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Episode 12 - Managing Through A Downturn
115 Plays6 years ago
In this special episode, Eric Johnson of the Journal of Commerce joins Brian Glick to discuss tips and tricks for managing Logistics IT through an economic downturn.
In this episode, you'll find tips for both IT leaders within LSPs and sales leaders within technology companies.
Topics covered include:
- Moving discussions from headcount reductions to business value
- Removing scope from existing projects
- Selling to Logistics Providers with a faster delivery and ROIs
- Making a short-term value based internal or external sales pitch
- Leveraging your partner network to generate new sales
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Transcript
Introduction and Return Guest
00:00:02
Speaker
Welcome to Profiles by Chain.io. I'm Brian Glick, Chain.io's CEO. This is going to be a little bit of a different episode. We have our first-time return guest, Eric Johnson, on the line. How are you, Eric? I'm doing as well as I can be expected. I think everybody's adjusting to the new world.
00:00:23
Speaker
Yeah,
Leadership Strategies in Economic Downturns
00:00:24
Speaker
so that's what we're gonna talk about today. We're gonna actually flip it around a little bit and Eric is going to throw some questions at me that hopefully open up some discussions. We're gonna talk a little bit less about the prognostications about the virus or the economy itself because I think there's a lot of other experts who are way more qualified than the two of us on those two topics and really lean more back into what
00:00:53
Speaker
logistics leaders and logistics IT and tech leaders can do in the event that this does turn into a prolonged economic downturn and how to manage through that and still look at opportunities to move forward and not end up in a completely defensive situation.
00:01:13
Speaker
So,
Impact of Economic Shifts on Tech Initiatives
00:01:14
Speaker
Eric, does that sound good to you? Absolutely. It's actually an issue that I've been thinking about a lot in recent days. How does this impact potential companies that are either in progress or about to embark on some major technology initiative and the providers that are
00:01:32
Speaker
both involved in those initiatives or thinking about themselves, like what areas of their business were they going to invest in prior to this happening and what can be learned and lessons from the past. So definitely a good topic. Cool. So I guess we'll just dive in then. Yeah. Again, this one's a little on the fly, so we'll figure it out.
00:01:56
Speaker
Absolutely. I get to ask the questions this time. I'm struggling with this. I'm more comfortable in that role than answering. I guess everybody's mind, when we hear the economic projections, everybody's mind who's been in the workforce in the last 20 years flips back to those
00:02:19
Speaker
last black swan event we had, namely, you know, 911, the economic downturn, think the economic downturn, especially in 0807 through 09, really, was probably the most the clearest kind of match for what we're going through in terms of
00:02:37
Speaker
a lot of the world being impacted at the same time. So from your perspective, you were kind of in the thick of things back then. What did you learn in a way that's transferable to today? Yeah, so
Lessons from Past Downturns
00:02:51
Speaker
a little context on what my experience was.
00:02:56
Speaker
working for a 3PL at the time, running global infrastructure and systems integration and sort of a lot of the back office sort of what we call it shared services amongst the warehousing and freight divisions. And so at that time,
00:03:17
Speaker
was a team of, I think it was maybe 120 people spread across the globe. And one of the things that happened then that thankfully won't happen in this one is it seemed like an overnight event.
00:03:33
Speaker
it was an instant shift and there was no time to prepare, at least from my perspective then, especially as a younger leader. I think at the time I was just about 30 and it was a sort of a role I was just growing into. And the day that the CFO sort of walked into the office with the red pen and the org chart and said,
00:03:59
Speaker
you need to, we need to cut out people because there's just may not be enough cash to go around and we need to make this happen. And essentially there was a number and it was come back with this number by the end of the day or the end of the day tomorrow, whatever the case may be. I remember it as being the same day, but it might be a little overdramatized.
00:04:25
Speaker
And we were, as an IT team, not necessarily prepared for that. And because we weren't prepared, we went into denial mode initially of, oh, he can't do that. And we didn't understand the larger business context.
Reprioritizing and Supplier Negotiations
00:04:44
Speaker
We ended up really just having to cut heads because we didn't have an alternative plan or any other path to give them. So one of the big learnings that I took from that was, you know, this is a situation that is a little bit slower, more slowly unfolding, maybe not a lot. But there is time now for people to be sitting down.
00:05:04
Speaker
before those conversations happen to say, you know, these are projects that maybe we should reprioritize and
00:05:14
Speaker
get a faster return by doing them differently or these are suppliers that might give us more favorable terms or these are projects that could be put on hold or investments that we've made that we don't necessarily need to accelerate and really know what your answer is going to be sort of for this small, medium and large ask before it happens because sort of burying your head in the sand and hoping
00:05:41
Speaker
that the CFO never walks into the room is not a good preparation tool. I think I mentioned I've been working through this in terms of discussing it with buyers of software as well as listening a little bit to what sellers of software have to say about how you manage a
00:06:04
Speaker
an event like this where there's an intrinsic need for what I presume a lot of people think they're selling, but it's not necessarily the right time to sell it because people aren't in a position where they can do a long-term RFP and implementation phase and learn how to use the system. They're
Focus on Immediate Value and ROI
00:06:24
Speaker
just bailing water trying to figure out what's next.
00:06:31
Speaker
leaders at logistics companies, technology leaders kind of frame this discussion so that it's not like another thing that people have to deal with. But it's actually like, no, let's just talk about this discrete thing that we do that can help you right now. And then we can blow it up bigger when things calm down. Yeah, well, I think the big piece of that is
00:06:54
Speaker
Having a really clear ROI payback, right, that is really short. So if your product or your project that you want to implement, if you're on the sort of the internal side of it, is got a three year payback, you know, your company is used to talking about three year projects.
00:07:15
Speaker
Okay, think about a year, right? And if you're used to talking in the terms of a year, you might have to think about things that are immediately cashflow positive, right? And oftentimes, a software company can figure out
00:07:31
Speaker
a subset of their functionality or a adjusted pricing model that can get you there. So it may be a question of saying, hey, normally what we do is there's a big license fee upfront and
00:07:46
Speaker
it's going to be implemented that way and we're going to move it to more of a transactional thing so that you don't have to have that big cash outlay. And if you're a software vendor, sometimes that actually becomes a more favorable long-term deal than you thought it might be. I noticed
Adapting Pricing Strategies
00:08:06
Speaker
One of our customers, who's a software vendor, created a free tier last week of their software. That will cost them money initially, but over the long haul, they have a very sticky product, and some of those customers will be retained throughout this, and they will eventually upsell into a paying product.
00:08:30
Speaker
So there's a lot of things you can do to work with your software vendors to say, hey, what can we do immediately? Another sort of thought on top of that is, this is a great time to take some of the BS out of your processes and out of your projects, right? That, you know, we often get into stakeholder meetings, especially at large organizations, where
00:08:53
Speaker
you know, everyone gets to say at the table and you end up with a feature list and a bunch of modifications that you want from your software vendor, you know, we want this button to be blue and, you know, this thing is not centered and so on that you let happen because you need all the stakeholders bought in. Now's the time to say, hey, you know, we had quoted this project as, you know, $250,000 in professional services to do all these modifications.
00:09:19
Speaker
in reality, what we really need in order to get some client facing business value, so we don't lose our customers is 1% of that or 10% of that. And that can be a really good, healthy thing to cut out some of that fat. Yeah, it's interesting. Actually, as we're recording this, I just like an hour ago filed a story about about some of those vendors that are offering free versions of their software. And it's
00:09:46
Speaker
It's a fine line between being opportunistic and sensing that the market needs something and growing your base of customers. I would argue that it's a great time to be opportunistic as long as you're creating business value.
00:10:07
Speaker
Right? So there's a, you know, a distinction between being entirely self-serving and finding win-win opportunities.
Balancing Opportunism with Value Creation
00:10:18
Speaker
You know, and, you know, I would call sort of call out that, you know,
00:10:24
Speaker
a couple of weeks ago when TPM was canceled and we at Chain.io sort of hosted a virtual El Dorado that was very opportunistic to us. And I'm happy to mention it that it was opportunistic from a marketing standpoint, but it also created value for the participants, right? So that versus sending out a message, sort of an empty message out to your customers that, oh, we're here to support you and then not having any meat behind it.
00:10:54
Speaker
That's opportunistic, right? That's just using it to create, to put another marketing message out. So looking for places and everyone's customers, whether that's the shippers to the service providers or the software companies feeding to the service providers, everyone's looking for help or guidance. And so if you can create value, that's great.
00:11:22
Speaker
Yeah, that's fair. And there is the point about having some sort of value attached to the opportunistic kind of approach is, I think, really critical. It's like taking this back to 08, you had those predatory lenders that were offering people mortgages with zero down. That was being opportunistic. Allowing people right now to refinance a mortgage is being
00:11:49
Speaker
It's taking advantage of the situation and creating value for yourself and them. How do you think the conversation between logistics tech providers right now is changing with the market that they're trying to serve compared to what it was a month ago?
00:12:14
Speaker
What is the, what's sort of like the introductory discussion right now? I mean, obviously COVID is replaced talking about the weather as the first thing we all talk about, but like when you get to actual, what is this going to do to help a specific thing that you need help with?
Demonstrating Product Value
00:12:29
Speaker
What, has that changed at all? Do you think in the last three weeks? I think that for us, it hasn't quite yet.
00:12:38
Speaker
But where I would venture that these conversations are headed is that all of us who have wonderful features in our products are going to have to not be so proud of those features and get right to the point.
00:12:54
Speaker
And the point is I can save you money by doing X or I can create revenue for you by doing Y. And that essentially what I've seen, and I would even go back to the .com boom and in the early 2000s and the bust there that if you made a lot of those companies, pets.com and what have you,
00:13:21
Speaker
prove their business value in their first sentence, they would have never gotten out of the gate.
00:13:28
Speaker
You know, and I think that there's a really, that shift will invariably happens in any of these cycles where, you know, people love to shop when they have a lot of, when they have a lot of time and a lot of money. And when you don't, you want to walk in the store and say, okay, yeah, that thing's going to cut my lawn and it's something I can afford. So I will buy that lawnmower and we're all going to need to sell our products with business value as the lead and all of the really cool engineering tricks and, you know, features.
00:13:59
Speaker
as trailing behind that. That's interesting. As you were talking, I was thinking, okay, so the last five years, we've been in a situation where the underlying economy has been really strong.
00:14:14
Speaker
growing and growing. The market was obviously through the roof. You had a ton of capital being deployed into logistics technology startups. You had a pretty frothy market even in the private equity world around logistics companies. So essentially, you had a lot of
00:14:33
Speaker
companies being supported in one way or another without any, you know, obviously some of them were failing and not being funded, but they were getting an opportunity to be funded in Italy. And now we're in a situation where that's probably going to be curtailed a bit, and companies are not going to be able to kind of, to your point, develop this campaign around what your supply chain is going to look like in five years, or it's going to be more about like,
00:15:03
Speaker
old school, what can I do for you right now? The selling that forwarders do and the selling that software providers in years past might have done that doesn't feel like what companies have been talking about now. Digital transformation, it seems like, is not going to be a phrase that's said a lot over the rest of 2020.
00:15:27
Speaker
So I think I don't want to be unfair to most of the software startups that are out there because probably you and I probably spend the most time with them maybe outside of the VCs, but maybe even including them across the industry because
Challenges for Startups and Existing Companies
00:15:44
Speaker
we do so much connectivity and obviously it's your job. But I don't think there are a lot of software companies out there that I've encountered that have no business model.
00:15:56
Speaker
or have no value proposition. I remember seeing those companies in my life and other industries and they're like, what the hell is this thing and why would anybody ever pay for it? I don't see a lot of companies doing that in our space. I do see a handful where there's probably a little oversaturation in certain
00:16:18
Speaker
certain segments, there's too many companies and, you know, the ones that are not already at market might have trouble getting some traction. But I think maybe what's more relevant is that those companies are, like you said, they're not going to be able to just go to an innovation team and say, buy this and play with it. And we'll figure out if you like it. And then we'll tune our products so that you by the end of the POC, you like they're gonna have to come in and say,
00:16:46
Speaker
you know, I, this thing works already today and it, it will deliver this value and I may even be asked to put some, you know, some cash behind that or some, you know, take a game share or something like that. Right. And relevant to you, it needs to be integratable, like in, in an extremely short timeframe, this can't be something Yeah, it needs, it needs to just be Yeah, it can't be
00:17:15
Speaker
Yeah, and a big piece of that also is I don't think, if you have a product that says, hey, we need this organization to globally change the way they function to use this product, it's this massive five-year innovation, I think those are going to be tough. And if you can find a subset of the product features,
00:17:36
Speaker
that could be deployed at a office or regional level or self adopted or, you know, like I'm thinking if I had a massive and I'm just making this up, but I had this massive route optimization and allocation engine that was going to be fully integrated into the organization and do all of this work and do all these analytics.
Deploying Immediate Benefit Features
00:17:55
Speaker
And I could go in and say, Hey, here's a tool that you can give to all of your planners or all of your station managers. That is
00:18:03
Speaker
30% of that functionality, and it's going to get them an immediate benefit. And you can upload all of your data from a spreadsheet and you don't even need to call Chain.io. That's the sale I'd be trying to make right now. But still, please call us.
00:18:24
Speaker
So let's wrap up quickly. What do you think are some hidden opportunities out there that maybe things that you saw happen with the 2020 hindsight out of the last downturn?
00:18:38
Speaker
I think the biggest one is growing with your existing clients, right? Going into your existing client and saying, hey, you know, I really want to do something adjacent with them. Something that is, you know, where I might want to stretch my wings a little. They're going to be much more comfortable expanding with an existing vendor than going through the process of bringing in someone new.
00:18:56
Speaker
So if you have some adjacencies in your market, you're doing rates, but you're not doing quotes, that kind of thing. Now's the time to get into those customers. And then the
Expanding Client Relationships and Exploring Adjacencies
00:19:09
Speaker
other is I'm always reminded that Mark Benioff said that his biggest regret in that last downturn was not hiring more salespeople. So a lot of companies will pull back. And if you have the cash to deploy,
00:19:22
Speaker
Now's a great time to get in while other people might be hesitating and go after and get things.
00:19:30
Speaker
Interesting. On that first point about the adjacency, is it also an opportunity? Because I write about this a lot, you kind of enable this a lot. Is it also an opportunity where I have an existing customer in the last two years, I've created three different partners through integration and put that in front of a customer? Even if you don't have the capability, is that like more kind of showtime ready these days than it was 10 years ago?
00:20:00
Speaker
Um, I think so. I'm not exactly following what you were, what you're getting at. So in other words, I mean, you're saying, okay, I have an adjacent, I can sell more into an existing customer now because they, they trust me. Uh, that's an opportunity potentially. I'm saying if you have a, if you have, if you've set up three different partnerships with other software providers for that ancillary stuff that you didn't want to build, is that similarly an opportunity now?
00:20:31
Speaker
Oh yeah, I mean, I think if you can walk a partner in the door.
00:20:36
Speaker
with you and say, hey, we can save you X or create Y together. And before that was, hey, we're going to go through a whole RFP process and we consider that a different market. Now a customer may be much more willing to say, hey, I can't sign a new contract with that partner. But if you are willing to include their functionality in your contract, I can expand it a little or I can
00:21:03
Speaker
you know, do something in that space if it's going to save us money. And so yeah, walking partners in the door is definitely a piece of that. Cool. Yeah, well, hopefully this was helpful. I always learned a lot. Awesome. Yeah, happy. You know, happy to have you on and hopefully we won't do another one of these real soon.
00:21:26
Speaker
Yeah, and alternate universe Barcelona held on one that won the league this year. Yeah, absolutely. And I think I think we will hopefully let's do one in three months where we talk about how Brian and Eric were overreacting and everything turned out fine. That would be fantastic. Alright, thanks. Thanks so much for being on today and we will catch up with you soon. Yeah, thanks, Brian. Appreciate it.