A Retrospective of my Journey: Part 3 (Finale)—The Analyses

This post is the last and the most important part of the 3-part mini-series on my reflection of the journey to PROS. If you missed the earlier installment, you can review them here:

1. The Career Optimization Problem
2. Why PROS?

Previously, I’ve listed 8 reasons that led me to choose PROS over other coveted companies. If I stop here, I would’ve failed my job as a scientist, because this is my personal journey that may not apply to you. Today, I want to dive deeper and analyze the underlying market dynamics and the implications of some of these reasons. That way, my experiences can be more useful to you when you need to make a career decision.

My Understanding of PROS and What it Does

In order to provide the proper context, you must understand that I have a pretty limited understanding of PROS a year ago. My view of PROS was that it uses algorithms, big data, and AI to helps other companies monetize more efficiently and effectively. And we do so by offering 2 categories of software as a service (SaaS) solutions:

1. Pricing: Pricing has the most dramatic impact on monetization. By pricing right, companies can realize up to 11% margin improvement.
2. Sales: The next biggest driver for monetization is probably sales. Clearly, a more efficient and effective sales team is going to drive more revenue.

The Margin Compression Trend

Of all the reasons I join PROS, the last one is perhaps the most interesting. Because it involves a universal trend that has been shaping our society and economy for centuries. Many observed tech trends are short-lived, lasting only a few years. However, there are universal trends that are long-lasting. One of these is the ever-increasing accessibility of technologies in the market.

Regardless of the domain, the technology itself, or how expensive it might be, it will eventually be commoditized and become affordable to everyone. This universal trend has held up for hundreds of years across many industries, and it enables more businesses to compete more effectively. Many companies react to this increased competition in 2 ways:

1. The easier way is to give discounts (i.e. lower the price) in order to retain your customers. This will obviously erode your margin by reducing your revenue.
2. A better way is to differentiate yourself by delivering more to your customers. This will increase your operating cost, which will also compress your margin

Regardless of how a company might react, the ultimate result of this increased accessibility to technology is margin compression, which is also a persistent trend. That means, over time, the profit margin in any industry will be squeezed and become very thin.

Today, there are many industries whose margins are already razor thin (e.g. airlines, rental, cargo, oil and gas). And PROS solutions have been serving some of these industries for 30+ years. Meanwhile, there are also industries with relatively thick margins today. However, the increasing accessibility of technology implies that their margin will eventually be compressed and become thinner and thinner. That means there will always be an increasing need for PROS solutions in the future.

The important thing to recognize is that the margin compression trend is not a tech trend that emerges and disappears in a few years. It is a result of fundamental market dynamics that have persisted for centuries. So the future need for PROS solution is certain. Competitions aside, how often do you find a technology whose future demand is guaranteed?

It’s All About the Customers

3 of the 8 reasons that I decided to join PROS involve the customers (i.e. #2, #3 and #4).

First, PROS has a very customer-centric culture. This is very important for me, as I wouldn’t join a company that isn’t customer-centric. This is especially important for a SaaS company like PROS, because the valuation and long-term financial health of the company depends on the continued renewal of the software subscription. A SaaS company that isn’t customer-centric is basically a ticking time bomb.

As our world shifts to a subscription economy, we enter the “Age of the Customer” according to Forrester Research Inc. Customers are now entitled to cancel the subscription to any service that they feel isn’t delivering the value they expect. Hence, without a customer-centric culture that focuses on customer success, customers will not renew.

PROS also has a very diverse customer base spanning 30+ industries. This is definitely a plus for me, because it’s more interesting to work with companies from different industries with very different business needs and market ecosystems. But what this really means is that PROS solutions must be quite general. It must be addressing a real business need (e.g. margin leakage) that is common across industries. Having existing use cases in 30+ industries is a strong validation for the growth potential of PROS with huge total addressable market (TAM).

In addition, PROS work with cutting edge companies as well as more traditional businesses. This simply adds another dimension to our already diverse customer base—diversity of maturity in tech. So everything I said above still applies. But having customers on both ends of the tech maturity spectrum offer something more. It is definitely more exciting to work with cutting edge companies who can co-innovate with us and pushes the boundaries of our technology.

Working with traditional business is more challenging, but at the same time, more transformative. We would have to overcome more resistance, create greater value propositions, and drive more significant changes in these companies in order to bring them along. As such, it’s also more fulfilling when we succeed in bringing them forward.

Beyond the psychological gratification of accomplishing a great feat, there is a tangible reward, too. Because the majority of the companies that comprise the bulk of our current economy tends to be the pragmatists and the conservatives. If we succeed in driving adoption in these companies, it means we’ve crossed the chasm. And that means we are ready to win the huge TAM, drive mass adoption, and reap the financial rewards.

The Algorithms is the Product

As I wrote at the end of my last post, I’m glad that I’ve found the “PROS” when it comes to algorithms. 2 of the 8 reasons I choose PROS have to do with algorithms (i.e. #5 and #6).

In my previous career, I’ve developed many advanced predictive and prescriptive algorithms. However, no matter how strategic these algorithms may be, they were features, not the core product. For example, I’ve developed the Community Health Index (CHI) that quantifies the health of an online community for my previous employer—Lithium Technologies. Despite that CHI was a strategic differentiator for Lithium, it was merely a feature. The core product was the online community platform. CHI may be very important and provide tremendous utility and value for community practitioners, but it’s only in service of the core community platform.

This is very different at PROS. The brilliant PROS data scientists have also developed many algorithms over the years. From what I can see, those algorithms are the core product! And this has been the case ever since PROS was founded. To my knowledge, the first product from PROS was an overbooking algorithm for airlines.

Consequently, PROS has always understood the importance of algorithms and values the science and research that goes into developing algorithms. Moreover, PROS differentiates with its strength in data science, AI, and operations research. The significance of this is that my personal interests are well-aligned with PROS.

Nevertheless, it is still a huge challenge to monetize algorithms in my experience, and it’s even harder to monetize data. But PROS has demonstrated a very long history (33 years) of success in monetizing their algorithms. So I have no doubt that PROS has the secret sauce figured out.

The People, the Culture, and the Right Balance

The last 2 reasons for choosing PROS are pretty self-explanatory. In Part 1 of this mini-series, I mentioned that I was conflicted in my career choices. Because personally, I like to work in a smaller startup-like company that has much fewer processes. However, my family would’ve liked me to work in a bigger company with more resources and stability. PROS offers just the right balance compares to Lithium, which has ~500 employees when I left in Feb 2018.

PROS is a publicly trades company (NYSE: PRO) about twice the size of Lithium. It’s big enough to be relatively stable, and being in business for 33 years certainly speaks to this. Of course, there are some antiquated processes and artifacts that come with its age. But a company of 1000 is not big enough that changes become impossible. More importantly, it’s not so big that processes and bureaucracies would hamper progress. I find that the 2x size difference is a good rule of thumb for a career transition. It’s different enough to be noticed, but not different enough to be overwhelming.

Lastly, but certainly not the least, I was long told that PROS is a great company with exceptional culture. It’s a very collaborative environment where the management is caring and embraces diversity. Employees love the company so much that many stayed for decades. The problem was that I couldn’t see any of this during my interview at the corporate HQ in Houston.

Yet, when there is a will, there is a way. PROS management was kind enough to invite me to attend their annual customer conference. So I attended Outperform’18 as an observer before I’ve officially join PROS, and I am glad that I did. Because it was at Outperform’18 that I was able to get a glimpse of the collaborative PROS culture. People literally get out of their own way to help each other. I also got the opportunity to talk to customers and witness first handed the customer-centric culture at PROS. So this year, I am proud to keynote at Outperform’19 as the Chief AI Strategist of PROS.

Conclusion

If you are a data scientist, you know you are a highly desirable unicorn. So every company that wants you is going to tell you that they are riding on some massive tech trends and the future is great. And they really believe it too. Otherwise, they wouldn’t build the company in the first place. Moreover, they will all say that your work is crucially important to their business. But you need to be more vigilant and ask yourself some tough questions.

I hope this analysis of my own journey could help you decipher yours in the future. Although this is the finale of the 3 part mini-series, my journey has literally just begun. I hope I will have more opportunities to share this adventure with you in the future.

Image Credits: JanBaby, bruce mars, David McBee, Markus Spiske, and cbc.ca.