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Technology has played a huge role in the cultural, political, social, and economic ways that we experience the world, and it’s no wonder that with the developments of tech, the aptly-named “Age of Disruption” has been ushered in. In more recent years, the Age of Disruption has challenged the way we work, and it has brought forth a wealth of developments in terms of automation and digital transformation. Companies have had to either adapt or optimize to stay competitive, and according to Joe Hyrkin, CEO of digital publishing platform Issuu, this is half of the reason why SaaS has grown so dramatically.
Hyrkin is no stranger to radical, digital transformation. Working in early-phase content platforms and Silicon Valley startups since the 90s, he’s seen numerous iterations of companies adapting–and unfortunately, some failing to adapt–and optimizing the opportunities brought forth by digital transformation. As aforementioned, some faltered and some prospered, but the one thing that these successful companies had in common was profitability.
I had a conversation with Hyrkin surrounding profitability and how fledgling SaaS companies need to have a concerned focus on optimization and profitable growth to remain both successful and competitive. Here’s what he had to say:
Can you tell me about your experience in SaaS? How did you get to your current position as CEO of Issuu?
In college, I studied Chinese and Political Science, and I spent my junior year living in Beijing, China. Shortly after graduation, I moved to Hong Kong where I worked for the Economist Group. I spent most of the early 90s there, but I ended up moving to Silicon Valley because I wanted to get involved with tech. I started off working with Sina Corp, who owns the Chinese equivalent of Twitter, and that’s where my journey in tech really took off.
I was always interested and involved in the intersection of content and technology–I personally appreciated the challenge of finding solutions to enable creators to get their content in front of an audience. After Sina, I moved to a company called Virage, who created a software for publishing early video content. Virage was an interesting journey because when I joined, it was primarily a traditional software company, and before the SaaS acronym was even popularized, we started selling our software as a service to media companies. I was able to work with them through massive amounts of scaling and an IPO. I had an intimate role in growing the business, and that was extremely exciting to me. I took on a few more roles, but over the last ten years, I have been involved in running and scaling Silicon Valley startups.
About eight years ago, I was approached to run Issuu, which has been another interesting journey. Issuu started off as a business to radically transform the world of content. Instead of being dominated by traditional print or publishing mechanisms, the idea of Issuu was to turn the entire industry into a digital experience–from creation to transformation and distribution to consumption. As a business, we provide the tools and services for businesses and marketers to make all of their materials digitally available in a wide range of formats available across multiple channels. Issuu pioneered the Issuu Story Cloud, which sits at the intersection of creativity cloud products like Adobe and Canva, storage cloud products like DropBox and Google Drive, and marketing cloud and communication products like HubSpot, MailChimp and Salesforce. Together these services enable companies to create and share their stories. It’s been a great ride. We have been growing since I joined, but we have seen even more expansion in the past two to three years with the growing focus on the digital transformation of content.
Let’s talk a bit more about the importance of optimization. What does it look like and how does it contribute to profitability or profitable growth?
Digital used to just be websites, then it became social platforms, but with this great shift that has happened over the past few years, the web is just one of the many channels that companies need to distribute their content. The problem with this, though, is that it creates more chaos. What I mean is that companies need to create unique, native content across each platform. We not only enable the user to create content, we save them an enormous amount of time previously spent optimizing content for all of their marketing channels. On the whole, that is what we [Issuu] do; we help people adapt to changes and digital transformation.
But in relation to SaaS companies at large, these kinds of tools and services that help other companies adapt and optimize, they are increasingly becoming a part of how people complete their daily work. The more that people see the need for your tools, naturally, the more revenue you’re going to bring in. But profit and revenue are just proxies for the value that you are delivering to your customer. The goal isn’t profitability for the sake of profitability. The goal is to deliver a valuable product that people are willing to pay for and build their business around.
Companies that start with the foundation of ‘what we are trying to do, as a company, is to deliver products that are so compelling and so useful that they can be used by a massive audience who will build their businesses around what we offer,’ those are the successful companies. If you can’t do that, then you probably shouldn’t be in business. If you can, then you can grow it profitably because you have already demonstrated that people are willing to pay for your product.
I look at the notion of profitability in that context as a barometer for the opportunity to grow and build a successful business. It should be a core criterion for all SaaS businesses to get their platform to profitability within a reasonable amount of time. If profitability is not one of the core principles of operation, then SaaS businesses are missing the whole foundation of delivering sustainable value to their customers.
But growth at any level is good, right?
Well, it’s not profitability at all costs or growth at all costs–there has to be a balance. The two have to work in tandem. Prior to this year, there was this huge over-emphasis on growth, growth, growth, but the companies who have just focused on growth at all costs have spent most of their time on fundraising or spending massive amounts of money to get to market. They often end up getting false positives.
Just because you are spending massive amounts of money from a marketing perspective and you’re growing, it doesn’t actually demonstrate that you are delivering value. It demonstrates that you know how to leverage marketing channels. Just because you are raising millions of dollars and raising your valuation, it doesn’t mean that you are delivering value. It means you are just really good at fundraising.
In the SaaS world, we have spent way too much time over-emphasizing growth at all costs. And I believe that part of the reason that there was so much chaos in the first six months of this year, and why we’ll probably see more fallout in the coming months, is that companies had to scramble to become profitable. With all of the businesses that had massive marketing and sales expenses, of course, they were growing, but all of a sudden when sales slowed, there’s this realization that there hasn’t been enough of a focus on optimizing the product, selling efficiently, or optimizing the ability to deliver value to customers.
What else feeds into profitable growth?
Well, there are a couple of other pieces that matter a lot. It’s the responsibility of businesses to be profitable. In being profitable, you are also being responsible to your customers. If you are profitable, customers can rely on your for that product for…ever really! They don’t have to waste time finding another solution. This is an auxiliary benefit, but you can alleviate customer stress by being profitable.
But back to responsibility. Profitability is also an aspect of responsibility to your shareholders, employees, and your team. If you look at the chaos created by not being profitable–layoffs, trimming teams, cutting budgets–none of that looks like growth or efficiency.
Let’s take Issuu for example. In 2020, we have been able to add to our team rather than trim it because we have had a legacy of profitability. We also looked at the areas that cost us a lot of money and worked out how we could budget efficiently with profitable growth in mind. For example, we don’t have a huge sales organization–all of our sales come through limited digital marketing spend. And that’s what works for us! Companies need to discern where they can afford to be lean and how to optimize the tools and team they currently have.
Another piece of profitable growth is that one of the most important functions of a CEO is to remove as much distraction from delivering value as possible. If you’re spending all of your time focusing on raising money or navigating the chaos of a lack of profitability, there is a natural distraction that exists within the organization. When you remove that distraction, efficiency increases. And you will have a workforce that trusts you.
In addition to that, if you look at the companies that are thriving right now–think MailChimp or Atlassian–they are growing and acquiring customers and other companies. They are constantly building out new features and functions that are valuable to their customer bases. They are continuing to expand their toolsets and remain sustainable all because they have been able to nail the tandem movement of profitable growth.
Beyond the obvious benefits, what can companies gain from striving to be pro-gro?
Security and comfort. You don’t have to live in a place where you’re concerned that you will lose customers or your employees don’t have to be worried that they will lose their jobs. There’s multiple components to the ‘gro’ piece. How do we grow the business, how do we grow as human beings working for that business, how does management grow their employees. When you’re profitable you can actually think about these things. But overall, you can be secure in the fact that your business is moving onward and upward.
Let’s talk strategy or best practices. What can companies do to achieve profitable growth?
The first place to look is at your pricing. It’s important to align your pricing with the value you are delivering. I think a lot of SaaS companies under-charge on the value of their product, and if you start off under-charging, you are grooming customers to not be prepared to pay what you are actually worth. Of course, you don’t want to gouge anyone, but you want your pricing to be appropriate. What we did at Issuu, was researched where our customers were spending money and what they were willing to pay. It gave us a sense of where we could fit in and how we could justify our price to customers.
Another area to audit is your overall offering communication. A lot of companies offer tool suites with all of the bells and whistles, but customers really only use them for one specific tool. Part of getting profitable is communicating to your customers the value of your entire suite and why they should use the different pieces in your tool chest for them to be better.
This one is going to sound obvious, but look at your sales and marketing spend. There are many organizations that are built around structures that don’t actually serve the current environment. This doesn’t mean chop entire teams. Getting to profitability is not an exercise in cutting costs. It’s about making sure that your existing resources are being optimized.
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