Interview with The Center for Ethics and Entrepreneurship
In this candid interview, John discusses how getting fired led him to start his first company, the approach he uses to assess start-ups, the importance of psychology in entrepreneurship, and more.
Kaizen: You have founded two high-tech companies, Decisive Technology and CustomerSat. Were you technically oriented as a youth?
Chisholm: I think you would say so. I liked to take clocks apart and try to figure out how the gears and springs worked together. I grew up in Jupiter, Florida, a small town about 20 miles north of West Palm Beach. In junior high school, my best friend Al Pion and I each memorized pi to over 100 decimal places—we would recite it alternating the digits, like tossing a ball back and forth. Talk about geeky!
I also had two great math teachers. The first was Mr. Rees in the eighth grade, who introduced us to probability theory. It fascinated me then and still does today: at MIT, I was a teaching assistant in applied probabilistic systems; and at both Decisive Technology and CustomerSat, real-time statistics and metrics were key competitive advantages.
My other memorable high school math teacher was Mr. Parrish. In trig class, I noticed a commonality between the roots of polynomials and Pascal’s Triangle. I kept analyzing it until I could describe the exact relationship, thought I had discovered something, and with Mr. Parrish’s encouragement, wrote it up in a paper called, “A relationship between Pascal’s Triangle and the coefficients of equations with altered roots.” When I got to MIT, I learned a bit more math and realized that this relationship had been known for centuries. But the experience gave me a taste of how exciting mathematical discovery can be.
Kaizen: When you went off to MIT, did you know you would study electrical engineering and computer science (EE/CS)?
Chisholm: No. I started out in civil, switched to mechanical and then electrical. My dad was a mechanical engineer. The 1970’s were a hugely exciting time in electrical engineering and computer science—digital signal processing, data communications, and interactive timesharing were just coming of age. Even then, EE/CS was MIT’s largest department, as it remains today, though not by as wide a margin today as it was back then. Like many others, I got caught up in the excitement.
Kaizen: Is that why you stayed on at MIT to get a master’s degree in EE/CS?
Chisholm: As a sophomore, I was accepted into co-op, a work-study internship program; and later into its joint bachelor’s-master’s program. Companies like GE, IBM, and AT&T committed to MIT to providing work assignments relevant to our studies. We alternated semesters between MIT and our co-op companies, got real-life work experience, academic credit, and best of all, got paid. I feel really good about co-op. Among other benefits, it helped pay my way through MIT.
I landed a co-op position with GE. There were four semester-long assignments. The first two were at GE Ordnance Systems in Pittsfield, MA, where I did FORTRAN programming for finite element analyses and conducted Monte Carlo (i.e., driven by random processes) simulations. I learned a lot about both engineering and its practice.
Pittsfield, MA is just north of Tanglewood, the summer home of the Boston Symphony Orchestra. By volunteering as an usher on weekends, I went to all 24 concerts that season. Over the eight weeks, the music progressed from medieval to baroque to classical to romantic to modern, so you could hear the evolution of music over four centuries. Among the great musicians we heard was Leonard Bernstein conducting Tchaikovsky’s Fifth Symphony. It was a priceless introduction to classical music.
My third and fourth assignments were with the GE Electronics Lab in Syracuse, NY in digital signal processing (DSP). The E-Lab had just introduced a chip that calculated Fast Fourier Transforms (FFT) very fast and was looking for applications for it. A form of DSP called cepstral analysis and homomorphic filtering uses the FFT four times, and so was a perfect application for the chip. My master’s thesis was to use the chip to implement this form of DSP. It encompassed a bit of everything—signal theory, algorithms, even writing microcode.
Kaizen: What were you thinking your likely career path would be?
Chisholm: At first I followed two routes in parallel: the EE/CS Sc.D. (MIT’s equivalent to a Ph.D.) program and applying to business schools. My b-school applications talked a lot about entrepreneurship—applying engineering know-how to start a new company. That is the path I finally chose.
Kaizen: You went directly from MIT to Harvard Business School (HBS). What was the most valuable business lesson of your MBA program?
Chisholm: At first I rebelled against b-school. At MIT, substance—content—had been all-important; at HBS, it seemed that packaging was most important. Gradually, I came to appreciate that packaging was important, too. My favorite courses at HBS, and the ones I did best in, were still the most analytic ones—managerial economics (ME) and game theory, in particular.
Kaizen: After Harvard, you went west—to Hewlett-Packard as a product manager in northern California.
Chisholm: I knew that Silicon Valley was the place for me the first time I drove through it, among the hundreds of high-tech companies. Being a product manager at HP in those days was like running your own business: you were responsible for product specification, marketing, pricing, sales training, competitive analysis, production planning, forecasting, even writing press releases. HP was then still small enough that new employees were invited to meet with Bill Hewlett or Dave Packard. On October 3, 1978, I was one of a small group of engineers that got to spend 90 minutes with Bill at HP headquarters. That night I wrote two pages about him and the meeting in my journal. He made you feel perfectly at ease; that nothing could faze him; and that he wasn’t concerned with making money but just wanted the company to do well. I felt and still feel deep admiration and affection for him.
Both of the companies that I have started adopted HP’s egalitarianism. For example, until we merged with MarketTools, my cubicle at CustomerSat was the same as everyone else’s, as were Bill’s and Dave’s in the early days.
Kaizen: You went from HP to GRiD Systems. What did you learn at GRiD?
Chisholm: The value of focus. GRiD, my first start-up, was hugely ambitious: it offered a proprietary, flat-panel laptop, far ahead of its time; a proprietary operating system; a proprietary suite of management tools along the lines of Lotus 1-2-3 (a precursor to Microsoft Office) that ran only on the GRiD laptop; and even its own proprietary networking. The company became profitable only after it abandoned the proprietary architecture in favor of IBM compatibility, and then largely on the strength of its sales to the military/defense market, for which its ruggedized aluminum case was well-suited. Narrowing the focus to either just the laptop or the management tools software, and not attempting to re-invent the operating system and networking, would have been a path to greater market success, in my view.
Kaizen: Why did you decide to start John Chisholm Group and consult rather than pursue a marketing career within an established corporation?
Chisholm: Like many entrepreneurs, I was fired—in this case, from GRiD, after a disagreement with my boss about product strategy. While I was looking for another job, I landed a marketing consulting assignment. Then another. Then GRiD hired me back as a consultant. Eventually I lost interest in finding a regular job. Over time, I was able to parlay my consulting experience into monthly columns for Open Systems Today and Unix Review, which helped establish me as an industry expert, especially in the then-hot UNIX market. Today, it would be like writing a popular industry blog.
Kaizen: What kind of consulting did you do?
Chisholm: I developed a specialty in strategic marketing: finding optimal combinations of product definition and target market, given the relative strengths of a company and its competitors. The process involves inventorying the assets of the company and its competitors—e.g., product, brand, technology, distribution channels, and financing—and of estimating the size of market opportunity for each product and target market combination considered. The process requires collecting a lot of data, analyzing it, and prioritizing options. Think of it as searching out, evaluating and sorting values of the expression:
[Size of Target Market] * [Your Unique Strengths — Competitors’ Strengths]
for each combination of product and target market to which the unique strengths are applicable. The analysis is both qualitative and quantitative. It seeks the largest market opportunities for which your competitive advantage is strongest. We did this kind of work for clients such as IBM, Microsoft, Xerox, and Sun Microsystems. I also served as part-time director or VP of Marketing and as expert witness in high-tech litigation.
Kaizen: How did you get from there to founding Decisive Technology?
Chisholm: In 1990-91, our consulting included phone surveys—customer interviews. At the same time, we were engaged by Sun Micro to serve as brokers for divesting Inbox, an e-mail software business that was part of Sitka, a local area networking company that Sun had acquired. We sold Inbox to CE Software, publisher of QuickMail, then the leading email software for Mac, on June 30, 1992.
The combination of phone surveys and email made me think, “What if you could do a survey via email?” For months I couldn’t get that idea out of my head. I played with it, developed it, nurtured it, and hired software developers to first prototype it and then develop it for real.
Over 1992-93, John Chisholm Group evolved into Decisive Technology, publisher of the first shrink-wrapped software for conducting surveys via email. Our product, Decisive Survey, let you compose a survey under Windows and upload a distribution list of email addresses of recipients. The software then formatted the survey as a text message and emailed it to each recipient, who would complete the survey by editing and replying to the message. Decisive Survey then retrieved the completed questionnaires from the surveyor’s mailbox; parsed (i.e., read) the messages to find the responses to the questions; and generated a simple set of charts and statistics—frequency distributions and cross-tabs. In short, it used the PC and email to automate the entire survey process. After its introduction in late 1995, Decisive Survey quickly became the leading desktop software for conducting surveys online.
Using software to parse email messages to pick out survey responses was way ahead of its time. It was not 100% reliable—this was before the web—because with text messages, respondents could type in comments outside of designated response areas. To address this, Decisive Survey provided surveyors a split screen environment where they could compare how the parsing software interpreted the responses with what the person actually typed, to make sure that the software’s interpretation was correct. In 1996, as the web was taking off, we came out with Decisive Survey 2.0 which created surveys using the web’s Hypertext Markup Language (HTML) instead of plain text, and which eliminated the problem.
Kaizen: What other technical challenges did you face?
Chisholm: Oh, many. Working with all of the different email clients, for example—Microsoft, cc:Mail, Lotus Notes, Novell, and Eudora—each one had a different application programming interface.
Kaizen: As Decisive grew you became CEO of a bigger organization. Did developing the necessary management skills come naturally to you, or was it something you had to work at?
Chisholm: It was hard. As a consultant, I hadn’t gained much experience managing relationships with employees and board members. I half-joke that I made every possible mistake as CEO of Decisive so I could start with a clean slate at CustomerSat. After Decisive raised venture capital, we recruited Doug Stone as CEO, an experienced general executive and a valued friend and colleague.
Kaizen: Decisive Technology is now part of Google. How did that come about?
Chisholm: Decisive was part of what is known as a “roll-up”—combining multiple smaller companies into a larger company to achieve scale. Decisive was acquired by MessageMedia, which was acquired by DoubleClick, which was acquired by Google.
Kaizen: Your third venture, CustomerSat, was the next big thing. How did it grow out of Decisive Technology?
Chisholm: We learned a great deal at Decisive: that measuring customer satisfaction and loyalty was a critical segment of survey research; that enterprises (large corporations) needed professional services to help design and implement surveys; that they needed to conduct and manage multiple surveys concurrently; and to distribute survey results to large numbers of users.
At the same time, the web had changed the software landscape dramatically over the five years since I founded Decisive. While Decisive was a Windows application, CustomerSat was designed for the web from the outset. Decisive was primarily licensed software, that is, it ran on our clients’ computers. In contrast, CustomerSat was Software as a Service (SaaS—pronounced “sass”): it ran on our computers and was accessed by our clients through the Internet. CustomerSat helped define a new market category that analysts today refer to as Enterprise Feedback Management.
Kaizen: How was founding CustomerSat different from Decisive?
Chisholm: Several key team members came over to CustomerSat from Decisive, who helped us get up and running at CustomerSat quickly.
CustomerSat’s financing strategy was different from Decisive’s in several ways. At Decisive, we spent over $1 million in software development before we started selling software and generating revenue. In contrast, from CustomerSat’s inception, we provided web survey programming and consulting services that generated revenue, and used these revenues to fund much of CustomerSat’s initial software development. CustomerSat had nearly $1 million in revenues by the time we raised capital.
As a result, CustomerSat needed to raise less capital, and could do so on more favorable terms than Decisive. This is advantageous for many reasons. A greater share of the company’s ownership stays with the employees, on whose dedication and commitment the success of the company depends; the valuation hurdle is lower at which you have to sell the company for everyone to make money; and there are fewer conflicting objectives and power struggles that can distract the company.
Decisive raised venture capital from such respected firms as Softbank, Helix, and Hanna Ventures. In contrast, CustomerSat raised corporate capital from two strategic partners. J.D. Power and Associates was the world’s best-know brand in customer satisfaction, especially in automotive, and thus brought instant credibility to CustomerSat. NICE Systems, a leading provider in call center recording systems, wanted new ways to measure the customer experience, which CustomerSat provided. While venture firms’ primary focus is financial return, corporate investors are fully as interested in gaining market knowledge and new products to re-sell. Corporate capital is often overlooked and deserves more attention than it gets from entrepreneurs, in my view.
Kaizen: Who were your early clients? How big would they have to be to be attractive to you? And how did you market yourself to those companies?
Chisholm: Early on, most of our clients were technology companies like AMD, HP, Microsoft and AT&T, because they were the ones who consistently had email addresses for their customers. A company or business unit would ideally have revenues of $250-$500 million or more to be a good prospect for us. Seminars at industry conferences were particularly effective marketing vehicles for us—they let us show qualified prospects the entire customer feedback solution we offered, from survey design to IT system integration to generation of real-time survey results.
Kaizen: How did you weather the dot-com bust?
Chisholm: The economic downturn of late 2000 through 2002 was by far the hardest time of any in my career. The bust hit CustomerSat in the first quarter of 2001, causing our quarterly revenues, which had been on a healthy growth curve, to drop quarter-over-quarter by almost 20%. One of the hardest things was to cut salaries of employees and management by 20% and lay off 30% of our staff in a 90-day period. We factored receivables at considerable expense so we had enough cash to make payroll. Quarterly sales declined again slightly in the second quarter. No one knew when it would end.
These were the times I would wake up at 2 a.m. in sweat-soaked sheets wondering whether CustomerSat would make it. Our sales finally stabilized in the third quarter and were slightly up in the fourth quarter. We broke even in the third quarter—the infamous September 11 quarter—and made a small profit in the fourth. The going stayed tough for the next two years, through 2002 and the first half of 2003—we didn’t hire a single new employee for 18 months—but we made it through. Few companies of our cohort survived. I feel I earned my executive stripes during the dot-com bust. Among the team members who went through this ordeal with us, there was very little turnover—very strong employee loyalty—for many years. It was as if the crucible of the dot-com bust had bonded us all together.
Contrary to conventional wisdom, I believe that having raised less money may have actually helped CustomerSat make it through the dot-com bust. First, if a company has millions in reserve, it can be hard to persuade employees of the need for pay cuts and other reductions in benefits. We did not have that problem. Second, with little in reserve, you have to respond to market conditions immediately. Some of our competitors who had deeper pockets postponed the tough actions of cutting costs, thus burning through capital and forever diluting everyone’s interest, both financially and otherwise, in their companies. Third, if the company is owned primarily by outside investors rather than by employees, there can be a feeling that the problem is not ours, but the investors’, and they should fix it. Not a winning strategy.
Kaizen: How did you get back on a growth track?
Chisholm: Many factors contributed. In 2002, we introduced Action Management, the ability to use business rules to open and assign cases when high-value customers indicated in surveys they were dissatisfied with our clients’ products and services. We collaborated with one of our best clients, Honeywell, to develop this unique differentiator. Action Management enabled our clients to close the loop between customer experience and follow-up with that customer, and helped fuel our growth for several years. Interactive dashboards of satisfaction analytics and metrics also became key selling features.
Dickey Singh, Jonathan Clay, Tulsi Dharmarajan, and Scott Williams all brought superb leadership and/or innovation to our software development efforts. In Sales and Professional Services, execs like Harry Rich, Russ Haswell, Josh Lamour, Annette Gleneicki and Greg Rich—I could go on and on—articulated the benefits of our solutions, built long-term relationships with clients, and helped us expand into vertical markets like financial services, pharmaceuticals, and health care. CustomerSat succeeded because of them.
Kaizen: By 2007, CustomerSat had been in business and grown profitably for a decade. What then?
Chisholm: Selling CustomerSat was an unnatural act for me. It had been over seven years since we had brought in investors. Ernie Pomerantz, a member of my board and a 22-year former partner at Warburg Pincus, the world-famous private equity/venture capital firm, said, “John, you can’t keep your investors waiting indefinitely. You have to give them liquidity at some point.”
I started the M&A [mergers and acquisitions] process somewhat reluctantly. It is hard to both run a company and sell it at the same time so, as we had done at Decisive, we hired an investment banker to manage the process for us. Brian Mutert at Stratagem brought great financial insight to the process and knew the SaaS space intimately. In March, 2008, after negotiations with several potential acquirers in market research and business analytics, we closed the deal with MarketTools.
Kaizen: Right before the economic downturn?
Chisholm: The deal was well-timed. No one knew the downturn was coming.
Kaizen: How did the merger process start—who approached whom?
Chisholm: Our dealings with MarketTools had actually started three years before the merger, when Beth Rounds, a highly-regarded market research executive whom I had known for a decade, introduced me to Amal Johnson, MarketTools’ chairman. During that initial meeting, Amal indicated that MarketTools was interested in acquiring CustomerSat. We were not ready to sell then, but we entered into a reseller agreement that enabled both companies to get to know the other, which was a factor in our going with MarketTools.
Kaizen: Understanding that the exact terms are confidential, how much were Decisive and CustomerSat valued at when they were acquired, if I may ask?
Chisholm: Yes, exact terms are confidential, but between the two companies, the total was well above $50 million but less than $100 million combined.
Kaizen: What are the major factors that determine valuation?
Chisholm: They are many, including profitability, revenues, growth rate, technology, brand equity, customer loyalty, and scalability, i.e., how much incremental revenue growth can be achieved by injecting a specified amount of capital into the company.
Kaizen: Was it difficult to decide whether to stay on with the new parent company?
Chisholm: You work out those details as part of the merger agreement. I was expected to stay on to run CustomerSat as a business unit, was incentivized to do so and learned a great deal by doing so. Market Tools was larger and had more mature financial reporting and accounting controls than CustomerSat. Helping align and integrate CustomerSat’s systems with MarketTools was good experience.
Kaizen: So your management priorities changed after the merger.
Chisholm: Yes. Before the merger, they were sales, marketing and products; after the merger, they were finance, accounting and revenue recognition. Not my favorite areas, but necessary. As a result of this experience, I’ll likely put these processes and controls in place from the outset of my next venture.
Kaizen: Were non-compete agreements part of the process?
Chisholm: Yes, as is typical. First, during negotiations we agreed to a non-compete called a “no shop” agreement. This means that once we received a term sheet—a formal offer—we couldn’t talk or “shop” the company to other potential acquirers for a period of time. Later, we agreed that selected execs could not directly compete for specified periods of time.
Kaizen: Was it hard to let go of CustomerSat, having founded and built it up successfully?
Chisholm: At times, absolutely, especially early in the M&A process. Later, when I started to plan what I was going to do next, including taking some time off, it became easier.
Kaizen: What are you doing now?
Chisholm: Taking some time off before my next venture. I’ve traveled around southeast Asia and volunteered with the MIT Venture Mentoring Service where I get to help bright, young entrepreneurs who have great ideas and knowledge but limited experience. And I bought a new place in San Francisco with dramatic views of the bay and bay bridge.
Kaizen: You’ve climbed to the tops of Mounts Rainier, Whitney, Shasta, St. Helens, even a live volcano in Chile. Was that as dangerous as it sounds?
Chisholm: More exciting than dangerous. Like Rainier and Shasta, Volcan Villarica was a snow climb requiring crampons (boot spikes) and ice-axes. At the summit, you looked down into a boiling, bubbling, splashing lake of red-hot lava 200 feet below you. The crater had collapsed in some places and looked like it was about to collapse in others, so you stayed away from those parts.
Kaizen: Looking back on the last twenty years, what has been the best thing about being an entrepreneur?
Chisholm: Creating something of value out of nothing, and the camaraderie of fellow team members. Two milestones in a start-up’s life are particularly exciting: 1) when you realize that even if you disappeared today, the company has enough momentum and people committed to it that it will continue without you; and 2) when you realize that it has genuine value and others want to acquire it.
Kaizen: Entrepreneurs have to have creativity, initiative, guts, resourcefulness, perseverance, the ability to recover from setbacks, and so on. Which of those is the most important?
Chisholm: Any of those strengths could be the key to success, but overall I would vote for perseverance. Having an idea, not letting go of it, developing it, bouncing it off other people, and refining it. With time, you can turn an amorphous idea into a practical solution to a real need.
No new technology is better than all existing technologies for every application, but any new technology can be better than existing ones for some application, e.g., a certain user type, geographical area, or IT environment. The entrepreneur needs to figure out what specific market needs can best be addressed by new technology. I mentioned the process I use: unique advantages minus competitive strengths times size of target market to which the unique advantages are applicable. That whole strategic process can be thrilling and lead to unexpected results—I’m helping some new companies with this right now.
Kaizen: Who and what else have helped you be successful as an entrepreneur?
Chisholm: All of the friends and colleagues I have already mentioned. Bill Hewlett, Jerry Peterson, Fred Gibbons, and Bill Krause at HP; Ernie Pomerantz and Norman Nie at CustomerSat; Dave Hanna of Hanna Ventures; Bob Metcalfe of 3Com; Roy Rood of Rood Landscape; and Lee Hill of Dale Carnegie are among the execs who encouraged and/or inspired me.
Having loving and supportive parents is the greatest asset with which any individual can be endowed in life. I have enjoyed that asset in spades. Also a large network of friends to draw on for advice and encouragement.
Years ago I took Dale Carnegie, a 14-week course which challenges you to apply human relations principles in everyday life, then give talks to the class a few weeks later about what happened. As a result, you get experience applying the principles, organizing your thoughts, and speaking publicly. Principle #1, for example, is “Don’t criticize, condemn, or complain.” You can get very far in life on that one principle alone. Others are, “If you make a mistake, admit it quickly and emphatically,” and “Show appreciation and do it sincerely.” I’ve often said that Carnegie was more valuable to me than my Harvard MBA, because you use Carnegie’s principles every moment of every day that you are with another person.
Over the years, consistently applying these principles elevates you to a position of leadership. I think of myself as a point on the carpet below our feet. If I grab that point, I can’t lift it very far unless all the points around it also rise. We are all like points on that carpet.
A truly courageous person merely acts courageously consistently. Similarly, a truly noble person is one who acts nobly consistently. I may not be able to change who I am, but I can control the way I act. So anyone—even I—have the potential to be courageous and noble. That is an inspiring thought.
Kaizen: How do you come up with ideas for new ventures?
Chisholm: Find or ideally experience first-hand a need that current tools or solutions do not adequately address. If you are passionate about and have high aspirations for any activity or group of people—your work, a hobby, a team, or your family — finding such needs will come naturally. At the same time, place yourself where you’re exposed to ideas that could suggest new solutions. The TEDx conferences and MIT Clubs around the world give you access to thought leaders and innovators—a constant flow of ideas. Most of their events are open to everyone. I go to trade shows outside of my field, for example, to conferences on embedded systems (microprocessors and computers embedded in devices like digital cameras, toasters, and refrigerators) and online social games. Ideas from those fields may be applicable to other fields. Burning Man (annual art festival in Nevada) is an incredible, wild and crazy, exhausting 24×7 inspiration for out-of-the-box thinking. Don’t miss the chance to experience it at least once in your life. Books are also a great source. The Evolution of Cooperation and The Selfish Gene are two of my favorites.
Here is a technique for generating ideas: think of two or more separate markets, currently non-overlapping, that are growing rapidly. As they grow, they will likely overlap. That overlap will start very small and grow very fast and likely harbors good entrepreneurial opportunities. Streaming video on social networks on mobile devices is an example. Use of cams, microsensors and GPS are growing rapidly; what new applications might be found that combine these?
Kaizen: How has being gay affected your career?
Chisholm: It’s no big deal. Every year, sexual orientation becomes more of a non-issue. I came out late, in my late-30s. Being gay has been an asset for me in two ways. First, because it was not socially acceptable when I was growing up, much of the time and energy I might have put into dating went into studying, sports, and career. Second, being in a group against which many still discriminate has sensitized me to the challenge of being in a minority. Of course, a key to success is to view any aspect of yourself that you cannot change as an asset, so I am biased. For the under-30 crowd nowadays, being gay more and more is just not an issue, like eye color or left- or right-handedness. That is a good thing.
Kaizen: How do you think coming out should be handled in the workplace?
Chisholm: I think being “out” can be helpful, especially for those who work in teams. If your co-workers don’t know anything at all about your life outside of work, that can affect their trust in you, your teamwork, and your opportunity to assume leadership. With trust, anything is possible; without it, anything can be an obstacle.
I don’t much talk at work about being gay, but I believe everyone knows; people talk. I was in a relationship for five years with a wonderful guy, Mike Beasley, still my best friend, who would come to our company parties with me. A good general rule is: Don’t tell people; show them.
Kaizen: Is there anything distinctive about the way gay issues are treated in corporate culture, or should we just treat them like religious or political differences?
Chisholm: The issues do seem broadly similar to me. I wonder which is more generally acceptable today: abortion or same-sex marriage? I would guess abortion, although same-sex marriage is rapidly gaining wider acceptance. Nonetheless, I wouldn’t be inclined to start a discussion at work on either topic. A big part of success is focus, and that may mean not bringing up things aren’t relevant to or may distract from the company’s mission.
Kaizen: In reflecting on your CEO experience, what do you see as the CEO’s most important role?
Chisholm: Depending upon circumstances, it may be any position on the field: cheerleader, referee, quarterback, offence or defense. Overall, the way I can best help team members, or anyone else, for that matter, is to look for and find good qualities in them—strengths, skills, or knowledge—let them know that I see those qualities, and help them visualize how they might apply them. In other words, help them see their potential. The more specific and tangible I can make that potential, the better I can help that person do great things. The willingness to look for and ability to find the good in people and build on that good is a quality I look for and deeply value in executives.
The CEO and his or her team also have to choose which battles to fight—battles that build and strengthen the company and its human capital; and avoid those you are likely to lose.
Kaizen: Judgment matters, since CEOs can make big errors?
Chisholm: Absolutely. You can err by underestimating or misconstruing the resources needed to penetrate or dominate a market—and conversely, by not being ambitious enough. You don’t want to avoid a battle you can win, because then you forfeit market share and profitability and deprive your team of the growth, exhilaration and invigoration of winning a battle. You don’t want to leave a battle on the table. So you want to take on battles, go after new markets, win over new customers, develop new channels of distribution, and come out with exciting new products. But you want to say “no” to the ones that you cannot win.
Kaizen: Any of these “no” decisions that stand out from your experience?
Chisholm: One was opening a data center in Europe. In 2003, several major prospects wanted us to host their data there. This would have been very expensive, but several of our execs favored the idea, and we went long down the road of investigating it. Along the way, we asked, “What is Salesforce.com doing?” Salesforce was the most successful company and a role model for us in SaaS. They were easily 20 times our size with major clients in the EU. As it turned out, they were hosting all of their worldwide clients’ data in North America. If Salesforce could do major business in the EU without hosting there, why couldn’t we? We finally decided not to do it. That was a tough, important, and right decision.
Another example: several large prospects wanted us to license our software to them, in addition to making it available as a service. This also would have been very expensive, to develop, test, install and support our software in many different IT environments. In this case, “no” was a particularly good call, because the rest of market gradually moved and continues to move away from licensed software to SaaS. Even Oracle and SAP’s revenues are shifting from licensed software to SaaS. More and more, non-IT companies don’t want to have to run their own data centers, which is helping drive the shift to SaaS.
Kaizen: Another CEO job is managing the culture of a company?
Chisholm: I don’t think a CEO can control culture directly, but he or she hugely influences it. Culture emerges from how people treat each other and how decisions are made. The CEO’s behavior is critical, because people look to that example and copy it. Genuinely believing that people are important is necessary for any organization’s success. If you do, people will recognize, appreciate and respond to it; if you don’t, they will recognize and resent it. You cannot fake it.
CustomerSat had a company-wide meeting every Friday morning at 9:30, to make announcements, of course, but primarily to celebrate good things that people had done or had happened. Unlike most company meetings, people enjoyed attending them. All CustomerSat employees have received hand-written, personal notes or postcards from me over the years acknowledging and thanking them for something they have done. I also like to connect employees who don’t normally work together. I’ll try to guess which pairs of our employees know each other least well and encourage them to contact and get to know each other. Those new links can strengthen the social fabric of our company.
Kaizen: In closing, John, what advice would you have for young professionals?
Chisholm: Become passionate about something. Stick with it. Then have fun making it happen!
This interview was conducted for Kaizen by Stephen Hicks.