XU: So, five months in the job. How have you found it at Xero so far?

Obviously, you’ve got lots of experience at different types of corporations, so was it what you expected? How do you find it compared to the other places you’ve worked?

CO:  It’s a short answer: it’s been great. I’ve been traveling all over the place. I’ve been down under twice, London two times, Canada, all across the United States. My initial focus is to get to know the teams, get to know our partners, get to know our customers and really listen and learn. What I’ve heard is that the potential is vast, probably bigger than I could have imagined. There’s genuine love and trust amongst the community. You can feel it here at Xerocon, so that’s really cool and special. We can talk about how hard that is to create relative to other places. 

I’ve been fortunate to be part of great companies, great brands, but the unique bond we have in our community is very, very special and rare. We have incredible talent in all pockets of the world that have been on their journey, some for a long time. Many are actually newer to Xero, so it’s been really interesting to watch our growth. I have a lot more to learn for sure, but I’ve enjoyed spending time with the team and partners and customers. It’s starting to give me insight into what sorts of things are working well, and how we adjust our strategies going forward.

XU: How have you found your first Xerocons?

CO: I attended Xerocon London and there’s a good vibe across the two. When I was considering joining, Steve Vamos mentioned Xerocon. I was aware I’d never been to one, but he said just show up at one and you’ll get it. Part of it is the fact that we’re together again in real life, which is special in its own right, but it goes way beyond that. You can just feel it. You talk to people, they relay their stories, they talk about the impact that Xero has had on them, or more generally, the impact the cloud has had on their life. 

Xero is a catalyst to do that, and you hear stories like yesterday with small business customer Rashida Gayle and her accountant, Miguel Octre-Marshall, which was just a special kind of combination and really a microcosm of the community right there on stage. Xerocons are a great opportunity for us to hear feedback.

It’s amazing to me that people travel from all over the world. They come and they’re really open. They trust us, they share feedback: Big, small, what’s working, what’s not, and we take it in. That doesn’t mean we can act on everything of course, but that people take the time and energy to be so thoughtful in their feedback is amazing. It’s just a wonderful event.

XU: One of the things that you’re spearheading is the applications and services division. Could you unpack what that actually is and what it means?

CO: We’ve always really focused on compliance. The system of records getting translated into financial statements, that will always be the essence of Xero. Putting that in the cloud, making it easier through automation, bank feeds and APIs that allow data to flow in and flow out of Xero. Now think about, how do you stay organized and compliant? That’s the job that needs to be done. There’s ever-changing laws, regulations and all sorts of things. Staying ahead of that has a degree of energy and investments required. It’s quite significant actually. 

If you think about the other side of the equation, it’s how do you run a business? How do you know whether a business is doing well? Or how do you organize and optimize that business? We’ve done a whole bunch of work to study what all the other problems that small businesses have, beyond staying organized and compliant. There’s a long, long list and some of them are small and some of them are big. Some of them, we have a right to play and some of them, we don’t. 

There’s really three that I’ll point out. The first is managing your finances. Second is managing people. And the third is managing goods. 

If you’re a goods-based business with inventory your finances are getting paid, you’re making payments and need all sorts of access to capital. That’s how we’re thinking of the financial services ecosystem. 

Second is people. Obviously, businesses employ people. You need to figure out how to manage them, how to pay them, how to stay compliant on that, but also how to hire them. And actually in many ways, that goes even further upstream of a business. It’s not just stuff, at the end. It’s basically, in many cases, lifeblood at the employee side. 

And the last, but not least, is goods. We acquired a company called LOCATE, because of the explosion and continued growth of eCommerce. People are selling goods and I argue every business in 5 to 10 years will have some element of selling and we won’t even call it eCommerce, just commerce. We need to be good at that, and consistently good. 

If you think about those three broad areas, that’s where we want and will  play. We’ll make investments, whether that’s stuff we build ourselves, whether it’s stuff we partner on, or it’s stuff that we occasionally will buy. We have done so with Planday. When you think about what we’re trying to do at the highest level, it’s focused on the questions of: How do you stay compliant? And then, how do you optimize the business? 

Additionally, we also ask ourselves,. how do we make the best environment for developers to plug into Xero? That’s very much what this is about. There’s a lot of precedent for this. We’re not trying to invent a whole new model or a whole new thing. Think about lots of different companies, like Apple with their App Store, Atlassian or Stripe. The list goes on and on where it’s just a better ‘together’ proposition, and it says, “Hey, we’re going to do certain things and do them really, really well, because they’re core to what we do.”

The things that we bring to our community is  more of a human, transparent process that is very open. We’re not going to have a heavy hand and do a bunch of things that maybe other marketplaces have done over time. That doesn’t mean that we won’t seek to have aligned interests. So for example, in our App Store, we bring people, business and traffic and we expect to be compensated for that, similar to other things. 

We think that’s a way to align the interest, to invite  app partners bringing their software through an API to connect to Xero in some way. We invest in the APIs and ourdeveloper ecosystem to  make sure it’s a proper community. People understand that so i’m excited about this direction that we’re going in.

XU: One of the things that we hear a lot from the readership is how far will Xero go, in terms of starting to branch out of the SME market and potentially go a bit bigger. Is that something on the roadmap at the moment?

CO: No, it’s not like we’re going to go upmarket as fast as we can. I think there’s actually overlap between Planday and Xero right now. Is it catering to larger companies? It is, but we’re still talking in the 100-250 company size range as a sweet spot. We’re not talking thousands. Is that possible in time? Sure, of course it is, but it’s not where we want to play. 

I think that we have established a very strong commitment and traction with small businesses, and the jobs that we need to do are many. We constantly are faced with how do we make difficult trade-offs and really do them well?  I think that having a go upmarket is something that all companies look at in time, but that’s not something that is core to our strategy.

XU: What’s Xero’s view on having lots of apps, potentially being owned by other vendors, still working with them in the ecosystem? How do you find that relationship moving forward?

CO: There’s always tension in a marketplace in terms of who does what and so forth. We have competing products that we own and also enable in the app store. We have a very small business and/or partner-friendly stance on that dimension, and if you get a customer some other way, well we’d prefer it to be through the App Store for a whole bunch of reasons, but that’s okay with us. We’re  taking a very, very partner-friendly stance.

We want to have coverage and the best choice, but choice is part of the principle that we care about. So, if a partner wants to choose Dext over Hubdoc, that’s fine. We want to enable an app for every use case and we know that for a variety of reasons, not everyone will choose something that we have built or bought, and that’s okay with us.

XU: What do you think has made the US market more challenging for Xero, compared to Australia, New Zealand, the UK and even potentially Canada at the moment?

CO: Well, I’m Canadian and I’ve spent time in both markets. I think there’s more in common across the Commonwealth countries, rather than not. There are nuances of course, in terms of how we see the markets, in terms of how mature the digital evolution is and how advanced the government policies are towards digitization. 

If you look at Australia, and to some extent the UK and New Zealand too, the governments are very, very proactive in digitization. It literally does feel like when I went back to Canada in 2010, people were questioning or wondering whether they should have a website, right? Yeah, that was a conversation. Over two thirds of Canadian small businesses didn’t have a website, which was kind of mind-bending to me, but it was the reality.

Now, good news is, Canada has advanced in terms of that quite nicely. You have companies like Shopify, you have a pretty thriving tech sector now, which is fantastic, but that’s kind of where we are in Canada today with cloud adoption. It’s way behind for a bunch of reasons and we’re going to work to change that. But the playbook in Canada is more similar to the UK and in Australia, than not. 

The United States is a different kettle of fish. It’s really like 50 different countries in one. You have different jurisdictions, you have different tax regimes. There’s a very seminal tax ruling that basically caused the nexus of sales tax to not just be where you had physical presence, but where you ship. That is an earthshaking thing for a small business. All of a sudden I used to have to pay sales tax in one state, now I have to pay it wherever I ship. I mean, there’s been some structural changes and it’s just a much, much different market. It’s a much more advanced market in many ways but behind in others.

I think open banking and the digital stuff we’re talking about, the US is right around where Canada is. But it’s way, way, way behind in terms of embracing the cloud in this segment. So, lots of work there and we are aware of what is needed. 

We have studied this market, both first-hand, having conversation after conversation, getting a strategic lens of the market to segment where we’re going to pick our spots. And we’re very clear on that —  we’re not treating it like Australia or Canada or the United Kingdom. It’s a different market and  the competitive landscape is a little different. I think of our competitors t as worthy rivals, but there’s so much market and there’s so much room for us, that it’s not really what I’m worried about at all.

We’re worried about how we can execute, how we can bring the best combination of product and features that’s going to unlock some benefits with our partners. And then, how do we think about which verticals? Which regions do we emphasize more or less, so that we can continue to get traction? 

The third theme is really partnerships. Not just partnerships with the accountant, and bookkeepers, but how do we put together partnerships with other technology companies? Where they have small businesses, we have small businesses, and how do we go about it together? How do we think about distributing our products through different needs? There’s many different tactics that we will use in this market, because we simply have to. We have to think differently.

All these things that we had mentioned before, we’ll lean on those even more here. So as we build our core, we’ll fill in other jobs through partners. Gusto is a good example of that. We don’t have payroll here, we use Gusto, and that’s a good partnership for both parties.

XU: What do you think the next big thing with the FinTech industry is?

CO: Well, we’re so early in the cloud accounting journey, let’s be clear about that. We’re not going to lose sight of that. I think that one of the benefits of cloud is the ability to connect things through APIs, and we’ve only just scratched the surface on that.  I think one of the big things is trust and making sure that data is used in a very transparent and productive way. 

When you have these other jobs being done, take payroll as an example, that has to come in and it has to be pristine in certain ways for regulatory reasons and for paying people the right amount. That data gets decorated as it flows into the financial statements in a way that allows you to do very interesting things, make suggestions and your payroll is connected.

Maybe you have a supply chain disruption and it trickles through to decisions you need to make on the pay. There’s a whole bunch of scenarios, the only limitation there is our creativity. You start to put those pieces together like that, where you can actually start to use the data responsibly to help make very specific recommendations for a small business. That’s huge. 

I touched on this yesterday in my talk, but even further afield is embedded applications or embedded experiences. I used the example of our app launcher and you can pop it up and it will make suggestions for apps that we think are useful. That’s an embedded experience and you can imagine us going even further to have a dashboard for a business and/or an advisor that basically has other parties’ information present.

Another example is Stripe. We have space now in Stripe where you can put parts of Xero inside, or at least we’re early on that journey. That’s the notion of embedding experiences, to make sure they’re seamless for the end user and they’re just in one place. That’s the future. These things don’t sound transformative now, but as we start to see better use of data and more people embracing it, putting their businesses on the cloud, these are the sort of things we’ll see.

XU: What do you do in your downtime to relax?

CO: Well, I like to garden. That’s just fun, because I like to be outside all the time. I do that and then ride a road bike with my mates. I’m actually heading down to Italy and France for a little getaway with my wife and some friends to go biking.