In Palo Alto (CA), we meet CEO and Co-Founder of BetterWorks, Kris Duggan. Kris talks about his story how he came up with the idea and founded BetterWorks, how the current business model works, as well as he provides some advice for young entrepreneurs.

INTRODUCTION

Martin: Hi, today we are in Palo Alto with BetterWorks. Who are you? And what do you do?

Kris: My name is Kris Duggan, I am the CEO and co-founder of BetterWorks. And BetterWorks is enterprise software to help companies set and manage goals and do that at scale. So what that means is if you have a hundred people, if you have a thousand people, if you have ten or fifty thousand people in your company, you would use our software to align and coordinate the entire workforce.

Martin: So how did you come up with the idea of BetterWorks?

Kris: So I have always been very goal oriented and in many companies that I’ve worked at, I think, we had a very institutionalized disciplined approach to setting goals. And at my last company as CEO it was really important for me to make sure everybody had goals in the company every. It was important that everybody could see everybody’s goals, I wanted to have it very open and collaborative type of approach to working. And I looked for software to actually allow us to do goal setting openly, collaboratively and in kind of a fun and engaging way and I couldn’t find anything and we end up using powerpoint. And so for me, my thinking was: “There must be a way to do this better and let me create a company called BetterWorks to do that for companies.”

Martin: I can imagine that it’s quite hard to align and update it in powerpoint format if you have a bigger company.

Kris: Yes, in fact I was speaking with a company recently that has 82,000 knowledge workers. They do goal setting annually today and want to move to a quarterly model but they do 82,000 word documents. And so you can imagine that— if you don’t have software to facilitate it, automate it, make it easy, make it engaging, it’s going to be very difficult and costly for a large company to go through that process.

BUSINESS MODEL

Martin: Let’s talk about the business model, Kris. What are the type of customer there are currently using BetterWorks, in terms of type of industries and sizes?

Kris: So I would say in the beginning we were working with many very high growth, high tech companies here in Silicon Valley. And we’re venture a funded company ourselves, we’re funded by Kleiner Perkins and John Doors on board of directors. So, those were the early kind of customers and that could be like a Lookout Mobile, NerdWallet; companies that have maybe three, four, five hundred people.

The company (BetterWorks) now is two years old, we have about 60 people that work in the company, we have an office here Palo Alto and an office in New York and we actually plan to grow to about 150 people next year so we’re going through a high period of growth. And what we found was over the last couple of quarters that we’re not getting a lot of demands from very large enterprises. Many of these are multinationals, some of which are fortune 500 or fortune 1000 kinds companies, headquarter here in North America. But even companies in Europe and globally where they have thousands or ten of thousands of knowledge workers. They have the same problem that you know these high growth companues have, which is how you align the people, how do you coordinate at scale, how do you get people to focus on the right things and how do you do that in a very open and collaborative way so that people can actually see what other people are working on.

And interestingly, I think what is driving a lot of growth for our company is that these HR systems, these very traditionally HR systems; Work Days, Success Factors, etc., they are kind of the opposite of open and collaborative; they’re private, nobody can see what other people goals are, it’s not quarterly, its annual and companies are realizing that there must be a better way to do this and they’re coming to us for help.

Martin: How did you acquire your first customers, Kris?

Kris: So In the early days, it was knocking on doors. At first, rather than selling them BetterWorks, it was more learning how do they do goal selling. And so we talked to many many companies. In fact, I think in my first quarter I talked to almost hundred companies. First of all just to learn, is this a product that we want to build? And is there a market for this product? Because I knew I had the pain with my prior company but I didn’t know anything about HR and performance and goals and software for this area, so I wanted to verify that this was an area that could be commercialized. And by talking to a hundred companies we actually ended up signing ten customers and—

Martin: Wow, prior to you developing anything?

Kris: Yes, saying, “If you have this, we would buy it and if you could work towards getting it deployed we will pay this amount of money.” So that what was kind of that the genesis for getting started.

One thing that –just to add to kinf of my personal experience with this, from a product standpoint what really inspired me was— at my last company doing the powerpoitn goal setting and it’s boring and people hate it and it’s like a painful. And at the same time we were using fitbit in the company and we were doing a fitbit challenge. I saw people using their mobile phone and the app and they’re cheering and they’re taunting each other and some people were walking around the block to get more steps. And I was like how come goal setting in the workplace doesn’t have to be like a Work Day or Success Factor 2.0, if you’re going to reinvent that, it should be much more like fitbit type of experience so that was kind of what inspired the product for us.

Martin: And did you go to those one hundred potential clients with mock ups or was it just an idea or some story?

Kris: In the early days, it was purely just an idea, like “Can you teach me how you’re doing things?” And then, as it progressed it was, “Can I show you a couple of visual ideas that we have on how we would solve the problem?” Then towards the end, we had already started prototyping some real applications. So I think it was a journey over the course of those hundred conversations, because the main thing was that we wanted to make sure that what we developed there was going to be commercial need for it and that we were on the right track.

And I think being very interactive and many times I think the customer can’t exactly tell you what the solution should be but they can respond to, “How do you feel about this, does this kind of hit the mark?” or they say, “No actually if it was like this or maybe make these adjustments.” So I think it’s always balance between they can’t necessarily express exactly what the outcome should look like but they can give you very quick feedback on if you’re kind of getting close to it.

Martin: And out of those 10 potential customers, how much did you actually sign up?

Kris: Actually, all 10 of them signed up.

Martin: Wow, that’s awesome.

Kris: Yes, this was two years ago. So now we are working with a couple of hundred customers, many of these are large companies; fortune 500 companies. And we’ve had hundreds of thousands of goals that we’ve actually used in our system. And users are using this on a daily and weekly basis and we still have that very similar process, which is we have a ton of features that we’re working on right now and we take a very interactive approach where we listen for feedback, we listen for ideas, we go and do some designs and rapid prototyping and then we take those features back to a certain type of user, maybe the executive user or a manager or an individual or maybe even and an administrator of the system and get their feedback on, “Are we hitting the right mark?”

Martin: When we look at the revenue model, Kris, how did you come up with a pricing point?

Kris: So our price point is $15 per user per month and then we had some volume discounts as the volume goes up.

I guess the way that we looked at it was the value of doing goals in a very efficient, modern, open, collaborative and frequent way. We feel like if you’re spending a $100,000 a year on an employee or spending $180 a year to make sure they’re working on the right things, that are focused and engaged and they had a sense of purpose and they understand how their work relates to the big picture, we think that there is tremendous value for the customer to take advantage of that.

The second thing is we looked at comparative business models of other similar technologies and we saw for example that Work Day which is that a HR system doesn’t do the kind of collaborative goal settings like we do but it’s the kind of in the general area, kind of market that we’re in. And the price point for Work Days is typically $25-40 per users per month. And so for us to say it’s only an incremental investment of $15 for going really deep in this one highly valuable area for the company, it seemed like that was a very compelling kind of price point for our product.

Martin: Is there the ability to cancel the contract monthly or is it like an annual basis?

Kris: In English you would say month to month.

At BetterWorks, most of our agreements are an annual contract, but actually many of our customers are signing multi-year contracts. And they view this as like, this isn’t an optional thing, they have to do goals, they want to be disciplined in this area but they don’t want to use PowerPoint or Word or Excel or very traditional HR systems to do that and so they’re looking at actually deploying this company wide for thousands of users and not just as a test, but actually like, “This is how we want to run the company.”

Martin: Are you providing, besides the software, also some kind of training?

Kris: Yeah, we call that customer success and so for customer success we have a whole team there where and these are people from a consulting background, change management or business transformation background. So we had people from Deloitte, we have people from Microsoft Yammer and other areas where they are helping the customer work with the executive team to take advantage of the technology and working with the managers in the companies to take advantage and working with the program leader to drive the communication around how to roll out what is happening and then looking at best practices, or how to optimize their usage of the system. So, we absolutely invest in this for our larger client.

Martin: And in terms of combination of marketing and sales are you only doing direct sales or are you also doing marketing?

Kris: I would say that our business model today is mostly direct model. But I could see over time that we’re going to start to build that channel partners and that could be through other boutique services type of company, it could be the large kind of big consulting firms looking at bundling in this capability into some of their chain management practice. And I could see a whole host of complementary technology partners in the HR space where I could see us bundling into those platforms as well.

Martin: Cool. You shortly elaborated on a Work Day but in general when you look at the industry what is your competitive advantage?

Kris: Yes, I would say quite confidently that we have the best goals product on the planet. Literally. That’s because that is all we do, we love goals. And we spent two years working on it and we’ve completely reinvented how goals can be open, collaborative and where progress can be recorded as you’re actually making progress on your goal, you can support other people’s goals by aligning your goals with them, you can have multiple conributors aligning to goals. It’s basically the deepest goals product on the planet.

And what I would say is our long term competitive differentiation—it’s actually in a couple of areas:

  • The number one, we are very focused on engagement and how do you drive engagement around goals. So that means what we measure every day is our daily active usage, our weekly active usage and our monthly active usage to ensure that people are weaving this into how they actually work. And this is a new thing for goal setting. Typically if you have these HR systems, you might interact with your goals once or twice per year and now we’re getting people on average to do that several times per month. So that’s kind of a more than a 10x behavior change in engagement in a very traditional workflow like goals.
  • The second thing I would say is that we are really focused on how do you make goal setting— the process as smart as possible and using even techniques like data science and becoming more data driven to connect goals that appear related, to get recommendations around goals, to basically get as smart as you can around leveraging these data signals. And that has never been done before in this whole field.
  • And the third thing that totally new is connecting all of those different systems of records like Sales Force like Jira or Slack or whatever your day to day system are, connecting that directly to your goals so that you don’t even have to check in. I just closed the deal with this customer, if Sales Force automatically does that for you then you automatically get credit. Or I just shift this feature in JIRA and then it automatically publishes at BetterWorks.

So these are the three major areas that are completely kind of new in the field of goals is engagement, then data science, and then integration.

ADVICE TO ENTREPRENEURS FROM KRIS DUGGAN

Martin: Great Kris, imagine a friend of yours comes to you and says, “Hey Kris, I want to start with a company.” What advice would you give him?

Kris: Lots of advice I guess. I guess starting with, you better be pretty passionate about the topic that you’re going to be focused on because you’re probably going to be working on it for five or ten years. So that’s a pretty long commitment, so that’s number one.

Number two I think is, solve a problem that you’re intimately familiar with. So is this something that you read about it or is this something that you’ve actually personally experienced? Because I think the best ideas are the ones that come from this personal, kind of empathy and experience around the problem. Very similar to kind of like, “I was trying to do this exact same thing at my last company and the software that we created is the software that I wish that I had in my last company.”

Martin: Be your own customer.

Kris: Yes. And hopefully, there’s a market for that and then other people will start to get excited about it. But if you aren’t passionate and you haven’t personally experienced it, I think those are going be very very challenging things.

Probably the third piece of advice would be validate idea with as many as people as possible. And there’s a difference here because I see a lot of entrepeneurs that will tell you their idea or tell the people their idea but they’re not really listening for the right queues and they’re telling you everything but they’re not saying, “If I had this would you buy it and how much would you pay?’” And “On a scale of one to ten how valuable will this be? On a scale of one to ten how much of a priority will this take inside your company?” They’re not listening for the right signals to kind of verify their idea they’re more kind of telling you their concepts.

Martin: They’re not even asking because it sounds more to me like they’re saying something…

Kris: Yes, they’re not listening and they’re not asking. So, being an entrepreneur does not mean being stuck on this one idea and trying to tell as many people as possible. I think being entrepreneur is— to me its kind of like you start pulling out a thread on a sweater… And the thread could be – it was really difficult to do goal setting, at least for me. Let me see if other people are experiencing that…

I think in the case we were fortunate that the original vision for the idea and then ultimately kind of how it came about were quite similar. But it could have actually been that, it turns out that it was this some certain aspect of the idea was totally terrible part of it, but another totally unrelated thing was actually the real discovery. And I’ve see that many many times now, like some of the startups that I’ve worked with is that your original assumptions—If you start with, ‘it’s going to be this, it’s going look like it’s going to have these features and we’re going to sell this’ versus ‘I’ve got this thread, I want to pull on this thread some more. It seems like people are having a problem with XY and Z, let me brainstorn some various ideas on how to solve that and talk to people and listen’, then you’re going to accelerate your learning and probably realize the answer more quickly and more accurately.

Martin: Totally Agree. Thank you so much, Kris, for your time!

Kris: Okay.

Martin: And next time when you think about starting a company, just listen and validate your assumptions. Maybe you’ll learn faster where to stop or where to invest more. Thank you so much. Great, thank you.

Kris: Alright. Good.

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