They say that necessity is the mother of invention. I believe that the aphorism has a business corollary: Disruption is the mother of transformation. I’ve seen it prove out over and over again throughout my career. In fact, I’d even go one step further to say that lack of disruption can actually stand in the way of successful change—and I have the scars to prove it.
Change is hard. As humans we have lots of tricks up our sleeve to fight against it. Even when we want to change—when we know we have to change because sticking with the status quo would have dire consequences—we consciously or subconsciously work hard to avoid it. And that’s why disruption, although painful, can be valuable. It takes away all those defense mechanisms we would otherwise employ.
The dangers of incrementalism
I’ve focused my career, for better or worse, on turnarounds. You’d think that when a business’ (or division’s, if we’re talking about a global conglomerate) very existence is at stake, it would be relatively easy to foster change. But too often, that change happens in the form of incrementalism. It’s seductive—it’s different enough to feel like you’re making a real shift, but you’re not so far outside of your comfort zone that you can’t see it from where you’re now sitting. But incrementalism in turnarounds almost always fails. The hard truth is that you simply cannot incrementally improve your way from crisis to profitability, let alone market leadership.
COVID-19 is a disruptor like no other
Right now, every organization on the planet is having to deal with COVID-19. But our company, Virtana, is in an interesting position in that we were already in the process of trying to transform the business when the pandemic hit. In December 2019, the company, which had been founded in 2008 as Virtual Instruments, closed out a successful year. But with organizations increasingly moving applications from on-premises data centers into the cloud, infrastructure monitoring and optimization requirements were shifting. That, combined with an unsustainable burn rate, meant the company had to adapt. We had already acquired a cloud optimization company and rebranded as Virtana, but there was much more that needed to be done.
Everyone—the management team, the board, and the employees—was working hard. We’d reduced opex by 10%. And to avoid any false moves, we were having many thoughtful and analytical discussions before making decisions. We were actually making great incremental process.
Then in March 2020, COVID-19 happened and everything changed. For Virtana, the shock factor of the pandemic was multi-dimensional. There was the immediate shift to universal work-from-home, which was a challenge nearly every business was facing. All that remote working had a profound impact on cloud computing—increasing reliance on cloud-based applications and accelerating cloud initiatives—which, given the nature of Virtana’s business, accelerated the company’s own need to shift its go-to-market approach and product roadmap. In short, the overnight shift to 100% remote working affected both our internal operations and our strategy. When I came on board as executive chairman and acting CEO just a few weeks later, COVID-19 had kicked away the crutch of incrementalism.
Meaningful transformation is in progress
All of a sudden, all that great work that had been done was no longer enough. The difference between pre-COVID and post-COVID transformation efforts was astounding. The disruption it instigated fueled real, substantive, urgent change across every corner of the company. That may sound dire, but while the pandemic-induced disruption was unquestionably grim, the impact it had on the company was actually positive.
One of the first things I did was to institute the Objectives and Key Results (OKR) framework. The management team coalesced around six objectives and the key results needed to achieve each of those goals. This provided the aggressive, disruptive goals and urgency to drive the work that needed to happen. And we got there fast. Forgoing the fancy PowerPoint presentations and endless debates in favor of transparency and real-time collaboration, we had the new plan in place in three weeks.
Our market had changed overnight. Companies were accelerating their move away from premise-based data centers and into the cloud. Furthermore, any budget allocated for legacy assets—including hardware and human capital costs—had evaporated. To stay relevant, we had to quickly pivot our go-to-market strategy.
Cost loomed again as a critical issue. We faced a stark choice between deep cuts and not surviving. Painful as it was, the company swiftly found ways to slash opex by 30% with more creative thinking. For example, the 2020 sales kickoff had been an expensive event, which is by no means unusual. At that point, getting everyone together meant physically flying them in from around the globe. Then, other activities would be added to take advantage of (justify?) the investment. In the pandemic, this approach simply wasn’t possible. But the team didn’t just virtualize the traditional SKO, which would have been the incremental way to handle it. They completely re-imagined the event. In the end, they spent just $5,000 and yielded far better results than in years past. So, we didn’t just change how much we spent, we fundamentally changed what we spent on. Disruptive change, not incremental change.
There were also big cultural changes, which are probably the hardest to make in an incremental fashion. Collaboration is essential, particularly now when decisions must be made quickly. But collaboration is much harder with everyone working from home. You quickly realize how valuable those ad hoc meetings are when you’re together in the office. And without daily, in-person interactions, employees quickly begin to feel isolated. We had to adapt culturally to keep everyone engaged. To keep communications flowing, we increased the frequency of town halls and implemented more informal coffee corners. And we launched programs, such as a virtual health competition and a giveback event through our corporate social responsibility program, to go beyond mere job support to help employees thrive in this new reality. And we documented much more to ensure that decisions and plans were well understood.
Another area we focused on, which is too often forgotten, is board engagement. It’s not just a company that has to transform; its board also has to transform and we’ve been able to do this at Virtana. They’ve been included every step of the way. A typical board cadence is to convene once a month with a formal board session once a quarter. I was meeting with them two to three times a week. The management team short-circuited all the traditional layers between the board and company to create full transparency. As an example, executives will usually spend hours carefully crafting slides for their board presentations. But our CMO, Scott Leatherman, eliminated that gate-keeping step. Since he was fully transparent about the OKRs and had reorganized his team accordingly, he simply provided the board access to their consolidated weekly report of activities and results. Many CMOs might balk at the idea of ceding control of the message in this way, but Scott didn’t want there to be any questions about the strategy or the execution. And the team knows that any board member could look at the report at any time, which helps them connect their day-to-day activities to the overall company strategy.
The green shoots of post-pandemic success
We still have a ton of work to do, but we’ve made tremendous progress over the course of just a few short months. With the transformational seeds planted, the Virtana “field” is starting to sprout meaningful results. Employees are engaged like never before, owning their part in and delivering on the company’s OKRs. And heightened marketing leads, a refined sales process, and increased analyst engagement are filling the pipeline and driving record growth in our hybrid cloud migration business.
People may be hardwired to abhor change, but it’s in the face of extreme circumstances when they truly shine. With an amazing team fostering change that’s truly transformational, I’m nothing but optimistic about the future of the company.
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Ron Sege is a Partner at Benhamou Global Ventures (BGV) and Chairman and Acting CEO, Virtana. Ron has more than 37 years of operating experience with disruptive offerings in the Enterprise IT market, in established public companies and venture-backed startups. Ron has extensive cross-border management experience, managing operations in China, UK, Continental Europe and Israel. Ron specializes in go-to-market strategy and tactics, having started his career in Field Operations at ROLM Corporation and 3Com.
Ron Sege
