As Partner and CEO for the leading investment and advisory firm Tercera, Michelle Swan drives its thought leadership strategy. This includes coordinating the firm’s marquee Tercera 30 annual report on cloud services trends. Michelle knows the true strategy for successful tech services firms lies in demonstrating their problem-solving expertise with ample evidence to be heard above the din. That takes thought leadership — something that BudayTLP studies have found that many tech services companies hesitate to embrace.
In this interview with Alan Alper, Michelle shares the secret behind how Tercera’s portfolio companies earn lucrative returns on thought leadership–and no, it’s not just embracing the latest trends on the cloud, AI among them. She will talk about why most tech companies struggle with thought leadership, and the future of tech services thought leadership in the age of generative AI, among other topics.
Listen to the Podcast
Transcript: Michelle Swan and Alan Alper
Alan Alper
Michelle, thank you for joining us on Everything Thought Leadership. Let’s dive right in. So here’s a perplexing issue for me, at least, having spent many years in the IT services space. We at Buday Thought Leadership Partners study the attitudes of providers of thought leadership across industries. And surprisingly, we found that IT services executives that we surveyed value thought leadership much less than those who we polled in other industries, which was a mind blower for me.
Yet, when we surveyed consumers of thought leadership related to IT services, they said they found it highly valuable. And in fact, they use it heavily to inform their decisions to purchase and to partner with IT services companies. And this includes companies that are in the cloud services space. So, I look at that and then I look at what’s being produced by the business, and see a lot of lackluster attempts to produce thought leadership. I call it marketing collateral masquerading as thought leadership.
What’s out there is really bland. It’s me-too. It often lacks real evidence that these companies practice what they preach and can deliver the benefits that they tout. Why do you think IT services companies really struggle with thought leadership?
Michelle Swan
I think if there was ever an industry that needed thought leadership, it’s probably services, especially IT services, where everybody sounds a little bit the same and it’s not as easy to differentiate because there’s no hard tangible thing and you can’t parade your people out for every single thing out there. I chalk it up to three different things. One is probably the executives themselves. Most founders or CEOs of IT services companies tend to have come from a consulting background. This is interesting because I think to be a great consultant, you have to be able to tell a story, but maybe it’s just not at scale and they don’t have that background of having really strong marketing – which is where a lot of the thought leadership sits within IT services.
The second piece is that services companies just don’t have big budgets. They don’t have the big giant marketing teams that a lot of product companies do. We talk to hundreds of different services companies every year as investors. We get to look at their data. We see what they spend on marketing. And it’s definitely at the lower end of spend compared to product companies.
Alan
Outside of Accenture, you’re absolutely right. There’s a lot of zero-based marketing that goes on in this space.
Michelle
They’ll tell you they’ve got people who can be out there selling. And in a lot of cases, they actually do. And they’ve been able to grow to a certain point too, without having big marketing or thought leadership teams. So, they think they can keep that going, but at some point that falls down.
Achieving Value From Thought Leadership
Alan
Tercera works with a lot of smaller emerging firms in the cloud services space. And as you point out, they probably have smaller budgets than the tier-one companies out there. So how do you advise them to really focus on their thought leadership spend so they can get the biggest bang for the buck?
Michelle
It’s hard. Sometimes I think the word thought leadership has a connotation of fluffy, and something that’s not going to drive demand. And I think in services, it does drive demand. It creates a better brand and better pricing for services. Thought leadership should be part of the demand program, not separated out. The you should just leverage the heck out of it where you can. If you’re going to do a big investment into research, for example, create some campaigns around it; figure out how to attach it to an event that you’re doing.
Services companies tend to be fairly event-driven. If you can tie thought leadership into something that’s already getting a fair amount of attention and spend from the sales team, it helps a lot. And it also helps to drive usage of the thought leadership as well, which is half the battle — getting sales teams to actually use it with clients in lots of different ways.
Quantifying Results
Alan
How do you guide (your portfolio companies) to gauge the effectiveness or the return on their investment in thought leadership, if they’re piecing things together and, like you said, maybe don’t have the big budget to do so. How do you advise them to really understand that perhaps maybe they can command premium pricing and gain recognition for their ability to solve client problems by investing in thought leadership?
Michelle
Again, it’s hard, especially because a lot of the people who own the budget sometimes haven’t come from the background to see that it actually works. Part of it is just proving it out: Start small and show that it does start to have an impact. And in general, marketing has to figure out how thought leadership helps to sell services, especially complex B2B services, which typically have really big buying committees.
You’re not going to be able to say, this report created this million-dollar project. It’s going to (involve) so many conversations. Partners are going to be involved; both partners inside the services firm, as well your technology partners in a lot of cases. If you’re trying to do direct correlation, maybe tracking influence is part of it. Like, did they download that report? Did they click on that social media post without trying to claim credit for it? Because, once you try to claim credit for something, then everybody wants to argue against it.
Alan
Yeah, it’s more difficult to show cause and effect, or causation, than correlation. Trying to show influence is not easy. I grant you that. But are there other ways of showing the value? For instance, you do research that could offers an opportunity to build out a new service line or to think about more innovative ways to serve your client. And maybe that doesn’t have a direct impact on revenue near term, but longer term it positions the company to not only be a thought leader, but also perhaps to have a first mover advantage in the marketplace.
Can you convince companies in the IT services space that this is something worth doing?
Michelle
I think that’s probably easier than correlating it with direct sales, to be honest. If you can do research that’s going to create a service line, you can easily track sales of that new line in your systems and understand the direct correlation. I think it’s where it’s part of your everyday conversations, but it shows that you’re smarter than the average bear. Then that’s where it starts to get harder. The sales staff are the direct revenue generators, and it’s effective if they can tell you what works and what doesn’t, what’s helpful and what’s not helpful.
If they’re users and believers in the thought leadership that’s being used, then that’s going to go a long way in convincing executives to invest in it down the road.
Challenges of Early Stage Companies
Alan
Is there anything particularly interesting or different about early-stage companies that have outside investors, be they VC or private equity, that either creates challenges or opens new opportunities to using thought leadership? Is it different for those emerging companies than it is for the more established vendors and service providers?
Michelle
Other than just the fact that they don’t have as many resources. It may be a little bit harder just because there’s a smaller pool to go around. You have to fight for every dollar.
Alan
And you would think also that thought leadership for emerging companies is an easier way to get established as a leader in your space, if you can, as you point out, merchandise it and market it well.
Michelle
Honestly, I’m always surprised because as an investor we look at companies and their thought leadership. We might not call it thought leadership when we’re going through evaluation for investments — we might call it differentiation, or what’s their unique point of view. But it’s very easy to see if you have great thought leadership, you probably have good leadership internally, you have great talent, you have a strong differentiated point of view on things.
The Third Wave of Cloud Computing
Alan
Well, why don’t we talk a little bit about what’s going on in the cloud services space. Tercera talks a lot about the role that consulting and managed services firms will play in bringing this third wave of cloud computing to life. What are your portfolio companies doing vis-a-vis thought leadership to demonstrate their expertise, to drive revenue, to create brand awareness?
Michelle
I think it might help to talk a little bit about what we mean by the third wave. It’s basically just saying that there are different generations of technology that happen all the time. We have pinned ourselves on the start of cloud adoption in the early 2000s. There’s different phases. And as these new types of technology come to pass, (organizations) need different types of partners to help guide them through that.
So that happened with the cloud in the third wave, which accelerated with COVID in 2020 and now with AI. When it comes to thought leadership for these services firms that want to be a leader in this next generation of technology, they have to show how they are doing things differently internally, using a lot of these technologies. Nobody’s going to believe that you’re a leader in AI technology if you’re just talking about AI, but not doing things with AI internally or doing research about where AI is making a difference or not making a difference.
The biggest thing is you have to prove that you know what you’re talking about. And the best way to do that is through thought leadership. I think there’s a couple examples I can give you of some of our portfolio companies that are doing some interesting things.
The Power of Case Examples
Alan
Before you do that, let’s talk about the proof points that organizations need in terms of case studies or best-case examples that reinforce or demonstrate that their thought leadership is tangible, that it’s real. You need to show that the benefits are achievable, as seen through the eyes of a client or a company that feels a lot like a company you’re trying to influence or sell to. Can you talk about the role of case studies here? I assume they are very important, particularly to the younger companies, to establish credibility.
Michelle
Huge. I think that’s the number-one thing every buyer of services looks for is, have you done this before for someone in my space who has the same problems that I do? And if you have, and you can show that you’ve helped this other person, you’re so far down the sales cycle at that point in time. It’s amazing to me that more companies don’t put more work in their case studies and their use cases and examples and figure out how to make those really come to life. And it’s more than someone sitting and doing a video saying like how amazing a services company is.
Alan
It’s not a testimonial.
Michelle
It’s not a testimonial, exactly.
True thought leadership talks about the problems. Not everything goes great. Not that you want to scare everybody, but you have to be honest with what a customer is going to face as they start going down some of these paths.
Alan
If you can show them that you’ve got their best interest at heart — that you’re not perfect, but you’re trying hard to solve the problems in front of you that are the deepest, darkest ones for your client — they may take a chance with you. They may say, hey, you’re worth working with because you’re real. You’re relatable.
Michelle
Yeah. Well, especially now that everybody’s creating their own content with AI. Everybody’s going to sound the same.
Two Examples of Best Practices
Alan
We’ll get to that a little bit later. Tell me, what are the more interesting things your portfolio companies are doing with thought leadership that you see as best practice?
Michelle
There are two examples. One is a company called Hakoda, which is a data consultancy. They’re a big partner of Snowflake and a bunch of the different data ISVs (independent software vendors). They are doing a lot of traditional thought leadership research projects where they’re going in and talking about the state of data adoption, the complexity around it, and the challenges people face. Then they are bringing it to life in different ways, which is critical because as there’s more content out there, AI is going to make this worse.
So how do you truly stand out with your thought leadership? Presentation is part of it. Hakoda does a lot of interactive stuff; it’s not just downloading a PDF report. They have an assessment tool that feeds some of the data that they’ve collected through their research and shows the potential client where they stand compared to some of the other folks out there.
Alan
Those gap assessments are really good and they’re really great thought leadership tools, as well as thought leadership supporting lead gen. It’s very helpful to show the client that if they do this small evaluation, they get a sense of their issues. And then contact us if you want to learn how to solve this. This is a great, straight-through approach to showing how thought leadership can solve client problems.
Michelle
Which is huge for small companies that have small budgets, right? Like you have to figure out how to tie it all together. Thought leadership can’t be in this ivory tower. It’s got to tie back to some kind of results. I think they’ve seen huge success. And it’s interesting: now even the sales team at Snowflake, who’s one of their biggest partners, is using their data journey that they’ve created based on this research.
Alan
That’s interesting because I was going to ask you a related question. It seems that a lot of IT services companies basically are just mouthpieces for their software as a service partners, that they just tow the line because they want to sell more of their partner’s software as a service. They don’t really spend a lot of time thinking uniquely about their own value proposition or the difference that they bring to the engagement. It’s more or less that we’re doing the vendors’ bidding for them.
Michelle
We’ve seen that companies that are the best partners out there, that are growing the fastest, and that are the most in demand, have an opinion and a point of view related to what the partner is doing, the ISV. It’s got to be related to it to some extent, but the services companies need to bring leads and relationships to these software partners, too. So they’ve got to have their own muscle in that realm. They can’t just use all the content that their partner gives them, or they’ll just sound like everybody else.
Alan
What’s the second example?
Michelle
The second one I would say is Orium, which is a consultancy in the composable commerce space.
Alan
Do you want to explain what that is?
Michelle
Yes. There’s the traditional e-commerce stacks out there such as Salesforce or Adobe, where if you’re a retailer and you want to put your wares on the internet, then you would use these big monolithic stacks. Things are moving fast. Composable commerce takes a best of breed approach, and (uses) different tools and architects things in a way where you can swap out (stacks) as things change.
It’s a new concept. It’s a different type of architecture. It requires a little bit of a leap of faith. There’s a lot of education, which is ripe for a thought leadership. And so Orium has really built a name for themselves as probably the biggest and best composable commerce consultancy in North America, partly by owning the education around this space.
They actually have their own kind of media site, which is composable.com, sponsored by Orium. And they have an entire editorial team that is dedicated to putting out master classes: articles, blogs, interviews, They go to the shows. They talk to the vendors. And I think especially with a lot of the changes you see in journalism, more and more companies are starting to have their own media, even venture capitalists.
Achieving Brand Lift and Lead Generation
Alan
There’s a crisis of confidence. Both of us being recovering journalists can attest to that. You see what’s going on out there. It’s kind of scary. But let me ask you this question, because these lightly branded websites have been out there for a while. I know HP did one for a while and other vendors have tried doing it. At Cognizant, we tried to do it as well. And it’s sometimes very hard to then tie it back to the brand and get the brand lift and the lead generation that you’re looking for, because you’re trying real hard to be objective, not overly salesy and promotional. How does Orion kind of solve for that?
Michelle
It’s tricky. Technically you can pull it off, because today tools help you see who’s going to those sites and then you can start sending them your own marketing messages, but then nobody goes to the site. People distrust you, like they’re going specifically not to get sold to, they want to learn. I think you have to be a little bit careful about it, but there are ways to leverage some of the data.
For example, on this composable site they have an open-source tool that (visitors) can actually play with. Composable commerce is a highly technical space. And they know that if they can get developers playing with some of these open-source tools — not just Orium’s, there’s other things as well — that they’re going to create advocates inside their companies. But you can see which companies are playing with it.
If someone does come to say Orium’s website down the road, and you know that they’ve played with this tool, you’re going to give them a lot more attention than you probably are this cold lead that’s never going to do anything. So, I think there are ways. You just have to be careful with it. And then, the next thing that’s interesting, especially when budgets are tight, is how do you get more out of it?
Orium actually partners with all of their technology partners for that media site. And so they partner up with commerce tools players such as Vercel (a web experience development/platform company), with BigCommerce (an online store software as a service platform) and other ISVs to help with content. There’s a little bit of a brand tie-up too. So, if someone’s looking for a commerce tools partner and they’re on that site, it’s gonna help with the brand.
Alan
Sure. (Tercera), and you in particular, provide a lot of strategic guidance on thought leadership and best practices to your portfolio companies. In fact, I spoke to Orium about that, and they were just so happy to have you as a guiding light in this regard. Can you explain how you do that? You want to be somewhat connected to what they’re doing because you guys have a vested interest. You’ve invested in the company, but you don’t want to be overly controlling and dictatorial. You want to try to help them to help themselves, but it’s a fine line sometimes. Can you explain how you do that?
Michelle
It is a fine line, especially when you’re really passionate about something. I think part of it is you have to let them pull you into it. If you are overly dictatorial or force your opinion on things, (it doesn’t work). You have to ask questions. This is something I’ve learned moving from an operator to a board member. Asking questions is a very different skill set — one that I’m still working on, to be candid. The other thing is just inspiration. We have seven portfolio companies at Tercera. They are all in different spaces, but they’re all in IT services. They’re solving the same problems, but in different spaces. If one of our portfolio companies is doing something super cool on the thought leadership side, I’m going to share that with everybody else, of course, with their permission. Just to show (them) what else is out there, because sometimes companies just need inspiration.
And then I think the other one is challenging them. If they’re putting something out that is “me too,” or that doesn’t really seem worthy of their brand, I think it’s my job as the outside person to challenge them a little bit on it and say, you can do better.
Turning Founders Into Passionate Advocates
Alan
Interesting. You just mentioned that you ask questions and try not to be dictatorial. Earlier you talked about how a lot of founders or the smart people behind these IT services companies aren’t the best storytellers, or are more passionate about the technology than supporting the business through marketing. Founders, and their real smart (teams), are obviously very busy and sometimes can be, at least in my experience, somewhat self-centered and reluctant to speak out.
How do you convince them to make time for thought leadership? And you can make the case when you do it right, it can be time consuming, but it’s a highly effective marketing endeavor. It’s probably more cost effective than sponsorships or advertising or something that’s a more high-ticket item.
Michelle
I think it depends on the executive, too, because people are hesitant to do it for different reasons. Some people are just shy; they’re technologists. They like to be behind the scenes. They don’t want to be the one standing up on stage. Maybe there are fewer of these. But in that case, I think it’s just showing them that there are ways to put thought leadership out there and to be a face of the company. For example, it can be a video instead of them standing up on stage and presenting it. You can pair a writer with them versus them having time to just go out and do it on their own.
When other things are more important, that’s a little bit harder (to overcome). I think if you can show them that it gives them scale (you can succeed). They’re a leader of a company. If the company is doing well, they clearly have a good opinion on something, then showing how thought leadership and some of the marketing support behind it can help provide more scale for their opinions can help, too. And then there’s some people who just will never get it.
Alan
Can you share any examples of where you were able to turn somebody from being hesitant about either making the investment or about being the face of the thought leadership, and how and why it worked?
Michelle
Probably not in our portfolio companies. But there’s a couple examples at other tech firms. The key is creating the executive platform (for) thought leadership. I feel like that’s gone away a little bit as companies have kind of taken on (pushing) their brands, but I think we’ll pivot back to that as AI takes over. You need to convince your executive or the person who has an opinion that you’re going to make this thought leadership about their brand, because it will not only lift the company but also help their career, and there’s usually a little bit of an ego with some of these executives.
If you can show how you are going to give life to some of their point of view, their thoughts, and make it about them, that’s going to give lift to the company as well.
Helping Investment Firms Bolster Their Eminence
Alan
Why don’t we segue now to high finance? We’ve been studying thought leadership across numerous markets. And we looked at it in terms of the venture capital and private equity spaces. We see a lot of firms producing reports, white papers, blogs, podcasts, videos that really serve to bolster their eminence in the market segments that they underwrite. So how critical is thought leadership in high finance, and in particular to Tercera?
Michelle
I think it’s just as important for the services companies as it is for investors. It’s hard for VCs to stand out; everybody’s got really smart people and lots of money. And so how do you ensure companies want to work with you? Because they can get money in lots of different places these days. Tercera 30 is probably one of our biggest pillars of thought leadership, which is basically the top-30 ISV ecosystems that are great for building a services business.
I don’t think that we would have been this successful without putting out something like that, because we get a lot of inbound not only from founders, but also the ISVs themselves, even analysts. We have some data that they don’t have. I can see why more and more (high-finance firms) are starting to go down that path, some more successfully than others.
The Tercera 30
Alan
Can you talk a little bit about the genesis of the Tercera 30 and how it’s evolved over time?
Michelle
It was one of the things we said from the get-go that we wanted to do. We took inspiration from Bessemer Partners, a really big VC firm. They have the Cloud100, which looks at the biggest cloud players (from) the beginning of cloud. And we kind of grew up in that era too. That took on a life of its own. I believe that Forbes or Fortune and Salesforce sponsor it now. And there’s a market index associated with it.
But you can see how it grew over time and it really put Bessemer on the map when it came to cloud investing. We wanted to do the same thing for services. We 100% focus on IT services: how we look at the market, how we think about investing, and also how our (portfolio companies) think about their investments and expansion areas. We wanted something that would benefit our portfolio companies and also put us on the map.
It’s definitely evolved over the last few years and I’m sure will continue evolving.
Alan
And how do you justify the time, effort, and money, of course, that you invest in this? I’m cynical and skeptical sometimes, but I look your efforts and I say: Wow, this is really well thought through. It’s well produced, easy on the eye and supports your mission. And it’s very helpful to your portfolio companies, of course, without being obviously preferential. So how do you measure the impact?
Michelle
What matters is whether its driving people to us; whether it is getting us into conversations that we wouldn’t have otherwise, which it’s definitely doing. I think there’s a little bit of the anecdotal as well. When you hear someone say, I have the Tercera 30 on my wall and I look at it, it obviously makes my day as our CMO. But, you know, you can’t measure that.
It’s tough to measure (impact) so I think there’s a little bit of trust that has to come with it. The impact for great thought leadership builds over time, too. We know that in 10 years, this thing is going to be valuable to us, our portfolio companies and the market at large if we keep investing in it and evolving it. We know that it’s going to pay dividends down the road. We’ve just seen it happen in our own services companies. So it’s a mixture of soft and hard measures, and it’s dedication, because you know it’s the right thing to do and the impact will evolve and hopefully accumulate over time.
Alan
And you’re better off for having done it than not having done it.
Michelle
Executive sponsorship of thought leadership is really critical. The (Tercera) partners were all behind this idea from the very beginning. People who are thinking about thought leadership investments must get the executives behind it. Sometimes it’s a journey, and not everyone’s going to get behind it right away. That’s just why you’ve got to bring them along, show them a little bit of the impact before you make the investment. But that sponsorship makes a big difference.
The Future of Thought Leadership
Alan
So why don’t we look a little bit over the horizon? Where do you think thought leadership is heading overall? Where is it heading in the tech services space and in cloud services in particular? And what do you think companies need to do to stay out ahead of it so that they can use it to burnish their brand and drive recognition and revenue?
Michelle
AI is going to help and hurt in lots of different ways. It’s going to be a lot easier to produce mediocre content. People are going to put out a lot of mediocre content, which is good for the people who actually put some thought into it and try to be different and really understand what the audience wants to hear, what’s differentiating, what’s really going to drive value. But it’s will be harder to get found. So that’s where owning your own media, for example, is probably going to become more important.
Executive thought leadership (is key), even at smaller companies. If you have a 200-person services company, you’ve got 200 brand advocates out there. How do you make them inspired to share your content, your thought leadership out there and arm them. People are the new influencers, and they will become more and more important because the people will be easier to trust than just what’s out on the internet.
Alan
Yeah, for sure. I think generative AI is going to help to accelerate the process in terms of finding the right data, finding the supporting facts and figures, maybe even pressure testing the point of view to see if it hangs together, maybe helping with the writing. But like with most things, you can’t outsource everything. You can’t outsource thinking. There has to be the creative spark and the ingenuity and the human nature of working with clients and solving problems. Machine intelligence just isn’t there yet.
It maybe eventually will get there, but it’s not quite there. And companies shouldn’t use it as a crutch or a shortcut, but as a productivity multiplier.
Michelle
Someone once said, think of AI as an information hoarding coworker that is extraordinarily helpful, but also can sometimes lead you in the wrong direction.
I think because everybody else is going to (use generative AI), you have to start thinking about how you use it too. But especially in the near term, you got to think about the fact that it’s not always right, right now. And so if you trust too much in it, it could lead you sometimes in the wrong direction.
Alan
Trust and verify, I guess, is the right approach here.
But at the same time, my sense is that technology evolves, it’s going to improve. There are going to be fewer hallucinations and fewer fabrications. It’s going to be part of the (thought leadership) arsenal for sure. it has to be used wisely and in ways that are responsible. And I’ve heard stories, and I won’t mention names, of companies saying we’ve got to have this report generated by next week because we have a very important meeting with a client. And they send it over to their large language model of choice and start putting something together and they pass it off as their own. That’s a scary proposition.
Michelle
Yeah. It is.
New Arts of Persuasion
Alan
Last question about the future of thought leadership. Do you see any new techniques, new ways of telling stories, new ways of collecting data, new ways of influencing people through campaigns that you think are going to emerge in the near term? And AI may be part of that as well.
Michelle
One frontier is creating even a small language model out of your own content. We’re even thinking about that for the Tercera 30. We have so much data, and want to see if we can use it somehow for the Tercera 30. How do you package it, elevate it in a way that is, easy to consume? The days of the 50-page PDF are gone.
I think you can have a 50-page PDF for the people like me who still love to print things and read them, but you need the interactive pieces, you need the videos for the TikTok generation with the short attention spans. Which is a whole different subject, but I think there’s gonna be probably more thought put into the packaging and how to get things found. It will be interesting to see how research evolves because there’s good research, there’s bad research, there’s just so much data out there.
You can find a data point to tell any story that you want. How do you get data that is real, that is valuable and actually helps you make different decisions that are going to have better outcomes?
Alan
To me, that’s extremely important because we live in somewhat of a fact-light world these days. And I always say, people are entitled to their opinions, but the facts are the facts.
Michelle
Yeah.
Alan
I really appreciate your time and your insight. This has been great. Thank you so much for joining us today on Everything Thought Leadership.