What a way to start the week – a 9am press release announcing Rod Drury was relinquishing the role of CEO at Xero, seemingly out of the blue.
First, you have to pay credit where it’s due. Drury and co-founder Hamish Edwards were the first to reimagine accounting software in its current form. Automating compliance through digitising the bookkeeping and compliance process, building a massive online database of rich, professionally categorised data, and connecting it to a far broader number of online software, services and financial institutions than desktop software ever could.
And doing it all in just eight years after starting out from the tiny town of Wellington, New Zealand. It’s a hell of a run.
The conference call with media an hour later, where chairman Graham Smith introduced Steve Vamos and formally thanked Drury for his efforts, was especially revealing.
Why Drury left
Drury is first and foremost a technologist. He loves gadgets. Watch one of his keynotes or interviews and notice where he starts to jumble his sentences because he’s talking too fast.
Technologists like to invent the cool stuff. Invent something that is “truly magical and revolutionary”. That is fun. I really respect that – because that’s what excites me too.
To a technologist I would imagine running a global business would be a massive headache. People are a headache. Unless you’re into culture and educating people then this is work with a capital W. Like everything that Vamos is taking on: leadership talent, global operations, diverse geographies, managing growth rates, optimising global teams and implementing a matrixed organisation.
“I was finding I was a little bit stretched – we have so much innovation we can build, and then there’s the day to day of running a global business and working all that out,” Drury said on the call.
“I’m so passionate about building new products over this platform and I’d really like the time to work on those, work with our great leaders and get those strategies into place. This allows me to get back to the bits that really turn me on in the business.”
How it will work
Steve Vamos is in charge of the “day to day” and Drury is in charge of innovation on the platform. It’s a slightly odd arrangement in that Drury is now a non-executive director – possibly a face-saving move so Drury doesn’t have to report to Vamos. But as Matt Paff points out, Drury is clearly taking an executive role.
Vamos would no doubt have heard about the last time Xero tried to split these two positions – Drury holding onto CEO and pulling in Angus Norton as chief product officer. That lasted all of eight months, apparently because Drury couldn’t keep out of the product.
This approaches the same problem from the opposite direction. On the face of it it’s a much better fit. And Vamos made several comments about his familiarity with founder-led businesses, and also made this promise: “Rod’s DNA will always be part of Xero as I lead the business through the next phase.”
I can’t imagine Drury will surrender a mandate to take the product wherever he wants. With Vamos as the enabler and the board as the referee.
If Drury and Vamos can make it work they will be a pretty dangerous combination.
A note on the board: “The highest priority for the board is scaling operations around the world which requires slightly different set of skills in the CEO role. We’re committed to executing on our strategy. The next phase is on hiring the very best talent for global execution,” Smith said.
In short, Xero is mature enough to sell to millions more businesses everywhere. That alone will turn Xero into a very large and powerful company.
It also means the highest priority for the board is not product development. Will this lead to conflict? Maybe, but hopefully not.
Xero will always be Drury’s baby. He told the media he’s not taking any other directorships. And the board will no doubt want Drury around, if they believe recent research published in the Harvard Business Review. “S&P 500 companies where the founder is still CEO are more innovative, generate 31% more patents, create patents that are more valuable, and are more likely to make bold investments to renew and adapt the business model — demonstrating a willingness to take risk to invent the future,” the study said.
What Drury does next
Xero is heading in two directions; fancy fintech integrations that reinvent financial services (think automated approvals for loans), and adding more user features to Xero. The first direction will draw on Xero’s treasure trove of data – $1.3 trillion of transactions, neatly categorised (for free!) by an army of bookkeepers, accountants and business owners.
Every financial services provider from insurance companies to banks and investment funds will want to know how businesses are performing in various segmentations and when they are likely to need to buy a financial service. Xero will be busy clipping all sorts of tickets in the next five years.
The second is just as interesting. Drury talks about moving “from the back office to the front office” – that is, putting more elements of Xero in the hands of employees. In fact on the call Drury described the first 10 years of Xero’s life as “building all the complexity of SAP for small business”.
SAP is a business platform for enterprises that spans every part of the business from HR to inventory and warehousing to sales and marketing as well as finance. Will Xero ever get that big? It’s possible. Drury has talked about going after the mid-market before in his 2016 Xerocon keynote. In the conference call he talked about “reinventing the user experience”.
Perhaps, now that he has freed himself of the “day to day”, Drury can take on his next dream – to give fast-growing SMEs a reason never to leave Xero.
Image credit: Xero
Sholto Macpherson