Keeping the Internet Trustworthy: An Interview with Neustar CEO Lisa Hook
This interview with Neustar President and CEO Lisa Hook appeared earlier this week on strategy-business.com. The interview was conducted by Chrisie Wendin, a director and technology partner with PwC's Thought Leadership Institute.
When the Internet was first established in the late 1960s, as a group of interconnected university computers exchanging software files, there wasn’t much need for authentication. In the small, U.S. Department of Defense–funded community of programmers and technical administrators, everyone knew everyone else. But as the network expanded exponentially, especially after the browser was introduced in the early 1990s, authentication became critical. Today, whenever a message is sent, a transaction is posted, or a website is registered, the identities of the users involved must be established. On a purely technical level, there must be a reasonable level of trust that a message aimed at a particular computer or device will reach its chosen destination. Like everything else about the Internet, the infrastructure for ensuring that this happens evolved in a decentralized fashion, and it is now reaching new levels of sophistication and complexity as billions of devices with IP addresses come on line around the world.
Lisa Hook is right in the middle of this seemingly self-organizing system — and is one of the key people moving it forward, one step ahead of global demand. She is the president and CEO of Neustar, a company based in Sterling, Va., that provides analytics and certification for messages on the Internet, drawing on its capability for building and managing massive communications-oriented data sets. Founded in 1998, Neustar acts as an invisible hand guiding calls, texts, and Internet queries for approximately 30 percent of the Web traffic around the world, including all text messages within the United States, and the U.S. registries that track who holds which phone numbers. The company’s primary customers are the large enterprises and agencies that maintain the sites where traffic congregates. But that’s only a part of the company’s business — a declining segment, as Neustar pivots to take advantage of the enormous need for data services in digital business.
This pivot began around 2012, two years after Hook took the helm of the company as CEO. (She had been president since 2008; before that, she was CEO of VoIP provider SunRocket, an executive at AOL, and a partner at the private equity firm Brera Capital Partners.) She saw that the portfolio of services that Neustar offered would have to develop to meet customers’ increasing demands for authentication, analytics related to online activity, and protection from risk and fraud. It would also have to play a bigger role in making connections among the billions of devices coming online through the Internet of Things and Industry 4.0.
Neustar is a B2B company whose products and services are largely invisible to the general public. (Hook jokes about Neustar being a billion-dollar public company that no one’s heard of.) It is easy for such companies to retreat into a technology-oriented culture, paying little attention to the “soft” side of management. Hook is explicitly following a model more oriented toward human capital. She wants to foster, throughout the company, the kind of decision making and judgment that should go along with the company’s role as a guardian of trust and identity. This perspective, as well as her role as one of the few female CEOs in the technology sector, has helped make her one of the most thoughtful and respected voices in this field.
In a conversation in late 2015, at the company’s modern San Francisco offices — of which Hook spearheaded the design and which she sees as an integral part of the culture she is building — Hook shared her views on the future of her company and of the Internet. The discussion was part of PwC’s 2016 US CEO Survey interview program.
S+B: How do you describe your company’s purpose?
HOOK: Our purpose is to connect everyone authoritatively, seamlessly, and accurately. Just connecting to [an address] inside a network is not sufficient; the connection must be to the right person. When you make a phone call to your mother’s phone number, you always get your mother. The call is never routed somewhere else. That flawless routing and addressing — absolute authentication that the person or device on the other end of the communication is what it claims to be — is where Neustar came from in the past and where we intend to be in the future.
S+B: Many people are worried about the economy in the near future. How does that affect the prospects for your company?
HOOK: In the U.S., the economy has experienced a couple of bumps, but we see it as relatively stable. We haven’t seen any indications of a slowdown. Our clients are still out there building their businesses, looking for new sources of revenue, and trying to cut costs. The global market is suffering more bumps as a result of China’s problems and changes in the Middle East. There always will be unrest, instability, and global shifts in power — but over the longer term we’re very optimistic about the global economy and are actually looking to expand.
In general, whether the global economy is up or down doesn’t really affect our business. One major part of our business is data analytics for chief marketing officers and chief information officers. They need to know whom they’re talking to on the other end of a phone or online transaction. Identity inside the network is becoming critical as more people around the world are connected, both for good and for evil. The good guys leverage the global connected world, and so do the bad guys. So it’s critical from a security point of view to know with whom you’re communicating. That knowledge — about the individual on the other end — is what we provide.
Every text message and Internet-related telephone call completed every day in the U.S. has to run through our databases to know where to go. That business was not harmed by the economic downturn in 2008 and 2009. If anything, people were making more phone calls and sending more text messages during that period.
We also provide cybersecurity solutions to address an increasing element in every CEO’s worry bag. That part of our business also continues to grow, regardless of the business climate.
S+B: What markets and areas are you most interested in over the next three years?
HOOK: Our company has changed quite dramatically since the recession. At that time, about 80 percent of our revenues came from the U.S. numbering service. Today that service accounts for only 48 percent of our revenues. In the past four years, we’ve grown dramatically in the data analytics space. The transformation has been so radical that 74 percent of my employees have joined the company just in the past two years.
But even through this transformation, we have kept the core DNA of our company: our use of authoritative identity for reliable addressing inside networks. This is exciting in our increasingly connected world through the Internet of Things. We’re moving so rapidly from a world where we only had cell phones to one where our refrigerators may talk to our ovens, where sheep connected to the Internet in China may “communicate” with weavers in Ireland. In an interconnected world, trillions of addresses on the network will need to be identified: What is this thing, who is this person, where are they located, what can they do, and how are they allowed to communicate?
One example of the Internet of Things already in play is in a typical hospital. There are 200 sensors in a single operating room, all communicating with one another, with the surgical team, and with the medical device company. Every single industry is going to be affected by this sort of interconnectivity — agriculture, supply chain management, automotive. We’re just at the very beginning of understanding that, and our company hopes to play its part as the addressing entity for the global connected community. It’s all incredibly exciting.
Right now, the Internet of Things is close to where cellular was in the early days. Each company permitted its customers to send text messages only to other customers on the same network. There was no concept of interoperability between networks. When all the companies got together and decided on a methodology for interoperability, text messaging just exploded. You could send texts to your friends without regard to the network.
The Internet of Things right now is close to where cellular was in the early days. That’s what we need in the Internet of Things. Today, a company’s devices are able to communicate with one another, but they may not be able to connect to other companies’ devices. There needs to be a standard for communications. There also has to be a registry (or registries) containing the addresses and the business rules for those communications. We’re still at the jumping‑off point, getting the basic building blocks in place. For example, a skin sensor is already being developed — which will be promoted by insurance companies — that will allow folks with diabetes to have their blood sugar levels automatically transmitted to their doctor without the pinprick. That’s game changing, and just one of the first applications for the Internet of Things. We know that if we get these building blocks in place, there will be so much creativity on top of the basic registries that the sky’s the limit.
S+B: What do you want Neustar to look like in five years?
HOOK: It’s hard to say in a technology environment. The focus is not so much on the end state of the organization, but rather on the “becoming” state of how we want our people to act and think. We spend an inordinate amount of time coaching people through change. But regardless of whether the change is positive or negative, it provokes anxiety. We must create a supportive environment that encourages employees to embrace change, to lead change. The goal is to create an ever-evolving organization that brings everyone along.
Our efforts to accomplish this run the gamut. Because we have a number of data scientists and engineers, as well as sales and product marketing people, we have a wide variety of talents from a wide variety of backgrounds. We take into account that we have extreme introverts and extreme extroverts, so there’s no one-size-fits-all program. We do everything from formal communications to town halls to informal lunches to field trips outside the office. We have silly things like a contest called “Pimp My Cube,” where people can redecorate however they want. We randomly close the office every once in a while, which shocks people. We bring snow machines into our Los Angeles offices when there are horrible storms on the East Coast, just so they have a little bit of a sense of what the weather is like.
We have hackathons. We have serious technical talks for folks who like to meet other people, but only if they have something substantive to talk about. We have wine and beer tastings and dance parties and movie afternoons. We ask folks to get out of their bubble once or twice a month, to meet people they wouldn’t otherwise work with. It seems to be working extremely well.
The number one thing we’re focused on is becoming closer to both our current and our prospective customers, spending time with them in the field, understanding what their pain points are. The most exciting thing is having a customer say, “I was promoted because of you. You saved my job. You made me look great to the CEO.” That’s really where we need to spend more time over the next couple of years.
S+B: How are you implementing your expansion strategies?
HOOK: We’ve done nine acquisitions in the past four and a half years, acquiring basic building blocks at a breakneck speed. We recently acquired a company in Australia that’s a great beachhead for Southeast Asia, so we’re looking at expanding there fairly rapidly. We hope to do the same in the E.U.
We are also focusing on organic investment, integrating the acquisitions we have, and getting closer to our customer base. As we expand globally, we’ll look at partnerships for distribution purposes and to fill out our product portfolio. Domestically, we will never provide the entire marketing stack to large companies, so we have a number of data relationships, as well as relationships that involve activating our analytics in the marketing environment.
We’ve been winning business. Our marketing and securities services businesses last quarter grew 17 and 18 percent, so our growth rates are great. If our brand becomes more accessible and better known, we think we can accelerate our growth. So brand awareness and brand affinity is a huge area of interest for us going forward.
S+B: How do you recruit and develop the talent you need for this?
HOOK: Like everyone else in technology and analytics, we are always looking for more talented, innovative, and smart people. There is a talent shortage, so we’re focusing our corporate social responsibility efforts in STEM [science, technology, engineering, and math] educational programs, supporting students in the seventh and eighth grade. We are urging them to go into STEM careers.
In fact, our primary underwriting goes to “My Digital Life,” a STEM-readiness curriculum for middle school students that is administered through a D.C.-based nonprofit, EverFi. It’s a phenomenal education program that 250,000 students have graduated from in the last three years in California, Virginia, and Kentucky.
As a self-paced online course, “My Digital Life” teaches kids science and technology, such as how to build a website and how to build a business online, about microprocessors and cellular plants. The students I’ve met who have gone through the program have really loved what they’ve learned. They’ve been more excited about the connected world and all the opportunities it affords them. If we could grab only 10 percent of those children and say, “Go into a STEM career,” that would be a huge step forward for us. Given that every single industry is going to be touched by the Internet of Things and by coding, it’s absolutely vital for our young students to feel comfortable with science, with technology, and with math, and maybe learn basic programming. Even if they don’t have an affinity for STEM, having a comfort around that type of language is critical going forward.
Additionally, we support Grace Hopper — an organization that encourages women in computing, named after the U.S. Navy admiral who was one of the first programmers in the history of computers. We also support Year Up, a program that empowers low-income young adults to go from poverty to professional careers, with our focus on getting students into STEM programs. Wherever we can see a way to support young Americans going into STEM fields, we think it’s absolutely vital, not just for my company, but also for everyone else in technology, for the U.S. government, and ultimately in the interest of national security.
S+B: What are the other things you’re doing to build a distinctive culture?
HOOK: We have a very big environmental initiative. Employees are proud that their company invests in STEM and in protecting the environment. Our customers think that differentiates us as well. For instance, a potential client came to our company to look at our security operating center. Our visitors noticed that our facility was certified Platinum LEED [by the U.S. Green Building Council for Leadership in Energy and Environmental Design], and that’s why they decided to become a client. You can’t underestimate the need for a company to give back, not only for charitable reasons, not only to make ourselves feel good, but also to function effectively in today’s business environment.
Part of our effort involves getting LEED certification on all of our facilities. As we renew or move into new buildings, we focus on water use, on paper use, on energy usage. We’re running an experiment here in the San Francisco office, as well as in our D.C. office, to go trash-free by 2020. By that I mean no landfill. Of course, we’ll have food waste, which is compostable, but if you walk around the offices here you’ll notice that we have no cans, no bottles, no plastic, no paper plates, and no plastic utensils, and there’s rarely paper at the printing machine. We hope to be that company that one day in 2020 can say that we have 300 people in this building, but we took out only one bag of trash this month. It’s an ambitious goal, but we’re having a lot of fun with it. It is a huge shift for people to realize there’s no bottled water here.
We’re also conscious of diversity, and particularly in Northern California, there’s a huge emphasis on gender diversity. But we view diversity as something much broader than just gender. We also see it as socioeconomic diversity, religious diversity, racial diversity. How does one create that corporate dinner party that brings every possible background into the conversation? There are so many longitudinal studies showing that heterogeneous groups make dramatically better decisions than homogeneous groups. We talk about it, but I’m not sure any of us, including Neustar, are great at linking heterogeneity needs to shareholder value and showing the quantitative causality that’s so critical.
Young women walk up to me and say, “My name is Susan Smith. I joined the company because you’re a female, and I want to be in an environment where women have a voice and are heard.” This doesn’t often happen in a technology environment. I think women [in other workplaces] feel that even when they speak, they’re not heard. For me, it’s really exciting, it’s hugely flattering, and it’s a massive responsibility to live up to their expectations. And I’m going to.
S+B: If you had an unlimited budget and could invest in a new innovative group in your company, what would you want to do?
HOOK: If I had an unlimited budget, I would not give it to an innovative group. A great many innovations come from need. In my experience, an unlimited budget actually kills innovation, because in those cases people don’t need to be creative. We let people innovate all the time here. We don’t have a specific 80/20 rule [like the one Google used to have], but if an employee has a great idea, we’ll listen to it, and we’ll give him or her some time to go off and experiment. We may help with some coding, but the last thing we do is give a lot of money.