Each week, we seek expert advice to help a small or medium-sized business overcome a key issue.
When Akira Systems Inc. was founded 10 years ago, its managers focused on creating a consulting and advisory firm that would help other businesses manage their employees. The company made HR presentations and taught its clients how to run their corporate intranets.
But in early 2013, Akira’s managers realized that in order to grow and evolve, they needed new sources of revenue. Software was the answer.
The company, which is based in London, Ont., developed a program that helps businesses hire new employees, schedule and manage attendance and empower staff to manage training and benefits.
Akira is making an evolutionary switch, one that is focused on sales of its market-ready software, says Rob Herold, the company’s vice-president of strategic partnerships.
But in embracing this change, the company has encountered challenges.
“When you make a presentation, you’re seen as educating, and you’re also seen as an expert,” Mr. Herold says. “The perception is different with products. People don’t like to be bothered by salespeople.”
The consulting and advisory strategy worked for Akira because it operated regionally, servicing nearby clients, who in turn helped them expand by providing referrals.
“As a product company, we now have to go beyond Ontario,” Mr. Herold notes. “Our product transcends regional and local boundaries.
Akira’s software, called Wavelength, has 20,000 users among about a third of the company’s thirty-five clients. It is offered as a hosted software-as-a-service product for small and medium-sized businesses and as an on-premise platform for larger organizations. Subscription packages cost $7 to $15 a person.
Although 20,000 is a big number, Wavelength is capable of attracting and handling many more thousands of clients, Mr. Herold says. A large client alone could have nearly that many.
“The product’s ready for prime time internationally,” he stresses.
Akira has 14 full- and part-time employees. Managers don’t have a lot of time or resources to devote to business development and marketing. The company is looking for distribution partners to assist with sales and help make Wavelength more competitive in the market. “We need partners that have feet on the street,” Mr. Herold says.
They also hope that new partners will help them reach bigger clients. “We’ve decided to grow this way instead of hiring salespeople,” he said. “Direct salespeople are very expensive to put in place.”
The Challenge: How can Akira grow by selling human resources software as it shifts away from consulting?
THE EXPERTS WEIGH IN
Becky Reuber, professor of strategic management, Rotman School of Management, University of Toronto
I would take a good look at their sweet spot in terms of their clients – who are they? Akira is selling a human resource package, but these clients probably also have other types of packages for, say, their shop floor, for marketing and for their sales force. And they will probably have accounting packages. So you would want to make your product similar in nature to the other products they buy – similar in terms of price point and the expertise they need in-house to use it.
The other thing involves interfaces. Does their HR package feed into, say, the common accounting packages these companies use?
Once they have a good idea of the ideal customer profile, look to see where they are located. Within a geographic area there are lots of different companies that talk to each other – whether it’s through a young president’s organization or a chamber of commerce. You want to have some word-of-mouth advertising. But if they spread too thin geographically they are going to lose that potential.
Another thing Akira could do is see if they can get a happy, existing customer to make the transition to acquiring their HR application on a sort of pilot basis, and then use the endorsement from that. They need endorsements from companies saying this package really works.
Saul Plener, national leader, private company services at PricewaterhouseCoopers LLP, Toronto
First and most important, Akira must determine where the biggest and best opportunities are. Then they need to ask what they can reach in terms of that market, given the investment dollars available to them. But make sure they are capable of delivering because of the reputational damage that can result by not doing so, especially in today’s transparent world.
Think about a phase-in strategy. Everything doesn’t have to be done at once. This might involve testing the impact of their software in smaller cities, which might yield greater results compared to, for example, a more saturated market like Toronto. Concentrating on Southwestern Ontario where there are a lot of high-tech-related companies could provide Akira with a head start.
Another thing to think about is how social media or other forms of advertising may ultimately factor in future success. There are so many different forms of marketing and branding. Which is going to be most successful, and how will they penetrate the fastest?
They also need to determine how they are going to fund their strategy. Strong budgets are important. They need to ensure they don’t run out of funds halfway through such an initiative.
Andrew Moffat, entrepreneur in residence at the economic development agency Invest Ottawa
The best use of Akira’s time would involve establishing a good Web presence. Get their message out there so everybody understands what their value proposition is.
They should create certification programs for their potential resellers. By certifying resellers they would be able to ensure their customers get the best service possible. The reseller often knows the potential client and is able to leverage that relationship to shorten the sales cycle.
But in the early stages I recommend that most businesses – unless there’s a big client that’s prepared to pay a lot of money – don’t get involved with technology partnerships, because they have the potential to suck up your resources. When you commit to a technology partnership, what you are both trying to do is leverage each other’s clients. If you partner with a technology that you enhance or that enhances your product, you are both able to leverage your client acquisition investments.
As you transition from a professional services revenue model to a product sales model, it is critical to have a plan to reduce your reliance on professional services. Such services are an excellent option to raise funds and dilute equity. However, a plan will ensure that you focus more on product sales. Failure to recognize product sales as the future of the company may result in professional services robbing you of your best people by virtual of their constantly being required to go out to client sites.
THREE THINGS THE COMPANY COULD DO NOW
Know your client’s software
Make sure your software is compatible with other software the prospective client may have.
Try a pilot project
Persuade an existing customer to make the transition on a pilot basis, then use the endorsement as a type of low-cost advertising.
Consider concentrating on a region where there are a lot of high-tech-related companies that could provide Akira with a head start.
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Special to The Globe and Mail
Interviews have been edited and condensed.