Versatility in leadership

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Hello and welcome to the XTech Podcast by Fox Agency. I’m your host, Debbie Forster, MBE. I’m the CEO at the Tech Talent Charter and an advocate and campaigner for diversity, inclusion, and innovation in the tech industry. Now I’m delighted today to be joined by Rachael Powell, who’s the CCO of Xero. Rachael, thanks so much for joining today.

Thanks for having me, Debbie. It’s great to be here.

Now, Rachael, what we like to do in our podcasts, our community like to understand how people get into tech because some get straight in there, others have those wiggly careers that end up in the tech industry. What about you? How did you end up in tech?

Well, it was probably more accidental than deliberate. I was studying at a university doing accounting and marketing in an undergrad degree. Partway through my degree, I got a graduate position at a telecommunications company as a graduate accountant. So actually started my career in accounting, which is ironic given that now I’m working for an accounting software company. So yeah, I worked there for four or five years and then I moved to IBM, which most people would know about, it’s a global technology company, and really spent more than a decade in there in various roles in business development and channel management, in strategy in marketing, product marketing, and marketing communications.

And then from there, I sort of took a bit of a different track and went into some consulting work and started working with small businesses, some of them of which were tech startups and some of them that were in different industries, but it really gave me a flavor and a passion and understanding of some of the challenges that small businesses have as they grow through growing pains and try and get their back office organised while they still focus on their customer. And that sort of then led me to where I am today.

I’ve been working at Xero for the last seven years. I actually met the founder through a contact who found out that I was studying. At that time, I was doing the consulting work, but I was also doing a master’s in positive psychology. I became really fascinated in human behavior and how companies that actually focused on strengths-based leadership and purpose and meaning were way more productive and had happier workplaces and employees with higher levels of wellbeing. So Rod Drury, the founder of Xero, asked to have a conversation with me and asked if I’d come on board as his chief people officer, which was interesting given that HR was probably the only discipline that I didn’t have experience in, albeit I had spent some time in executive search around the time that I was consulting.

So I went in and started as the chief people officer. I was in that role for about three years and set up the HR function, if you like, of a very fast-growing tech company globally. Our mandate was really to mobilise the strategy that was in the founder’s head through a very fast-growing workforce in a positive way that played to everyone’s strengths and built purpose and meaning and on a common set of strong core values.

So that was fun. And then I moved into the chief customer role about four years ago. And now my mandate is to look after all things customer orientated, so it probably takes me back to more of my days pre chief people officer role. So I look after marketing, communications, global sales, global digital, technology, digitization of our platform as well as customer support, customer success, and education.

That’s really interesting. I think there’s been a change in corporate in general, but particularly in tech. People are starting to wake up. We’re no longer just looking for the deep, deep specialists.

No.

Quite often, we’re looking at leadership and management roles where the real gold dust is or those people who can think and operate across a range of disciplines rather than just those highly specialised ones.

Yeah. I think in technology, and I think most companies could claim that their technology companies these days because the world is becoming digitized. Whether you’re a bank or whether you are purist technology company, everybody needs people that understand the benefits that technology brings, also the risks that technology brings when you start to think about what we need to be careful of when you’re dealing with so much data. But I think that the contemporary leader is really a change agent. And to be a change agent, you really need to be ambidextrous and you need to be able to see across the whole organisations and understand how certain decisions have implications that ripple through the rest of the organisation.

So even though my career hasn’t been linear, Debbie, I think it’s been well grounded to set me up for where I am today. In the last seven years at Xero, there’s been a massive amount of transformation that we’ve done in the business. I definitely wouldn’t have been set up to be able to lead and manage that transformation if I didn’t have the experience that I’ve had in multiple companies and multiple disciplines.

Oh, absolutely. I’m somebody who’s never been linear in my career and always pride myself on that being ambidextrous like you say. And I’ve seen more and more people really rising to the top because of that, not despite of it.

Exactly.

It is that ambidexterity that really makes great leaders.

And it also is more interesting. We talked about earlier your portfolio career and how it’s interesting because you’ve got different things to focus on. You’re constantly changing the way that you think and the neural pathways on how you deal with. It’s problem solving, right? So I think that that is probably why I’ve had these longer tenures in organisations because it’s always been interesting enough for me to stay and there’s always another challenge to work on. So yeah, I’d encourage anyone to really think laterally and not be in a rush to kind of climb up vertically because sometimes taking a side wood step will set you in good stead for what comes in the future.

Absolutely. And really a shout-out to the tech managers who are listening. This is important to remember because there is always that problem that there’s never enough talent within the tech industry, but there is if you are willing to think in that lateral way and looking for that ambidexterity in your people.

100%. And just look at people’s strengths. I mean, people are going to give you more discretionary effort if they’re doing things that energise them and that they’re good at. And that’s what I learned a lot in positive psychology. It’s not just looking at the experience of people, but it’s really being able to understand what energizes them and what they’re interested in and they’re good at. And when you get people playing to their strengths, the tide lifts all boats in the organization and the productivity rises. I mean, statistically we know that people that are engaged and they’re playing to their strengths, they’re six times more productive than people that are slogging away at something that they’re perhaps not as interested in or not as good at.

Now, Rachael, Of course, I’ve been familiar with Xero for some years now because I have run SMEs and used you as a product for several years. But not everybody on the podcast has heard of Xero yet. I think Xero has a really interesting journey from the start to where you are now. Can you explain to us, I think first, who Xero is? And then what I really want to dig into is I think it’s been fascinating, what were the key differences that took you from quite a different starting position from some companies or products to the global leader that you are today?

Yeah, It is a fascinating story. I mean, if you think about this tiny little company that was born out of tiny little country, New Zealand, at the bottom of the world 17 years ago by Rod Drury who is our founder and was our CEO until five years ago but he still is a director on our board, he had this idea in working with his accountant. He was frustrated that they kept having to transfer files back and forward. And by the time that they went back and forward, they were out of date. So he had this idea that what if we could see the same information at the same time.

There was plenty of accounting software businesses across the globe, but there was no one that was doing it in the cloud so that it was actually accessible to two parties at the same time. So he started working on that concept. Actually very shortly after they were born as a company, in 2007 they floated on the stock exchange. So they raised about 15 million New Zealand dollars. Rod often jokes that most of that raised was shareholders had their surname, Drury, or were a family, a friend. But that really got them kickstarted to be able to go global from day one. And because it cloud-based, it enabled them to go global. I don’t know if you’ve worked with any Kiwis, but they really do have this mindset of anything is possible I think because they come from this tiny little country.

So fast-forward and now we are 17 years later and we have nearly 5,000 staff. We’re in South Africa, Australian, New Zealand, Singapore, America, Canada, the UK of course. So we’ve got over 12 offices around the globe and we distribute products in over 180 countries and we have over 3.5 million small business subscribers and accountants and bookkeepers that use our software.

I think to answer your question about what made us unique and why we were able to… It’s not been an overnight success. It’s 17 years in the making. We’re now listed on the Australian Stock Exchange. We were [inaudible 00:09:47]. We were first listed on New Zealand, then New Zealand and AU, and now just the Australian Stock Exchange. There was a couple of unique characteristics about why we’ve been able to scale so rapidly. Number one, we were cloud-based from the start, and I think that just means that you’ve got so much more reach.

Number two, we were very focused on building what we were building to sell and support our customers using digital technology. So we have very high margins because even our support team that I look after, they don’t take inbound support calls, but they do outbound support calls. So we use a lot of AI and technology for customers to serve themselves, and that means that 96 out of 100 times, customers can get the content or the information they need without having to go on and raise a case. But when they do raise a case, we do have qualified people to answer their questions. Using that technology for our own benefit I think has really helped.

And then the other really important element is we are a B2B company. We sell to small businesses and to accountants and bookkeepers. But some small businesses are so small, they’re like sole traders that it’s almost B2C. But then the accountant and bookkeeper channel is our B2B route. The unique factor there is that we really focused on accountants and bookkeepers in the first instance when we go into a country and into a market because they fall in love with our product and they’re the ones that have the reach to the millions of small businesses in their local communities. So they almost become an extension of our workforce and a sales channel for us, but they also run their own businesses on Xero. So that ambassadorship and advocacy is just something that if you can have your channel partners engaged and loving and using your product, they’re the best salespeople for you.

Great. I think there’s several interesting things from what you just said that I want to surface and draw attention to. I think it’s powerful that you were thinking global from day one. I think, secondly, that your route to market was different. You really looked at channels differently from your very earliest days than some companies do and built from that. I think the other thing you did that’s really powerful that a lot of products quite often when they start are thinking about “What am I delivering to the customer?” You flip that into thinking about how we can help the customer help themselves.

Exactly.

That’s a real lift to the customer services that you benefited from. And then I think that puts you in a great position. As AI evolves, you’ve got more and more that you can do and just slot in there. I think it was also really clever that your approach that has allowed you to scale and team with your intermediaries, with your market, et cetera, which is really, really positive. And when you’re looking at startup, you’re scaling so quickly, choosing your futures and choosing which direction you’re going. One of the things I was really impressed by reading and listening to some of the things that you said is that constant focus on the user needs. Once you have that embedded, I think in terms of driving what you do, where did you see that really make the difference, the lift for you and feel the benefit of that?

Oh, there’s several examples. I mean, I can even just pick COVID for example. And what I’ll say is having all of the customer functions under one executive when COVID hit and all of the regions reporting through to me as well, it meant that we were able to react really quickly. So not only did we support our customers in giving them the content that they needed to understand what government subsidies were available to them as they went in and out of lockdown in various locations across the globe, but we also were able to think about what is the features and functionality of the product that is going to best serve these customers. And we know that cash is king and we know that cash flow is often the thing that kills companies. A lot of small business operators may not have the financial confidence or literacy to actually keep on top of that. So we accelerated our cash flow analytics tool through COVID. That’s one example where we got that out to customers.

Another thing we did at the start of the pandemic is we looked at our product ladder and our product skew and thought that there’ll be a lot of companies that need access to their finances for government subsidy reasons, but they’re not bringing in revenue. So how do we actually get a product out to market that’s a cheaper product for them from a subscription perspective, but it allows them to still keep their data and access the information that they need so they can get access to technology? So I think there’s a couple of things in that, having a feedback loop with customers constantly and we are very regularly in touch with our customers. We run X Pack in every region where we bring our accountants and bookkeepers or contingent of our account and bookkeepers onto our X Pack panel in various regions and we bring them together quite regularly so that we can have discussions about what they’re hearing from their customers and what features and functions are really important to them and their customers.

We also run Xero Con once a year where we bring our accountants and bookkeepers together in the Northern Hemisphere, in the southern hemisphere, talk about what’s coming up from a product perspective and also bring all of our partners to those conferences because that’s the other unique thing, Debbie, that I’ll say about Xero. We have an open platform, so we have about over a thousand apps that plug in that are bespoke apps that are relevant for small businesses that connect through to the core record of finance in Xero and allows them to run their business. So these are all of the things that I think is about really understanding what are the needs of a small business and how can we best meet their needs so that they’re freed up to do what they do best, which is serve their customer.

I think that’s really something else that you did that was really interesting. That doesn’t often happen either in startups or when a company is thinking about running a new product line, and that was that you decided not to approach it from a proprietary standpoint by thinking about, “What are the APIs? How can we work together in that respect?” That’s crucial in today’s world, you know? They don’t want to hear that you’ll be back to them later with things that they want because they have other apps and things that they’re using. By making sure that you go in that non-pro proprietary way, that throws doors open for you, doesn’t it?

It does. I mean, our purpose is to improve the lives of people in small business, their advisors and communities across the globe because we think if we can help small businesses in whatever way that we can to improve their lives, and for some that’s growing, and for others it’s getting time back so they can spend it with family or working on hobbies or with our relief parents or loved ones, and we can’t do that on our own. Like if you think about small businesses in the plethora of different industries and different sizes of small businesses, some are employing, some are non-employing, so some need payroll, some don’t, we absolutely could not meet every single need of every single small business if we weren’t open and we weren’t cooperating with other partners that could plug into the Xero platform and make it easy for customers. There’s so much that we do that I’m really proud of to really say we stand by that purpose.

The last thing that I want to draw attention on that really impressed me, and I think it’s that golden thread that’s gone through all our podcasts, and it’s data. Because of all the data that you now have on businesses, during COVID you realized you were sitting on a treasure trove. Talk to me about that. How did that become a powerful insight tool and not just to your customers?

Yeah, so in 2017, so just pre-COVID, we actually launched what we called the Xero Small Business Insights Program where we started to look at the data on our platform. We launched it in Australia, first in New Zealand, and started to see what trends we were seeing around revenue, around time to pay, around employment in small businesses. What became really evident was there was just such rich data that was really meaningful. Now we were very careful in how we use that data because there’s lots of risks around privacy. So we aggregate and anonymise that data. We have an economist on staff that works with us that then turns that data into something that really is able to actually get a sense of what’s happening in different industries.

Now, fast-forward to when COVID hit, obviously there was lots of governments that were looking for information about what was happening in different segments of the market. We had this rich data that allowed us to actually give them insights to what was happening in the small business economy well before they could get it themselves. So we actually rolled out the Small Business Insights program across the UK and we are shortly rolling it out in the US and the America’s market as well.

So at that time, we actually created an index. So based on time to pay, wages, and sales, so wages job, time to pay, and sales, we can actually calculate what is called the Xero Small Business Index. And we know in any region or any industry vertical within that region, if the index is above 100, it means that it’s improving from where it was last time. If it’s below, it’s going backwards. So it’s sort of a thermometer test of what’s happening in the GDP, but it’s broken down to an industry level. And that information is just so powerful and allows us to go in and have conversations with government about where they should be focused on deployment packages to support businesses that might be in need in different verticals.

That’s something I hear again and again from our guests. There’s that moment when you realize you have this treasure trove of data and what it means for you internally. Then there’s that real eureka moment when you realize that what value that has externally for different stakeholders, for customers, et cetera, that you can serve it up to them. And as you say, really careful obviously in terms of privacy, but that data is rich and it can be mined in so many different ways.

There is trillions and trillions and trillions of dollars going through the Xero platform. And if you even think about the amount of small business employees that are paid on the Xero platform using Xero payroll technology, there is a treasure trove, to use your words, of information. It’s not something that we even look at from a commercialisation perspective. It’s like, “No, this is about living our purpose. We can help small businesses if we can help governments know who they need to help.”

The other thing that we do to help small businesses because a lot of using the data, because a lot of small businesses just don’t have the same luxury that big enterprises do to bring in consultants and help them with different elements of what they’re focused on, is we know climate is a big hot topic at the moment and people are really curious and interested and willing and able or wanting to know how they reduce their carbon footprint. So we’ve got plenty of apps that plug into our platform that work in carbon calculation, but we actually have launched a couple of specific partnerships. One is with Cogo, who’s another New Zealand based business that actually plugs into Xero and helps small businesses calculate what is the carbon that they’re using and gives them some tips on how to reduce their carbon footprint. So we are thinking about that all the time, those sorts of things saying, “What else could we be doing to help small businesses?” Because we have the data, we have the information, and we have the resources to be able to assist them.

But Xero’s not done by any stretch of the imagination. You’re facing current challenges. What are the biggest ones that you’re looking at at this moment?

Well, it’s interesting because going into COVID, I think for most businesses it was probably one of the scariest times in all of our lives not knowing what was going to happen. I remember at the time, I look after revenue for the company. So I remember at the time working on different scenarios of everything, from things we’re going to completely collapse and all businesses were going to be shut for a period of time, and therefore our revenue would go down drastically because we have monthly subscriptions so people can turn that off at any point. Or the other flip side was that potentially it was going to accelerate because people would need to get onto a digital platform.

So I remember at the time it was kind of a white-knuckle moment, “Which way are we going to go and how do we even forecast what’s happening in our business?” Now, we did see an acceleration in digitisation. We probably saw in that two to three year period a decade of growth of digitisation. Coming out the other side of that, I think what we are all seeing in the tech industry is that we need to look at how we’ve grown and whether or not our revenue and our cost base has grown at the same rate and how we can ensure that we’re becoming more efficient ourselves as well, which is what we are focused on, is where else can we use digital technology to become a more efficient engine to serve and support our customers.

So that’s one thing that I’ll say is top of mind for us at the moment. How do we make sure that we are growing top line but also growing the bottom line? The other challenge for us is continuing to seek talent in markets where perhaps we’re newer to the markets. So we’re well known in the markets where we are, but of course in Australia and New Zealand, we’re significant number one player. So we need to make sure that we continue on that growth in the UK and the US. And attracting talent in a highly competitive market is also something that is keeping us awake sometimes at night, making sure that we can get the best people that are really purpose-driven, believe in supporting small businesses. A lot of our employees have some affinity with small businesses. They’ve worked in them, they’ve grown up in them. So that’s something else that is top of mind for us.

We want to just as we grow, one thing that I’m really passionate about is what I call the human ripple effect. And having started my journey at Xero as the chief people officer and really being fundamental in helping build that culture and that foundation, you don’t want to lose that as the business grows and becomes more geographically dispersed because that is the special source. That’s the magic that actually brings our people together to best serve our customers and our accountants and bookkeepers.

I’d like to build on something you said a bit earlier. You’ve got your finger on the pulse of what’s happening with SMEs with your customer base. So much has changed. There’s so much more digital. If I am a tech listener, in a broader sense, are you observing anything else from a technical perspective that is going to keep changing rules emerging as a trend in the SME market?

Yeah, I think that there’s a couple of things. The first thing I’d say is we need to continue to think about from a financial services perspective, so not just like managing the finances in the back office, but how we support small businesses getting access to funds. Like I said, cash flow is the most important thing. So that’s something that I think that the traditional bricks and mortar bank and going and getting a loan, I mean, we’ve seen extrapolation of that into the digital world. I think there’s a role for all of us to play in making it easier and more seamless for small businesses to get that support.

The other thing is I think that the workforce, like the workforce that’s coming through Gen Z and then the alpha generation that’ll come in after that. Whether it’s B2C or B2B, there’s going to be entrepreneurs and small business startups. They have different expectations of what their digital technology will do for them. So they have the same expectation as they have in their personal apps at the moment. So where they wake up and their phone tells them how long they’ve slept for and what kind of level of sleep they’ve had and how long it’s going to take them to get to work, the technology in running their business is going to have to be as personalised and intuitive.

I couldn’t agree more. I think we absolutely have to remember that the consumers of that B2C market when we’re B2B are our consumers. And what they want, they have that absolute insistence on customisation, personalisation. I think there’s just a lot around integration. They don’t want to go lots of places. They don’t want to have to open lots of different programs. One of the things I think you’re talking about is a real gateway to all, and I think that more and more companies need to think about that integration for their customers.

And they want the technology to tell them not only what they need to do now, but what they’re going to do next. So they need to think about the proactivity of that. What’s your next best action to take? Is it to chase up an invoice that’s not being paid? Is it to ensure that your employee’s wellbeing is being looked after because the technology notices that somebody’s not been in for two days in a row? Or whatever it might be. This is the opportunity that lies in front of us. And if you think about some of the digital technology in AI that’s starting to rear its head like ChatGPT, and I think we’ve got a long way to go on that, so I don’t want to overemphasize that it’s fun to play with, but there’s probably a lot of challenges in that. But we need to think about how we embrace these technologies and how we use them for good and how we do so in a way that’s responsible in using other people’s data to actually help not hinder them and respect their privacy.

Rachael, I’ve asked you a lot about what worries you. I also like to ask my guest to think about looking at the horizon in a more positive way. It doesn’t have to be necessarily what’s happening with Xero, but in general, what are you keeping your eye on? What are you excited about?

I think we’re excited about the opportunities with respect to what we can do to support small businesses outside the hygiene of finance, which is why when we started, we had a tagline, Beautiful Accounting Software. Our tagline now is Beautiful Business, because it’s not just about the accounting software. It’s not just about doing the books and the compliance. It’s about how we can actually support small businesses to improve their lives. So whatever that might be.

And I think that that can go in multiple directions. I think that the thing that we just need to be cognizant of is what we are going to focus on and where we’re going to partner because we can’t do everything. And that’s why having an open platform is I think the smartest way to go about that. The thing that excites me but also scares me a bit is all of this AI technology and how we’re going to be able to integrate that into how we not only run our business, but we help small businesses run their business. So I think that we’re going to see a acceleration of sophistication in what’s coming down the pipe with AI and machine learning, and we just need to be all very cognizant about what we’re staring into and what we pick up and we use and what we stay away from based on the technology and what underpins it all and the responsible data use that’s being driven in the backend of all of those technologies as well.

Agreed. It’s just about embracing. It’s not getting lost in the hype [inaudible 00:28:06]. We are so at the height of the hype curve at the moment with AI and ChatGPT. It’s just so important to keep our head to remember it’s just a tool like any other tool, and to use that with a real sense of our users, our customers, to drive that, not just get excited and lost in the next big thing.

Exactly. And I think that when you continue to come back to… I talk about the soul of Xero and making decisions internally for what is right for the soul of Xero and thinking about that. If you think about it as a soul, it’s like you’re thinking about it as an eternity. So what decision you make today and how that might affect things in the future, you really need to be cognizant of that. But continuously coming back to, “What problem am I solving for my customer?” And if you put the customer in the center of the soul, it’s hard to go wrong, but you need to make sure that you’ve got the strengths in the organisation, the thinking about all the different contingencies as you head in different directions.

Rachael, thank you so much for joining me. I’ve really enjoyed chatting and you’ve just made me love Xero even more. I’ve always been a big fan and a big user, so you now just moved up even further in my mind.

That’s good, Debbie. I think one of the things that is a challenge for us is to make sure that clients like you access the full benefit of the platform. So the education that we can give to customers and making sure that… Because you’re not going searching for what else has dropped from a product perspective, we need to make it obvious for you and we need to make sure in your busy, busy life that it’s intuitive and that you can see that we’re constantly evolving and improving the product. So it’s been my pleasure. Thank you for having me.

Thank you for listening. If you are a tech innovator and would like to appear as a guest on the show, email us now at xtech@fox.agency. And finally, thank you to the team of experts at Fox Agency who make this podcast happen. I’m Debbie Forster and you’ve been listening to the XTech Podcast.

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