From software startup to global player: how customer value shapes your organization
Building a value-driven organization sounds easy but is counter-intuitive at times. Read on for my lessons learned from 15-years at Dynatrace.
Over the last 15 years, Dynatrace has evolved from a small software startup to a multi-billion-dollar cloud business with 3,000 employees worldwide listed on the NYSE (ticker DT).
I was part of the journey, and I still am.
Why did we make it while other’s didn’t?, I thought to myself as we rang the NYSE bell.
Was a ton of luck involved? Of course. Did we put our heart and soul in it? Absolutely. Has our market been growing? Yeah.
So I went back to work.
But a couple of days later it struck me — our relentless focus on value creation is the no1 reason for our success. I forgot about it because I’m so used to it.
Wait, what? Let me explain.
Three types of org structures
In his book Organize for Complexity, Niels Pflaeging lays out the three fundamental structures of every organization: a formal one, an informal one, and one that creates customer value — products, services, goods.
1. Formal structure
I bet your first thought is hierarchy in form of an org chart — and that’s exactly what this is. Like most companies, Dynatrace also has a formal structure where our CEO and his executive team stand on top of everyone. Employees know who they report to and managers know who is in their team.
2. Informal structure
This is the invisible network built upon personal connections and sympathy, and powered by influence. You are connected to former team mates, co-workers with similar hobbies who became friends, coffee buddies, etc., through an informal structure, and these stay intact even after switching companies.
3. Value creation structure
This structure starts with the company-wide conviction that every employee has talents above and beyond what their job title, business unit, hierarchy or role imply — everyone creates value.
But how do you define value?
Value is not only created by delivering products, services or goods. Value is created by running a marketing campaign that boosts the company brand, by improving employee happiness to retain talent, by sharing context before a workshop to save time, by preventing a wrong bill being sent or by introducing analytics to unite customer-facing teams to leapfrog competition.
Think about it for a minute. You’ll quickly come up with examples based on your type of organization, domain, market and industry.
The value creation structure exists implicitly. However, successful organizations manage it explicitly by promoting employees, rewarding change and embedding it into the work environment.
Value creation in practice
Imagine you are working at a software intelligence company like Dynatrace. You are talking to customers daily and you have identified a business opportunity that 8 out of 10 customer would pay for. Even better, it’s a missing product feature that will take market share from your competitors.
You decide to go for it.
Since there is a well-established value creation structure, you can sit down and work on a pitch with focus on why, intent and 6-month goals. You run it by your informal network. You start small i.e. with 3 co-workers, and your pitch gets better. You run it by your formal network and you know which talent is required to create customer value.
You do not limit yourself by the formal structure — who would be part of your dream team? You chat with a sales rep you bump into. You ask a product designer you admire. You sip a coffee with two software developers you have worked with before. You browse the company blog and pick the author that you like best.
Your pitch is getting better and co-workers are eager to join and work with you on this feature for 6 months, being aware of which talents need to be filled now and later.
But Florian, that’s impossible!
You’re taking co-workers out of their formal structure and off tasks, even out of value creation initiatives!
But if it’s important, there is no way around it! That’s why the company-wide and explicit value creation structure is crucial.
Nobody sits around being idle. If you are not getting the right talent into the value creation initiative, it’s a good indicator that other things are more important. Or, it’s better kicked off in two quarters.
If you stick to a formal structure, where team membership is static, it’s close to impossible to re-focus based on talent to compete and win market share. Just imagine trying to take away senior developers from a team while everything seems to depend on their knowledge.
At Dynatrace, we aim to have 80% of our employees spend 80% of their time on value creation initiatives. We also mandate to focus on one at a time. Less is more.
Lessons learned at Dynatrace
I’ve learned many lessons along the way — my personal top 3 below.
#1 Finding purpose is a creative process
In a startup, you work with a relatively small team, and everybody understands their purpose, intent, and goals — even without saying it out loud. Once the company grows, this becomes less clear. It gets more complex because there is no one-size-fits-all explainer, and team motivation deteriorates because direct impact to customer value isn’t obvious anymore.
At Dynatrace, we don’t tell teams what to do. Instead, the purpose and intent are communicated top-down — typically after an intense consultation — empowering teams to develop their set of goals and define their purpose. We learned that this is a creative process that requires time and needs to be done across formal structures and roles.
#2 Diversifying your team is harder than it seems
At Dynatrace, our first product was built for seasoned software engineers, so 90% of hires had a software engineering background. While this led to exceptional tech talent, we had to learn how to embed people without software know-how, with skills from other industries and varying experiences.
We learned that diversification needs to be formally integrated into hiring and onboarding processes. Job and role rotations can create excellent results when combined with value creation structures because empathy is built for other roles, talents, and seniority.
#3 Defining goals is like a muscle you train
When we created our first value creation structures, we thought it was easy to define a purpose, intent, and 6-months goals. No problem, right?
But by writing these down, we realized how much was lost in translation and how little we knew about how to deliver value to customers.
For example, it’s not required to know all aspects of our licensing model. However, a basic understanding is required to define goals properly. What about the trial process? How does the sales cycle work? What steps are needed to up- or cross sell? Which customer segment to start with? And so on.
Suddenly, defining goals felt like art. But it’s a muscle you can train; it’s a high-value skill to needs to be developed. Scope reduction, asking five times why, let others do your pitch — I have tons of lessons learned. That’s for another article.
Wrapping it up
It’s interesting that I took value creation for granted, and almost forgot about it. Yet, it made us succeed and become a global player in our industry.
Since there is no one size fits all, you might consider other approaches like the Flow Framework (check out the explainer by Dr. Mik Kersten).
I feel we have unlocked 20% of the potential of value creation. After all, it’s about improving little by little and about enjoying the journey.
Thanks Giulia Di Pietro for your help with my first post on Medium!
From software startup to global player: how customer value shapes your organization was originally published in Dynatrace Engineering on Medium, where people are continuing the conversation by highlighting and responding to this story.