Everything Changed in March of 2020

When COVID-19 cases first appeared in cities across the United States, the deadly disease alarmed both public officials and private citizens. Consequential decisions and unprecedented events quickly followed: Governors and mayors issued stay-at-home orders. Local news anchors added the terms “coronavirus,” “essential workers,” and “social distancing” to their vocabulary. Office buildings emptied of workers. Colleges and universities sent students home or told them not to return from spring break. Sports venues, concert halls, and convention centers issued cancellation notices in droves. The downtown districts, school campuses, and commerce hubs that had been bustling centers of society became ghost towns as businesses shuttered and went dark. 

What happened next has been well documented. Spreading infection, mounting fatalities, and the loss of livelihoods hit hard and exacted a terrible toll. Two years later, the pandemic continues to reshape daily life around the world. The loss of life, damage to physical and mental health, and other human costs have been enormous, and the accounting is far from complete. 

Along with the impact on public health, the pandemic’s effect on businesses, employment, and the overall economy has been a prominent concern for many.  This case explores how one company faced the dramatic disruption caused by COVID-19, took action as changing circumstances upended the business, and emerged to find a new set of challenges at the dawn of 2022.

A Terrible Tagline

Carousel Digital Signage is an industry leader in enterprise digital signage content management. It's a business built on the need to provide people with information in physical spaces. Digital signage is commonly seen in corporate offices, schools, hotels, and event centers, among other places. But what happens to a business like Carousel when all those places are suddenly empty?

“Our tagline was, ‘Communicate in places where people gather,’" reflects JJ Parker. "Obviously, that was a terrible tagline given the emerging environment,” he adds, acknowledging the grim irony — and new reality — his company faced in March of 2020. Almost no one was gathering in physical spaces, a change that happened seemingly overnight. 

“Carousel’s revenue dropped to nearly one fourth of what it was the previous month,” says Parker. “Not great timing given that the company took the leap of faith into the SaaS [1] model just a few months before,” explains the co-founder and CEO of Tightrope Media Systems, parent company of Carousel Digital Signage. 

Of course, at the time Parker could not have known how long the pandemic would last. But as lockdowns went into effect and millions of people set up home offices and study areas, the long-term future of the Carousel business came into question. If the primary goal of the product was to communicate in public spaces, but everyone was staying at home, what use was Carousel?

Evolution of the Digital Signage Industry

In the early 2000s, not long after Carousel Digital Signage was founded, the first flat-screen TVs became available. Flat-screens marked the beginning of the end for the old tube sets and provided a catalyst for the digital signage industry. Flat-screens were lighter and much easier to ship. At the same time, the screen sizes were larger and the units could hang on the wall like a picture. Large screens began appearing in corporate headquarters, university campuses, and hotel lobbies as a kind of high-tech status symbol.

Along with the proliferation of screens came a rush of new companies eager to claim a piece of the market. 

“For a while, digital signage was one of the most funded emerging technologies,” says Parker. “Software and hardware vendors were popping up left and right. It quickly became very fragmented. There were flat-panel manufacturers getting into the software business. There were software companies making hardware products.” 

As time passed and the market matured, many vendors who entered during the “gold rush” period pulled out of the market. According to Parker, events like the 2007-2009 recession further thinned the number of players, paving the way for today’s more settled environment where vendors operate in specific niches.

Generally, uses for digital signage fall into two major categories. “Digital out of Home” or DooH, is primarily used for advertising and includes billboards and retail applications. The second category is considered "informational" and consists of corporate communications, way-finding, and signage used to inform people in spaces. Carousel operates primarily in the informational signage segment. Informational signage is commonly found in corporate buildings, government centers, healthcare facilities, manufacturing plants, places of worship, malls, and on school campuses. 

Carousel Over the Years: From Appliance to SaaS

In the beginning, Carousel sold its product as a turnkey appliance. The unit consisted of a small Windows PC preloaded with a media player and the Carousel content management software. Carousel sold the software as a perpetual license. 

Carousel was the first web-based digital signage CMS, and one of the very early “web apps” when released in 1997. Back then, Carousel ran on the Windows NT platform using Internet Information Server 1.0, Visual Basic Script, and a Microsoft Access database. 

Over the next two decades, the team at Carousel updated the product architecture, making use of more modern tools, and eventually migrated to the Microsoft.Net platform and Microsoft SQL Server. Throughout these years, Carousel remained an on-premise, perpetual license product. 

But as the software industry evolved, companies offering an on-premise installation with a perpetual license were losing value in comparison to the cloud-based Software as a Service (SaaS) model. Carousel’s leadership team recognized the need for more profound change, and in 2018, they started planning a transition to a cloud-based SaaS model. They would encounter several challenges along the way.

John Reilly, Carousel’s vice president of operations, led the technical transition. The legacy software architecture provided each customer with their own server and copy of the CMS software. Modern SaaS software does not follow this “single tenant” model. Reilly’s team weighed the pros and cons of different approaches. The key question being, should they re-write the software as a multi-tenant model, or make the existing single-tenant version work in the cloud?

“Ultimately, we decided it was more important for us to get a solution rather than the technically best solution,” says Reilly. The team put the existing Carousel software in the cloud, spinning up a Windows Server for each customer on Amazon Web Services (AWS). 

“It turns out that’s the most expensive way to do it,” he chuckles, citing the Average Cost Per Subscription (ACPS). “But we made that trade-off because the speed of getting there was worth the cost, we feel, and we knew there were things we could do to drive that cost down in the future.”

Reilly notes other advantages of moving to the cloud, such as the opportunity to make product updates and customer support easier. No more custom instances of the software for each customer meant the company’s engineers could solve other problems. But mostly, he says, “We wanted to validate that our model would work, that people would buy it, that we could gain subscribers. And we wanted to do that as quickly as possible, before making the huge investment to restructure things.”

Navigating the COVID Years, Toward a New Way of Thinking

The timing of Carousel’s transition to SaaS — shortly before COVID hit — was far from ideal, to say the least. Fortunately, the business had enough cash reserves to keep its 30 employees working full time. The question was what to do during that time? 

A new reality quickly took shape in the world: People were working and studying from home. There was very little gathering going on, and public spaces were mostly empty. As the days and weeks of spring 2020 unfolded, it looked like these circumstances would last for a while. Maybe a long while. Business analysts even started to predict a fundamental shift towards remote work as the new, post-pandemic normal.

“We asked the entire company, ‘What does Carousel mean in a pandemic environment?’” says Reilly. “It was fascinating the amount of ideas that people were throwing around. Some of them were really wild. Some were mundane. But there was no shortage of creativity from the team.”

Reilly, Parker, and Eric Henry, the company’s president, invited input from everyone, and encouraged novel thinking about the business and the market. Conversations and brainstorming sessions, like so much else going on in the world, all happened via video calls and messaging apps. 

“The insight that happened was, people are still gathering. They’re absolutely still gathering in spaces, it's just the spaces have changed,” recalls Reilly. “They’re not necessarily physical environments anymore. They may be virtual.

“We were literally having the conversation in a Slack room as a gathered group,” continues Reilly. “So it was, ‘What if we changed the definition of space?’ And that spurred a bunch of different interesting things in April and May. We kind of said, ‘Okay, the world has changed. Let’s build a new one.’ And we decided to experiment.”

New product ideas quickly resulted from those experiments, most notably, a concept called Express Players. Reilly’s engineering team worked fast to implement the Express Players, which were built to allow customers to take the same content that Carousel software displayed on flat-screens dedicated to signage and deliver it to screensavers, websites, and Slack channels accessible on tablets, desktops, or other devices. Essentially, Express Players extended Carousel’s reach. Carousel customers could deliver content to their people, without being tethered to a particular physical location.

Looking back on that time period, Henry says, “I think that the value of signage has actually crystallized much more because of the pandemic. It’s actually helped us understand the story,” 

Collectively, a new way of thinking emerged. The central idea was that Carousel could be more than the term “digital signage” implied. From a broader perspective, Carousel could be seen as a “visual communication” company. 

Decoupling Carousel from the paradigm of “screens on the wall” changed how the company thought of itself. Going forward, Carousel wouldn’t simply sell signage, or even content management software; instead, they’d deliver visual communications to people wherever they happened to be. 

Henry draws a connection between this new way of thinking and the kind of higher-order goals organizations pursue, like employee engagement. “The employee base is largely disengaged according to all the Gartner research,” he says [2]. “So with Carousel, the question is, can we use digital signage and visual communications as part of a strategy to engage employees?”

In Henry’s view, content distributed via Carousel can build company culture, reinforce shared values, provide real-time training, and encourage goal achievement. 

“If they reinforce the things they want to be about, organizations can show people they’re a part of something,” he says.

In other environments, like K-12 schools, Henry posits, “I think there’s a tremendous value in the education space around presenting content on screens that helps people feel like they’re connected, that they see that there’s actually a future for them.” He envisions Carousel as a useful tool in diversity and inclusion efforts in this regard. 

Demonstrating this broader idea of Carousel’s capabilities and value to customers eventually emerged as an important strategic goal for the company as the pandemic continued into 2021.

Selling Carousel Digital Signage as SaaS

Carousel’s new Express Player features caught on with some early adopters, but the marketing and sales teams had trouble getting traction at first. In addition, the company was still in the process of learning how to sell Carousel Cloud as a SaaS offering. 

Just before the pandemic hit, Parker and Henry were in the process of bringing a seasoned SaaS sales leader, Chris Brama, into the organization. Assuming the role of vice president of sales, Brama set out to help Carousel change its overall sales process.

The pandemic prompted the company to shift away from relying on reseller channels and in-person trade shows. Search engine optimization (SEO), search engine marketing (SEM), and other online marketing techniques were better suited to the current environment. But the challenges didn’t end at lead generation. In addition to filling the funnel, Brama worked to instill SaaS principles into the Carousel's practices. 

“The customer journey in a SaaS model is from end to end,” he explains. “We are earning that customer’s business from the first email that we ever send, to the first call, and throughout that journey. You don’t just sell it once and you’re done. You’re going to have to earn that customer’s business for the next 12 months and make sure they renew.”

In the two years since he joined Carousel, Brama has grown the sales team by 200% and has implemented new processes for both pre- and post-sales efforts. Today, the Carousel business is on a good growth trajectory. It has maintained consistent 10% month-over-month subscription growth and become “cash” net positive after years of investment. The team has worked hard to maintain a 90% gross retention rate with an impressive 115% net retention rate [3].

Between the improvement in sales, the engineering team’s ingenuity, and the leadership team’s willingness to adapt the business model to new circumstances, Carousel is emerging from the pandemic in a good position. This is great news for a company that saw its place-based market go dark nearly overnight in March of 2020. But that doesn’t mean the company can coast. There are still challenges to address.

Going Forward: Carousel Digital Signage in 2022 and Beyond

Although not exactly “over,” the pandemic seems to have entered a new phase as spring of 2022 begins. Infections are down in the U.S., mask mandates are ending, and more in-person events and activities have resumed. People are returning to school campuses, public places, and office buildings. But that doesn’t mean things will go back to the way they were two years ago. 

Since 2020, some 50 million Americans left their offices to work remotely, and many are not eager to return. According to Pew Research Center, “Looking to the future, 60% of workers with jobs that can be done from home say when the coronavirus outbreak is over, if they have the choice, they’d like to work from home all or most of the time.”

What will this mean for a company like Carousel going forward? Having weathered the COVID storm and come out of the last two years better than might have been expected given the circumstances, the Carousel leadership team is looking to the future and considering what moves to make next. 

At this point in Carousel’s evolution, Parker, Henry, Reilly, and Brama have identified two important and interrelated issues they want to address: how to make the Carousel product more valuable and indispensable for customers, and how to demonstrate that value to existing and prospective customers.

➔ How Can Carousel Make the Tech as Sticky as Possible?

Carousel’s transition to a subscription-based SaaS model has been successful, but there’s no guarantee that success will last, especially if the product doesn’t evolve with customers’ changing needs in the current environment. 

“We’re not out of COVID times yet,” says Parker. But it’s clear to him that, “The way people work and attend school will forever be different. Will digital signage be a relevant and useful technology as businesses and schools change the way they operate?”

From a product development perspective, Henry phrases the question this way: “How do you make it sticky within an organization? If you have an ERP system, and you’re paying for it on a recurring revenue basis, there’s a lot of pain in moving away from Netsuite or Salesforce or whatever system you’re using, because it’s so integrated into your organization.”

In other words, what technology components, features, or functionality does Carousel need to offer in order to enhance the product’s value proposition, demonstrate ROI for customers, and become an integral part of every organization’s communication strategy?

The leadership team has ideas, of course. Henry says, “Our strength really is around scheduling of content, workflow, and content approvals. That’s what it comes down to. Content doesn’t have to be on a dedicated screen. It could be, being able to take a piece of content and decide where it goes. With scheduling, with content approval flows. Are there other ways that the value that we provide can be leveraged in an organization?”

Asked where he sees the industry heading in the future, Brama says, “I think it’s going to continue to shift away from the display and the devices that sit behind the display. I think it already is shifting to the content management vendors like Carousel, CMS partners, and IT device management tools like MDM (Mobile Device Management).

“I think ultimately it’s going to go even further and it’s going to be content,” he continues. “Right now there’s good margin, and being a CMS vendor is a good business to be in. There’s a lot of value that you can bring. But eventually everyone’s going to have a good CMS. Everyone’s going to have the ability to deliver very similar value. Where I think the differentiation is going to happen down the road is the ability to produce stellar content. Not just okay content, but world-class content. I think that’s the natural progression. It’s going to move there, and it’s going to move to integrations.”

Reilly agrees. “I believe pretty strongly that the future of this, the success of tools like ours across the industry is going to be in the integration. The interoperability. I think finding those stories where we could build these integrations to really move information in a pathway that gets it to your audience quickly, easily, with little effort, that’s where I want us to go.”

“Are there use cases and stories or other killer features that you could add that make it more cohesive?” ponders Henry. “Ultimately, I want somebody who’s in charge of employee engagement or communications within an organization to say, ‘Carousel is integral to my visual communication strategy.’ What does Carousel need in order to be that?”

➔ What’s the Business Case that Will Convince the Late Majority?

Carousel’s SaaS product is resonating with early adopters and technology enthusiasts. This is a positive sign, but company leaders believe the future lies with the “late majority” of more conservative companies and buyers.

“Our cloud business is really kind of like a startup. It’s a new product,” says Brama. “We’re winning early adopters and that’s good, but in order to actually capture market majority, we need the more mature buyers, the late adopters. They’re buying with different criteria in mind. They need to see a business case, and they’re looking for really specific outcomes; they don’t just buy things because they think they’re cool. And the way that they buy is different. They’re going to do their research. They’re going to compare you against easily three other vendors. You’re never the only horse in the race.”

“The value proposition of digital signage in the past was that it was flashy and new and interesting and novel. That is absolutely not the case anymore,” says Henry. “For the customer, it’s like, ‘This thing better have some sort of return, some clear value, or why would I even spend my time doing this?’”

In other situations, Carousel’s biggest competitor is the status quo. “We actually compete more against a customer opting do nothing at all versus us losing to a competitor,” says Henry, “because they've got to see clearly that there’s actually a value to what they’re doing with us.”

Both Henry and Brama see a need for Carousel to develop a strong business case to convince potential and existing customers. Competitive landscape, value proposition, ROI, security concerns, integration strategies, and how to change perception of the product from screen/hardware based to something more could all be considered in developing such an argument. 

Carousel’s executive team agrees that developing such a business case, along with changes to make the product “sticky,” will be key to the company’s continued success in 2022. They look forward to seeing your ideas and recommendations.

Your Task

For the competition, you should imagine that you and your colleagues have recently joined Carousel as team members. Given your background in business technology and management information systems, your group has been asked to bring a fresh perspective to the business in the wake of the pandemic. 

Your recommendations should address the leadership team's key concerns (outlined above): 

• How Can Carousel Make the Tech as Sticky as Possible? What technology components, features, or functionality does Carousel need to make the product integral to a customer's visual communication strategy?

• What’s the Business Case that Will Convince the Late Majority? Put yourself in the shoes of the Carousel sales and marketing team. Articulate how the Carousel product — with your suggested improvements — adds value to organizations that don't fit the "early adopter" model.

As you consider these questions, keep in mind that Carousel is a small organization of just over 30 people. This means that they can be nimble, but they lack some of the resources of a bigger organization. As a point of reference, Carousel's latest integration with Microsoft PowerBI cost about $100,000 total to implement. 

A sample P&L statement has been provided (below), but note that the subscription model means that Carousel has a tremendous amount of money in deferred revenue that does not show up on the P&L. So the revenue, by cash, is significantly understated. You've been told to limit any initial investment to $1.2 million, and to focus on solutions that provide short-term returns in order to help the business become revenue positive in the next 12 months. If your plan expects enough short term returns, you can plan for more investment in future years.  

Carousel's culture is very open to good ideas that come from anyone in the company; however, you will need to convince your immediate supervisors of your proposal's merits first (in the prelim round). If they like your ideas, they will recommend that you be invited to present to JJ Parker and the senior leadership team (in the final round). 

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