What high-growth software companies do differently, with Kelly Waffle February 2, 2022 NEW EPISODE Kelly Waffle, Managing Director at the Hinge Research Institute, joins the show to share recent research on what high-growth software companies do differently than their slower-growing peers. In this episode we talk about: the 4 key advantages of high-growth companiesopportunities for digital transformationwhy software companies should invest in SEOand much more Please listen, subscribe, and leave a rating and review! Transcript John Tyreman: Hi Gang. Welcome to the Digital Marketing Troop, where we go in the trenches with marketing leaders and practitioners to help you learn more about digital marketing. And today we have a special guest on the Troop Podcast. We once co-hosted the Visible Expert Podcast together. Now he’s the managing director of the Hinge Research Institute, Mr. Kelly Waffle. Kelly, how are you doing today? Kelly Waffle: Hey, John. It’s great to be here. I love the idea of talking to you. John Tyreman: Yeah, I’m glad that we’re able to connect again. It was good to catch up here before we dived into this podcast. And we’re here today to talk about what high growth technology and software companies do differently. But first, before we dive into the meat of our conversation, I know that you’ve got a passion for woodworking and making handcrafted furniture. I’m curious, what’s the latest with Waffle Woodshop? Kelly Waffle: Still do a lot of live edge table tops – that’s my big seller. So my son and I do it together. We did a show right before the holidays in early December. And that went quite well. So beyond the tabletops that we do, which you know, the last couple I’ve done, I’ve done in walnut and I think I did one that was in oak and I think those are the main ones. We also do a bunch of other stuff. So we take on custom orders. People want decorations for their home, things like that. So you know we will make those for them. So yeah, we were surprised. That’s the first show that we went to in public and it went quite well. John Tyreman: That’s really cool. If folks wanted to check out some of the work you do or want to put in a custom order, where can they go? Kelly Waffle: www.wafflewoodshop.com John Tyreman: All right, there you go. Well if you want some custom handcrafted furniture, Mr. Kelly Waffle, go to wafflewoodshop.com. Kelly, let’s shift gears a little bit. So we’re here to talk about high growth technology and software companies and the Hinge Research Institute focuses on understanding what drives extraordinary growth in professional services. And each year you look at what the fastest growing companies do in a range of different industries. But for this episode, I’d like to focus on software and technology companies. What were some of the key takeaways from this year’s report in that industry? Kelly Waffle: There are a couple of them. So yeah, thanks, John. The high growth study that we do, we’ve been doing for the last seven years in a variety of key markets, including technology and software. And what we found this year was really, I’d say a new normal has been established. So if you look at last year’s study, the big challenges were around unpredictability in the marketplace. Things like that. So people were operating more from a position of fear or being blind and things like that. They didn’t know what was out there. This year, our research shows that people were a lot more confident, especially in the technology and software space. In fact, the technology and software industry category was actually, had the highest amount of growth of any of the six industry categories that we covered. So they’ve kind of cracked the code. So they’re moving on beyond unpredictability to more stability, and predictability and things like that. So they do a number of different things to get there. But it was really good to see that they’ve embraced that and figured out what to do. John Tyreman: On the surface level, that makes sense to me because you know, of everything that’s happened in the last couple of years: managing a remote workforce, companies who need to rely on software a little bit more for their business operations. Yeah, that was gonna be my next question is, what contributes to that growth? Kelly Waffle: We saw that there were four, I would call them key advantages, that the high growth firms had over the average growth or no growth firms. So those include the areas of talent, technology, strategy and marketing. So while a lot of the no growth firms and average growth firms may have done some of the same stuff that the high growth firms did, how they did it, at the high growth levels was a lot different. So an example of that is we were talking about technology and you’re absolutely right. So because of COVID more of the technology buyers relied on buying technology to help them get an advantage during the pandemic and working from home and things like that, but the technology and software sellers used more technology than the no growth firms. So our research showed that they used 22% more technology that no growth firms did. And not only did they use more technology, they used more of more technology. So they used to more frequently. They actually developed a higher level of maturity with it. And then like especially with technology, they were getting into areas such as reporting and analytics, so they were taking that next step. So they weren’t just going out and implementing the technology and running campaigns for the sake of running campaigns and generating leads. They were using the reporting and the analytics to actually make better decisions. So that comes from, you know, a higher level of maturity, a little bit more sophistication. But that’s a key differentiator there when you can take the analytics, adapt what you’re doing, and then move more towards optimizing your performance. That’s going to give you obviously more revenue, more profitability and allow your organization to run more efficiently. John Tyreman: Well, it sounds like these technology companies are taking their own medicine, right? They’re using more technology and using it in a strategic way. And it seems like that use of technology and the way that they’re setting up the analytics and reporting is really helping them make those decisions at the strategic level. So, you mentioned talent and strategy as two of the other ones. It seems like this technology can enable both of those and probably marketing as well. Can you talk a little bit about some of the marketing things that the software companies did that set them apart? Kelly Waffle: A key thing that we saw with the high growth firms is the way that they address talent during the you know, what we see out there right now, the trend that economists call the Great Resignation. You’ve got employees leaving everywhere, sometimes for no reason at all, sometimes with little notice at all, but it’s having a definite disruption across almost every company out there. But what the high growth firms do differently so that the disruption is minimized is they make sure that they’re still getting the highest skill levels that they can. And so the way that they do that is they don’t necessarily hire full time employees. They rely very heavily on using outside resources. And to me, you know, that’s, that’s pretty smart. So there are a number of different areas such as when they’re developing marketing materials, or you know, they want to improve their website or they need some graphic design done or they need to do video production, things like that, where you don’t necessarily need to have someone on staff full time to do that. And you can go to an outside partner. And by doing that, you’re probably going to get a higher level of expertise and a higher level of experience. But you’re still going to be able to get those projects done, which are also going to be able to help impact the type of growth that you get. So that’s kind of where these things start to tie together. But on the marketing front, the one real area that we saw noticeable growth and impact was around search engine optimization. So that’s, you know, now kind of going from a concept for a lot of these companies to something that’s tangible and meaningful. And I think there was an issue for a while with a lot of organizations because, as you know, John, with SEO, you don’t see the immediate impact, when you invest in SEO. There’s, depending on where you are with it, it takes a number of months to kind of prime the pump, get your content associated with certain keywords. You know, let those play out. You have to see how relevant your content is, make adjustments. But the exciting part is, is that you know, I’d say maybe over a six to nine month period, if you really put the effort into it, you will see your content rankings go up. So you may start out you know, as you know, 40th place around a certain keyword, but you know, as more people consume that content, and they digest it and they like it and they share it with others, you’re going to see suddenly you’re at 21st place and then you’re down to 11th place and before you know it and hopefully you know if everything works out well, you’ll be on the first page of Google and, you know, if you got your fingers crossed, you’re gonna end up with the one or number two slot around that keyword and that’s where the real payoff comes. John Tyreman: Well, there’s a couple things that I want to unpack. This is all really great insight, Kelly. You mentioned relying on outside resources for things like graphic design, improving your website video production. I’ve noticed a trend where there’s this tendency among marketing leaders to want to try to build an in-house team and that’s really like the old game of doing things right. And that’s just not scalable anymore if building an in-house team entirely within a software company. Instead, there’s this hybrid model where you really need to insource the key specializations that you need, you absolutely need to then outsource the rest. But that can be a bit tricky, right. So you’re working with multiple different resources, coordinating those resources, that can be a headache. What have you seen around that? I’m curious. Kelly Waffle: Yeah, well, you know, I’ve been around for a while. So I will say this kind of thing runs in cycles. So you know, I remember earlier in my consulting career, I worked for a Fortune… did work for a Fortune 50 company and helped them kind of map out a centralized marketing organization that would service all nine of their lines of business. So that was the thinking at that time. And, you know, I’ve also worked other times where if you’ve got a large business, each line of business has its own marketing department. So they’ve got their own graphic designers and things like that. But to your point earlier, you’re absolutely right. Now is a time when I think organizations, especially small to midsize organizations, need to be a little bit more agile. And the debate has always been around control. So if you have an in-house organization, you have a lot more control over them. Obviously, if you’re using a bunch of outside partners, you know, you could be using up to 10 or 15 different outside partners. That’s a lot of extra time and effort that you got to manage all of that stuff. So that’s kind of the trade off that’s happening there. But most organizations that I talk to now are kind of looking for this hybrid agile model where they’ve got like you say, the core disciplines are in house, and then things like video production that they’re not necessarily doing all year long, or they’re doing it on a project basis, they can go out to an organization that’s got a video studio and has the talent and the equipment and all that. So that’s how I see it operating right now. John Tyreman: That’s good insight that these things run in cycles. I can see how going down this path of managing this hybrid model can be a headache for some companies, and then you may see this trend swing back in the other direction of well, let’s just insource all of these key roles and invest more in marketing in that capacity. Well, we’ll see how it goes, right? Kelly Waffle: You know, if you look at the small to midsize organizations, a mistake that they make all the time is that they hire a person on board for a given skill set. And then as the company evolves, they dump more and more onto that person, but that’s not where their area of expertise is, or that’s not where they have those skills. But that’s how their mentality is. Oh, well, you know, this person who was our office manager is now our director of marketing, and so now I’m going to dump all this stuff on that person, but they may not have a background in SEO, they may not have a background in website development, things like that. So you’re actually hurting yourself by doing that, instead of saying, well, we need to have our website become a lot more of a high performance lead generation tool for us. Let’s go outside and invest the money into the expertise, you know, that’s out there that can help us get that done versus putting it on an internal resource. John Tyreman: Yeah, because that internal resource could learn it over time, but time is an investment, too. And especially in things like, in areas like SEO, where things are changing constantly. I think in the year 2020, Google updated its search algorithm like 4500 times. So if you think that one person can stay on top of all those, you’re in for a rough ride. But the SEO component of what high growth software firms do differently. This is a little intriguing to me, because it seems like at least in B2B SaaS, B2B software as a service, what I’ve noticed is that SEO is a great way to generate leads because of the long sales cycle, right? So there’s a lot of education that needs to happen within that sales cycle. And so you get users searching on Google for, with an informational intent, right? They’re going out there to learn something. They’re searching for keywords like how do I streamline my operations? Or how do I streamline hiring, for example. And then there’s software tools that can help with those kinds of things. So I’m curious, have you dug that deep into why SEO is successful for these software companies? Kelly Waffle: Yeah, I mean, I think it’s bubbled up to the top because of the pandemic. So as you touched on earlier, more and more people are working from home or working remotely, a lot more than they used to do. So. In the old days, when people wanted to be educated, they would go to trade shows or conferences or different events, networking events, they’d hear people speak, they talked to other people, they’d get a lot of referrals, things like that. And that’s how they would collect a lot of their data or intelligence. Now, most of these folks are working from home. So it’s much easier to go up on Google and like you say, you know, type in some keyword phrase and see what pops up. And that’s where the power of SEO really lies, is that for a lot of people, SEO is your first step into branding and differentiation. So people think of your company differently. If you are the first, second or third listing around that keyword, rather than if you’re on page two and you’re the 12th listing. So, you know, making that investment into SEO does pay off on a number of different levels. John Tyreman: Yeah, this is really great stuff Kelly. Just to kind of summarize this key point before we move on, so in the software space and in the technology space, there’s really four key advantages that these high growth firms have over slower growing companies and it’s, they have a better approach to talent, technology, strategy, and marketing. I noticed that the Hinge Research Institute published a study about digital transformation and I’d like to kind of shift gears and talk about that a little bit. So through this research, you’ve found companies that invest in modern digital tools, platforms and processes are usually more efficient, grow faster and are more profitable. What are some of the strategies that drive successful digital transformation? Kelly Waffle: I’ve seen it a lot in marketing automation or anytime you’re implementing any significant technology, is most people don’t really take the time to count the cost. So I would say most people that I talked to get obsessed with the shiny object, the shiny object syndrome. So you hear that, you know, a marketing automation platform can generate all these leads for you. And then that’s all your focus is on so you, you know, you go around and you talk to your management you get to the point where it’s like, okay, we’re going to go out and buy this marketing automation platform. Well, what you haven’t done is you haven’t looked at all the processes that are involved in that, all the skill levels that are involved in that, all the additional costs that are involved in that. So, you know, that’s the main issue with a successful digital transformation implementation is a lot of people – it’s like what we were talking about earlier – a lot of people say, “Hey, we’ve got a lot of smart people that work for our company. We can just do this in house”. Well, I would liken that to, if you, John Tyreman, decided you wanted to climb up to the top of Mount Everest. Alright? So you can either take some of your buddies and stuff and you know, pack a lot of equipment and start climbing up Mount Everest, or you can go out and hire a Sherpa or some other people that have done it before who can show you you know, stay away from this, be careful this pitfall, don’t do this, you know, blah, blah, blah. And that’s kind of what happens with digital transformation. Too many people try to do it in house on their own without the right skill sets with the right preparation. And they’re lucky to make it to the base of the mountain, let alone to the top of the mountain. And we have found through that research, that those people that actually used a Sherpa or an outside partner got much further up the mountain top. John Tyreman: I’ve been in those shoes and I have scars to prove it. I’ve spent more time than I care to admit in the back end of Salesforce trying to configure things. So I get and I’ve but I’ve I’ve also worked with Sherpas, as you say, who do a great job. I’ve also worked with some folks that don’t do a great job so you really kind of have to watch out and vet your vendors, too. So I’m curious, it seems like through this digital transformation that’s happening, through your research, it looked like there were a number of companies who realized that this is a key path to growth that they need to invest in. What kind of opportunities are there for software companies to capitalize on this demand? Kelly Waffle: Well, again, digital transformation is a broad term. So you know, if you look at it, there are a number of ways to kind of gauge success with an organization. So one way is around effectiveness and efficiency. So, can you take a bunch of things that you’re doing today and automate those processes and streamline them and pick up a lot of extra time that you can use elsewhere to help the company grow? So you know, that’s one way. Another way that people do it, as they come up with ideas for applications that they want to use: new products or new services for their organization, but they just don’t necessarily have the know-how to effectively and efficiently put those together. So like you say, if you invest the time, you may be able to get there at some point but you know, how much is that time costing you, where if you went outside and used the right expertise, and somebody that’s done it, you know, day in and day out, you’re going to see results much faster from the development of that application. John Tyreman: We talked about marketing technology, and I think listeners to this podcast will really kind of understand that but what are some other areas of the business that may be ripe for digital transformation? Kelly Waffle: Well, a lot of them again, it depends on the size of the organization and things like that. But there’s a lot of areas for improvement around the operations and so you know, your back end, your accounting, your financial stuff, is a big area. Business Development is another big area. The beauty of digital transformation now is that you know, I’ve been in the software space for a long time and artificial intelligence is really coming into its own now. So in the old days, it was more of a concept but now almost every innovative platform that I look at now has some area of artificial intelligence that is either helping you make better decisions or it’s taking the data that’s being collected and it’s helping to enhance what you’re doing. And that’s the real game changer is leveraging that artificial intelligence. John Tyreman: Well, Kelly, we talked about some of the things that these high growth software companies do differently that make them successful. We talked about digital transformation and why that’s so important to businesses. I’d like to talk a little bit about, kind of flip the coin a little bit and talk about the buyer side of the equation. So the Hinge Research Institute recently published an update to your Inside the Buyer’s Brain study which looks at buyers of professional services, and in this case, software services. How has buyer behavior changed if at all over the last few years? Kelly Waffle: It’s changed significantly. So it depends on the industry, but again, a lot changed when COVID came to town. So with that, organizations that again, we’re considering doing some sort of digital transformation or leveraging technology more in the past may have not gone through the whole process. It was on their wish list to do but it kept getting put on the back burner. Now more and more organizations are like okay, we need to do this. We’re behind everybody else because like we talked about earlier, buyers have changed the way that they go out and research organizations. There’s so much online research that occurs before a buyer even raises their hand and reaches out to a vendor nowadays. So you could be 70% of the way down the buying path before that buyer reaches out to you. They’ve gone out, they’ve looked at your website, they’ve looked at your competitors, they see what products you have, they may have done some research on pricing. There are a number of platforms out there now that you can go out to and get, you know, evaluations on different products from your peers and things like that. So there’s so much that people can do if they want to do the due diligence before they even, you know, send you an email or pick up the phone to call you to say that they have an interest in your product. John Tyreman: That’s one thing that I picked up on is just how word of mouth has evolved over the last couple of years. And you mentioned like going to trade shows or like conferences and networking with your peers, that those, you know, that was… you could do that before Coronavirus. Now it’s a little bit harder to do and you can’t really network in the same way when you’re on a webinar. But now what I’ve seen is like you go to these like niche slack communities like pavilion for example. And you can ask a peer group for recommendation and then you go and do a little bit of research on them. Like you mentioned, you could be nearly to the point of where you’re ready to make a decision before you even reach out to sales. So yeah, that whole buyer journey, that evolution of that is looking really, really interesting these days. And I guess it kind of speaks to the importance of like G2 reviews and TrustRadius reviews and things like that. Kelly Waffle: Yeah, so I mean it’s like, you know, the buyer is in a position to be more educated than they used to be. So yeah, that’s to me, like where a lot of vendors have to kind of step up their game around integrity and trust and things like that. They’ve got to be adding more value to the conversation earlier on and take on kind of more of a trusted advisor role if they really want to get to business because, you know, I can tell you the same thing happens with me. I do a lot of research online before I reach out to a vendor. And I’ve already got my shortlist picked, you know, before I’m reaching out. So that’s a big change that we’ve seen over the last couple years. It’s become definitely much more of a digital journey than it used to be. John Tyreman: I guess that makes sense as to why those high growth software companies are finding success through SEO. Again, I mean, with this, you mentioned buyers are in a position to be more educated. A lot of that has to do with being able to find the right content in the search results in the first place. Bringing it all full circle. Well, Kelly, this has been really great. Thank you so much for taking the time to walk through some of the research findings from the Hinge Research Institute. If folks want to connect with you and learn more, where can they find you? Kelly Waffle: KWaffle@hingemarketing.com. I’m also very active on Twitter, so they can follow me there, or LinkedIn. So I try to post a lot of thought leadership content there that they can use. And like you said, our new high growth study, John, is just rolling out now. So we’ve got six different flavors of that for different industries. But people, over the next week or two we’ll be rolling out six different blogs that are kind of like executive summaries for each of those studies. So you know, before people want to buy the study, they can read this executive summary, get a better sense of the value that it would have to them, and then go ahead and make that purchase if they’d like. John Tyreman: Well for listeners, I highly recommend going and at least reading those executive summaries. They’re always insightful and I know Hinge does a really great job at investing the resources to make sure that that information is shared with the community. So I highly recommend doing that. Connect with Kelly on LinkedIn and Twitter and shoot him an email and tell him Hi. Kelly Waffle: Tell him John sent you. John Tyreman: Tell him I sent you, exactly. Well, Kelly, thank you so much for coming on our podcast. This has been great to catch up. Kelly Waffle: John, it’s been my pleasure.