SoftwareCEO Exclusives
© Copyright 2007 The Computing Technology Industry Association, Inc.
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© Copyright 2007 The Computing Technology Industry Association, Inc. |
by Grant Buckler, Contributor, SoftwareCEO
Oceangoing cargo vessels may seem like a reminder of a bygone era when sailing ships took weeks to travel from London to New York.
It's far removed from the electronic age in which bits fly back and forth across oceans in seconds.
Yet ocean shippers don't exist in a separate world from the internet. In fact, the net can help them operate more effectively, as the founders of Oceanwide Inc. were among the first to recognize back in the mid-1990s.
Montreal-based Oceanwide was launched in 1996. But the company wasn't one of those dot-coms with lots of venture capital and no business plan.
CEO Mitchell Wasserman weathered the dot-com storm that sank hundreds of other less seaworthy firms. Today he sits at the helm of a company that racked up $10.7 million in revenues in fiscal 2006.
Oceanwide has been profitable since 2003, and this year ranked 45th on Toronto-based Profit magazine's list of the 100 fastest-growing companies in Canada, with five-year growth of 1,259 percent.
The firm also hit #25 on the Deloitte Technology Fast 50 for Canada, and #157 for the Fast Technology 500 of all of North America.
Wasserman says the company is heading for more than $12 million in revenues in the current year.
Oceanwide has about 150 employees and it continues to grow, though Wasserman says it's deliberately throttling back growth to ensure that its product quality and customer care don't suffer.
Listening to customers — and taking good care of them — have been the cornerstones of Oceanwide's success. So has a tight focus and being the very best in its particular niche.
Here, drawn from Mitchell Wasserman's experience, are 19 tips for keeping a software company on course through boom times and bust.
Stay on course tip #1: Identify a niche with a need you can meet.
In 1995, Wasserman had just sold a previous software company called Bizware that provided software for gas stations and convenience stores. He was looking for a new opportunity.
The trade journals were filled with talk of the internet, and entrepreneurs everywhere were looking for ways to capitalize on it.
The first thing Oceanwide's founders did right — and Wasserman credits partner David Berger with the idea — was spotting how the internet could help a specific sector.
Even though co-founders Wasserman, Berger, and Mark Adessky knew little about the shipping industry, they knew about software, and they knew an opportunity when they saw one.
Berger "came to me with the idea of targeting the freight transportation industry," Wasserman says, "particularly freight forwarders and ocean carriers. There were many of them, they were fragmented, they needed to communicate a lot of information both locally and internationally, so that would leverage and harness the power of the internet."
Stay on course tip #2: Use a creative solution to a customer's problem to get in the door, even if you can't make money on it.
But Oceanwide's founders had a problem.
They didn't know much about the freight transportation industry, and in 1996 that industry knew even less about the internet.
So how could they get potential customers to listen to them? The answer was a simple solution to a nagging problem.
Ocean carriers published their sailing schedules in magazines. The magazines charged substantial fees, yet their long lead times meant the schedules were often outdated by the time they appeared.
There was a better way to do it — using the internet.
So Oceanwide built a simple application that let ocean carriers enter data once, generate ad copy for the magazines, publish the same information to their own websites (which in many cases Oceanwide built for them), and submit the same information to an Oceanwide site that combined sailing schedules for many carriers.
The idea came partly from the founders' conviction that eliminating redundant data entry was a sure path to delivering benefits and making customers happy.
"Back then the notion was that everything on the internet was free," Wasserman recalls, "so we couldn't really charge for it, and the advertising pay-per-click model really hadn't materialized either."
But he says those efforts gave the startup "a lot of exposure, and it started to give us entry into the ocean carriers and into their customers, the freight forwarders."
Stay on course tip #3: Ask lots of questions and look for inefficiencies at customer sites.
Early in Oceanwide's history, Wasserman and his team were visiting customers when they noticed clerks getting up from their computer workstations and walking over to a typewriter in the corner. There they'd type on multi-part forms.
When the Oceanwide founders asked what was going on, their customers explained, "'Oh, that's our insurance. We have to type it onto this pre-printed carbon-paper form and send one copy in to the insurance company — and yeah, there's mistakes all the time, and it's a real pain in the neck, but we make a lot of money from it.'"
"You didn't have to be a genius to actually identify that this was an opportunity for us," Wasserman says. "So we built this cargo insurance application." It eliminates the paper forms, and became one of Oceanwide's two core applications.
The other core application allows ocean carriers and freight forwarders to exchange bills of lading electronically. That too came from asking the shippers and forwarders how their organizations worked, and looking for ways of improving the processes.
Stay on course tip #4: Focus on dominating your niche.
If one thing sums up Wasserman's approach, it's this.
"Instead of going out and trying to build a search engine, or build something where we were going to be competing with IBM and Microsoft and Oracle and the big goliaths in the industry," Wasserman says, "I've always believed personally in going and finding a niche that really had a compelling need for something."
By narrowing your focus, Wasserman argues, it's possible to be the best at what you do.
Given Oceanwide's size, it could never hope to build the best universal insurance software product on the market. But by focusing on marine-cargo insurance, with 40 people working on the development of that product alone, it can be number one.
Wasserman believes a commitment to be "the Rolls-Royce product in our market" is one of the keys to Oceanwide's success. Doing that depends in part on devoting the resources to product development and support.
About half Oceanwide's staff, 75 people, work in development, and the company spends around 40 percent of its revenues on R&D. Another 40 employees work in customer service. That's a big chunk of its people committed to creating and supporting applications, just the way Wasserman likes it.
Stay on course tip #5: Don't take your customers' business problems at face value.
Wasserman says his business analysts play a crucial role at Oceanwide.
"They don't just take things at face value," he says. "They actually dig a little deeper, they suggest things that could be improved... They push on different aspects of a process to see if it can be improved."
Besides asking questions, Oceanwide uses several other strategies to get under the surface of its customers' processes. Holding annual gatherings of customers, encouraging suggestions from employees throughout the company, and forming tight relationships with customers all help.
Stay on course tip #6: Become expert in the industry you serve.
In the early days, a big part of Oceanwide's sales and marketing effort was talking to customers, both to learn about their needs and to promote Oceanwide's understanding of the industry — or at least its willingness to learn.
Now Wasserman takes speaking engagements at industry conferences to help promote the company's image as a knowledgeable industry resource.
By spending time with customers, Oceanwide's business analysts learn the complexities and the language of their companies.
"I guess we have about 20 people in our company now who understand as much about marine cargo insurance as any broker or underwriter," Wasserman says.
"So when they're talking to customers, they understand the complexities, they can talk the lingo, they're respected in the industry. That's how you really dominate a niche — you're part of this industry."
Stay on course tip #7: Hire bright, ambitious people with initiative, even if they lack experience.
As much as Wasserman emphasizes knowing the industry Oceanwide serves, he says hiring employees with many years' experience in that industry hasn't always worked well.
"The industry knowledge didn't really translate into understanding how to improve the business," he says. "We had more success with younger people who come with a fresh perspective."
Wasserman also says large corporations are often inefficient and wasteful, and he has found that people who have spent many years in that work environment develop bad habits.
"There wasn't the same type of dedication, ambition, initiative demonstrated by those individuals."
So now, Oceanwide mainly hires "young, ambitious kids with one or two years out of school." New recruits learn on the job by going to customer meetings with senior employees, asking questions, attending industry courses and software training, and studying manuals and books on the industry that their employer provides.
Stay on course tip #8: Involve customers in your product planning.
Oceanwide holds annual meetings where it asks customers for their input on possible improvements to the software.
Oceanwide solicits customer suggestions before the meetings, then prepares its proposed solutions, and asks customers to comment on and prioritize the enhancements.
"A claims adjuster overseas — should that entity have access to the data that we're capturing in the application, and what type of access should they have?" Wasserman says. "We'll come out with a proposal for it, and everyone will rank that, as opposed to say capturing information on the value of goods stored in warehouses."
The customers also talk about how to improve processes and collaboration in the industry.
Stay on course tip #9: Plan realistically for the future.
In Oceanwide's infancy, during the dot-com boom, investment bankers pressed the company to prepare aggressive projections showing "hockey-stick" growth.
Wasserman resisted, and he's glad he did.
"I think that prevented us from hitting the dot-com graveyard," he says.
Startups that project rapid growth tend to spend accordingly, Wasserman says, pouring money into hiring staff and advertising in hopes it will bring the growth — instead of focusing on building strong software and solid customer relationships.
Oceanwide holds annual strategic planning meetings, designed to set goals for the coming year and for a three-year horizon. Once set, those goals drive the smaller decisions about budgeting, hiring, and how to deploy resources during the year.
The firm's deals come in all sizes.
Some insurance companies spend more than $1 million a year on Oceanwide's software. Freight forwarders may spend $5,000 to $10,000 annually, while some shippers purchase $80 to $100 worth of cargo insurance as they need it.
The large deals can take anywhere from six months to three years to close. That's all the more reason to make realistic plans, instead of carrying deals that big on your sales projections from one year to the next.
Stay on course tip #10: Align your business model to suit your customers' interests.
Before Oceanwide, Wasserman ran a company that sold software the traditional way, via a one-time fee with limited ongoing revenue from after-sales support.
The problem, he says, was that most of the revenue came up-front — "so to maintain profitability, we always had to be focused on the next big sale."
That meant existing customers didn't always get enough attention.
So for Oceanwide, Wasserman chose the software-as-a-service (SaaS) model.
"Our interests are closely aligned with those of our customers." Oceanwide is focused on making the software work for its customers, and the customers don't have to write a big check up front, nor are they locked in to the product.
And, with the software residing on Oceanwide's servers, it's easier to do upgrades, so the software gets enhanced more frequently.
The SaaS model benefits Oceanwide as well, because it provides a steady, ongoing revenue stream. That makes planning easier, and helps the company invest in further R&D.
Stay on course tip #11: Use technology to operate more effectively.
Oceanwide has always controlled costs carefully, while trying not to skimp on product development.
Sometimes technology can help do things more effectively and for less money.
For instance, Oceanwide uses web conferences extensively for talking to customers and prospects around the world.
"The best use of them that we've had has been in avoiding having to travel to meet with customers to provide a number of different employees within a customer organization with a tour of the software," Wasserman says.
"We can do all that remotely from our office in Montreal, and it saves a lot of cost and just speeds things up in the sales process."
Stay on course tip #12: Educate your customers.
One of Oceanwide's first sales was to Canada Maritime and CAST, sister companies within the CP Ships family. CP Ships was a large Canadian container shipping company that became part of Hapag Lloyd in late 2005.
Wasserman's team identified Canada Maritime and CAST as early prospects because they had significant offices in Montreal, which made it easy to meet with them.
While Oceanwide was trying to understand the shipping industry, the software company was also teaching its prospective customers about the internet.
This was in the late 1990s, remember — before everyone from big corporations to corner stores had their own websites.
"We'd go out and explain the internet to them and they literally had no idea what it was," Wasserman says. "It was 'yeah, we've read about it,' but they didn't have a website, no one had e-mail addresses.
"We went to do demonstrations and had to have a long — like a 50-foot — telephone cord that would plug into their fax machine in order that we could dial into the internet, and show them what was involved."
Oceanwide closed that sale by building the CP shipping companies a website and showing it to them.
"They were amazed," Wasserman recalls. "'Oh wow, we could have this?' 'Yeah, we just did this for you, it's a sample, but we could do much more.' And that's how we ended up closing the sale."
Stay on course tip #13: Be patient and build trust through small successes.
Oceanwide won that Canada Maritime/CAST deal, but at first it was only a $10,000 contract to build a website.
Canadian Pacific, the venerable multinational that was their parent, was reluctant to get deeply involved with Oceanwide, which was still a tiny startup at the time.
"They started very slow with things that didn't give them very much risk or exposure," Wasserman says. By setting their sights first on those small deals that fell within the customer's comfort zone, then taking care to deliver the goods, Oceanwide was able to win the larger company's trust, "and eventually they gave us more and more business."
Stay on course tip #14: Choose investors carefully, but don't pass up investment when available.
Wasserman's experience mirrored that of many entrepreneurs during the dot-com boom.
"In 1999, I recall there were investors literally just begging me to invest money," he says.
With capital so easy to come by, Wasserman gave many of them answers like, "You're really not the type of investor that we're looking for; we're looking for someone more strategic."
Wasserman admits he came to regret that a couple of years later, when the boom turned to bust and money for internet-related companies was suddenly very, very scarce.
"From a capitalization standpoint," he says now, "I certainly wish I had taken in more money when it was easily available, instead of having to scramble and really fight for it when it wasn't."
Nonetheless, he says, a growing company needs to choose the right investors.
"There's a lot of private equity money looking to invest in companies. The challenge is to try and identify which of those groups are interested in the type of company you are, the size of company you are, and the growth rate that you're presenting."
And to bring in those investment dollars, Wasserman's team did their homework. Each round of financing was a three- to six-month exercise, he says.
"We'd prepare documentation; we'd have all the answers ready for potential investors."
His early investors were mainly angels, individuals, and one company that has since ceased operations.
Stay on course tip #15: An informal, fun work environment will help foster open communication.
On the last Friday of every month, Oceanwide holds a pizza-and-beer afternoon.
Okay, maybe it sounds like a dot-com cliché, but Wasserman says it's all part of a strategy of keeping the work environment informal and the lines of communication open.
Part of the program at these Friday-afternoon get-togethers is Wasserman getting up to tell employees what's new with the company — new sales, upcoming events, and so on.
Oceanwide also holds other social events for employees, ranging from a day out every summer and most winters with sports events and dinners, to team lunches, to drinks after work partly paid for by the company.
By helping employees become friends, Wasserman says, "they spend a lot of time in the office either working or even just having fun — I mean hacking around, and getting to know each other."
Maintaining communication is increasingly critical as Oceanwide grows. Thanks to an acquisition in 2004, the company now has an office in Miami, and there's another branch office in Belgium.
"So it's important to keep communications clear and make sure that everyone knows not only how the company is doing but their impact in the company," says Wasserman.
Stay on course tip #16: Actively encourage and reward initiative.
When an employee who didn't work in sales picked up a promising sales lead, she brought it to Wasserman.
An existing customer told her that a colleague in another company had expressed interest in the Oceanwide software. She got the other man's contact information, and then asked Wasserman if she could make the call.
He said yes, giving her advice on how to approach it. She got the sale, and, Wasserman says, "she ended up getting into sales more and more."
In another case, when an employee suggested process improvements, Wasserman told him to write up a proposal, and invited him to present it to Oceanwide's development group. After feedback from the development team, Wasserman let the employee who suggested the improvement run with the implementation.
"We don't shoot the messenger," Wasserman says. "So if something is going wrong, we actually treat it with the appropriate attention. We reward initiative, so even if it's not in your area, if you see something that could be improved, bring it up, and you're not going to be knocked down."
Stay on course tip #17: Be choosy about your growth opportunities.
In 2004, the company acquired Micro Software Services Inc. (commonly known as Editrade), a Miami-based maker of software for customs brokers for an undisclosed sum.
Oceanwide made the acquisition for a specific reason: because its Editrade customs clearance product complemented Oceanwide's existing products.
"As we started to sell to larger freight forwarders, they tended to have import divisions as well," Wasserman says. Oceanwide wanted a customs clearance product to offer those customers, and Editrade wanted an offering for freight forwarders.
"It was a natural marriage of companies," says Wasserman.
What Oceanwide doesn't do is expand indiscriminately by going after every opportunity that presents itself. The goal is to offer more to the existing target market, to further dominate the niche.
At present, that focus is also helping the company moderate its growth. Wasserman says Oceanwide's executive team want to see 15 to 20 percent growth this year rather than 35 to 40 percent, to make sure it can keep up and maintain product quality.
"We're not going to take any type of opportunity that comes our way," he says, "and if we narrow the focus, the sales usually reduce as well."
Stay on course tip #18: Don't milk your customers.
"We have a no-compromise commitment here to integrity and to a sense of being fair," Wasserman says. "If a customer is completely beholden to us and needs something urgently, we don't go and charge them an arm and a leg for it. We don't milk them."
Being there when your customers need you, without taking unfair advantage of their need, is simply part of building a good relationship, he says.
Of course, there will always be customers who expect more than a company can afford to give them.
"Then," says Wasserman, "it's a matter of sitting down, presenting them with some factual information on the number of calls, the amount of time that's been spent... explaining the problem."
But Oceanwide always tries to negotiate a solution that works for both parties.
In some cases, Wasserman adds, Oceanwide makes it a practice to sit down with the customer once a year "to look at the usage of the product, the value being delivered, to make sure that the fees continue to represent value to them — and we adjust it."
Stay on course tip #19: When you mess up, admit it.
In the software business, Wasserman says, there are bound to be occasional hiccups.
Sometimes things go wrong. Sometimes expectations aren't met. When that happens, Oceanwide's policy is to say so — to tell its customers what happened, and how it will be fixed.
For instance, Wasserman says a defect can easily slip through testing.
"Don't try and hide it," he says. "Say yes, this is what happened, this is why it happened. I've made those calls when needed.
"But now there are many people within the company who know that. I really drill this into their heads; that we have to be open, we have to be honest with our customers."
After all, customers are key to any software company's success. Listening to customers helped Oceanwide define its niche. Paying attention to their needs helped the company build a strong position in that niche. And where Oceanwide goes from here will depend on what those customers ask for — and on Oceanwide's continued willingness to listen.