MYOB’S ONLINE RECOVERY ACT

MYOB’S JOHN MOSS IS FIGHTING TO SOLVE A CLASSIC STRATEGIC CHALLENGE: HOW A POWERFUL INCUMBENT CAN RESPOND TO INNOVATIVE NEW COMPETITORS.

Australia’s SME accounting software market is one of the most competitive software spaces in the world. It was the first big market for cloud software provider Xero, now a global force. US giant Intuit has set up shop to more effectively sell QuickBooks Online, its answer to Xero. Long-time local player Reckon is selling its newly built Reckon One product, and UK giant Sage is trying to make inroads with its own Sage One. In the middle of this shootout is the Australian-based MYOB, long the dominant player in the market and now trying to retain its position in the evolving online accounting software market. How would you like to be steering the strategic course through all that? The man doing just that is John Moss, MYOB’s chief strategy officer since 2012. He says the company is rapidly winning online customers in the Australian and New Zealand markets. 

In the years around 2007, as Xero built its product in New Zealand, MYOB experienced a classic case of innovator’s dilemma. At the time, the company felt it needed to prioritise its base of about 1.2 million desktop clients. Now it is working hard to make up lost ground online.

“We’ve really shifted ourselves from what was a desktop-only company to primarily an online company now,” says Moss, pointing to a 46 per cent growth in online subscriptions in 2015. “I think in the second quarter, 78 per cent of our SME clients chose online solutions rather than desktop. We’ve now got 170,000 online customers and it’s growing pretty rapidly.”

Yet a powerful historical legacy remains: MYOB also still has 375,000 paying offline SME customers, with 56 per cent of its revenues coming from desktop users. In comparison, cloud provider Xero has signed up more than 600,000 subscribers globally, including more than 425,000 in Australia and New Zealand.

Moss says he is confident MYOB now has the right strategies and culture in place to complete its transformation to a serious online player. `We have many more product managers who have spent their entire career on online solutions and tools, marketing team members who are digital first, who think quite differently to the team we had four years ago. Internally, there’s been a very large cultural change.”

The challenge of incumbency

MYOB may now be focused on building its online presence, but its strategy continues to be influenced by its legacy as a desktop software company. “We’re trying to build solutions for clients who have got slightly different needs and desires,” explains Moss.

It’s a problem the new generation of online-only players simply don’t face. “If you’re a complete new entrant with no base, you can behave quite differently,” he says.

While competitors such as Xero invest all their resources in a single online offering, MYOB has developed both the AccountRight Live tool — which Moss says is designed largely for the desktop base — and the Essentials tools, focused on entrants coming into the market for the first time.

IVIYOB’s legacy continues to influence its products, even as the company seeks to move clients into the cloud. `Whilst we’ve moved all our tools online,” he says, “there are slight nuances in those just to recognise the fact that we’ve got different client segments and they want different things.”

Yet Moss believes that the company’s decision to focus exclusively on the Australian and New Zealand markets gives it an important competitive advantage. “There are some global players out there that are trying to build global platforms, arid they invest effectively across multiple jurisdictions,” he says. `We know from having been a global player a decade ago that it’s quite costly doing that.”

In contrast, over the past year MYOB devoted A$47 million to R&D spending on new features designed especially for the Australian and New Zealand markets. `We are very comfortable with our ANZ focus,” says Moss. “We believe in delivering solutions for them and we believe that we’ll compete very strongly in that space.”

Building an online ecosystem

Moss says that a key part of MYOB’s approach has been to build its software capabilities through strategic acquisitions, such as the purchase of BankLink in 2013. The aim is to expand the capabilities of MYOB’s products and better serve changing client needs through rapid access to innovative solutions.

“We want to understand how best to provide and service those needs — sometimes it’s an acquisition, sometimes it’s a partnership and sometimes we build it ourselves,” he explains.

Moss adds that partnerships have helped make MYOB’s products more attractive by creating a flexible ecosystem of integrated solutions that clients can adapt to very specific needs.

“There’s specific functionality that certain industries require, and we could never go out and build all of those very specific bespoke solutions,” he says. “So we try to create a platform that our clients can then access on the applications and have developers build on top of that to make it a seamless experience for our customers.”

That platform is also designed to give accountants a rich dashboard of client information for a higher level of service. “We try to help accountants to be advisers to their end customers, not just transaction processors and compliance agents,” says Moss.

Evolving at speed

Moss continues to map future scenarios and potential strategic responses in a rapidly evolving market.

“We look at our environment, we look at how things may change from a technology perspective, and we create a number of scenarios,” he says. `We’ll discuss and debate those. How likely are those to occur? What are the sorts of events that need to occur to create that end point? How can we shape those going forward?”

In one recent exercise, Moss and his team asked themselves what would happen if a new player adopted a “freemium” model — giving away accounting software free of charge.

“You have to think about how things will look in five or 10 years’ time. Will your own industry exist? There’s probably a lot more future thinking required now than in the past, just because of the sheer breadth of potential distribution.

Reference: Extracted from “In The Black” Magazine_July 2016_Article by John Moss