Hyperion and the Profitable Customer Relationship

It's important to have a clear mission, a clear promise about what your company is all about. You want to have an expectation match. Our customers are increasingly understanding that we are a Business Performance Management software company, and so when they come to us, they are looking for solutions that help them turn strategies into plans, help to monitor execution, and get insight into how they can improve both their financial and operational performance. They want help automating management processes such as analysis, planning, reporting, setting goals, modeling and monitoring results. That's what they expect from Business Performance Management. Just as importantly, you need to make it clear what not to come to us for - we are not in the business of high volume transaction processing. Other software companies do that.

Customers want to use products that work and that are from companies that stand behind them. They want to work with a company that's going to be around a long time. Therefore, they often check out your balance sheet to look at how you are spending your money, to make sure that you are reinvesting in product development. They look at your people, your products and your brand to see if there's a match. They look at all of those things to try and determine who they want to have as a strategic partner. Then they want to talk to other customers; they want references. That is the whole package of what they look for in a software company.

We firmly believe in the adage that you can't manage what you can't measure. So we survey our customers about all aspects of doing business with Hyperion. And to ensure alignment, we make sure rewards match performance vs. goals. For example, customer satisfaction is a key factor in the Hyperion bonus program. If we achieve our customer satisfaction goals, we can add bonus money to the pool. If we don't achieve our goals, we take money away. Everybody is affected and because of the way bonuses work - bonuses generally impact managers more than line employees because a higher percentage of their target compensation is bonus - it impacts our senior management even more than it impacts the front lines. You have to put your money where your mouth is. In aligning the goals, you have to measure them as the customers want them to be measured and you have to impact the reward system.

The keys to profitability in the enterprise software business are different than in many other businesses. You can achieve good margins if your selling cycles are effective, you're not doing a lot of customization, customers are implemented quickly and efficiently, and you're not selling buggy software that requires a lot of support and consulting services. But profitability is more than revenue minus cost - you have to understand the total relationship with the customer. So we look at successful implementations and we measure how much free consulting we have to provide to ensure customer satisfaction. Another set of criteria involves how many commissions are being paid to complete a sale - is the selling process efficient, or are there too many people around and involved in a deal? And we also look at streamlining activities such as license extensions for additional users; we are increasingly turning to the Web to make those transactions both more cost efficient and also simpler for the customer.

Keeping a customer happy is as important as getting a new customer happy. We're doing this in part by putting a lot of energy into improving our support program; such as automating many support initiatives. For instance, we have about 300 customers using new software that with their permission, helps us determine the technical environment, operating system, and hardware they are using. So we short circuit a lot of the questions a support person would normally ask and get a head start on solving the customer's problem. This is easier for the customer and it makes it easier for us to give them an answer. We've learned that using this approach cuts down on customer irritation and helps us resolve a problem in a fraction of the time it used to. That keeps our costs down and the customers much happier.

The purpose of any business is to get and keep a customer. Customer acquisition is about bringing a customer into the fold and selling them software and services, but then also keeping them as a customer and growing with that customer. It is important to recognize that there is a relationship that must be kept with that customer long past the point of selling them software, whether that be further consulting work, more software or perhaps just establishing a great reference.

The software business provides a built-in mechanism to measure continuing satisfaction, since customers pay for ongoing maintenance support. In return, the customer receives updates of the software and gets help resolving any problems. Because of the maintenance contracts, measuring customer retention is pretty easy for a software company; you know how many bought your software and each month you can monitor how many are paying for maintenance to stay with you.

Customer loyalty is the step beyond customer satisfaction. With customer satisfaction, you have sold something to somebody and they are happy. In customer loyalty, they are not only happy, but they often make recommendations to others. It's very much like the old saw about if somebody goes to a restaurant and has a good experience, they might tell 10 people. If they go to a restaurant and have a bad experience, they might tell 110 people. So, customer loyalty goes beyond a satisfied customer toward a customer who is a champion, an advocate, a fanatic about what you're doing, and they're very likely to make unsolicited recommendations for you.

For example, I recently visited Yankee Stadium as a guest of NASDAQ. We were in their box along with quite a few other companies. Within my first five minutes in the box, several different people from different companies saw my nametag and affiliation, and told me how much they love Hyperion. Hearing "you've got great software!" made me feel good but it was also great for everybody else in the room to hear it, since there were probably some potential customers in the group. Another example is when I was in Pennsylvania recently to visit with a customer. The controller, a long time user of our software, said he would only allow Hyperion software to be replaced with another if it was pried from "his cold, dead hands." Fortunately losing the account was not at risk, but this is the kind of relationship that goes beyond satisfaction all the way to loyalty.

Approaching Risk in the Business

Risk - and managing risk - is very important in the software business. There are several things we do in approaching risk while dealing with the customer; such as the way we address quality assurance in product development. Ideally, you want to find any problems in the software while you're testing inside your shop, rather than finding the problems once the customer has installed it. Like many software companies, we restrict Alpha testing, or the very early, unfinished versions of software, to internal review. However we work with customers to test Beta versions, which are not quite ready for prime time but functional. By testing in the customer environment with customers who are willing to give feedback, we improve quality and manage some of the risk involved with introducing highly complex new products.

We also mitigate risk by using our own software - we call it drinking our own champagne. We have a much better sense of how the software works in the real world by virtue of our own experience with it.

Some of the work that we are doing to automate the interaction of customers also helps us manage risk. It's one thing to have a problem with the customer, but it is far worse if the solution to the problem doesn't work. That lesson was reinforced over and over during my career at Federal Express. We did not like being late or losing a package. But if we did, it could be far worse to mishandle the solution. The same thing applies to software companies. A customer calling with a problem is already upset. How that situation is handled is paramount - problems quickly resolved and with honest feedback and communication go a long way toward customer satisfaction and even loyalty. However, problems mismanaged or bungled can get very nasty. From a risk management standpoint, companies have to understand that they're going to have some problems. How those problems are resolved is the difference between world-class customer satisfaction and the also rans.

At Hyperion, the protocol for problem resolution comes through our support organization. Beyond normal call center activities, we work to contain and resolve a problem. But we also go back later and try to make sure that we've addressed the root cause rather than just the symptom.

A new change for us addresses the deployment environment. We have a deployment guide to help our people match our software to the environment and equipment being used at the customer site. In the past, we sometimes weren't aggressive enough in recommending a customer get more horsepower and a bigger machine if in fact the upgrades would have been helpful in supporting our software. But we know that customers would rather understand the requirements up front. And we know from experience in which environments our software performs best, so we should not be shy about communicating this information to customers up front. Logically, if the software works well in an environment, the chances are it will work well in a similar environment with a different customer. Communicating requirements early rather than waiting for problems to surface is a good path to customer satisfaction and part of a proactive approach to risk management.

Technology Now and in the Future

Great technology is scalable in two ways: one way is bigger, better, faster. Another dimension is in terms of making software that scales across a company and allows a great many people to use it and to collaborate with it. The Internet is a great enabler of scalable technology. For instance, our software enables thousands of users in a company to be collaborating and modeling as part of a dynamic planning process. It allows managers and knowledge workers across the company to interact with information. And it supports the notion that everybody is different, everybody has different performance indicators that they are working with. So processing speed and the ability to touch many users in a company and doing that in a way that provides data integrity and a single version of the truth are three important aspects of great technology.

We also think about today and tomorrow. A good solution meets a customer's requirements today. A great solution anticipates the future need. We talked earlier about listening to customers. There are three types of customers that you should listen to very closely. The first ones are those with the squeaky wheel. They have a problem right now; you need to listen to them, contain the problem, and go back and fix the root cause. The second type of customer is one that is interested in a very broad solution. For those, you want to go listen to them to see if you can solve their problem and close the sale. The third type is what I call the design type of customer. Design customers are really thinking beyond how today's features and functions will help them to do today's job. They can help build a vision of where your product should be in the future, which helps us decide what should be happening in our R&D labs and what should come out of the labs in three or five years.

The technology in our business is really at a magical moment. The Internet allows technology to be deployed much more widely and much more effectively, tailored to each user. The Web has simply transformed our business. You'll see companies using Web-based software to support thousands of people -all collaborating on planning, doing real-time reporting off of a single version of the truth for better financial integrity.

The Web has also enabled much broader usage of our software. For instance, for many years our software was chiefly used by finance organizations - the CFO and the controller were our best customers. With the newer Web-based technologies, we have implementations that can span the enterprise. Touching a quarter to a half of all the knowledge workers in a company with our products is a realistic goal.

Technology is a key differentiator too. We're always working for bigger, better, faster, and easier enhancements. And while there is great progress, there is also room for improvement in that area of technology. We are setting new benchmarks every year. We're improving the response times for calculating large amounts of data. And we continually advance ease of use, making the software easier to use for more people. There is no end in sight and that's just on the software side - there are huge advancements on the hardware side of it as well.

It is also important to match the technology with the needs of the customer, with what you do vs. what they need. We offer a suite of products that work together from planning to reporting to goal setting to supporting and monitoring all of these processes that we talk about, but offer customers the option of "starting anywhere." Meaning a customer doesn't have to buy the entire suite to see some immediate benefit. And this comes back to listening to your customers, having a good open dialog with them. We talk about the entire management process and some of them buy solutions to address the entire cycle. Some "get" the big picture but only want to solve an immediate pain. Still others look to enter the suite at one point, to solve an immediate and pressing need, but want to work with us to develop a roadmap to get to the bigger idea. We're ok working with our customers on each of these levels, because ultimately they have to see value and reap a benefit if the relationship is going to succeed over the long haul. Too many companies sell so hard that customers end up with more than they need…which leads to unsatisfied customers. This isn't a long-term strategy but rather a recipe for a bad reputation in the industry. If customers need everything, we're more than happy to sell it and more often than not, our customers want to take it. But one success at a time is also a good selling philosophy.

Customer Relationships in a Nutshell

In a nutshell there are five really key ideas we keep foremost in mind around profitable customer relationships.

First, perception is reality. If the customer thinks there is a problem, there is a problem. Passing the buck, as in, "it's not our problem, it is their problem or another vendor's problem," is not a successful strategy. Rather, the best companies acknowledge problems and work hard to resolve them.

The second idea is based on the reality that companies are going to have problems. Nobody's perfect. Rather, what separates the great companies is how they react and respond to problems. The great companies try to get it right as fast as they can. Then they keep at it until they've determined the root cause. They don't settle for patching over the symptoms but drive to achieve customer satisfaction.

The third idea is organized around people, processes, and systems, which are absolutely integral to customer service. It's about building a culture where those are priorities. It is also about building management systems that are built around commitment and unleashing the discretionary effort of every employee in the interest of both customer satisfaction and also profits. I think that there are things that you tell people, that you try to drill into their heads, but there are also systematic changes to make in the company. It's imperative that we instill a culture of customer service, but we also need to enable people to support that ideal. All of those things have to come together and that's been a constant mantra here.

Fourthly, companies must constantly raise the bar on themselves. The great companies are ahead of customers and ahead of competitors because they never settle, they never rest. They set very high standards and increase those standards every year.

And lastly, you can't manage what you can't measure. Customer satisfaction has to be more than just campaign slogans. It has to be just like profitability or employee satisfaction; you have to find a way to measure it. You have to go back and impact the reward system or it will probably just pay lip service to you. Everything else you need to know flows from these rules.