Technology providers in the HCM space love to talk about how businesses must transform and how their products enable that critical change.
“Skills have become the new digital currency. Almost all skills that are required today will change in the next 5-10 years. The pace of change is really dramatic now and it’s wiping out industries and transforming almost every job on the planet. And as a result, how we manage the skills needs to be completely different from the last 20 years.”
Software providers like CSOD aren’t immune to the volatility of digital transformation. Last year, just as it proclaimed itself the world’s top software solution for unified talent management, Cornerstone found itself in need of dramatic change.
Leveraging their expertise proved to be quite valuable to Cornerstone as it, too, met and overcame these same challenges.
To the casual observer, Cornerstone seemed like a powerhouse: More than 3,000 clients in 192 countries, doing business in 43 languages in 18 offices with 36 million users. There seemed to be no limit to the number of organizations needing Cornerstone’s learning, performance, recruiting and HR products.
For years, Cornerstone focused solely on total sales. For close to a decade, that was a very effective strategy. Software accounted for 65% of sales and services revenue made up the rest. But over time, as Cornerstone focused on large (100,000+) employers, the sales mix shifted. Services revenue — which only occurs in the first year of a typical three-year software subscription contract — increased. By 2017, renewable software sales were 15 percent lower than in 2011.
Operating margins reflected this shift and Cornerstone’s stock price remained flat for three years. Wall Street was not pleased. The business faced considerable pressure. Something had to change — quickly.
And it did. Over the past 18 months — with most of the activity occurring during the last year — Cornerstone miraculously transformed itself.
CEO Miller and his team faced analysts this week, eager to talk about their aggressive emphasis on growth fueled by “an extreme focus” on user experience.
Cornerstone followed a five-point plan, dubbed Cornerstone 2.0:
- A refocus on recurring revenue. This meant exiting the enterprise service delivery business. CSOD shifted that work to its partners, including stalwarts like Deloitte and IBM. Whenever possible, Miller said, Cornerstone worked with the partners to hire employees on the services side of the business who lost their jobs from this sift.
- Improved operating margins and cash flow.
- Creation of new recurring revenue streams. The big focus is on re-entering the content market that had contributed 20% of revenues but dwindled to just 2%.
- Changes to the executive team.Half the executive team is new in 2018. COO Kirsten Helvey is gone, as is the chief sales officer and the general manager of Asia Pacific. CSOD hired a new president of global field operations, Jeff Lautenbach, formerly of Jive Software, Salesforce.com, SAP and IBM, along with a new chief marketing officer (Adrianna Burrows) from Microsoft and a new VP of investor relations. Miller said executives with experience doing business at scale were needed for Cornerstone to grow to a $1 billion company as he envisions.
- Improved governance.Three new directors came on board in 2017 and another three are set to join later this year. Former Jive Software CEO Elisa Steeleis slated to become board chair at Cornerstone’s annual meeting next week. She will replace Miller to become the CSOD board’s first independent chair.
Before this transformation, Cornerstone tightened its product focus from 28 offerings to four product suites: recruiting, learning, performance and HR that’s focused on Europe, where the market is not as jammed with competitors as it is domestically.
“The reason the focus on the four product suites is so transformative for us,” Miller said, “is that it allowed us to be more focused on what we are building and more ambitious about what we were innovating.”
The improvements include:
- A recent release of the recruiting solution to deliver a consumer-like candidate experience, making it easier for recruiters to do their jobs. Miller alluded to upcoming improvements to allow recruiters to handle ultra-high volumes of candidates in the fraction of the time they currently do.
- An LMS with simplified administration and a learning experience platform with Netflix-like content playlists. Already deployed on iOS, a mobile Android app drops next month. Much more development is slated for Cornerstone Content.
- Evolving the performance product to concentrate more on developing employees as well as measuring their performance. The roadmap includes a redesign of the career center with a greater focus on career development and helping employees understand career options in an intuitive way.
Miller said there’s much more on the horizon as the product team leverages their considerable technology investments to engage end-users and those who manage and administrate technology.
With two big transformations behind them, Cornerstone leaders believe the company is beginning to achieve the innovation, growth and recognition they’ve sought for several years.