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Episode 3: The DNA of Innovation with Avanish Sahai

In Episode 3, Brian speaks with Avanish Sahai, Vice President, ISV & Applications Partnerships for Google Cloud, about how enterprise businesses can leverage platform ecosystems to catalyze innovation, the challenges of transforming internal enterprise IT projects into external products, and the importance of product-focused DNA for successful innovation.

Listen to the full episode below…

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Brian (00:01):
Welcome back everybody to our next episode of Innovation in the Enterprise. And for those that you know me, you will recognize this is my super excited voice. I get the honor right now to talk to one of my favorite humans who I think we at Code Science have a lot of thanks to give for helping create the PDO program at Salesforce, where we focused all of our years and the energy and thoughts. So I welcome to our podcast today Avanish Sahai. Welcome, sir.

Avanish (00:32):
Brian, it is always a delight to talk to you, in whichever context. And thanks for those kind words, by the way. It’s been amazing, amazing to watch the journey that you and the team have been through and keep driving, keep innovating, keep making change happen, and delighted to be a very, very tiny part of that, so much appreciated.

Brian (00:50):
Oh, I love it. So before we get started today, talking about innovation, what you’ve seen happen, I actually wanted to give our audience a little bit of background and I wanted to walk through your career, getting to today. And there were a bunch of things that I didn’t know either. And I’m very excited to ask questions on this journey. So the first is you were a product manager at Oracle in 1993.

Avanish (01:17):
You’re not supposed to share the date, but yes, I was a product manager at Oracle in the early 90s. Let’s put it that way. And it was a transition from being a hardcore, very hardcore engineer, working on some really interesting networking and database problems to really asking the question, which I think is actually relevant to our broader topic today, which is, so what?

Avanish (01:42):
Great engineers build great product, but ultimately there has to be the context for why is a customer going to buy? Why are they going to change what they’ve been doing? Where does it matter? And to me at Oracle, there was an opportunity to basically, as long as you were doing well, to move into a different role. And this is product management felt like the place where you could bring that, the technical skills, but really the curiosity of how does this fit into a customer’s journey? What’s going to change?

Avanish (02:16):
And since you’ve already dated me anyway, I might as well say it. This was a transition from mainframe era to client server. I was a product manager for a lot of our client-facing development tools for Windows desktop, for-

Brian (02:36):
Wow.

Avanish (02:37):
… OS 2 and for some of the original Mac products. So that’s how old I am, buddy.

Brian (02:44):
Well, I only actually highlighted the age or the year, not the age, the year. Because it seemed like there was something super special at Oracle at that time because the amount of people that came out of Oracle and went into enterprise and then into just general product, I mean, it’s an amazing list of humans.

Avanish (03:06):
It is. And Oracle was one of those places where you’ve had companies over history, where people go, typically coming out of school, learn a whole slew of skills and then go off and do other things. And Oracle was one of those places where the caliber of people that came straight from college or grad school was truly mind blowing. And modesty aside, but there was a set of folks who truly were exceptional in their functions, be it engineering, be it sales, be it marketing, be it whatever.

Avanish (03:39):
And then at that three, four, five-year mark, they would either go back to grad school, in some cases, go form companies, go join a startup. There’s actually a very strong Oracle alumni network, because folks have gone off to do amazing things and found some of the most iconic companies of today, folks who started their careers at Oracle. So yes, there’s a few companies like that. IBM is another one. PTC is another one. GE is another one that people go there, form some core skills and then go off to do some interesting work elsewhere too, while maintaining a tether to the mothership.

Brian (04:23):
But that network wasn’t good enough for you because then you had to join McKinsey, which is another one of those that is known for the network of ex-employees who go, but what was more shocking for me is you started the software and services practice at McKinsey or helped do that.

Avanish (04:43):
Yeah. So this is now coming to the late 90s. So I joined McKinsey coming out of business school and did a couple of years of low tech, oil and gas, utilities, core, core, core clients, but always with an eye on saying, “Hey, how can a firm like McKinsey, iconic, has been around for the longest time, serves, still serves most of the Fortune 2000, Global 5000, a lot of government agencies and so on.”

Avanish (05:13):
But tech had always been a bit of a mystery, and it was things like, “Hey, how can a firm that is dealing with very traditional issues of organizations, strategy, operations — technology in general, moves at such a fast pace — what can you bring to the table?” And in McKinsey speak, some of us had a hypothesis that said, “Hey, in fact, there are a number of areas that a firm like McKinsey can serve large clients with rapid growth and have issues of, how do we organize? How do you strategize? How do you operate?”

Avanish (05:52):
In fact, as well as earlier stage companies. So a few of us were the pioneers who joined a relatively small team here in the Palo Alto office. And that was then became known as a Silicon Valley office and Software & Services was one of the pillars that a handful of us built out and it’s become actually a very substantial practice area, but it was being a bit of an entrepreneur inside a very, very large, very successful organization.

Brian (06:24):
Well, that will be very appropriate for our conversations as we go forward talking about how to innovate within these large enterprises, because obviously you are bringing in something cutting edge into McKinsey to do that.

Avanish (06:37):
Yeah. And that’s exactly it. So it’s thinking about, there’s a lot of knowledge development, there’s a lot of core skills and insights that are from, like, McKinsey develops for, again, some of the largest organizations. But then you think about, “Hey, you’ve got large, let’s say high group, sizable software companies. Well, guess what, they’re also experiencing growth. They’re also experiencing challenges in how do you organize? How do you operationalize?” Et cetera.

Avanish (07:09):
And the innovation aspect is one where it crosses over, which says those traditional clients can learn from the high growth, high tech companies. The high tech company is going to learn from the traditional clients. And if that organization, like Microsoft, to use an example, a lot of different product areas, a lot of different consumer business, gaming business, enterprise business, et cetera. Well, there’s learnings from a Procter and Gamble that has got a portfolio of businesses or learnings from a GE, another portfolio based company. So how do you cross over? And frankly, that kind of learning has to go both ways. So it was an interesting place to be to connect those worlds.

Brian (08:00):
Well, and those years that you were there were probably the maximum amount of just alternative titles and art organization structures that were brought to the world when everybody was like, “I’m chief soda officer,” or whatever they created. So having to merge those things together were a challenge. After that, you went on to essentially three separate acquisitions with different companies. Why would you ever… I can’t believe you’re still working. You must love what you do.

Avanish (08:34):
Again, the journey has been seeing the evolution of technology. So client server to internet 1.0, which was late 90s, early 2000s, working with some early-to-mid stage venture backed companies. And yes, a few exits and my background has always been in enterprise, but the beauty of it is, it is … I think it comes back to curiosity. Like, how can these changes that have been happening at a massive, massive pace? We’re on the cusp of another set of big changes right now, which we’ll talk about. How does it impact the business? How does this impact? It’s not just the business of technology. It impacts all of us, impacts us as consumers. It impacts our clients. It impacts vendors.

Avanish (09:25):
How do they engage internally? How do they engage with their ecosystem of partners and vendors? And so on. Of course, how they interact with their customers. So to me, it’s fascinating. And frankly, we’ve been living in a kind of a golden age of how, as Marc Andreesson has always said, software’s going to eat the world. Oh yeah, software and technology, data, all of us, all of those things are eating the world. And it’s frankly, it’s a privilege to be in the midst of a lot of that from a number of different directions.

Brian (09:58):
Well, you used a keyword for me that describes what I see. Obviously, 2006, you founded two companies. I don’t know why somebody would do two in one year, but good on you. But the next step was where I find, we came together, and I find most interesting that you took an area of really focused on building out these ecosystems and not once or twice, but building the ecosystems of Salesforce early in the AppExchange with Ron Huddleston, and a great team there building that up. At Demandbase and the whole Martech stack and everything going on there, inside sales, trying to rebuild, approach high volume sales. Then to Service Now and everything that they’re doing around employee and ITSM. And then now, in your current role at Google Cloud, focusing on it. I mean, I can’t think of another human that has that resume of names for ecosystems that make such an impact on our world. So many of them. Why ecosystems? Why alliances and channels? How is this your passion?

Avanish (11:05):
Well, it’s actually really interesting. So the cynic might say I can’t keep a job, but the reality of it is, it is a … in fact, it was one of the things that we spent a lot of time researching at McKinsey, on what is the power … So back in the late 90s, what is the power of the lines and ecosystem to the technology world? How do they play out? What is a network effect that you can create from not just a standard business development, partnership relationship, but how do you build so that you can scale?

Avanish (11:44):
Canonical examples are Intel and Microsoft is a great example of they built a phenomenal ecosystem around them, between the hardware and the software, then you Compaq at HP, et cetera. So that was actually a theme that we had spent a lot of time both thinking about and contributed a number of articles.

Avanish (12:03):
So the back of my mind had always been an element of, again, curiosity and how do you do that at some repeatability? When Salesforce came calling in 2009, my first reaction was … phenomenal company. I’ve known Marc from Oracle days, have been at customer many a times in all my startups and so on. And I was like, “It’s great, but not something I would necessarily be very fascinated by.” But then they kind of peel the onion around the vision behind the AppExchange, which was, “Hey, we’ve had this ecosystem, it’s got all these integrations right now, but we think we can expose a real platform. And around that platform, if we can figure out, how do you build an ecosystem? How do you expose this to both end customers and how can they innovate on a platform?”

Avanish (13:06):
And then to ISVs, that becomes something very powerful because it drives a few things. Frankly, it can drive a business. And that was one of the open questions at the time was, is there a business here? Two, it drives stickiness, because now … yes, you’ve got incumbent platforms in the database world, in operating system world and so on. But one of the lines that Marc had always used with us was, “No company has made it to 10 billion dollars of revenue with a B without being a platform.” And a platform requires a platform mindset, but it requires an ecosystem. If nobody builds on it, nobody builds with it, then does it really matter?

Avanish (13:56):
So that was again the ingoing hypothesis or thinking, which was, how do we leverage all the innovation that has happened inside an amazing company like Salesforce, expose that to partners and customers, then help them innovate in their own term? So, yes. And then, as we’ve mentioned from then on, it’s for the last … in this phase of my career, for the last 10, 11 years, it’s been all about ecosystems. It’s been all about identifying, building, figuring out what we need to do and then going off and helping build a team to scale.

Brian (14:37):
So we think of, or at least I always thought of ecosystems, like when I would think about Microsoft, Intuit, as defensibility. It would provide this huge moat where another platform trying to compete wouldn’t have that much … wouldn’t have all of those other companies involved. So there’s a great network effect, as you said, that it causes, but what I’ve learned over time and being in these ecosystems is how much innovation it drives for the end customer.

Brian (15:09):
Where it’s not just Salesforce or it’s not just Service Now, it’s not just the core host of that ecosystem, but actually the innovation comes from the edges, from the partners as well. Why does that happen? Why does innovation sort of shift from just being centralized from the one company to all of a sudden innovation actually being heavily weighted on the ecosystem itself?

Avanish (15:35):
Look, it’s the crux of this, which is no single company, as big as they may be, as many people as they may have, as awesome as they be, they may be yet recruiting the best talent. Nobody can aggregate all the skills and all the expertise, all the domain expertise, functional expertise, et cetera, across a number of different business areas or process areas.

Avanish (16:02):
So the beauty of this approach is the platform player invests in the core capabilities, core services, core infrastructure. But then you’ve got innovators who have deep expertise in other business function industry areas. And for them, this becomes twofold. One, it allows them to not have to reinvent the wheel, first off. So, hey, those core services are common, they’re not necessarily that differentiated, but what I bring on top of that can now be very differentiated and I don’t have to reinvest in that core.

Avanish (16:46):
I can build on top of it. So it brings me cost effectiveness. It brings me, most likely, brings me market time acceleration. And it brings me an ability to keep doing that, innovate at a faster pace, and that’s kind of the expectation that’s out there now. Number one. Number two, if you do it right, that infrastructure platform player has built an install base that is committed to that platform. And the more innovation, the more applications, the more edge cases as you just described, come onto that, it brings them more value. Because they’re saying, “Hey, now my skillset understands platform A or B or C, so I don’t have to diversify my skillset from technology and administration,” and so on. But two, and perhaps even more importantly, I’ve got some common data models, I’ve got some common ways of accessing that data.

Avanish (17:54):
My API are relatively well-defined and I can leverage that. So now I’m back to the network effect. That’s very real. So from a buyer’s perspective, it creates a huge value for them because I can, much more easily, build on top of that. And from the vendors’ perspective, from the ecosystem perspective, they have a ready-made, not to say captive, customer base that they can go sell into. And that becomes the crux of it. There’s a technology conversation to be had, is like, “Hey, accelerate the business.” And then there is the, “Hey …” There’s a business conversation to be had, which is, “Hey, we did the right go-to-market framework.” And that innovation is being consumed by very, very willing customers. So it’s something that when it all works together, it’s pretty-

Brian (18:48):
It’s a huge flywheel.

Avanish (18:49):
Yeah, you got it.

Brian (18:51):
So that flywheel leads me, I think, to the crux of our conversation, which is, as these have become larger and larger, more impactful, true enterprise plays, that they’re really playing within the enterprise, they start to attract traditional enterprise companies to want to be a part of that. They go through this and I think through the years and, we should call out, we’re not in a place to really call out any specific company and we’ll talk in generalities because it’s safer for everyone, I believe, if we do that.

Avanish (19:25):
Keeps the lawyers away.

Brian (19:27):
Yes. But we’ve seen both successes and some failures of these enterprise companies trying to invigorate innovation in some form of digital transformation to bring products to market in these different ecosystems.

Avanish (19:44):
Yeah. It’s a really interesting aspect of this, which is the exposure of these platforms, like I said earlier, to both customers and to partners has created incredible innovation. So I’ll give a few examples. Ten years ago, well, again, won’t name the company, but a very large food distributor had built some really, really interesting channel management / supply chain management solutions on force.com.

Avanish (20:19):
And they really wanted to expose that as a proper product to even their competitors, because they felt in that distribution chain, value chain, they had something that really allowed for much better control, better quality, better improved deliverability, all the success metrics. So they actually put together a proposal to their investment committee and board to build a business that would package this software that was built for internal use to expose that to the rest of the world. And this was 10 years ago.

Brian (20:56):
I mean, that is, at that point, truly a cutting edge idea, taking our IT systems and making that as software to sell.

Avanish (21:04):
Right. And there’s other examples. I’ve seen it in construction. I’ve seen it in certainly in the telecom industry. We’re seeing it in banks right now, even, where internal initiatives that have leveraged these cloud platforms and kind of the acceleration they provide and the ability to innovate faster and frankly, do things that were not easy to do before. And then this light bulb goes on sometimes, it’s, “If I need this, probably my value chain and maybe even my competitors can benefit from it too.” Number one.

Avanish (21:44):
Number two, let’s face it, the markets, the financial markets, the stock markets, the venture community have rewarded companies with a recurring revenue business model that is inherent to a cloud or SaaS for their business, substantially higher multiples than more traditional businesses. So when you’re sitting inside some of these very established, incumbent organizations, there’s always some folks thinking about, “Hey, how can we also innovate so that we bring in a portfolio of businesses, a portfolio of offerings that allows us to have this higher multiple recurring revenue model that drives great evaluations?”

Avanish (22:33):
It’s not, again, not just a technology conversation, business conversation that kind of ties into that as well.

Brian (22:39):
And yet, while the business driver is strong and logical, Bloomberg yesterday, or maybe it was two days ago, had an article talking about all the automotive OEMs and they see the valuations from software being so much higher than their core business. And that this opportunity is worth multiples above where they’re at today, all of the industry and that they’re all in some way transforming to that.

Brian (23:04):
All of those business drivers make total sense, but the ability to drive that type of innovation, that transformation that needs to take place is rarely executed well. There’s an inertia not to change, not to become something different. The one word that you said very early was your move from engineer to product manager to finally ask, why does this matter? Why would someone buy this? Is that one of those roles as we move from IT to R&D with products that is missing or drives this change?

Avanish (23:47):
Yeah. Again, very, very insightful, very thoughtful. So I think it is, and you’ve got core … I tend to use the term DNA. All these organizations have built very successful, very large very scaled businesses over time, whether it’s automotive, whether it’s transportation, whether it’s food, logistics, et cetera. But that core DNA understands that business, understands that business problem, understands their, call it physical assets, super well.

Avanish (24:24):
When you move into the world of bits and bytes and the more technology world that we live in, it does become a different DNA. So you will have an IT organization typically, like I described earlier, building something for internal use and helping improve a process, improve maybe visibility, automation control, et cetera. Fantastic. When you think about the next step, which is now to a point, I’m going to build a product.

Avanish (24:58):
The product now is not a project, which is what IT built. And no disrespect to IT, but IT is solving a point-in-time specific problem for one customer, which is their internal user-

Brian (25:12):
Which they pay the users.

Avanish (25:15):
You got it. So it’s a relatively narrowly defined problem statement, defined scope, and pretty well within the guardrails of one organization. But now you start to think about, I’m going to take this and replicate this to a world of potential customers and buyers but with a whole bunch of other requirements, a whole bunch of other specific situations. Then it comes back to the why and then the how. And that DNA that exists inside the organization has to change. It has to be different because now you got to have that product manager for a tech company mindset, which is, “Hey, it’s not just a project, now you need a roadmap. You need a set of capabilities that can deliver this on an ongoing basis.” You need to set expectations, which is no longer just your circumspects of internal constituents and customers, but with the world at large.

Avanish (26:21):
And some of them are going to be more demanding. Some of they’re going to be different locations, a lot of different constraints. That mindset shift, it’s a pretty big change.

Brian (26:35):
Huge.

Avanish (26:36):
That’s a different DNA. I mean, that, to me, it does come down to that, and that’s something you have to really be thoughtful about from the get go, because it’s not flipping a switch. It’s way more complex than that.

Brian (26:49):
Well, and in our new world of SaaS and the, how much companies are moving the direction of subscription, there’s a contract we essentially have with our customers, which is ongoing innovation. A constant roadmap, always delivering that, always fulfilling the value of your subscription. That is the sort of trade here rather than a one-time upfront license is I will always innovate for you and keep moving forward and you’ll be on subscription. And so that only amplifies the difficulty for that organization that’s transforming where they get to a, this internal project is done, now we maintain, to it is never done.

Avanish (27:33):
And that’s exactly it. And in fact, one could say in the old world, when we talk about the 90s, these big implementations, SAP, Siebel, Oracle, et cetera. These were 24, 30, 36-month projects with literally dozens of people. And then you had the infamous Go Live, and then it went into maintenance mode.

Avanish (27:58):
But from then on, you didn’t upgrade until maybe three years, four years down the road. That was the world of yesterday. Today, exactly like you said, come in like Salesforce, does three releases a year, and those are a pretty major release for every product. But guess what? Between those three releases, there’s a bunch of stuff being delivered, fixed, changed, even if they may not be part of the big release that comes every four months. There’s a lot of that happening. Service Now does it every six months, twice a year. Google-

Brian (28:33):
Google seems like it does it every day.

Avanish (28:36):
We do stuff every day. We do do stuff every day. It’s constant. And that creates, again, a DNA, there’s a lot of underlying processes, tools, technology, continuous integration, continuous development, continuous deployment. There’s a whole slew of capabilities that you have to think about. And by the way, sometimes you’re not launching this into a six month testing cycle, you’re kind of going into production. So how you build, how you release, how you do the good old QA, you have to … it’s a big undertaking. And frankly, it’s because it’s no longer part of the, just as I call it, a back office process. It’s exposed to tens of thousands, hundreds of thousands of users the minute it gets out there. So you really have to think about it differently.

Brian (29:37):
I mean, culture for me is the magic sauce. I mean, it’s one of those things, it’s almost impossible to truly define. And yet, as you refer to it as DNA, it is the controlling factor for so much of we do. And so you have this conundrum of, I can’t define why this culture is different than that culture, but they produce significantly different outcomes. Sue Boehlke, who was a guest with us in a previous episode, defined innovation that takes place in the enterprise of when you’re working on your core product, you’ll be more successful to keep that in-house.

Brian (30:13):
So if you’re moving to touchless check-in in your hotels, or you’re moving to some digitization of some process, that that is a good innovation for in-house. But as we move to new markets, new buyers, new problems, new business model, that her experience was it’s more successful to move it out. And it was an interesting breakdown of where innovation can occur. And I was wondering if you share some of those same opinions?

Avanish (30:47):
Look, I think it’s a thoughtful perspective. I think it certainly, call it phase zero, phase one, that makes sense. Like we said earlier, you know the business, you know the business process, you know your industry, you know your challenges, something that’s within that core. Yes, the expertise is there. And then it’s a question of packaging that into the right kind of solution or technology approach.

Avanish (31:15):
But I do think you also want to identify early on things that are maybe in a phase two, phase three, that may be a bit further out, and maybe partner with someone who can help bring, again, the right DNA, the right culture, the right skillset. But I think it’s also important to keep options open. So something that’s core to me, I may do today. Something that may not be core to me today, I may figure out tomorrow becomes core to me.

Avanish (31:47):
And let’s be honest, let’s look at Amazon. Amazon started out as an amazing retail experience. Now they’re a massive infrastructure-

Brian (32:02):
Everything.

Avanish (32:03):
So, I think there’s different ways of planning that out. But I think the ability to keep … make some bets, but keep your options open. And that can come in many different ways. It can come in, “Hey, I’m going to work with a third-party to build this for me. But at some stage I want to keep the option open to bring it in-house, because by then I may have had the learning. I may have changed a bit of my culture. I may have brought in some new DNA, and this may be something that I want to bet on as a next phase or an additional phase of growth.”

Avanish (32:42):
There’s a flip side of that. You could say, “Hey, there’s some things I want to start out as an internal project, prove it out, but then keep the option open to spit it out.” Not spit it out, spin it out.

Brian (32:58):
Either way. Either way, it’s out.

Avanish (33:01):
Either way, it’s out. Yes. And in this spin out, maybe create a different value proposition, create a different, maybe even legal entity, that says, “Hey, I’m going to continue doing my core, I do it well, look at these intellectual assets that I found, I packaged, but because it requires a different maybe go-to-market model, a different DNA, back to the point of the continuous development cycle, it’s not an IT project, I really want to build a separate company and I’m going to maybe maintain a shareholder interest in it, but it needs to operate independently.” So I think keeping those options open is super important and you have to be thoughtful about it.

Brian (33:48):
So if you became an executive at an organization and had an idea like that, how would you navigate that? How would you navigate of, I want the freedom to operate and to create, and yet there’s so much value in the large organization. And you want to have optionality, how would you think through that?

Avanish (34:10):
Look, it’s not an easy question. But I think there are ways to first foremost, I think you have to identify who are the stakeholders that you can align with your own point of view. And say, “Hey, whether it’s at a C-suite, whether it’s the board even, who some of the folks who can … may see the world as you see it?” And kind of bring them into the tent and, hey, have a discussion, have a candid discussion about what those potential optionalities are. And then how do you, again, with maybe not enough information at the get go, but as you get more information, more insights and more data, you say, “Hey, here’s some paths we can take. And here’s trade-offs, here’s the investment requirements and here’s the potential upsides, downsides,” et cetera. So I think first and foremost is identifying that stakeholder group and what some of those potential paths are.

Avanish (35:10):
Second, I think, again, one of the things we’ve learned in this industry is that things move pretty quickly. So you have to be data-driven, look at the data, look at what it’s telling you, look at what the feedback is, and then exercise those options, if you would, on a relatively fast basis. So if you see some good traction, if you see some … the ability to identify a good market opportunity, say, “Hey, this is something that I think is worth investing in,” and go figure out how to build a business case for that. And go back to those stakeholders and say, “Look, here’s something I think we can go do.” And the answer will be yes, no, maybe. And then depending on that, figure out how to act on that.

Avanish (36:00):
But I think there’s increasing, there’s a lot more creativity and a lot more support for that type of big bet thinking. And how do you make sure you get the right folks engage in it from early in the cycle.

Brian (36:18):
So the three that I sort of took away on this, and I think they’re so wise on this is it’s about aligning your internal stakeholders, so that you can get the budgets, you can get the direction, you can get the runway that you need. It’s finding the right partners in DNA to bring in. So again, how an ecosystem and partnerships through all of these players that are building ecosystems out can actually help drive that for you. And the last piece is the capability and capacity for product management, the ability to listen to the market, to see trends and to build a business case and investment plan around that.

Avanish (36:56):
Yeah. I think in the last one, Brian, I would add one. I think product management is very core, but I think it’s also the broader … we didn’t talk too much about this, but the broader go-to-market skills that you need to bring in as well. So product helps define bits of crucial function and it’s a crux of fate. What are we going to build? What are we not going to build? When? How? Et cetera.

Avanish (37:23):
But then you think about it, at the end of the day, if you’re going to build a business around this, you may have the best product in the world, but if you don’t have the right go-to-market strategy, then it’s still going to fail. If nobody’s paying for it, nobody’s buying it, it fails. So I think in that last bucket, I think I would bundle product and go-to-market capabilities and figure out, what does that look like?

Avanish (37:51):
Am I going to build a direct sales team? Because maybe my core team is great at selling my core business, but probably not at selling software subscriptions. How am I going to do that? You have to ask those questions, which is, am I going to do it? Am I going to find a third party to do it? Is a platform partner that has a go-to-market program that I can leverage? There’s a lot of different options, but you have to think that through, because otherwise, it’s just another project and nothing-

Brian (38:24):
And getting the incentives correct for that go to market in that transformation, I think are the area that I’ve seen some of the biggest challenges that organizations face, because Salesforce is going to sell where they get the most incentive and where it’s the easiest to sell. And making sure that’s-

Avanish (38:38):
Absolutely.

Brian (38:39):
… aligned is really hard for a new product that has a very different price point.

Avanish (38:44):
Oh, it’s price point, it’s expertise. It’s enablement. It is, again, let’s go back to some of the examples we discussed earlier. If it’s someone who’s on the food distribution business and their sales team manages these large accounts where they’re grocers and retailers and so on, they’re not going to just jump around and say, “Well, now, today, would you like me to replenish your stock? Would you like to buy some software?” That’s not quite how … So-

Brian (39:16):
Let me set up a trial and configure it for you.

Avanish (39:18):
Exactly, exactly. What’s it going to be today? So I think you have to think a lot about where that process is going to live. Is it a parallel organization? And back to the spin-out, sometimes we have to spin it out for that reason alone. Not just because what do you need to build.

Avanish (39:38):
But your go to market skills are now going to be different. You have to hire pre-sales people, software salespeople. We got to build, perhaps, delivery skills that are professional services, or maybe again, do a partnership. It creates a whole slew of other questions. And when you think about that holistic business plan and those optionality that we were discussing earlier, you have to take all those things into account.

Avanish (40:05):
So it’s not just what to build, but then how do you bring it to market? And that I think is where, back to failure points, I think that is where the combination of those two things, it’s product market fit is what we call it in our lingo in the venture world, or even in the tech world, is how do you make that work? And it’s, is it the right product? Is someone going to pay for it? And if someone is going to pay for it, how do I make sure I have the right skill sets to either, within myself or within my ecosystem, to deliver it. So all of those things have to be thought through together.

Brian (40:44):
Again, reinforcing why step one is aligning your stakeholders.

Avanish (40:48):
Yes, because-

Brian (40:50):
Because that is a monster organizational change in investment.

Avanish (40:53):
It is. And by the way, the other thing that I think we always have to talk about is a timeframes in which these things may happen. We talked on the one hand, say, “Hey, in tech, we have this rapid daily, weekly, monthly innovation.” That’s fine. But frankly, to get to the point of a MVP product, that may require an investment, which will not show any return for maybe nine months, 12 months, 18 months until you kind of get it right.

Avanish (41:25):
Well, guess what, that is an investment that is not a typical part of the portfolio, of the investment portfolio of a traditional company. So stakeholders have to align and sign off on that say, “Yeah, I’m willing to allocate resources for this.” It’s not going to grow my core top line for the next three, four, five quarters, and then bet on the future that we can actually productize and sell. So there’s a lot of different ways you have to think about that.

Brian (41:55):
Well, you’re a McKinsey alumni, they have frameworks for this, they have their Horizon 1, 2, 3 framework that basically says what we’re playing within are really Horizon 2 where the measurement of that is net present value, not ROI. We need-

Avanish (42:12):
Again-

Brian (42:13):
… to look farther out.

Avanish (42:14):
That’s right. And it could even be Horizon 3. And that’s where the notion of that starts to come in, which is I’m making one big bet by placing a bunch of smaller bets and then seeing how they evolve. So you can then, the ones that start to flourish, you can put more investment water into. So there’s different ways of thinking about it. But again, that stakeholder alignment and getting the right people involved in that. Because you said it, I think very astutely earlier, there is going to be resistance to change. There is going to be folks who don’t … either don’t get it, don’t want to get it or have other, frankly, other agendas.

Avanish (42:55):
So if you don’t find that that support group, and it has to be a senior level, it can’t always be a skunk works project, then when it comes time to make those investment decisions, those trade-offs, and some relatively complex organizational and other decisions, you may find yourself somewhat lonely.

Brian (43:24):
Amazing. All right. In chapter two, we would go … No, no, no. I want to respect both our listeners’ time and your time, because I know you’ve carved this out of a very busy calendar. Thank you very much for sharing these insights and your wisdom and your experience with us, because I think it was incredible firsthand knowledge of watching this play out and helping guide it to both success and observing things that went wrong. So thank you very much, Avanish.

Avanish (43:49):
Well, Brian, and again it is always a pleasure. I think you’re onto something, is really both interesting questions of tremendous opportunities, and I always wish you and the CodeScience team always the best. And thanks for having me.

Brian (44:03):
Thank you very much, sir. All right, everyone. Thank you very much for listening in, and again, you can subscribe within iTunes or Spotify or any of your favorite podcasting, and look forward for our next episode. Thanks so much.

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