A year ago, entrepreneur Keith Krach decided to develop a forum for sharing what he's learned about turning businesses into extraordinary successes. The effort would focus on "developing the next generation of transformational leaders," he said.
The co-founder of Ariba, the world's largest business-to-business trading platform, and former chairman and CEO of e-signature company DocuSign, however, didn't plan to go it alone. He launched the Virtual Mentor Network, recruiting world-class leaders to pay it forward by getting them to talk about their transformational leader style.
"The challenge is that there are not enough great mentors to go around. So, taking world-class mentors and capturing them on video talking about their fears, their failures and their flaws is the best way to learn," Krach said. "And creating a two-sided network of mentors and mentees follows the same strategy we used at Ariba and DocuSign."
In this third and final part of our extended interview, Krach talks about the period after he left Ariba. His transformational leadership style is on full display in his role as chairman of the board of trustees at his alma mater, Purdue University, and in the steps he took to put DocuSign on a path to becoming a category killer.
Editor's note: Krach's early years at General Motors and in Silicon Valley are chronicled in part one. You can find his seven-ingredient recipe for building one of the fastest-growing startups of its time in part two.
Bringing a transformational leadership style to higher ed
After Ariba, you served as the international president of the Sigma Chi fraternity at Purdue University and then got summoned for a bigger job.
Keith Krach: As I was finishing up, I got a call from the chief of staff of the governor of Indiana. He said, 'Come on out to Indiana the next time you're in the Midwest. The governor would like to put you on the board of trustees for Purdue University.' I said I'd be honored to be on the board of trustees. 'Who's the governor of Indiana?'
It was Mitch Daniels, who was former director of the OMB [Office of Management and Budget]. He had also been the youngest EVP [executive vice president] of Eli Lilly. I met him, and I joined the board. And then, a couple years later, they elected me to chairman. At the time, Purdue had a great president; her name was France Córdova. She's now the director of National Science Foundation that does about 50% of the research funding for all universities.
When it came time for Ms. Córdova to move on, I hired Mitch Daniels, who was then the governor of Indiana, to be the next president of the university. We did a lot to reform higher education. First, we froze tuition. There has been no increase in tuition at Purdue for the last seven years. I think this is vital. One of the biggest issues for the U.S. economy is the fact that we've got $1.7 trillion in student debt weighing young people down.
Then, we bought Kaplan and created Purdue University Global, and we put everything online. This is a national treasure and a platform for retraining the workforce. Purdue is the largest engineering school in the country, with 70,000 students.
What kind of time commitment did the job require?
Krach: I was probably spending 50% of my time doing that. I started sitting on a few boards. I actually went back to Benchmark [Capital Partners, the venture capital that backed Ariba], this time as CEO in residence. Then, in 2009, I met some of the team at DocuSign. One of the VCs [venture capitals] who had invested in it was our second customer at Ariba when he was the CIO of Cisco. He said, 'Hey, let's have a cup of coffee.' I told him I really wasn't interested in going back to being a CEO. He said, 'No, no, no. It's not about that. I just want to show it to you.'
I looked at DocuSign, and I thought we could build a network around it just like we did at Ariba, because the Ariba network was buyers and suppliers. Today, $1.7 trillion in commerce goes through Ariba on an annual basis -- more than Amazon, eBay and Alibaba combined.
Hard to believe.
Krach: $1.7 trillion on an annual basis.
Transformational leadership style at DocuSign: The network effect
And you thought, well, we can repeat this with DocuSign?
Krach: I thought it was another perfect opportunity for category creation. We created B2B e-commerce. We could use that same network effect at DocuSign, because the value proposition would be high. When you're building a network, you have three objectives:
- Maximize the number of nodes -- that is, the business and consumer members.
- Reduce the friction between the nodes.
- Add value to each node.
I applied the golden rule again and focused first on business customers, because they have the gold, even though we were doing a lot of consumer stuff. I thought the viral effect would help us grow both sides of the business. Then, to reduce friction, we improved ease of use and we built trust. We built trust by creating the xDTM standard, which quantitatively measures trust in a digital transaction. This was similar to what we did at Ariba when we created the cXML industry standard for transactions.
Krach: That's the standard for digital transaction management. This is the category we created. We went way beyond regular e-signature, and we also built a 250-person advisory board that included the former CEO of General Motors, former CEO of McDonald's and former CEO of Adobe.
Transformational leadership style: Turning competitors into partners
Just as you did at Ariba, you formed an advisory board of your customers.
Krach: Yes. We followed that play to a tee and then some. One of the big twists we added was that we held off going public at DocuSign. When DocuSign went public, it had roughly 10 times the revenue that Ariba had when that company went public. Our reason was not only to maintain stealth and not have the distraction of being a public company, but we could also strategically use our equity financing strategy for our partner strategy.
We created four-dimensional partnerships that combined being a big enterprise customer, doing product integrations, helping us with go-to-market and equity investment. We did that with the most powerful technology companies in the world who could have turned into competitors: Microsoft, Google, Salesforce, SAP. We did it with Visa, FedEx, Intel, Dell, NTT, Telstra, the country of Singapore -- all equity investors.
You gave your potential competitors a cut of your business so they would have an interest in watching you grow.
Krach: We turned potential competitors into partners. They're all great partners for us now. We're Salesforce's No. 1 partner. We were Microsoft's partner of the year for Office. We're SAP's biggest partner. Now, understand, I'm the former chairman and CEO. I stepped down Jan. 1, after 10 years. So, those were key parts of our playbook -- creating our advisory board and creating a category.
What's in a name?
What was different about the development of DocuSign from Ariba?
Krach: Now, one thing that we had an issue with at DocuSign was the name. At Ariba, the name didn't really mean anything, so we could do anything we wanted with it. DocuSign has intrinsic meaning. So, we decided to create the category, digital transaction management, and grow the category.
Now, we call it System of Agreement. We also decided to turn the company name into a verb. And I think that's another mission we accomplished. Today, people say, 'I'll just DocuSign it.'
I remember the early days at DocuSign, people would say, 'Is this legal? It's so easy.' I'd say, 'Well, it's not illegal.' I was just kidding. Then, you'd run into people who were avid users, 'Oh my God, I love it,' they would say. Everybody just loves DocuSign. You talk to a real estate agent, and they say, 'You've changed my life.'
Sometimes, you run into someone who, for whatever reason, doesn't accept it -- they think it's illegal or something. But our customers would get angry if they couldn't use us. I told the company, 'Imagine this for a software product. Imagine that people not only love it, they get mad when they can't use it.' I don't know if that's a feature, a function or benefit, but that characteristic alone, any software company would invest $2 billion in R&D to get that.
Today, DocuSign does document assembly, preparation, the management of it, intelligence.
So, I heard your favorite quote was, 'Make no little plans. They have no magic to stir men's souls.' Can you explain what that means to you?
Krach: That came from Daniel Burnham, the architect who planned the World Columbian Exhibition in Chicago in 1893. He said, 'Make no little plans. They have no magic to stir men's blood, or men's soul, and probably, therefore, will not be realized. Make big plans, and be high, and hope and work.'
To me, setting those big ambitious goals -- or what I like to call the 'moonshot goals' -- get everybody inspired. They're enthusiastic, you can mobilize them, you can energize them, you can get them to do things that they never thought were possible. And even if you fall a little bit short, you still get escape velocity. I really believe in that.
I guess that's the transformational leader in me. Challenging the status quo and energizing and mobilizing a high-performance team to achieve a noble mission that will leave a profound and far-reaching impact.
My mom always used to say, 'People can deny your logic, but they can't deny your enthusiasm.' It's all about inspiring a shared vision.
Definition: What is transformational leadership?
Chief data officer talks importance of transformational leadership
Explore the radical candor management technique