From XU Magazine, 
Issue 32

Interview with Steve Vamos, CEO Xero

This article originated from the Xero blog. The XU Hub is an independent news and media platform - for Xero users, by Xero users. Any content, imagery and associated links below are directly from Xero and not produced by the XU Hub.
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XU: It seems like a lifetime ago since we interviewed you back in 2018. You’ve been in the role for 4 years now, how has that time been?

SV: It’s gone fast, but it also feels like a long time too. We live in very interesting times, let’s put it that way. Certainly when we spoke last, I wasn’t anticipating a global pandemic. I wasn’t anticipating months of working from home and looking at the world of Xero through a screen. That certainly has been interesting. And it doesn’t stop, does it? I mean, the world we’re living in today is different and evolving and uncertain. 

All through that, the thing I would say is that for a technology business, it is all about change. So whilst those things are concerning and challenging, being good at change and evolving constantly is really what we are all about. That’s what our DNA is all about. So as the CEO, if I look at what the last four years have been like? Well, I’d say first of all, the promise of what I loved about Xero before I joined, when I was working with Rod as an advisor, has been true and real. So what I expected and thought from the outside, having now spent four years here, it’s been the most awesome experience.

It comes down to the fundamentals. A company that is really grounded in purpose and has that sense of connection with our customers and partners. Making life better for people in small businesses and their advisors around the world is real. Getting that reinforcement from small business customers and accounting partners is what really makes you feel like you’re doing something meaningful.

I think the relationship we have with accountants and bookkeepers is very special at Xero and continues to be a real differentiator. The authenticity of it differentiates us…. the products and the love of our product. We get plenty of good feedback on what people want and expect from us, but that’s what you expect on a journey. The bar doesn’t drop, the bar rises. The need and the desire to meet customer expectations continues to be something that we’re really conscious of and drives us. 

And then the people and the culture. It’s been fantastic to be part of Xero and feel at home in a company like this. To have watched the way that our people and their people leaders have responded, and continue to respond, to everything going on. So it’s been a really special four years so far, and there’s plenty more to do. It’s exciting and challenging times.

XU: What do you think the next 4 years will look like and how will it be different from your time so far as CEO?

SV: It’s easy to have a long term view because our strategy is grounded in 2030. We started by looking at the size of the opportunity that we have. And as a part of that strategy process, doing a lot of work with customers around the world and their expectations. It’s really interesting. We’ve learned a lot about our business in doing that.

So it’s not a trivial thing. Really knowing what made you successful is important to not forget as you go forward. You’ve seen in the technology industry historically, there are examples where companies forgot, or took the wrong lesson from their success. I feel that that’s something you’ve got to really keep in mind. 

So strategically, there are three things that I think define, not the last four years alone, but really the journey ahead. 

One is that global adoption rates of cloud software in small businesses are still low. And by the way -  Australia, New Zealand and the UK are well ahead of many other countries around the world. We’ve done pretty good work looking at the developments of cloud accounting around the world at large. 

Canada’s fascinating. Canada is less than 10% penetrated. You know, in Canada we’re talking to banks now about digital connection bank feeds. So the UK is well ahead in the sense of opening that up and having expectations around the availability of customer data in accounting platforms.

Other countries like Australia and New Zealand are leading that way. We’ve got good access to that direct data. There are lots of opportunities elsewhere. 

So, yeah, number one is driving adoption. It is still really, really important. It is foundational. That’s really about the proposition at large of cloud accounting. The bank feeds, compliance, tax, payroll and the application ecosystem… all those things really maturing together. 

The second is getting our customers to do more in the cloud, whether they’re an accountant,  bookkeeper or a small business. So that’s been a big part of our strategy around expanding and acquisitions. Dealing with the biggest areas of concern for small business operators: cash flow, employee management and inventory stock management. We’ve acquired businesses in those spaces to enhance Xero’s offering. 

And the final piece is investing for the future. I talked about this at Xerocon, in terms of our ultimate aim and ambition, which is to be the most trusted, insightful small business platform. What does that mean? It means that by connecting accountants, bookkeepers and small businesses to the platform, doing the compliance, the system of record, and then building out from that into a whole range of applications and services, you’ve created data insight. The customer’s data then gives you an opportunity to leverage AI machine learning and other capabilities to create applications and services that go beyond doing a task today, and to providing predictive, proactive insights for the future. That’s really the journey that we’re on. 

Our challenge now is how do we carve up the investments we’re making across those elements? What creates our future vision and at the same time delivers those basic functions of cloud accounting into more markets around the world? The markets we’re in today, by the way, not markets we’re not in. There’s still plenty more to be done.

XU: As you’re now settling down into your role as CEO, what keeps driving you to grow the business and be excited about where it can go.

SV: I really do feel lucky because if you can find what you love doing and be okay at it, then that’s the ultimate. I pinch myself sometimes that I’ve had the opportunity, and have the opportunity, to do what I do. If I wasn’t the CEO of Xero, I would have been a teacher, or I’d love to be a coach. I always say that really being a CEO now is like being a head coach. I love doing that.

Whilst the things that get you down occasionally are the disconnects and the lack of clarity that you deal with quite a bit, but solving that and working with great people to overcome that is just awesome. And doing it with a company that’s making a difference to small business. For me, with 40 years in the tech industry, small business is the last frontier and small business deserves better. We are one of the few companies of global scale that can really make an impact there. So, you know, it’s awesome.

XU: If you weren’t with Xero, what would be your dream coach job?

SV: I’m an NFL fanatic. I’m going to watch a lot more British, European and global football too. I love it. I love the New York Jets, I’ve followed them since the early seventies. I just want the Jets to win a Super Bowl before I die. Bill Belichick, the coach of the Patriots, and the coaching philosophy of American football is phenomenal. We’re really good parallels. Great coaching in football, great coaching in sport. Some people don’t like the sporting analogies, but to me it’s about human endeavor to a common purpose. I think more of that should be brought to the world of business.

This is why I believe coaching small businesses is a massive growth opportunity. Coaching is not always rocket science. Coaching is just ‘How are you? What’s going on? Why are you doing what you’re doing? Are you happy here? What is most important to you?’. It’s about giving someone a person to talk to. 

XU: How do you go about building layers of infrastructure to manage a business with 5,000+ employees?

SV: I can articulate really simply and clearly the principles, I’ll take you through them. Although I’ll say again, simple things are often hard to do. So if I could wave a magic wand, then everything I’m about to say would be done at Xero. But the challenge is that just as you’re doing it, things are changing anyway. You’re growing and the environment is changing. But here’s what I would say. 

The first is really making sure you operate your business in a way that does not amplify fear. Change is constant, change is human, humans fear change. That’s the default reaction, until they understand it and they feel looked after through it. 

We’re all living in changing times. Our businesses are changing and we’re dealing with that change. Don’t do things that make people fearful. That means you’ve got to encourage them to speak their truth and when they tell you something you don’t like to hear, you embrace that and it’s a gift. Really encourage honest and open conversation. Create an environment where people can be themselves and not come to the office with a different face on. They are truly, genuinely able to be at home. So that’s the foundation. 

Change can only happen at the speed of words. If you create an environment that is fearful, where people don’t share or speak up and say, “You’re not doing that the way I do it, I reckon you should think about it in a different way”, they’ll be afraid that you’ll be upset if they raise anything. If you have that discussion and you listen, even if you decide to keep going as you were, that’s a big difference to not listening at all. Opening up the conversation and giving that feedback is key. That’s kind of the hub. 

Then there’s three things you’ve got to try and do, and none of them are easy. Pursue clarity. Clarity is about clear purpose and clear priorities. Prioritization is really tough. Most businesses do more things than they should. Most do. And there’s always a good reason for doing those things. It’s not choosing between a good idea and a bad idea. It’s really hard because you’re saying no to good ideas that good people share with you. I find that really hard.

I worked at Apple for a number of years at the time Steve Jobs came back, so I was there through three CEOs, Steve Jobs being the third. Steve Jobs greatest contribution to Apple was nothing to do with innovation. It was his courage to focus, to say no to good ideas and say “No. We’re doing those three things.” That’s something that always resonates. Today, I had conversations with my team about the importance of focus and prioritization. So clarity of why you’re doing what you’re doing and what’s most important is super important. 

Then the second one is ‘align’. You’ve got to align your money, your people and everything with that. That’s another really hard thing, because it could be that you’re going to have to take two people off of someone and give them to someone else, because the priorities have changed. And they have to get it and get why we’re doing this as a company. Unfortunately, they might not feel great about that, but they need to support it because they care about the company. 

So alignment is the big challenge, because it’s actually easy to be clear about priorities and purpose, but it’s not easy for everyone to then align with that; to make sure that every employee, every day is doing work that is aligned with what’s most important. That’s really hard. 

The third and final piece is ‘do it and review it’. It’s really regularly reviewing whether we’re doing the things we said we would do and are we doing them well enough? We have a tool at Xero where we rate our team to check if it’s safe, we having the right conversations, we’re clear, we’re aligned and we are reviewing in the most appropriate ways. We give ourselves a score on those things and there’s always work to be done. 

This year, I’ve been able to visit teams in the UK, the US and Canada. This has really helped as they give me plenty of good advice and input on how we could be clear about things, how we could be more aligned around things and how we could be more accountable around how we’re executing what we’re doing.

XU: Lots of businesses have used the last couple of years as a way to close down offices and save on cost. Xero seems to want to keep investing in office spaces, why is this and what is the benefit?

SV: It starts with a positive view of the future. We have a big future in this part of the world and London, Milton Keynes, Cape Town and now the offices in Manchester, they’re all part of that. I think that’s foundational. It’s also the experience we want to create for our people. It’s always been part of the Xero culture to create a positive environment in every aspect, the physical aspect as well.

It’ll be interesting to see. In the times we’re living in, everything is moving in pretty significant extremes. Every force has an equal and opposite force. I think that what will come out of the last few years will further normalize over time. I’m expecting that people will gravitate back to offices. I think we’ll never, ever lose what we’ve gained in terms of remote working and flexible working. We don’t want to lose that. But I do think that over time, not only will people want to come back more physically, but I think that just doing business is going to gradually get more comfortable again, person to person.

We’ve just gone through something that’s really big. If you said to me that two and a half years of the four years so far that I’ve been CEO, I would have done behind a screen in an apartment in Wellington, I would have said “No way, that’s impossible. Couldn’t do that”. But we found a way and fortunately we’re able to adapt pretty easily. But I think our office presence is going to be an important part of the future.

Human connection is really important. It’s intense working remotely. The kind of work you do obviously has a significant relevance. But if you’re someone who’s meeting with people all the time rather than maybe, you know, cutting code, I really think you go home from work a little bit less wrung out because you had those breaks where you’ve seen an actual person. And I know quite a few people who are complaining about their eyesight going south after looking at a screen all day. 

The office will still be an important part of our culture and we’ll continue to evolve that, whilst making sure people are on board. I’d expect there to be more physical contact as we get more comfortable with it. 

XU: What is Xero’s view on acquisitions as part of your growth and strengthening strategy? Especially as others are increasing their acquisitions within the marketplace.

SV: I think it starts with the customer, and the problem that you want to solve for the customer. There’s an assessment of whether or not you build it, whether you buy it or whether you partner. Obviously, in financial services there are plenty of partnerships that we have because we know we’re not going to build the payments engine. 

It’s really a thoughtful exercise that you go through to say, what’s the strategic priority of solving that customer problem? What’s the assessment of those three different ways of fulfilling it? How long will it take? What is the risk it involves? And then the economics doesn’t make sense. 

With acquisitions there’s other steps like, does a company have a culture that is compatible? Does a company have management that’s committed to our vision, not just theirs? So there’s a lot to that. We don’t have a strategy driven by M&A. We have a strategy that then defines where M&A can support what we aspire to achieve for our customers and our partners. 

So, with the acquisition of Waddle, that was about recognising that getting access to capital is a real challenge for small businesses. You’ve got invoice lending for big companies, but you don’t for small companies because there’s inadequate insight for the lender into the health of that business. We want to evolve that category over the next few years because we think that there’s potential there, and certainly the Waddle platform can help us fulfill that. 

Planday is about helping manage the complexity of having shift workers, managing their schedules and making sure that the data that’s feeding your payroll and compliance is accurate. We’re really excited about Planday and they also give us a little bit of an insight into new European markets that we’re not in today with the Xero accounting product. Planday also typically serves larger customers than Xero, as well as smaller, so it made a lot of sense to acquire. We’re excited about that. 

Then one that’s more specific to the basics of driving cloud accounting in Canada; we acquired TaxCycle. It’s the first time we’ve acquired a desktop company, which was  an interesting concept. TaxCycle has unparalleled expertise in tax and compliance, in annual tax and compliance in the Canadian market, and they’ve got great relationships with accountants and bookkeepers. Their product is loved. Whatever the cloud journey is in that particular application area, we know that the TaxCycle asset, capabilities and people we have there are going to help us a lot. So that is filling out one of our more basic elements of tax and compliance and cloud accounting.

The landscape of the small business, cloud is still in the early stages. I think it’s really important to reflect on that. Where we are with small business cloud accounting is kind of like the consumer internet 2007/8. To be fair, it’s probably post-iphone, right? But not a long way past the iphone, because really the cloud accounting platforms in a way are the foundation of creating this environment where you can build out a data view of a small business and therefore innovate on that. 

Xero is one of the born-in-the-cloud, original players. There’s still enormous opportunity, so I think it’s really important to remember how early we are in this journey and how much more there is to do. No one company is going to be able to do it all themselves, so great partnerships and acquisitions feed into the strategy.

XU: One of the things you touched on there was the planned acquisition access to larger customers. Is that something that is potentially on Xero’s roadmap?

SV: Yeah, we have got customers at the higher end. I think right now I would say that moving more deliberately into, let’s say mid-market, is not a priority for us. We have so many other things to do, but what we gained through Planday is in a sense Xero extending itself into that market segment, so that we can get to know it better. When or if we do extend ourselves into that area, we’ll have a much, much better base of understanding. There’s enough people at Xero today that have worked in enterprise and other segments to know that it’s a fundamentally different segment. 

With Planday, we’re excited about the no touch, low touch offering that they’re building and the opportunity then for us to really seamlessly connect the Planday functionality into Xero subscriptions as we go forward. That’s going to take time because, you know, I always say simple things are often hardest to do and making things simple is not easy. So there’s a bit of time before we see all that play out. But without that knowledge-base and experience in that particular time-attendance and scheduling space, it will be harder for us to do that.

XU’s Dave & Alex visit Steve at the Xero London office to speak in person

XU: The Xero App Store is currently going through some major changes, what do you think the long term positive impact of this will be for the apps and also accounting partners?

SV: Launching the App Store and the work that’s going on to migrate our app ecosystem to the App Store has been a really, really important exercise. I think the most important thing about all of this is that if we want to be successful in the future, it is about driving application usage in the small business segment. The more we can collaborate deliberately with our ecosystem, the better. And that’s what the App Store is really all about. 

The ecosystem has made a wonderful contribution to  Xero, and we are incredibly grateful for that.We continue to focus on better connecting small business customers to the right applications for their business. Treating that as a line of business is important because if you don’t, you won’t advance it. I hope it ultimately means more customers using more applications as a result of that, and more of our partners doing more business and hopefully being able to acquire those customers more efficiently.

XU: Within the Xero App Store at the moment, what do you see potentially coming up as some of the main verticals that are a good opportunity for people to come in and shake it up? Is there enough competition there?

SV: With a thousand applications, we’ve got pretty good coverage. I think the bigger question, I actually had a partner say to me recently was around selection: “I go to your site and you’re serving me up many, many applications, and you’re giving me the job of trying to figure out which one is right for me. The more you can help me with that, the better”. So it’s about helping our partners and customers select the app that is right for them and this is an area we are focused on in our App Store. 

XU: The main regions for Xero have always been Aus, NZ, US and UK. Do you see there ever being a main fifth region?

SV: If you look at the way we categorise the world, it’s probably more likely to be country than region. I love the fact that with Planday, we now have insights into Germany, a number of Scandinavian markets and obviously they are in the UK as well. I would hope that we’re in new markets in the future, but again, we’ve got a lot of work to do and opportunities to serve customers in the markets we’re currently in.

XU: 10-15 years ago Xero was the new kid on the block disrupting the market, what do you think the next major market changes would be that Xero needs to ensure a new kid on the block isn’t going to come along and beat them on?

SV: It’s a really, really good question and I get asked that a lot. I get asked that question by different stakeholders, even Xero people say to me, who’s the next disruptor? It’s a little bit flippant, but my answer is we are the disruptor! We are trying to change the way that the small business economy in the countries we operate in functions. It’s not just about Xero, it’s about banks, it’s about the application ecosystem, it’s about government.

The role of government in the digitization of the small business economy is really, really important. When you look at open banking, when you look at initiatives in Australia and New Zealand around payroll, single touch payroll, you look at MTD for ITSA, those are really significant. Partnering with government around those initiatives I think is another really big dimension.

With what I know about the complexity of wiring up the small business economy, I expect that there’ll be innovation around the edges. This is now playing out with a handful of global scale platform providers. The reason why I say we’re still the disruptor is that cloud accounting adoption around the world is still so low.

Then there’s using applications and services, which is even lower. If you look at the global scale e-commerce players, and in every vertical you look at the size of the customer base relative to the total addressable market, it’s still very early days. I think the innovation that will open up is that wave three that I talked about. The thing that got us where we were and where we are today was through open APIs. I think we have to go further and further in enabling innovation on our platform. 

Again, that’s a long term thing. This stuff is a lot easier to say than to do, but the more it can open up Xero for innovators to build applications and services around, that will be awesome. It gets better and better the more customers you have and the more applications those customers use. Then you’re creating an amazing environment for innovation, from whoever it might be that has a great idea that can leverage the customer’s data in Xero, and obviously has the customer’s permission to do that.

XU: One of the big gems that we’ve just talked about is that leap from desktop accounting to cloud accounting, and you touched on working closely with different government bodies. 

Do you see that as being one of the next big leaps in terms of more unified data passing through, and working with people like that?

SV: Government involvement isone of the key ingredients for the adoption of cloud software by small business. It’s really front and centre for us in Australia, New Zealand, the UK and increasingly in Canada  and the US. These markets are all at different points on their digital journey, but there’s a good connection between the Canadian government and tax authorities, and the UK and Australia.

I think it’s a really important element to the future. If you’re a small business operator, the back office is complex and it’s not where you want to spend your time. That’s why I really strongly believe that even in the area of accountants and bookkeepers, the notion of the advisor, coach or mentor for a small business operator is another industry that has real growth potential. Your kids get more coaching on a Saturday than a small business operator gets, and running a business is hard. So I do think that wiring up the back office requires more than an accounting platform. It requires great applications, great data feeds and as much as possible, streamlining those compliance aspects of running a business around payroll and tax that become a real headache if they’re not well connected.

XU: Is there one bit of advice that’s helped you in your career?

SV: I’ve learned so much from other people. That’s how I have learned pretty much everything. But if I had to, what would I pick as the one? I think the one thing that is always front of mind for me is the cliché of people being your greatest asset. To me, the thing that I never, ever fail to be amazed at is how that truth doesn’t play out enough in the world. I would say it’s all about the people. Technology doesn’t innovate, people innovate. Organizations don’t change, people change. It’s that human element. The importance of it and the need for obsession about it is a challenge for me.

It doesn’t matter who you are as a manager or a senior person in a large organization, or running a business, you will not spend the amount of time on it that it deserves. No matter how good you are, you just won’t. There will be other distractions, other things you think about that take you away from that. So be obsessive about the human element.  

Why leave it there?

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