How to Innovate in a Hypersocial World: Q&A with Gail Goodman, CEO of Constant Contact

6/28/11Follow @gthuang

Constant Contact is a digital marketing company led by babes. I don’t mean women, though that is true, actually. And I don’t mean babies in the crying, needy, or naïve sense, but rather the youngest-in-the-family sense.

Let me start over. As it turns out, many of the senior management team of Waltham, MA-based Constant Contact (NASDAQ: CTCT) grew up as the baby of their family, and they had older siblings who influenced their worldview. And that has impacted the culture of the company in an important way.

That was one of the more interesting things I learned last week from speaking with Gail Goodman, the company’s CEO and chairman (and youngest of four). She has been CEO since 1999 and led the company’s $107 million IPO in 2007. For those who don’t know, Constant Contact started in the mid-1990s (originally called Roving Software) and rose to become a leader in e-mail marketing and online surveys for small businesses. Now 815 employees strong, it anchors a vibrant hub of marketing-tech-related firms in the Boston area.

Like most young public companies, though, Constant Contact faces challenges in continuing to innovate while staying focused on increasing its profits. The firm made $174.2 million in revenue in 2010—a 35 percent increase over the previous year—and a modest profit of $2.9 million. But its percentage growth has been slowing down over the past couple of years, and the company is investing in newer areas like social media and mobile marketing—to the tune of $24 million spent on R&D in 2010.

Earlier this month, Goodman presided over an annual “innovation day” at the company. Employees were encouraged to submit innovative new ideas for products and processes, and five finalists were selected out of a pool of 33 project ideas, she says. (The finalists weren’t revealed, but two had to do with mobile, and two had to do with “customer wow experiences,” she says.) There will be a final bakeoff in late August, with the overall winner to be implemented by the company by the end of the year.

But Goodman (see below) had a lot more to say about what’s happening at Constant Contact these days. Here’s an edited transcript of our chat:

Xconomy: It’s a perennial question, but how does a mid-size public company like Constant Contact continue to innovate?

Gail Goodman: It actually starts with making sure everyone knows they’re paid to think and to innovate. It all starts with an attitude: what else cool can we do? It helps that we innovate with context. Everyone here is really clear about who our target audience is—small businesses, small associations. We have more than 450,000 customers, and 70 percent of them have fewer than 10 employees. Our innovation needs to be highly usable cool technology. Everyone knows the problem set we’re trying to work on. We help [businesses] create and grow customer relationships. We talk about it a lot. And employees use 10 percent of their time to innovate.

X: So what are you doing that’s unique or special?

GG: We have a Labs organization, and we did that earlier than most companies. That’s where some larger companies get stuck. How do you invest in the future? We keep a running strategic roadmap, with a multi-year focus that has technology disrupters on it—here are things coming that could disrupt our market and customers. We continue to role play, we continue to do late-night pizza sessions.

One example: we have a fantastic “big data” problem. We have 450,000 customers, all of their customer e-mail addresses, and [data on what's been sent, opened, and clicked through]—about a petabyte of data. We help customers find co-marketing partners around them. We did a map of Acton, MA, and listed the overlap of our customers. So if customer A and B have 20 percent overlap, they can co-market together. How do we use that data pragmatically, what could we do to make that happen for them?

We also put small companies in the mix. We encourage all executives to mentor smaller businesses. That’s how you stay fresh.

X: So are you still on the board of HubSpot, which seems to be becoming more of a competitor with Constant Contact these days?

GG: We are drifting a little closer, and Brian [Halligan, HubSpot’s CEO] and I are aware of that. It might lead to us needing to part ways. The conversation is active.

X: Talk about the biggest challenges you’re facing with Constant Contact.

GG: There are lot of twists and turns in our story. 2005 was a big inflection point for us. In 2007, when we went public, that put rocket fuel behind the engine. Then we’ve been very high-growth. But our end market, the small business, has been badly hit by the recession. Main Street hasn’t felt the end of the recession. We’ll grow roughly 25 percent this year, but for us that’s a disappointing number, given the size of our addressable market. The last two years has been challenging for us as a mature company, but it’s not tragic.

X: What’s unique about your company culture?

GG: One of the things that makes this company special is we have a “no asshole” hiring policy. Our employees are very results-oriented and very driven, but they do that with a respectful style, and laughter is the name of the game here. You know you’re one of the team here when people starting ribbing you.

We did a senior management team meeting, and one of the icebreakers was to talk about your siblings. We have a lot of last-borns, so you take a lot of ribbing [growing up] as the youngest of four, or youngest of two. It’s not a hiring criteria, it just turned out that way. How does that shape our culture? We all give each other a hard time, and we know how to take it.

It’s super hard to hire good people. Our best weapon is our employees.

X: So what are the most important lessons you’ve learned over the past decade?

GG: I think probably the biggest leadership lesson, as we’ve grown the company, is the focus on hiring great people. And making sure they know what you do and why you do it. Not to constrain ideas, but to give context to innovate in them. Startups, in their hunt for repeatable models, sometimes get all over the place.

We were tempted to go up-market [for example]. But we said no, we’re shaping everything around this customer [small businesses] and this customer market. As we grow, the challenge for us is to really make sure we’re following that customer as they grow and change—not because we talked to them two years ago. So we have to move in advance of our customer, but not too far in advance.

The second thing is, in this hypersocial world, it’s all about customer experience. You have to design your business from the customer inward and make sure you know what your customer experience is. The social viral impact of great customer impact is extraordinary. And the inverse is true. I wouldn’t make a major purchase today without reaching out to my social network. If you’re not treating your customer extraordinarily well, you will definitely hear it.

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com. Follow @gthuang

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