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We met with Stephen Kelly, one of the UK’s most accomplished business leaders, to learn about:

1. His single most important lesson at Sage

2. The importance of culture within technology businesses

3. How to embed culture at a practical level

4. The growing importance of social responsibility for companies of all sizes

5. Why professional service firms need to do more to promote gender equality at board level

6. How the rate of change within business has accelerated in recent years

7. Why he thinks smaller accountancy firms cannot afford to ignore digital transformation

8. Whether cyber security belongs on a board’s agenda

9. Whether cyber security is just about mitigating risk or can it be a positive differentiator

10. The role does technology need to play in protecting local government services

11. Whether small businesses can afford to ignore the role of technology in their future strategies

 

Question 1 – What’s the single most important lesson that you learned at Sage?

So, I think it’s fair to say that the playbooks I learned about in the U.S. in terms of growing global companies, apply perfectly at Sage. We transformed, as I said at the time, a sleeping giant into a powerhouse, in terms of cloud subscription accountant solutions, and really reconnected our customers to the profession. The most obvious thing I’d say as a chief executive is that you’ve got to have a compelling vision and what better service could you provide than one for entrepreneurs? So building the businesses, creating jobs, creating prosperity for all, keeping rural communities together, these are the heroes of the economy. These were the guys working 80 hours a week, so it was an honourable task to build awesome technology that allowed them to transform their business, save bucket-loads for cost in terms of running their back-end systems and their offices and really invest that time in terms of growing their businesses. So, a lot of lessons there but the number one is to have a compelling vision: how you going to change the world and really motivate your amazing colleagues to come to work with a spring in their step and galvanize your customers to come on that mission with you.

 

Question 2 – How important is it that people in a technology company buy into the cultural values of an organisation?

I think is really important, I guess very simplistically if you look at it as a chief executive, you’ve got almost two sides of a perfect coin. You’ve got the market, your customers and partners, and then you’ve got your colleagues, and obviously where you start is with your colleagues to try and absolutely explain the compelling vision. Good news is they’re smart people, they get it, and then you say “and furthermore, there are great strategies that allow us to deliver against that vision”, and then you’ve got to operationalise and execute them. I always say that A class strategy, B class execution is always inferior to B class strategy and A class execution. So, you want to have a culture ultimately, where you have flawless execution; fail fast, learn quickly, build the playbooks, find what works, double down on it and stop what’s not working. Then the other thing I think, you know especially in 2019, all companies have got to have a soul, so maybe we talk a bit more about the whole kind of compassionate capitalism to connect, particularly when you recruit in the Millennial Generation to really not only connect them with the vision and the mission, but also to make a difference for the communities they serve.

I do think it’s probably changed dramatically even in 10 years, but certainly in 20. If you saw us back in the 2000s the 90s, everybody was leaning towards value creation, but sometimes doing it at the expense of what I call a moral compass, of serving the wider community and I do believe now talking to many CEOs that they can serve multiple stakeholders; they can serve customers colleagues, partners, shareholders, the wider context but also communities where they live, and they can take on issues where they care about whether it is homelessness, whether it’s youth unemployment, whether it’s disability, they can actually make a big difference to fund, provide volunteering where they really connect their colleagues with that mission, and I think most great companies now absolutely have a soul.

When twenty, thirty-year-olds go to an interview, and they’ll say you know “What are your values?” and it’s not just things like integrity and honesty that are up on the wall, but it’s how do you bring the essence of making a difference, building a great company for that compelling vision, but giving back and serving a much wider set of stakeholders.

 

Question 3 – How do you practically embed cultural values into a company?

I think, well number one obviously you have to live it, but success has many followers, and I’d say particularly for professional services companies, growth pretty much cures most evils. So, if you’ve got a core fundamental where you’re loving your customers from the CEO down – I’d encourage you always to be in search for customers, customer obsession is fundamental and again connect your colleagues brilliant work and talent to that mission – deliver very successful projects, deliver very referenceable customers, and then those customers become raving fanatics. But I’d say that’s not enough because then you’ve got to say how do you really motivate your colleagues to say if they’re making a difference on a much more meaningful scale. So, it’s not just about making money and seeing the top-line grow, it’s about giving back, making the difference, filling a gap where we’re supporting the vulnerable, and again I think you just have to embed it and live it, live the values. An example, for me, we created the Sage foundation so every colleague of mine got 5 days paid volunteering every year. We put notionally about 2% of our free cash-flows into the charity foundation, particularly to support women and youth, and then also we gave free software for not-for-profit sectors so they could power their businesses and make sure the donations they collected went to the causes that they serve.

That was very compelling, I actually went around town on meetings, CEO Fireside Chats, talking to a new joiners, one of the big reason why they joined Sage is because of the Sage foundation, because it matters, it makes a difference, and it really does a lot of heavy lifting in communities and helping vulnerable communities around the world. People just get energised about that, and I think you know in a time where our political leaders don’t inspire great leadership or trust, and you see surveys in the US which is staggering at the under 30s saying, I think 30% of them don’t believe in capitalism, I believe we as the business community need to say actually, capitalism can create wealth for all, can create prosperity on a much wider platform for the vulnerable and really the essence of this compassionate capitalism is very inclusive for your colleagues in your business to really get engaged, and I guarantee, I had some naysayers saying, “well if I give people five days paid off volunteering you’ll hurt the P&L”. No no no, this pays for itself a thousand times over, and most of all it is the right heart thing to do, and it’s an amazing way where you can connect the heads of your colleagues with their hands, so they do better work for your customers every day because you’re touching their hearts.

 

Question 4 – Do businesses of all sizes need a higher purpose beyond commercial goals?

I always say, against the compelling vision, dream big, but just start small, take a baby step. I think it was Martin Luther King that said: ‘You don’t need to see the whole staircase, just take the first step.’ So how do you do it? If I’m running a consulting business in Warrington of ten people, I’d probably have local clients, I’d probably be able to very easily go and say to them, you do charity projects in the community for homelessness, or the elderly, or whatever it is, how about we give your colleagues and our colleagues a day where they do joint volunteering and going away with a local charity to connect them together. Now just one day in a year might cost you about £8000 in terms of lost revenue, but the engagement with the customer, and engagement with your colleagues, and doing the right thing would immeasurably outweigh the investment that you make in lost time.

So, I just think with these sort of things, there must be ways for your audience out there to think of ways, how can I connect with that, what do I care about as well, it might be military veterans coming back, and trying to get jobs in the civilian workplace, there’s always something all of us care about as issues where we feel we can do something for the vulnerable, and you can use your company or professional services organization as a platform to make a difference in the wider community, and wouldn’t that be a great thing to do?

 

Question 5 – Do professional service firms need to do more to promote gender equality at board level?

This is a complex issue with multiple moving parts. Now, the good news is that technology, speed, now everyone gets flexibility in terms of employment, whether you work at home, in the client site or in the office, there’s tons more flexibility than there even 10 years ago. Broadband and technology- even the technology you’re holding – just makes all the difference. But again, I think it all comes down to the tone at the top saying, we not only passionately believe in equality and diversity, creating a great multi-ethnic, multi-religious, multicultural organisation where everybody can be themselves when they come into our firm. But, actually doing some things that really encourage that. So you could have it where you talent-spot the best women and then support their professional development, leadership development, mentoring, coaching, and again when I’ve done these things directly in those sort of programs, it’s incredible the number of people who put up their hands and say “Yeah, I want some of that”. It will take time, it’s not going to be like a magic wand where you wave it and things are solved in a month, but you can start programs, but also just inherently if the Chief Executive or the Partners in your firm say, “This is really important to who we are, our identity, and we believe in promoting and set targets for it, in five years time, three years time we’ll have a 50% of our top team or partners who are going to be women”, and then put a plan together to make it happen, and then absolutely support the aspiring women to take responsibilities, to have the confidence to have the leadership development, and have the mentorship and the safe space that they can be successful, and they can smash through that glass ceiling.

 

Question 6 – How has the rate of change within business accelerated in recent years?

It’s incredible, 35 years I’ve spent around technology and it has never been more exciting than now. Back in the 80s and 90s, I worked for a company called Oracle where we had a vision of creating data ubiquitously around the world, and wow, who would have guessed in the last 2 years, there’s been more data created than in the history of man and womankind. So, everything is accelerating, the same way you can say there have been more photos taken in the last 18 months than in the history of photography. The speed of acceleration is breath-taking, it’s not necessarily a white-knuckle ride but we are hanging onto our seats in terms of seeing the convergence of different technologies coming together, and now I’ve invested in some really interesting companies with artificial intelligence, some probably of interest to the audience around Kimble, which is a really cool professional service automation solution doing things that 10 years ago were done manually, and really inefficiently with loads of variable and loads of hand-offs.

There is no doubt about it, technology is the new DNA of successful companies, and I believe also when you look in ten year’s time at consumer companies, and we’re seeing this now on the high street, everything will be digital, everything will be technology enabled. So, the speed is breath-taking, that’s point number one. Number two, partners and chief executives out there step in, many of you will be digital natives, you will have inherently grown up in a world that is digitally enabled, and what it allows you to do is build businesses much quicker than was humanly possible even 10 to 15 years ago. So, if you’re looking to recruit consultants, wow, it’s a lot easier, you’ve got the world of LinkedIn, you’ve got all the informal social networks around the world, where you can do your diligence on potential candidates, and you can accelerate that recruitment process, and you can make sure also people really understand the cultural fit and your vision and what you’re trying to do because they will have done their due diligence. So, the speed of compression in terms of all these different technologies come together, I don’t think there’s ever been such an exciting time.

I do think where we’ve had massive convergence in terms of the consumer world, we’ll have one device that’s our watch, is our phone, is our browser, is everything, it runs our life and now the underline of software technologies around the data, the analytics, the machine learning, artificial intelligence, the Internet of Things is going to be transformational and there will be huge companies created, and consultancy firms will basically make themselves famous, by converging these technologies to be very disruptive in business segments. I can’t think of a more exciting time than being a partner in a great professional service to disrupt and create the future, whether it’s in financial services or the consumer world than now, and Sage absolutely was part of that journey in the accountant space and going forward, looking to see the accountants to play their role in helping businesses and give great advice to help grow and get their growth capital and go to the next stage.

 

Question 7 – Do you think smaller accountancy firms can afford to ignore digital transformation?

Firstly, I respect it but the world’s moving on very fast. Just sitting around here we’ve got a Nikon camera, we’ve got an iPhone and we’ve got a laptop. If I’d been here 15 years ago, we would have a camera crew here, the equipment would’ve cost probably $100,000. Today $1,000 or $2,000? So that’s the reality of every industry segment.

For the accountants, there is little value in transaction type services where error checking is the case 10 years ago, but now on a lot of is going to be automated through really cool software technology powered by artificial intelligence and analytics where you can go to a restaurant with a customer, you can scan a receipt in and it’s all automatic in the accounting system, it’s on the attending system, it’s already there. What happens ten years ago, every month you have to manually get consultants to go in and type their T&E and their bills and stuff, it was just brutal. So, the world’s moved on and as an accountant, I think the opportunity is you know – you’ve got to look at it from a half-full perspective- you can’t stand, the technology, the digital bus is rolling down and you expect to stop it because that’s not going to happen.
What you can do is say you can get on it and you can think about how do you want to reinvent the services you provide so they provide your clients with even greater value? So, I think in the accounting profession, there will still incredible talents around advising customers but the advice they’ll want is about how I grow faster, how do I export, how do I get access to growth capital, how do I effectively redefine the role of the accountant, as almost being a virtual finance director and again some of the early stage companies where I’ve invested, we’ve got brilliant finance directors who come in and give unbelievably strategic advice, but they only work two days a month for that company. So, from your point of view, there’s a different model. Now the good news is, the day rates you can charge in the value bring is much higher than just that crazy last minute over the weekend at the end of the tax year, just crashing away and inputting data to get off to each HMRC or the tax authority.
So, the quality of the work you can do is exponentially higher, the value of it to your clients is much higher and it redefines your business to become almost a virtual finance director of your client’s business and hugely helpful. Probably just through technology means you can double, triple, quadruple the number of clients that you have for transactional services at the same cost base that you’re operating today.

 

Question 8 – What’s your perspective on where cyber security belongs on a board’s agenda?

I guess we all suffer from “cobbler’s shoes”, so every technology company I’ve worked for, we talk about how we transform the client’s business, but sometimes our internal systems in the technology company aren’t fit for purpose in term of 2019.

It’s a really valid point [you raise] around cyber security, of risk, it’s got to be top of the agenda, it’s got to be a board item. Most of the companies I’ve led as CEO, I’ve introduced it to the board, it’s a standard item, you get an update from the person responsible and accountable for cyber security of the company, and that could be the IT Director, CIO, but as you grow probably want to specialize that in either a consultant or a full-time employee. I think many companies will be offering this is a consultative offering to their customers, as part of their whole solution, but in your own business is absolutely critical you’ve got to keep data safe, you’ve got to make sure you’re really effective in terms of the outside threats, but probably in 90% of occasions, it’s the internal sloppiness, where you leave your laptop on the train, you lose your iPhone, it’s are not protected, is not encrypted, all these sort of things.

There are lots of things you can do to raise awareness, get everybody marching to the same tune that everybody in your company owns a responsibility to keep every client safe, every bit of data safe, and be very responsible and judicious around the cybersecurity threat. I would advocate any business should do that and you start doing training and then obviously make sure you have all the things like firewalls and patches today, antivirus and all those sorts of things in place. Then just obvious things if you walk around the office in the evening everybody’s kind of gone home and you see someone left their laptop and they’ve written their password on post-it note, that’s not good enough- that’s a recipe, because you’ll probably have interns in other folks in, so just the diligence and the discipline that needs to embedded into everyone to make sure we keep the bad guys away.

 

Question 9 – Is cyber security just about mitigating risk or can it be a positive differentiator?

I would advocate managing partners and CEOs, in my view this is non-negotiable, and if you want a shock and also a treatment for your colleagues, then just give them a couple of case studies. Say in the UK, someone like TalkTalk: I know Dido was a great CEO, but within literally minutes, hours and days that trust that’s built up in that company was decimated effectively, and anybody will always see as leaders trying to build trust with our customers and our colleagues, and it takes days, weeks, months, and years to build trust, but in the digital age it takes seconds to destroy. So, you know fundamentally if you’re not serious about it, go and look at a few case studies. If you worked at building a consulting company for 10 years, in days it could be decimated if you have a major breach, or you’re acting on behalf of a client and they have a breach through negligent work, trust can be decimated literally in days.

So, I think you have to create that burning platform, that shock and awe moment because then you can say let’s turn this into a positive, let’s make this one of our core strengths that we do everything humanly possible to be as safe as we can because you can’t absolutely be a hundred percent totally secure because you don’t know what the bad guys are going to do tomorrow the threats are changing and evolving at a record rate, just like speed of digital technology. But, then and also to your customers, they’ll want to have that reassurance, when you pitching your work, they’ll want to know that they’re as safe with you as the highest gold standard out there on the planet, and I think therefore you can make it a virtue, and then you have to make sure it’s firm; you have the systems, processes, training and the people awareness to make sure that’s reality.

 

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