Box CEO Aaron Levie has been working to change the software world for 15 years, but the pandemic has accelerated the move to cloud services much faster than anyone imagined. As he pointed out yesterday in an Extra Crunch Live interview, who would have thought three months ago that businesses like yoga and cooking classes would have moved online — but here we are.
Levie says we are just beginning to see the range of what’s possible because circumstances are forcing us to move to the cloud much faster than most businesses probably would have without the pandemic acting as a change agent.
“Overall, what we’re going to see is that anything that can become digital probably will be in a much more accelerated way than we’ve ever seen before,” Levie said.
Fellow TechCrunch reporter Jon Shieber and I spent an hour chatting with Levie about how digital transformation is accelerating in general, how Box is coping with that internally and externally, his advice for founders in an economic crisis and what life might be like when we return to our offices.
Our interview was broadcast on YouTube and we have included the embed below.
Just a note that Extra Crunch Live is our new virtual speaker series for Extra Crunch members. Folks can ask their own questions live during the chat, with past and future guests like Alexis Ohanian, Garry Tan, GGV’s Hans Tung and Jeff Richards, Eventbrite’s Julia Hartz and many, many more. You can check out the schedule here. If you’d like to submit a question during a live chat, please join Extra Crunch.
On digital transformation
The way that we think about digital transformation is that much of the world has a whole bunch of processes and ways of working — ways of communicating and ways of collaborating where if those business processes or that way we worked were able to be done in digital forms or in the cloud, you’d actually be more productive, more secure and you’d be able to serve your customers better. You’d be able to automate more business processes.
We think we’re [in] an environment that anything that can be digitized probably will be. Certainly as this pandemic has reinforced, we have way too many manual processes in businesses. We have way too slow ways of working together and collaborating. And we know that we’re going to move more and more of that to digital platforms.
In some cases, it’s simple, like moving to being able to do video conferences and being able to collaborate virtually. Some of it will become more advanced. How do I begin to automate things like client onboarding processes or doing research in a life sciences organization or delivering telemedicine digitally, but overall, what we’re going to see is that anything that can become digital probably will be in a much more accelerated way than we’ve ever seen before.
How the pandemic is driving change faster
Technology tends to take a really long time to ripple through markets. So think about the iPhone. It took maybe five or so years before the iPhone was just a part of our vernacular, was ubiquitous and everybody was building apps for it, and it started to transform business processes.
If you think about the advent of cloud computing, I mean, we’re 15 years into Amazon Web Services at this point. And even so, new organizations are now discovering cloud computing. So technology can take three or five or 10 years to be able to ripple through markets. And that’s usually the adoption cycle that’s required for a new tool to enter the mainstream.
Well, what’s happened is that nobody has the time for that regular adoption cycle. In a matter of weeks and months, companies have had to basically dramatically accelerate the kind of technology adoption maybe they would have done over a two or three or five or 10-year period into a matter of weeks.
And to me the most profound part of this change is that usually the sort of flow of technology adoption happens through networks in a very kind of methodical and somewhat slow fashion — like one company adopts a technology, then their partners adopt that technology, then the partners of that organization adopt the technology. And so you have these sort of network effects that emerge over a multi-year or even decade-long period that is now happening instantaneously.
And so take something like video conferencing as an example, where maybe pre-March of 2020, at any given time, 5% or 10% of your meetings were done over video with customers, now all of a sudden that becomes the only way to communicate with suppliers, partners, customers, clients, freelancers, vendors, everybody. And so we’ve solved the traditional network effects problem that would have taken a decade to go play out. And that’s now been solved instantaneously, which, which has this important factor of now causing us to realize, ‘oh, wow, this is a better way to work in some instances.’
It doesn’t mean it’s better in all instances, but why do I have to get on an airplane if I’m just going to go meet with one customer or one partner? Why don’t we move that to virtual? So I think what’s happening is we’re seeing an acceleration to the future at a clock speed and an order of magnitude that we’ve never seen before.
SaaS vendor cooperation
I think that that has been an important shift. Vendors like Zoom and Slack and many more, we are all in constant communication right now. So many of the leading SaaS companies are sharing best practices and are focused on what we can do for our customers, for our employees and for the community. We’re focusing on what we can do from a technology standpoint to better integrate our tools.
So there has been a pretty big shift in the level of partnering and the level of coordination amongst our organizations right now, which has been great to see. For instance, we announced a new integration with Zoom just a couple weeks ago. We’ve been doing a lot of work with Cisco. We have some great updates that we’re doing with Slack and Microsoft Teams. So we want to make sure that we’re embedded into all of the applications that our customers are using. And just the level of interoperability and level of partnership that’s happening right now is unlike any level that I’ve ever seen.
Changing customer conversations around transformation
We were very proud of the earnings that we came out with yesterday, which had better growth than I think what the market was expecting and better profitability than what we had guided to. And that was really driven by the resilience of the company. We were able to transition to work from home very smoothly, and able to continue to support our customers. The majority of those big deals came after that mid-March shift to work from home. Some of them were net new to the pipeline, so they hadn’t existed coming into the year. They were just about helping companies be able to accelerate their digital transformation.
We’re now at a stage coming into Q2 where customers are now starting to think about what’s the second wave of this? So the first wave was working from home and triaging how do we get employees to be productive when they work from anywhere? The second wave is probably more profound, which is how do we make sure that we avoid ever being in a position like this again as an organization?
So that’s where you’re going to have companies start to look across all their processes and say, have we automated what can be automated? Can we digitize what can become digital? Have we moved off of legacy and paper-based processes?
I think those conversations will start to happen and those are now starting to emerge because people can get their head above water and they can say, what is this environment going to look like? What do we want our business to look like in the future and let’s invest in technology that will help us with that strategy. And that’s honestly way more exciting as a technology person because now we can go and really bring a new level of creativity and innovation to our customers, not just the sort of the immediate, let’s triage The immediate crisis is super important. But now we can have maybe a more kind of transformational conversation with our customers.
Breaking into new markets
Just to geek out for a second, if you imagine a kind of bell curve, Geoffrey Moore popularized this idea of the technology adoption lifecycle and the phases that technology goes through to be adopted. And initially you have early adopters and early adopters are kind of like all of us, and people on the call. We buy the first iPhone, we buy the next version, we buy the AirPods, and we love technology. We want to use it just because we’re so excited by just the idea of technology.
Then you get to kind of these early innovators, these early companies that use technology to sort of push the limits of their business to innovate more rapidly. These are technology companies. These are maybe smaller businesses that want to accelerate their company. And then you get to more of the kind of conservative mainstream parts of organizations. That’s when technology has really been proven out.
That’s when companies like banks start to use cloud computing, once it’s vetted, it’s tested, they know it works, it’s compliant, then they start adopting. And then at the end of that bell curve, on the other side, are really kind of pragmatic, not always as nice a term, as laggards in technology adoption. But these are organizations where they don’t get ahead by being first in technology, adoption. They need the most stable, the most mature technologies.
So what’s interesting is if you look at this environment, you can almost flip the bell curve. And the people that have needed modernization the most are at the other end of that bell curve because that’s really who has been crunched in this situation. It’s the government agency that’s still on legacy systems. And maybe they would have gotten to move to the cloud a year from now or three years from now or five years from now, but they have to do it today.
They have to process loans, for constituents. It’s the healthcare provider that needs to be able to deliver telemedicine, and they weren’t anticipating doing it in March of 2020. So it’s really accelerated the thrust into the cloud and digital. And that’s, to me, it’s really exciting because you’re seeing the ingenuity come out of all pockets of businesses.
We were able to, we did a pretty significant partnership with the USDA, who needs to be able to give loans out to farmers right now. And so they have to go and digitize that entire process. And so we could help them do that in a secure way. And with, obviously, the cloud, whether it’s federal aid agencies, local governments, life sciences organizations, healthcare providers — some of these institutions that maybe weren’t using the cloud for competitive advantage. Now they’re doing it because it’s going to be critical to running their organizations going forward.
Office versus home debate
I’m glad that there are people that are so ideological about remote work. And I’m glad that there are people that are so ideologically against remote work, because you can start to see what are the different factors that people are considering in this type of situation?
If you imagine a continuum, if you will, that on one end of the continuum, everybody’s fully distributed, fully remote. And then on the other end of the continuum, everybody goes to the office. You commute an hour each way to the office, and we just build up skyscrapers and everyone works that way. I think it would be at least safe to start with the premise that most of the world probably won’t, especially in bigger companies, will not be on either end of that continuum.
Because on one end of the continuum where you’re fully distributed, there’s a lot of reasons why you want to get together with other people, and why businesses can represent a community. If you’re just out of college and you want to join a company, because you want to make new friends in a new city, you might want to go to an office and be able to meet those people.
And you’re new in your career, and you want to get closely mentored and you’re able to network with more colleagues, there are benefits to being in an office environment. So that’s the one case why maybe everything being remote forever, fully distributed, why there’s some tension there.
Conversely, if you imagine a world where you have to spend two hours a day just getting to and from work, and you could only work at a company that happens to have an office in your city. And every meeting requires you to be in person, or you don’t get to have a voice in the conversation, I think that end of the spectrum also starts to not make a lot of sense.
And what Box as an organization, and as a corporate entity, is landing on is trying to find the way to make that work and we have the best of both worlds. Can people maybe have a little bit more flexibility around when they work in the office and they have flexibility if they need to be remote for a sustained period?
Advice for startups
The danger of any type of startup advice is it’s so dependent on the situation, and so I know that sounds unnecessarily nuanced, but it’s unfortunately the truth. First of all, I would highly recommend to any company of any size that you have as much control of your destiny as possible. So put yourself in a position where you spend as little amount of dollars as you can from a burn standpoint and get as close to revenue being equal to your expenses as you can possibly get to.
The second thing is, I think it’s so dependent on the kind of company that we’re talking about. I think that there’s going to be all new and very enormous opportunities that emerge, not because of the recession that we’re entering, but because you’re seeing an all new set of ways of working and an all new set of digital experiences that businesses are going to need to have. I’ve seen ideas for dozens of really interesting startups just in the past few weeks, where, if you had pitched the idea two months ago, people would say, ‘no, no one’s gonna do a virtual yoga studio that you pay for.’ And now all of a sudden, you’re like, holy shit, that’s a unicorn idea.
We are now in this new normal that we’re emerging into, where there are going to be amazing opportunities for new startups to emerge that will go and digitize lots of parts of the world that maybe previously hadn’t gone digital. And so for a company like that type of company, maybe it’s a great time to raise.
So I think it really depends on the situation you’re in. Unfortunately, there will be some companies where they’re not necessarily benefiting from this environment, and they will need capital to survive. And in those cases, again, you might not have a choice. And so you might have to take the terms that are available if survival is at stake, and it’s so hard to give advice generically because you can fall in many camps, but I’m very optimistic that there’s going to be some very exciting companies that get created today because so much about the world is changing at such a pace that is just unprecedented.