Focus on innovation and the rest will follow, says ServiceNow CEO Donahoe

SUMMARY:

ServiceNow’s new CEO John Donahoe is approaching the end of his first month in the job and is getting some clear feedback from customers about the firm’s roadmap ahead.

John Donahoe, ServiceNow’s new CEO

For its new CEO John Donahoe, ServiceNow’s better-than-Wall-St-expected first quarter numbers gave him a steady jumping-on point for his new job. (The firm turned in a loss of $40.7 million for the quarter on revenues of $416.8 million, both numbers topping analyst consensus.)

Donahoe picked up the reins from former CEO Frank Slootman last month following his time as head of eBay, where was actually a customer of ServiceNow. This has given him a particular perspective on his new firm, he suggests:

I first met ServiceNow while I was at eBay as a happy and satisfied customer.The more I explored this opportunity, the more I fell in love with this company. I believe ServiceNow has the potential to become one of the great enterprise software companies of this era and I’m committed to building an enduring company.

There is enormous untapped potential in digital transformation for ServiceNow, he adds:

When I stepped down as CEO of eBay, I had the opportunity to survey the technology landscape. And it became clear to me that cloud businesses are disrupting both consumer and enterprise experiences for the better. I witnessed this first hand in the consumer space, where cloud-based applications like eBay and PayPal are transforming how consumers behave, but we’re still in the early innings of enterprise transformation and a lot of opportunity remains.

With three weeks under his belt as CEO, Donahoe has met 70 customers in 8 cities across the US to get a feel for their views and needs. From these meetings, he distills three main themes:

The first is that our customers absolutely love our products and they love our platform. And importantly, they want to do more with us. Rarely in my business career have I seen such an enthusiastic customer base. We pride ourselves in high customer satisfaction and our average NPS score is 50, which is considered world-class for the enterprise technology industry. Once we land a customer, they continue to buy from us as is demonstrated by our 97% renewal rate in Q1.

A second theme is that many of the largest systems integrators in the world are rapidly investing in ServiceNow’s ecosystem. As we look to $4 billion of revenue and beyond, our partners will significantly influence our growth as they implement solutions for our shared customers, provide outsourcing services and consume our products internally.

The third theme is that we have a real opportunity to raise our visibility and awareness with executives and decision makers across the enterprise. We’re well-known within IT and with CIOs, but our platform is being aggressively deployed outside of IT to provide real value in areas such as HR, security and customer service.

On that last point, he cites the example of an unspecified Global 50 customer who spent $2.5 million on ITSM (IT Service Management] and added an additional $1.7 million, primarily for ServiceNow’s Customer Service Management and ServiceWatch offerings. This is something that is becoming more of a trend, he says:

Another interesting trend we’re seeing is the extension of our platform to manage relationships outside the enterprise. This customer is using ServiceWatch to not only map internal services, but also map external services and they’re using customer support management to resolve the underlying issues. In my discussions with customers, they increasingly view our platform as a way to manage work across and outside of enterprise. This awareness makes ServiceNow even more relevant and more strategic to our customers.

He adds:

Our platform is getting pulled into new use cases by the customers themselves. They see this platform as an opportunity any place there is a workflow or any place where they can divide a service, that we can do for them there what we’ve done in ITSM. [You just hear that], whether they either building their own applications or asking us to build applications. My observation is what the company has done a very good job on over the last couple years, is to recognize that and then build these new products or new services into the platform. So, build the HR, build customer support, build security. And you see the customers appreciating that.

Tech evolution

The quality of ServiceNow’s technology is something that attracted Donahoe to the role of CEO, he states:

This platform is architected the right way. [Founder] Fred Luddy deserves enormous credit because, as I did my due diligence about this platform and then as I listened to customers, everyone says what a flexible, easy-to-build on and extensible platform it is.

The other thing that I found interesting and attractive was the organic growth. A lot of the innovation at ServiceNow has been organically developed. You don’t see that very often. Usually, technology companies have a one-hit wonder and then use M&A to add in new innovations. Because of the way the platform is architected and because of the way Frank and team have really jumped on the HR, customer support, security, business applications, you see organically built innovation and a muscle and a track record to begin to do that…that innovation engine has to be the core of the core of any successful technology organization.

What is interesting is the changing role of the CIO and the technology organization, he adds, evolving into Chief Transformation Officers:

The goal of every company is to minimize the resources consumed in the running of the company and maximize the resources devoted to innovation and your end customers. Because technology can really help reduce complexity, simplify, automate and empower employees to be more customer facing, the CIO is often the most technology-literate senior executive. So, they’re being called on to drive what we would have called business process re-engineering, technology-enabled business process re-engineering,across the enterprise.

The other thing that’s I think sort of acting as early kerosene on this [evolving CIO role] trend is just the movement toward intelligent automation, machine learning, deep learning, where data and analytics can help automate these processes and help you go from being reactive and responsive to being more predictive and addressing the root cause and remediating it. And the center of where that knowledge often is going to reside inside the enterprise. So, you’re not going to build machine learning capability in every department, you’re going to say, ‘All right, where’s our machine learning?’. Just as you often have a big data analytics group, you’re going to have machine learning or what we call intelligent automation group. And I think that’s going to reside in IT. So, I see an expanding role of IT in many of these enterprises.

As he comes to the end of his first month in situ and looking out at his first full quarter in charge, Donahoe argues that he’s also bringing a specific learning from his experiences at eBay, one that has relevance when considering potential competitive threats to ServiceNow:

The lesson I learned from the consumer Internet is, eight years ago, there’s all this talk about the big platforms potentially competing with one another. If you look at what happened, most of them focused on innovation, focused on delivering for their customers and there was ample room for growth for both. I think we’ve got that kind of white space. What we do, others are not doing. If we continue to innovate and continue to drive hard in that direction, we’re going to focus on innovating, satisfying our customers and I think when you do that, the rest takes care of itself.

My take

Some nice numbers that get the Donahoe era at ServiceNow off to a solid start. The new CEO rightly paid tribute to the previous management for building the company to where it is today – from 375 employees and $93 million revenue six years ago to 5,000 people and revenue of $1.4 billion today – but it’s time to enter the next phase of growth. Donahoe’s enthusiasm for the task at hand is self-evident. Onwards!

Image credit - Freeimages.com Raja R/ServiceNow

Disclosure - At time of writing, ServiceNow is a premier partner of diginomica.