Reprise — How I Evaluate Vendors/Products — Ambition Matters

Show Me The Money!

[After many vendor briefings in Q1 2011, I published a series of blog posts summarizing my reactions to those briefings which really captured, as of then, how I evaluated vendors and their products/services.  Rereading those posts after a two year hiatus, I was struck not only by their relevance to my current thinking about this topic but also by how much they needed and deserved an update.  If you’d like to read the originals, they can be found here, here, here, here and here.  But I hope you’ll be more interested in my current thinking because two years is a lifetime in our neighborhood at the intersection of HRM and IT.  This is a reprise of the first of that series; please stay tuned for the others.]

I take a ton of briefings/demos with HRM software and services vendors, really as many as possible for this solo whose day job as a working consulting keeps her quite busy.  And since I’m absolutely not an analyst of the Gartner/Forrester/IDC or smaller firm persuasion, for whom taking vendor briefings is a key part of their day job, let me start this post with a major shout-out to all the vendors with whom I’ve met and will be meeting for their time, their preparation, and their courtesy.  I know that it’s a major draw upon vendor leadership time to keep all we so-called influencers informed about their business, their products/services, and their industry perspectives, and I for one am very grateful to everyone involved in these briefings.  Hopefully I’m giving as good as I’m getting so that their time is as well-spent on these calls as is mine.

One of the questions I always ask vendors, as context for learning about their business and products/services, is “what is your ambition?”  Ambitions for organizations change over time, and they should do so as competitive, industry and organizational changes argue persuasively for such changes.  And it’s a wise leader who is realistic about what it will take to realize their ambitions and the extent to which their assets are sufficient and a good fit for doing so.  But understanding a vendor’s ambitions, what they hope to accomplish and are working toward, tells you a lot about what types of buyers and business needs might be a good fit for them — always assuming they’re half-way competent and able to deliver decent products/services as promised.Within the HRM software/services industry, we’ve got leaders with enormous ambitions in whom we have confidence of their achieving them because they bring so much to doing so in terms of experience/track record, financial resources in hand or easily obtained, and tons of talented people ready to follow them wherever they lead.  And then there are those leaders in our industry who have squandered their assets, damaged the talented people who found themselves working for them, and never came close to realizing their ambitions (or snatched defeat from the jaws of victory) because of their own fatally flawed KSAOCs and decisions — and their inability to adjust their ambitions to fit their capabilities.

And then there’s Naomi.  One ambition I had personally and did achieve before my legs stopped working well enough to do it (which adds the dimension of timing, because ambitions must evolve to meet the current reality, or at least they should) was to climb a number of the more remote Mayan pyramids.  Professionally, one ambition I set for myself in 1987 when I started my solo practice was to help change the practice of HRM from a focus on administration with an emphasis on labor cost control and systems which were basically file cabinets and payroll calculators to a focus on achieving business outcomes via integrated strategic HRM processes enabled by systems that managed KSAOCs at their core, with all that implies.

I know that I wasn’t the only voice pushing for these changes in the practice of HRM and the software available to deliver it, but I will take a tiny bit of credit for the fact that most of today’s HRM systems are KSAOC-centric, focused heavily on enabling strategic HRM processes, and very much attempting to drive business outcomes via improving workforce decisions.  Climbing those pyramids and seeing my fingerprints on a good bit of today’s HRM software are two ambitions realized, each in their own time and each requiring me to make fundamental choices about what I would do and, VERY importantly, what I would not do in using my own limited resources and KSAOCs to achieve my ambitions.

This is why I’m so interested in each vendor’s ambitions as a backdrop to learning about their strategies, products/services, target markets, etc. etc.  Those ambitions really matter when you evaluate a vendor’s viability, their likelihood of acheving those ambitions, as you look at their organizational assets, their bench strength, their software assets and services infrastructure along with their intellectual property.  Successful organizations are those whose assets are sufficient to realize their ambitions — how obvious is that! — but it’s always amazing to me how many organizations (and people!) are out of sync on this point.  And if you’re a buyer of HRM software/services, you’d better keep a very careful eye on this point to ensure that, as they pursue their ambitions, your vendors are serving yours.

What may be less obvious is that, within our industry, there are generally three very different patterns of organizational ambitions.  These patterns do vary for a given organization over time – and they should — because smart leaders, as noted above, evolve their ambitions along with reality.  However, these organizational ambitions also evolve because businesses that are failing to achieve one set of ambitions may well set their sights differently when faced with that reality.  Although there are many variations, and individual organizations do evolve in terms of their ambitions, I’ve observed three major patterns of organizational ambitions within our industry.

Lifestyle Businesses

These are businesses which are founded or run to support the modest to affluent financial needs while fulfilling the professional passion of their founders or leaders.  Bloom & Wallace is a good example of this where my professional passions are well-known.  What’s less well-known is that I’ve stayed a solo, in spite of opportunities for much greater wealth, so that I could:

1. Work with many more industry players in an impactful way than I could have done by working with just one industry player,
2. Focus exclusively on my clients without the obvious creative tensions of supporting a whole consulting enterprise,
3. Accommodate my husband’s career, which was in the Washington, DC area for 22+ years, which isn’t exactly a hotbed of HRM software/services HQs,
4. Build/license/support a body of intellectual property that is vendor neutral but which has influenced the current and next generation of HRM software,
5. Travel widely when and where we choose with only the need to plan far enough in advance so as not to disrupt client projects, and
6. Adapt to the needs of my aging body.

There are many such HRM software and services firms, making money for themselves and their investors (where they have investors), providing often quite wonderful work environments for their staff, and contributing mightily to our industry — and they aren’t all small.  For the customers/clients of these firms, they’re often a great pleasure with which to do business, can be quite innovative and agile, and rarely have unhappy customers because they couldn’t survive if that were the case.

But it’s also rarely the case that, at least among HRM software/services companies, larger and more global end-user organizations are well-served by having a lifestyle vendor at the center of their HRM delivery system except where these founder-led vendors are morphing into a form which will survive and prosper beyond the founder’s tenure.  When Bloom & Wallace finishes a client engagement, we’re off that client’s critical path and aren’t responsible in an ongoing manner for their HRM service delivery foundation.  From the perspective of product/service buyers, you may not want to be unduly dependent on a lifestyle vendor unless they and you are prepared to accept the risks of their inevitable adoption of one of the other two ambition patterns or the ending of their business.

Built To Be Bought Businesses

These are businesses, often founded by serial entrepreneurs with their own or investor money, which fill an opportunistic niche in our market, innovate in an underserved area, find a need and fill it.  But, unlike the run/grow/dominate businesses, the built to be bought businesses usually don’t take on a scope of product or services which is large enough, by itself, to generate the type of return that the investors may require or to which the founder aspires via an IPO nor with a large enough and sustainable enough niche to simply grow and profit their way to those wanted/needed returns.

Successful businesses of this type — and they are legion in the IT world and within our own HRM software/services industry — know (or should know) from their earliest days who their likely buyers are, what those buyers value, and how they can develop enough interest from enough buyers to achieve the desired multiple when they do sell.  And while some such businesses are started with this ambition from day one, many more start out as lifestyle businesses which turn to buyouts as their founders/owners want liquidity, retirement, or just out.

From the perspective of their customers, knowing that your vendor is going to be bought is VERY important for your own planning.  Are you okay with having your contract now serviced by a much larger vendor, perhaps one which you didn’t select in the first place?  One which may force you off of the software/services that you chose and onto something else?  Or perhaps one that will save you from a dying product, replacing it with their much more survivable one?  Whatever the case, there’s disruption ahead, even if the outcome is a very good one.  And knowing that your vendor/provider is likely to be bought helps you decide where you’re willing to use such vendors within your HRM service delivery.

Built To Run/Grow/Dominate Businesses

And then there are the businesses that are started with the clear and stated intention of being grown and run to dominate an important industry segment, and one that’s big enough to offer them almost limitless possibilities in terms of revenue and profitability.  These are the businesses whose founders, at least in our industry, are redefining how we think about a major market segment, how products/services are built/sold/delivered/priced/etc., and how we think about HRM and the HRM delivery system.

Now that doesn’t mean that these ambitions are always realized — they most often aren’t — but when combined with the right assets, these are the ones to watch over the long run.  And these are the ones on whom we want to bet for our core HRM delivery system platform.  Some to many of these firms go public (hopefully when they’re big enough and with sufficiently industrial strength internal processes not to be overwhelmed by the demands of being public), and some remain incredibly successful but privately owned, but businesses with this ambition become the very backbones of our HRM delivery systems.

From a buyer’s perspective, you rarely get leading edge capabilities for the core components of your HRM delivery system unless you jump on board with one of these vendors when they are themselves early days, and that means being an early adopter.  Once these companies have achieved their ambition, it’s very hard for them to remain as innovative, as agile, as aggressively focused on their customers’ success as they did when they were hungrier, but by then they become the “safe” choices for buyers who aren’t early adopters.  And sometimes these very same vendors, or at least their leadership teams in a new endeavor, having grown large and successful, surprise us by delivering their own next generation of products/services.

The Bottom Line

There’s no such thing as a correct ambition, but there are viable combinations of ambition and assets.  Do you know the ambitions of all of your HRM software /services vendors?  Do you know how well they are doing against those ambitions?  How good a fit are their assets for achieving those ambitions?  Have you matched the ambitions of your vendors, presuming that they are moving toward achieving them successfully (because you certainly don’t want to rely on vendors who are failing to do so), to the role that their products/services play in your HRM delivery system?  Have you bet the farm on a vendor’s failed (or likely to fail) ambition to run/grow/dominate the HRM delivery system platform?  Does one or more of your talent management “best of breed” vendors fit the profile of built to be bought, whether deliberately so or because they’ve failed as a run/grow/dominate business?  Just as I want to understand the ambitions of the vendors/providers with whom I’m taking briefings so that I can look at their products/services etc. against that backdrop, so too should buyers of these products/services take a hard look at the fit between what they need and what they vendor/provider’s ambition will lead them to deliver.  Ambition matters!