These are certainly uncertain times. The only certain thing is that the world has changed. As these CEOs shifted to working from home and managing distributed teams, they got on a conference call with managing director, Steve Singh, to share how they have been addressing moving their business forward. Everything from communication to how they are planning (or not!) for a very different year than was in the cards when we clicked over to 2020 is discussed. Glenn, Robert, Bill and Steve share heartfelt lessons from previous downturns and how they are navigating their current reality and helping employees and customers through this time.
Transcript below
I’m Erika Shaffer. Welcome to founded and funded. I work at Madrona Venture Group. We are doing something a little different today. We have three CEOs with us. We have Bill Richter from Qumulo, Robert Wahbe, from Highspot and Glen Kelman from Redfin to talk about how they are managing through this really volatile period. As our moderator, we have a managing director, Steve Singh. Steve is best known as the CEO of Concur, which was pulling in a billion in revenue when SAP purchased it. But to get to that point, he had to manage through not one but two downturns. And so both he and Glenn can reflect on their experience of navigating the big recession of 2008 2009. And with that, I’ll turn it over to Steve. Thank you.
Steve Singh
Thank you, Erika. Good afternoon, everyone. Today our topic is managing through an economic downturn and we did a version of This webcast for Madrona only companies last week. This podcast is open for all companies. Sadly, the world has changed materially in the past week. At this point, it’s clear that we’re headed into an economic slowdown. Now we can all debate the depth and the duration of that economic slowdown. But what’s not debatable is that every business now has a new set of factors to consider in how they operate. Inclusive in that new operating model is that every company is learning how to efficiently and frankly at scale work remotely. So one of the many values of being a part of a community is that we get to share and learn from each other’s experiences. Joining me today are three very accomplished leaders. Robert Wahbe, the CEO of Highspot, Bill Richter, the CEO of Qumulo, and Glenn Kelman, the CEO of Redfin. Each of these companies are market leaders operating in large markets, Qumulo and Highspot are private companies in the rapid growth phase of their business. And Redfin as a public company with a rich operating history, having navigated multiple economic cycles. Gentlemen, I’m going to ask each of you to briefly introduce yourself and your company. Robert, let’s start with you.
Robert Wahbe
Hi, everyone. My name is Robert Wahbe, CEO of Highspot. We are in the emerging category called sales enablement. We came to market around late 2015, early 2016. And we’ve been experiencing very rapid growth. So over the last 14 months, we’ve gone from about 150 people to about north of 450 people. So thinking about how we’re going to be having discipline growth going forward, given the economic downturn will be a very interesting part of the conversation. Also relevant to the conversation we just raised our series d 130 $5 million, series D, which gives us optionality, , but clearly we need to understand how we’re going to use that as we navigate the downturn. So looking forward to the conversation.
Steve
Thank you, Robert. Bill.
Bill Richter
Ah, hello, everyone. My name is Bill Richter. I’m the CEO of Qumulo. First, Steve, thanks for putting this on. It’s you and the gang over at Madrona has just been awesome in terms of bringing together the community of companies to be able to share information quickly and learn from one another. So thanks for doing this. Qumulo is in the business of helping customers store, manage and understand vast sums of data. And we do that both in the public and the private cloud. So that’s our business and we’ve been at it for about eight years. Eight years now we have nearly 500 enterprise class customers and we just finished an absolute blockbuster record year and then we came into some of the new facts this year. And so we like everyone else are working through this downturn, and I’m looking forward to the conversation and to learn a few things the great fellow CEOs on the call here.
Glenn Kelman
Hi, I’m Glenn Kelman. I’m the CEO of Redfin, a technology powered real estate broker. Our mission is to redefine real estate in the consumers favor. We open for business more than 15 years ago, so survived the great financial crisis of 2008. Before that, I started Plumtree software, which went through the.com, boom, and then the crash before going public, in 2002. So I think I’ve been through some ups and downs and hope I can learn something today and also that I have something to share.
Steve
Thanks so much for joining us, Glenn. So my name is Steve Singh, and I’m a partner at Madrona Venture Group. And from time to time in this podcast, I’ll chime in with some of the lessons and strategies that we used to Concur as we managed a couple of economic downturns. But let’s start the conversation with Bill. Bill with the start of the new fiscal year, you sent a fairly detailed framework to your company on how you want Qumulo not just To operate, but to strengthen. So in what is clearly an economic downturn, obviously, you’ve got ahead of this, the key share the principles behind that framework, and maybe how the companies & your people are responding to it.
Bill
Yeah, sure. You know, listen, we we’ve been watching the news, like everyone over the last month, and about three weeks ago, or two and a half weeks ago, you know, when I saw enough of the evidence building, what I decided to do for my team is just to write my organization, my leadership team, a note saying, hey, look, let’s say we’re entering a recession right now, an economic downturn, that’s going to significantly impact our how our market behaves. We don’t know exactly how but what we do know is that it will have an impact. And so I asked the organization just to sort of absorb that and clear the decks in terms of our current operating plan and start rethinking things with the idea that we were going to be entering this model. And one of the things I did for my organization is I kind of wrote them an FAQ, a frequently asked questions, Hey, what does this mean? Or, for example, you know, what if we get this wrong, and we overreact? What What, what will be the impacts of that? Should we act now? Or should we wait? And I walked through that with the team. And my strategy, there was really to, first of all, get the ball rolling quickly. I mean, like Glenn and yourself and Robert, I’ve been executive through the last couple downturns and, you know, you really learn a lot during those cycles. And one of the things I learned most quickly, was you have to move quickly. Going slow through these cycles is not helpful. And the second major thing I learned is that it’s important to communicate deep and wide with the team. And it turns out that people always surprise you when you give them enough information and you share what’s really on your mind. And so with those kind of two principles in mind sort of they are really recognizing that there really were a new set of rules to kind of admitting, hey, we’re going through an economic cycle, let’s get in front of it. And three, let me get really good at communicating with those three principles in mind. I shared a note with my team and said, hey, let’s, let’s rock and roll because the companies that operate well through this cycle will come out the other side, much, much, much stronger, and those that don’t will find themselves in very troubled waters.
Steve
Thanks, Bill. Robert, how are you thinking about this Highspot? Is this a process you already engaged in, as Bill has or is this something that you’re currently contemplating? Obviously, you’ve got a lot of capital on the balance sheet.
Robert
Yeah, I mean, very similar to bill. We’ve been communicating our plan and you know, we’re Really trying to face the reality that we’re going to be facing this economic downturn. We’re doing a few things. Probably the overarching theme for us is this phrase that we’re using which is ‘our job is to navigate the downturn, but invest for the upturn.” The one thing we know for sure is that inevitably, there will be an upturn. It might be in six months, it might be in 18 months. But we need to react quickly. I completely agree with Bill. But we also have to not overreact. You know, building a company to survive is not the same thing as building a company to thrive. And you can look at a lot of the experiences in the post mortems from 2000 and 2008. And you talked about this Steve on the earlier panel, where you have to make sure that your balance between making sure you survive and making sure you’re ready to invest in that after and so that’s been kind of a theme for us. And it also helps the company as we communicate, why we might be pulling back in one area, but actually investing and even doubling down in another area because it might be confusing, they might think we should be locking down. But no, we got to be smart about this. And it’s art more than science about how to balance that. So one big thing is this notion of navigating the downturn investing for the upturn. The second thing is controlling costs, you know, and that is two things for us. One is it’s trying to save money wherever we can, but it’s also going through the exercise and not doing too much, because you can overdo this by trying to create optionality in our budgets and our operating plan. So we can say, based on trip wires that say the end of q1, the end of q2, the end of q3, what levers could we create now, so we can pull them whether it’s marketing, whether it’s other kinds of investment, so the second big thing for us is controlling costs. And then the final one, and this is really big, especially as you know, the pandemic has really changed over the last even two weeks and people are now really working from home and in certain cities based on your offices. They’re really required to shelter at home, and they can’t even leave this notion of focusing on execution, especially as opposed to forecasting. I think there’s very, there’s a very big tendency to say, you know what, let’s figure out what’s going to happen in the future, let’s start to think about what our conversion will look like, they start to think about how much we’re going to lose off the top line so we can begin to plan. And what I’ve been saying is, let’s not have that conversation. We don’t know enough yet. Let’s not forecast, it’s not clear how the operating model is going to change. Let’s just focus on execution. And really, we’ve been focused on kind of, you know, the details like, what does it mean to work from home? How should we use zoom and slack and G Suite? We literally had, believe it or not, in an all hands where we walk through best practices for zoom, slack and G Suite, trying to really focus on execution. And then the other part of that is really helping people as they’re anxious. They’re clearly very anxious, staying connected to them, to the company to their managers. And so a lot of talk in fact, I had a meeting today with all the people, managers, again, on best practices to keep connected even in this remote world. So those are kind of the three things that we’ve done. And there’s lots of details under there. But those are the three themes that we’ve we’ve approached it with.
Steve
Thank you. And obviously, there’s some themes emerging here. I want to pull the thread down a little bit further. But before we entertain that part of the conversation, Glenn let me ask you to share what’s happening at Redfin, as far as how are you dealing with this downturn? Obviously, I want to be sensitive to the fact that you run a public company. And so you know, the comments would be relative to what is appropriate to share within this context.
Glenn
Sure, well, I think we’ve been preparing for this day for a long time, in different ways. When we went public, we recorded a roadshow video that featured a cameo from Bane this villain from a Batman movie because we had told investors that you shouldn’t be afraid of Dark because we were born in the dark, and everyone at Redfin knows that we’re in a cyclical business, there will be ups and downs, and that we’re going to react very quickly to that. And so, if you don’t have that preparation, if you feel offended by a downturn, I think you spend valuable weeks and months, really wondering what to do. But if you’ve built the discipline from the beginning, that there are going to be ups and downs in every single business, and we have a mission that is fundamentally good to make real estate better for regular people. And that if we’re more efficient than other people, there will be times where revenue grows and times where it doesn’t, but over time, the business will become more valuable. So I think that’s the first theme which is just having a mentality, that there will be ups and downs and preparing for that before there are downs. On the second, which is related to is just talking about the mission of the company always because the reason someone should work at Redfin or Highspot or Qumulo is not just because you’re gonna go out and kill it. There’s always going to be a sexier business. There’s always somebody who’s growing five points faster than you. And so you have to develop a rationale to be at a company because you believe in the company. And if that rationale only comes to you, when you’re announcing a layoff, or some kind of cost cutting move, it sounds very hollow. But I remember in 2008 2009 2010 when I thought Redfin was going to go out of business. I told my wife that I felt like such a failure. And she said, Well, I thought you really believed in the mission of the company. And I said, Well, of course I do. But if we go out of business, I’ll still feel like a schmuck. And she said, Well, it’s still a good mission. And you need to be true to that. If you really believe in it, you shouldn’t abandon it now. And so I just think you Have to really reiterate the emotional, the soulful reason to be at a company in hard times because people need chicken soup for their soul as much as they need steaks in their freezer right now. And we try to address both of those issues.
Steve
That’s fantastic. I love that. Let’s, pull on a couple of threads. You all talked about a number of different themes, one of which is, is transparency and communication. One is really sharing the purpose of the business and why you’re doing what you’re doing. The other is just is. I think, Robert used the phrase optionality, really making sure that you’ve got lots of decision points or opportunities to react in a way that can add strength to the business over time, but let’s take the optionality piece for a second and drill down on it. Obviously, none of us knows what is going to happen over the next three to six months. How are you talking to the team about that? What is the definition of optionality? What does that mean? When you ask your team to look at optionality? And how much are you pushing on that topic? I mean, it’s easy, obviously, for people to come back and say, Look, of course, we can do lots of things. Are you then taking it to the next level of saying, I want to plan in every one of these areas? Anybody can jump in on this, bill? Maybe I can ask you to start but anybody should jump in.
Bill
Yeah, sure. There’s a lot of a lot of ideas come to mind there. I mean, look, we’ve kind of hit on this idea of planning and forecasting. I really like what Robert said that, you know, focus on execution, not forecasting right now. Because at some point that becomes, you know, an exercise that that’s not as valuable but what I’ve been telling my team is the following is, is you know, we at Qumulo really pride ourselves on running a data driven business. I mean, we, we, we talked about it all the time. It’s one of our values of the company, but what I’ve said lately over the last couple weeks is like, Hey, remember business leaders, your data right now in the cycle, your data is going to lie, your data is going to lie. And that’s something that we’re not accustomed to hearing. We love data. We’re a data company. And but what I really mean by that is like, hey, if you look at the old models, if you look at the old trends, if you look at a cost per or, you know, ramp rate of a certain segment of your business, or the performance of a, of a trade show, or whatever those types of things are, you know, you have to kind of figure that in this model right now, or this in this environment. You’re gonna, learn a lot of new things, and your historical data models are going to be far more fragile now than ever. And so what I’m asking people to do is sort of think around corners more than we ever have before. And, and do smaller things much more quickly and learn fast, and that’s going to give us a lot of optionality in terms of how we run the business and really how we resource the business. And actually, I gotta tell you, our team has been responding really well to these things. We completely over the last two or three weeks, rebuilt our marketing plan for the year, for example, because a lot of our traditional marketing at Qumulo would rely on physical trade shows. So it’s like, okay, you know, that’s a great example. It’s like that the data that we have about performance of those trade shows is completely off. And most of the shows won’t take place, if they are happening, the attendance is going to be much lower, we have to change the way that we’re going to invest. And it’s through those fast changes that we create for more optionality in the business. And so that’s kind of a micro example. And then the macro one for the business, and I’ve been very clear with them on that we have a very healthy balance sheet here. Qumulo. We raised around about a year and a half ago, and we’ve been very slow to spend, which is good. And and in these environments, cash, I would say equals optionality. And so we’ve had very open conversations around that in the business, and people have been You know, I think more appreciative about balance sheet management than I’ve ever seen our tech, your average tech, tech and employee been in the past. And that’s kind of cool. It’s cool to see them adapt quickly.
Steve
Robert Glenn, would you want to jump in on this topic?
Robert
So one of the things that we’ve been doing, you got to not do this too much as we’ve been trying to take our plans. And we have this concept of a North Star, and then click stops along the way to that North Star. And so if you think about something that we might want to accomplish, whether it’s delivering a particular feature, or new new capability, or a marketing program, we’ve gotten more granular, and we’ve asked the teams, we understand your Northstar. And that took some amount of resources. Now think a little bit harder about could you do incremental things along the way. And then let’s think about kind of like a bill said, let’s do that. Click stop one right now. And let’s fund that right now. And let’s have some tripwires about how we think about click stop to and click stop three. If you go back, you know, it seems like so long ago, you go back on A month ago, we just said, Hey, the plan looks great, the North Star looks great, we’re going to invest toward that, you know, invest wisely, be smart about it. But we don’t need to have that finer grain in the plan. And that’s what’s happening. Now we’re getting much more fine grained in a lot of our big areas of investment, whether it’s marketing programs, whether it’s product capabilities, and the roadmap there, where our big spends are. And so this notion of getting more granular, the one thing I would caution is, you don’t want to do that too much, because then you just sit there and you analyze until the cows come home and you don’t actually execute. So a little bit more click stops a little bit more optionality a little bit more trip wires, and then go do that first click stop. Now right away.
Steve
And that goes really to the theme you brought up earlier, which is more data points, more engagement on day to day execution, to really be able to measure what’s going on. Glenn before we go to you, one of the things I just jump in and share in 2008 2009, when concur was living through the financial crisis that obviously gripped the whole world. One of the data points that we did see early on, was advanced travel bookings were down 50% or there abouts immediately. And so literally on, on one day we saw for travel bookings drop off of a cliff. And in immediately you look at this and say, the first reaction is there’s something wrong in our systems, are we missing something, and then you realize, Okay, the next day, same things happening, same and so on. And what you saw was an immediate drop off in travel which followed very, very quickly with a whole string of other things, including drop off in employment. In fact, in the in the first month of 2009, you can literally pick up the Wall Street Journal. And on the cover of the journal were companies that were all our customers, where they’re laying off 25% of the workforce, 30% 40% of the workforce, or even going you know, bankrupt frankly, like a Lehman did. And so, one of the things that we really had to come to grips was that you All of our data elements as you’re is your highlighting Robert and Bill is that all the data and elements we had in the past were no longer valid. And we have to start measuring things on a daily basis, and learning how to react to things much more real time. And in one of the things we did we happen to be a business that was growing in the 30 40% per year range, and we’re 10% you know, free cash flow margins. But without certainty where the world was going, we decided to pull back and decided to pull back relatively hard. So much. So the operating margins jumped about 24 25% in the fourth year, and we still grew top line about 15% or so year over year. But in looking back at it, boy, I sure wish I hadn’t pulled back so hard. There are things within that, that that, you know, I feel like we might have gotten right there were instructive lessons. I’d love for you guys to comment on your businesses. One of the things we did is we realized that an economic downturn is an opportunity to actually distance yourself from the competition. To actually strengthen your business. And so while we slowed the rate of investment in every area of the business, we actually increased it in product development. So we decided we want to invest more in product and our key distance ourselves from everybody else who we know, didn’t have not just a balance sheet, but the operating, leverage and discipline the business to compete with us. And it has been a massive advantage for us in 2010. So Glenn, maybe you can, you know, kind of a segue off of that into into things that you saw at Redfin in the past, but frankly, also today, in how to improve your competitive position.
Glenn
The point that I wanted to make, which I think is really important is that you try to have employees hold two thoughts in their head at the same time, and one is about the fundamental long term strength in the business. And the second is the short term apocalypse that you’re now facing. Because if you only talk about how strong the company is long term, it sounds like happy horse manure when you’re cutting costs and freaking out. And if you talk only about how you have to cut costs, you throw the baby out with the bathwater. So you try to tell employees, it’s real. What we’re going through is perhaps an existential crisis if you’re a smaller company, but certainly a real threat to the business. And you have to hold that thought at the same time that you remember. We’re the best damn real estate brokerage or are the best damn cloud software company in the world. And it’s hard for people to hold those to the people who think you’re great. often don’t respond with the right level of urgency. The people who respond with the right level of urgency often forget what made the business so great in the first place. And you just try to have both in your head at the same time. All the time.
Steve
Yeah. Bill, any thoughts on that?
Bill
I just love it. Like Glenn was talking about that when we think about the opportunities here. You know, I love this quote that gets tossed around, you know, big doesn’t beat small but fast beat slow. And so, you know, we compete with very, very large companies, and I think that they have a tougher time. We all face the kind of the environmentals, but the adaptability of an organization of our size with our mentality can be superior to large competitors. And all that’s in service of customers, right? If the faster that we can move, the more that we product that we can create more value that we can deliver to customers without having a massive amount of fixed costs and a bunch of entrenched people that make change difficult, gives us an advantage. And so that’s something that we’re talking about a lot around here. And then the other thing that just happens to be kind of a big opportunity for Qumulo is a lot of the vertical markets that we focus on, we think, have a decent chance of being counter cyclical here. You know, so for example, like the federal government’s becoming a fast growing market for Qumulo. That will likely be counter cyclical healthcare is a very large market for Qumulo. As healthcare organizations, you go to the doctor, a doctor visit generates an enormous amount of data for any patient. It’s very likely that healthcare will not be underfunded during this cycle. And so I can kind of go through some of the lists, but what we’ve told our organization is, you know, in every business is different. But we said, Hey, you know, pull back and think about the segments of your business that might be impacted less or more and every company’s different, and then go seize that opportunity. And so that’s like, gotten a lot of like, really exciting thinking going on around here. As you know, we’re talking about two things. What are the external opportunities and how nimble and agile can we be to go seize them? And how much faster Can we do that than our competitors? So that’s like been the rallying cry around here.
Glenn
I would just think about this as an opportunity to promote financial literacy. If you try to explain to an engineer or a marketer, a balance sheet, they just want to go back to writing their press release or putting together ones and zeros. But when you need to explain to people how much money you have in the bank, and what your ability is to withstand a downturn and you walk them through your income statement and your balance sheet, I think you really put them in your seat when they start seeing the business the way a CEO does, and just the level of urgency that conversation has in a tough time when people distrust rhetoric and just want to see the numbers can really be your friend, you can say, Listen, I’ll show you the business the way I see it. And I’ll explain what would trigger us to have to cut costs further, and how we make decisions about where to invest, and you’ll see exactly the numbers that the execs are seeing. And just walking people through that can build more trust than any bland proclamation about how much you love the employees, even though of course, all of us really do care about our culture and our people.
Robert
I was going to say one of the themes that’s emerging, is that done right coming out of an economic downturn, you can actually be a stronger company in many ways. You know, Glenn talked about financial discipline. Bill talked about being very smart about you know, segments. One of the things And I think is unique to this particular time is that we’re all working from home. And one thing that I think is happening is that we’re getting better at collaborating. We think of ourselves as very good at collaborating, but in lots of small and big ways, we’re getting better at it, because we’re having to get better as we work from home. So I think on every level, you can actually come out of this stronger whether it’s financial discipline, whether it’s being smarter about your marketing, whether it’s being better at collaborating. And that is a positive message which is looking at we’re getting better at you know, we had a hard time cutting costs, we’re getting better at it because we’re being forced to
Steve
Guys, let’s pull on a thread here that certainly is becoming more top of mind for our people. And that is looking at difficult economic climate that some companies will have to deal with reducing their workforce. How do you think about engaging in that discussion with your evaluating whether or not it seems something you have to do., I would love to hear your thoughts on on this. What advice would you give others?
Glenn
I have been surprised talking to some startup CEOs around town, how slow people are to depart from the narrative of “we’re killing it”. They’re actually worried about what people will think, instead of just deciding what they can afford, and doing it as fast as possible so they can maximize severance for their people. There might be an exception, because some people are waiting for federal stimulus I can understand wanting to know what’s coming before e deciding but I’d still err on the side of moving fairly quickly so that you can give people the maximum amount of notice and respect.
Steve
So Glenn, on that transparency theme, This is open to Bill and Robert How do you pull your team into that process? What have you historically done? What advice would you give young entrepreneurs who may not have gone through an economic downturn before?
Bill
I was having a text conversation with one of my leaders, and they were saying how they kind of appreciate what was going on, you know, how we were kind of working through this and, and, and what I told them is like, Look, you know, we get paid as leaders, not just for the kind of nice up into the right cycle, that has plenty of its own challenges, but you actually kind of like, earn your keep through managing through these cycles here. And this is like really, when you earn your stripes, and not just for a CEO, but for anybody in a company, but particularly like the leadership and management team. And, you know, the conversation I had with my leadership team is to say like, hey, just be cognizant of the fact that you’ll have many people that are management rolls in the company, some of them that run big teams that have never been through a cycle like this because they just haven’t been in their career long enough where we’re in a really odd scenario now where we’re sitting here on the back of like a 10,11 year, pure up into the right expansion. And so the implication there is you could be 10 or 11 years into your career. In fact, you could be more like 13 14,15 years into your career, but like as a manager, never having been a manager and not seen something like this. And so you have this scenario where you can have some of your veteran people that have not developed this skill set of being able to manage through a cycle like this and what I told the team is like saying, Hey, you know, the world is cyclical, it does go down. Like Glenn said a minute ago just kind of operating in the world killing it, cycle. Again, that’s hard because killing it’s not easy, but it’s through these cycles that you will really become like a veteran leader. And, you know, my team sort of like has responded to that they’re like, yeah, you know, this is a career development opportunity, as tough as it might be operating through the cycle.
Unknown 34:14
I don’t know if you want to add to that.
Robert
I agree with both the things that Glen and Bill said, the one piece of I would add is that, even as you’re trying to be transparent, you also have to think about the speed of information and how it lands. You know, as companies get bigger, and I’ve, we’ve some of us work in very, very large companies, the speed of information might be literally six months, six months before everybody in the organization for real for real, understands the key thing that you’re trying to do in small organizations that might be you know, that day in the conference room, but if you think about what’s happening right now, you know, I find that people are anxious enough that they’re not hearing the information as they used to even a month ago, and you have to repeat it a lot more often than I would expect. So for example, we’ve been pretty consistent and pretty disciplined about our work from home policy, starting back when King County did the first set of guidelines, and we’ve documented that we send out an email every Thursday at four o’clock we have within Highspot, you know, the fact we have all these things, and we’ve been very consistent. I do think as part of transparency, consistency, repetition is more important than it’s been in previous times.
Steve
I just expand on one comment that Glen made in the for every entrepreneur, your board will always give you feedback. back and always provide input on what you want to board things that you can do better. I will tell you some of the best learning opportunities I had I Concur, were the mistakes that I made, and that, that fundamentally, those actions or those, those events, created amazing learning opportunities. If I think about the times when we had to do reduction in force, the single biggest thing that I really wrestled with was, how did I not see it coming? How did I not see that this event would happen one day? And why didn’t I have two three contingency plans that I could pull on way before an event happened? And I realized that it’s a high bar to hold yourself to, but it’s the bar that you have to hold yourself to as the CEO, you are responsible for not just the the investment that people have made in your company, but for the people who have trusted you to come to work at your company. So the real trick and CEO’s far better than myself and figured out how do you take that, that ownership and accountability model and keep pushing it down to every level of the business? Because it’s it’s a fallacy to assume that you and you alone can can address challenges or or see them entirely on your own, the more you share, and the more that you involve everybody in the decision process, the better your company becomes. So I really identify with the comments that all of you made. Um, I’m going to hit one more topic and then we’ll, we’ll wrap up. Over the last several years, especially in software businesses, the the world has moved to much more of a SaaS or consumption based model. And that model has tremendous upsides to the customer, but will certainly be put to the test in an economic downturn. And so I’d love to get your thoughts on how do you manage a SaaS business or consumption based business in a In a economic down cycle, and obviously I’d love to share some some experiences from concur as well. So, Bill, why don’t you jump in on this one first?
Bill
Yeah, well, I’ll make a few comments. And then I’m going to learn a lot more than I’m going to teach here, but a couple things. And I was having a conversation with someone on my team about this today. And I think in these cycles, what you have to remember is like, keep your customers. And what I really mean is if if you have a model where you like to bill for, you know, multiple years, and customers can’t afford it right now or their or their or their want to be risk adverse, they want to bring in that cycle, they want more flexibility, or if you have a model where you sell them this much, but they only want to be able to buy this much for a little while. I think it’s really important to sort of, sort of rethink how flexible you can you can be for customers, and that’s going to kind of keep them with you like in our business Qumulo. We’re making 5,10, 15 year or more relationships with our customers. And so if you if you think short sidedly about your structures with customers and really push them on it, you know, you might get the deal. But you, you might also force them to back away. And so my opinion is during these cycles, it’s like, you know, think a lot about flexibility. Keep your customers and I’ll give you the counter example, which is, maybe probably, perhaps more telling someone literally came into my office two hours ago and said, Hey, I have this contract from from a vendor, and they’re forcing us to buy for two years. And I just tell him, I told him, why don’t you tell that vendor, absolutely not, goodbye. Because we just want to buy one year. And it’s like, hey, during a cycle like this, I expect my vendors to show up and kind of really partner with us and be and be flexible. And if they’re not willing to do that. It’s like now I know who my partner is and who my partner isn’t. And that’s just kind of an attitudinal difference about operating and actually like forming deep customer and partner relationships during one of these cycles, and I think being rigid is not the way,
Steve
Robert.
Robert
Yeah, I mean, you know, different businesses are going to be impacted so much differently. And so we’re, I don’t know how much we’re countercyclical. But our usage is actually going up right now, in a couple of ways. One is that the people that naturally aren’t on our platform, because they’re working from home need to access the platform even more. So we have our usage almost doubled across many, many of our bigger customers. And we’re seeing another thing and this is where we’re trying to be creative. And we haven’t figured out the answer yet. But to kind of Bill’s point, they’re also saying, hey, can’t we for a certain amount of time, open up the platform to more people in our company that we want to pay for right now. They don’t normally need access to it. But right now, because everyone’s working from home, can you somehow facilitate that and it’s not just a licensing thing. It’s also just something we have to do Figure out programmatically. So I think this notion of being flexible, is really important. I do think that, you know, you will see in our business and others, you know, when you think about consumption, there’s kind of per user, and there’s per per activity. On the per user side, I think everybody’s gonna try to trim users. Now, we’ve already thought about some of our biggest spends, you know, we’ve been fairly. We’ve been fairly lax about if you have a need and a reasonable will give you a license. And now we might tighten that up. And I think we’ll all see that. I don’t know what’s going to happen on the consumption side where you’re doing activity like AWS, I think for a lot of businesses, those run critical systems, and I don’t know if they’re gonna see a downturn or not, because they they need to run those things. Just like Qumulo for data, you need that data. So it’d be very interesting to see if they really see a downturn as long as those applications continue to function.
Steve
First of all, I want to tell you, I happen to be a shareholder in all of your companies, and I’m listening to you, I am very glad I am. Um, there’s a there’s a theme that you guys bring out, which is really amazing. And that is the compassion of who you are, who your company is, has to extend not just to your people, but also to your customers. And it’s now more than ever, having a long term relationship with your client is critical. So I mean, one of the things we did and perhaps not purely out of a thoughtful, you know, planning, but as much as we just want to treat our customers the way we wanted to be treated in 2009, because travel lines are way Down and expense reporting was way down. And so we went to our customers proactively and said, Look, we’ll let you tier down, you know, we’ll let you buy it, the whatever tier, you need to buy it. And so if you want to reduce your commitment by 25%, that’s fine. Now, obviously, it gave us a chance to re engage with the customer. And think about how we might expand other parts of our relationship either now or in the future. But the biggest thing is that they knew that we had their back and and we were acting in a way that was truly a partner. And, you know, we’re hoping that that kind of partnership building or the relationship building would, over the long term be constructive. And honestly, it was incredibly constructive. The I will give you an example. I’m on the board of Washington federal. And one of these I love about this company is that the CEO has got a culture that that that, you know, honestly it, it speaks to being a partner. It’s not, hey, I’m just a bank and I’m looking at business with you, but it’s a partner. He literally proactively at the beginning of this downturn, went to all of his SMB customers and said, you can move to interest only effective immediately. And it’s it’s that model that that really helps build loyalty and trust. And that’s what I hear in the comments that you guys made.
Let me do this. We’re coming up at the top of the hour. And I’m going to try to summarize this conversation. And if I’ve not summarize it correctly , please jump in wherever you like. First is that be decisive and take action now. The theme behind this is very simple the best always take a leadership position and define the path forward before it becomes obvious that has to be done. In that process. The advice we’re getting is be brutally honest and assessing the challenges that your company is facing or that it likely will face in a downturn. The second is cash is king. And that’s true not just in good economic climates, but even more so in tougher economic climates. Use this downturn. to really focus your business, whether it’s on unit economics of driving efficiency into your business, or whatever the metric might be, but make sure that you have you use this opportunity to actually fine tune your business, either build cash reserves or actually decrease your cash burn. Third is take the opportunity to make your company stronger, increase your competitive advantage. One proxy might be every dollar being spent on your top three initiatives. If it’s not, then why is it being spent. It’s an opportunity to increase product leadership. It’s an opportunity to differentiate your relationship with your customers, for example, the Wafed did. Fourth is be transparent and be authentic in your communications across the entire company. There’s no way to over communicate the rationale, the strategy with the specific tactics that you want your company to execute against. And I’ll borrow from a phrase that Glenn used, don’t forget your humanity. do what’s right for your business. But don’t forget that your people are and they’ll always be a huge part of creating your business. If you’re considering reducing the size of your team, do it with full transparency, and do it within the cultural values that define your company. simple lesson trust is really the critical currency that we all have. It always has been critical. It’s even more so in this type of climate. Fifth is, and this is really just what I’ve benefited from, in my experiences, that instrument your business, use this opportunity to make your business better. Are you really measuring the right things? How broadly are those metrics measured? How fast can you take actions based upon that instrumentation? And, you know, look, the best get better in difficult times. So think about it in the context of what’s your competition doing? And how does that factor into your plans? How do you raise the bar and yourself?
I’m going to close with two thoughts. That first is that the ideas they’re never the differentiator, these are great ideas that we’ve all shared here. But they’re never the differentiator. It’s the execution of those ideas that create distance between market leaders and those that aspire to be more computers. And then, you know one more thing, this too is going to pass. And when it does, the companies that have adjusted and really optimized, their businesses will be stronger. And they will distance themselves massively from the competition that couldn’t be agile and couldn’t deal with these issues in honest, authentic way. Bill, Robert Glenn, I can’t thank you enough for sharing your time and your insights to all of our listeners for everyone that madona our best wishes to you and your families. Please be safe. Thank everyone.