I (Bob) have taken a bunch of vacation time and had minor surgery that required time off, so I’ve had time to do a lot of reading (Ron Chernow’s Alexander Hamilton (great play!) and Ben Bernanke’s Courage to Act and a bunch of web stuff). I tend toward tech, business and economics reading and the collection of readings only reinforced the guiding principles and structure we have put in place at RunSignup. Creating a long term organization with a synergistic balance of meeting the needs of Employees, Customers and Owners.
The key problem that many organizations have is they are structured too much around short term thinking. DealBook had their conference this past week, which included this interview with Stanley Drunkenmiller. One of his best points (start around 12:50 into the video with the money shot around 13:40 was that IBM is meticulous about hitting their quarterly numbers while Jeff Bezos at Amazon has missed 9 Quarterly Earnings Estimates in the past 19 quarters, but doesn’t give a damn. Amazon stock is up 20X and IBM is flat over the past 10 years and is now worth 2.5X what IBM is worth. DealBook also put this together in a nice tidy graphic that explains why the system reinforces the short term notion:
When we created RunSignup about 6 years ago, I was not sure what would happen and if customers would like what we built. By 2012 we became convinced that we were building something that could be very useful to the running and endurance community. I also met Alan Jones of RunScore and Roger Bradshaw of The Race Director during that time period, and very much respected them both for building small, focused businesses around their passion that have served the endurance community for many years. I became focused on building a long term organization even though we were very tiny.
I have been lucky to be part of a number of fast growing companies and have studied and learned different approaches to building companies. With RunSignup, we decided we wanted to create something for the long run. We focused on several key elements to the company:
- Long Term Technology – make infrastructure investments (not just bells and whistles) to make it fast, scalable, easy to modify. Commit to re-writing code to make the system continuously using current technology. Build around the idea of Continuous Delivery of code every day – not once a year releases. Build an open platform where we could work easily with partners.
- Long Term People – look for people with passion for our target market and their areas of specialization. Structure the organization so it is built on trust and responsibility in a decentralized way. Think about long term employees and succession planning.
- Long Term Customers – give customers a real say in what we are doing. Track what they want and deliver continuously. Admit we don’t do everything and we need to learn. Put in place the resources to help customers help themselves (self serve and open platform). Make sure we hire ahead of the curve to make sure we support our customers well. Make sure we get customers coming back every year.
- Long Term Partners – timers, running stores, running clubs and other technology providers all provide a mechanism for RunSignup to mingle our offerings with their offerings to create a better solution for the races and participants.
- Long Term Financial – no short term investment. The financial incentive is for long term annual cash flow.
- Long Term Governance – live up to the ideal of a three leg stool model of Employees, Customers and Owners being equal partners. Empower the Customer Advisory Board more as the company gains critical mass.
Long Term Technology
In 2012 we took on a silly project to many, but one that helped to fundamentally define us. We saw race registration systems fail on mass openings and determined that we should rebuild our infrastructure to handle 50,000 registrations in 10 minutes. We moved to a massively scalable architecture on Amazon AWS, wrote a load testing framework capable of emulating 50,000 users (it became RedLine13), redesigned our code to include multiple tiers and redundancy. You can read a white paper on the original design and this blog on our current implementation.
This project would have been ridiculous from a short term view since the ENTIRE year of 2012 we only had 80,000 registrations, and we had built a system that could handle 50,000 registrations in 7 minutes (we are over-achievers). But we are thinking long term, and knew that some day a customer would want to have that functionality. And if we built a robust system and had a race open up we could sleep soundly.
The other key technical thing we did that year was to put in place a mechanism for rapid development and deployment of code changes without bringing the system down. Last year we did close to 2,000 releases of our software without anyone noticing any interruption of service. We also put in place multiple test servers on AWS that our multiple developers can use on overlapping projects. This allows us to break apart projects into many small parts that can be included in our service when they are ready.
We view Technology as the key thing we offer. Having a nice customer service person is great, but means nothing if the system won’t allow them to help you.
Long Term People
We look to hire people that want to work in this space. Most importantly, we look for people of extraordinary talents (Stephen is the epitome of this). If we give them great challenges and responsibility for meeting them along with fair compensation then they can stay at RunSignup for a long time.
We believe in compensating our people well. We pay decent salaries and have a Profit Sharing program. Our benefits include 100% company paid health insurance and HSA accounts, Simple IRA where we match 3%, Short and Long Term Disability plan, computers, cell phone and Internet coverage especially if people work from home.
We realize our customers are actually paying for these benefits. And if our customers like the people supporting them with technology and service, then they should be willing to make sure they are paid well. This type of almost automated feedback loop is key in creating a virtuous long term cycle unlike the short term cycle shown at the start of this blog.
One of the other things you will note about RunSignup is that we have a mix of ages. And the 20 and 30 Somethings are very likely to lead this company in 20 years.
Long Term Customers
We want long term customers. One of the secrets to our business model is that it costs a lot to win a customer and much less to hold onto them. So customers become more profitable the longer they stay with you and can pay back that initial investment.
More importantly, it is a whole lot nicer to come into work when you have a good relationship with your customers. Oh, and customers have a much better experience if they are happy!
Long Term Partners
We have a flourishing Partner Program that has been one of the keys to our success. For example, hundreds of timers now combine our technology and technology they for timing and scoring to make races increasingly interactive and social.
We built our technology platform with a completely open API so other technology providers could interact. We know we can not build everything ourselves and so our platform is “plug and play”. This enables use with existing systems and encourages new developments by others.
Long Term Financial
I own 100% of RunSignup. I’ve put a fair amount of money into the building of the business and have not taken any compensation yet. 6 years is a long time, but I am fortunate with some of my other previous and current activities. I expect 2016 will be the first year I am able to take some compensation, and my wife is happy about that.
I will earn a good return because I am looking at the Alan Jones model of hopefully working at RunSignup for another 20+ years (I am 58 now – 20 years younger than Alan). From an economic standpoint, I can then look at the cash flow generated from the business as my financial payback for my investment. Since I am a patient investor, unlike some of the investor types in the feedback loop above, there are no rush scenarios.
For example, I had expected to start paying myself from the business in 2015, but we had the opportunity to bring Roger and James on board by acquiring The Race Director and RaceJoy. We also had the opportunity to help the Boston Film move forward. These long term investments will bring a great deal of innovation and fulfillment to the running community, and will be paid back over the long term.
Long Term Governance
As stated above, I believe in organizations being structured around the concept of Employees, Customers and Owners being equal partners. To date because of our size and youth, we have only made early progress on institutionalizing this. We created a Customer Advisory Board (CAB) in the summer of 2014. We meet the Monday before our annual Symposium. This past year we agreed on having rotating 2 year assignments (so half the board is new each year).
Today the CAB acts as a mechanism to get customer feedback into the company. As time progresses, it will become more like a Board of Directors for the company with more and more meaningful strategic input.
I also think about progression planning. Mostly from the perspective of what happens in 20 years when I might not be able to be as engaged as I am today, but also what would happen is Stephen or I or any of our folks were not able to productively work. We have plans in place for all of that, which is important if we are truly building a long term organization of Employees, Customers and Owners.
Summary
While most of our customers only use us a few times over a few months each year, we view these interactions as part of a long term relationship. It is our responsibility to continue to provide technology options for you to improve your races. With the fast pace of technological advancement with Cloud, Mobile, Social, Advertising, Marketing, Race Day Technology, there is a lot of work for us to do for many, many years. We want to make sure you can continue to count on us for those few months each year when you ramp up promoting your race and then having a great Race Day. We look forward to many decades of a fun, productive partnership!