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Will the enterprise market spend significant IT budget on Windows Vista in 2007?



CEO Spotlight: Massood Zarrabian, OutStart
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Angel Mehta: I want to talk about the market category that OutStart is in, because historically I donít think e-learning has been perceived as a critical priority. It was more of a Ďnice-to-haveí. Obviously you and the venture investors at Sigma, General Catalyst, etc. saw something different that very few others were seeing. What was it?

Massood Zarrabian: I agree with you that historically, it was a Ďnice-to-haveí but there were two trends that suggested that things were going to change and the category was going to take off. There are two major areas that companies have to address with regard to training: administration issues and products and service. Human Resources is responsible for the wellbeing and growth of employees. So, they have to do things like policy training: sexual harassment, expense reports, benefits. Generic stuff, where you train all new hires on the same content. This was a first generation problem: i.e. ĎHow do you make the administration of training on this type of stuff low cost?í Well, you offer it online; make it possible for people to get it done without trainers, etc.

Once people deploy these kinds of solutions, they realize that 1) the people competence is not increasing, and 2) the ROI is not there. Thatís when people step back and realize that the real improvement in competence and savings is going to come by transferring product knowledge FASTER, better, quicker, cheaper.

So, imagine if you could make every sales rep in the company have the exact same domain expertise and competence as your top sales rep. Imagine being able to get all your professional services consultants to the same level of competence as your top person. To do that, you have to create a content-centric approach where knowledge is captured and authored and deployed rapidly, and you need to make the knowledge deployment to be done in a personalized fashion based on peopleís existing competence.

By doing that, you donít have your best people wasting time on training they donít need. You help people who know 75% of the information to go and spend time on the 25% they donít have. And you have your newest people going through complete training in rapid fashion to catch up to the experts.

If you can create an environment in which that critical information is available 24/7, be received in any medium that the learner wants, and have it available to them anywhere in the worldÖwell if you could do that, you will have defined the next generation learning strategy. It moves training from a support function to a mainstream business process. It becomes the way in which you increase the know-how, competence, of employees and partners.

Angel Mehta: How does OutStart differentiate? How does it compete? Presumably, the large mega-suite vendors are starting at least to enter the e-learning space, which on one hand is validation for the category. But, how do you compete against an Oracle or SAP?

Massood Zarrabian: The good news is, we donít. PeopleSoft, SAP, and Oracle all are in this market with a Learning Management System. Itís an extension to what large software companies like PeopleSoft have already done. We do a content solution Ė in fact, we were selected by PeopleSoft as a partner. Both Oracle and PeopleSoft have announced that they have no intention to develop a content solution because it is just so far out of their domain. We actually bring PeopleSoft in whenever we see an opportunity for a Learning Management system in a global 2000 organization. At the same time, we can offer LMS solutions to the SMB market Ė itís a segment that simply cannot afford to buy from the larger vendors.

Angel Mehta: Bob Davoli obviously has this legendary reputation as a software investorÖ my question is, is there an order of magnitude difference between the value he brings vs. other venture investors you might have observed in the industry?

Massood Zarrabian: I actually met Bob Davoli for the first time in 1994 when I joined Bachman Information Systems. Sometimes you meet people and have an alignment of the minds. For some reason, I have that with Bob. I understand him without needing long explanations. I admit my errors to him comfortably. I donít worry about having to cover my screw ups with him. We share an understanding about what the responsibilities of a CEO are, and what the responsibilities of a board member are. He publicly acknowledges that as a Board Member, his job is to coach and help the CEO. Itís not his job to tell the CEO what to do. If heís unhappy with the CEO, he shoots the CEO Ė he doesnít shoot anyone else.

The important lesson from the relationship I have with Bob is about clarity. Clarity about what I do versus what you do. The analogy I use is that a business is like a theatre production: Somebody puts the money in, and somebody hires the Director. A bunch of actors are hired, and for a while there are rehearsals going on. At a rehearsal, everybody can give opinions about how to act or play a role. Everybody might have tips for improving the production. Everybody can have opinions about how you can act better, right? Nothing wrong with that! But then when the opening night comes, everybody plays their role. At the end of the day, everybody has to know whoís going to decide what, or itís going to be very confusing.

Bob is a great coach and mentor. Heís got one of the sharpest minds Iíve ever seen. Heís very strategic and, at the same time, he can go from strategy to the smallest detail, picking out the one tiny detail that is going to kill your strategy 6 months down the road. He believes in metrics, which I believe in also. So heís very rich in terms of experience, intellect, and passion. And that makes him a great board member. But we have two other great investors who are OutStart board members as well in Charlie Lax and John Simon Ė their contributions have been great. And I am fortunate enough to have been able to get Al Luccesse, who was chairman of the board at Concerto Software, to join the Board as an outside director. So it is a smart, experienced, committed and balanced Board.

Angel Mehta: What is your biggest weakness as a leader?

Massood Zarrabian: I wish I had just one. The biggest weakness, I think, is that I like to debate. Sometimes, I will argue a point with an employee and people assume that because Iíve argued my point, Iíve made a decision. In reality, Iím just making a point for discussion Ė and I want the employee to tell me why Iím wrong. But perhaps because of how I communicate, employees will think that Iíve already made up my mind. Iím debating, not deciding Ė and perhaps I need to be more clear about the difference.

A second weakness is my tendency to stick with the same people longer than I should. I just have a passion for coaching and mentoring, and tend to believe in the ability of a human being to grow and develop. The problem is, a company may not have the time required for a particular person to grow and develop.

So those are a couple of weaknesses Iíd point out for you.

Angel Mehta: How has your approach to leadership changed over the last 15 years? What do you know today that you wish you knew back then?

Massood Zarrabian: There are two things in particular. First, separation of style from a personís character. And second, the need for speed.

Angel Mehta: Separation of style?

Massood Zarrabian: How a person communicates is not necessarily representative of who they really are. For example, I have known countless people throughout my career who I used to think were dictators. I assumed they were Ďbadí people. What I realize now is that no, they were very good people. Itís just the way they talk Ė it sounds autocratic, thatís all. So Iíve learned to listen and hear people a lot more. I try to separate what a person is saying from how they say it or the words they use.

The second one has to do with the need for speed. I think I was way too patient. In retrospect, I should have made decisions faster. Terminated people faster. Hired smart people faster. Made decisions more quickly. Had I done that, I believe my organizations would have performed even better than they have.

Massood Zarrabian is President and CEO of OutStart. During his short tenure with OutStart he has overseen three successful acquisitions, most recently of Trainersoft Corporation, provider of a leading e-learning authoring tool. Prior to OutStart, he was President of the eService Division of Broadbase Software, a leading provider of eCRM solutions. Before that, as President and CEO of Servicesoft Technologies, a leading provider of intelligent eService solutions, he directed the successful merger with Broadbase Software. For article feedback, you can contact Massood at: mzarrabian@OutStart.com.

Angel Mehta is Managing Director at Sterling-Hoffman, a retained executive search firm focused on VP Sales, VP Marketing, and CEO searches for enterprise software companies. He can be reached for feedback at: amehta@sterlinghoffman.net


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