Under current pandemic conditions, there’s limited opportunity for the face-to-face contact and in-person sensitivity that are typically hallmarks of the M&A process. Therefore, it’s more important than ever for parties on both sides to make the most of what interactions they do have. In spite of COVID-19, we’ve seen a surprising number of deals take place in recent months, including the coming together of digital business consulting firm Keste and business modernization pioneer Argano. To learn more about M&A best practices and the direction of the Argano platform, we invited Chip Register, CEO of Argano, to speak with MGI Research analyst Igor Stenmark at the 2021 Monetize Forum.
Key Issues
What is a digital operating platform?
How has services M&A changed in the pandemic climate?
What steps can CEOs and CFOs take to prepare for potential outside investment?
Guest Profile
Chip is the Group CEO of Argano, LLC. Prior to this role, he was a member of the nine-person Executive Board of Publicis Groupe, and Co-CEO of Publicis Sapient, its digital transformation division. Before Publicis Groupe acquired Sapient in 2015, he was the CEO of Sapient Consulting.
In 2010, Chip was named one of the “Top 25 Consultants in the World” by Consulting Magazine.
Igor Stenmark
Hello, this is Igor Stenmark of MGI Research, and we are at the 2021 Monetize Forum conference. In our next session, “Systems Integration M&A Goldrush: The Argano Approach,” we’ll focus on consolidation in the systems integration market, specifically as it applies to digital operations and quote-to-cash. Earlier in the conference, you may have heard some investor perspectives on M&A. These focused primarily on software and fintech. In this session, we’ll focus on services M&A and get a perspective from someone who successfully wears the multiple hats of executive, board member, and consultant.
Our guest for this session is Chip Register. Chip is the Group CEO of Argano, LLC. Prior to this role, he was a member of the nine-person Executive Board of Publicis Groupe, one of the three largest media and communications holding companies in the world and Co-CEO of Publicis Sapient, a digital transformation division with around $3 billion in services revenue. He joined Publicis when it acquired Sapient in 2015. At Sapient, he was the CEO of Sapient Consulting, one of its two operating divisions focused on industry-led consulting and IT services. In 2010, Chip was named one of the “Top 25 Consultants in the World” by Consulting Magazine. He also serves on several boards of directors and advisory boards for companies innovating enterprise and consumer technologies and services. Chip is joining today from one of my favorite places in the world, New Orleans. Chip, welcome to Monetize Forum 2021. We’re delighted to have you here.
Chip Register
Hey, Igor. Thanks for having me.
Igor Stenmark
It’s great to have you here. To start, who is Argano? What is your focus?
Chip Register
Hopefully, Argano represents an innovation in digital services for a new age. Argano is a platform—it’s an operating company, but it’s a platform, and it’s made up of best-of-breed service providers that represent different skillsets across a couple of different continuums in the digital operating platform space. The digital operating platform, in my parlance, is sort of the noun behind the verb of agile monetization. The digital operating platform is how you monetize demand. What happens once you’ve generated demand? I spent a whole chunk of my career at Publicis and Publicis Sapient really focused on demand generation, all the way from brand through omnichannel digital strategy and right up to commerce. We’ll probably talk about this later in the session, but I think what a lot of people have lost focus on (and certainly what a lot of service providers have lost the skill on) is the monetization aspect.
What do you do after demand is generated? How do you run an efficient and effective company that’s capable of not only enabling the vision, services, products, and experiences that you have, but also the ones that you want to have? We believe that in order to refocus on agile monetization, a new type of operating platform is required in the digital services environment. So, Argano is a platform which represents a whole bunch of best-of-breed companies that bring skillsets—business solutions skillsets, different technologies skillsets, and different industry specializations together in a sort of mosaic, specifically focused on this problem of agile monetization through a reimagining of the digital operating platform with the total intent of making it an enabler of the reimagination of commerce, as opposed to an albatross around the neck of your legacy enterprise.Igor Stenmark
Got it. Your first partner on the platform is Keste, a company based in Dallas and one we actually know very well. What attracted you to Keste?
Chip Register
Keste is a great firm and a great example of the type of partners that we have on the platform. First of all, it starts with super strong leadership and super strong culture, whether we’re talking about Argano or acquisition in general. There’s an old saying: “You bet on jockeys, not horses,” and if you look at Keste, you see an incredible leadership team that’s been together for 15 or 20 years. They’ve really made a dent in the universe they specialize in, which is solving complex B2B sales enablement and operating environments. That’s really where they put their mark, and they have great branding. People know Keste for their ability to do impactful work in this space. But it starts with the people who put that company together and the people who’ve been running it for two decades. They’re fantastic. Not only have they built a great team, a great organization, and a great culture, but they’ve also built a great capability set.
We sort of joke that Keste was overbuilt in the sense that, as a smaller and growing company, they solved a lot of the problems that companies face as they move from phase to phase to phase in their development. If you take a $5 million services firm and one at $50 million, $150 million, or $500 million,
those are all different companies, and Keste has always been building itself in preparation for being the next-level company. So, they have a lot of great platform aspects in the ways they think about their strategy, their delivery, their culture, and their global delivery capabilities. They’ve built a lot of things that most companies their size haven’t done yet. Because they were very forward-looking and built a lot of these great capabilities, a lot of the later joiners to the platform will be able to leverage some of that thinking and those capabilities. I jokingly say they’re a little overbuilt or prebuilt for what they need today, but that just shows credit to their leadership and the culture for always thinking two steps ahead
Igor Stenmark
Yes. leadership and depth of management are definitely key—no question about that. What attracts you guys to the monetization space itself? We certainly know why this is important and worth spending time on; our own effort is oriented around that. You guys obviously have a lot of choice and could have invested in a wide variety of strategies. Why digital operations and monetization?
Chip Register
So, I touched on this a little bit a few minutes ago, but the way that we see the world is—picture a rubber band: there’s a gap developing in the market between what I refer to as the digital experience platform and the digital operating platform. The digital experience platform is what we’ve all been hyperventilating about for the last 15 years. Pick a date. It could be the introduction of the iPhone, the app store, the cloud, or a similar unveiling starting to taking place between 2005 and 2010. These advents started to reshape society. We talk a lot about the digital renaissance. Starting in the 21st century, we entered a period of digital renaissance that, in my view, is no less potentially transformative than the renaissance of the 16th century. We all went to work really fast and hard, invested tons of dollars, and shifted all of our focus both as service providers and as enterprises onto how to reimagine ourselves to be relevant in that new economy.
It was all about how to be the “x of the future”: the bank of the future, the retailer of the future, the oil company of the future, the healthcare company of the future, whatever it was. It was all about reimagining yourself, which meant radical product service and experience design shifts. We all became very active in that at Sapient, which created SapientNitro, the world’s first digital agency. Publicis acquired Sapient to get at this in the broader digital transformation market. So, a lot of my experience over the last 15 or 20 years has been looking at this digital experience platform and saying, “How do we change our brand and our business to be the ‘something’ of the future?”
The problem is that this created a gap in investment, in attention, in technology, and just in effort between the digital experience platform, what we could imagine, and the digital operating platform, what we could do efficiently and effectively. And I think that gap’s been growing and growing and growing. You see it on the client side, where all sorts of heat and smoke are coming off these engines because we’re trying to do things in a much more customized way, a much more self-service way, a much more mobile way, a much more intelligent way, or a much more personalized way—all of these dimensions of expectation that customers have for good service now. The digital operating platform just can’t accommodate it in most instances, and I think that’s really where a ton of effort is going to have to go now.
I’m by no means moving past the digital experience platform and saying, “Oh, we’re done with that, and we’re going to stop.” Investment’s going to keep pouring in that direction, as it should. But in the digital operating platform, there hasn’t been the investment, and there must be in order for it to not become an albatross for all of your innovative ideas and your factors of competition in the future. However, having run a large company, I can also tell you that the service model is not constructed anymore to really get at the digital operating platform. I think the world came to view work in that area as sort of uninteresting, commoditized, and less compelling than work on the digital experience platform, and service company after service company after service company either got rid of their capability or de-emphasized their capability.
We believe that it’s not just a re-emphasis of the importance of work in the digital operating platform. It actually needs to become as dynamic and innovative a part of the business infrastructure as the digital experience platform. All of the technologies, the lessons, and the experiences we’ve had there need to translate back into the fulfillment engine and the monetization engine. So, how we use cloud, AI, data, and integration—all these things that we’ve been doing and focusing on at the front need to move to the back, and I find that the service companies really aren’t good at this anymore. They lost their attention. They lost their capability. They lost their view of it as important. And that’s an opportunity not only to step into a less competitive place that has a massive coalface of demand, but it’s also an opportunity to change a little bit of how it’s done.
So, Argano is a platform made up of companies that are the best in the world at solving some of these problems, now working together in at-scale, global, integrated ways that I think will be far more compelling than the broad, bland, poorly delivered services offered by the big systems integrators that you might normally call to say, “Hey, do me a big transformational project in this area.” They may offer the old pea soup version as opposed to this, which is hopefully super sharp, super crisp, and super well delivered.
Igor Stenmark
It sounds like you’re building a critical mass of best-in-class, best-in-the-world specialists in monetization.
Chip Register
That’s right. But we’re doing it in a very integrated, scalable, thoughtful, and purpose-built way.
Igor Stenmark
Yes. At one point, I remember you described Argano as having a build-out versus a roll-up approach. What’s the difference, and why the build-out approach?
Chip Register
Well, a roll-up is something you commonly see where people say, “Hey, I’m going to go pick a technology or capability, go out on an acquisition spree, and stack up this capability so that it gets to scale.” That scale will give you some kind of change in valuation, and then that’s the basis behind an investment thesis. If you take the capability and make it bigger, it then becomes more valuable just on the nature of its scale.
This is not a roll-up. This is a mosaic. We’re looking at business solutions inside agile monetization primarily (though not only) in three axes. So, look at commerce, CPQ, billing, order management, subscription, ERP, HCM, supply chain, procurement, and EPM—look at these different business solutions that are in the monetization world or the digital operation platform. That’s an axis for us. We want some of each of those, not all of one. We’re not trying to build a big digital commerce company. We’re not trying to build a big ERP company. We’re trying to build a big digital operating platform company, so we need skills across that value chain.
Secondarily, we have technology. We need to be able to deliver those solutions in the client’s technology of choice. It doesn’t matter to us what technology language the client chooses to speak. We ought to be able to deliver services in the digital operating platform because we believe that our value is as a business solutions partner, not a technology implementation partner. So, for us, technology is something where we need to have a broad suite of capabilities.
The third focus is industry expertise. We have a select set of industries that we think are worth focusing on, and we do believe in an industry focus because industries themselves are languages. I think anybody can execute in any industry, but to innovate in an industry, you have to have expertise. You have to understand the language, the best practices in that industry, the technology stack in that industry, and what’s working and what’s not working in the business models of that industry. Anybody can go do an implementation; they’ll be fine. But if you want to be an innovation partner or a strategy partner, I think you have to have some deep industry expertise to be able to have an intelligent conversation that’s differentiated.
So, that’s primarily how we think about it. In terms of the mosaic, we’re looking across those three lenses. Geography is clearly another one as we want to be globally distributed in our talent pool so we can provide a mix of offerings from a delivery standpoint. We’re interested in market segment and what parts of the market segments different companies are good at. We want to have a diversity of that as well. So, there are some other lenses, but those are the big three, with a particular focus on business solutions. As a company, we want to be seen as a service provider that is a thought partner in the digital operating platform with everything else as a capability.
Igor Stenmark
Got it. You’ve been involved in a lot of transactions in your career—acquisitions, integrations. Since you’ve brought Keste on board, you’re now looking at a handful of additional transactions. What’s different about doing M&A in pandemic times? There’s a people aspect here. How do you guys manage it? How do you handle it?
Chip Register
It’s interesting. I’ve done a lot of M&A through the years. Interestingly, over the last couple years of my career, I’ve been working with private equity firms—sitting on the other side of the table was super enlightening. Now I’m again an operator, but an operator who’s growing inorganically as well as organically. So, there are three different perspectives I bring to it now. Clearly, the biggest difference in this time (if you believe in this idea) is what we mentioned earlier: “Bet on jockeys, not horses.” It is more difficult to really understand the leadership and the culture of a company if you just can’t do the hours: the face-to-face hours, the formal versus informal hours, the conference room versus the dinner hours. It’s just harder to really get a natural read on those things. You can’t go meet dozens and dozens and dozens of employees and ask them the same questions and see how that triangulates. Questions of strategies, questions of culture, questions of leadership—you just can’t do it, or certainly not to the same depth. So, that’s a big one.
Additionally, maybe a little bit more during or post acquisition, there’s the issue of communicating with people. You have to remember that when you acquire a company, exactly 0% of the population (or maybe just one or two people) actually chose to work for you. So, you have a lot of work to do to convince them that this thing that’s happening is in their interest. They weren’t part of the decision. They probably didn’t even know of the decision. In order to build culture and to create, we start with the idea that we’re not an M&A process. Our platform is a joiner model. Our platform is for people who think the next best destiny of their company is on this platform. We’re not acquiring anybody; that’s not our point.
However, though I think the people involved in the transaction and that decision all get that and are fine with it, there’s 1,000 people who weren’t involved. They had their own culture, their own pride, their own way of working, and their own concerns. So, you have to be super communicative with those people about why they should believe what you’ve told them to be true. That takes a lot of communication. Typically, I would go do roadshow after roadshow after roadshow, meeting with teams from two people to 2,000 people, talking about what we are; what vision, what values, what beliefs, and what behaviors we share; why, strategically, this is in everyone’s interest; and especially why, maybe tactically, it’s in all of their interests. What do they get out of this whole event? That’s harder to get across.
The other things that’s also maybe during or post process is getting the leadership teams working together. We all become team members when the first shot gets fired, right? That’s an old saying, but if teams can come together, work together, and solve problems in a common way, that develops that cohesion, co-ownership, et cetera. It’s just harder to produce virtually than you’d like.
On the other hand, though, I think there were a lot of myths about this type of process which might not have been true—for example, “It’s impossible.” I think a year or eight to ten months ago, people would have said, “What you’re talking about is impossible in today’s reality. It could never happen.” And, in fact, it has.
Igor Stenmark
We’ve seen so much activity in the market, so it’s definitely possible.
Chip Register
True.
Igor Stenmark
We’re almost coming to the close of our session here. To conclude, I wanted to ask you one more quick question here. What should every CEO or CFO do to prepare their business for an outside investment?
Chip Register
I’ll tell you the number one thing that we find helpful: get your data ready to tell your story. Most people have the same website. Everybody has the same deck, and they all have the same grand statements, core beliefs, values, and strategy. They identify the same problems and articulate the same capabilities. At some point, though, somebody is going say, “Prove that you do that,” and that’s a data exercise. I want to see you slice this information this way to show me that you’re doing that—not that you say you do that, but that you actually do that and are successful doing that. You’re actually efficiently and effectively delivering that service. Effectively means you impact your client, and efficiently means you can make money doing it. So, get your data in a place where you can actually support your story with that.
One of the things that I think is on the soft side is to understand that people are evaluating you as an individual as much as they are your data or your story. Lots of people look at things and say, “Hey, this business—good, bad, or indifferent—the leadership is strong or weak. The culture is strong or weak. The strategy is strong or weak. The vision is strong or weak.” And that’s how you come off a compass point in one direction or the other. Understand that how you’re presenting, how you think about your organization, and how you think about your culture and all that definitely matters—at least to me. It’s incredibly important that you thought about these things, and if you show up and talk about nothing but how you make money in a business, I’m kind of less interested. So, those are just some thoughts for anybody that thinks they might want to go into this process.
Igor Stenmark
Definitely words of wisdom, and it sounds like they come from a lot of deep experience here.
Chip Register
A lot of scar tissue.
Igor Stenmark
Yes, or a lot of scars! Well, Chip, I want to thank you for joining us here today and participating in the conference. I’ll remind everybody to go and visit the Keste booth at the virtual exhibit floor. I’m sure Keste and the team there would be happy to answer any additional questions. Thank you all for joining us today, and enjoy the rest of Monetize Forum 2021. We hope to see you again.
