed it. Let’s say you settled on the amount and burned through that spend. What have you been able to accomplish with the deployment of those resources in the end? Have you built a healthy business that has a strong foundation for future growth and have you been able to establish a strong pattern of increasing performance metrics that strike the right balance between aggressive growth, establishing a healthy corporate environment, while positioning the company to deliver on your commitments? General questions, but you get the point.

Let’s talk about the Personal side though. I find myself on sabbatical and all of the sudden I basically have an “open checking account” for training time and can do whatever I want. I can train for 10 hours per week, 20 hours per week…or even 40. However, as with a Corporate environment, there is the same consideration to resources and a healthy foundation as there is for an athlete training for an event. It has to be methodical, planned, sustainable, with appropriate periods of reflection and a tempering of the pace. The attached picture is the actual chart of my training since November and the progressive peaks and subsequent tapering as I move towards my goal of leaving for Europe next week. In the chart the magenta line is the shorter term acute training load while the blue line is the longer term chronic load, which indicates a core fitness base. The yellow line is the fatigue line and the more it dips, the higher the fatigue and time and indication of need to rest. Think of the magenta line as the 200-day moving average for a stock…you can see spikes above the norm, but ultimately it’s going to come back down before hopefully making the next run up. It’s the same concept here. You can see where I’ve had the spikes, but ultimately, you taper down before making the next training push. It’s about finding the right balance, creating a healthy foundation, and continually pushing forward.

Just like the Personal level, there is an equal penalty for “overtraining” at the Corporate level. At the personal level, overtraining can lead to becoming ill, an inability to achieve peak performance, and an extended recovery time to get back to a healthy state of training. In the Corporate environment, the equivalent of “overtraining” is essentially excessive spend, excessive hiring, and a deterioration in the performance metrics of the company. At that point, there’s no choice but to move into a period of recovery to get back to a higher level of performance.

Over the last four month I’ve managed to put in over 9,200 kilometers in the saddle, climb in excess of 300,000 feet, and during that time burn almost 210,000 calories on the bike to achieve that. Again…that’s just in the last four months. Putting 210,000 calories in perspective with some of my favorite foods…

  • Roughly 2,100 packets of energy gel…
  • 131 pounds of pasta…
  • Roughly 1,750 Chobani yogurt cups
  • 1,500 cans of that nectar of the gods…Coca Cola

You get the idea…it’s all about the long game and establishing a strategic and achievable result. Imaging trying to cram all the stats above into a shorter window…say even two months. The likelihood is that you don’t have the proper foundation in place, will overtrain yourself, you’ll likely get sick…and ultimately your fall back weeks or a month…or in the case of a Corporate scenario…potentially losing Quarters due to overtraining.

Happy training my friends…

Jeff

Best Of Class Forecasting & The Eternal Struggle…

March 16th, 2017 Comments off

There’s few corporate topics that elicit the levels of frustration and confrontation that budgeting will create amongst teams. Unlike the amusing skirmishes that we’re watching at a government level right now, you’d think that this exercise at a corporate level, when there is only company performance to address and the absence of “political parties”, that this would be a straightforward process. Well this certainly couldn’t be farther from the truth as we all know. Over the next few posts I’ll be diving into not only the process and pain that most companies will go through, but an overview of the budgeting platforms I have worked on and the considerations for each.  While some of my views might seem matter of fact to my finance colleagues, my posts are always intended to provide insights for the rest of the organization when their having to deal with what is typically that “black box” department called Finance.

In the most optimal situation, the compilation of a Budget represents the collaborative process that should involve all the functional areas of an organization. This collaboration in the end will yield a Budget that all individuals are supportive of and will ultimately drive future accountability in delivering results that achieve the commitment made to the Board. In the worst situation, and one that will ultimately result in a broken process at every level, are goals that are mandated at the top level and each functional area is forced to determine what path it will take to get to the end goal, regardless of how reasonable the goals might seem. Ultimately, these goals are not fully supported by the team, will not be met over time, will yield resentment, as well as create unnecessary levels of conflict amongst the team as they resources become scarce in the absence of results and fingers are pointed in every direction as goals that were never their own are missed. These are absolute extremes, and in most cases, the majority of corporate budgeting efforts fall somewhere in between and need to be navigated through effective communications, compromise, and support.

What is important to keep in mind, at least with consideration to what the Finance department is managing, is all the elements that they’re compiling and that the budgeting process is really a mechanical process…there is no emotion involved in this process. Even though it will prompt emotional responses across functional areas, it’s really mechanical for the Finance team. With that in mind, it’s also worth understanding what the endless data points are that are having to be compiled for the Budget. I’ve worked in smaller $30M turnarounds that have a relatively small product offering and limited international distribution….to much larger entities such as DC Shoes / Quiksilver, as well as MGE, which then reported on a consolidated basis to Schneider Electric. The latter organizations had extremely complex budgeting practices that had been decades in the making, involved consolidations with dozens of international entities, while also having to balance both GAAP and IFRS reporting. Not only were there challenges with international consolidations, but there were countless other elements to work into the planning process, which included…

  • Establishment of company codes depending on subsidiary considerations.
  • Delineation between the multiple sales organizations
  • Considerations to the multiple distribution channels that were at play
  • Breakdown between customer types
  • Inventory segregation
  • Product segregation to allow further performance reporting
  • Seasonal considerations, which in apparel, likely meant 4-5 seasons annually
  • Demographic segregation…Men, Women, Youth, etc.
  • Product categories…Bottoms, Tops, etc.
  • Fabric segregation…Denim, etc.

It’s easy to see with the list above why the Budget process is a very mechanical process and NEEDS to be absent of any emotion in the process. It’s also easy to see with the list above that the process also needs to be a collaborative one with EVERY functional area to ensure success in the process and an end budget product that is supported an endorsed by the team.

With some relief, it was a much simpler budgeting process at Cylance as we were still a primarily domestic story with Protect being the main product offering. We ran a separate P&L for the Services business as that was a strategic part of the organization, but we also had to ensure that the Services team was operating in a profitable manner. Services was an incredibly profitable business at MGE and there was no reason it shouldn’t be at Cylance and we had the reporting enabled to be able to track whether that was the case. While there was still some developing international business, it was going to be a fairly small percentage of our overall results, at least over the next 12-24 months while the domestic business was still going to be the main growth vehicle. Did we need to plan at a regional level and monitor the spend…absolutely. However, for the stage that Cylance was at, and for the foreseeable future, there was no reason to complicate the process and create a ton of busy work to keep Finance busy and engaged. There was no reason to build a P&L based on hundreds of departments or cost centers that was more akin to what was necessary at a $40B Schneider organization. As with manufacturing, and other supply chain philosophies, lean P&L management in early stages leads to a very straightforward process, one that does not require extensive interpretation, and ultimately leads to a clear & concise path that was developed by the team, is supported by the team, and is easily navigated by all constituents.

So how do we bridge the gap between supporting the teams with what they need, effectively consolidating and considering their feedback, and the platform that is utilized to bring it all together and present the detailed view to the Board? That’s what we’ll dive into over the next few posts and jump into some of the key areas of the P&L. The common theme that I’ve always carried over the years, is that the success of an organization is tied to the collaborative approach and one that considers and respects the feedback of the team. Ultimately it’s the team, or the CEO, that is presenting the Budget to the Board. A Budget that is expected to be delivered on and achieved. It should be a safe assumption that the Budget is the product of an entire team collaboration and one the team is committed to rather than being dragged along for the ride. I’ve had to endure every situation, but without a doubt, I’ll always side with collaboration…

Thanks for reading…

Jeffrey Ishmael

Not All Levels Of Transparency Are Created Equal…

March 13th, 2017 Comments off

Transparency

Over time it’s always interesting to see how individuals and organizations define and operate under varying levels of “transparency”. These insights may take weeks to play out or may ultimately take years. While I will agree out of the gate that there should be varying levels, depending on the sensitivity of the underlying data, an extremely high percentage of transparency should exist within an organization to build trust with internal and external customers, as well as investors and other key constituents. In summary, Transparency should be defined as…

a :  free from pretense or deceit : 

b :  easily detected or seen through : 

c :  readily understood

d :  characterized by visibility or accessibility of information especially concerning business practices

As mentioned, there are always certain types of information that need to be contained to a small group depending on the level of sensitivity, but 98% of discussions should be open and collaborative with the broader team. Are you planning a reduction in force that may cross over multiple departments…then yes, that is going to require an incredibly amount of sensitivity and confined to a small group in the planning of the event. Releasing this information to the broader group would result in a paralyzing decrease in productivity across the teams and produce undue anxiety for those that aren’t affected. Absolutely painful, but these are actions that need to be controlled with military precision.

Are you doing an IPO? The group in the know on this activity obviously widens as it becomes necessary to involve more people in the process as you continue to bolster internal functions, coordinate functional area contributions to the drafting of an S-1 and the characterization of the business, working with investors, bankers, and legal partners. A large group…absolutely, but still a relatively combined group of folks. Will there be leaks in this pool and others find out…absolutely. But again, not necessarily doing regular updates out to the broader organization and discussing in an open environment in a regular cadence.

I’m really not a fan or subscriber of playing semantics with certain topics. The allowance of “access” or inclusion in a meeting or systems is also not equal to transparency. It’s just exactly that…access or inclusion. You may be given access to a courtroom to view a criminal case, but that doesn’t mean that you’re given access to all the details of the files held by the defense and prosecution, but you have “access”. In a corporate environment, that absence of financial information, historical activities, investor information, or operational performance will simply result in the failure of a team to succeed…period.

When it comes to strategic planning, hiring, geographic expansion, financial performance, facilities expansion, or other operational initiatives, there’s no reason not to be working in a fully transparent manner to build trust and effective collaboration across the teams. It’s not about spinning the information or results to create a sense of vagueness of lack of definition for the team, or withhold information that creates a hurdle in allowing the team to make a fully informed decision. Ultimately, as reflected in the definition above, any level of deceit will always be discovered and the subsequent erosion of trust can seldom be recovered.

This is not a topic that should require extensive discussion…it comes down to just recognizing the DNA of an individual or organization. For a team, and ultimately an organization to succeed, there needs to an environment free of pretense and deceit, an environment that is easily translated and readily understood, and is characterized by high visibility & accessibility of information concerning the vast majority of business results and practices. It’s an insightful walk to observe how different people and organizations promote these conditions, but in the end, it’s critical for the success of the team, company, and ultimately promoting a healthy environment of trust and collaboration.

Thanks for reading and sharing in my walk…

Jeffrey Ishmael

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

When Processes & Systems Are Put To The Test…

January 21st, 2015 Comments off

Part of the enjoyment that I get from working at a “start-up” is that we essentially have a blank canvas on which to build the company, configure our systems, and define processes. Processes that are both needed, as well as in the best interests of the company. Essentially the establishment of a back office configuration that will support increasing growth as opposed to legacy decisions that are still carried out within a larger enterprise that are simply no longer adding any value.

However, until you’re tested, how do you know the decisions you’ve been making will be positively affirmed and be of value to the organization? From an operational point of view we’ve had a number of touch points that have tested our systems. Whether it’s been the growth of our employee base, the successful completion of our Series-B fundraising, or our accounting audit….we’ve had multiple opportunities to test our systems.

From an operational point of view, I’ve chose to run headcount in a VERY lean manner and instead invest in systems that would support the highest level of efficiency. I’m probably working with the smallest Finance & HR team that I’ve had at any company, yet we’ve continued to successfully respond to due diligence and audit requests that typically involve the generation of hundreds of supporting documents to validate what we are reporting. While tedious, we have the systems and processes in place to respond to these requests.

We’ve also had to strike a very fine balance between implementing system enhancements and the need to run the day-to-day operations. We could have easily put Commission and Deferred Revenue modules in place earlier, but with a focus on cash management and time resources, we’ve waited on multiple implementations until it was right for the business…not for what was convenient or bragging rights of extra system horsepower that ultimately sat idle in the garage.

The challenge we’ll continue to embrace moving forward is how lean we can continue to run while providing top tier business intelligence to the rest of the team and responding to the needs of our outside vendors and partners. While we might be currently smaller in revenues than most of the other companies I’ve worked with, our trajectory is on plan and we have a great operational foundation in place to support it. The satisfaction I get from testing our systems and processes isn’t much different than the Sales Director who gets that purchase order…it feels like a win. It’s great to be working with a team that’s always focused on the test and ensuring that daily efforts put us in the strongest position possible.

Thanks for reading…

Jeffrey Ishmael

2-Years and Marking The Milestones…

July 25th, 2014 Comments off

It really is hard to believe that two years have already passed since the company was started, as well as equally amazing to see what has been accomplished during those two years. Coming in as employee #8, I still laugh at my first day sitting down with our Founder over a fold-up table in his living room when he handed me a laptop, tells me it has Quickbooks installed and if I can get payroll entered the next day. Welcome to the start-up world!

Fortunately I had already done an honest self-assessment and knew the dedication it was going to take to play a role in the building of this company and the necessary pieces I would need to put in place to have a solid foundation. I knew that I was going to have to hire people that had an equal dedication and focus. While Stuart was going to need to keep a laser focus on the product side of the house and assemble his technical “A-Team”, I was going to need to focus on everything else that would support that mission. I also knew that I was going to have to modify my approach and decrease the level of rigidity in my operational approach since we would have a heavily dynamic environment that was likely going to be changing on a constant basis. However, there needed to be one basic premise that everyone would need to operate under….Deliver what you promise. It becomes apparent, and very quickly, that there is no place to hide in a start-up.

In order for people to deliver on what was necessary we needed to have the proper tools in place. Two years later, it’s very satisfying to reflect on the systems we’ve been able to implement and track the progression of our business and the contributions of individuals. In many respects, while not the grandiose scope of SAP (thankfully), we have an incredibly robust reporting and forecasting structure that started with the implementation of Salesforce.com. We then added additional platforms that have resulted in a seamless flow of information from identification of an opportunity to final invoicing. We’re in the process of implementing additional functionality with the addition of a revenue recognition module to track what is a rapidly growing product offering.

Systems and reporting aside, how can you not be motivated to deliver when other members of the team have developed a fantastic product that is not amazing in our own minds, but being recognized throughout the industry?!?!

  • Cylance was the runner up at the 2014 RSA Innovation Sandbox program. This was only 18-months into our existence as a company. Amazing!
  • Cylance has just been named one of CRN’s 2014 Hottest Emerging Technology vendors.

When I look at the customer base that we have assembled I see a virtual mirror of the customer base that I was servicing during my time with a Schneider division that supported a variety of customer ranging from SMB’s, to Large Enterprise, and Government. We had a $125 million Services & Product business that employed over 300. While we are still on the upward revenue trajectory, it took them decades to build a quality customer base…and we’re 2-years in. Really a fantastic accomplishment!

It’s all the base hits along the way, and the reflection of those, that really keep me motivated and excited about what lays ahead for Cylance.

  • The creation of a team that is intensely focused on delivering the Cylance mission.
  • The establishment of a successful and profitable Services business
  • The creation of a truly industry disruptive technology that is already being embraced by a notable customer base.
  • The continued development of relationships with key financial partners, as well as new partners brought in during a successful Series-B.
  • Establishment and collaboration with Board level committees adding additional oversight to the business.
  • Successful onboarding of a key accounting partner for additional oversight & auditing.
  • Successful onboarding of a new Director of Human Resources and the continual building of an already successful program.

It’s been a pretty darn fantastic ride over the last two years and I can only imagine where we’ll be in another two years with the team and partners we have in place. The only thing that will limit us moving forward will be the limitations we place on ourselves and our inability to properly plan for the success ahead.

Thanks for reading…

Jeffrey Ishmael