Chief Commercial Officer Philip Hogan has spent the past seventeen years driving sales, services, solutions and process at Ireland’s largest indigenous technology company, Openet.
During his Openet tenure, Hogan has held a number of senior positions including Global Vice President of Sales, and Global Vice President of Alliances. In October this year, Hogan made the decision to move on from Openet, but he retains a tangible enthusiasm and passion for the job, and for building large and great technology companies.
He recently sat down with Dublin Commissioner for Startups, Niamh Bushnell.
Let’s start with the early days of Openet…
I joined Openet in 1988, about six months after Joe (CTO and Founder Joe Hogan, Philip’s brother). At that time the company was selling consultancy. We had a vision for the product we would build, but had not yet established he revenue to fund it or the team to build it.
So, our first step was to solicit interest. We did this by developing a demo. It was a shell to be honest (laughs) but it did demonstrate our knowledge of the space. I visited trade shows showing our demo, and in a relatively short time we solicited interest from our first customer. Bear in mind this was 1998: with the newly deregulated market, operators were springing up everywhere, so the timing was perfect for us. With one customer, we had a reference, and we were off.
You managed to sell something that didn’t yet have any intrinsic value?
Interestingly, negotiations on this deal set a precedent for Openet in our early years. I was able to move the deal from an expectation of sub $20,000 proposed initially by the customer to over $300,000. Understanding our perceived value and the competitive market no matter how small we were was important. We were still competitive at the higher price, and mixed with technical competence, our commitment to deliver and relationship building over beers in Dublin we sealed our deal.
Selling is about having the integrity to close the deal on what I call the line of truth, where we commit to deliver on the customer’s expectations while still selling the future potential of our solution. Young companies should not be afraid to sell ahead of what they have. By the time they close a deal, they typically have better clarity of what the customer wants, be it different or maybe bigger, and in my experience the timelines required to deliver can be negotiated.
When everyone was selling futures I made money servicing the today needs of my customers profitably, with a view on the future.
At what rate, then, did the size of your deals increase?
I’ll give you an idea: our deals in the first year of operation ranged in size from sub $100k to over $3M. I focussed on building our customer base quickly. Establishing good profitable deals fast. Conservative aggression, fast pace, stretching ourselves but building on each success and making sure we delivered on our promises.
You sold the same thing, for all those different prices?
I sold each deal based on the value of the solution to that customer. That value was measured based on the size the company, or the number of end users using the technology. We used multiple measurement points for each customer and made sure to establish an ongoing revenue model where we could. It is absolutely critical to deliver what you commit to, and to do so profitably.
The last deal in our first year of operation was closed for over $3 million. Our customer was a VC-backed WiMax company. It was famous for having the single largest raising of finance in the VC community at the time. Just under a billion dollars. It was 1999… Dot-com in full swing. They were putting in WiMax networks across Europe and were looking for nimble and aggressive companies to support their ambitious plans. Openet fit that bill. So in that universe of hard work, smart work and good luck, I was getting healthy doses of good luck, and it all worked out. As someone once said, the harder you work the luckier you become.
My advice to friends in the startup community today is get the money in. Don’t try to be too clever about revenue share models when you’ve got no established income. SaaS models are great but the old expression ‘jam today’ holds true, too. I’m not saying mortgage your future: be prepared to sacrifice some long-term trickle revenue for high-yield, short-term return to get your business self-funding early. The VC community is not a charity; the value of your deal with them will be a function of the need for their financing. Self-funding gives you an edge in negotiations and allows you to focus on investment for growth rather than to survive.
Aspiration and reality collide very quickly when the bank runs dry.
Can you elaborate more on that? About sacrificing revenue in the long term?
The point I’m making is that revenue share models may look very attractive, but the amount of personal investment for the risk return can be massive. The timelines for a business which is self-funding on these models may kill the business before it ever takes off. With that in mind, it’s important to consider how you will fund your business, and what revenue models support profitability and long-term sustainability. Common sense stuff, but aspiration and reality collide very quickly when the bank runs dry.
An example approach may be to do an upfront license model in markets you do not intent to service using a SaaS approach, or offer attractive upfront license deals to resellers in geographies that you do not intend to service directly. All this may look ugly in hindsight, but it will have served its purpose while you focus on core markets, and get you to the next step in growth.
It’s about gathering your resources for best impact…
Correct. For example, I removed China, Russia and India from my addressable markets, despite having an already global presence. I had offices in KL, Sao Paulo and Washington and customers across EMEA, APAC and the Americas but I still consolidated my sales resources, specifically avoiding territories which require much prolonged, personal investment. Spreading ourselves thin would result in high opex and average results.
How did you select the markets that were right for your company?
I’d like to say it was carefully planned, but in truth it was organic. I learned to be selective because I made mistakes, I allowed ambition to override focus from time to time and we spent money and time on diluted objectives. China is a good example of that: you can’t half invest in China. It requires many resources and much time, something in short supply for a growing young company. Expecting results from sporadic investment gets you nowhere. Success in geographies and accounts will only come from full commitment of resources and time.
By way of example, I spent almost two and a half years back and forth to Mexico, supporting my team to win over a client that I had initially lost and then re-won through patience and tenacity. The full story is a long one and for another time. I had to make difficult decisions on the first go-around that protected my focus on solid profitable business elsewhere. Fortunately, through persistence, hard work and a little good fortune our opportunity returned and we were successful on terms that served us and our customer better. I am most proud of making the tough decision to walk away from business that would not serve us well, but pursued the relationship until we could establish terms that worked.
What’s the takeaway from that particular situation?
The expression that I like to use with my team is ‘conservative aggression’. You have to do a good deal, but you have to be aggressive. There’s no point in doing business for business’ sake. If it’s bad business don’t attempt to convince yourself ‘I’m going to do a lousy deal this time, but it’ll lead to good business in the future.’ If you do a bad deal now, it’ll be a bad deal in the future. It is better to walk from a deal and focus valuable resources on real business than buy a logo. You must run your business from the outset by doing profitable deals all the time.
There are people who work very hard, but who never attained the needed success. Why? Because it’s not just about hard work, but about how it is applied.
Tell me more about selling now, and selling futures…
As I mentioned earlier, being relevant for right now is critical. Service a today need; don’t hope that buyers will invest in advance of future need. Too many companies try to sell concepts a year or two ahead of demand. They typically burn through funds and die. All that said, you must have a futures strategy, too. This should be used to help differentiate your business. A clear vision and consultative value support a customer’s willingness to invest and believe in your long-term value.
We found a good mix in Openet, addressing the challenge of our telco customers and a developed road map. Truthfully, sometimes it was not the most exciting projects that drove revenue, but they afforded us the ability to invest in the next solution.
How would you define your business philosophy?
I believe that businesses succeed on a foundation of three parts: hard work, smart work and good luck. Market conditions determine what proportions of all three are needed to succeed. In good times like the dot-com boom, luck comes in good measure. But as opportunities become more scarce and competition increases, then hard work and smart work are essential. I differentiate smart work, as young companies should apply themselves with careful consideration to winning business. Where resources and key personnel are in short supply, focus is much more critical in developing businesses.
Be prepared to adapt and change. From startup to medium sized company, our business changed rapidly; new personnel, additional products, the need for new processes and new customers helped shaped Openet. Having the fortitude to absorb all that is good while being open-minded to fix your mistakes is an important facet of the culture of success. An uncomfortable truth in business is that there are people who work very hard, but who never attain the needed success. Why? Because it’s not just about hard work, but about how it is applied.
Knowing your customer and understanding their challenges on their terms can be easily overlooked. This may seem obvious but many businesses become obsessed with their products rather than the practicalities of its application within the customer environment. It is healthy to challenge your value by rationalising your customer’s world and their needs. This is something that Openet does well, and one of the reasons we grew in the good times and survived the hard times. Again, it comes back to a phrase I like to use, ‘conservative aggression’. When everyone was selling futures, I made money servicing the today needs of my customers profitably, with a view on the future.
The mistakes we’ve made in the past have often involved taking a very linear approach to our customer.
How important, then, is your relationship with the customer?
I’m going through a ‘know your customer’ phase with my team, a programme to get them to comfortably talk to CEOs, CMOs, CFOs, people who will ultimately influence that buying decision. How many people are you talking to in your customer’s environment? How well do you know the finance team or the marketing team? You need to establish a broad perspective on the utilization of your technology, and how it can be advantageous to them. The mistakes we’ve made in the past have often involved taking a very linear approach to our customer.
When you came into the market at the time of deregulation, there was a lot of ‘open field’. Do you see anything like that now, where markets are opening up, or becoming majorly disrupted, that we should know about?
There are always exciting innovations in the ICT market. Big data is getting much attention. Analysing and acting on consumer behaviour has huge potential. Telecom operators have more work to do to connect to their customer base, to maximise the value they can bring and create a convenient interaction with customers. After all, they provide the infrastructure for communication, so it makes sense they should capitalise on it to improve their interaction with us.
What advice would you have for someone with a new startup in today’s market?
My advice is somewhat prejudiced by my involvement in the ICT sector, though hopefully it carries some universal truths. I would establish a customer footprint before completing product development. Invest in understanding your customer. Build a conservative profitability based business model, no ‘field of dreams’ business cases! Service a current market need while having a clear-but-malleable vision for your future. As you take on good people, allow their skills to shape your culture. Hire successful salespeople only. Let me repeat that, hire successful salespeople only. Don’t be afraid of big competition, small companies win all the time. Be clear on your corporate ambition. I spoke to a customer recently who told me he had ambition to grow his business to be a ‘$100M company.’ I asked ‘Why $100M, why not $101M, or $99M?’ $100M is a nice target, but pointless if your EBITDA is poor or you have had your shareholding divested to nothing through investment rounds. It’s better to set practical corporate goals.
Lastly, work hard and work smart and luck will follow.