Interesting article this morning in The Australian. This is one thing look for in a CEO - a clear strategic focus, leading to an ability to decide what to chase and what to forego.

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Link

Why TechnologyOne CEO Ed Chung turned down $500m

JARED LYNCH

TechnologyOne chief executive Ed Chung celebrates the company’s 25th anniversary as a listed company. He says being consistent and focused is the key to longevity in tech.

TechnologyOne chief executive Ed Chung turned down $500m from an investor to expand in a new category. Why? He says the answer reveals the secrets to the company’s success.

The Brisbane-based software giant is celebrating its 25th anniversary on the ASX this year. It floated in 1999 at $1 per share, just before the dotcom bust, which ripped through the tech sector like a wrecking ball, demolishing companies such as Davnet and PocketMail. Names long forgotten.

But TechnologyOne has grown into one of Australia’s biggest companies with a market value of $7.94bn — larger than AGL Energy ($7.09bn), Lendlease ($4.64bn) and Ansell ($4.5bn) — making software for local councils and higher education.

It is a company proud to have a narrow focus, with Mr Chung believing it is better to excel at a few things than be spread too thin and make a mess.

And this is why, when one of his long-term investors offered what appeared to be a golden opportunity, he turned him down.

“He goes ‘Ed, I’m going to give you half a billion dollars. I need you to get into manufacturing and take over SAP space because these companies I invest in are burning all their money’,” Mr Chung said.

“I said ‘We don’t know that space. We’d stuff it up. We’ve got to keep focused’. It’s a running joke. We laugh every time.”

But it’s paid off for investors. If they bought one share for $1 when TechnologyOne floated, it would have yielded $216 today on a total return basis.

Overall, the company has raised $208m in follow-on capital since its listing and paid out almost $756m in dividends. Its share price has also rocketed to $24.31, gaining almost 60 per cent in the past year alone.

While TechnologyOne has attracted headlines recently as part of its efforts to take on the consulting giants, vowing to slash the time it takes to implement its SaaS+ software to 30 days by the end of the decade (rivals currently take more than 2000 days), Mr Chung normally prefers to keep a low profile.

He believes the key to success is to be consistent and focused, aiming to deliver 10-15 per cent profit growth each year.

“If you talk to the analysts they say we should be growing at 15 to 20 per cent not 10 to 15. And we agree, but we have to get there in a carefully measured way.

“Last year, we actually grew at 16 per cent. This year we might grow a little bit faster and a little bit faster every year after that, and inch our way up to 20 per cent because you’ve got to stop and pause and see that your systems, your process, your culture, your people, are all still operating.

“There is a lot of pressure to grow but to go outside your sweet spot. And we’ve been outside our sweet spot a few times, and every time we went outside our sweet spot, we made some mistakes and we say ‘well let’s not do that again’.”

But there is still pressure to grow via acquisitions, particularly after TechnologyOne posted a $129.9m net profit last year.

An on Friday it snapped up Melbourne-based education software provider CourseLoop for an undisclosed sum.

The CourseLoop deal aims to solidify TechnologyOne’s position as an SaaS provider for higher education institutions in Australia, New Zealand and Britain. But Mr Chung is picky when it comes to takeovers and there are others he has walked away from.

“If you look at our company, under the covers, we’ve got 1300 staff, but we’ve got 16-17 products. So each product is not very big. Years ago, we looked at Elmo, it got sold. Elmo’s HR payroll or HCM (human capital management software) I think had 500-800 staff, our HR payroll team’s about 30.

“And then we looked at buying Tribal in the UK a year ago. It’s student management. They’ve got 800 staff, we’ve got 100.

“So that says a few things to me. We’ve got our enterprise solution, we’re very focused on it, but it’s actually not about adding more people. It’s about finding those people who have got the innovation, grit and the determination, because we compete with all the world’s biggest and best and win.”

Disc: Held in RL