Investors aim to bet on companies that outperform analysts’ growth forecasts and strengthen their forecasts.
Can the Boston-based 908 devices – a maker of portable and desktop mass spectrometers – continue to do this?
This is more likely because 908
- Empower the people closest to its customers,
- Attracts and motivates the best talents,
- Launches new products at a rapid pace,
- Hold people accountable for ambitious results, and
- Fight bureaucracy.
(I have no financial interest in the securities mentioned in this article).
Rapid growth and optimistic 908 forecasts
The vision of 908 is to democratize mass spectroscopy. This 100-year-old product is like a supercomputer that takes tiny chemical samples, puts them under tremendous pressure, and analyzes their chemical makeup. The idea is to determine if, for example, a little white powder is a deadly chemical like carfentanyl or something harmless.
908 takes these giant machines and breaks them down – like Apple and others did when they introduced PCs, laptops, and portable devices. One of the keys to the 908’s success is that its mass-spec portable and desktop devices can analyze samples without high pressure.
908 – a nine-year-old company whose stock has lost about 8.4% of its value since going public on Dec. 18, 2020, according to Morningstar – has reported rapid growth for 2020 and plans to maintain that pace supported in 2021. According to Globe Newswire, 2020 revenue increased by 50% to $ 26.9 million and it expects 2021 revenue to increase by 45% – in the middle of the range between $ 38 million and $ 40 million.
His report was not good news. 908 reported a 32% drop in fourth quarter revenue “primarily due to lower license and contract revenue of $ 1.5 million and due to the timing of deployments with end customers, “according to the press release.
At the same time, 908 announced a $ 25 million contract with the U.S. military for 350 additional mass specifications – MX908 trace level detection devices – over the next two years for its sets, kits and outfits. Safe for Army Explosive Ordnance Disposal (EOD) disposal. Program (RS SKO). “
Can the 908 continue to grow so fast? History suggests that businesses don’t grow 50% per year forever. But a few, like Amazon, have a habit of growing at least 20% a year even as they reach gigantic levels.
My guess is that if companies keep doing the five things I listed above, many of which I describe in the first chapter of my book, Goliath Strikes Back, they can fight the corporate lethargy that plagues most businesses that have been around for a decade or more.
How 908 empowers people
First, businesses are slowed down if they insist on forcing those closest to customers, competitors and new technologies to undergo detailed teeth-cleaning-type examinations by layers of directors, vice-presidents and top executives. before acting.
In contrast, companies that empower those closest to markets can act faster, which means their products are more responsive to customer needs.
908 is closer to the latter. As CEO Kevin Knopp explained in a March 30 interview, “We don’t delegate as much as we empower. We started the business nine years ago and realized as we grew that we needed to add people – now we have 130. You have to trust and empower people and we have the knowledge to all of our founders and managers who provide advice to those closest to customers, we have great and smart people who listen and understand customers and take action. “
908 sees itself as going faster than its rivals who make supercomputer-type mass specification machines. “The incumbent operators have the technology, a lot of experience and a large base in place. It can be difficult for them to turn around and be successful. 908 has an orthogonal strategy – our laptops and handheld devices are used by non-specialists. This is a different user than those who use traditional mass spectrometers [which are akin to] supercomputers, ”he said.
How 908 attracts and motivates talent
Talent is the natural resource that many high-tech companies need to gain market share. My conversations with CEOs reveal that the most talented people want to learn from people whose reputation for excellence can help them grow professionally.
908 aims to do just that. As Knopp explains, “We just hired Steve Davenport to lead commercial sales for our mass specification office machines. He has experience building sales organizations for start-ups – he was with Sartorius [a biopharma company]. We can attract talent because we have a clear vision, differentiated technologies, smart and humble people to work with. [New hires] Go in depth and find plenty of other motivated entrepreneurs who are making an impact. It attracts new people who have the opportunity to develop professionally [as they join us]. “
How 908 develops new products
The ability to make improvements to new products and create entirely new markets through innovation is the key to rapid growth.
908 aims to make both breakthrough innovations and incremental improvements. “We have innovated in the field of mass spectroscopy by breaking the kilos of pressure in order to be able to provide portable and desktop mass spectrometers. We’re making good progress in learning what can be done and unlocking new feature sets to get our minds thinking about the future. We are listening to the voice of innovation – which will be exciting 12 to 18 months from now, ”Knopp said.
908 does this by observing customers and systematically improving their experience with its products. “We stay close to the customer. We understand how they use the product, their workflow – what they do before and after using our product. We are looking for ways to remove the sore spots. If they are doing preparatory work that is painful, we can do it in software. We also chat with key opinion leaders at conferences and trade journals to see what comes next. We’re doing something with our Zip chip in our Rebel product that connects to supercomputers, ”Knopp noted.
The culture of 908 encourages communication between the customer and its engineers. “Our field application service [engineers] observe how customers use our products, ask questions and bring back [what customers ask for] in the laboratory. Our culture encourages this and emphasizes pride [we feel in putting] engineers in front of customers. Our CTO allows them to be curious and ask questions, ”he said.
908 formalizes its process of prioritizing all these customer returns. As he told me, “We are now focusing on forensics and biopharmacy and in the future we will focus on proteomics and diagnostics. We just hired Maura Fitzpatrick from Waters as VP of Product Management and Marketing, whose job it is to prioritize and develop roadmaps for customer innovations.
How 908 holds people accountable
If inspiration is 1% genius, the remaining 99% is perspiration. And much of that perspiration holds people accountable for achieving results.
It does this by helping a public company know what investors expect and find a way to hold everyone who works in the company accountable for their contribution.
908 worked with analysts during the IPO process to agree on how they would rate its progress – it was a mix of quarterly financial metrics and key performance indicators (KPIs) that are leading indicators of these financial results.
As Knopp explained, “During the IPO process, I got to know the analysts and we agreed on a set of KPIs that they will track. These include financial and other measures. Other metrics include the number of people we hire as we increase the sales force to meet our growth goals, increasing the number of clients – like our recent contract with the US military; how far we are expanding our sales to existing accounts – some of them have gone from three to six [of our different products]; our international turnover (now 25%); and our pace of improving our existing products and inventing new product categories. “
908 can estimate how many units of product it will sell as its customer relationships grow stronger. As Knopp explains, “Our client relationships go through three phases: trial (usually with third party validation; pilot adoption (one to 20 units); and enterprise adoption. We track where each client is in these three.” phases and make predictions about their situation in the future on which we base our growth projections The CFO and CEO remain close to the sales managers [so we can make the forecasts accurate and up to date]. “
To empower people, 908 uses an approach called Key Objectives and Results (OKRs) which was developed by Google. The reason for using this approach is to encourage the flow of information. “We use OKRs. There are short-term ones, such as turnover, but also customer satisfaction and respect for our R&D roadmap. Managers, directors and vice-presidents share them with their teams. They promote communication around our objectives, ”he said.
How 908 fights bureaucracy
Finally, big business is slowing down because the bureaucracy – which was initially well intentioned – is taking on a life of its own. Put simply, in many large companies – IBM comes to mind, the demands of executives and internal managers are more urgent than what customers demand.
908 is smaller and therefore has not developed life-destroying bureaucracies. He tries to keep his customer oriented products and processes very simple. As Knopp explained, “We have a flat and open culture. There is a lot of information sharing and we avoid hierarchy. We try to make our products simple for our customers – push a button and get an answer. We try to make our customer-facing functions such as service, support and sales just as easy. “
If 908 can find an easy button to maintain 50% annual revenue growth, its action is a buy.