Top line growth is paramount to business start-ups, and this is no different for us.  Our focus on attracting new customers has not changed.  What has changed is how this growth is measured.

In the past, we would tout the Contract Value of the customers we had signed in a given month.  But as illustrated in the previous post, this number can be misleading.

Therefore, the primary metric for our Company (other than cash) is Committed Monthly Recurring Revenue (CMRR).

CMRR is the total of all monthly recurring revenue, net of expected churn during the next six months.  The metric includes revenue that has been installed and is being recognized, as well as revenue that has yet to install but has been committed to by a customer.

Why did I bring this up?  Prior to Envysion’s launch of Envysion Video in 2007, software-as-a-service had not been introduced to the video surveillance marketplace.  We were one of the first companies to the mark.  It has taken some time to help educate the market, but we believe that the more and more companies are recognizing the unique benefits of MVaaS. 

With success has come a clearer focus on achieving our growth aspirations.  It has also caused us to reflect on what the growth may mean to current and prospective investors.  The conclusion was that the metrics we were utilizing to gauge performance were not adequate.  They served us well for a time.  But as our growth has accelerated, the metrics were not adequately presenting our financial performance.  In a sense, we risked becoming pilots without an instrument-rating.

As speculation persisted over what happened (over the period of weeks, probably), one thing stuck with me.  A primary driver of the tragedy was the fact that JFK Jr. was not qualified to fly at night.  He was not an instrument-rated pilot.  Therefore, since the flight was at night and the weather was poor, he was unable to utilize visual cues (e.g., the coastline) in guiding his pilot reactions.  And since he was not qualified to fly utilizing only his instrumentation, he became disoriented and crashed.

I am not well versed in the field of aerospace.  My knowledge begins and ends with the requirements of lift and thrust.  So the fact that the concept instrument-rated has stuck with me is curious.  And it is more so as we’ve undergone a shift of the instruments that we use to measure our performance at Envysion.

Typically, customers that are afforded a pilot are those with a large number of sites.  And it is certainly reasonable that these customers would want to “kick the tires” prior to committing to an extensive enterprise roll-out.

There are a multitude of things that a customer may want to know prior to buying.  Does the system operate as presented during the sales process?  Has the system been properly integrated with the POS System?  Are the views clear and useful to the operators?  Are people within the organization adopting the software?

But there is one ultimate question in which these companies are interested - Will our investment in this technolgy provide a healthy return?

In our experience, when our MVaaS system is utilized, customers are able to drive 1.5% to 2% of revenue to their operating profit.  This leads to a payback of five months, and a triple digit ROI!  

If these returns are achieved (and we’ve seen them replicated several times over), the logical conclusion is to move ahead quickly, because every day delayed is another missed opportunity to gather the extra cash.

The Hawthorne Effect is a term from psychology that describes the tendency of people to act differently when they know they are being studied.  The concept was named by Henry Landsberger, who was busy in the 1950′s analyzing experiments from the 1920′s at the Hawthorne Works.

The earlier experiments were designed to measure the impact of lighting on worker productivity.  Presumably they expected to find that worker productivity increased with better lighting.  However, this was not what they found.  Instead, the original researchers observed productivity improvement in both control groups, regardless of the lighting.

The researchers were puzzled by the result.  Presumably it was not until Mr. Landsberger reviewed their work was his theory postulated.

The Hawthorne Effect has since been used to describe any short-lived productivity improvement that occurs because individuals are being watched.

So what happens if you apply this concept to MVaaS customers?  If MVaaS is deployed to several “test” sites, and these sites achieve greater performance than the other “non-test” sites in the enterprise, could you dismiss the findings and conclude that this is due to the Hawthorne Effect?

I was pondering Matt’s recent post about manufacturer’s claims when I came upon this article on Cheerios.  Check out the warning letter from the Food and Drug Administration.  This is not something I would like to find on my desk on a Monday morning.

Caveat emptor, to be sure.

In a prior post, I asked for suggestions on what the Unintended Consequences would be when MVaaS is introduced into an environment.  Based on the underwhelming response, one may be tempted to conclude that there aren’t any.  Just upside opportunity, right?

In an attempt to start a dialogue on this, let me share one that I’ve heard.  This is not a direct quote, but the sentiments expressed are genuine:

“I need my store managers to be in the stores.  If they have this type of tool, they may spend more time away from their stores, and they will be less effective.”

Point taken, and I’m in agreement that direct line store managers need to be on the scene to be most effective. 

However, allow me the opportunity for a rebuttal.  Even if they are on-site (as they should be), isn’t it fair to assume that they are missing important events?  Wouldn’t it be useful for them to review significant events during off hours to improve their locations go-forward performance?

And what about the others within the organization – CEO, owner, regional manager, etc?  They obviously can’t be multiple places at once.  Wouldn’t they benefit greatly from seeing how their operations are performing? 

Do you have other examples?

This got me thinking about UC in other contexts.  Take MVaaS, for example.  By merely introducing video, certain things change.  Employees may work harder.  Customer may feel safer.  Would-be bad guys may target other stores.  Operators may utilize the system to improve profitability.  These, of course, are the intended benefits.

But are there UC to consider?  Any suggestions?

Congraulations are in order for Dan Caruso, who took first.  Dan got to the final two with a commanding lead, and he never let up.  Perhaps his blogging on the Telecom Texas Hold’em paid off. 

Second place went to Steve Wilson (no relation), who recovered from some early disappointments to dominate the rest of the field.  I specifically remember this early moment from the tournament.  “Ok Steve, what do you have?”  Steve – “Just the six-seven-eight.”

As for me, I placed 11th.  Out of how many?  That’s not really important.  What is important is that the event was enjoyed by all, and my early exit provided me with ample time to catch up on my pizza consumption.

If you foresaw this and moved appropriately, hats off to you.  For the rest of us, though, it’s been painful.

Among their benefits, stock markets, as measured by various indices, act as leading indicators of what is expected from the underlying companies.  Since the overall economy impacts business results, the market is also a measure of where investors see the economy going (not where it is now).   To this end, the U.S. market started its fall as the asset “bubble” burst, bank failures were witnessed, more were expected, and a recession seemed inevitable.  Even though the U.S. economy grew the first half of 2008, investors, and by proxy the market indices, anticipated problems ahead.

If you haven’t stopped watching, the U.S. stock markets has gone dramatically upward in the past seven trading days.  From its low, the S&P500 Index has returned 17% to investors in this very short period.  Did we hit bottom on March 9th?  Is this the start of a significant move upward?  I’m not so brazen to make this call.  But some government officials and market experts are expressing cautious optimism about the future.  The outlook seems to have improved a bit from one month ago.

We have repeatedly explained how the value proposition for MVaaS solutions improves in a tough economic environment.  Still, it would be a welcome development to see the economies of the world improve in the 2nd half, and return to growth in 2010.