From Operator to Advisor: Carlos Granda on Navigating Private Equity

you're listening to the Far Side with founders and Leaders Podcast the podcast that gives you a behind the scenes look of some of the world's most amazing founders and leaders looking at their journeys and how they got to where they are today hello everyone and welcome to the latest edition of the fireside with founders and leaders podcast today I am delighted to bring you the amazing Carlos Granda who is currently working as an operating advisor working as a mentor he's worked at companies like HG Capital Google Salesforce SAP um working as chief customer officer for a number of those organizations now he's moved from operator to advisor something that we talk about how he made that switch and also we delve deep into what it's really like to work for a PE organization so if you're someone who's thinking about getting into the world of PE trying to understand it a little bit more trying to really understand the nuance the difference we're gonna bust some myths today we're gonna help you get set to really position yourself and understand is this the right environment for you and if it is how you can try and get there so I know you're gonna love this one I'll leave you just to check it out hello Carlos welcome to the podcast hello Rupert good morning good afternoon to you good morning and good good morning to you and good afternoon to me cause you are uh coming all the way from from California right and I'm over here in the UK today so we don't have distance on our side but we're making things work and so far things are going pretty well with communication so it's not letting us down um we've got some really great topics to talk about today so I wanna get stuck into it cause there's some some what I think people will find very interesting things that we're we're going to talk about but I'm gonna ask you to set the scene in terms of your background and who you are because you've worked for some really interesting companies if anyone goes on your LinkedIn they'll see that you've worked for likes of SAP and Salesforce and Google um so some big names people will recognize but you've you've sort of moved into a slightly different position uh more recently so yeah I'll let you tell tell the story and talk about your journey from from where you started and and where you are now sounds great for first of all Rupert thank you so much for inviting me I'm excited to participate and share a little bit about my story I won't spend too much time on it cause we don't want your audience to fall asleep I did spend 30 years of my career in technology industries pretty much all focus on post sales functions um I started my career doing consulting work and then slowly moved into the software side of the world uh started as a developer kind of an individual sort of contributor to eventually leading practices and then pretty much over the course of my career I've been able to uh manage pretty much every component of the customer journey sort of post sales once a Po comes in so my team always took over whether it was onboarding or implementation adoption usage and eventually customer support customer success it seems like the names and acronyms change seems like every year there's a new word a new buzzword so I've done it kind of done quite a bit so I did work for companies like SAP Salesforce Vmware Google Cloud uh the Google Cloud experience is probably one of the most fascinating ones cause we did start customer success from scratch and having to hire lots of very very smart people but have to do it uh right as the pandemic started so that that in itself can yeah can have its own its own show of how challenging it was but also uh rewarding I have to say that was probably one of the uh probably most rewarding things of my entire 30 years of having to build great culture and build a great team and great friendships but about two or three years ago I sort of decided that it was it was time to transition to a new phase in my life I'm not gonna call it retire cause uh people in my family will get very upset if I use that word yeah um but I really transitioned into sort of this new world of being an advisor uh instead of that shift from being an operator to an advisor it's uh it's not easy uh everybody thinks it's easy but it's not that easy uh and so hopefully today you know we'll be able to share some some thoughts best practices cause there really isn't a playbook out there for people who want to transition into this role so hopefully maybe some of the things that I went through that I can you know I'm happy to share with with your audience nice we can create the playbook uh and then let's do it this is it this is what it's for so so you moved from operator to operating advisor as you mentioned right so yup what was the thing that triggered the shift cause I'm interested interested was it like a pull or was it a push or what happened you know it's a great question I think you and I talked a little bit about it when we first sort of met and started having this conversation you know I I went a little deep you know uh I don't know if it was the post pandemic situation um I don't know if it was having my two sons and you know one of them graduating from college at some point and then the other one sort of starting college sort of being an empty nester as you you wanna call it uh we dealt with some health issues in my family as well so I don't know if all these things were sort of coming together uh but it came to to the point of me wanting to realize that I wanted to have a more purpose driven sort of second half of my life uh as you know I see you you Chelsea fan back there you know that I am a soccer or football fan so looking at sort of what happens in the second half what adjustments do you make at half time so you can come back and kind of enjoy the second half of the game the lead or maybe come back and win the game and so I wrote this thing called My 4 Pillars of purpose which was really kind of trying to find what was really important what was really meaningful to me um you know you get to a certain extent where you know some of the financial incentives that pull you in into working on a day to day job it gets to a point where like what's what's enough you know what's and you know I've always been a big believer that you know not just in leadership roles but just being a dad that the best thing to do is to model the behavior you want for your own sons and so at least for me you know I know you have a seven year old son so with that comes to like what you can't just tell them what to do you gotta show them what to do and so part of that is to ensure that you always have sort of some purpose in life and so I decided to write this four pillars of purpose cause I didn't have anything better to call it and I wrote because we have my family we have a soccer non profit a football non profit that we've been doing since 2,015 where we collect soccer gear for kids around the world who are less fortunate so that was sort of one of them um the second one is I've been doing a lot of mentoring so I do mentor through the Latino community through Alban or other programs where I mentor they pair us up sort of you know seasoned veterans with sort of young entrepreneurs who are getting started many many times focus on technology and obviously some you know this new word called AI or at least these new two letters called AI so they pair us up with that and then also investing in in other parts of the world I love to cook so I started you know investing in some you know uh food and restaurant things out there as well but I also felt that I was not that old or at least as people thought that is like you know you still have more to give and so part of that was to shifting into the fourth pillar which is really being an advisor being an operator and you know how do you actually help coach mentor companies advise companies and so I enter the PE world of understanding what the world is which is was uh very um unknown space for me I did not know what it meant I didn't know how many P firms existed if you and I were in Las Vegas and had to put some money on how to guess how many P firms exist in the world I probably wouldn't have guessed more than 50 I honestly had no idea that this whole new world existed and so um learning that was has been a great journey of learning and adjusting as well so that's that's really kind of the why I made this shift and I've been doing it for three years and I love it I love it I don't I'm not gonna say never but there's probably a very very slim chance I would ever go back and be a full time operator again it would have to be the right P firm the right seal the right circumstances so I'm not gonna say no never um but it would be a very rare opportunity and when you've been making this identity shift if we call it that right from um from operator to to where you are now like what surprised you about about yeah it's a good question um I think everybody gives you some level of advice so I think there's probably two things the first thing everybody said oh it's gonna be very different you know you're gonna move from being in the driver's seat to being in the back seat of a car yeah and even though people tell you you really don't appreciate it until you're actually in uh in in the middle of the battle um and it's very very true so I think in many cases uh depending on the P firm so I'll caveat in general a lot of our conversation today I'm gonna caveat by being very general because I don't wanna generalize and by the way it's not 50 PE firms there's over 5,000 PE firms in the world so I was nowhere close so you would have made a lot of money on me if we were in Vegas together um so I don't wanna generalize it but I think every P E firm is different whether you're majority stake minority stake as well as just your philosophy around how you treat your investments and so you can either be very hands on or completely away so there's that there's definitely a range of their style their philosophy and you know if you have complexity of a multiple P firms owning a company that in itself changes the dynamics of what you as an operator can help those comments yeah right so it's not just being in the in the back seat you may be in the you know if you're if you're using the train analogy you may be in the the last wagon yeah of the train so you're nowhere near so trying to influence change becomes very difficult so I would say that's number one um and I think the second one when it comes to sort of moving into this role is that there isn't a playbook there really isn't a playbook I talked to a few folks that I knew in the space and nobody really had this like do this do this do this do this um it was very very different and people didn't like to share their story they were very guarded as a sharing of like the journey that they went through themselves so which is very very interesting and I think it just comes down to the competitive nature of all these P E firms and they're all competing for investments and targets which is great but I think that translates into everybody else and so for me I'm like there's 5,000 P E firms in the world so if I if somebody asked me about what took me to get here I wanna share I don't know there's plenty there's like there's plenty work to do I'm like there's probably we probably need 10,000 Carloses out there to even you know hit 1% of what I think P farms really need yeah and so so for me that that was also very surprising that wasn't really a playbook yeah yes you can go into Claude or Gemini or open or chat GPT and type it in there but the three years ago when I first started it was really more kind of getting to know people networking and and trying really understand what's it gonna take to get here and that's probably still the best way to do it right is to go and speak to people try and network it it's um it's one of those those sort of places you so I call inner circle right you have to be on the inner circle build trust build relationships before people then start to let their guard down so imagine that it wasn't always the case that people people don't still tell you like things now you're in a position where people will talk to you and they'll tell you a bit more of what they're doing because you've built their trust and you're part of that sort of circle if you like yeah no it's a good point and I think another thing to think about is that the whole P world is a whole new different set of people that I never really interacted with for the last 30 years you know through my network I can probably get to pretty much anybody in a company whether CEO CFO CCO CTO CTO cause somehow someone is connected to somebody that I know but you go to the P world a lot of these very smart investors very smart partners that came from Wall Street I wasn't in that world and so to getting to know the truly power hitters and sort of the people that are the influencers for a better word in the P world are not people that I new and so it was it was really almost like starting from scratch of like building your network making the connection and and and getting them to understand like this is what I bring to the table yeah nice versus what they bring to the table so it's just very different super entertaining and uh very rewarding uh cause they're way smarter than I am when it comes to putting numbers and spreadsheets together than I ever thought of I was um but yeah it's it was just it's just a different network of people that uh now I'm finding myself that OK now I'm opening it up and now I can get to certain people that before I never had a chance or even they know that existed and and what parts of being an operator did you have to to ultimately let go of like um yeah so for me I'm a natural operator I'm just that's just what I do I uh even my family thinks I'm nuts when we plan a vacation it's like it's it's a project it's a program a project with milestones and implications and budgets and and so being in a role where you're an advisor you can't do that you can only show them and so building trust with the portfolio companies with the leadership team that I am not there to take your job I am not there to get rid of you and replace you I am there to help you and I think I would say that's probably where I have to use really use my skills of um getting them to trust me and understand that yes I bring this to the experience to the table but I am here to help you um I think that's sort of the the first thing is just really getting them to trust me um and I always uh coach this to my own team when we started a new company or we were in a new company and we always said look respect their journey cause they it took them they were successful before we got here so respect that yeah but they also hire you cause they need some help and so then bring your your so find a balance between respectful of where they were and that you don't have all the answers and hey things that worked at Google or SAP or Salesforce may not work here yeah so almost have to be very humble coming in but at the same time understanding and sharing your your your your experience and I think the trust kind of builds on its own over time yeah nice and and you said obviously we said a couple of times there's no playbook for this or there certainly wasn't any playbook other than now as you say you can go into one of the AI models and probably build a playbook whether that's right or wrong let someone else decide but like what do you think of the questions that someone should ask themselves before they consider making this move if they're someone who's you three or four years ago thinking OK I'm gonna make the next chapter yeah I think the the first thing is that it's not for everybody I I really think that um even if I had a playbook um every human has to assess it for themselves because there's financial constraints there's personal constraints there's uh you know family constraints there's um so everyone needs to kind of look at their own situation independently from my advice or any advice that comes from any of the uh AI models out there um so I think that's number one is you need to assess it in in kind of whether you are ready or not for the transition I think that's the most important thing and I think the second thing is that look there's there's over 5,000 p farms in the world and they're all are super successful in their own merit but at the same time they all have their own style their different almost like a personality of how they treat not just the targets of companies that they're trying to buy but also how they take care of them sort of post acquisition and so then you kind of have to match your style as an operator who wants to shift this to kind of work with those PE firms I work with some PE firms who completely leave me alone like literally they make an introduction to a portfolio company and I never hear from them again and suddenly I'm helping them I'm actually reaching out to the PE firm to see like let me share with you what we just did and they're like ah you're fine yeah so there's some are like that and there's others that are like no Carlos this is where you're going to breathe eat and go to the bathroom this is like literally what we're you're gonna do for each portfolio company so you have to adjust your style for some people one one extreme or the other extreme works better so you need to just adjust it so there isn't I guess that's maybe that's why uh there isn't really a playbook but at least there's a framework to kind of think about is that every P firm is different um you have to assess your own personal situation independence and understand that you're I think the third one is that I think you're not in the driver's seat anymore you're in the back seat and you have to be okay with that it took me time by the way it's there's times that I'm still wanna jump over the the the seat and take over take over the wheel um but learning that it's it's it's hard it's probably the hardest thing outside of the three did you feel you've you've now you've got control of that though in terms of where you are from where you've been you're not you're not sort of scratching to get over over the seat as you said a second ago as much yeah I think I've Learned the techniques and sort of the balance of working closely with a P firm closely with a portfolio company and I think I would say the the number one thing is just I think your experience helps you build trust and I think that's where you know AI can give you 60 70% to get there but you still need the 30% uh that you need the experience I was using this analogy with somebody and I said look you know I I was I was doing this event uh in the East Coast uh back late last year and I asked the audience and I said look AI is great but let me ask you guys a question and I said does anybody travel everybody raise their hand does anybody go on family vacations you just came back from South Africa right so everybody goes on family vacations great yes would you feel comfortable having the AI fly the plane by themselves with no pilot no pilot in the cockpit or no pilot anywhere as a passenger and everybody said no way yeah yeah yeah no freaking way yeah yeah so if you think about it that way right our AI models can get us to the 70% there of sometimes what the answer could be or should be but you still need 30% of old guys like me who can bring sort of that experience cause there's there's a pattern recognition that AI does not bring to the table not yet I gotta say someday they will but they're not there yet and I can give you plenty of examples where AI came up with an answer and once we dug in into the situation it was like no it was something different than what the actual answer from AI was and so just learning that is I think is in being humble about that that's I think that's where the P firms that get it truly are making meaningful impact and we've talked a bit about AI so I'm gonna gonna jump in in terms of some of the the AI related topic we can't not talk about AI these days it's everywhere um we talk about like AI creating value creation uh across the board with different organizations and making sure that there's like the pricing is correct and all all these sorts of things different different areas that AI can help but where do you think it helps in terms of creating value in terms of like MNA um for P firms cause they they have a playbook towards all of that stuff right you there might not be a playbook for doing what you've done but they've got a playbook that they normally work to so how's AI changing that part of the game yeah it's um I would say in the last even just in the last like probably 12 to 24 months uh maybe even less probably um I think AI has truly at least I believe so may not not all the PFS may agree with me but at least this is my own personal opinion so I'll carry on by that yeah um I do I do believe that AI has changed and will continue to change the traditional thesis that most P firms do evaluate or do due diligence when it comes to um buying companies uh because I think AI change that so traditionally um and again I'll caveat by like not all 5,000 do it this way may they may do it differently but at least in the software space at least some of the ones that I've interacted with is and this is no not a matter of national security this is pretty traditional but they all look at hey we're gonna do a bunch of MNA work right so we're gonna buy company a and we're gonna try to wrap it around BC DNA companies either through geography expansion or feature expansion or I'm gonna go take out a competitor or you know whatever it is it's good good strategy mmm hmm part 2 of that thesis is number one thing is that we let's we should look and evaluate price should we increase prices is there an opportunity for us to maybe we haven't been getting uh the money that in return maybe we haven't increased prices most customers and you're getting more value so we should increase prices and the third one is all about optimizing sales kind of growth right cause it's all about the value of these companies all about top line growth and things like that so I do think before I get to your AI answer or your AI question is it that typically will manifest itself into seeing churn in year 2 year 3 because a lot of those things you do are going to impact how um customers are viewing themselves right so if you're working with one company and then this company gets bought and suddenly they have tons of companies customers feel the pain they're the ones that actually feel the pain of that acquisition and what they're doing so I think that's one I think on the price increases if you increase price with any additional value customers are going to especially within the AI world it's much easier to go somewhere else than stay with what you have so that traditionally the the the challenge of traditional thesis is very different impact turn yeah so now I believe that I think when you're doing due diligence um the AI lens need to be kind of in the forefront yeah because you're not the thesis of like I'm gonna buy company a and buy B C d and E and F is well now you need to think about is like are there other AI companies who potentially if you're if you're the incumbent yeah are there other ones that are gonna disrupt you so your thesis of price increases more acquisitions sales optimization new logos top top line growth which then translates into valuations which translate into multiples which translates into enterprise value three and a/2 to 5 year x exit now you're you're dealing with seems like by the time you and I are done this conversation there's gonna be 10 new AI companies that were just born yeah and so now that has to be considered and looked at not just does my target have an AI functionality or an AI module is our thesis is not gonna have to be adjusted to are there other AI startups that can potentially disrupt this company yeah and so that's that's a different lens that maybe we haven't seen before that I think P firms will have to start looking at and then obviously in post sales you know AI is just just driving so much change whether is in go to market whether is in product engineering product development and then obviously in my space of customer experience gosh we see it everywhere whether it's customer support whether it's customer success whether it's onboarding whether it's implementation I mean it's just it's being disrupted yeah quite a bit and I think so not just due diligence but also the value creation piece of it begins to uh be need to be considered what AI will do for that and and so we've talked a bit about sort of where AI is and it's obviously it's like everywhere but so there are some firms and I I believe this myself this is my opinion that probably uh have an over reliance or an overestimation on the things that AI can do so from a PE perspective like what do you what do you see that they're doing um to overestimate like AI leverage yeah um it's hard to to give you a range cause a range can be very big especially depending on the size of companies right if you're a 50 million dollar AR or you're a 250 million dollar AR or you're a billion dollar AR AI will be uh sort of consumed slightly different um but I would say anything traditionally that when you think of AI you're like everybody's like we can save 30 40% of cost by reducing this cause we gotta get we can get rid of you know 34% of humans basically you know in our organization so the cost the impact is right away so to me I think that's an overestimation in my opinion cause I was thinking about this just a few days ago so I mean if you think about when the whole offshore model came out yeah where you said look we can send all of our development we can send all of our implementation our customer support to whether it was India Thailand the Philippines Argentina wherever it was right we all said we can reduce cost cause you know a a person here in California is gonna cost us this much a person in the Philippines or India or any other places will cost us literally you know 10 x less than what cost us here yeah and so on paper if you do a comparison 1:01 yes but when you come to the actual implementation of that is you still had a lead person in the Philippines or India you had a lead person here they did QA you have to do double QA cause some of the QA that was coming on board on the other side was not done properly and so it wasn't the 10 x savings it was maybe only 4 x savings and then the headaches of having to manage an offshore piece of it became much bigger the people will say do I really need that I'm not sure I need that yeah and so I feel like in some cases it's somewhat similar with AI where AI is making these very massive promises um I heard something today where 80% of case deflection be done by one of the AI tools out there right yeah wow like that just seems like super big but it's just yeah yeah so I make and so I think the the the problem is that in some cases people read that on a magazine or on a Super Bowl ad or you know wherever it is and suddenly they're like we should come and do that in our organization like tomorrow and like yeah it doesn't work that that the same way so I think I think organizational readiness is important I think organizational maturity is important I think understanding the overall ecosystem where AI can play I think it's important I think sprinkling a little bit of AI on on on your organization it's not the way to do it you gotta do a full transformation I think you definitely have to be ready but you also have to be honest with yourself about are you organizationally ready for that yeah yeah you know is your is your leadership team ready for that change and transformation cause we're talking about change and transformation that's not new most aren't ready that's the main thing right ultimately there's lots of companies that aren't ready and as you say the sprinkling and that's again why I see just generally take PE aside like most businesses are doing a sprinkling and then they're realising actually that doesn't work you just need to you need to take it down and almost build it up again yeah it's like you like you'll do that you're like yeah I'm gonna sprinkle some AI um I can get rid of these five people here but then guess what I have to hire five more people over here so not gonna support AI now yeah I'm like well what's the really cost benefit that you did and so I also I do think like when somebody says when I think of when I ask the question to whether there's a border the CEOs and I like what's the value of AI for you and their their answer to that question will tell me whether they're ready or not it's very simple the question is simple is what's AI gonna do for you and if they're thinking like oh this is gonna save me money this is gonna reduce you know the hit counts that I have in this particular department yeah you're not ready yeah the companies that say you know what this is gonna reduce 30% errors of how we're filing claims or you know for a insurance company or you're dealing with patients right this is gonna reduce and give us more time for our doctors to spend time with patients in front of them rather than having to deal with charts and doing all this and that that tells me OK you're ready you're ready thinking about change transformation and ultimately who runs the business your patients your customers that's who actually pays our bills not the AI and the headcount reduction that we have to do sometimes so I think that tells me quite a bit and and when we last caught up you you spoke about something that you framed as the G R R time bomb uh I thought that was a really interesting interesting interesting phrase but also when you talked about it and explained it it's it's quite fascinating but it all makes sense so can we talk a bit about it what is it and uh yeah let's get into that because that's really interesting yeah so let me first start by sort of so GRR is you know gross revenue retention it's really where customers turn that's it is a hidden metric that everybody looks at it right most P firms do a really nice job during due diligence as well as to monitor kind of as things go by but GRR to me is a lagging indicator right it tells you when your customers are going to leave you they they turn but you know or they left you not when they're going to but when they left yeah but to me those customers didn't leave you today they were leaving you six months ago mm hmm the signals were there that six months ago nine months ago 12 months ago the signals were already there yeah and so to me that is why I think sometimes GR I we we spent a lot of times I've spent a lot of times reviewing board decks I the the slides that get put together for the quarterly board deck that has to be put together whether it's a P firm or even if you're not owned by a P firm just in general and I find it ironic that 90% of those slides are focused on sales go to market pipeline conversion yield compliance uh retention of sales people retention of the pre sale all those things and then the other 50% of the 90% is focused on product product right now product this and that and about 10% is spent on actual customs yeah and a couple of those lies is GRR yeah or NRR or NPS or CSAT and so to me those are all metrics that are like lagging indicator metrics that is like so what you're telling me the cost you tell me Rupert left us well Rupert was unhappy a year ago six months ago nine months ago and so I think the GR time bomb is that in many cases the traditional thesis of lots of acquisitions price increase all these things are creating sort of the Year 3 GR drop is sometimes um some companies and executive teams don't see it happening cause when you do lots of acquisitions now you have potential product competition yeah you may have potentially this product and this product overlapping functionality and so now you're putting customers into a situation where like you just bought this other company they're not integrated which you always promised to integrate them they're not necessarily integrated what is that gonna do to me guess what I'm gonna go explore some new starter yeah cause I don't need the 30 bells and whistles I only need these two or three things to you do it really good this other company that's all they do that's one the second one's are price increases right especially if you're not releasing great functionality value added stuff and suddenly you increase 20% 30% of price just so you can get a bump on AR and that's your thesis goes forward that potentially could become a challenge customers take that opportunity than the next renewal cause if they're stuck for for on the next renewal they're gonna go bye bye yeah that's just what's that's what's gonna happen and I think the third thing that you know when I think of GR is you know we evaluate companies on growing but I always ask a question is like are you going through new logos or are you really gonna up selling cross sell that organization or you know from a product's perspective so have you done due diligence and post sales and typically most of the due diligence is all done on product and sales and go to market and channel and market share all the beautiful things that happen in the front end but typically the back end is what's actually driving that and that's where GR becomes sort of a big issue right so everybody says what's your GR somebody says somewhere in the 90s check everybody moves on yeah and then two years later when you have multiple account teams calling on the same customer with potentially competitor products within the same organization or you call me for renewals and they're like wait a second you just increased prices this is the third time you've increased prices on me in the last two years that's when something gr becomes an issue and next you know it's like let's call Carlos or someone like Carlos who can come in and help us and guide us through this and so that's why I call it the time bomb because it's not something that you look at but it's like this hidden issue that just by looking at some of the stuff that they're doing I can just already start seeing it that all this is gonna happen in six to nine months I think that's where AI is very powerful it can actually help you do some of that prediction some of those insights that you can truly leverage and is that what you do so if you go into a portfolio company with declining GRR would you would you start with that as your diagnostic starting point if you like by just looking lifting up the the hood and having a look at what's underneath maybe using AI to to give you a bit of a head start yeah so traditionally you would go look at a uh at a company and understand them and by the way the leadership teams you know especially when they're presenting to the board and they like gr drop by 2 percentage points they already have tactics they already know at least in their mind what it is what's not working and so it really depends right cause I I don't have the magic wand to just fix it in 6 months and in a year it just doesn't nobody does maybe others do I don't but I think it really depends on the reason of GR and the reason for the turn right if the turn is related to product or architecture of that product and how it integrates maybe to an ecosystem depending on what kind of product you have depending on what that is that may take longer it may take a year for that product and so then at that point then I sit with the team to say okay let's let's discuss features functionality road maps and fixing this hmm cause sometimes that's it's kind of not necessarily a top priority because guess what it's not maybe has not hit the the level of uh the the you know the house on fire yet and so maybe the engineering team has not done it so taking a look at that and kind of sitting down with the teams okay how do we help prioritize I I won't do it I can't do it but I can show it here's the 10 other features that we want nobody cares that you want a red button instead of a blue button guess what this particular functionality is gonna help reduce 3 percentage points of GR and by the way that continues to grow even further yeah so that's kind of one thing to look at is truly look at what the executive the leadership team whether it's the CEO or anybody in that organization has already put together cause I mean there's just valuable insights that they already have so that's I think the one thing but really understanding um the reasons for turn and say okay what's it gonna take for us to fix it some of the fixes can be long term it also depends on when you wanna fix Jr yeah some companies they goes like we need to fix this by the end of this year cause we gotta get rid of the company or we're trying to sell it or whatever the reason is need to fix it by the end of this year there's bonuses attached to it whatever it is well when you put tactics together you gotta define short term and long term tactics yeah sometimes it requires hand to hand combat which means like we have you know 300 renewals coming up this quarter we have 100 that we don't feel like it's gonna happen well guess what there's no strategy that I can put in place to fix that this requires let's take those 100 sort them by value we map them up with a leadership team and each one of them is gonna call one by one to ensure that we don't lose those customers like that's so in some cases is that versus in other cases is like well guess what it's not price increases is actually your on boarding was not done correctly you haven't onboarded this customer so let's look at on boarding so it really depends so assessing their customers where is um the turn happening by segment sometimes GR needs to be looked at it by product or be looked at it by geography maybe it's happening more in North America than it is in Europe yeah or in some cases you're selling it through a channel you're selling it through a partner versus selling it with your own sales team well guess what you have less visibility when you sell it through a channel they don't tell you everything so is your GR much higher in the channel than it is in direct so like getting deep into like really understanding the root cause of it then we can put together a plan um AI has definitely helped us accelerate the initial diagnostic but there is no way and I'm willing to say there is no way that no AI tool today can go to run an AI model and in 30 minutes give you the answers to all your gr problems that's just not there yet maybe someday but I just haven't seen it yeah I think I agree with you I think that that goes for for most things though right it's um you just need there's still work that needs to go go into it and as you say at the at the early part of this conversation AI is great for for doing lots of bits of heavy lifting but you still need the people involved in it to to use their experience to ask the right questions to dig a little bit deeper to really understand like what's going on because there are different potential outcomes that can can happen depending on the setup of the firm and all sorts of other things yeah there's lots of things that that that happen and and some of it is very silly I'll give you one one example it's just super silly but I went into a company and I was helping around G R R and their number one thing was the number one reason was price mm hmm that's the number one reason that the their customers were turning and I'm like wow I'm like that's so walk me through your prices and all we went through all that data the board deck that's all it had all these tactics around how to do better negotiations better pricing maybe concessions anything they were trying to do like just figure out a way how not to lose more customers over price and as I started digging into it I realized that when customers were turning the No.

1 item on the dropdown menu of turn reasons that the CSMS or the renewals team or whoever was handling the support or the the turn exit the No. 1 thing on the dropdown menu was price so to get rid of like quickly to move on right you just place pricing one to the next time they're like alright so I'm like okay let me find so it's like 70% of the customers Cherry was priced I'm like what are you guys doing like why are you guys increasing price so like and then we started digging into it and what we realized because I mean you and I know right we never we never leave because of price we leave because there's no value yeah and so when we start digging into we realize it had nothing to do with prices but that's what the AI model initially had told them because they pull all the data and guess what every customer data said and even in the even in the conversation through um you know the the transcripts of these sort of meetings customer mention price like 10 times but when you start digging into it you realize that actually the issue was on boarding yeah custom were sold and literally three four five months later hadn't even installed the product hadn't been configured yeah hadn't been set up users hadn't been set up like just this is like the dumbest smallest thing you can possibly think of and so it had nothing to do with prices yeah I'm sure some were I'm not gonna say never but but it wasn't the crux of the the problem right no the issue was on boarding and so leveraging good technology products out there there's tons of them out there that exist or even just working with engineering like what can we do and actually the issue was the handoff you know sales kind of finished it collected their P O moved on they're partying in Vegas or Hawaii wherever they're celebrating my big win and customers like no one's calling me back what do I do now yeah yeah and it's so it's as simple as onboarding yeah and so suddenly we paid that quite a bit and started working on onboarding and installing we were able to see reduction kind of in the first six months like quickly cause communication went out we put a plan in place we communicate with the customers we got involved we start looking at these customers and it like cause there were if you don't get customers to get value in the first 90 days six months yeah it probably the the the chance of them leaving you is probably in the 50% like in the first you know if you don't do that in the first three to six months they're gone yep cause they never get on board with it they never keep they they don't build the habit of using the product cause they go I'm frustrated it's been 90 days you know what I'm just moving on I'm going then it comes to renewals and you go are you gonna renew they go nope nope and they probably put I'm like why first thing on the the category and then you get into this circle I was just like that is like that was the most amazing thing I've ever seen I was just like wow and and so moving on from um as of where where we've been talking about now so in terms of like losing customers to that strategy of like go to market and investing in your go to market strategies right when you're taking a new product or new features out to market um sometimes well companies don't get it right all the time uh and they misallocate their investment so what have you what have you seen where companies have misallocated like go to market investment uh on products they've been been trying to sell it's probably it's probably more not so much on portfolio LED companies it's probably some of these new AI startups so one of the things that I've been doing for the last three years too not just working with P firms but working very closely with these AI startups right uh super smart founders who are getting these companies started and they have a lot of courage I don't know if I could do it but they do and so it's pretty amazing but I would say the number one thing I think you and I talked a little bit about this the analogy of the being a general contractor mm hmm is in many cases when I work with these AI companies is there's so many of them out there but I feel like they're missing the point around their messaging and their value proposition they spend 60% 70% of their time explaining how it works how the sausage is made versus focusing on the value that they can create and so I was speaking at an event last year with some AI founders I think it was the same event and I use this analogy of like most of them come I go you can't just be a general contractor when the faucet in my bathroom is leaking yeah like that's my pain point don't come in and tell me you're gonna remodel my house tear down the put a second story and put a new pool and a barbecue and a you know a man cave in the garage yeah I don't care I want you to fix the leaky faucet in my bathroom yeah and so they all come in with this very much this like I can do it all structure and unstructured data I can create a genetic AI I can do this I can like all these like really wonderful things and let me tell you how we do it and they're all very proud about when they should very proud of what they've built yeah but they don't focus on the actual value creation the value proposition so to me I think that's where um you can tell when you're assessing AI companies cause there's so many of them there is the their level of maturity is when they're spending way too much time telling you how the sausage is made and how it works versus like on the impact that they have or what they've been able to accomplish and do and what they're learning from I think that gives you quite a bit of a sense of like their level of maturity around how they're thinking about it and so I think uh when I see slides that spend 60 70% of the sausage making and all the integration all the APIs they can integrate great I don't care yeah I care about the value that if I'm a CCO or CEO or CFO what value can you bring to me by implementing AI and I think that's where there's so much noise for a lot of these companies and they're struggling and so that's kind of where I try to help mentor the AI startups to kind of think about it that way right what is your messaging what is your value proposition how you should think about it like that and I think that also then begins to translate into the big enterprise companies yeah they already have kind of a traditional product or traditional SAS based three tier architecture kind of product now can now let's bring AI into it what should your go to market motion should be mm hmm to complain changes yeah like you know it's it's very disruptive I love our sales teams I love our sales market teams but you have to begin to adjust cause we're in a very different world today and and what are the the other sort of common mistakes that you're seeing these some of these AI start AI startups make when they're they're selling to enterprise that's what they're trying to get in with on the most part yep to get in with enterprise level organizations or consumer but I think you're pretty well positioned to probably talk more about the enterprise side of things um yeah what are you what are you seeing as some of the mistakes there um I think they um they all have a uh a playbook to say let's go take out x incumbent so if you're like doing CRM stuff like let me go figure out how to take out Salesforce or you know compliment Salesforce I'm like that's that's a little tough or on the customer experience side of let me go take out gain side or to tango and like so they have like they have like almost a like the big David and Goliath story where they're like that's who I'm gonna go after and I just think they they should just shift to more like focus on the value focus on the persona on the messaging and not try to boil the ocean um I think in many cases the stuff that they're doing today is stuff that I've been trying to do this forever like there's there's nothing somewhat new to this like we've been trying to do data integration consolidation of data so we pull it up in a dashboard so we can render content to somebody and somebody can go make decisions yeah like that's that's what you call data warehouses like that all these things have happened over time the difference now that is that you know we're shifting from this is what happened to why don't we stop it from happening that's the shift and I think so I think that's where they need to start thinking that like yes you have AI technologies you have sort of a new paradigm shift that you can take advantage of it but just be careful and be humble that hey these are problems especially when you're talking to a CRO a CFO who's been around yeah you know everybody's trying to pitch this like this is brand new you've never seen this before I'm like well no we have yeah it's just a faster more modern electric car than my traditional 1966 Mustang yeah it's a little different but but I but I still like my 1966 Mustang so yeah yeah exactly you can still like the old stuff right the way it was done before it's okay yes I think there's some there's definitely some patterns and some good lessons Learned that happened in the past that could be leveraged in the forefront um but I do think AI is gonna is continues to change and dramatically change software companies I mean there was an article on the Wall Street Journal around the whole what $1 trillion or $1.

6 trillion meltdown swept by the new AI announcers whether it's anthropic or open AI or you know Google but just things think about things have shifted um in 2021 20 when I was at Google the three big battles was Microsoft Amazon and Google yeah that was it who's gonna own the cloud space yeah and who do we look at today Google and Tropic and open AI you know and so it's just very interesting that things continue to shift um so there's always gonna be the the three the top three you know but you know things evolve and change but there's definitely some lessons Learned that we can take from the past yeah nice there's there's enough room for everyone to play as well that's the main thing as well that I it's not have doesn't have to be just the top three right there's plenty of plenty of room for other organizations to other things um before we sort of run out of of time I wanna actually go back to talking a bit more about um P businesses and maybe uh doing a bit of myth busting or or however you wanna frame it because I think there are there'll be people listening who never worked in a PE organization maybe they have but not knowing the difference between what it's like to to work in a a PE backed organization versus a VC backed organization etcetera um I think PE more recently and some in some ways rightly so has had a bit of a crown on its head as this place that people certainly tend to want to work um whether that's through job security or whatever whatever it might be but what do you see that changes when a software business becomes PE backed from maybe being you know found found around or even uh like VC to to PE PE backed as an organization yeah I I mean obviously you know you always think about I think it was the three tiers of investments you start with you know if you're a small company startup you're looking at angel investments you're you're borrowing money from uncle and aunt and grandpa and grandma to get your company started which is great and then you get to sort of the VC phase where you're like okay you know 3 million 5 million dollar checks are being written so then that's when you get into the VC phase and then eventually you get into the P world and depending on the kind of P you're working with they can be looking at growth some of them have more focus on particular industry things like that so I think if anybody is considering or thinking about working um in a P backed software company um I think it's it's a great opportunity to create a wealth creation for you if you are with the right company so for me the questions I would always ask and I ask them today cause I do get asked quite a bit to like would you like to join this company so for me it's very simple No.