Strategy Spotlight

Good morning, everyone in the Americas. Good evening to the folks in Europe. And welcome to our segment, Strategy Spotlight. My name is Elina and I'm on the Global Go-to-Market Strategy and Ops team here at Cloudflare. As part of Women's Empowerment Month, joining me today is Aneta Key, business strategist and startup advisor, and we will be talking about scaling organizations, a topic relevant to companies like ours. I thought of inviting Aneta with us today because she has always been thoughtful yet pragmatic on the topic of growth. In fact, I remember this very vividly on one of our walks through San Francisco. We were talking about startups and you said to me, well Elina, in my experience, it goes something like this. At first there were growing pains and then the pains kept growing. Yeah, I actually remember that walk. It wasn't a simple walk. It was a very steep, scaling a hill of San Francisco. But yeah, thank you for having me. I'm glad that that quote led to this invitation. Looking forward to the conversation. Thank you so much for joining us. Though at this point, we should probably disclose to our viewers that while we met just a few years ago, it turned out that we're practically neighbors and that you are in fact my Bulgarian cousin. It's a small world. It sure is. I find your career path to be very inspirational. You had a fascinating journey from Bulgaria to Wall Street to McKinsey and now being a trusted advisor. So how about we start with a bit about you? Sure, that's the usual way you start interviews. Here are five things about me to give folks a bit of an idea about me as a person. I was born and raised in Bulgaria, which would explain my accent. I was trained as a system science engineer and I've been thinking that way all my life and applying it in my career, but outside of engineering. I started up my career as a investment banking startup-y person because I was an employee number four and a half in the very first bank allowed to operate in Bulgaria and four and a half because I was working part -time. I then moved to the States because of love. My husband's American and I fell in love with him. I went to Vanderbilt University for an MBA and I had a stint on Wall Street as my kind of jumping board of coming here. And then last, professionally, as you said, I'm a consultant. I got recruited from a business school by McKinsey through a special experimental program and then I stayed with them for 10 years and then I actually liked consulting so much that decided to keep doing it even after I left McKinsey. And since 2009, I've been working on my own, helping executives in teams around the world think through key questions, get everybody on the same page and execute on their priorities. That's me in five things. Very cool. I actually didn't know that you were recruited into McKinsey through a special program. What was that? Yes, it was an experiment. I'm officially a McKinsey guinea pig. So it was a program called Odyssey and it aimed to increase the cognitive diversity of their consultants so that they can serve better their clients in term. So if you think about it, I was at Vanderbilt University because, well, I came here for love and my husband lived in Nashville and Vanderbilt is in Nashville. Vanderbilt had a top 10 program in finance. It was the only school in the country that offered electronic commerce at the time. Those were my two specialties, but they were not on the list of target schools for McKinsey. So McKinsey did not come and recruit on campus. And yet, because of this program, they decided to reach out to other folks they normally do not tap. They sent me a letter directly to invite me to interview, which I discarded, but then my husband asked me to give it a second thought. And the letter basically gave me a shot at earning my spot and interviewing along my peers from Harvard and Stanford, and the rest, as they say, is history. But what I find interesting now that we're talking about it is diversity is such a hot topic right now. Everybody's talking about diversity of thought in the boardroom, in the classroom, whatnot, but yet it's a very old topic because that was late 90s we are talking about. And just to cap the story, in the words of a senior partner, McKinsey got a very, very direct Eastern European fresh off the boat engineer to work with. Well, they certainly made a wise decision hiring you. Being a fellow Eastern European female engineer myself, I approve. And you're right, diversity of thought, bringing in different perspectives to the table is very important and study shows, leads to better business outcomes. So now that we've established that you're qualified to talk about strategy and growth here on Cogslayer TV, which happens to be the focus today, let's dig in. The term growth is being thrown around everywhere these days. We often hear about economic growth and business growth, even professional and personal growth. We read about exponential growth, hyper growth, rapid growth, all these terms. Could you help us maybe zoom out a bit and clarify some of these terms? Certainly, I'm always happy to talk about growth. As you know, my car plate says growth. And for those who are not in the States, they have this weird thing here. You can actually select what the plate on your car says, and mine says growth. So happy to talk about it. Let's actually just focus on business growth for a moment. Growth in anything is basically just a positive increment. So positive delta incremental change over time. In business, the metric that you're measuring are things like number of users, sales, number of offices, number of employees, profits, et cetera. And an example of growth in that sense would be if you have a startup and they actually develop something and they attract a few users because the users find that thing valuable, and then they manage to keep attracting more and more users, that's growth. Yeah, so actually a little fun fact about our users. Our overall business model has inherently built this in since we started from a bottoms-up approach with our self -serve plans. And then fast forward to today, we are now trusted by over 25 million Internet properties, and this is just the beginning. Well, yeah, 25 million, that's a good beginning. Okay, so in that case, that's a good lead-in to the second term that you requested, hypergrowth. When we are plotting growth on a picture, let's say you have revenues over time, people say, oh, you have an S-curve because growth usually kind of ramps up slowly, and then there is a steeper part of the curve, and then it kind of tapers off eventually. So the hypergrowth refers to the slope of this steep curve. So if companies grow year-on-year with a CAGR of 40% or more, which is insanely good, this is called hypergrowth. If they're growing 20 to 40, it is rapid growth. And if it is below 20, it is called normal growth, although to be fair, many companies don't even get to grow at all. So that's what hypergrowth actually is. Yeah, and just to throw out another fun fact, just because we're big on fun facts here at Cloudflare, we're definitely operating in the hypergrowth realm above the 40% CAGR mark. So we must be insanely good, in your words. We must be doing something right. So what about exponential growth? Yeah, exponential growth. So mathematically, engineer-to-engineer just means the growth goes on a curve, the growth accelerates. And this would be one way that a company achieves very high CAGRs, right? What I like about the term exponential growth is in the strategic sense, if you look back at the big picture, it gives us a sense of this accelerated pace of doing business and accelerated pace of change. And my favorite talking points here are how the speed of adoption of a given technology to the first 50 million has shrunk over time. And my go-to factoids are, it took the cars, speaking of cars, 62 years to reach 50 million users. And then it took radio, 32 years. And then it took computers, 14 years. And then it took the Internet, seven years. And then when Facebook comes along, they only need three years. But then Pokemon Go shows up, and in 19 days, 50 million people around the world are walking with their mobile phones without looking, right? So times are accelerating. Yeah, it's just crazy how much things have really accelerated. And it's great to step back and kind of outline these specific definitions of growth given people often use them interchangeably, which leads us to our next topic on scaling, also often used interchangeably with growth, but not the same. How do you think about scaling as it relates to growth? Correct. So first of all, definitions are important. As long as everybody's on the same page, you can use any definition you want. But for the purposes of today, scaling, in fact, is different than growth. Growth usually means, in the business sense, as you're growing your top line, your underlying costs grow more or less in lockstep. So your revenue grows, your costs grow. Maybe you get some efficiency, but they grow together. A scalable business model is one that allows you to grow the revenues much, much faster than the expenses. That's what VCs love, a scalable business model, because with limited growth in the cost infrastructure, you can actually continue growing the top line. Personal simple example, just to illustrate kind of the non-scalable business model, if you wish, I'm a career consultant, so professional services. Most of professional services have a very simple business model. You have billable hours, time, rate per hour, and that gives you revenue. You can still grow. You can add more consultants if you attract more clients and more work, and revenues grow year on year, but so do your costs. So it is not truly scalable. You're kind of limited. On the other hand, if I had some sort of an online scalable platform and I create some self-guided learning modules where team leads who need consulting can go and kind of do it themselves based on what I've put out, that would be a scalable business model because the incremental cost of delivery, knowledge transfer, right, would be very limited. But that doesn't mean that I can actually grow that because I still have to sort out the economics, still have to sort out the adoption and all that. So this is a very small example of how things can grow but not be scalable, or the fact that a model is scalable doesn't necessarily mean that it will grow. But the idea is you try to create a scalable business model because it gives you a bigger oomph for the investment. Yeah, definitely. I have to say the whole topic of scaling really resonates with me since that's all my team seems to be thinking about these days. I find myself when I'm approaching a new project thinking with the end in mind, but will this scale? How can I make this scalable? I'm constantly thinking of ways to optimize processes so we can operate as effectively and efficiently as possible. As Einstein put it, once you stop learning, you start dying. Well, for me, I say, once I stop optimizing, I start dying. It's pretty much built into my DNA. And from experience in various scaling companies, not just Calcler, my sense is that scaling is tricky, especially when it comes to scaling the people side of things. Yes, that is true. But I first have to note that you just tried to improve a quote on Einstein. So leave it to you to try to do that. But substantively, yes, scaling is tricky and scaling the people side of organizations is usually the trickiest bit. That's why I like the analogy of scaling a business is like scaling the side of a mountain. You have to work against gravity, you have to put in the effort, but it is worth the effort because at the top of the mountain, you see these amazing views and actually the journey along the way could be quite exhilarating. That said, scaling is tricky. That's a very nice analogy, actually. I'll keep this in mind next time we scale Mount Tam. When I think of scaling organizations, I can see that idea applying not just at the company level, but also at the team level and even at an individual level. Would you agree? Yes. It is very nice to think about scaling at these three levels, individual level, team level and kind of organizational level. And it also fits very nicely when you think about kind of the life cycle, the evolution of an organization. So you start with a couple of folks and you have your nuclear startup and it is at this individual level that people very quickly realize that they're not scalable. Humans are not scalable and founders and leaders frequently become a bottleneck that actually limits the growth and scalability of an organization. Now, how do at the individual level, how do we handle that? The first reaction usually is to work harder, which is the prequel to a burnout. And I see you nodding in agreement because you've been around the startup world, right? The second way is to work smarter with things like automation and prioritization. And these are all super helpful and we should all do them, but they're necessary but insufficient. And the third way then is you got to spread the work, which means you got to add more people, you got to scale up your organization. And this is where it becomes the tricky, the trickiness begins, right? If you think again about the life cycle, you start adding some people, now you have to onboard them, you have to communicate with them. But if there is a problem, you can all get in the same room or nowadays on the same screen and work things through. At one point, as the organization gets bigger and bigger, not just in size, but the greater complexity, now you have people in different places, diverse teams, distributed teams, specialized roles, and now you have graduated to this kind of organizational level. So you've moved from individual level to organizational level. Yeah, and then the question becomes, how do you coordinate a sprawling team to drive alignment and ensure everyone around the world is on the same page and running in the same direction? Yes. So this is one, in fact, this is one of the key questions that leaders must figure out. They have to figure out how to enable all these talented people that they have attracted so that collectively, they can all be pulling in the same direction while being distributed, diverse, and making decisions all the time. And in practice, leaders have a handful of levers to pull on, and apologies, levers is a consulting jargon, but you have some hard levers, tangible things, like how do you organize your org structure? How do you use your processes, your infrastructure, your incentives, your metrics, OKRs, all those things. And then you have some soft levers, which are a bit more intangible, things like vision, mission, culture, communication, strategy, all the intangible things. So between the hard and the soft, you have to orchestrate a situation in which everybody actually pulls in the same direction. That makes sense. By the way, we often use the term levers on our team. In fact, I've used it a couple times this week. And to throw out some relatable examples of both elements, so regarding infrastructure, our expansive global network spans over 200 cities in over more than 100 countries. As a result, we're able to successfully block 57 billion cyber threats per day. Ooh, billion, OK, that's a good number. And then regarding strategy and communication, case in point right here, as we speak on Cloudflare TV, we're helping everyone stay on the same page and get a sense of who we are, what we do, how and why we do it. Oh, I gotta say, actually, this whole TV, having your own TV channel is very cool. Most of my clients, you know, they would put out a video on the intranet or they would put out the video on some externally facing channel once in a while, but you guys have taken it to a whole new level with this 24-7 real-time TV setup. Which brings me to another key point, right? So as companies are trying to scale and figure out how do we rally the troops to pull in the same direction, there is no right formula. Everybody does it the way that works for them, for their context, for their culture, for their objectives, and even more as things change, because things always change, how you organize also changes. So you have a constant evolution of how you pull these soft and hard levers. Hopefully, as these things change, they not only change organically, but are also being shaped proactively by the leaders who are trying to anticipate what's coming around the corner and setting themselves up for success. Very true. Agility is critical, especially these days. So we've touched on scaling at a personal leader level and on a corporate level. But in terms of daily experience of working in a scaling organization, it is the team interactions that are most relevant. So can you speak to that? And maybe also this is a good opportunity to touch upon that objective distribution joke that you recently shared with me. Just because I love histograms so much. All right, so for our viewers, this is where my prepared remarks come, because Elena explicitly asked me to reshare a joke I texted her. But before we go there, let me just make the serious point. So yes, in reality, our day-to-day experience on the job is shaped by how we interact with our team, or actually immediate teams, because we are on multiple teams. And as you get more diverse and you bring in folks with different perspectives, different backgrounds, different communication styles, there is some healthy and natural friction that you need to work through so that you get to that better outcome that we discussed diversity brings. So here is the joke. I gotta say, I'm not sure who authored it, but kudos to them. I found it on the Internet. What I know about that person is they were a geek, because the joke set up actually starts as a little histogram, and it has stuff assessed on some axis from bad to good. And the distribution that Elena mentioned is, okay, so if you have some sort of an objective distribution of how people would assess stuff, most people would say, most stuff is pretty good. There are some people who would say this stuff is junk, and there are some people who say this is awesome. So we have some gradiation here of how people would assess the same stuff with this histogram distribution, right? The joke goes, there are some cultural differences of how this would look like for a subsegment of this population. So for example, Americans, there is the American joke. Americans, they're very optimistic and encouraging crowd, right? So anything that you put out there is at least a good start. Then it says pretty good, with a fairly lower bar than the general population, and then everything else is awesome. And as somebody who's married to an American guy, I can tell you my husband is very easy to please and everything is awesome. So that rings true to me. And then the joke continues for Eastern Europeans in contrast, people like you and me. Most of the times, whatever the situation is, the reaction, the first reaction is, what is this junk? And then even things that are just awesome, the answer is, this is not good enough, right? So this is the joke. I think it resonates because people have just viscerally experienced how people with different communication styles see the same situation and interpret it or react to it very differently. And to collaborate, we just need to be patient and work through that to actually get to a better outcome. I have to say this joke really doesn't get old. I laugh every time. Though I think it may help to distinguish between different states. Awesome is very much part of our California vernacular, but let's take New York, for example. I'd argue that histogram more closely resembles the Eastern European curve. Geographically speaking, it is closer in proximity as well. Okay, I like your instinct to always go and start thinking with the end of mind and scaling a simple histogram off of Internet. It's very Einstein of you. We can do that on a walk, I think. Sounds good, looking forward to it. Now, as we wrap up this session, could you offer us some pragmatic words of advice on how to navigate growth and scaling? All right, so here are three tips on very pragmatically how to navigate growth and scaling. First, on the topic of team collaboration and navigating diverse perspectives, the real hack here is to be explicit. And by that, I mean explicitly define terms, just like we defined what growth and scalability would mean for us. Define expectations, team norms, logic, assumptions, just explicitly put it down on paper and share your frame of reference. Anything that makes your thinking clear and transparent to others really shortcuts the whole negotiation while you're trying to sort who's saying what. The second pragmatic advice on how to handle growth and deal with change and risk and uncertainty is supported by my academic work and thesis in decision-making on the risk and uncertainty. And it's supported by 25 years of working with diverse clients solving their toughest problems. And it summed up on an improv class t-shirt I got and it says, make stuff up. And the only thing I would add, it's perfect. The only thing I would add is strategically. So make stuff up strategically. And yes, this comes a bit cheeky, but let me just specify in a hyper-growth organization, you have a huge number of people who've just joined. You have a huge number of people who've just been reassigned a new role because more people are coming and everybody's being elevated. And then even if you've been around in the same role, every day you're faced with a new situation. Every new market that you'll enter has new regulations. Every new customer has new backend, whatever it is, it is constantly something new. So you constantly have to work through a new situation. And so what that means is you have to kind of make it up. You never do the same thing twice. And then the third thing would be, I wanna focus on this word strategically, because I think this is what actually makes the difference. So it's just not good enough to fly by the seat of your pants. It's actually important to be systematic and thoughtful without being slow. And the way you do that is by constantly asking a handful of key questions regardless the situation. So you find yourself in a situation and you start asking, what is the context? What's the bigger picture? What am I trying to achieve here? What is the situation? What's going on? What do I have to work with, right? Then you think through what are my options and which option do I choose or combination do I choose to pursue? And then how do I get there? And you just constantly look because the moment you take action or something else happens outside, things change. So the make it up, but strategically, I think is a winning formula for navigating growth and change and risk and uncertainty on any level, on organizational level, as a strategy, on team level, as a, you know, let's figure out how we tackle this project. And even on individual level leaders or anybody really. So that would be my three pieces of advice. Be explicit, make stuff up, but strategically. Thank you for the great advice on scaling. This was a very insightful discussion which flowed in a very strategic manner, might I add. Anneta, such a pleasure having you join us today and thanks to our audience for tuning in. I hope everyone enjoyed the segment. Until next time on Strategy Spotlight.