This week on Trusted Counsel’s podcast show In Process: Conversations about Business in the 21st Century, Managing Partner, Evelyn Ashley and Partner John Monahon speak with Alan McKeon, President and CEO of Alexander Babbage. Fifteen years ago McKeon bought a market research company focused on shopping centers. Shortly thereafter, he recognized an opportunity for growth and embarked on the company’s first strategic business transformation. In the following years, he has successfully led Alexander Babbage through two more business transformations and has consistently grown his cash flow funded company.
“With the company’s first business transformation, the idea was to learn the commercial real estate industry and to integrate the business that I’d just bought into a platform that we could grow from,” says McKeon. By the third year he purchased a second company, their largest competitor, thus making Alexander Babbage the largest market research provider for the shopping center industry. This strategic acquisition led to the company’s second business transformation – market expansion. “We identified what was common between shopping centers and other visitor destinations such as museums, zoo’s or sporting arena’s and determined that while these destinations attract thousands or millions of people a year, the destination executives actually knew very little about their customer demographics based on ticket sales alone. We took our expertise in shopping center visitor market research and applied it to these other destination verticals by building out expertise in those areas.”
Leading a business transformation can be daunting. Transformation initiatives require strong and clear communications to gain buy-in from employees. Employees are ultimately concerned about how they fit in post transformation. Emphasizing the reasons, such as market expansion, oftentimes satisfies concerns for long term success. McKeon recommends implementing benchmarking goals. He says that a transformation will always take longer than anticipated. Success will be achieved by continual focus on those benchmarking goals as well as continued clear employee and other key players communications. McKeon’s approach was weekly emails, frequent one-on-ones, and town hall meetings. The consistent message was summarizing where the business was in the overall timeline and reiterating their importance in Alexander Babbage’s successful business transformation.
During the course of the podcast, C-level executives and business owners will learn:
- What external factors led Alexander Babbage, a location-based analytics firm to go through three business transformations
- Tips to quickly get employees onboard with a business transformation
- Key performance indicators that Alexander Babbage used to measure success for their business transformations
- How to lead a successful business transformation
About Alexander Babbage
Alexander Babbage is a location-based analytics firm specializing in physical destinations that uses advanced geo-fencing technology and mobile signals to understand their actual visitors. For example, shoppers at a shopping center or visitors to a museum. This approach supports asset leasing and marketing decisions by providing insights into where customers are coming from, their demographics, frequency, dwell time, retail preferences and behaviors. Studying over 100 million consumers the company measures market penetration for destination clients and their competitors all without installing any equipment or invading consumer privacy.
Learn more about leading a business transformation by streaming the conversation in its entirety in the player below or download it to your mobile device via iTunes. Don’t miss a single episode, subscribe to our show “In Process Podcast” on iTunes to receive this episode as well as future episodes to your smartphone.
LEADING BUSINESS TRANSFORMATION INITIATIVES IN 2020
Trusted Counsel (Ashley) LLC. All Rights Reserved.
Announcer: It’s time for In Process. Conversations about business in the 21st century with Evelyn Ashley and John Monahon. Presented by Trusted Counsel, a corporate and intellectual property law firm. For more information visit trusted-counsel.com and now with In Process here are Evelyn Ashley and John Monahon.
John: Welcome to In Process. Today we’re talking about business transformations Evelyn. This is actually the second podcast that we’ve had on this topic.
Evelyn: And since the first one was with an operating partner from a venture firm and kind of his background, I think this one’s got quite a lot of different aspects to it as we’ll find out our guest is actively operating and overseeing his business and has actually experienced a number of transformations in the development of that business.
John: Right. And that always makes it very interesting because I think it fits a lot of the people that may listen to this show that are our client base. They own their business, they’re owner operators and they’re facing outside pressures of transformations and then they respond by shifting strategy of their business. And that can be really scary when it is you as the owner and the sole person who’s controlling the direction of that business. I think we’re very lucky to have Alan McKeon here today. He’s the CEO of Alexander Babbage. Alexander Babbage is a location-based analytics firm specializing in physical destinations that use advanced geo-fencing technology and mobile signals to understand their actual visitors. For example, shoppers at a shopping center or visitors to a museum. This approach supports asset leasing and marketing decisions by providing insights into where the customers are coming from, their demographics, frequency, dwell time, retail preferences and behaviors. Studying over 100 million consumers, the company measures market penetration for destination clients and their competitors all without installing any equipment or invading consumer privacy. Alan, welcome to the show.
Alan: Hey, thank you, John. Thank you, Evelyn. Pleasure to be here.
Evelyn: Great to have you here.
Alan: Well, listening to that makes me realize what a transformation we’ve been through over 15 years. I don’t think I even understood the introduction description of what we are.
I’ll tell you where we started standing with clipboards in a shopping mall asking people, “Have you been here before? How long have you been here? Where else did you shop?” That is a simpler place of where we started and perhaps can show where we’ve gone to.
John: And how did you come about doing that? Because I understand that you bought the business. So tell me about buying it, what you saw in it and sort of that transition process and transformation. Because I understand there was an initial transformation at that point.
Alan: So I just finished out a previous company and I was looking around for what to do next. So I built a list of things that I wanted from the next company that I ran and I started scoring different businesses against that list and this was the one that came out on top. I discovered a marketing agency that focused on shopping centers and they did market research on the side and the owner wanted to dispose of the market research business. So we purchased that and suddenly I’m the owner of a market research company with some existing clients and learning how to go and do intercepts and understand shoppers in an industry I knew nothing about. This was 15 years ago. The first transformation was to learn the commercial real estate industry and to integrate what I just bought into a business or into a platform that we could grow from.
John: As you mentioned, it was a very traditional model then of market research. You said standing there with a clipboard taking in information just so people get a sense of sort of where you’re going to end up here as we tell this story, what did you do with that information once you received it at that time?
Alan: Imagine you own a large shopping center and you’re trying to market that center. You want to know who your shoppers are. Are they young? Are they old? Are they rich? Are they poor? You want to know where they live. Do they live to the east or to the west? You want to know what they like about your center. Do they like the retailers you have? They’re missing restaurants you should have and you only find out that information through market research. Back then we used traditional techniques, surveys essentially to find out that information by asking consumers, “Excuse me, how often do you come here?”
And I’m sure you’ve been interrupted somewhere at dinner, maybe someone’s called you, someone’s sent you an email asking for a survey, or you’ve been walking happily about your day and someone stopped you and said, “Excuse me, would you tell me something?”
John: And I can’t wait to fill out that survey. Gosh I’m glad you found me.
Evelyn: Just like everyone else.
Alan: Which led me to learn a whole series of things around that industry, such as how to get people to cooperate. How to get a random sample so it was representative, and so you could inform a shopping center or a retailer, this is where my customers come from. This is who they are, this is what they want. This is why you should locate your restaurant here. So the first piece of the transformation was me understanding the industry and the people and the relationships that I’d acquired.
John: So fast forward a little bit because that seems like a good model. It’s worked for many, many years, decades that people have done market research in that manner. You had a successful business, it was going well. What led you to think, well, maybe you have to do something a little bit different?
Alan: The first thing I wanted to do was to use that as a platform to grow because shopping centers is a, it’s a nice market, it’s a big market, but it isn’t a huge and growing market. So I looked first for what assets do we have from a people, from a technology, from a process viewpoint, and where else could they apply? So I would think of the transformation as being a market expansion. And we identified that what is common between a shopping center and other destinations. For example, a museum or a baseball team or a basketball team or a zoo, is they’re all large format. They attract hundreds of thousands or millions of people a year and they probably don’t know very much about them. So we took the expertise that we had in shopping centers and the reference accounts, and we bounced over into baseball and then into basketball and from there into the performing arts, so museums, operas and orchestras. And so it was really a growth strategy based around going from one vertical market into aligned or comparable vertical markets where you could at least transfer some of the expertise.
John: And how many years into the business was this?
Alan: It took me about a year to stabilize and build relationships in commercial real estate and identify what assets we had. And then two years in, I purchased a second company, my largest competitor, and that cemented us as the largest provider in shopping centers. And then from there we said, okay, I left the people behind who were working in the shopping center vertical and said I’m going to go chase other verticals and we’re going to build out expertise in those. So that realistically happened in year three through around about year seven or eight. So we started in 2004 and it took us through 2007 and as soon as that large real estate recession that some people may remember.
Alan: Ouch. Yes, I was really glad that I wasn’t dependent on one vertical. Real estate would have been a decimating business to be dependent on in 2008 or nine.
John: Was there any shift in the market or external threats that made you think about this strategy? You said that you had to switch to other verticals and you thought about that, you developed the strategy, but was that coming from within the organization or from outside of it?
Alan: We’re internally financed. We’ve never taken external capital, but in conversations and listening to your podcasts, I often hear that people ask questions, venture investors ask questions like revenue concentration. Do you have one customer that generates more than 15% of your business? And thinking about that, it was partially, “Hmm, well if I’ve got one vertical market that is cyclic and I’m heavily dependent on that, how do I survive the next recession? How do we grow the business beyond the next recession?” In a services business all of your business is the people. So how do you grow the people? And if every 10 year recession you have to downsize the people, that is a problem. So I wanted to try and mitigate that as that was primarily the motivating factor.
John: What about on the technology side? One of the reasons I was thinking about the dates was 2004, 2007 around that time obviously data’s a big play now. What you do is as a lot of data and a lot of the technologies that you do was coming online then or in existence but isn’t where it is today. Did you have to account for that in your strategy when you were thinking about it?
Alan: Yes. So one of the things that we saw at that time was the rise of online surveying. So completing surveys on the internet and the first thing that we saw to go away was clipboards. We used a series of different technology devices, tablets originally and then through to PDAs and now through to phones as means of collecting data so you could reduce the cost because you weren’t having to re key the data from paper.
John: No, it’s very interesting because it goes paper and then online surveys and then now it’s in the pocket.
Alan: Now it’s mobile.
John: It’s a very, it’s a very big but quick shift. I mean that’s not a long period of time to go through three cycles to where you are now doing geo-fencing and being able to track preferences. It’s a very quick change with the technology, which means you’ve had to change with it as well.
Evelyn: But while you are actually building the business and growing it, was there a point where you realized the power of the data that you were collecting? With everyone talking about a data warehousing and the use of data and it continues to be data is king. Was that part of your strategy as you move forward?
Alan: Yes, but by happenstance. When social media started to appear, we were engaged and interested in social media and so we started creating benchmarks. Which shopping center or which baseball team has the most Facebook fans? Which has the most Instagram fans? We started writing reports around that as a marketing tool and people reacted to it. And then we started realizing benchmarking as a tool is really valuable. People want to know where they stand. We all want to know where do we stand. Am I the richest, the poorest? Am I the tallest? Am I the shortest? Am I the, do I have the most Facebook fans? Did I get the most likes for that post? So we started a series of benchmarking reports and we still get calls for those today even though we ran them for about four years and then transitioned to what we’re currently doing today.
John: Well, fast forward to big data and tell me about the transformation that you made from a services business to a big data business.
Alan: So the next transformation we made started from listening to a customer in 2013 and the customer said, “I think the rich people who live at the beach are driving straight past my shopping center to go to my competitor.” And this is in Los Angeles. How would you quantify that? So we’ve got tablets, we’re standing around in shopping centers, we’re sending out online surveys and we’re left asking the question, I know it’s LA and the traffic is really slow, but I don’t think we can stop people and ask them, “Do you come from the beach community and where are you going?” So we had a problem, how do we find that out? And we started realizing that mobile data, your mobile phone is generating vast amounts of data. And we started acquiring that data. Not to freak anybody out, your mobile phone is leaving footprints behind of where you are.
If you open up an app right now such as a weather app or a restaurant reservation app, it will tell you where you are. And to do that in the background, it’s leaving little breadcrumbs. Observations of where it saw your phone. We collect that data for 120 million consumers on a daily basis, on an anonymous basis and we use that in place of stopping 400 or 500 people in a shopping center and asking them questions. So now we’re seeing where people are going. That led to all sorts of organizational challenges for us.
John: When you first started the transformation process, we’ve looked into this, a lot of people get a lot of resistance because you’ve got employees who are good at one thing they signed on for a certain culture and organization. Now you’re telling them we’re going in a different direction. How did you deliver that message and what was the response from the people at the company?
Alan: So at first everybody was excited about new revenue streams and the customer reaction, “Wow, this is neat. So what is True Trade?” We created and branded a product and customers were responding to it and then it suddenly and fairly quickly became overwhelming. We were doing all of this in the old style of how we would have done a consulting project. So we would bring in a project and we would work through large data sets using the tools we’d always used and that broke the team. There was too much work and not enough hours to do the work and there was no standardization of the reporting. And so we had folks tearing their hair out. That’s when we decided we had to build software. I’ve built software in the past, but no one on my team had run software development. So we had to bring in software developers and a lead for software development.
We had to teach a team that was used to having a very precise finished work where they could touch everything that software was different. If you’ve ever had a piece of software break on you, you know software development isn’t perfect and in the data world things need to be perfect. So we had individuals saying, “Well, if it’s not perfect yet, how can I do anything with it?” So there’s a cultural shift there. You said that some of the things we’ve done, like market research has been around for a long time. Now you go into a software industry where the data source is mobile phones or smart phones to be technical, which had only existed for five years or so, apps and geo [where 00:15:43] apps, which has only existed for two or three years and things were changing really, really fast. So I think the first thing we saw going from a consulting company to a software business was we really had to get new skills and that’s intimidating for people.
Evelyn: Didn’t you face some reticence from the people that were legacy market research people that actually were very comfortable selling market research services, but basically when it came to trying to put True Trade into a client that they were like, “No, I can’t do that Alan, you’re in charge of True Trade.”
Alan: Yes. Our consultants are very experienced and very knowledgeable about all the different nuances of the tools they knew. Well, here’s a new tool that can answer some questions that we used to answer before. Some brand new questions we’ve never been able to answer before and can’t answer some of the things we could do before. So there’s differences and they felt uncomfortable with those differences.
Evelyn: So how did you overcome that?
Alan: The best way we found that worked was to find pioneers in our industry who were willing to accept and remember this is over five years ago now, things that weren’t perfect and were excited about adopting new technologies and having their own competitive advantage. So when the client or the end user is excited, then the salesperson and the consultant get excited too because they see it’s happy. And so we used a client success model as our means of generating momentum internally.
John: So what were you primarily focused on when you were going through that client success?
Alan: The thing that we were most interested in was how were we growing our existing team and were we creating new opportunities for them? Jim Collins calls it, “Get the right people on the bus first and then get them in the right seats.” So predominantly focused on are these the people that we need to be working with and can we get them and then how do we redefine the seats that they should be sitting in for where the business should be.
John: How did you address the perception in the marketplace? Here you are, you’ve been a traditional marketing research company for a while, but now you have this exciting solution. How did you go out and tell people about this but have them think of you differently? Because that can be a very big challenge in itself.
Alan: That’s a good question.
I think it helped that we were already perceived as a market leader and an innovator in the space. It wasn’t surprising from our clients that we were doing something innovative. I think they were surprised at the depth and the power of the technology that we were bringing to bear and so when we would go in, we were trusted and people would listen to what we were saying and then they would say, “Well is that possible? Is that legal? Should I do it? Who else is doing it?
Alan: How fast can I catch up? That’s kind of the phases that it went through. Each time I found myself, we found ourselves answering last year’s questions when we had next year’s questions in front of us.
John: So when you finally undertook the business transformation, what were some of the objectives or ways that you measured success on that?
Alan: I think I would say there were three. The first one is key performance indicators. What are we supposed to be tracking so we can trend those over time. The second was customer feedback and the third was our organizational structure. What were we trying to do? We grew at an accelerated rate as soon as we launched True Trade. Within the key performance indicators, obviously you want to look at revenue and we looked at the type of client that we had. The second thing we were interested in was job profitability. It’s fine to bring on new revenue streams, but if you go from being profitable to being non-profitable on that job, then that’s a fast way out of business. In parallel, these are very different processes. So we looked at hours to complete a project, so hours and staffing overall, and we were bringing in new costs, Amazon web services, data hosting cost, processing costs, et cetera. So that became significant. That’s within the KPIs.
John: On the KPIs, was that an iterative process? Because I think for a lot of people it’s easy for them to say, “Oh well that was just the first year, so that doesn’t count and we’ll excuse that benchmark.” How did you know that you were hitting the right benchmarks and did you continuously reexamine that?
Alan: That really talks to organizational structure. We would look out 12 and 36 months as to what we thought the organization could be and then we would come back and build out the revenue and expense model assumptions if we were there. And then we would only pull the trigger on, for example, hiring additional people if our revenue model was on track. And that came from the KPIs. So there were losses that we were willing to take in order to build the product. But it wasn’t a, it’s an infinite loss situation. It doesn’t really matter, we’re just building the future. Is the market ready for this? Is the market accepting this? And by acceptance I mean are people buying? And that to me is the biggest test.
John: And we talked a little bit about the market perception, but what about some of the customer feedback as far as pilots, case studies, how did you handle that? How did you get people to adopt?
Alan: So in traditional market research, case studies X did Y with this information and had that outcome been always valuable in sales. People can identify with that. In software that’s called use cases. So we learn a new language here, who’s using the software and what are they going to do with it? And so we worked on pilots to try and narrow down to here is a single use you could use all of this data and technology for and this would improve your business by closing a deal with X restaurant or this would allow you to assess the success of this museum exhibition. When we could show that type of use case, then we were able to get people saying, “Oh well that’s great, I’d like that. Could I also do this? Or maybe you could also do that.” So because there’s new technology, it allows people to ideate for themselves essentially and if you listen carefully, you get to answer.
John: And you talked about going out there, making sure people feeling that am I the first or am I behind? And I think that is a very important thing. Did you find that you had to land a major shopping center first and then that gave more credibility to the others later on?
Alan: Yes, we started small and then went large and then went broad. Small was, how can I get a customer relationship where there’s a level of trust and intimate friendship and they’ll tolerate as we work through and make the technology work for them? Then we can use that use case to get a large account. Then we use the reference ability of the large account to spread out from there.
John: And so how long did this transformation process take?
Alan: So I think one of the learnings and the shift from market research to software is it’s transforming all the time. But I know you’d like a precise answer to that which I’m going to take as when we got more than 50% of our revenues from True Trade, and that took us about five years in total to get to the point where our technology was delivering over half of our revenue stream.
John: Well obviously you’ve been through the business transformations, but the industry keeps changing. Tell me a little bit about what the future is for big data and location-based analytics.
Alan: I’m really excited about where we are now. The transformation as builders of the True Trade platform, which allows us to receive observations of hundreds of millions of consumers on a daily basis and that’s the location data. So where do we see them? I think future things we want to look at is what else are they doing, who are they, what are their attitudes and interests? Are they more likely to be cat people than dog people, for example. Are they more likely to be fast food restaurant users or more likely to be fine dining users? This large data sets are allowing us to go from reported data, why are you here today, to observe data, where are people going? And then we can supplement that with more advanced market research tools than we never had this available 10 years ago.
Evelyn: Do you have any advice that you would give to an entrepreneur or an operator that is at the point where they are moving toward a transformation or are thinking that they should?
Alan: The first thing I would say is you have to be the driver. The change begins with you and I think it’s really difficult to delegate to a department. I know you used to do things this way, but I want you to come up with a brand new way of doing them and execute it. People…
Evelyn: Change always starts at the head.
Alan: Change has to start at the head and I think if it starts with you, then you start with the vision. Where do you want to be and bring it down into visualizations. Where do you want to be a year from now? Two years from now? Three years from now?. We’ve always driven that from the customer backwards. What do we want to be providing the customer and I think if you know where you’re going to be two years from now, you’ve got to break down the one year into 90 days and 180 days.
Other advice I have is that this is hard. It takes longer than you think. It’s easy to get out ahead of yourself in the excitement and the market isn’t yet accepting it and your expenses run out of control or it’s easy to be slow in responding to market demand and your revenue expense mix is out of whack.
I think you have to pay very close attention to how to do that. The market will dictate how quickly you should go to market and the probably the third thing I would say is communication. You’re leaving people behind almost certainly and creating new opportunities for others, visioning where you are and talking about what that is. So I do a weekly email summarizing where the business is and what the vision is and reiterating our core values and what matters to us and then frequent one-on-ones and town hall meetings. I think it’s hard to over communicate during a transformation phase.
John: Well Alan, this has been really great. It’s really sinking in what a true transformation that you’ve had over the years and seeing it and knowing you, but also knowing the experience of me actually shopping too and how it’s changed over the years.
Evelyn: How we used to be completely freaked out when we found out that we were being tracked. And now it’s just like, of course.
John: Now it’s normal. Of course it is anonymous, which is helpful, but a lot of data out there and a lot of cool stuff happening really and there are a lot of benefits to it. So this has been very fun. But tell our listeners where they can go to learn more about Alexander Babbage.
Alan: So our website is alexanderbabbage.com. Alexander like the boy’s name and Babbage like cabbage, but with a B at the beginning.
John: Right. Well thank you Alan. Thanks for joining us.
Evelyn: We’ll see you next time.
Alan: Thanks John. Thanks Evelyn. It’s been fun.
Announcer: This has been In Process, conversations about business in the 21st century, with Evelyn Ashley and John Monahon, presented by Trusted Counsel, a corporate and intellectual property law firm. Are you interested in being a guest on our show? Email our show producers at email@example.com. For more information on Trusted Counsel, please visit trusted-counsel.com