The stepping stone to success
Colin Tenwick, recent CEO of StepStone shares his transformation of a dot.com from bust to boom
Online job board business StepStone went from having €300 million in the bank after the 1999 stock market float to being in imminent threat of bankruptcy with Ebitda losses of over €210m in November 2001. Yet in May 2010 StepStone sold its talent management software division to HgCapital for €110 million, and in December 2009 Axel Springer increased its ownership of StepStone around 90% at an estimated value of €165 million. CEO Colin Tenwick explains this remarkable turnaround.
StepStone was one of Europe’s highest profile dotcom failures. How did the company look when you first joined?
StepStone was like a patient lying on the pavement having just suffered a cardiac arrest; we needed to resuscitate it and get it into an emergency room. It was haemorrhaging money by operating across six different platforms, had 2,800 staff with an average age of 26 spread across London, Paris and Madrid focusing on growth, growth, growth no matter the cost.
How did you address this?
The first stage was assessing the patient - can it survive, does it have enough cash, can it get support and secondly is there is an opportunity to radically reshape the business?
Second stage starts almost in parallel, focusing on radical restructuring assessing how to ensure the business operates in a consistent, sustainable fashion. That ranges literally from the front of your company to the back – e.g. sales forecasting and processes through to the development products using a single platform. We inherited six different platforms, how do you go from six to one? What does that actually mean?
I also had to fundamentally change the culture. We were profligately generous - at one stage there were 25 BMW 3 Series parked outside for sales staff yet to join the company. I moved this to a results driven culture where every single penny was both forecasted and counted.
We had a raw company, with multiple unintegrated acquisitions ruled remotely from a heavily centralised corporate function. I created clear guidelines regarding measurement points and the value proposition, all with the aim of empowering local businesses. We had fantastically gifted local managers who lacked the right tools to succeed - I therefore put in place a solid core of technology, consistent core marketing and branding, a cohesive pricing structure and value proposition that enabled the whole European company to speak the same language in terms of pricing and structure of the offering.
Once we had stabilised the business, it started to become profitable and produce great margins. That is the thing about online business, it is a highly cyclical but once it is on the upside it just accelerates like crazy. We wanted to create a business which complemented this highly cyclical transactional business with something which smoothed the ups and downs.
That is how we started to get into recruitment technology, deciding to utilise a subscription based model. Having been at Sybase in the era when 75% of big enterprise software licence sales were closed in the last 3 hours of a quarter, I wanted to build something that was more predictable. For this reason we created the new business on a SaaS model.
A SaaS business has a fundamentally different economic model to a traditional software business, and the cost of getting up to speed is very, very high. It is only after the first year when a customer renews that you start to make any money; however as it is an annuity, it keeps doing that every single month, so after two years you have a very, big amount of money as long as the customers are retained. The whole model is based on attraction and retention. We started from scratch in 2004 and we exited last year at the run rate close to €60 million, out of which two thirds is monthly recurring revenues.
What have been the most important lessons that you have learned in this process?
I think that one of the biggest learning points has been the importance of upwards and downwards relationships within a company.
For a CEO “upward” relationships tend to be with your chairman, and I have been blessed with two exceedingly capable and gifted chairmen, who managed to be simultaneously fully supportive whilst also challenging and questioning. I think a Chief Executive needs to have people to bounce ideas off, people that will challenge, sounding boards fundamentally working in the same direction. If you get this right it can make an enormous difference.
“Downwards” relationships focus on how you build a team. You can’t do everything yourself, and so must be able to attract exceptional talent. This is fundamental; however the problem comes for a CEO if you don’t recognise the need for blended skills across the company. A common failure is that you find CEO’s who either don’t delegate or prefer to recruit in their own image - the last thing you want is for your CTO to be the same as your CFO. The CEO must bring together a fantastic blend of skills and then drive it forward into a common approach. It is about appreciating and developing different skills into a consistent whole.
You built from scratch a successful Software as a Service business at StepStone. What is your view on the SaaS and Cloud market at the moment?
I think inevitably near-core and none-core services are going to go into the Cloud, forcing hosting suppliers’ services to be assembled from anywhere with immense security – resulting in a mixed model where some technologies will be hosted on premise other areas will be hosted outside.
An example of this blurred line could be if a company kept their core HR system on premise within their firewall, but placed their expense management out in to the Clouds. So you are going to see a blending as the Cloud calls on the on-site server and vice-versa. I think we have moved way beyond the one size fits all, where standards connectivity and interconnectivity become bywords and ultimately price performance becomes critical.
The days of people commissioning enormous, multi million Euro enterprise software development will rapidly disappear as SaaS delivery mechanisms offers faster, more assessable benefits to businesses. Really, I think what we will see are mixed models appearing as economies of scale are realised with SaaS companies developing once and deploying many times, insuring an inherent flexibility in the way that software and technology is built. I don’t see this as a pseudo -religious war, this is simply the future.
What does the future hold for you?
More of the same hopefully, it is just not in me to stay on the bench. I passionately believe in the profession of the CEO, but find that all too often in Europe founders of companies build to a successful exit, and become non-executive directors. We don’t have a culture of serial CEOs, people who are willing to go and do it again with the aid of experience - that is what I want to do. I want another crunchy CEO challenge because I think they are fun, it is the best place to be.
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