Welcome to episode 13 of the SaaS Backwards podcast. This episode is a great thought starter for product and brand managers who are looking for ideas on how to engage more deeply with end users. I also made a call for social media strategists to take a deeper look at communities as an extension of their SoMe plans.

Our conversation is also interesting in that this firm was originally a "consultant with kit" before Terry joined. In order to scale up, they realized that the crowdsourcing opportunity had a wider applicability than they could implement as a service and achieve growth ambition. And so, a SaaS was born.

You can listen to the full episode directly below or wherever you listen to podcasts.

Transcript below is edited for clarity and readability 

Host, Ken Lempit:
Thanks for joining us today on SaaS Backwards, it's a podcast that helps CEOs and CMOs at SaaS firms to improve the profitability and growth rate of their companies. And today we have a great guest for our listeners. It's Terry Sydoryk, he's CEO of Chaordix. It's a company that helps firms build their own communities to drive business results. Hey Terry, could you tell us a little bit about yourself and the company?

Terry Sydoryk:
Yeah, absolutely Ken. I've been involved in the tech marketplace for a while now. I've had various roles within early stage companies and joined Chaordix almost eight years ago now as the COO. And that came as about, as a result of a relationship I had with a number of the folks in the company, as well as with the VC firm that stepped in at that point in time. Saw an opportunity to take the experiences that I've had previously and contribute those to the organization as it embarked on its next phase of growth. And basically, the last eight years have been involved here and I stepped into the CEO role about five years ago with the organization.

Ken Lempit:
That's great. And can you tell us just a little bit about what Chaordix does and what kinds of clients that you serve?

Terry Sydoryk:
Absolutely. I mean, there's a long history here, but early on the founder saw an opportunity with respect to the general characterization of crowdsourcing. So the opportunity to bring a large group of people together to contribute and in essence, tackle a business or other problem that would be beneficial to the enterprise. And through that journey, developed various applications and work with some great brands, everything from American Airlines to Orange, out of the European geography, a telecommunication company, we've worked with Procter & Gamble and currently have a very large presence with LEGO. We'd been working with them for eight years now and our platform runs the LEGO ideas community, which is 1.7 million members. And that group basically gets involved in putting together commercial ideas for products for LEGO and to date has been extremely commercially successful. And I think at the last count I've seen was around 33 products have entered the market and right now there's a least another six that are about to come forward.

Terry Sydoryk:
So it's been extremely successful. And it's an example of how an organization who has been long working with their end users, really just transitioned to add an online or digital presence to the ongoing physical connections that they have in the marketplace today. So we provide that platform, we've evolved that, we you talk a little bit more about the specifics, but ultimately providing an online place where the enterprise or the brand can engage with their end consumers and give them an opportunity to work closely with the brand.

Ken Lempit:
I think it would be good to talk just a little bit about what some of the top use cases are for a brand to build communities. That's the heart of what you do for your clients and perhaps not everybody has a sense of what the power of a community might be.

Terry Sydoryk:
I mean, I think at the end of the day, we all can appreciate the community as something that as individuals we strive for. So whether it's the family community, which is a small group, whether it's your neighborhood, your sports team or a specific brand, the opportunity to collect with a group of individuals that have a like interest is really the definition of community. We take that one step further at Chaordix and do that to get to true community. You have to get the individuals working with each other on a specific problem that exists for the business, for the hobby, for the sports team, et cetera. And that's really the differentiator. So our platform has two prongs to it. One is a very structured environment. So we've brought together various activities, everything from research-based elements, to challenges, to discussions, et cetera, that allow the membership to engage with each other in a very structured format.

On the other side, we have a very unstructured format. It's like that digital water cooler and the value there is really the opportunity for community members to introduce and start conversations amongst themselves. So it's almost like a digital ethnography, if you will, to an online environment. So the brand or the community owner can watch what's going on within that informal discussion and gain tons of insights relative to what's important to the membership. What we've often seen with a lot of our customers is that they'll take that informal discussion, see what trends and interests are amongst the membership, and then bring contents of that back into the formal to flush it out further. So whether that'd be a service improvement, a product improvement, whatever that happens to be, it gives the brand a way to engage and interact with the membership to further enhance what they're offering to the marketplace.

So it's a win-win for everybody. So it's quite interesting to watch. Historically, we used to run a number of communities which were really short in their timeframe a couple months long, a specific initiative, a specific objective. And there's value in doing that, but you really miss out the opportunity to build trust within the community and have that informal engagement and ad hoc discussion that happens around the specific challenge. So what we've seen is that as a community is invested into, as the membership grows, as the trust aspect of that community evolves, that's when you really see the magic happening that the membership starts to work with each other in a way that you probably wouldn't have imagined prior. And so for some of our long standing customers, that's where you see things really start to take shape.

Furthermore, we often end up in discussions with new clients around, well, what will this take to manage? I'm concerned about the maturing of this community, how will it affect my brand? And what we see is that as the membership evolves and matures, they have an affinity with the brand. They manage their own space. It's a great value to the owner as it takes the burden off of them to manage that environment.

Ken Lempit:
That actually brings me to the thing I really wanted to dig into, which is what is the value of building a community for a brand? What are the outcomes that they might expect? And I think in the context of what you've really described as building a longterm relationship in our personal lives, we expect that our long-term relationships are going to become more nuanced, more important, more multifaceted. And I wonder if in this brand to community, brand to user base brand to fan base, what are the stages of maturity here in this community model, we can maybe professionalize it a little bit, talk about a maturity model, if you will, and what are the potentials that one might achieve?

Terry Sydoryk:
From the experience we've had, it's really evolved. And there's a number of dynamics that are really affecting that, which we're really excited about as we look forward into the future of a community for things like brand. First of all, we probably to date have focused really on the fact that a community is a brand initiative with their consumers, but ultimately, there's also the opportunity for that brand to initiate a community with their employees. What changes is really how you engage that community. Secondly, is that when we talk about a brand evolving and adopting a community mindset, it is really about that one-to-one relationship with their end users. I mean, if you think back to what the definition of marketing has always been, it's about moving towards establishing a one-to-one relationship with your end consumer. And what we've seen over time, as we've moved from very much a broadcast environment, TV, radio print to then LinkedIn, Instagram, Snapchat, et cetera, broadcast channels that have obviously proven value will continue to be part of the mix.

But now you've got technology enabling an actual interaction. One of the things that we end up saying is that give social a purpose. At the end of the day, these individuals are self identifying as interested in what you're doing through follows, through likes, what have you, most brands today continue to just simply treat them as a medium of which they will broadcast to. Our view is to take that next step and actually engage these folks. We're also seeing a movement within the marketplace that consumers are looking for brands that care. And so at the end of the day, what does that mean? They recognize that the reason the brand is successful it's as a result of them, in the collective, that they are the ones buying the product and services. They're the ones that are commercially making the brand successful. And so what they want to see today is the brands that are going to recognize that and are willing to engage and work with them around what the brand may do in the long-term.

One of the key drivers in that whole equation is really what we've seen as far as technology advancement. I mean, we've seen the articles that are out there in terms of how technology is impacting every element of what we do on our day to day basis, and this is no different.

Ken Lempit:
I want to make sure we go back just a few moments, because something you said that I think is really important is a notion of this is sort of a next step or an evolution of social media. And that it's almost as if the community function might be something that would reside within the social media group at a brand B2C or B2B. And in fact, it might be something that strategists looking at social, how do I take my social to the next step? How do I actually create value and much deeper engagement? And we often talk about, well, am I following these people? Am I retweeting their stuff? Am I sharing their stuff on those social channels? Am I taking the inbound DMs and handling them appropriately? So here's a real opportunity for practitioners in the social space to say, wait, there's probably a lot more we can do with your brand if we take a look at community in a larger sense, and with some strategic intent beyond this pushing out our content and intercepting concerns, maybe this is the call to social media strategists to take a look.

Terry Sydoryk:
If you don't take charge of the conversation, if you're naive to think it's not happening, I think that's something that you're missing out on, in terms of, you've got to recognize that in today's world, you can either get in the mix and control that conversation or not and then therefore, it's going to take place around you. An individual by the name of David Spinks, he's one of the founders of CMX Bevy and they have in essence and online platform for event based initiatives. He just released a book called The Business of Belonging, which is centered around community. And he sets out a model that's based on spaces as sort of that overarching elements of why you would want to run a community. Spaces with the S standing for support. And we've seen a lot of early movements with respect to communities around support, it's clear ROI, people in essence, help each other, the brand gets a huge financial benefit in both response, as well as costs and ultimately, users helping other users. So it's clear.

There's products for the P in spaces, which is product improvements. That's an area that we've been involved with. Acquisitions, the whole concept of advocacy. Again, today's consumers are looking for brands that care about what they have to say, and the minute you engage them and get involved with them, there's an advocacy aspect that they then echo to their communities. And that's hugely valuable for a brand. Contribution, the C in space is contribution around collaboration and crowdsourcing. Crowdsourcing is really where Chaordix got its start and we see the value of bringing folks together that have that common interest and can work on opportunity as being the value that the brand gets out of a community. Engagement, clear again, with respect to understanding that a brand cares about what you have to say, and therefore gets you involved with them. The engagement aspect, not only benefits the community as it is, but allows it to grow because that extends further.

And the last thing on spaces being the success aspect, which means drives business growth. So the combination of all of the above, depending on how far you go with each, ultimately creates a scenario where your business is being driven to a different level. The reality of today is that we're at different stages with different organizations. The progressive forward thinking companies are embracing this aspect of community as part of their go-forward marketing strategy or social strategy. To your point, we found that these can exist not only on the product side, but mostly on the marketing side, not always as seen as a strategic evolution of social, but sometimes running in parallel with social. But ultimately, we see that this is naturally going to evolve over time, such that it is a complimentary aspect to what we have in place today.

The last thing I just want to make a point of Ken, is that we say, well, why Chaordix? What about Facebook? What about LinkedIn? Yeah. Those both offer that opportunity. And they have taught us about ways to start to engage with our community. The difference here, and again, evolving is that the ownership and control of both the data and the communication. In our world when you communicate to the community, the individuals, everybody gets to see that. In the social world of Facebook, LinkedIn, there's algorithms that control ultimately who may or may not see it. And so again, is that important to you in terms of what you're putting out to a community? Probably. And then the last piece is data ownership. When you have and own the community, you control the content, you engage with the community. And as you gain insights, you have the control and access to all of that data, which is hugely beneficial for the brand.

Ken Lempit:
There's also folks that don't want to participate on Facebook so you have a slice of your customer base or prospect base that you might not reach, who might not want to engage with you on those platforms. And I think the ability to completely control the experience to the extent your platform allows that is really important. We talk about things like YouTube as a channel versus a paid for video player, simple analogy, but on YouTube, there could be ads for competitors or things that you don't want mixed up with your brand. Same on Facebook, you're running a group on the Facebook, there could be ads that take people away from the group or that aren't consistent with your brand. If you're doing a community for young people, do you want an ad for a local nightclub? Probably not. I think having control of that environment is highly valuable.

But I love the spaces thing and I think that maybe that's a great revelation or a piece of followup for people to take, is that there is some modeling going on on how to become more strategic about the use of community. I think the use case you mentioned on support, like technology support, like there's support.apple.com and there's all those forums for that. That's a pretty tangible, understandable application. And maybe a good way as the practitioners are trying to introduce the many values that can be created through community, start there because everybody understands it and then say, well, here's the rest of this model, why don't we try and apply that to our business and see where there might be value creation for us?

Terry Sydoryk:
Absolutely. I mean, I can extend that further with some of the other use cases that we're involved with. There's probably an article weekly that comes out on the LEGO ideas community, which we've been involved with, as I mentioned, for eight years is very specific as LEGO is a company specific. And that there's an opportunity to take raw product bricks in the case of LEGO and ultimately create kits that are considered for commercial release. So in their case, they have an open forum, open innovation community, where individuals are submitting ideas constantly, those ideas go out to the community at large, the community votes. If it reaches, I think it's 10,000 votes, LEGO then says, this is worthy of a further assessment. They look at it to make sure it aligns with the brand, that there are no licensing or IP issues. And ultimately, they decide one way or the other. If you're successful with that product being commercialized, you share in a royalty. And I believe it's 2% of the commercial value.

To date there's been, as I mentioned, 33 products released all of them have been hugely commercially successful, which ultimately has a bit of a kickback to the individual or the inventor if you will. LEGO has gotten way more mature in terms of how they launch products. There was a Canadian based individual that created the yellow submarine. They flew him to the closest LEGO store to Abbey road, did a big PR thing. What's really interesting as much as the royalty aspect is something that people get excited about, most of these individuals are just looking for notoriety amongst their peers. And initially a lot of them, it was rumored donated those proceeds to a charity of sorts. So they're not in it for the financial gain as much as just recognition from their community. So you can start to see how the dynamics of community would be hugely valuable for the brand.

Now, look at another scenario with a longstanding customers of ours, Rust-Oleum, who is a paint stain company in the US, all of their products sells through a channel, whether it be Lowe's or a hardware store, et cetera. So they never had a direct relationship with their end users. The community now has given them that direct connection. And so when you are in the Rust-Oleum community, there are all kinds of activities going on, like kitchen make-overs, bathroom make-overs, garage make-overs, which take advantage of the Rust-Oleum product. So what does Rust-Oleum do? One, they learn as a result of watching how the individuals use the product, because all of it is documented. Secondly, the individuals get to work closer and there's a lot of how to videos in the community so they gain value in terms of what to do with product.

The collection of images as an individual works through a project is user generated content that ultimately Rust-Oleum will work into their social feeds or other collateral or advertising. And again, it's got an authentic aspect to it as a result. So this is extremely value for the brand. So you see these two scenarios that obviously have great value to the brands themselves, and ultimately, the communities are extremely vibrant. They're active, they're long-standing, so they reach maturity, there's trust, there's interaction. And a lot of times there's conversations and things that go on in the community outside of the direction of the brand, but hugely valuable as the brand observes and watches to see what's important to the individuals that are their end users.

Ken Lempit:
I'd like to recapitulate for listeners, because a lot of times guys like you, you'll just slip something in that is actually a very high value and to you it's, "of course." So the idea that a brand with distribution ultimately struggles to get a relationship with its customer. This is a CPG kind of normal everyday problem from Nestle Water to Rust-Oleum paint. They put the product in distribution and they lose control of it and it's very difficult to get to the customer for insight and usage, variations, maybe it's skewed variations they're looking at or flavor or whatever it might be, packaging. I think that for the CPG listeners, which we probably won't have a lot, but maybe someone will sneak in, the idea that if your product of any kind is in distribution, and you're looking for a way to get direct feedback, a community that you control gives you the opportunity to incentivize that kind of interaction.

Terry Sydoryk:
It's evolved over time. So very much driven out of the marketing organization within Rust-Oleum, but brand managers now are active. And so typically, where they would have previously initiated a focus group, which logistically would take weeks to coordinate and reach across the country. Technology has just allowed you to do that on a global scale and we turn stuff around in 24 to 36 hours. A brand manager comes back and says, "Hey, I'd love to get the community's response to this new retail initiative, packaging or a retail space within one of the stores we're going to have." And ultimately, that feedback is back to the brand manager within a couple of days, everything from instructions to packaging, to color choices, et cetera, is something that they do constantly in the community. So there's a huge amount of value there.

So incremental innovation, if you will, around some of the products, hugely valuable as well as ultimately open innovation in terms of new ideas and things. So our communities have demonstrated both of those. And again, it's around a brand who understands and is progressive in terms of making use of this community to their best efforts.

Ken Lempit:
One of the things we wanted to touch on Terry, was the impact of the pandemic on communities and your business. So tell us a little bit about your experience in the pandemic, but also looking ahead what you think that means for this space.

Terry Sydoryk:
We, like a lot of businesses obviously dealt with the impact of the pandemic from operating our business, but also just from a sense of what would happen in the marketplace. And we're fortunate that across our customer base, there wasn't any material impact. There was definitely a slowing with some of the new customers, but what we saw was quite interesting. And so if you think about this acceptance of an online community as something that in maybe a traditional space, wasn't top of mind, wasn't on the strategy of a lot of organizations, but the pandemic in essence accelerated the thinking around how one would go about running their business virtually, and arguably put a lot of senior level folks in a position that they were experiencing an online event and now it's become normal. And so what we've found is that there is a higher level of acceptance for individuals considering a online community for membership or consumers.

And so it's just accelerated the adoption or thinking relative to a strategy of going digital with respect to how I would engage in a larger sense with these community initiatives. It's been interesting to watch. I mean, you've seen and heard how others have felt that there's been a 10 year acceleration in technology hasn't really changed, it just accelerated and forced us into situations that because we're humans, because we're slow to adopt would take longer and we were just forced into it overnight. And so the result is we've seen a number of folks that have had interest in essence giving social a purpose. And so let's generate a community. Let's engage with these people online. I've seen it, I've used it, it works. So let's move forward.

Ken Lempit:
Awesome. Well, I feel like we've done a good job setting the table as to what Chaordix does. I wanted to turn a little bit to the company history, stuff that'll be relevant to our listeners. The fact that the business was really a consultancy with a toolkit and that had to change. And it would be great for you to paint the picture about that situation and what motivated the move to become a software company versus a consultant with kit.

Terry Sydoryk:
Yeah. So, I mean, if you think about it and you marry up the timelines across the various things that affected the organization, you'll see that Chaordix has been around for approximately 10 years. Early on there was a view that this opportunity around crowdsourcing could be extremely valuable to a number of different stakeholders. So they're ultimately using technology to bring folks together in an effective manner. And at the same time as that vision was seen, you see technology advance in terms of cloud-based, in terms of smartphones, in terms of access points, et cetera. We know one interesting data point is 65% of all members across our communities access the community platform via a smart form or tablet versus the desktop. We see that as do our customers in terms of access. And what's happened early on was there an opportunity to, in essence do crowdsourcing, but every one of the brands or customers has unique interests and requirements.

The initial phases of the organization would address those, sort of a customization on top of a technology stack. And so ultimately, it would take anywhere from I'll say, 45 to 60 plus days to bring up a community, run it for a period of time, garner the value, and then take it back down. What we saw was the opportunity to obviously move more towards product. So appreciating the custom aspects that everyone was looking for, we went to a product based solution with configuration, and we continue to invest in their configuration abilities to allow the brand to get closer and closer to their look, feel and representation in the marketplace. And we continue to invest that. We know brands hold highly their differentiation of how they look and feel to the consumers. And so our community has to adapt to allow that to happen.

At the same time, the benefit to the customer is efficiencies across the product and so for us to have a SaaS based solution where all of our clients today operate their communities on the same platform engine, it's just configured such that it represents the brand in the marketplace. And that's been a huge benefit for them as well as for us in terms of addressing this aspect of scale. We've gotten away from a custom development scenario into more of a product oriented offering, but to the brand, as I mentioned, it's most important that they continue to allow their nuances being implemented into the community platform itself.

Ken Lempit:
And so how did that change the financial performance of the business and the ability to grow it?

Terry Sydoryk:
It is around scale. Back to seven, eight years ago when the organization went the traditional route of attracting venture capital funding, anytime you bring on capitalization of that manner, their formula is pretty much understood and that they're looking for scale relative to top line growth and therefore having the ability to do so is something that they would drive. So it was only natural that we pushed the platform to more of a product orientation. So we're, cloud-based, we're on Amazon web services today. We have instances around the globe to service the various customers, depending primarily on their data restriction requirements as to where that instance will exist. But every one of them has memberships around the globe. And so individuals in the community access the platform, regardless of where it sits, as far as hosting on the cloud.

Ken Lempit:
I'd love you to talk a little bit about the opportunity and challenges of taking on that investment round. Because you came in right as that had closed, for CEOs and CMOs that are looking at a liquidity event, as you lead up, what are the opportunities that are made possible. And also what did you experience in terms of expectations that were being set and how you met them early on?

Terry Sydoryk:
Yeah, for sure. So I've been in this early stage technology marketplace for a number of years with different companies and typically come in at the same stage that I did here, which is on that commercialization. So once an entrepreneur or founder has identified an opportunity and has a good product market fit and wants to take it to the next level and commercialize build-out or the organization, that's where my experience has just been valuable to different organizations. So the situation that any business owner, CEO, cetera has to recognize, as they do, is as you're growing your business and how you do that, whether you take on venture capital, whether you take on debt, all of these things have requirements that you have to appreciate. And that's the key thing, it's no different than, as you build your organization with employees. I mean, you've got to give the employees the right culture, the environment, a career path for them to stick around. So as you invest for them to continue to contribute the business, these are things you have to consider.

Similarly, as you take on customers, what are the requirements those customers, or the segment that you're addressing, what are they going to be looking for? How will it affect your business? So if you rewind that all the way back to how you capitalize, you've got to understand that a venture capitalist is going to be looking for a return on their investment. It hasn't changed much in the last number of years about the analogy that's often used is that as they invest in their portfolio and there's 10 companies, they expect two to completely fail, six, to be whatever and then the last two to hit it out of the park and that in total provides them with the return that they have for their investors and ultimately provides a return on the portfolio. As an individual or company taking on that venture capital, you have to understand one, they're looking for that. So they're going to drive you for strong growth and two, there's a timeline. The fund that you're involved in typically has a timeline.

Now, that'll vary, but I'll say seven to 10 years is an average timeline. So depending on when you step in and get track that venture capital relative to that fund, you have to appreciate whether you have five years, eight years or nine years. When you start to look at what you're doing for your business and appreciate that it has an impact. In this case here, we've got extremely supportive VCs involved, operators by heart. They understand what it takes, they've been supportive and we continue to work closely with them through the maturing and growth of the organization.

Ken Lempit:
That's terrific. I think we've done a really great job here, digging in on the value of community. I think for software CEOs and CMOs that want to expand their reach into their user base and potential users, a really great platform to consider as well as the CPGs that probably drive the really giant volumes. And I appreciate just painting the picture for people that are looking at VC as the nuance of the way you look at everything being interconnected from the customer all the way back up to the source of funds. If people want to reach you or learn more about your company, how can they do that?

Terry Sydoryk:
We've got a social presence, obviously, and our website chaordix.com. We're on LinkedIn, Facebook, and yeah, anytime anybody wants to reach out and find out more how we'd welcome the opportunity to have the discussion and share our experiences. Our view is a rising tide lifts all boats and so we want to be supportive in that environment. So we've got a collection of materials that would help someone.

Ken Lempit:
That's great. Also, could you just give us the name of the book and the author again, because I think that's a great resource.

Terry Sydoryk:
Yes. David Spinks and he just released, I think it was literally within the last couple of weeks. It's called The Business of Belonging.

Ken Lempit:
That's terrific. Thanks very much. For listeners that want to reach out to me, I'm on LinkedIn at linkedin.com/in/kenlempit. My company, Austin Lawrence Group is available on the web at austinlawrence.com and would really welcome anybody's outreach wants to talk about building their SaaS and growing business generally. So thanks again, Terry, for a great episode.

Terry Sydoryk:
Appreciated the opportunity to have this discussion this morning.

Thanks for listening to the SaaS Backwards Podcast. Brought to you by Austin Lawrence Group. We're a growth marketing agency that helps SaaS firms reduce churn, accelerate sales, and generate demand. We hope you'll subscribe, and thanks again for listening.