The COVID-19 crisis meant our annual CXO Advisory Council retreat took place where every other business interaction is happening now: online. Even as we are working from home, large enterprise organizations are facing and responding to change, and startups are still building the tools to be successful in a new environment for us all.
More than 30 CXOs from Fortune 500 companies and leading organizations joined start-up CEOs and the Greylock enterprise investing team to share insights and best practices, learn how the current environment has affected priorities of large enterprises, and make lasting connections with innovative startups. We all left the event with some actionable insights:
Expect continued changes to the economic and social environment
- Most attendees said they do not expect anything close to a normal level of operations until at least the fourth quarter of 2020.
- In the meantime, many organizations are making considerable reductions in their operating expenses. On the upside, this reality has helped draw some attention to ongoing operating inefficiencies CXOs have been experiencing, and they are now more eager to find solutions.
Cash Preservation is Key to Survival
- From early stage startups to large, established enterprises, cash preservation is the #1 priority for everyone right now, so we dug into that in more detail.
- On the enterprise side, some cost centers have naturally decreased, such as travel and expense costs. Yet sharp revenue declines across a number of industries have forced technology leaders to rebase budgets and re-prioritize.
- Even at enterprises that feel comfortable with their cash buffers, every expense is being scrutinized, from renegotiating contracts to pushing out payment terms. In other ways, it’s drawing attention to problems CXOs have voiced for a long time, such as locating data centers in expensive geographies; cash preservation may itself accelerate a move toward cloud adoption.
- Additionally, there is mutual concern from CXOs about the runway startups have to build quickly and scale their products. More than ever, CXOs want to know that a startup has a strong balance sheet — enterprise leaders want to be reassured that the products they’re buying are coming from well-capitalized companies that will be around for the long-run.
CXOs are looking for tools that keep their organizations innovative and resilient
- Nobody can delay digital transformation anymore. There is now an absolute need to have a fully functional business with little to no reliance on an in-person workforce or tech that can only deliver value on-prem.
- The acceleration from COVID-19 has put even more impetus on enterprises to move to the cloud, and they want unification of their data if it is spread across multiple cloud providers or sitting in one of their data centers. They can’t just look at dashboards; they want to be able to derive insights from all sources and take action.
- At the same time, there is an immediate concern about the growing risk of cybersecurity threats because of this digital transformation. Decentralization allows attackers to isolate individual users, further diminishing the protection of the already permeable corporate firewall. But there is an acknowledgement that just adding more and more tools, as enterprise organizations have done in the past, does not solve that problem.
- In the early stages of the crisis, the major focus of technology teams was on facilitating and supporting a distributed workforce, often at home, at a scale never previously contemplated by most enterprises (and some are even considering offloading commercial real estate leases altogether). In many ways, that process is still ongoing as priorities shift from learning to use remote collaboration tools at scale to more complex challenges, such as cloud monitoring and drastically changed cybersecurity threat surface.
- As businesses begin to plan what a return to the office could look like, altogether new technology questions will dominate: Is it possible to identify sick employees through ambient temperature measurement tools? Are there wearables that can help provide insights into health or beacons that could assist with contact tracing? The crisis is causing multiple, sometimes distinct phases of disruption that will require different approaches to solve the new challenges.
Proof of Value is the New Proof of Concept
Enterprise organizations don’t have a choice but to make some changes to their tech stack in order to stay ahead of the game. But since we’re facing an economic downturn, they aren’t going to be as open to pilots or testing periods with startups unless they are very certain their technology will have a significant and immediate impact on their bottom line.
Moreover, no one wants to work with a company that has to deliver a physical device and whose technology requires a lot of hands-on, back and forth work to get it actually up and running. CXOs want one-click APIs. They don’t just want proof of concept; they want proof of value. They don’t want to hear about the possible impact – it’s much more powerful to have a testing partnership where the startup can say ‘the whole point of this exercise is just to demonstrate why we already know for sure that you need this.’
Underpinning all of the change so far is the acknowledgement that more change is coming. CXOs recognize the need for agility in the coming days, weeks, and months; solving the problems initiated by a pandemic is only the beginning. Despite the uncertainty, early stage companies are moving quickly to respond to the new environment and new companies continue to be founded to answer the call. At Greylock, we’re grateful to have been able to listen, learn, and share as part of this year’s CXO Advisory Council retreat.