AI is here—can we finally rethink our tired beliefs about work?
A recent report by technology company Visier coined the term ' productivity theater' to describe the performative tasks that employees engage in to look busy. They report that 43% of workers spend over 10 hours a week trying to look productive rather than engaging in value-creating work.
This isn't occurring because employees are lazy or trying to cheat the system. They are acting rationally in response to the signals that are all around them. They see colleagues proudly wearing their busyness badge of honor. They receive emails at all hours of the day and night, contributing to a sense of needing to be 'always on.' They get a text five minutes after someone sends an email asking, 'Did you get my email?' They hear co-workers boasting that 'multitasking is a survival strategy' for keeping up with their work.
It is utter madness.
Meanwhile, AI tools are rapidly taking on the administrative tasks—drafting and filtering email, quickly summarizing lengthy or complex reports, sending meeting recaps, scheduling—that easily consume hours a week. And that's just the tip of the iceberg in terms of what's quickly to come. Unfortunately, the temptation will be to fill this growing blank space with more noise.
What if, instead, organizations prepared to take full advantage of the extra time and capacity afforded by these new tools? The key is providing knowledge workers with the direction and empowerment to make good choices about how to invest their time.
Start by clarifying how each function creates value for the enterprise overall, and which performance attributes are most important in delivering it. For example, in a professional services firm, the client-facing roles need to be proactive as well as expert in the issues that impact clients. Marketing teams need to serve as a knowledgeable bridge between customer needs and product design teams. Procurement and supply chain teams need to be well-informed negotiators. In each case, the best use of worker time varies based on role.
Once the team has clarity on what it's optimizing for, they can engage in an exercise to design the ideal allocation of work each week. What percentage of time should be optimally spent engaging with customers, reading up on industry reports, or collaborating with other functions? Comparing that ideal versus members' actual calendars usually produces some abashed insights into how big the gap is.
From here, the team can be relentless about eliminating low-value work. In their book, The Friction Project, Stanford professors Robert Sutton and Huggy Rao suggest creating a RidicuList—a ledger of everything ridiculous that workers have to deal with in service of getting their job done—and be merciless in eliminating the items on the list.
An easy place to look is recurring meetings. In our experience, they often start out valuable and lose momentum over time. If your calendar is full of them, it's time for a trim. You can also invest in establishing collaborative norms for the team—shared expectations for how to use each collaboration medium, expected response times to communication, and where and how documents are stored. This eliminates frequent guesswork and dramatically cuts down the effort required to even get started on the work.
The goal is to claw back a meaningful amount of time each week that can be reinvested in things that improve the human performance of the system. Things such as building relationships with clients and colleagues, learning a new skill or experimenting with an AI tool, or taking the time to think through strategy or generate innovative solutions. Make a list of the things you should be doing with your thinking time specific to your role so that when you have it, you put it to good use. Believe it or not, sitting still and thinking is real work.
That's the block we must overcome: our beliefs about what constitutes work. It's not looking busy. It's engaging with the tough questions, leaning into the future, and challenging ourselves to rise above the status quo.
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Acquisition Engine vs Valuation Ceiling: Constellation's Challenge
Introduction Constellation Software Inc. is a Canadian technology conglomerate that focuses on acquiring and operating vertical market software (VMS) companies. Founded in 1995 by Mark Leonard, the company has effectively created a decentralized empire of hundreds of unique software companies that are serving different sectors such as healthcare, education, construction, and government services. Constellation's acquisition-oriented plan is essentially different and mainly on the acquisition of profitable, market-leading VMS businesses which have regular earnings and have high customer switching costs. It functions as a decentralized entity, which essentially allows acquired businesses to operate independently, but at the same time they benefit from shared resources and best practices. Constellation, which brings in over $6 billion a year, has rewarded shareholders immeasurable returns through careful capital investments, consistent acquisition procedures, and the seamless execution of operational excellence throughout its versatile suite of critical software applications. Warning! GuruFocus has detected 7 Warning Signs with CNSWF. Valuation Multiples Looking at Constellation Software (CNSW) through the lens of this valuation context conjures up a very dramatic picture of a firm that seems to be much more disciplined in the comparison with its software relatives, even though its multiples are still more than those that one would call fantasized just a decade before. Constellation's 3.52x PEG ratio is the most reasonable in this peer group, which is indicative of the market's recognition of a fair growth-valuation relationship compared to ADSK at 47.23x or CDNS at 28.81x. This metric indicates that the investors are not paying a huge premium for Constellation's growth prospects which fits its philosophy of creating returns through operational improvements and capital allocation as opposed to relying on multiple expansion. The 40.41x TTM EV/EBITDA for Constellation, though it is high in absolute terms, looks almost cautious when viewed against WDAY's 61x or SNPS's 47x. This partial self-restraint is likely to correspond to the special nature of Constellation's business model. Unlike pure-play SaaS companies that must invest heavily in sales and marketing to acquire customers, Constellation's decentralized approach allows for acquired companies to keep their client relationships while benefiting from better capital allocation and operational practices. This model generates more predictable cash flows with lower reinvestment requirements. The 32.57x Price-to-Cash flow ratio is particularly noteworthy in light of the fact that Constellation is devoted to producing free cash flow and being capital efficient. This multiple, though it stands alone as high, may indicate that the market is confident in management's ability to invest money in a gainful way through acquisitions. Constellation has been consistent in demonstrating its ability to acquire companies at good multiples and improve their cash flow through operation improvements, which makes the current multiple more justifiable than the similar ratios for firms that are reliant on organic growth. The outstanding thing about the valuation of Constellation is its representation of the evolution of the market in terms of understanding the company's business model. In the earlier stages of Constellation, the investors often used the traditional software multiples to value the company, without fully grasping the impact of disciplined capital allocation compounding. The present valuation implies that the market acknowledges the company as operating an entirely distinct model from where the returns arise from the expertise of acquisition either than product innovation or expansion of the market. Decentralized Acquisition Engine and Due Diligence Strategy Constellation's decentralized acquisition engine forms the core of its technical infrastructure. This is the part that deals with thousands of potential acquisitions every year by a highly systematized evaluation framework. The company relies on the use of state-of-the-art financial modeling algorithms and valuation methodologies that are tailored especially for the vertical market software business. This technical solution allows for swift evaluation of target companies on various criteria such as the quality of recurring revenue, customer concentration metrics, competitive positioning, and levels of technical debt. The due diligence framework integrates automated screening processes that eliminate potential acquisitions per pre-defined criteria such as the minimum revenue thresholds, customer retention rates, and market characteristics. The state-of-the-art analytical tools that are available measure software architecture quality, codebase maintainability, and technical scalability potential. This methodical approach gives Constellation the opportunity to maintain acquisition speed while ensuring that quality standards are consistently upheld across its expanding portfolio. Utilizing machine learning algorithms historical acquisition performance data is analyzed for the purpose of improving the target identification and valuation accuracy. The platform iteratively enhances its predictive capabilities by establishing the correlation between post-acquisition performance metrics and pre-acquisition company characteristics, leading to a more precise decision-making process on future investments. Vertical Market Software Focus and Network Effects Constellation's vertical market software feature is a powerful technical weapon that is achieved through domain specialization and network effects. VMS solutions not only offer the technicalities of particular industry workflow, regulatory mandates, and operational processes but also add to the customer stickiness and the so-called high switching costs that they create. The company's technical teams head on develop a concentrated subject matter expertise across areas such as healthcare, education, construction, agriculture, and government services. The cross-introduction of technological solutions in related vertical markets enables Constellation to reap the benefits from the common functionalities and architectural patterns. The introduction of shared development frameworks, security protocols, and integration standards means that development costs will be reduced and the time for rolling out new features will be shorter across the portfolio of companies. The technical standardization brought about by this shared arrangement causes the creation of a scale that will increase the operational efficiency and profit margins. The network effects are apparent especially in the adjacent market segments that the company is targeting where Constellation can use the existing customer relationships and technical infrastructure to further increase its market presence. Customer data analytics compile a list of cross-selling opportunities and provide the main points for product development across the portfolio. Operational Excellence via Systematic Management Systems Constellation's technical improvement and growth are mostly attached to operational management systems that have been standardized and as such, they guarantee that the performance level will be consistent across the diverse units. The company sticks to one standard for financial reports, customer success metrics, and operational key performance indicators (KPIs). This allows centralized control and also the optimization of hundreds of subsidiary companies. The business intelligence platforms that have been developed are advanced enough to give performance data accordingly across all companies in the portfolio, and as a result, they give real-time tracking of revenue changes, customer health metrics, and operational efficiency indicators. The introduced alerting systems detect whenever there are some declines in performance and these require the attention of the management, therefore, the action is taken before the profit performance is affected. The standardization also covers the customer relationship management (CRM) systems, accounting software, and operating procedures creating the appearances of uniformity, all the while upholding the entrepreneurial culture of acquired companies. This balanced approach, which entails both centralized monitoring and the possibility of independent operation, has been the technical achievement that makes scalable growth a reality without creating bureaucratic burden. Competition For the most part, in the vertical market software sector, companies such as Constellation primarily compete with serial acquirers who are also acquiring primary market software assets. Firms like Roper Technologies, Danaher Corporation, and Addtech AB use the method of acquiring companies as a main strategy. This causes competitive pressure to increase substantially for quality targets and creates the valuation inflation issue in the VMS sector. In addition, some private equity firms like Vista Equity Partners, Thoma Bravo, and Francisco Partners not only represent the aforementioned competition but have also significant capital resources and knowledge in software acquisition. The technical portion of the challenge appears from the auction dynamics where there are multiple sophisticated purchasers to buy only a few high-quality assets. Hence, it becomes the need for advanced valuation modeling and rapid decision-making capabilities to stay in competitive alignment. The proprietary deal sourcing algorithms which are utilized by Constellation are the key reason that the enterprise's competitive edge prevails. Such algorithms add value by identifying off-market opportunities before the competitive auction processes commence. The decentralized acquisition model, which is being implemented by Constellation, has several advantages over the centralized ones. In a distributed network system of acquisition professionals being the company staff and who have the power to make the decisions and vertical market expertise, decisions are made faster and as well as the evaluation is more accurate than in a centralized model. Thus, this structural opportunity allows Constellation to match the performance of bigger-sized competitors which have better capital resources but lack operational agility. With the systematic development of relationships with business brokers, investment bankers, and software entrepreneurs, the company becomes a moat that is not easily penetrated due to the preferential deal flow it gets. Sophisticated Customer Relationship Management (CRM) systems monitor several thousands of possible acquisition targets and build continuous relationships which result in the exclusive deal opportunities that are not available to competitors relying solely on intermediated processes. Competition from VMS platforms and venture-backed startups increases pressure on the modernization of technology within the portfolio companies under the umbrella of Constellation. These modern SaaS platforms, cloud-native solutions, and venture-backed startups which are targeting the vertical markets of Constellation-backed portfolio companies are their main rivals. These types of firm competitors have frequently the upper hand since they employ better technological platforms, more appealing user interfaces, and greater integration capacities which counterattack the older, VMS products that were developed on the technical base. Constellation takes on the challenge of the technology sector by implementing modernization initiatives that are well-coordinated throughout the entire portfolio. The legacy cloud migration framework that they will share facilitates the transition for portfolio firms to the state-of-the-art infrastructure while also achieving cost savings through economies of scale. This hardware is developed by the company's technical teams who develop standardized API frameworks, microservices architectures, and integration platforms that enable legacy systems to interface with modern technology stacks. DevOps features that are advanced and without barriers have the potential to alter the way feature development cycles work for all the portfolio businesses leading to a quicker competitive response to new startups. Providing the same development resources and technical expertise will enable the smaller VMS companies to acquire skills that normally only the rich firms have. 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The existing state of being "overvalued" which is about 14% seems small compared to the long-term company's success in outpacing their growth targets and also it is hard to find the real value of a platform which is constantly adding market with the use of promising agreements. Guru Torray's huge investment of $8.1 million (2,571 shares, 1.21% of the portfolio) is a sign that the firm fully believes in Constellation's long-term performance. However, the 1.49% recent drop (-39 shares) and the timing of Q1 2021 implies that the profit-taking behavior rather than the fundamental concern was the reason behind them. With an average price basis of $1,341.28, they would have achieved exceptional returns of around 170% at the current levels of prices, which also supports Constellation's successful value creation during the last four years. This may actually be a rebalancing of the portfolio rather than a lack of confidence. 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Currys launches AI-powered employee-led ideas platform
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