“Build for change.” What an unusual slogan for an enterprise software company.
Isn’t it the goal of every profitable enterprise software business to build a standardized application and try to sell it as many times and with as little customization as possible? Not at Pegasystems (Nasdaq: PEGA).
At PEGA, the current industry leader in Business Process Management solutions (BPM), change or adaptability is at the core of the company’s software development philosophy. It is not something to be avoided. It is not something to be ignored. It is an opportunity to provide solutions that truly meet clients’ ever-evolving business needs.
Since Alan Trefler founded PEGA in 1983, he has managed to engineer consistent and impressive growth. In the last five years the company has generated 250% growth, reaching $250 million in revenue in 2010 from around 100 million in 2005.
On the surface it seems PEGA may simply be another young software company that took an early lead in the right emerging segment. But a few weeks ago, we interviewed Alan, the CEO and founder of Pegasystems, and believe there is something special going on.
As a former competitive chess player, Alan brought an unorthodox view to the software industry. He realized there was an opportunity to innovate in the enterprise software sector through a dynamic software product that would be flexible and customizable to better adapt to clients’ changing business needs. He wanted to empower business people by allowing them to “own the change,” at least on the technology side.
As Alan put it, “If you don’t believe in the rhythm of change, if the rhythm of change is measured in years or quarters because you know that from writing a [technology request] document to the delivery of the result it’s going to take a year, then you become obsessed with putting everything into [that document]…[but] if you believe you can really iterate every week…then your whole view changes. This is an approach that enables continuous improvement.”
There are two important strategic shifts to note in how Alan describes PEGA’s strategy.
First: rapid iteration. A revolution has been underway in the software industry in recent years. The model was to build and test a perfect piece of software and then release it to the world in a big launch. But today we see the value of the rapid-iteration model in which companies like Google launch lots of imperfect “beta” products and adapt them as people use the software.
This approach cuts against the traditional Western view of change: change means uncertainty. It means abandoning the status quo. It zaps energy.
Instead, this rapid iteration approach falls more in line with Eastern, primarily the Taoist, view which suggests all moments are changing. The ball never comes to rest but is in constant motion. When the traditional Western view says you are on the top of the pyramid, the Taoist view says you are already falling.
Second: shift from an information-centered view to an interface view. Essentially the traditional view held that what programmers needed to do was design an interface that allowed users to access continually changing information. Your inventory changes by the minute, but your inventory monitoring panel on your enterprise software stays the same.
But an emerging view is that the interface itself must continually change based on user needs. Indeed, this view holds that the best model is one in which the user co-creates the interface. If you really want to dive deeply into this new view, Kaihan’s father wrote an article on it: http://www.asc.upenn.edu/usr/krippendorff/CENTEREDNESS.html.
In practical terms, PEGA’s approach is to create a system whose interface adapts as people need it and to do this without having to invest in a heavy redesign process. Alan likens this approach to building flying horses when your competitors are building bridges.
During the recent recession, PEGA actually grew. As IT spending improves, it makes sense to expect PEGA to continue growing. Traditional players like IBM have attempted to acquire their way into the BPM space but have so far not been able to challenge BPM’s leading position.
Will PEGA’s rise continue? It is probably too early to tell, but as long as it holds onto its unique perspective – rapid iteration and a co-created user interface – while its competitors cling to older mental models, history tells us PEGA will remain unique and continue to grow profitably.
Ask yourself the questions below to see how you can not only make your business more adaptable to change but also profit from it:
1. What types of change are your competitors trying to avoid that could present an opportunity for you?
2. What fixed part of your business or service could you change into a dynamic, continually changing one?
3. How can you change how your employees relate to change, so they stop associating with uncertainty but instead welcome and champion it?
4. If you were given a blank sheet of paper and were tasked with redesigning an entire industry, starting from scratch, what innovative point of view would you bring to the drawing board?
Nadia Laurincikova, a prinicpal at Kai Consulting, contributed to this piece.