| Interview with Jeffrey Beir, CEO/President of eRoom Technology
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| by Angel Mehta, Managing Director, Sterling-Hoffman Management Consultants
As the CEO of eRoom Technology, Inc. (www.eroom.com), Jeffrey Beir is well aware of the need for strong leadership during difficult economic conditions. A graduate from Lotus Notes, Jeffrey saw an opportunity to create applications that brought the ease of use of the desktop environment into extended enterprise collaboration. Unlike Groove Networks, eRoom brings together cross-organizational teams to work on mission-critical projects and assignments. Spread out amongst multiple organizations and even countries, teams have the ability to instantly track project status, are able to hold real-time chat meetings and manage documents. Jeffrey shares his thoughts on what it takes to be a CEO of a startup software company and the lessons he has learned along the way. Sterling Hoffman: Why did you leave Lotus notes to startup eRoom? Jeffrey Beir: When IBM acquired Lotus, it provided a huge platform to take Lotus to the next level. I did that for 6 months or so, but then saw the opportunity to go do something that was based on Internet technology along with opportunities created around VC funding Internet based companies. At the time the commercial Internet was beginning to explode, mostly for consumer applications and the beginning of online purchases. I saw the opportunity to bring the ease of use of the desktop applications world, what I spent a lot of time with at Lotus, to create an enterprise application using the web as a platform. It was a strong pull to go do something else. Sterling Hoffman: Was it a pull to make money or build brand new technology? Jeffrey Beir: I've always been a builder; even as a young kid, I loved building and creating things. I've always had a strong desire to create a company, build something from scratch and create something that had huge market impact. Was the financial opportunity a part of it, yeah, somewhat, I had lived through the early PC era (1981) not in a leadership role but more in a supporting role, saw the huge opportunities and the wealth that was created in the early 1980's. I saw that same opportunity from a grander scale in the mid 1990's and if there was a point where I was going to scratch that itch to build my own company, that was the opportunity to do so. From a technology perspective, there certainly was a large technology transition that was underway. The classic client server desktop applications were going to be somewhat less relevant and the opportunity to leverage the technologies provided by the Internet to connect enterprises together presented a technology shift that to me meant, and to many meant, huge market opportunities. At the same time (in 1996) there was a fair abundance of venture capital and I had developed some relationships with the Venture folks over a period of years, and they were doing their fair share of pulling on me to go get something started as well. So, it was an opportunity to take many of the ideas I had, tie it to a technology transition and then go test the waters to see if, in fact, I could create something that could get funded and begin to build a company. Sterling Hoffman: Are you glad today you scratched that itch? Jeffrey Beir: I love what we have built here at eRoom and I love the job that I have here as a CEO, it's a fabulous mix of challenges, variety and fun. So, yeah I'm thrilled that I did this. Looking back, Lotus was great learning ground, I spent 10 years there, met and learned from some wonderful people. But it was time to go do something else. And there is incredible amounts of learning you get from being a first-time CEO. Trying to figure things out without a road map in front of you, making some mistakes and learning from those mistakes. Sterling Hoffman: Why don't you tell me about some of those mistakes. Give me an example from the early days, as a brand new CEO, the kinds of challenges you had overcome and how you learned from them. Jeffrey Beir: Ah many (laughter). There was one very challenging time in the early days of the company. Within 6 weeks of raising the capital to get eRoom started, we had built a prototype of eRoom and I was on the road showing it to old friends, prospective customers, industry analysts, even some Press. I went out on the road, east and west coast, north and south, showed it to probably two-dozen different customers and prospects. And the response to the prototype was, you know, positive. I was getting comments of "very interesting", "this is nice", "we could probably use this" and I'm logging this in the back of my mind thinking, "this is great, I'm getting good feedback". Towards the end of this tour, I ended up showing it to an individual on the West Coast, soneone I worked with when I was at Lotus, and respected his opinion immensely. He knew me well enough not to pull any punches. He said to me, "You are going to get killed. This is wrong, it's the wrong approach." When I paused and reflected on what he was saying, and then went back and looked at the comments that I had been receiving from others customers, I realized the feedback was not that positive, that it was neutral at best. And on the flight back from California, I'm thinking, "He's right, we're going in the wrong direction, we have to change direction". This was right after I had raised 3.5 million dollars from two leading VC's, we hired about a dozen people that were already hard at work and I'm flying back from California thinking, "I made a mistake. We need to make a change here. What do I do?" Sterling Hoffman: And so, what did you do? Well, I did what my instincts told me to do. My instincts told me to engage the team in the problem. Share openly the challenge, share openly the feedback and enlist the team's help and the Board's help in figuring out what we do. I had to overcome the fear of coming back and saying, "It's wrong, we have to go in a different direction" and the whole team bails or my investors say we want our money back (laughter). And also overcoming the insecurities that we all carry around in the deep recesses of our brain and realizing, "gee, maybe I wasn't cut out to be a CEO". So I did what had worked for me for many years prior to that event, be direct with people, tell them the honest truth, lay out the problem and engage people to help solve the problem. Sterling Hoffman: Clearly that helped, because you're still here today, right? Jeffrey Beir: It did help; we actually did a 180-degree turn. We had the entire team figure out which direction we should turn because it wasn't clear. And we all came back aligned on a new strategy. As a result of this, we built a much stronger team because there was more trust, open dialogue and communication. Everybody got on the same page about what we needed to do and within a month we had more momentum and were further ahead then we were when I came back from California. So that was a big mistake, a scary time for me, but one that I think provided a lot of the foundation for the culture and values that we have at eRoom. Sterling Hoffman: Let's talk about eRoom's culture. Do you feel that eRoom is a reflection of you as a Leader, what you believe in and how you treat your people? Jeffrey Beir: It may be that it reflects the CEO, reflects me, I'm actually more proud that the values and culture of eRoom are created by the collective whole of the people that are here. Now, it may be by design that people we hire, therefore the people that they hire and the values that we ultimately share is a selection process. But, you know, fundamentally, the culture and the values we put in place from the beginning, and not just me, but the founding team and the early engineers, believed that that was the way we would build a company of value and would be built to last, to use a trite phrase. I remember early I didn't have much to talk about in a board meeting except for development progress and how we were building the team. And I remember spending a lot of time talking about the values, the culture and some of the benefits and HR practices we were putting in place and frankly, my board didn't have a lot of interest in those topics. Yeah, they almost didn't feel they were, at the time, board topics that needed to be brought up. As time has proven though, I think they've come to appreciate that [the culture] has created a backbone for a company like eRoom. It has allowed us take on very difficult challenges, make changes mid-stream, hold people together and hold the team together. Through great times, when it was difficult to hire and there were a million jobs out there, to tough times when there weren't a lot of jobs out there and yet we needed to keep people focused and excited about what they were doing. And I think, underlying all that is a culture that people believe in and that's why they stay more then anything else. Sterling Hoffman: You've talked about tough times and times are tough right now, has that changed the way you think about IPO's? Jeffrey Beir: Well, what's an IPO (laughter). When I was at Lotus and I had a fair amount of visibility with Wall Street because I was heading up the Spreadsheet Division at the time. It was also during a period in which Lotus was being severely challenged by Microsoft. We were behind and we were playing catching up to Windows. And so I got a good taste of how challenging the public markets can be on the company and how it can sometimes deflect you from your longer-term objectives. What happened during 1999 and 2000 wasn't real, you know, there were companies that weren't high quality companies or weren't really companies that should have gone public, they were private companies that should have remained private. And, at one level, we are back to normal times, in terms of the types of companies that should be public. Companies that are well managed financially, predictable, have real business models and revenue models that are profitable. So I think what we are seeing right now, perhaps the pendulum has swung a little too far in the other direction, but the types of companies that will emerge, will be much higher quality companies then the companies that went public in 1998 to the year 2000. What we are doing right now, is just putting our heads down and growing a profitable software company and continuing to improve our systems, our products, our predictability and improve the profitability in the business. When the market returns, we will be very well positioned as a strong public company that investors will value. Sterling Hoffman: Are you doing anything to improve and bolster investor's confidence? Jeffrey Beir: I'm not spending a lot of time focusing on the PR Investor side. I do my share speaking with the bankers, they come in to remain up to date on the business and I do a number of the investor conferences to keep telling our story. Our story is very powerful if an investor cares about software technology. If they don't care about software technology I can't tell a story that will convince them otherwise. Right now, there is a class of investor that is very wary of technology stocks and until they come back, it's like pushing a rock uphill. Also, I need the market to be ready and receptive to an IPO, which it's not right now. So the only work I'm doing in the financial world, is keeping our story out in front of potential investors and keeping myself up to date in delivering that message. Most of what I'm doing right now is making sure we are running a healthy, profitable software company. Sterling Hoffman: Do you spend a lot of time in front of your customers? Jeffrey Beir: Right now, my job is probably best tuned for my skills. I'm spending a lot of my time on strategy, on product, on customers and on partners. That's great role for me right now. I have a very strong CIO/COO type person who is my Chief Financial Officer and Sr. VP Operations and he's spending a lot of time more on the day to day and getting the quarter done. And so, we divide the world where he is more quarter/short term focused and I'm strategy, product and long-term focused. I spend a lot of time with customers and partners if it's on strategic issues and where we are going, also dealing with any problems they are having with us as a company overall and maintaining the relationship. And I love that role. I don't spend a lot of time with customers today closing deals or selling software. I have a very strong team that does that. Sterling Hoffman: How are you different (versus your competition) in terms of product innovation? How much do you encourage your customers and employees to get involved? Jeffrey Beir: Ours is a simple formula, we put forth a very strong vision that our folks believe in and our customers believe in. Then we spend a lot of time listening, and taking feedback. At one level we don't want to build only what our customers ask for because sometimes they might miss something. You certainly can listen to what the customer requests are, try and project beyond those requests and understand what the underlying need is. We pride ourselves in more then just being ahead of the technology curve. We are delivering business value and making sure what we deliver in the product actually helps our customers solve their own business problems. So, how we compare competitively, is much more around clarity of vision, awesome execution and focusing on those things that deliver high payback for our customers. You know, from a technology perspective we are doing some pretty innovative things, but technology without the business value is not the point. How are our employees are involved? Well, all our employees are involved. We have product designers and managers that are driving the specs and the requirements but it's a very open communicative environment around how we improve parts of the product. Customers give us feedback and there is a lot of visibility with that feedback, everybody touches the customer, everybody gets a sense of what the customer is trying to do with eRoom and we build that into everybody's understanding of what we are about. That's the way we continue to be better because we continuously challenge ourselves. We don't believe that we have the best ideas concocted in engineering. With input from employees, customers, and partners, we all create some ideas, test them, prototype them, get some feedback, improve them and more often then not, what ultimately gets shipped is different from the initial concept. Ultimately it comes down to smart, creative people coming together, making a judgment call and taking a product in a particular direction and feeling empowered to do so. Sterling Hoffman: Is there any one competitor that concerns you most these days? Jeffrey Beir: There is always one competitor that always concerns me. One should never discount Microsoft, they continue to try and compete in the space we are in. We see them in a number of accounts; they have the resources to do whatever it takes to win this market. So far they haven't gone after the market in the way we have, which is really enterprise-wide ready/extended enterprise collaboration. They've mostly focused on small teams and lighter weight collaboration but we always worry about what Microsoft might do. They have the resources, the people and the ability to execute here, fortunately over the past couple of years they've been focusing on other problems. That's kept them busy doing other things. But, we certainly watch them carefully, stay on top of their technologies and stay close to what they are doing. Sterling Hoffman: Microsoft is getting very comfortable with Groove these days, is this why you've decided to focus more on the enterprise application approach? Jeffrey Beir: In terms of Microsoft's closeness to Groove, you know, we haven't run into many situations where Microsoft has brought Groove in to compete with us. We occasionally see Groove in some of the same accounts but they are mostly focused on pilots in a particular group within the division of a company. We are more focused on winning the entire enterprise, and getting the standards instituted within the enterprise after we've won particular business units. Groove has done a good job building integration from Microsoft's latest technologies and getting some good PR as a result of doing that. I think the fundamental problem they are trying to solve is not well solved by their technology, it's better solved by eRoom. If the customer is truly looking at putting together an extended enterprise team that is mission critical in trying to get something done that involves large amounts of content, covering many geographies and many companies, e-Room is the right solution. Sterling Hoffman: What are three key lessons that you learned this year that you feel would be of value to other software CEOs? Jeffrey Beir: First, market downturns are opportunities to extend your leadership position. That is challenging in an environment where it is difficult to raise capital. But with focus and an internal investment, we are finding that competitors that are less focused or aren't as far along, are having a harder time keeping up. We're extending our leadership position during this time, and it's allowing us to improve the way we do business so that when the market picks up again we'll be a stronger company. So that's lesson number one. We are using this market downturn as an opportunity to get better rather then lament that the financial markets are terrible and customers are hard to predict when they are going to buy. The second one is actually one I learned this summer. Doing business in these times requires a new work/life balance. We talked a lot about keeping things in balance but in the past there were very, very, long work hours, then you figured out a way to take a couple of days vacation and you took your laptop with you. What I found out this summer is that I took a little more time off, actually a two-week vacation this summer, which is the first in the entire history of eRoom, and, I remained connected but it was in a way that was more managed, I wasn't taken away from my family because of some emergency at work. It was, "Dad needs to do this particular piece of work at 4 o'clock today, so let's make sure I can step away from what we are doing to go do that and then come back". As long as expectations are set well and you're disciplined about it, there's a way to get a new work/life balance that is connected yet allows you to really focus on your personal life and your life balance. Part of that is borne out of necessity realizing that this is marathon, not a sprint. The expectations are very different now versus the time when young CEOs said that they would retire at 45 and go kick back at the beach. It is now much more about the journey, this sounds so trite, but it's true; enjoy the journey as we are living it rather then deferring all the joys until some kind of future liquidity event. That future liquidity event may be very far off into the future. The last one is, these are times for very strong CEO leadership and most importantly, spending it absorbing the ambiguity of these times. To a great extent, employees want to believe, want to know that they are going to have an impact on the marketplace. And while they look outside and see lots of companies that are hitting the wall and lots of their friends are getting laid off, the most important thing that I can do as a CEO is maintain the clarity of vision, over communicate that vision and absorb the ambiguity of the marketplace, both the financial and economic markets, so that people can focus on what they need to do which is to continue to execute in the same direction. Angel Mehta is a Managing Director at Sterling-Hoffman, a retained executive search firm that represents venture capital firms and enterprise software companies in VP Sales, VP Marketing, and C-Level recruitment projects. He can be reached via email at: amehta@sterlinghoffman.net. |
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