The First Wave to Change: From Premise to SaaS with Roland Zelles pt 1

Foreign.

Welcome to the Rethink Sales podcast. I'm Mark Danolo.

And I'm Michelle Seeger.

And we're talking about transformation delusion. Why do we expect big changes when we repeat the same old patterns? And how do we fix that for our lives and our businesses? And this episode, we're talking to Roland Zealous and we're. Rowan was the CRO of Autodesk and made a huge transformation when they moved from premise based software to SaaS based software in the cloud, which sounds commonplace now, but back when they did it, they were one of the first five companies to do it. So this is a great conversation.

Yeah, it was really interesting. And Mark, one of the things that I learned is you asked Roland what would he do differently and what he said is a bit surprising. He said I would have been bolder and moved faster. And that's one of the pieces, one of the many pieces of advice that he has for everyone who's listening today.

So we're going to dive into the topic of transformation and we're going to hear some stories about what it was really like because we kind of look at it now and it was kind of like de facto. Oh yeah, companies made this transition. Companies are still doing it, but this is a really, really big thing. Back when it happened and when Roland.

Yeah, it sure is. I'm really excited for the conversation today. Roland. We've had a lot of great conversations within the past and now we're going to just spread the word, aren't we?

Yep, yep. So, Roland, welcome.

Great to meet you, Mark and Michel, and thanks for having me on your podcast.

So, so you've had an amazing run at Autodesk and now, and you've been, you've been teaching at university for, for years and you're doing that now and you're doing advisory work, you're doing board work. Tell us a little bit as we start out, just about your story, like how, how did you get to all the great things that you've done and tell us a little bit about the path that you took.

Okay. It's actually not so interesting. You know, I'm an educate, I'm an engineer by education and interesting enough. All of my life I worked in the software industry, or actually, I'm being precise, in the cat camp CA industry. So I started software development during university for German cat vendor. At that time is what was quite new. And it was also the time where Autodesk was born, autocad. I think a lot of people know that. And then I, you Know, worked for one year at the university, a little less than one year at the university. And then I got my first job in Huntsville, Alabama, was my first time. I worked in the US at that time, and then stayed with that company, now Hexagon, that time it was Intergraph for six years, then moved to Autodesk and stayed there for more than 29 years. And as you mentioned at the end, I was the chief revenue officer, you know, and we, we going from one change to the next and I think was, you know, quite happy about everything we achieved and, you know, helping Autodesk, I think, to be the largest player in this market now.

Yeah. Amazing. So tell us, back when you came to the U.S. huntsville, Alabama, after being from Germany, what was that like for you in terms of just the cultural.

I was going to ask that question. I'm fascinated to hear about that.

So different. It's actually, it's quite funny. I, I didn't even know where Huntsville, Alabama is when I, when I signed the contract. So. And with my wife at that time already she was a civil servant, so. And it was possible for her to kind of stop working or put like an unpaid holiday and join me. So. And, you know, if you ask her and me today, still, this was one of our best times in our life. Hardly anybody went to the US for software development at that time. And, you know, people were wondering, why do they need you? What we figured out later, I think it's, you know, in the deep flowers and a lot of people, like, always wondering. The biggest challenge for me was language because, you know, until I understood, like I raised up in Alabama to get the slang and to, to get into that one, but lovely people, wonderful environment and, you know, great food. So still have, still have friends there. And this is like after so many years.

So that's great.

So Michelle, you're kind of a master of languages. Michelle speaks a few languages, but I know when, when you learn a language, probably when you learn English in Europe, you're not learning it with a Southern accent. Right. So that had to really throw you different.

I tell you a funny story. The first time I got a call, and at that time, there was no number identification on the phone. Okay, picked up the phone. I was listening for probably 90 seconds. I didn't understand a word. I just put the telephone down again, and what did I do? And then I think, you know, you start to learn again and put your books out. And I think, because I think it was like 21 days until we had to leave Germany and the wife did was good. No, it was when you listen into it and then I think you, it's, it's all good. Was very fine.

So when you're looking ahead now with where you are, what, what are you most excited about in the next chapter?

I do actually, you know, we just talked about languages. I'm challenged with learning Italian, just, you know, going through the grammar. I just realized why I didn't, I didn't enjoy Latin at school, but that's a site reason I do that is, you know, I have a house and I, I invested in hospitality so I bought a small hotel in Italy and change it into a holiday apartment. But other than that I, you know, work at the university. So I have two assignments at two different universities doing some board work, work with some startup companies and also then, and also work with several global private equity companies actually to kind of help on probably some board assignments but also help on how to put things together, get a plan and you know, keeps me busy so. So far on retirement.

Yeah, yeah. Sounds like a lot of fun.

This thing is I can do what I really enjoy.

Yeah, yeah. So, so let's, let's jump into it on, on transformation. And, and Roland, we had a ch. And one thing you said was because I asked you about transformation and you said, well, we didn't even use the word transformation back then. In fact, as we were getting set up today, we were talking about this word transformation and it's kind of become obsolete now. But what do you see as what is transformation or what is significant change in your mind versus just we're kind of making incremental change in the business. How do you know that you're in the midst of a transformation or you're going to go into one?

So when we spoke actually and this was when we made the change in the company, this was 2011, it started and then 2014 announcements were made, so the term wasn't so popular, I would say. I think and we, I think for me what transformation really is means you change and you change regular and you constantly make decisions about the future where you don't know the outcome. And you, you know, I think there's a tendency sometimes to over plan and I think you have to plan, don't get me wrong, but I think to, to believe, to put things into a framework, you can plan everything and you can predict all the outcome and you actually, you cannot. And you know, as we, as we talk about the changes, you very, very often you, you make, make an assumption, you make a change and then you change Your change very fast after that. And I think that's, you know, that's what happens I think with the transformation. I think in my opinion it gives too often an impression. There's a, there's a plan and you just follow a certain plan and it's not.

So I'm curious to know a little bit about, to lay some context what the environment was like in the industry and some of the drivers that led you to say your company right, boy, we're going to SaaS.

It's quite interesting. I think when this, the early details happened. I worked in the US in San Francisco, this time in San Francisco, at San Rafael, at Autodesk and place you work in this. Certain things going on in the industry. I think some new competitors came up. 3D printing was like started the big thing. 3D printing was a big one. Cloud was one of these things or SaaS models. I think Salesforce, we talked about Salesforce earlier, I think is under CRM. I think people could see how much faster you are with change and driving also the company forward. For our industry it was really 3D printing, it was cloud, we could see that. And AI actually it was more machine learning. We weren't bold enough by the way to call it machine learning or AI because there was still lots of skepticism. So we called it generative design, which was actually a machine learning algorithm to do the work of an engineer. So a lot of these things were going on and we were in a perpetual model where you put all the effort in to win a customer and then they kind of locked in because I think all the investment is done and then you're in a maintenance model. And the CEO at that time, Carl Bass, was on the conviction that we have to fundamentally change the company to move towards a cloud business model. Number one. Also we had a lot of 175 software products doing everything from like design to calculations etc. And keeping maintain all of that and integrating that one into suites and portfolios of products made it very complicated. While when you had a vision of a platform customers could consume rather than, you know, buy a software installer, software user software. So I think this was at that time and then I think one of the last things which happened because of the business model which, which is actually not very dynamic, the company also was kind of plateauing and you know, wasn't growing and growing enough fast enough and also didn't create the cash flow. So I think there was a business reason, but there was also industry reason and technology reasons which kind three things came at the same time which made it necessary.

So then you made that commitment. I'm interested to hear how this was because you know, in previous conversation I believe with you Mark, you, you mentioned that you are one of the first companies to burn the boats, right? You were making a change and you were not going to go back. So making that prem to SaaS. What was really that like and what was going on internally?

I think the only company I was aware was Adobe which I think did like did the jump but in our industry nobody did it. And I talked a lot about culture when I, when we talk about this change because I think the, the company had like an extensive portfolio as I mentioned and it was a very autonomous liberation liberal or libertarian culture and had some benefits. But it also came with the challenge that we didn't respond fast to change. And that's kind of the biggest problem for a company. And then I think, you know, I talked about the technology. We also got an activist investor which I think accelerated things a little, little more. Right. Because we planned a lot from between 2011 and 14 and you know, introduced some subscription offerings and try to experiment and understand a little better where we are. But then I think we had to go and the big day was in 20, fiscally 2015 at that time when I think we announced the end of perpetual licenses. And I think everybody was looking forward to it a little bit, but on the management, but I think a lot of people were afraid because you know how, how will customers react, how will the competitors react, how will the employees react? Investors, I think the industry, magazines, etc. So I think was a big thing and you know, we did enough preparation to feel confident. But still the day you do that, I think you know, there's probably no return.

So, so you had, you mentioned before your CEO was committed to it and you had an activist investor that was, was committed to that. So you had these two, two big driving forces you could see in the industry that Adobe had done it. I'm wondering so. So you got driving forces to make the change, right? So, so we're committed. But when you looked in the industry, well, salesforce.com had had, was really born in the cloud. So they were already doing that. But were there examples as you started out where you said hey, this is actually working for these companies or was it like perceived as being a lot of risk?

No, nobody. And I think we, we were, we were probably asset. I think there was Adobe around but then from all perpetual software companies the, the first one to, to go and there were a lot of unknowns and nobody knew, I think how, how the customers would react. Carl Bass at the OCO at that time, I think he described it was like you drive with your car in a snowy night, right? There's no track you can follow. The only thing is your headlight and you have to make the decision. And then you have other people to follow your track, which actually happened later on. I think a lot of the competitors followed and I think they're still, still doing that. I think 10 years later, I think you still have several of our competitors trying to do it or did it or in the middle of the change. So which, you know, being first is great because you can, you, you may be the only one who is getting it wrong or you have all the benefits of doing it and being successful. Right, right.

I mean, and you mentioned, okay, so prior conversation, you mentioned some of the math that was involved here. So you talked about the idea of disbelief and you said something like it wasn't that people necessarily didn't want to go along with it, but they didn't believe in it. And then you talked about some interesting numbers. Roland, you said, we, we got to a million customers in 30 years, but then the new model said, do we had to add, had to get to 5 million customers in just five more years.

Wow.

I mean, that seems like insurmountable. So talk a little bit about this, this like huge jump in belief and what kind of reaction you got from the organization.

I can start with myself, I think, on this one because, you know, being in the sales organization, when you see these numbers, you also know what it means or could mean to your compensation and also to the stress and the pressure you, you will have. I, I struggled. I think I understand the math and what it, what all the great things it would do. But then I'm like, okay, why, why would we, why would we convince suddenly 4 million customers? So, you know, and adding 4 million versus versus the 1 million we had, it was scary. The thing we did a lot I think is like this comes to the headlines or you have no track. I think you create a plan. You must not be afraid at all. You have a plan and you move. If you don't fully understand it, it's like, okay, you kind of commit and try. And as I talked earlier, I think you have to commit to yourself. You change to change, to change the change you changed. And you're in this constant mode of correcting things. And sometimes you do tactical moves just to get from point A to B and then you change that again. And the difficulty is on the believers and disbelievers is to not lose, to not lose the, the cause you have. Because you will find a lot of people who said, like, you have to avoid this, I told you so people. Because you make a change and then you figure out, okay, this actually doesn't work, it doesn't deliver the results you wanted. And you do another change, which I think you find all these people who like, okay, they don't know what they do, that's why they change again. And so you go through these cycles of constant change and actually what happens is you, you, you build a new culture. And that's the most important thing in a company. As I mentioned earlier, I think, you know, you, the, the most important thing is to get things right. And now you have to re. To reach a culture, come to a culture where speed and speed of change is everything. And then you know, you, you, you always get right. Nobody knows what the future brings otherwise. I think all these smart people should go into investment banking and make all the bets about the future. So you make decisions with a limited amount of information and hopefully in the right, you make more right than wrong decisions. What it does, it's quite interesting. I think you immediately identify the people who are either not committed and then some of them go on their own and some of them you have to ask to help somebody else. An interesting number I remember is we had between 2013 and 2016, which was also the change from CEO Carl Bus to the current CEO Andrew Anagnos, 40% employee.

Wow.

So close to half of the employees only knew one CEO, which was the current one, which was only in place for like less than two years. I think it's just tells you how much change was going on at that time.

Yeah. So that's a high number. And I'm curious, I've got like two questions, an internal and external facing one. So internally, how did you manage that change? So you've got some high turnover. Let's talk about some people that maybe weren't even asked to consider something else, but they just left due to that disbelief. And how did you deal with any internal conflict?

The most important thing, so why you want this change and why you drive it? I think to be honest, we didn't plan for this number. Okay. It just turned out, I think that that's what's going to happen is we knew you want to move to new and different skill set and also you want to have people who are fascinated about the future and not fascinated about the past. And that's driving a lot of the, a lot of the change. And that what we did is I think you can categorize people into. And you see that very fast into like if you put an axis of willingness and skill, there's people who can and want and that's the one you want on your side. And that's because become your change agents and help you to convince others. Then you have people who want but cannot. Right. You can train them. That's you can help them. I think if they're willing to do that. And then you have a group of they can, but they don't want to. Or then, okay, you have people who cannot and don't want. Okay, that's easy. But if you look to a lot of the employee statistics, I think, you know, 10 to 20% are top performer, 60 to 70% of moderate. So how you identify the people who want and can. Right. To become your advocates and drive a lot of the change. And the people you don't want is the one who can but don't want because worst case, they can move into sabotage.

Yeah. Yeah. So what did you run into? I was curious about that in terms of like sabotage or any kind of passive resistance. What did you see?

We always talked about passive aggressive. Yeah, that's. I think it's, it's, it's a lot of people is like, you know, they're very good in explaining you why you're wrong, why things don't work. And I think one thing is factual, like, you know, what competitors do or why they don't do it. And you know, I used the metaphor earlier with the driving in the snowy night with your headlights. I think, right. There's no track. So I think you have to create your own track. And people who are afraid of that, I think ideally they decommit themselves, which happened in, in high volume. But also I think you have to drive some of the change and because you want people who, who actually really like and have a growth mindset. I think like, like the change and also can see that, that, you know, it takes effort and it's not like an earned, you know, something you earned in the past. I think it's like, okay, you change something, you change again. And it's not about right or wrong. It's all smart and, and stupid. It's more. You can grow, you can learn. If you get it wrong, you know, you have learned something and now you know what you and you have more information to get things right. You embrace the challenge. You know, I think if you look at the growth mindset kind of philosophy. I think it helps a lot and I think that's why I say you, you want, you need new people because you have to change the, the culture and you have to have a, you have to change a lot on the operating model of a company. Right. Right.

So, so a question or two on, on this, this whole people thing. So I, I love your, your four quadrant description.

Right.

The, the, the willingness to change and the ability to change and skill and, and, but that sounds good in retrospect. It has to be like when you're going through it, it may not be quite that clear. So are you proactively identifying the people that fit in those quadrants and taking some kind of action or what are you doing in real terms?

Yes. So yes, you have, you know, sometimes memory is, memory is not so good on. They delude, they. Sometimes you have a delusion to make things look perfect. I get, I would say half and half. So half of the people really decommitted and looked for something else and then half you had to drive specifically in sales. It was a need from moving to inside sales if you go to a SaaS model. And also I think when you think about the pricing model and everything coming along with that, you need a different sales model as well. And in a classical sales organization you have a lot of, I call it sales moderators. They participate in the cell but they not do it net driving it. And they're not, not, not really have the responsibility of value creation at the customer and, and helping customers really do, you know, end of the year have a better balance sheet, have a better cash flow, have a better profit. Right. So this was the first target group, the sales moderators. So you have true salespeople and true kind of change agents in the organization. And the other ones I think you had, you had to remove and you.

Have to remove sales moderators. I love that. So, so when you're having all this, this turnover on one thing I think leaders would be concerned about is okay, we're going through this change and we're, we're taking a lot of damage here. You know, we're losing people. How do you keep the morale going when you're losing people? Even if you know we're going to lose people because you know it's, it may not be perceived as healthy in the organization while people are quitting, they're jumping from the sink and ship. Right. But not really because you're evolving. How do you keep the, how do you manage that perception?

I think the key is to make the. The unfamiliar family, to build a bridge to something unknown and, you know, create a vision or try to explain it as, as good as you. You know that with that information you have. I, I had a nice metaphor from somebody. You, you have to explain it because if you think about somebody is clapping a song, you. I may have a song in mind when I clap the song, but you have no idea. And the same thing is whether you call it transformation or the change of the vision of the company, somebody has to expl. And explain why reaching the other side is so much better.

Yeah.

And then also creating a psychological safety so that people are able to say the unpleasant truth without appearing to be decommitted. I think that's the difficulty in that one, because I think you have people who are committed and decommitted. You have people who believe and disbelief. But then people have questions and allowing, really having an environment where people actually can ask these questions. And a lot of these questions are very valid because customers, investors, partners have the same question and how you're able to answer them and you learn to answer them better. And that's why I think this change of. You change the change and take risk and try new ideas and then, you know, when you change it again, it wasn't a mistake. It's something you learned and you do it better. That's, I think, from the, from an employee side. And the, the biggest challenge as a leader is you have to delegate a lot of decisions and you let people, you need to allow people to make a lot of decisions very fast. And one of the big biggest learnings for me was you watch it and then you think, I would have made a different decision. But different doesn't mean better or worse. It's just different. Right. And to allow people to make their own decisions, make their own mistakes or their own successes, and then correct them or improve them later on. For me, that's, that's for. As a leader, it's very difficult, I think, at the beginning because you really have to build a lot of trust and confidence in your team and just go with the decision.

And that's one of the principles, Roland, we've picked up in these conversations we've been having with leaders is the idea that you can't own the change. Just as a leadership team, you've got to give that to the organization and then they have to take that and do it. And when that happens, you're going to see a different approach or different interpretation. Like you said, it may not be wrong but it's just different than you might, might have done. But that creates ownership, right?

Yep.

You know what, what was one of the most interesting experiences sometimes, like our CEO Andrew made a decision, nobody had an idea how to get that, but he, I don't know, I, I, I'm not sure he would say it this way, but I think he did that in the confidence and the knowledge we somehow will figure it out. Right. And I think it's, it's a compliment on the one hand side, but at the other when you, when, when I think the next thing comes, you kind of, oh, holy, are we doing that now? And then I think you, you, you just develop a muscle as an organization that I think, you know, everything is possible and, and then you're also able to do that. But as you said, rightly said, I think the biggest challenge at the very beginning is you have to trust the kind of, you know, crowd intelligence of the organization.

So I want to pick up on two words that you had used over the past few minutes. One was purpose. And then you use the word vision. And again, we've heard this in other conversations we've had that the way you get through these kind of big transformational changes, I'll use a different word, is you have to have a very clear mission that people can own.

Right.

Because there's got to be a bigger purpose to this than just making the change. So what I want to ask you is, you know, in some of the companies we talk to, I'll give you an example, like maybe it's a healthcare company and so the mission becomes about, we want to give patients access to, you know, better care, whatever it might be, because there's a big gap and it's going to make life better for them and.

Right.

And everybody feels good about that and they get on board and they'll, you know, they'll fight for that. Right. In terms of the employees, because this is a bigger purpose rather than just we're going to make more money. Right. So when you make a change from premise to Cloud or SaaS, and maybe you don't need to do this in that situation, but is how do you articulate a bigger mission or a bigger purpose that people will buy off on versus this is just a better business model for us because that only lasts so long before people go, you know, this isn't working, let's back out.

Interesting that you mentioned that is exactly what happened. You, we created a new vision and a new mission statement and also value statement. So what you stand for as a Company, I think, and we started with some, you know, we help people imagine, design and create a better world. Good. Yeah. In, in the industry where like a lot of our customers are engineers. And then I think it, it moved into, with something like make anything. So this was one important, one important change. The, the other big changes which go along with the vision and the mission and the values was, you know, we didn't use the word burn the boats. Of course, I think it sometimes was used in conversations, but it was, it was making unres. Reversible decisions. Okay. You make a decision you cannot reverse any. The minute you go, there is no way back. You can only move forward. Okay. And for that I think there was, we put a lot of effort in also new cultural capabilities which came along with that. So people talk a lot about psychological safety, but what does it, what does it mean? How you, how you as a team, a management team, an organization, how you work, Decision making, inclusive leadership or risk taking. So just one simple example I can. And then organizational structure which kind of follows what you're trying to achieve. We, for instance, one of the things a lot of people struggle is okay, how's decisions being made? It's. In most companies, there's always when you look about like employee surveys, there's typically who. The two low rated items are communication always. And the other one is decision making. I think, you know, decision making is a bit of a tricky one because people may not like the decision or some people may think they should be involved in the decision or they just disagree with the decision. So. And you never find out. Exactly. So this was one big thing which was actually helped a lot is doing training on people helping to make a decision. You know, different companies have different models. So what we, what we did is, okay, somebody comes in with a proposal, then a little bit like in a sales process, everybody asks clarifying questions first. So this helps the person who made the proposal to see, okay, what was not well understood. And you make sure also that everybody kind of has a say and everybody really, everybody's really speaking up. Then you ask people to make improvements and suggest improvements and then you kind of reissue your proposal after everything you heard on the questions, etc. And you go there and then, okay, how you communicate the decision. And I think it's, it sounds very simple and banal, but on the, on the other hand, but it helped a lot people to understand, okay, I'm part of the decision, I can raise my concern or make my argument. And then you also learn, okay, you know, the world is not binary. Other people have a different point of view and other customers or other industries react different. So that was probably equally important on the mission Vision Values was that kind of cultural change in the organization where you move to a much more fast moving crowd intelligence organization.

So let's pause right here and we'll pick up in our next episode.

See you then.

Thanks for joining us. And remember, SalesGlobe is a revenue growth consulting and services firm focused on helping our clients reach their revenue growth aspirations through better solution development and operationalizing to get results.