By Hung Nguyen, LogiGear
In an era where many of the latest tech Unicorns having staggering IPOs, the mentality in Silicon Valley and VC-backed startups is “go big or go home” that sometimes leads to “go bust” or is too myopic and focuses on an exit strategy.
Few entrepreneurs today think of building a long-lasting, 20-years-or-more enterprise. This article will discuss the challenges of starting and growing a business, as well as how to survive and thrive in an on-going, changing environment.
LogiGear is celebrating its 25th year of operating in Silicon Valley. Over the years, we’ve developed the following smart practices we think are key to building a long-lasting software company:
- Navigate strategies to compete with big companies
- Have a program of quick pivoting — rapid ramping up/down
- Product innovation cycle, before product end-of-life
- Business model innovation to stay ahead of trends — adapt to changing conditions
- Planned leadership/HR turnover to stay “talent-current”
- Financing — when the hard things get really hard
An entrepreneur can expect to see major events shape the industry every seven to eight years. As a result, you’ll need to be able to lead your company through a major transformation to adjust.
I started LogiGear in 1994, when the market was prime. Software testing was an unsexy business with low competitors to market, and I was passionate about the field. In the first seven years my cofounder Michael and I worked on publishing, teaching, coaching, and strategic consulting, and were focused on a U.S.-based test engineering service model. We were employing around 200 Silicon Valley engineers when the dot.com bust hit in 2001.
Over the next seven years we shifted toward a new business model and focused on developing an R&D arm. We decided to focus on test automation as a core service offering and develop our own proprietary automation technology, TestArchitect, as a licensed product as well as an IP-led test engineering services. To help our price-sensitive customers we shifted the core service operations of our business to Vietnam. By the time we were introducing our Vietnam branch to the world the 2008 financial crisis hit and we had to shift again.
Over the next seven years we focused on remodeling our service offerings and kept an eye on how the tool ecosystem had changed. To remain agile in our skills set, we started a TCoE, an R&D arm for the company which is still running today. (To learn more, read Michael Hackett’s recent article on the latest happenings with the TcoE.)
We examined how open source and crowdsource will make an impact on both our service and product offerings and focused on shifting our teams to align with Agile Philosophy and the API economy. We were early to the DevOps wave that started in 2016.
In order to grow, survive, and thrive in a fast-paced, changing market, as well as keep up with technological advancements, you need to:
- Build a 12-month sales pipeline cycle. Understand your sales cycle and work to build sustainable growth. Focus on building new-logo business while keeping an eye on customer churn over/replacement rates and focus on building an account development program to grow existing client projects.
- Develop a strategy to continuously compete with bigger companies, as well as with smaller, new entrants. Look for opportunities to gain equal visibility and footing with the Fortune 100s. Looking for where to play and deciding how to win are key factors for this. Your marketing and PR teams will be crucial helping you gain this visibility. Furthermore, your product teams should always keep an eye on the smaller startups as they are more agile and can easily pivot and shift strategy, making them a threat to your business.
- Develop a product and business model innovation cycle to stay market-current or market-relevant and ahead of market trends, as well as to quickly adapt with market conditions. Have you figured out how your business is going to address AI/ML or blockchain? Are you prepared to have offerings around them or about the impact they will have on clients? If not it’s important to develop an R&D arm that can keep a forward-looking eye on emerging trends and technologies to make sure you stay business-current.
- Plan for leadership/HR turnover to stay talent-current. Finding, recruiting, and training talent to staff your business as it adapts to market trends is important. Retrain talent as needed to make sure they are hitting business needs.
- Create an elastic workforce that allows quick pivoting and rapid ramping up/down. If the majority of your business is in services, which is headcount-heavy, you need an elasticity model which can rapidly ramp your resources up or down or else the high rate of resource utilization will quickly eat up your margins. Your workforce must be flexible and quickly learn and adapt with new technologies, methods, and smart practices. Invest in on-going training and skill development programs to ensure your people are market-current.
- Balance growth versus profitability with an eye on a healthy balance sheet to be financing-ready. You need to decide whether you put priority on growth or EBIT. If you have natural growth, it will result in great EBIT but, usually, this is not a case. To grow, you will need to invest, and investment means cash. You need to prioritize and keep a healthy P&L and balance sheet. Your business must always be financing-ready, whether it’s a short- or long-term activity.
Building a long-lasting software business is achievable. Navigating strategies to compete with bigger competitors is possible if you develop a strong program of quick pivoting. When it comes to staffing always stay talent-current to adapt to the new emerging trends and technologies as the occur.
With the support of staff, leaders can look to create a product innovation cycle and find the financing needed when times get tough or the right opportunity comes along. While each software business is different, they share common sets of challenges. By incorporating these practices into your arsenal of tools for building long-lasting companies, you will not only survive but thrive and succeed in challenging times.
About The Author
Hung Nguyen co-founded LogiGear in 1994, and is responsible for the company’s strategic direction and executive business management. His passion and relentless focus on execution and results has been the driver for the company’s innovative approach to software testing, test automation, testing tool solutions, and testing education programs. Hung is co-author of the top-selling book in the software testing field, “Testing Computer Software,” (Wiley, 2nd ed. 1993) and other publications including, “Testing Applications on the Web,” (Wiley, 1st ed. 2001, 2nd ed. 2003), and “Global Software Test Automation,” (HappyAbout Publishing, 2006). His experience prior to LogiGear includes leadership roles in software development, quality, product and business management at Spinnaker, PowerUp, Electronic Arts and Palm Computing. Hung holds a Bachelor of Science in Quality Assurance from Cogswell Polytechnical College, and completed a Stanford Graduate School of Business Executive Program.