On quality and defining the right roles
#4 - Port Cities long winter. My meeting with Fabien Pinckaers.
Hi!,
Entrepreneur, Odoo consultant, business manager, business software enthusiast, or whoever you are,
Welcome to issue #4 of Odoo Trailblazer, our journey to become the #1 Odoo partner.
“I was very happy as we were heading to our office in Ho Chi Minh, Vietnam. It’s been five years since my last visit, as Covid didn’t help. The entire management team changed, and I needed to meet most of our Vietnamese directors and colleagues for the first time.”
The guy with me is Stan; he had an unexpected journey with Port Cities across Asia, as he shared in this video here.
Let me tell you about our wild ride of 2017-2018 at Port Cities! Everything was going great until mid-2017. We were cruising on euphoric growth for 2.5 years, but then things took a turn for the worse.
That’s also when I met Fabien Pinckaers for the first time, the Odoo founder.
It changed the way we manage our delivery team. We’ll deep dive into our past and future evolution.
Enjoy!
Agenda
Backstories - In May 2018, we lost money for ten months in a row; I contacted Odoo’s founder, Fabien Pinckaers
Business update - All KPIs are about sales, but the long-term drivers for success are delivery and quality
Roles & levels in consulting
Typical functions in an Odoo partner, and the four stages of development
Problems with techno-functional
Job positions and levels
Next steps
1. Backstories - In May 2018, we lost money for ten months in a row; I contacted Odoo’s founder, Fabien Pinckaers
It was May 2018, and we had been experiencing financial losses for ten consecutive months.
Before that, we did about a year of 12% growth, on a monthly basis, which means doubling in size every six months while making money.
We went from 20 to 80 employees.
It’s important to understand the mindset of the management team at this stage. You are obsessed with growth, feeling invincible, and almost blind about anything else.
When I saw the revenue growth flattening and the cost rising sharply, I obviously started to panic, but could not be rational quickly enough.
We then cut costs, because we had to. It’s hard for the people, as well as anyone else in the remaining team. After topping ~95 employees, we had to terminate ten people. We structured better our current projects and boosted our sales efforts. But it was not enough.
In May 2018, we had lost money for 12 months in a row, our cash was critically low, and I was desperate.
I had a short break in Belgium to meet my family and some old friends.
I asked for help from my business school friends. They are good consultants and entrepreneurs, but they are not Odoo consulting experts, so they advised me to contact Fabien Pinckaers. What?! I’m not the kind of outgoing person, but ‘OKAY, I’ll do it.’
I sent him a message informing him about our rapid expansion in Asia and inquired if I could schedule a meeting with him at his office.
A couple of days later, I travelled to the Odoo headquarters to meet Fabien in person. Surprisingly, their office was located on a farm in a nearby village, not too far from Brussels.
I explained my story to him: Odoo was booming in Indonesia, and our crazy growth over the first 2.5 years. I also shared some of our current issues. I was not crystal clear about our losses, but they have been through it before, so he understood.
Fabien listened and asked the right questions. You could feel how smart he is, especially to speak about Odoo consulting. It was mindblowing.
You would feel like you are speaking to the Bill Gates or Jeff Bezos of business software.
Some Belgian newspapers call him the Bill Gates of Belgium (here it said “The Walloon Bill Gates”, referring to the French-speaking Belgian)
After understanding my current business situation, he gave me recommendations specifically addressing my issues. It later transformed my business forever.
1) Stop with “techno-functional consultant”, and build a team of only “functional” and only “technical” consultants.
2) Focus on project gross margin, your single most important KPI to measure the business performance, and how well your projects are managed.
3) You need excellent, better project managers. A bad PM has a tremendous impact on your implementation, margin, quality, customer satisfaction, and upsales. This is your #1 priority.
4) He implicitly suggested that I needed to reduce my team and overhead. He gave me this advice indirectly by sharing his own experience. Although I knew we had to let go of more people, it helped me to hear it.
In 2018 I read about the right way to lay people off by Ben Horowitz; a very useful guide. You should better manage your business to avoid mass layoffs, but if you have to do it, do it right.
We also visited the farms in construction, as it was the beginning of the crazy ascension of Odoo. He is a very nice person and passionate, and this drove me to succeed.
What was the impact on our business? I was motivated, which gave me the courage to continue our business turnaround.
We were profitable a few months later and continued to grow.
2. Business update - All KPIs are about sales, but the long-term drivers for success are delivery and quality
In the last three issues of this newsletter, we presented;
Issue #1: our new business organization for 2023; to group our business by region.
Issue #2: why do we set profit targets of 25% for these new regions?
Issue #3: why we want to be the #1 Odoo partner.
I spoke about “sales KPI” as criteria for the top Odoo partners. We see that businesses often prioritize sales:
We propose to use revenue or the number of users as the criteria for the best partner.
All start-ups speak about growth before margin or profits.
Companies tend to invest much more in sales & marketing software or consultants than anything else.
The reasons why the managers or directors focus on sales seem rational
Higher sales enable you to cover your overheads, gain market and negotiating power, and make a higher margin percentage.
For two businesses with equal margin percentages, if you are 2x as big, you’ll make 2x as much profit.
In the short term, your fixed cost is stable. So if you increase your sales, you boost the margin and profit.
Sales have direct and short-term effects. But in the long term, business owners and directors should focus more on margin and gross margin.
Usually, businesses with the best products or services make higher margins, so it indirectly measures how good is what you sell.
With a high margin, you could afford to make the right investments and pay for the best staff.
For our business (Odoo consulting), I learned that improving services and quality is more valuable than investing in sales for very obvious reasons:
I can keep my existing clients longer, and I upsell new software features and apps.
I make money on support contracts.
Word-of-mouth from happy clients gives me new customers
CONCLUSION: quality & gross margin are the true long-term drivers for success.
Accenture mentioned in their Annual shareholder report than more than 80% of their revenue comes from clients that they have served for more than 10 years.
Analyze financial statement of public companies. It is very useful to analyze the financial statements of public companies in your sector. They disclose a lot of relevant information freely available.
Each year we do several initiatives to improve consulting quality. Our top priority to improve delivery excellence in 2023 is to harmonize roles definition and training plan:
Update all our job positions, roles and levels across the group.
Define a precise skills matrix for each level, so a set of skills that each position should have.
Consolidate training material to develop each skill.
3. Roles & levels in consulting
3a. Typical functions in an Odoo partner, and the four stages of development
We noticed that Odoo partners usually developed in stages.
STAGE 1: techno-functional.
Usually, tiny business software businesses start only with a “techno-functional team. This is actually a very bad approach, and I discussed it in the next section.
In Port Cities, we split our techno-functional team in June 2018. We’ve now project managers, functional consultants, and software engineers (developers).
STAGE 2: functional and technical teams.
Later, they split functional and technical consultants.
The functional team is typically client-facing, with more expertise in the business side and configuring the software. They will define the requirements for the technical team, and help to manage the project scope, budgets, and priorities.
The technical team configures advanced features and writes customized code to change the default software functionalities, add new features, and integrate with other software.
Actually, this change should happen as soon as possible, even with a few employees.
STAGE 3: sales & marketing.
In small services firms, the founder is typically in charge of sales and marketing. When it gets bigger, developing a sales & marketing team is critical to keep increasing the revenue, but also to free up the founder's time to focus on other areas.
STAGE 4: build your niche market
I noticed that more mature partners start to build their expertise and create dedicated divisions or teams for that.
Some will focus on vertical, such as developing expertise or special apps for specific industries. Others will focus on technical competencies such as BI or integration.
In Port Cities, we built three strengths to create our niche:
Corporate infrastructure team: they set up the network and cloud environment to run Odoo safely and meet the corporate standards in terms of security, stability, performance, etc.
Data engineers: they develop and install middleware to integrate Odoo with other software, even when the volume of transactions is very large, or the IT architecture is complex.
International support: a support team to provide high availability of functional, technical, and infrastructure experts, 24/7.
3b. Problems with techno-functional
As said by Fabien, all business software consulting firms need to move away from “techno-functional” profiles as soon as possible.
First, Being a proficient functional consultant is no different from being a skilled developer - both are challenging roles to excel in.
Focusing on one rather than the two is the right way to go.
Second, you don’t want your developers to decide with the client what they’ll develop. Developers love to solve problems with code, but this is usually bad for businesses.
In Business software implementations, it is advisable to minimize the use of customizations in resolving issues.
As Fabien Pinckaers said, the problem with developers is that they love to solve problems with code.
3c. Job positions and levels
Some consulting firms only define the roles in terms of function, such as engineer, consultant, and project manager.
At Port Cities, we follow the concept of large firms by also defining many levels for each function: e.g. you could get ~10 levels of software engineers.
Here are the generic levels in Accenture for example:
In Port Cities, we start from 1 to 13. So an intern will be level 1, a fresh graduate will be level 2, and a manager level 8.
In each of our countries, a specific profile has a standard salary range and a selling price. So depending on the market, a manager may be sold 2-3x as much as an Analyst per hour.
Many companies don’t do it and sell all software engineers at the same price. So, they overprice their junior resources and underprice their senior experts.
The counter-argument to our approach is that it is more complex to sell a service with a more complex price structure. But I would answer that you could solve it by presenting your commercial proposal well.
Unfortunately, today, the selling price of Odoo senior consultants is, on average, too low in the market, so it is either hard to hire or sell very senior consultants; the profiles needed for larger and more complex implementations.
My opinion: to succeed in the midmarket, Odoo and Odoo partners must properly set the price of their consultants per level, and increase the selling prices of senior experts
4. Next steps & advice
We are now in the middle of setting up our new organization by region, moving out from an organization by country.
We align all job levels across the regions
In the coming weeks, we’ll introduce our new skill matrix, to define precise expectations and training plans for each function and level
We are trying to engage our team emotionally with the new region, teams, and clients, so they feel that they belong to a region instead of a country.
In parallel, our finance and sales teams are finalizing and implementing the finance, sales & marketing planning for 2023. Subscribe to not miss it!
I hope you enjoy this issue. If you wonder why we do things a certain way, or if you have another opinion on how we should run such a business, please share your feedback!
To know more about Odoo for midmarket, you should read:
Odoo large data implementation for Gojek logistics (an Indonesian unicorn): https://portcities.net/blog/business-cases-3/post/port-cities-x-gojek-built-a-system-that-handles-high-volumes-of-daily-transactions-55
On our infrastructure services for corporate: https://portcities.net/cloud-hosting-solutions
On high-performance API for Odoo: https://portcities.net/blog/tech-blog-6/post/odoo-api-solutions-56
Use of PgBouncer for Odoo: https://portcities.net/blog/tech-blog-6/post/calibrating-pgbouncer-with-odoo-77