Rightnow Technologies

RightNow Technologies

1. Evaluate the startup of RightNow Technologies in light of: (a) Kawasaki’s “top five things an entrepreneur must accomplish”; and (b) Bhide’s “questions every entrepreneur must answer”.  Looking back from the perspective of December 2003, how closely did Gianforte’s approach to the startup conform to these guidelines? Where did it differ? What were the implications?

In light of Kawasaki’s “top five things an entrepreneur must accomplish”, RightNow Technologies did the following things right:

• The founder, Greg Gianforte, has an ambition to create jobs, specifically 2000 in number, in the town of Bozeman, Montana. By setting a goal which is intended to make the town a better place to live, Gianforte is making meaning.
• Simply put, sales is Gianforte’s mantra. To quote Gianforte, “sales is the only job that has to be done well in building a business”. By laying a strong foundation that relies on the selling capability, Gianforte is building an ecosystem that has sales at the center of it. He believes that sales would provide the necessary feedback to estimate the feasibility of the business. Not making lofty and unrealistic promises to clients in the form of long drawn out marketing campaigns gives Gianforte a realistic image of customers’ preferences.
• While creating the product was the first part of Gianforte’s startup launch, the equally important second aspect is the decision relating to medium of offering. This is particularly relevant in the context of a software product/services business. Gianforte decides that his firm would use ASP technology to deliver their products to clients. (Kawasaki, 2004)

In line with Bhide’s “questions every entrepreneur must answer”, Gianforte accomplishes the following:

• He sets a clear direction before executing his plans via his stated goal to create 200 jobs in the Bozeman area. He also identifies what product to offer by laying out the existing software in hopes of identifying a niche for his startup.

• In terms of the type of firm, Gianforte decides that his startup would be based completely on the ASP technology, which would offer RightNow multifarious advantages. Also, he identifies that sales would be the underpinning for his startup.  
• Studying the viability is an important issue that Gianforte tackles by keeping things simple and true to the goals of his firm – he employs sales as a means of market research to understand the customer needs and preferences in order to be able to make the necessary tweaks to his product before its full-fledged launch.
• Gianforte is non aggressive in his approach to growing revenues, and the company goes through the startup lifecycle as profits are non-existent in the early years. Profit figures are also exacerbated by the crashing of the market due to the bursting of the internet bubble at the turn of the century. But it has to be mentioned that since RightNow’s solution was offered via the internet, it did not involve too many product related costs.
• Gianforte displays an inclination for sustainability right from the start through building his product gradually based on customer requirements. Since there are not too many competitors in the ASP space and given the fact that there is still a significant preference for the traditional way of distributing software, RightNow’s strategy of delivering software solutions over the ASP platform with focus on selling is a sustainable strategy for the long term.
• Gianforte carefully builds his resources over time as the need for them arises. The appointment of Peter Dunning as head of sales after an 18 month search is a case in point. Also, systems such as financial controls, audits and alignment of strategic and business plans were made possible with the hiring of upper management personnel. (Bhide, 1996)

1. Consider RightNow Technologies’ growth trajectory and development in the light of the models of organizational growth and evolution: (a) did RightNow’s growth pattern conform more closely to that of a rocket ship, a gazelle or a turtle? (b) at which stage of development would you place them in the Flamholtz framework? Why? (c) how successful were Gianforte and his team in clearing each of the eight hurdles of the period of transition?  Evaluate the company’s current state with respect to each of the eight hurdles.

• In consideration of RightNow Technologies’ growth strategy, it can be safely said that the firm follows a gazelle, or fast organic trajectory. This is because Gianforte has a vision to expand the firm on a large scale. At the same time, the business is not dependent on any breakthrough technology or disruptive innovation that would require vast amounts of investment upfront in order to be able to move past the Survival stage. Other factors that indicate that RightNow follows a gazelle growth trajectory are the firm’s cautious approach to expanding its revenues, emphasis on efficiency, and most importantly, the fact that the firm relies on its ability to exploit ASP technology to further its evolution into the growth stage. (Picken, 2015)

• In the Flamholtz framework, RightNow technologies could be placed in the Professionalization stage where the firms focus is on developing management systems. Although the firm’s revenues are slightly above the threshold for a firm in the professionalization stage, RightNow is evidently still undergoing the process of evolution from an entrepreneurial firm to one that is professionally managed. Gianforte still holds 60% equity stake, and this is highly indicative of the entrepreneurial mindset at RightNow Technologies. From the information in the case, it is understandable that the firm has reached the point where formal management systems need to be put in place.  (Flamholtz, 2000).
• Gianforte has been fairly successful in steering clear of the fallacies of the period of transition. The company’s current state with respect to each of the eight hurdles of the period of transition can be found in the appendix.

1. The case points out that Gianforte was a proselytizer for bootstrapping. Analysis of the financial statements (Exhibit 2) suggests that during the period of rapid growth in 2000-2001, the company’s operating expenses ballooned out of control, triggering a retrenchment and reevaluation of strategy. Based on the information in the case, to what extent did RightNow Technologies conform to the guidelines and recommendations provided by Kawasaki (Ch 5)?

RightNow Technologies’ strategies more or less conform to the recommendations provided by Kawasaki for bootstrapping firms. Some points worth noting are:

• RightNow always maintained a good level of cash flow except during the time of the crisis during which there were significant outflows of cash. Revenue growth has never been the primary objective of RightNow. Instead, there has been a consistent focus on sales and customer service.
• Gianforte believes in selling directly to the customer, and this is evident right from the founding of RightNow when he makes cold calls to customers to try and sell his product, while also getting valuable feedback to better the product. This is also a good example of the “Ship, then test” principle postulated by Kawasaki.
• While establishing RightNow as a player in the CRM market, Gianforte capitalizes on the foundation laid by bigger players such as Siebel and SAP. In other words, RightNow would reap the late mover advantage in this industry, by offering an on demand CRM solution.
• Gianforte relies on a highly skilled top management that he has handpicked. Each of these CXOs function similar a “Morpheus” as quoted by Kawasaki. Gianforte not only “builds a board”, but also empowers its members, who are involved in almost every major decision made by the company ranging from funding to recruiting.
• The change in strategy post the crisis does result in larger average selling prices and longer sales cycles which goes against Kawasaki’s recommendations, but this serves as the foundation for the transformation from a product selling sales force to a solutions selling direct channel. The other smart move on RightNow’s part is the clear definition of their target market: upper mid-market, where the larger players would not necessarily concentrate. (Kawasaki, 2004)

1.  What do you think Gianforte recommended to his board at the end of the case? Why? (Consider the estimated market valuations of the various options using data from the exhibits).

• Due to his innate preference to bootstrap, I believe Gianforte declined the IPO and decided to grow the firm organically. Adding inertia to this assumption is the fact that Gianforte owns 60% equity stake meaning that his vote would have a large say in the ultimate decision.
• In terms of funding, RightNow Technologies was need in need of the funds that the IPO or an acquisition would bring to the table. This is a cash stable company with growing revenues and an ethical approach to doing business. IPOs have been known to result in high compliance costs in addition to potentially causing a conflict of needs between the board and the top management.
• Both the acquisition and the IPO would result in the transferal of management power and decision making to entities outside of the company. This could cause a mismatch in goals and strategy between the acquiring firm and RightNow. Also, an IPO would place the weight of shareholder returns on the shoulders of the board. The constraints that come with both the sources of funding would significantly alter the course of RightNow’s progress.
• Given the conservative approach that Gianforte has taken in building the firm, it is highly unlikely that he would risk derailing it from its course by pursuing either of the two expansion avenues which would provide not much more than a source of marketing for the company.

Appendix: The eight hurdles of the period of transition

(Picken, 2015)