Tech Brew Ride Home - (Portfolio Profile) Cognitive Talent Solutions

Episode Date: July 31, 2022

Check out Cognitive Talent Solutions here, or get in touch with me to put you in touch with them. And if you'd like to invest in CTS, subscribe and invest to the Ride Home Fund by August 30th here. Learn more about your ad choices. Visit megaphone.fm/adchoices

On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to another portfolio profile episode of the TechMeme Ride Home podcast. We're going to talk to another exciting company that the Ride Home Fund that the Mutant Podcast Army has invested in. Today we're going to talk to Cognitive Talent Solutions, which is a really fascinating sort of product in space.

And we're going to talk to Francisco Marin, who is the founder of CTS. Francisco, thanks for coming on the show. Hi, Brian. Really excited to be here today. Well, the easiest way to start is give me the two-minute sort of not elevator pitch, but just describe what CTS does and basically what this sort of, again, I'm mentioning this is an interesting space, what this sort of kind of product does. Sure. So CTS is a people analytics company based in Palo Alto. And we focus our activity on on organizational network analysis, also known as ONA. And ONA is a people analytics method that allows companies to analyze and visualize

the informal interactions that exist within the organization. We leverage active data sources like online surveys and passive data sources like Office 365 and Slack to understand the informal networks of interactions that exist within companies. And we can do things like identifying who are the informal leaders in the organization, identify organizational silos and bottlenecks, or monitor employees burn at risk. And we apply this across a variety of areas such as change

management, leadership development, and diversity and inclusion among other things. So, for example, when companies have to implement strategy change initiatives, they can position these informal leaders as early adopters and accelerate and increase strategy change adoption, you know, significant manner instead of having those informal leaders creating resistance against those changes. Another common use case is onboarding. So when new hires join the organization, especially in the context of hybrid work models, actually new hires that join in remote work models have 60% fewer interactions than new hires that join on site. So by positioning informal leaders, as bodies and mentors of those new hires,

you can shorten the time to productivity of those new hires. In other words, the time that they need to reach an optimal level of productivity, you can reduce their turnover risk and enhance their overall employee experience. Another common use case is leadership development. So actually two-thirds of high-performing employees are not recognized as informal leaders by their peers. So by considering both human and social capital metrics, when identifying high potential employees in leadership development programs, you can change the leadership development pipeline by up to 70%. That's all the work that we do with Fortune 500 companies across a variety of sectors,

such as real estate, security, and biotech, among others. So essentially what you're describing is a system for an organization to essentially take the temperature of its existing talent and human capital and have an understanding of how it actually functions. Like where communications go, where sales go, who are the leaders, who are the people that maybe are the laggards or whatever. But essentially, it gives you a dashboard or a map of what your team is actually like, I'm assuming at basically any size team. Well, the larger the better, but we've done projects with both small, medium, and large companies. And yeah, you're right.

As Rob Cross puts it, it acts as an X-ray technology that allows to see what's going on in the organization with an unprecedented level of detail. There was another thought leader that explained. It shows who is showing up in the organization. That's another way of looking at it. But there's really something deeper going on there. So so far, most of organizations have been assessing the performance of their employees almost exclusively based on the so-called human capital metrics. Things like, for example, educational background or hard and soft skills, or, for example, years of service.

And what we're proposing with organizational network analysis is to generate social capital metrics that are reflecting the informal interactions that you create in an organic way across the organization. For example, who you reach out to when you need technical or personal support, who you share information with, who inspires you inside the organization, or how are you collaborating organically across a variety of tools like Slack, office, 365, Jira, GitHub, or Jammar. So that combination of human social capital metrics is used to inform deficient making across a variety of areas in the organization. So it's essentially like on the one hand, like what we're describing is the ability to analyze the sort of the actual cultural structure of your team in ways that if you were an employee, you would know, well, of course, Sarah over there's a super high performer and Joe over there is, you know, he's probably burned out and he's struggling.

And so it gives you like tangible ways and actionable ways to see things that maybe it would almost be, you would have that knowledge informally. And even in management, maybe you wouldn't have it because it's all anecdotal. and maybe you wouldn't have access to that because you are in management. But it sort of makes that sort of knowledge of how your culture actually functions, sort of stops it from being opaque. Exactly. It sheds light on the informal reality of the organization with, especially now with the adoption of hybrid work models,

where part of the organization is working from home, it's really difficult for managers to understand and analyze. And obviously, when we talk about monitoring the digital footprint in tools like Office 365 and Jira or GitHub, data privacy is a top concern. So we are actually one of the few vendors in the industry that refuses to analyze the detailed footprint at individual level. So for example, when we use active data services like online surveys,

yeah, we can analyze the data at individual level because the employees provide the consent to participate in the survey, they can revoke it at any time, and they have access to the data protection officer to solve any questions that they have. But when we monitor the digital footprint of tools like Office 365, we use APIs that do not grant us access to the content of the communications,

and we only analyze the data at aggregate level, meaning at department level or team level, but not at individual level. But conversely, if you're not at individual level. Conversely, if I wanted to implement this at my organization, it is sort of a plug and play into your existing apps or environments where people are actually working. Like you're saying Jira, GitHub, Slack, whatever. If I wanted to implement this, it is sort of a turnkey sort of solution where it works with wherever I'm currently working.

Yes, yes. Different organizations work with different collaborative tools. But yeah, we plug both active and passive data services into our SaaS platform, which is called Cognitive Network Analysis. And this way we can analyze and visualize these informal networks of interactions, so we can provide a series of recommendations on specific interventions. You mentioned that you're one of the, in this industry, you're one of the folks that is trying to take the lead in terms of preserving privacy and things like that. Who would you describe as competitors in the space? How old is this space in terms of this is a product that provides a tool for management to understand their organizations? Well, that's an interesting question because the field of organizational network analysis,

I mean, you can find literature from 1993 from Harvard Business Review, for example. But it always remained kind of like in an academic environment. But over the last years, because of the progress in data visualization techniques and data analytics in general, there has been an increase in adoption in corporate environments based on all the latest reports from Mercer, already 44% of companies use ONA on a regular basis. The challenge is that many of these companies leverage open-source libraries that are very difficult to scale across the organization. So all the challenges that we solve is to help them move beyond a pilot and integrate this social capital metrics across the whole organization on a regular basis. What's your entrepreneurial story? What's your background?

Is this your first rodeo in terms of being a founder? Where did you get turned on to, I guess, this as a startup idea? Yeah. So, first of all, I come originally from Spain, from a city in the south of Spain called Cordoba. I used to work at IBM in Bratislava, Slovakia, along with the other two co-founders and with our CTO.

So my background is in project management and process improvement. I am a certified Lin-Six Sigma Black Belt, and I used to work at IBM as business analytics leader for the self-transactions support operations in Europe, Middle East and Africa. The leadership team at CTS consists of four people. So the Trico founders are Katerina Victor and myself. Katerina and Victor come from Slovakia. Katrina used to work as a team leader and as a Lin-Sissima Black Belt. Victor is a data scientist and Luca, our CTO, he has a background in both technical development and leadership.

So while working in this Fortune 500 company, we were exposed to the challenges that large organizations face when implementing large-scale changing statistics. And initially, we thought that the main challenge was that companies were struggling to anticipate which employees were more likely to live. That's why when we started CTS actually were focusing on predictive talent retention, applying predictive analytics to anticipate who was most likely to live and proactively work on mitigating that at risk. But as we scale the company, we realized that some of the issues were deeper

than that. And all the main challenges is that when companies were implementing these large-scale initiatives, the early adopters that they were identifying, sometimes they did not possess the informal influence needed to drive change adoption. So, for example, if you're implementing agile methodologies, it's very important we position as agile champions. If it's a cultural change, you may want to leverage these informal leaders as cultural ambassadors. If you're implementing the SAP, it would be the sub-super users. So these early adopters have different names in different initiatives, but the concept is the same in the end. If only 3% of informal leaders can influence up to 85% of the remaining population based on recent research

and increase change adoption or accelerates change adoption by up to 70%. But if you don't identify these informal leaders, the informal leaders still exist in the organization, and they can use their influence to create resistance against those changes you are trying to implement. And that's a challenge that many, many companies, especially large organizations, are facing on a regular basis, that they are not fully aware of it or they don't have the tools and resources to properly address it. How long have you been working on this? When did you take the leap into we're going to try to scale us out as a company ourselves? When did you get the sort of MVP together?

How many years has the team been working on this? So the company was founded in 2018, in August of 2018. So we've been with this for three, four years. And yeah, it's been really a very challenging journey. When you transition from a corporate to a startup environment, one of the first things you need to learn is how to deal with uncertainty on a regular basis. You don't have a fixed salary. You don't have any manual of instructions on how to scale up the company,

especially in our case. This is the first time we were founding a company, and we didn't have anybody in our network that had this type of experience. So first months were completely freestyle mode. And it's really challenging because you have to learn how to speak to clients, to partners, to investors. And I think one of the key challenges is how you make top talent gravitate around the company. And I consider myself lucky because I think we have assembled a great team of people.

We count with really seasoned professionals, for example, Diane Gerson, the former CHITO of IBM, who is currently a senior lecturer at Harvard Business School, or Francis Flynn, who is a professor of organizational behavior at Stanford University. So these people along with the early team members have really made a very significant difference. Angelo Del Priore, who is the partner at HB Tech Ventures, has helped us a lot. And actually got us in touch together as I remember. That's right, yes. So those are the people in the end really make a difference as you scale up the organization.

You have to partner with other people to make things happen because you realize you're very limited in many, many areas. Well, also, one of the things that I, when I talk to companies that are going to market in various markets is one thing, but going to market as cognitive talent solutions is clearly into the enterprise market. I imagine that you, you know, you were describing the team has backgrounds at IBM. So I would assume that you have some sort of a background and what that means. It's one thing to go out and find customers. It's another thing to go out and convert large enterprise customers.

So I'm just curious if you have any insights or best practices for going to market with something new, where it's not just getting one individual to sign up for a subscription to something. It's about trying to convince a large organization to, adopt something for hundreds or thousands of their team members. Is there sort of any philosophy that you have in terms of approaching the enterprise market? Yeah, we believe that organic interactions are always way more effective. And for example, a key part of our strategy has been to partner with consulting firms and IT platforms to gain greater access to key stakeholders.

The market is super saturated. And I mean, I don't disclose anything new when I say that most of us receive every day multiple emails or call calls or messages on LinkedIn. So what people really are looking for in the end is genuine thought leadership and, you know, working with people that they can trust and their respect. And in that regard, sometimes we have companies that proactively reach out to us because we have written an article or we have a peer in some event talking about ONA. But it's really a very educational process. It's a very educational sale.

So we really focus a lot on spreading the word about the benefits of ONA, educating the market, and partnering with top leaders that can explain this. to our clients in a way that they can understand it. And we do a lot of work with HR stakeholders, but also with non-HHHR stakeholders, people in the IT department, in the finance department. And I think that's a recurring trend in people analytics where step by step fewer and fewer projects take place in the HR space and more and more projects

are taking place in other parts of the organization. But I would say some of the main lessons learned, for us was that first of all, we need to identify the business need that we are addressing for each organization specifically. So when working with Fortune 500 companies, each company is its own universe and they have different needs. For example, we were working with Fortune 500 in the biotech space and their focus was shortening the time to productivity of new hires in the context of adopting in hybrid work models. So we have to explore this particular use case,

explain to them how ONA can create value in this context. And then it's critical to get access to an executive sponsor that has access to budget, but also believes in this initiative. Because the cycle time in the B2B space in general is really long. It can take anywhere from six to 18 months. So unless you work with somebody that is really motivated and somebody that genuinely believes in the benefits of this technology, it's difficult to effectively navigate the whole process of onboarding of $4,500 company.

A few questions here that just to broader things that maybe you might have insights to beginning with, you mentioned that one of the use cases that CTS can provide for clients is managing things like remote work or managing things like specifically right now. now returning to the office and, you know, sort of like that, again, the sort of culture clash or like the sort of deciding, you know, if teams can mesh together in various contexts. From what you've seen with the clients, you're servicing right now, and I'm going to reference, I don't know that I have these statistics right, but I saw a story recently, and might even have done it on the show, about how, you know, in tech circles or in like, let's say,

coastal cities and hubs like that, maybe the return to work is 40 to 60% return to the office, whereas in other places it might be as high as 90. What I'm trying to sort of poke towards here is what are you seeing in terms of the adoption of remote, the adoption of hybrid, or the sort of charge to fully return to the office generally? Yeah, well, I think, as you have pointed, it's not really a homogeneous process. So different companies are returning to the office at different speeds and in different ways. But definitely, this is a top priority for many companies out there. And the way we help companies manage the return to the office in a more effective and efficient way is by shedding light.

on the internal collaboration dynamics, and comparing those internal collaboration dynamics between remote teams and on-site teams. This is critical because you need to understand, for example, how the response time varies between both setups, how the burnout risk varies. While the interesting things we have observed is that when people work from home,

they tend to work a higher number of hours outside of working hours. And even if you don't do a lot of transactional work outside of working hours, the fact that you are paying attention to the phone or to the laptop because you are waiting for an email to come, that prevents you from disconnecting from work. That's created this kind of like always-own mentality that has a very serious impact at psychological level on employees. a main contributor to burn out risk.

So companies need to be aware of these dynamics and need to have objective data that can inform mitigation plans and mitigation actions when needed. But if you don't have visibility on those internal collaboration dynamics of people that are working from home, it's really difficult to improve the situation because you cannot improve anything you cannot measure. So that's part of the work we're doing with companies. Then there are some companies that have a focus on leadership development, diversity and inclusion, that return to the office is umbrella use case that cover many of these other use cases. In the data, are you seeing that they're, because what you're trying to provide companies is like,

this is the most efficient or effective way to operate and here's the numbers that prove this or that. Is there, given the three options, remote hybrid or back to the office, is there one that your data shows is better? Or is it, as you said, it's very case-by-case sort of company-by-company-specific? Well, an interesting thing we are observing is that younger employees prefer to work more time from the office, whereas all their employees are more comfortable working from home. I've seen stories recently that have said similar things that like the youngest employees are hungry to return to the office. And that makes sense to me because it is, I mean, especially early in your career, like the ability to network and the ability to get guidance and education and like sort of mentoring and training.

I would feel like that that's harder remote. Do you see that? Yeah. Exactly. Yes, yes. We see that. But ultimately, what we focus is on the informal interactions that are created when working remotely or from the office. And what we notice, for example, is that when people work from home, it is more likely that the organization will have a series of organizational silos and bottlenecks where you have maybe a group of people that don't interact with each other, but don't interact with.

with the rest of the organization, and the potential to leverage AI power technology to mitigate this situation is really amazing. For example, one of the things we do with our implementation is that we can identify these organizations of silos and bottlenecks. We can analyze their composition, and we can determine based on artificial intelligence

who are the people that should be connected between the silos to mitigate their existence. And this introduction can be made based on peer introduction technology in a way that the algorithm will automatically introduce the two people via email and schedule a meeting base on their availability. So the combination of organizational network analysis and AI-powered algorithms is really powerful. But ultimately also the value of ONA, it's in its complementarity when combined with existing processes.

So when we have a system, for example, to identify high potential employees or to for example, identify early change adopters. The goal is not to replace the way that organizations are operating at the moment, but to provide additional data points to support those decision-making processes. Well, and to that end, as you're describing, you just provide the data and it's up to companies to act on that data in the way that is most efficacious for them. Let me give you just one quick example of something that I've always wondered, which is there's a team that's siloed as you describe it or a bottleneck in the organization, but they're very high functioning, very high performing.

Based on the data that you've seen, based on experiences of your clients, is it, you almost want to say, well, if it's not broke, don't fix it. right, except for the fact that that high-performing team that maybe is bringing in the best sales or doing the best development or whatever, if they're sort of breaking your overall organization, is that a good thing? So I guess my overall question is, based on your experiences, if you have a team that is insular but functional, is it better to try to bring them into your overall organization so that maybe they can spread their ideas that are successful? Or is it better to just leave them alone and whatever works for them works and just let it happen?

So it all depends on the context, right? So there are some situations where teams need to be insulated. For example, if there are teams that are working with highly confidential information and you really don't want those people to interact with anybody else across the organization or, yeah, It needs to be put into a context, right? But I'm a big believer in observing the organic collaboration dynamics that exists within the organization and use them to your advantage. So if you highlight a person that has been for a short period of time in the organization, that doesn't have a formal leadership role, however, has been able to develop in a short period of time, a wide network across the organization. in a way that is in the top 20% of most influential people in the organization,

this is something that you should notice and you should give this person the tools and resources to amplify that impact that the person can have in the company. And that's something, unfortunately, that it's not visible to top management, especially in very large organizations. And especially with young people that are eager to, to make an impact. If you don't spot these top talents early enough and give them the tools and resources they need, they end up living the organization. And that's that's unfortunate. Also, because we are touching here different use cases and it can become a little bit technical.

But I want to share what really excites me about networks and the reason why I'm working with this area is because I believe the society is becoming increasing more. interconnected and complex. And networks provide the most powerful framework to understand and manage this increasingly interconnected and complex environments. And organizational network analysis, it's the application of this thinking

to human resources and change management. But the long-term implications are much broader. For example, I'm sure you have heard about decentralized autonomous organizations on the blockchain and the alternative governance model. One of the main challenges that these type of organizations are facing is the problems when scaling up. How do you somehow replicate traditional decision-making processes in large multinationals to a setup where you have no hierarchy? And I believe that the integration of social capital metrics in smart contracts holds the key to help these decentralized autonomous organizations.

scale up. So I really want to use networks to, on the one hand, help large centralized organizations behave more like startups, behaving a more decentralized and agile way, and at the same time, start creating that infrastructure for the future of work that is to come. That's really what exacts me about networks. Well, and that's what excites me about this and why we invest it. I mean, it It reminds me of like Taylorism, which has a negative connotation sometimes, but Taylorism, the science of figuring out how tasks in like a factory environment would be more efficient and things like that.

And in the sort of modern, everything's the information space now. Everything's sort of these large organizations of people working together, where it's like, it's hard to find the inefficiencies when it's not someone. putting a widget on a thing that's going down an assembly line, but it's people on Slack. It's people going to meetings and having these interactions. It's harder to quantify where the inefficiencies are. This is why it's so exciting to me that this seems like a modern solution to that problem. Can I give you one more than I've always been curious about and see what you guys have

seen that maybe people listening could use as an actionable insight? When I talk for the internet history podcast and things like that about companies where, I'm going to use a specific example, actually. Every time Apple has a new product, with the iPhone, all of a sudden, everyone knew something was happening, but they didn't know what it was, and then all of a sudden people would disappear because they were grabbing all the A players and bringing them to the secret team and being like, And so I did an episode not too long ago with somebody at Apple that was like, I knew it was happening and no one was picking me.

And then one day I got the call and I went into the meeting. And I finally got picked to go to the iPhone team and I knew I was one of the A players. If you're an organization, obviously you want to identify the A team. You want to identify your best performers, your most connected, you want to avoid the bottlenecks, all that stuff. But not everyone's on the A team. So how do you manage like that sort of identifying of who is A team, B, team, C team, and manage things like people that feel like they're not on the A team?

How do you manage their sort of morale? Do you know what I mean? Because it's a whole wide organization and even the C team players need to be motivated and need to feel like that they're doing good work and that there's a future for them and excitement and stuff like that. Yeah, I love that you brought up Apple and steep jobs with regards to this topic because I think one of the things that differentiated Steve Jobs in this, basically in his own words, is that even when Apple was already at a late stage, he still ran the company as a startup in the regard

that he had only a person in charge of each of the big departments. And he basically hired a bunch of bright people and let them manage themselves and organize themselves. And great things happen when you give people collaborative freedom. When startups start their journey, there is a lot of collaborative freedom. You have basically a bunch of people that organically want to work with each other. So you have the freedom to work with whom you want on what you want. That collaborative freedom is lost as the companies scale up their operations. In the moment you have even 25, 50, 100 employees, you start implementing managerial layers

and already is not about working with who you want or what you want, but working with whom you are taught on what you are taught. And to the extent that there is a gap between your organic interactions and, you and the work that you are assigned, then that impacts this engagement. And that's also, I believe that's the key really to startups, productivity and innovation compared to large multinationals. And that has led to the situation that we have nowadays where many multinationals increasingly depend on acquiring startups to innovate.

And it's really just because when multinationals have, have such a large side, they don't have the structure needed to provide their employees with the collaborative freedom they need to work in an effective and efficient manner. So going back to your question, how do you identify these A players and how you handle the other people? First of all, it's important to define the concept of a player. An A player has to be somebody that is recognized as an informal leader by the whole organization. An A player cannot be exclusively defined by top management based on some agreed criteria.

And this goes back to the topic of hiding for cultural diversity or hiding for cultural fit. right if you hire people with a specific setup of values and behaviors you're not really achieving that diversity of thought and and diversity of behavior in the organization and this is critical as well to achieve organizational effectiveness and efficiency you need to have people with very different profiles and let them interact organically and now once you observe what's going on in the organization Once you see, well, these guys, independently of the role that they have, independently of the time that they have spent in the organization, they are recognized as informal leaders by their peers. Now let's have a discussion on what to do with those guys. Are we going to put them in a leadership development program? Are we going to position them as Italy adopters of changes?

Are we going to basically give them the tools and resources that they need to to amplify that impact that I was talking about earlier? And the people that are disconnected from the organization, they can leverage from additional exposure to these informal leaders. So, for example, if you have a guy that is working in a completely isolated way, you see that it's working remotely, that doesn't have any interactions across the organization. Connect those people with informal leaders. But make sure the disconnections are taking place because in the context of remote work, we can have people completely isolated. and nobody notices at all. And that's the challenge of the adoption of hybrid work environment,

something we're trying to mitigate through technology at the moment. Yeah, I mean, to sort of bring this to a close, like, again, this is why I'm so excited about what you're doing. By the way, we wrote the biggest check we've ever written to CTS because we have so much conviction what you're doing. And that conviction is that already, already in a modern workforce, understanding how teams and organizations and culture works is so important because it is now all people, not all, but a lot of people behind screens

and interacting and et cetera, et cetera. But especially now in these post-COVID times and this hybrid work environment, and it is even more valuable to have an understanding, a tangible, actionable understanding of the efficiency and the effectiveness of your human capital and things like that. So I'm as excited about the tools that you're providing to organizations and the insights that this sort of a product can offer. Let's wrap it up by saying, you know, there's thousands of people listening right now in organizations that could use this if they want to get in touch to learn more. It's CognitiveTalant Solutions.com, but if there's any other way to get in touch,

let me know about that. But then also, if you haven't asked, even if people aren't in the market for this sort of thing, but if you haven't asked for helping CTS grow and evolve, please share it with us now. Sure. I mean, this was our story. If it resonated with you,

feel free to get in touch. We're always looking for introductions to potential client, partners and investors. We have an ongoing round. a seed round where we're raising up to $1 million at the $10 million pre-money valuation in a price equity round. We have already committed 300k and I'm really grateful for your participation leading the round through Right Home Fund. And yeah, always looking forward to connecting with people that believe in our mission. Our mission is unleashing the power of organizational networks

and anybody that feels identified with that please get in touch and let's identify opportunities to work together. And I should say, we probably can't talk too much about it, but some of your partners that you've recently started working with and are in the pipeline are very exciting and very big. So again, if you're out there and this sounds like a great sort of tool for your organization, get in touch and Francisco and the team would love to work with you. Thanks for sharing all that with us. Thanks for giving us such insight in terms of like, you know, organizations and how they work in the modern way.

It's fantastic. And I couldn't be more proud to be involved in this. Thanks, Brian. Really happy to be here today.