Behind the Cloud-Marc Benioff || Book Highlights
Picking up ‘Behind the Cloud’ was a no brainer for me as I enjoy reading founding stories and Salesforce is considered the Godfather of SaaS business. The book surpassed my expectations and brought me to think, if we dream big and act, the result will follow. It’s Benioff’s version of how he started Salesforce and the journey for close to 10 years which also includes taking the company public. If you are someone who loves to read about inspiring people and stories, this is a must read. I have shared some of my highlights from the book if you would like to get a glimpse before you decide to start reading. Grab the book if you like the highlights that follow.
The foreword is written by Michael Dell (CEO of Dell) who mentions Salesforce is known as one of the best places to work for because it offers the employees an opportunity to make a difference and not just earn a paycheck. Salesforce has changed corporate philanthropy by integrating giving into its business model.
Marc Benioff had interned at Apple right around the time Steve Jobs was made to leave. He learnt a critical lesson that he took with him for the rest of his career. If we made the customer truly successful, we had the opportunity to transform him/her into an apple loyalist and evangelist. This opened his eyes into importance of Customer Success.
While he built the company with a mission to transform traditional softwares, one day he realized the team was not in on the message. When another tenant from the building asked 4 employees on what Salesforce did, everybody had different answers. Benioff then hired a PR firm and did some internal programs to make sure the messaging is consistent. Benioff also stresses on the fact that every employee should be made a key player on the Marketing Team and to make sure everyone gets the same message about the product and the company.
On the lines of marketing, he mentions to always go after the Goliath. Salesforce only acknowledged one competitor and the market leader. That was the only position they wanted to be. They approached every person who went into the Siebel conference and gave them an invitation to the Salesforce.com launch party that night and had a good turnout.
In another opportunity to leverage competitor’s activity for their own benefit, they offered rides to the conference attendees in San Diego and handed coffee and donuts with a message “Wake up Siebel, salesforce.com is a disruptive technology and is slowly moving in on the CRM prize”. Interestingly, Siebel acknowledged this and said “There is no way that company exists in a year”. This later the Sibel executives will realize is a big mistake. By defending itself and acknowledging Salesforce.com, they chipped in to its airtime and the press also found this as an interesting story which gave Salesforce lot of publicity. Benioff says never to let the competition to make you angry or make decisions that your competition wants you to make. One must always have the clarity of mind to take their own decisions.
After years of denouncing the on-demand model, Siebel also entered the SaaS model by launching a Siebel CRM on-demand service and it also bought Up-Shot a on-demand enterprise software company. This validated Benioff’s vision of creating a new category and he welcomed competition and as there is no market if there you don’t have at least two or three competitors.
Once one of their events coincided with the US presidential election. They narrowed down to this date as it was the only date Hilton was available in San Francisco. When Benioff walked to the stage to begin keynote, someone handed a note that said ‘President George W Bush’ is here and might swing by the event which Marc also informed the guests about. Then few minutes later ‘President George W Bush’ walked onto the stage and guess what. It was a really good fake president and they kicked off Dreamforce 2004 with Election Day comedy sketch. You should always leverage any situation around you and have a plan for every scenario and Have Fun.
Just before one of the Dreamforce event, Oracle acquired Siebel and released the news to the public. Benioff reworked on the Keynote that he had prepared for months. Every news article that wrote about Oracle — Siebel acquisition also mentioned that it was Salesforce’s Annual User Week. Salesforce got more press from this story. Apart from planning events and leveraging press for the company’s growth, investing heavily in Customer Success and using existing customers to sell new products and reach new accounts are vital to go from Underdog to a Market Leader.
The concept of free trial was also invented by Salesforce. It seems very obvious now but no company allowed a prospect to use the entire service at no cost back in 1999. And the company’s revenue success doesn’t end with a signed deal as its a recurring subscription model. They have to invest just as much as effort in making the customer’s successful. With every passing month, the number that sales rep used to close kept going up and reached 70,000$ a month. It is vital to hire more sales people as there is always a limit on how much one sales rep can close. Every lead irrespective of the deal size was looked into and with sales team contributing to half of the head count, Salesforce grew aggressively in revenue.
Rob who was with Salesforce, one day wanted to focus on a particular segment of customers after tracking few metrics and realizing that it could be a gold mine. Benioff was playing devil’s advocate but agreed to Rob’s idea and gave him 4 people to focus on it. This was a successful effort and the 4 member team became a 20 member team in 6 months. When you have your team passionate about the company, they will come up with ideas to build the business and as a leader, Benioff just had to give them time and listen to their ideas and facilitate for things to happen.
With such aggressive growth and expansion, Salesforce was still cash flow negative. They were burning 1 to 1.5 million every month in October 2001 and there was potential bankruptcy. That's when one of their board member came to Benioff with the idea of having a long term subscription. Getting small amounts month-on-month was proving to be very costly and offering annual and multi annual contracts with a discount might encourage customers to pay more upfront. This was a huge bet according to Benioff as their messaging was around getting access to the software without the huge upfront cost. This was a huge careful exercise that salesforce did and made sure they didn't lose customer’s loyalty.
This is compared to Coca-Cola's launch of sweet formula in their new coke. Customer’s did not want this and stopped buying it. The sales and loyalty picked up only after they brought back the old coke. It is very important to make changes that the customer’s want and not what the company thinks they want.
The concept of Land and Expand worked really well for Salesforce. They began with 80 users in ADP and 75 users at Merrill Lynch and both the deals went to multi thousand- user once they had the opportunity to prove the service. They also had a well established Customer Success Organization as its easy for customers to leave if they don’t like the service. Salesforce had 90% renewal rate and that includes customers who go out of business.
If you have read this far, finish the blog as the best part of the book is yet to come.
Benioff came up with the idea about build salesforce.com in his sleep. Literally. he had a weird dream in which he envisioned Amazon.com, but instead of the tabs with Books, CDs, or DVDs, they said Accounts, Contacts, Opportunities, Forecasts, and Reports. After this dream, he had an almost crystal-clear picture of where he was going. The words of Walt Disney rang in his mind: ‘‘If you can dream it, you can do it.’’
Every company will have its downtime and times that are challenging. Salesforce also had them. Once their product was down and it disappointed a lot of customers. Few competitors even used this downtime as a way to lure customers out of Salesforce. But Benioff saw this as an opportunity. While they worked on solving the downtime, Benioff realized downtime isn’t the problem. Its the transparency. The team then made a status page and made it public where customers can go to the webpage and check if Salesforce is down and get updates on the fix. The decision to make it public wasn’t easy. If not done right, it might backfire. But ultimately, they won the customers trust on the long run. Even in 2007, if their servers are down — even for twenty minutes — they call our top customers. Even Benioff calls many of the customers personally to apologize and share what is happening. Often they are completely surprised to hear from Benioff. One CIO at a very large company told him that he couldn’t believe he was taking the time to call him. He revealed that he had had data centers down for two days, so an hour of downtime didn’t represent a massive problem to him. Benioff found, however, that open communication, in tandem with quickly fixing the problem, is the only way to build and retain trust.
Benioff also worked with customers to help them grow and innovate their business. Salesforce had built a feedback module to let the customers be a part of the product building process. One unusual roll out from Starbucks was introducing “Splash Sticks” which fit into the hole of the lid to prevent coffee from spilling while someone is walking or driving. It came from the community of customers. ‘‘I was floored. It was like Starbucks was reading my mind. That little stick made my whole morning,’’ Angela Vargo wrote in a blog response to the initiative.
Just like many of us, during his first few years in Oracle, Benioff defined success by making money and achieving power. Only in early thirties he realized that these superficial things did not give him happiness. Though he had the title, money and material possessions, he felt something was missing. Which is why once he started Salesforce he always considered in giving back to the community as that gave him purpose.
When he wanted to give computers to a school he had a good mentor who said ‘‘If you start a foundation that focuses on schools and technology, you have to hire a teacher. You shouldn’t just be a company that gives out computers and money. You need someone who is familiar with working with kids and education — it gives credibility and makes a deeper impact.’’
Benioff explains that contrary to what we see in the movies, aggressive and heated conversations are not the way business disputes are best conducted or resolved. When Salesforce wanted to enter Australia, unfortunately the name was taken by some other company that was running a call center. They went to court initially. But Benioff later says with the right outlook, its possible to transform a losing situation into a good break. He then entered into conversation with the Kevin who runs the call center and both of them agreed to a mutual deal instead of going to court. They also pledged to donate the amount that they would have spent on litigation to a development center in Laos.
Starting a new business can be intimidating especially giving up a paycheck and pouring the savings into the business. Also in a new business, everything takes twice as long and costs twice as much as you’d expect. There would be opposition but one has to believe in their ideas firmly. MGM reportedly told Walt Disney that Mickey Mouse would never be a hit because a giant mouse on the screen would terrify women. We all know how it turned out.
Benioff also talks about how few changes in Salesforce did not happen naturally and how it was opposed by everyone especially those who had been there for sometime. Even Benioff at times didn't want things to change. He also talks about thinking about future and how Salesforce tracks performance framework called V2MOM which he employs for himself and Salesforce.
Salesforce also hires big from referrals and they give opportunity for folks to try out new things. An assistant from law firm who joined at the entry level sales position went on to become a sales leader. Just like how they don’t win customers for price, they don’t win employees for compensation.
They select the very best people and put them in new regions, move them across departments, and transfer them in and out of headquarters. As people grow and gain more access to the executive team, they have a broader perspective and a deeper understanding of the company culture, sales strategies, and marketing tactics. They can help leverage this knowledge across the company
Benioff ends the book with these lines.
Seize the opportunity in front of you. Imagine. Invent. Disrupt. Do good. I know that you must be passionate, unreasonable, and a little bit crazy to follow your own ideas and do things differently. But it’s worth it.
