Capitalizing on Opportunity and Fixing What's Broken

Ten years ago, Ryan Frederick, became a partner at AWH, a now 26-year-old firm that builds net new software products, solves data problems, and integrates systems across platforms and products (phones, the web, Internet of Things [IoT] devices).

The client mix is split in thirds:

1. Funded startups building disruptive products to capitalize on unique opportunities
2. Midmarket companies (manufacturers, distributors, or nonprofits/social enterprises) who don't have much technological knowledge or "horsepower" and a one-time or only sporadic need to build a "digital fix."
3. Enterprise clients that need prototypes and proofs of concept for corporate innovation initiatives (e.g.; leveraging blockchain technologies, integrating machine learning, and utilizing artificial intelligence). These companies have the resources to build the needed system but need guidance on how to approach a problem and what needs to be done. To ensure the best outcomes, AWH consults with clients and establishes advisory boards to iteratively build products that resonate with customers and provide value.

Ryan started out his career as a software developer but migrated to the "business, human, and creative side of things" – because he was interested in utilizing a more complete mix of skills. In this interview, he talks about how developers have been maligned in the past for not caring about the quality of the code they wrote. He admits that a lot of bad software was written when developers were a "background assembly unit" and the practice was to "slide the requirements under the door" and direct developers to build what they were told to build.

Ryan says today's developers, designers, and QA professionals demand interesting, challenging, impactful work and need to be involved from the beginning – in defining the problem and in the planning, design, and user experience processes. Losing team members mid-project destroys process, teamwork, and collaborative continuity and chokes progress as "replacements" need "ramping up." AWH's focus, particularly in the last 5 years, has been on creating an environment where team members feel valued for their work – in order to "get and keep the most talented, capable team" possible.

AWH often works with funded startups that often come up financially short at times where continued development is critical. To address this problem, AWH formalized an internal financing mechanism where AWH lends monies to cover continued development work in exchange for client royalties or equity. Ryan says AWH has done this 20- or 30- times, not so much by choice as by necessity. A few "loans" have "gone south" – but the company, to date, has accrued royalties or client equity of almost $2 million.

Ryan authored The Founder's Manual, an experiential exposé of things Ryan has seen work . . . and not work . . . in the development world. His second book, Sell Naked, covers his experience over the past 10 years of owning and leading a professional services firm. Ryan says a lot of service firm representatives sell "propaganda, paraphernalia, and crutches" and 999-slide capabilities decks rather than starting with an open, authentic conversation about client needs. He says, "No prospective client cares about how awesome you are until they believe that you understand their problem and that you can . . . help them alleviate the pain of the problem. He also explains the informal proposal email process his company uses to quickly and effectively close contracts.

Ryan can be reached on his company's website at: AWH.net.

Transcript Follows:

ROB: Welcome to the Marketing Agency Leadership Podcast. I'm your host, Rob Kischuk, and I am joined today by Ryan Frederick, who is a Principal at AWH based in Dublin, Ohio. Welcome to the podcast, Ryan.

RYAN: Thanks for having me. Appreciate it.

ROB: Wonderful to have you here. If we're looking up AWH and what you focus on, it says "building great digital products." But why don't you give us the big picture of AWH and what that specialty really means when you talk about building a firm around that?

RYAN: Essentially, we do one thing, and that is build net new software products for clients across the spectrum of startups to midmarket to enterprises. Around the building of net new software products, we also do a fair amount of data work, solving data problems, data plumbing to support those products, integration work – because rarely do software products now exist on their own without talking to other products and other systems – and then we do a fair amount of product consulting as part of it, too. We help clients establish customer advisory boards, for example, to be able to work iteratively in building a product to ensure that it resonates with customers and they find value from what's getting built.

So some wrappers around that core of building software products, but at the core, we build net new software products that run on phones and the web and IoT devices and various places for lots of different purposes and to solve lots of different problems. That's our day job and how we butter our bread, so to speak.

ROB: Got it. Is there a typical sort of firm, a sort of client that's looking to engage you? Are we talking about seed stage funded companies, are we talking about enterprise, are we talking about all of the above and then some?

RYAN: Our business is mixed in about thirds. About a third of our clients are funded startups trying to build a net new disruptive product in many cases, where they're going after a space and a problem or to capitalize on an opportunity that is fairly unique; otherwise they probably wouldn't be starting a company around it.

About a third is midmarket clients. Those are manufacturing companies, distribution companies, and in some cases nonprofits or social enterprises that are trying to become more digitally capable. Often, they are digital laggers. They don't have the technology teams, if any technology teams, and they need things like customer portals built and they need design tools built and they need customer apps built, etc. So in the midmarket, it's really I would say them becoming digitally capable if not exceptional to fuel their growth. If they're a $50 million company, how are they going to get to be a $100 million company? If they're a $200 million company, how are they going to get to be a $500 million company? And that answer now is almost always digital and technological in some way. So that's where we typically play in midmarket space.

Then with enterprises, most of our enterprise clients and engagements are around some sort of corporate innovation initiative, trying to figure out how they're going to leverage blockchain, what they're going to do with machine learning or artificial intelligence. Then we engage with them to build some prototypes and some concepts, and they'll then take it and run with it moving forward. We don't want to, in the enterprise space, do a lot of uninteresting work. We want to be able to stay true to our DNA and our desire to build interesting things, because frankly, that's how we keep really smart, talented people – because they want to build interesting things. So we tend to shy away from enterprise work that is just "upgrade something that's been running on a mainframe to something that's now modern." We tend to stay away from that sort of stuff and focus more on the corporate innovation stuff inside of enterprises.

ROB: Obviously, with a new company, I can certainly understand how they would look at what they need to do and say, "We don't know how to build technology. Let's call up Ryan and his team." What do you think is the missing ingredient, perhaps – when you get to the mid-stage in an enterprise, I would imagine in a lot of these cases, you're talking about standing up a team of two, five, ten people to accomplish something that you would certainly imagine could be in the reach of such a company. What do you think it is that keeps them from sometimes even building that capability, or wanting to, when innovation is so important?

RYAN: I think it's different between the midmarket and enterprise. In the midmarket space, clients will engage with us because they don't have much technological knowledge or horsepower. They also don't envision getting a substantial amount of it, either, because if you're a bolt manufacturer, there is a point where technology needs to serve you and you need to leverage it, but you also then don't need a team of 10 technologists running around that you're paying a ton of money to not do anything of consequence on a daily basis.

Most of our midmarket clients build one software product that would be considered a custom software product. They build one of those in the entire history of their company. If you're a $50 million company and you need to build a customer app for ordering or what have you, it's probably the first time you've ever actually built your own software product, and you probably aren't going to have to do it again for a very long time because you're filling a gap that has now become so painful that you have to address it. But you're also probably not seeking to run around and build a bunch of new software products.

That's the reason the midmarket clients often don't have their own teams and don't have a desire to implement and build out their own teams, because it's sort of a moment in time for a midmarket client.

ROB: It's not as much of a sustained need, but it comes in bursts, and they need to know who they can trust to come back to it time after time, even.

RYAN: Yeah, absolutely. But they are moments in time where there's a problem that has to be addressed, and then once it's addressed, the pain has subsided for some period of time. Enterprises are a little bit different, and that's why we mostly focus on innovation work inside of enterprises. Most enterprises have IT, design, product capability, either internally or through staffed augmentation or contracting firms. They have more people and more resources than they know what to do with in most cases, frankly. That's why we don't really want to play in that area, because it's just not that interesting to us.

But we will come in, and enterprises often use us as like a special projects firm, where they're trying to figure out, "We've got this problem; our existing team doesn't know how to address it. We need help figuring out how we approach this problem. What's the right technical solution? What's the right digital solution? What's going to add that value for the business, and what's going to align with our customers and our users?"

We do a lot of enterprise work, frankly, where we're just helping them concept things from a design perspective and a problem statement perspective and to build out customer advisory boards. There's a lot of cases with enterprise clients where we don't write one line of code and we have no engineers from our team actually engage with enterprise clients. It's more about helping them figure out what the right thing to do and the right thing to build is in the right way than it is actually doing a lot of wrenching on the product behind the scenes, if that makes sense.

ROB: For sure. Ryan, it looks to me like you just might've celebrated a 10th anniversary for the company.

RYAN: I did, yeah.

ROB: Which is pretty exciting. Congratulations. If we rewind 10 years, how did you end up in the direction that the firm is in now? What led you to start it in the first place?

RYAN: The firm's actually been around for 26 years, and I joined 10 years ago as a partner. I was coming down off of something else, and I was looking for something to do, frankly. I reached out to my network and said, "Hey, I'm looking for something to do," and my now-partner Chris said, "Why don't you just come here?" I said, "Oh, didn't know that was on the table." We talked for a few weeks, discussed what that might look like, and then we came together around it.

I think the biggest evolution for us as a firm has been that software and data continue to eat the world, but you have to pick and choose where you want to dig in and where you want to leverage your team's expertise and experience. For us, we could be doing lots of different things in and around technology and software products, and we've said we're going to focus on building net new products. That's surfaced well because we really want to make sure that we're adding value for our clients.

We also want to make sure – and this is becoming increasingly more important – that we're adding value for our team. Our team could work anywhere besides our firm, because developers and designers and QA professionals, everybody in our team is desirous and a value to work at, I don't know, 100 million other places. So. for us, we have to be way more intentional about creating an environment that they feel valued in and that they can ply their craft in and that they can do exceptional work on behalf of our clients.

That's been a significant evolution. The days when you could get a developer or designer and hang on to them forever just by virtue of staying in business and continuing to have a paycheck deposited into their account, those days are gone. If you're not doing interesting work that they find challenging but also impactful, you're probably going to have a turnstile of team members. As a services firm, a turnstile of team members is one of the worst things you can have happening and going on because you have no continuity of process, you have no continuity of teamwork and collaboration. Client projects get upended because somebody new has to come in and get ramped up, etc.

So our focus, especially over the last five years, has really been on how we get and keep the most talented, capable team that we can. Everything else is a derivative of that.

ROB: Any one of those sharp developers or designers can go out and get into a bidding war and they can pit Google against Amazon, and it can ring the cash register if that's their priority. So it certainly has to be something different.

I am a bit curious; if I'm looking at your background a little bit, it looks like you come from, pre- and maybe even with AWH, more of a sales background. Is that fair?

RYAN: Yeah, I started out as a developer and then realized I didn't want to write code every day. I then migrated over to the business side and then got fortunate and hooked up with a startup fairly early in my career. I was the third person into the company. Learned a lot about business and also how to build software products. It was a software company. We had some success with that. The company ultimately got sold, and then I started another company with the investors that were behind that one. We had that for a short period of time because we ended up getting an offer to buy that, so we sold that one.

I enjoy the technology aspects of things, but for me personally, I enjoy the human side of it and the creative side of it more than the analytical bits and bytes side of it. So I migrated over to the business side because I wanted as much of each side of the brain as I could get on a daily basis because that was the most interesting to me.

ROB: And that early background as a developer helps put everything in perspective. I was certainly wondering – I come from a software development background; I have a pretty good understanding of what it takes to motivate and retain software developers, and what you were expressing resonated with me and showed an empathy for that developer mindset. If you came from purely a sales background, I was going to ask how you came by that understanding, because it is deep, it is resonant with my own experience. Having your feet in the technology early on helps tie it all together. It's a really fascinating journey.

RYAN: Yeah, absolutely. Developers are often maligned for not caring about what code they write and what the application is and what problem the application is solving, etc. That's true to some degree, but my experience is that most developers actually do care about what they're working on and why they're working on it and what the problem is and what the value of the software is going to be. I think coming from a developer background initially, I have a little bit of empathy for their perspective and their role.

It's also been the case where in a lot of organizations, developers are treated as the assembly line in the background that "We're going to slide the requirements under the door, and you just write code against what we tell you to build." That's how a lot of bad software products got built. And now we realize, if you're going to build great, successful products, developers need to be involved from the beginning. They need to have as much context as they can have. They need to be part of the planning process. They need to be part of the design, the user experience process. This is not you figure out what to build and then pass it off to the development for them to build it. We discovered that that really didn't work, even though that's what we kind of wanted to have happen.

So development, even as a craft, has evolved too. It's certainly less cookie cutter, and it's become valued to the level that it always should've been valued and not some smarter people than developers figuring out what would need to get built. Developers are now at the table, working with the other members of a product team to figure out what should get built.

ROB: I'm interested; you mentioned that a significant portion of your business is in early stage. I note that you also invest in companies at times. I think a thing a lot of services firms face when they're dealing with early stage is they get asked to invest some portion of their fees into their clients' companies, essentially. As someone who invests and has a services firm serving these companies, how do you think about those tricky conversations? They're challenging, I think, from a valuing the client well perspective, from what you communicate, how it's perceived, all that.

RYAN: Absolutely. They're tricky conversations. My base position is a services firm should never discount services and should never trade services for equity unless there are special circumstances and there's awareness of the client and what they're trying to accomplish and there's good reason to do so.

With that said, we got into a situation – we have formalized our work then and now because I didn't want to do it haphazardly. To your point, if you're going to have clients that are early stage companies as part of your client mix, the question around services for discounts, services for equity, services for delayed payment, etc., it's going to be a real and present thing that you're not going to be able to avoid.

We got to the point with a client a few years ago – probably five years ago, maybe six now. They were a funded startup, but they were in between funding rounds, and we were working on their product, and still are their outsourced product team. They said, "We're not going to be able to raise our next round if we don't continue to work on the product, i.e. if you guys don't continue working on the product." So we were at a crossroads.

We said, well, we can either stop working and they can go out and see if they can raise more money with the product where it is. If they can't, that means the whole thing comes to a screeching halt, so that's not a really good outcome for anybody. Or we can continue to work and we can essentially finance the work until they raise their next round of funding and then we get paid back. We thought that was the better option, so we actually put a promissory note in place and we financed the work under the framework of this promissory note. It all worked out and it all played out as we hoped that it would.

We've now done that probably 20 or 30 times over the last couple of years, where we've actually put a financing mechanism in place with some clients. I would rather have not done it, but I'm glad that we formalized it and we didn't treat it haphazardly, because you're talking about real money. Services firms are cash flow monsters. You pay your team to show up today, to ply their craft, to do their work, and then you collect from clients at some point in the future. By the very definition of that, every services firm is a bank.

If you then pile on top of that some clients need extended terms and relationships, like we're talking about, you'd better at least treat that dynamic and those monies and that relationship as formally as you absolutely can so that everybody knows what's at stake, what's happening, who's committed to what, who's on the hook for what, etc. We now have this little financing arm inside of the firm that we've now financed and in other ways taken royalties or actually taken equity in some clients, up to at this point almost $2 million.

I would rather have not done it, frankly. But we didn't really have a choice with one client, and then over time, we've now had a couple dozen clients that have gotten into a similar situation. And knock on wood, most of them have gone well and progressed well and the deals have made sense. We've had a couple that have gone south, but from a percentage perspective, it's mostly gone okay. But it was really out of necessity less than it was out of "Yeah, we're stoked to do this."

ROB: Yeah, it's challenging. It sounds like you're looking at a way to be a good partner to a company that trusts you to be a good partner in other ways. But that's a two-way street, and that's not to be trifled with either.

You've been sharing all along some good lessons, but I think it would be remiss not to mention that some of these lessons, you have written down and put into book form. What led you into the path of writing and publishing? Tell us about what you've been sharing lately, book-side. I see a 2021 date on one of your books on Amazon, even.

RYAN: Yeah. I was just writing notes and thoughts down, and I got to the point where there was enough of it where it seemed to be the construct for a book. That was the first book, The Founder's Manual, about providing some experiential exposure to things that I had seen work and not work. I said, "All right, there's no point in jotting these notes down over time if you're not going to do something about it." So I then reached out to a publisher who had worked with somebody that I know, and I said, "Hey, I want to do this book." They said, "Okay, we'll do it with you." The first book is not a super long book. It's been relatively well-received. My publisher would like me to get better at selling books now than just writing books, so that's always an interesting conversation with them. [laughs]

The second book was really the same thing. After I finished the first book, I started writing down notes about my experience as part of AWH the last 10 years. This was my first time owning and leading a professional services firm, so I learned a lot over the last 10 years. I saw some things work well that we tried, and I saw some things that were just abject failures that we tried. I've gotten to know people that also run and lead other professional services firms, and professional services firms are a tricky beast to make work. There's virtually no scalability. Your people are your product. You're selling time. To forecast where the business is going beyond like three months is almost nonexistent.

And most services firms, because of a lot of the things I've just mentioned and more, have a really hard time growing and becoming what they want to become. One of the epiphanies that hit me was, it is really easy to start a services firm. All you have to do is say, "I've got a craft. I've got something that I can help people and companies with," and you put up a site and boom, you're "in business," so to speak. But the challenge is not starting a services firm; the challenge is, how do you grow a services firm? That's a very different animal than starting one. Super easy to start, very difficult to grow.

ROB: I may have to pick up that. I can get the Kindle version. I have some credits I can use on the Kindle version of Sell Naked, and I might have to go grab this myself. What's maybe one of the key principles you'd pull out of that book as a teaser for folks who might be thinking about picking it up?

RYAN: There's a couple that I would say. We titled it Sell Naked for a reason, because that's one of the chapters in the book, and the publisher felt like that was the lead chapter. The theory there is I see a lot of business development people for services firms, either leaders of or business development representatives at services firms, who sell with lots of propaganda, paraphernalia, and crutches. They've got these capabilities decks that are like 999 slides. They have these elaborate portfolios, etc. And in some services firms, I get it. Those make sense.

But I think by and large, for a lot of services firms if not most, those things are just crutches because what those do is force people to focus on the tools and the propaganda and the paraphernalia rather than going in with a prospective client and sitting down and having a very open, authentic, transparent conversation about "What are you trying to accomplish? Are we a fit in any way to help you accomplish that? And if we are, now let's start peeling back the layers."

But if you go in with a capabilities deck and propaganda and all this other stuff, you're delaying getting to the crux of the matter while you pontificate about how awesome you are, and no prospective client cares about how awesome you are until they believe that you understand their problem and that you can share some insights and some value that might help them alleviate the pain of the problem. So I think people get selling services mostly wrong, I guess is the sum of that.

ROB: That sounds very aligned. I can certainly understand especially how a peacocky sales culture and teams of very capable developers and designers – that's probably more oil and water than most organizations. But I think most people, outside of a very slick sales organization, appreciate that genuineness, that straightforwardness, building the connection and trust, more than building a shiny deck.

RYAN: Yeah. I think the other thing we have figured out and that we do is we also don't do elaborate proposals. When a potential client says, "Yeah, we're interested in engaging with you," then we send them – truly, and in the book I actually put some of the copy that we use, and the format – we send the client a bulleted list of the essential terms of engaging together. I call that estimating informally or proposing informally. The last sentence in that bulleted email is essentially, "If you're comfortable moving forward, let us know, and we will take this and wrap it in an SOW."

The reason we do the informal emails to engage is because there's no point in spending hours and hours and hours on an elaborate proposal when the prospective client is only interested in really two things at that point: how long and how much? If you've built enough value and enough credibility to that point, you don't need an elaborate, flowery proposal reiterating how special of a snowflake you are. Just get to the point and then engage formally by sending them an agreement to actually engage.

Because if a prospective client responds to that informal proposal email saying, "I think we're good to move forward," guess what? You just got a verbal that the deal is closed. But if you send a big, elaborate proposal asking people, "What do you think? Are we in alignment?" and all of these things, you're still trying to build value when that ship already sailed. Does that make sense?

ROB: Oh yeah. They don't even know what they're saying yes to in a giant contract. They might float it over to procurement before they say yes to a dang thing in the enterprise context. There's a lot of hazards that just keeping it human – that makes complete sense to me.

Ryan, when people want to connect with you and AWH, where should they go to find you and see more?

RYAN: AWH.net is the easiest place because they can get to me from there and of course get to the rest of our team and the great work that our team does. That's probably the best place, and then jump off from there.

ROB: Sounds perfect. Ryan, thank you so much. Congratulations to you and the team and what you're building together. We will look for more excellent digital products coming from you and the team for your clients down the line.

RYAN: Thanks, man. Appreciate it.

ROB: Be well. Thank you. Bye.

Thank you for listening. The Marketing Agency Leadership Podcast is presented by Converge. Converge helps digital marketing agencies and brands automate their reporting so they can be more profitable, accurate, and responsive. To learn more about how Converge can automate your marketing reporting, email info@convergehq.com, or visit us on the web at convergehq.com.