Category Archives: Anaplan

The Next Chapter

This morning we announced that Vector Capital has closed the acquisition of Host Analytics.  As part of that transaction I have stepped down from my position of CEO at Host Analytics.  To borrow a line from The Lone Ranger, “my work is done here.”  I’ll consult a bit to help with the transition and will remain a friend of and investor in the company.

A Word of Thanks
Before talking about what’s next, let me again thank the folks who made it possible for us to quintuple Host during my tenure all while cutting customer acquisition costs in half, driving a significant increase in dollar retention rates, and making a dramatic increase in net promoter score (NPS).  Thanks to:

  • Our employees, who drove major productivity improvements in virtually all areas and were always committed to our core values of customer success, trust, and teamwork.
  • Our customers, who placed their faith in us, who entrusted us with their overall success and the secure handling of their enormously important data and who, in many cases, helped us develop the business through references and testimonials.
  • Our partners, who worked alongside us to develop the market and make customers successful – and often the most challenging ones at that.
  • Our board of directors, who consistently worked positively and constructively with the team, regardless of whether we were sailing in fair or foul weather.

We Laid the Groundwork for a Bright Future
When Vector’s very talented PR guy did his edits on the closing press release, he decided to conclude it with the following quote:

Mr. Kellogg added, “Host Analytics is a terrific company and it has been an honor lead this dynamic organization.  I firmly believe the company’s best days are ahead.”

When I first read it I thought, “what an odd thing for a departing CEO to say!”  But before jumping to change it, I thought for a bit.  In reality, I do believe it’s true.  Why do Host’s best days lie ahead?  Two reasons.

First, we did an enormous amount of groundwork during my tenure at Host.  The biggest slug of that was on product and specifically on non-functional requirements.  As a fan of Greek mythology, the technical debt I inherited felt like the fifth labor of Hercules, cleaning the Augean stables.  But, like Hercules, we got it done, and in so doing shored up the internals of a functionally excellent product and transformed our Hyderabad operation into a world-class product development center.  The rest of the groundwork was in areas like focusing the organization on the right metrics, building an amazing demand generation machine, creating our Customers for Life organization, running a world-class analyst relations program, creating a culture based on learning and development, and building a team of strong players, all curious about and focused on solving problems for customers.

Second, the market has moved in Host’s direction.  Since I have an affinity for numbers, I’ll explain the market with one single number:  three.  Anaplan’s average sales price is three times Host’s.  Host’s is three times Adaptive’s.  Despite considerable vendor marketing, posturing, positioning, haze, and confusion to the contrary, there are three clear segments in today’s EPM market.

  • Anaplan is expensive, up-market, and focused primarily on operational planning.
  • Adaptive is cheap, down-market, and focused primarily on financial planning.
  • Host is reasonably priced, mid-market, focused primarily on financial planning, with some operational modeling capabilities.

Host serves the vast middle where people don’t want (1) to pay $250K/year in subscription and build a $500K/year center of excellence to support the system or (2) to pay $25K/year only to be nickeled and dimed on downstream services and end up with a tool they outgrow in a few years.

Now, some people don’t like mid-layer strategies and would argue that Host risks getting caught in a squeeze between the other two competitors.  That never bothered me – I can name a dozen other successful SaaS vendors who grew off a mid-market base, including within the finance department where NetSuite created a hugely successful business that eventually sold for $9.3B.

But all that’s about the past.  What’s making things even better going forward?  Two things.

  • Host has significantly improved access to capital under Vector, including the ability to better fund both organic and inorganic growth. Funding?  Check.
  • If Workday is to succeed with its goals in acquiring Adaptive, all rhetoric notwithstanding, Adaptive will have to become a vendor able to deliver high-end, financial-focused EPM for Workday customers.  I believe Workday will succeed at that.  But you can’t be all things to all people; or, to paraphrase SNL, you can’t be a dessert topping and a floor wax.  Similarly, Adaptive can’t be what it will become and what it once was at the same time – the gap is too wide.  As Adaptive undergoes its Workday transformation, the market will switch from three to two layers, leaving both a fertile opening for Host in mid-market and a dramatically reduced risk of any squeeze play.  Relatively uncontested market space?  Check.

Don’t underestimate these developments.  Both these changes are huge.  I have a lot of respect for Vector in seeing them.  They say that Michelangelo could see the statue within the block of marble and unleash it.  I think Vector has clearly seen the potential within Host and will unleash it in the years to come.

What’s Next?
I don’t have any specific plans at this time.  I’m happily working on two fantastic boards already – data catalog pioneer Alation and next-generation content services platform Nuxeo.   I’ll finally have time to write literally scores of blog posts currently stalled on my to-do list.  Over the next few quarters I expect to meet a lot of interesting people, do some consulting, do some angel investing, and perhaps join another board or two.  I’ll surely do another CEO gig at some point.  But I’m not in a rush.

So, if you want to have a coffee at Coupa, a beer at the Old Pro, or – dare I date myself – breakfast at Buck’s, let me know.

Myths of the Headless Company

In the past year or so, two of our competitors have abruptly transitioned their CEOs and both have perpetuated a lot of mythology about what happens and/or will happen in such transitions.  As someone who’s run two startups as CEO for more than a combined ten years, been the “new guy” CEO twice after such transitions, sat on two startup boards as an independent director, and advised numerous startups, I thought I’d do a little myth-busting around some of the common things these companies say to employees and customers when these transitions happen.

“Everythings’s fine, there is no problem.”

If everything were fine, you would not have changed your CEO.  QED.

Houston, there is a problem.

“Uh, the actual problem is we’re doing too well, … so we need to change our the CEO for the next level of growth.”

This reminds me of the job interview response where you say your biggest weakness is perfectionism.

Look, while successful companies do periodically outgrow their executives, you can tell the difference between an organized scale-driven CEO swap out and something going wrong.  How?

Organized transitions are organized.  The CEO and the board agree that the company is scaling beyond the CEO’s abilities.  A search is started.  The new CEO is found.  The old CEO gracefully hands the reins over to the new CEO.  This can and does happen all the time in Silicon Valley because the problem is real and everyone — both the VCs and the outgoing CEO — are all big shareholders and want what’s best for the company, which is a smooth transition.

When a CEO is exited …

  • Abruptly, without notice, over a weekend, …
  • Without a replacement already identified
  • Without even a search firm hired
  • At an awkward time (e.g., a few days before the end of a quarter or a few weeks before the annual user conference)

You can be pretty sure that something went wrong.  What exactly went wrong you can never know.  But you can be sure of thing:  the conversation ended with either “I’m outta here” or “he’s (or she’s) outta here” depending on whether the person was “pushed’ or “jumped.”

“But we did need someone for the next level of growth.”

That’s quite possibly true and the board will undoubtedly use the transition as an attempt to find someone who’s done the next level of growth before.  But, don’t be confused, if the transition is abrupt and disorganized that’s not why the prior CEO was exited.  Something else is going on, and it typically falls into one of three areas:

  • Dispute with the board, including but not limited to disagreements about the executive team or company strategy.
  • Below-plan operating results.  Most CEOs are measured according to expectations set in fundraising and established in the operating plan.  At unicorns, I call this the curse of the megaround, because such rounds are often done on the back on unachievable expectations.
  • Improprieties — while hopefully rare — such as legal, accounting, or employment violations, can also result in abrupt transitions.

“Nothing’s going to change.”

This is a favorite myth perpetuated on customers.  Having been “the new guy” at both MarkLogic and Host Analytics, I can assure you that things did change and the precise reason I was hired was to change things.  I’ve seen dozens of CEO job specs and I’ve never a single one that said “we want to hire a new CEO but you are not supposed to change anything.”  Doesn’t happen.

But companies tell customers this — and maybe they convince themselves it’s true because they want to believe it — but it’s a myth.  You hire a new CEO precisely and exactly to change certain things.

When I joined MarkLogic I focused the company almost exclusively on media and government verticals.  When I joined Host, I focused us up-market (relative to Adaptive) and on core EPM (as opposed to BI).

Since most companies get in trouble due to lack of focus, one of the basic job descriptions of the new-person CEO is to identify the core areas on which to focus — and the ones to cut.  Particularly, as is the case at Anaplan where the board is on record saying that the burn rate is too high — that means cut things.  Will he or she cut the area or geography that most concerns customer X?  Nobody knows.

Nobody.  And that’s important.  The only person who knows will be the new CEO and he/she will only know after 30-90 days of assessment.  So if anyone tells you “they know” that nothing’s going to change, they are either lying or clueless.  Either way, they are flat wrong.  No one knows, by definition.

“But the founder says nothing’s going to change.”

Now that would be an interesting statement if the founder were CEO.  But, in these cases, the founder isn’t CEO and there is a reason for that — typically a lack of sufficient business experience.

So when the founder tells you “nothing is going to change” it’s simply the guy who lacks enough business experience to actually run the business telling you his/her opinion.

The reality is new CEOs are hired for a reason, they are hired to change things, that change typically involves a change in focus, and CEO changes are always risky.  Sometimes they work out great.  Sometimes the new person craters the company.  You can never know.