The Competitive Advantage Goes To Conscious Leadership As We Invest In The Future of Work
Announcing our investment in Torch, taking on the $360 billion L&D market opportunity.
When I was a founder in 2013, the fact that you had an executive coach implied that you were an inadequate leader. Today, I know more founders and leaders who have a coach than not, and peer-mentoring communities like YPO and Chief are must-have tools in your repertoire of resources. Successful companies recognize that people are the key to high-performing, resilient, and healthy organizations.
This generation’s workforce needs greater help with professional development across the spectrum. Millennials and Gen Z are specifically demanding more from their employers to help them grow. And the stigma behind leadership coaching has now gone away.
Let’s also not forget that the current pandemic is causing many companies to scramble to find digital solutions to help maintain culture and foster learning and development (L&D) for this new norm of distributed teams.
Why is L&D important to employers?
The data is staggering. The World Economic Forum estimates that 50% of employees will need to be reskilled by 2025. They have also highlighted that AI/ML will impact existing roles in a huge way over the next five years — creating 97 million new jobs and disrupting 85 million jobs that will need to be repurposed. This burden is left for L&D teams to bear as they are tasked with the tall order of ensuring that the workforce today has the right skillset to help companies achieve their goals tomorrow. In addition to these hard skills, the importance of soft skills is becoming more clear. In a study conducted by leadership consulting firm DDI, it was found that 57% of employees in the U.S. have left at least one job to escape a bad manager, and the cost of replacing a departing employee can reach 213% of their annual salary. Coaching and mentorship can play a meaningful role in helping employees grow as individuals, become more effective managers, and adapt to the ever-changing conditions of work. But never before has coaching, mentorship, and learning been united into a single, full-stack enterprise platform. Enter Torch.
What is Torch and why did we invest?
Torch was founded in 2017 by Cameron Yarbrough and Keegan Walden, who met a decade prior while studying for their master’s degrees in counseling psychology. They observed that coaching was a fragmented industry of individual practitioners — each using their own bespoke tools, making it hard to scale and be affordable. In January 2020, Torch acquired Everwise, adding mentoring and digital learning software to its product stack.
Torch’s mission is to create conscious leaders driving intention, inspiration, and innovation to solve the biggest challenges of our time. This is precisely what we need across the private, public, and social sectors right now: more conscious leadership from more people across all levels of all sectors. Their mission — and the deserved traction they are seeing in the market with enterprise customers — is fully aligned with Obvious’ thesis around modern work. As the nature of how we work evolves, we envision a world with a more empowered, flexible, and fulfilled workforce. We believe that Torch will play a large part in helping to mold the future leaders of tomorrow.
Our thesis for where the L&D market is heading
In the evolution of SaaS enterprise software, we have seen tremendous innovation and progress over the past two decades with companies like Salesforce completely reimagining CRM software; Workday doing the same for the HR function; and Slack elevating our ability to collaborate together. It is our belief that the L&D function is next for disruption for the following reasons:
I. Enterprises are seeking consolidation and integration across fragmented tools.
My very first investment as an investor was in a company called Merkle. Today, Merkle is a full-service digital marketing agency. But back then in 2010, they were only a database CRM marketing agency, and it was almost the same exact challenge for marketing teams as we are seeing today for L&D buyers. If you were a Dell back then, you had one company in charge of your email marketing efforts. Then you had another handling your paid search, and another agency for SEO. Then you had a database marketing company storing your client info (e.g. Merkle). None of these agencies “talked” to each other, which made it challenging for customers to have a holistic view of their marketing performance.
The thesis for the investment was that Merkle had a competitive advantage since they owned the system of record, which was the core asset that served as the foundation in which mostly all marketing campaigns are built on. If Merkle were to build out their breadth of service offerings (i.e. SEO, paid search, email marketing, etc.), there was significant demand to consolidate from the customer’s perspective. This strategy ended up working out really well for Merkle since it was acquired by Dentsu for $1.6 billion. We are seeing the same dynamic in the L&D category today with a sea of point solutions that serve only a single purpose — might it be delivering online content, live coaching, mentorship, 360 reviews, leadership assessments, etc. Enterprises are paying for a myriad of tools but have no holistic view on what is working or not.
II. ROI as a main focus.
Would you ever continue to pay for something if you did not see any value in it? Likely not. Given the wave of new startups addressing L&D buyers and how competitive this space has gotten, enterprises have more and more options. We believe that over the next few years, the ability to prove ROI will separate the billion dollar companies in this space from others.
If we just take a simple example of C-level leadership coaching, a service that costs upwards of $100,000 for a 6-month engagement, how does one know it actually worked? There is really no feedback loop typically, and most of the surveys to measure customer satisfaction are self-reported. Upskilling platforms for digital learning has been a big area of investment recently. But with all this money spent on these classes, is there really a strong case that sales reps are generating more revenue and engineers are shipping product faster? As L&D spend increases within an organization, accountability will become more important and this will trickle down to the vendors that are providing these services. We believe analytics will be the core focus and companies will have to prove the ROI story using data and analytics.
III. Learning is a continuous loop.
Being better at our jobs, being a better manager and leader — this requires investment and we are the stewards of the level of investment that goes into this. It is almost analogous to building something new. It is impossible to believe that when you have an idea, the first version of what you have built is going to be perfect. It is an iterative process and most startups go through so many pivots before they get to any degree of success.
We believe that professional development should be viewed in the same way. We may have moments in our careers where we push ourselves to read a new book about how to be a better salesperson, take a completely new role because we want to broaden our scope, or spend $100,000 on executive coaching — but these are singular events in time, and we have to make a conscious effort to bring these learnings back to our desks; incorporate them into our day-to-day; and constantly strive to improve. I was at a Tony Robbins’ event earlier in my career and he said something that really stuck with me: “If you’re not growing, you’re dying.” At first this sounded pretty morbid, but I get it now. Bringing this back to our thesis for the L&D market, the best companies will be ones that grow with each employee that they serve while demonstrating a relentless pursuit for delivering a continuous feedback loop over a long horizon of time. After all, learning is not a one-time thing.
The good news is Torch is helping to solve for all the above. The team has worked hard to provide an integrated, customizable full-stack enterprise platform for L&D leaders to deliver, manage, and measure employee growth at scale and in a holistic way. Torch is rooted in behavioral science and powered by data-driven technology to support all types of teams — distributed, co-located, or hybrid.
And in line with Obvious’ mission, they are also helping to build more equitable workplaces, as they have assisted many HR teams to design the right approach to coaching and mentoring for diversity, equity, and inclusion (DEI). Torch has supported companies like LinkedIn, Reddit, Twitch, Zendesk, Okta, Gilead Sciences, T-Mobile, FICO, and this list is growing quickly.
We’re excited to welcome Torch to the Obvious family and support them on this journey!