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SaaS model

By igniting the SaaS industry and then offering its Platform-as-a-Service, salesforce.com has spawned an ecosystem of countless new companies. It has offered large companies (such as Dell) and smaller companies just starting out valuable insights on how to innovate and succeed in the future.

Many of my colleagues were leaving Oracle to lead their own companies, most of which were traditional software plays. In many ways, Oracle served as an incubator where you got your legs, built a network of friends and learned what you needed to go off on your own — and ultimately compete with Oracle.

For me, launching salesforce.com was a way to respond to new directions and new opportunities that I could not pursue from inside an established corporation.

From the very beginning, salesforce.com set out to build a new technology model (on-demand or delivered over the Internet — now called cloud computing), a new sales model (subscription based), and a new philanthropic model (integrated into the corporation).

The Start-Up Playbook

Nicholas Carr, former executive editor of the Harvard Business Review, suggested that “utility-supplied” computing will have economic and social impacts as profound as the ones that took place one hundred years ago, when companies “stopped generating their own power with steam engines and dynamos and plugged into the newly built electric grid”.

SFA is a huge market; every company has some kind of sales force. In the late 1990s, when I was investigating the category, there was certainly room for improvement.

I told Tom about the SaaS CRM solution I envisioned. We would have “subscribers” pay a small monthly fee ($ 50 to $ 100, which added up to less than half the cost of the traditional systems) and we’d “operate” it so there would be no messy installation for the customer. Tom liked the idea so much that he invited me to join Siebel.

Bobby Yazdani, a friend from Oracle and the founder of the human capital management company Saba Software.

“The number – one mistake entrepreneurs make is that they hold their ideas too closely to their chest”, Bobby said. “Their destiny is their destiny, though. If they share their ideas, others can help make it happen”.

My summers at Apple had taught me that the secret to encouraging creativity and producing the best possible product was to keep people fulfilled and happy. I wanted the people who built salesforce.com to be inspired and to feel valued.

Being inclusive of potential users from large and small companies across the world helped us gain valuable insight. After all, our goal was to build something that could serve as a global CRM solution for the masses. The value of involving prospective users in order to build a user interface that was intuitive. Don’t be afraid to ignore rules of your industry that have become obsolete or that defy common sense.

Throughout the thirteen years we worked together, Larry and I spent countless hours discussing potential future innovations. Larry believed that salesforce.com was the next big idea, and he invested $ 2 million in seed money and joined the board of directors. He knew that I needed top talen , and as he was aware that Oracle would be the first place I would look to find it, he requested I take only three people from Oracle with me to salesforce.com.

What I learned from Larry:

  • Always have a vision.
  • Be passionate.
  • Act confident, even when you’re not.
  • Think of it as you want it, not as it is!
  • Don’t let others sway you from your point of view.
  • See things in the present, even if they are in the future.

Don’t give others your power. Ever.

The Marketing Playbook

Don Clark, a reporter at the Wall Street Journal, visited us while we were still based in the apartment, and he wrote a front-page story called “Canceled Programs: Software Is Becoming an Online Service, Shaking Up an Industry.” Published on July 21, 1999, the article illustrated the shift that was occurring.

We needed a real Web site. Immediately. I asked Parker Harris to build it overnight and that turned out to be an auspicious decision. We received five hundred leads the next day! Anyone can create a persona, but it takes time and energy to do it properly. Your “character” must fit with your company’s story to bolster your brand. My “go to the guru” approach led me to hire Bruce Campbell to help brand salesforce.com. I shared with him our “End of Software” mission and he came to me with an idea for a NO SOFTWARE logo (the word SOFTWARE in a red circle with a line though it; think Ghostbusters). It was perfect. It was simple. It was sexy. It was fun. Although I loved the NO SOFTWARE logo immediately, almost everyone else hated it. I felt that their arguments were overruled by the most important rule in marketing — the necessity to differentiate your brand. We own NO SOFTWARE — not because we are the only one doing it but because we were the first to think it was important to customers.

To ensure that everyone was on the same page (literally), our PR firm, OutCast Communications, produced a two-sided laminated card. It was a marketing cheat sheet that stated in one sentence what we did. Salesforce.com only acknowledged one competitor — the market leader.

One idea alone is a tactic, but if it can be executed a number of different ways, it becomes a great strategy.

We had a problem with the traditional software model that didn’t care about customers’ success. We believed that “business as service”, pursuing long-term customer engagement, was better for our bottom line.

There is a Japanese belief that business is temporal, whereas relationships are eternal.

Don’t ever let the competition make you angry. You must have clarity of mind to make your own decisions — not the ones that your competitors want you to make. You must be transparent to the competition. See, recognize and understand what your competitor is doing.

I also consider my relationships with journalists and bloggers to be a pivotal part of our marketing strategy. A large part of our marketing and PR strategy is making sure that we always remain relevant. One of the ways we do this is by making ourselves available to discuss the direction of the industry.

We often referenced Clayton M. Christensen’s The Innovator’s Dilemma and Nicholas Carr’s The Big Switch, two thought-provoking books that validated our crusade.

Keep in mind that the landscape is always changing; you must always examine what’s working, evolve your ideas and change the way you do things.

The Events Playbook

We examined what marketing methods most directly converted into sales and discovered two means that can be used effectively by any company:

  • Editorial: unbiased business and technology stories in the press
  • Testimony: the word-of-mouth phenomenon created by customers sharing their success stories with their peers.

If you want a successful event, you have to project success; your attitude will help make it a hit.

Our customers paid month-to-month, so we knew they were happy.

Macintosh, the idea for cultivating a group of salesforce.com enthusiasts did not come from the technology community; it emanated from the hip-hop community. A friend introduced me to MC Hammer, who visited our San Francisco office (wearing a business suit, not the trademark Hammer pants) and shared his “Street Team” concept: that of building local networks of people to back you.

Our City Tour program served as a vehicle to extend the salesforce.com message, ignite passion behind the idea and help us build salesforce.com Street Teams to get customers out and selling for us on a local level.

Although every company knows that customer references are important, most companies have a lax approach to managing them, not giving references more focus than a bullet point on a marketing person’s to-do list. Enterprise software companies target the executives who control the budget. To us that seemed nonsensical, so we targeted the end users instead and found that they were grateful to finally be given a voice.

When a prospect came to one of our events, about 80 percent of the time we were able to close the deal. Appealing directly to the people who used the service made all the difference. The event is the message. Ensure that every decision you make — from venue to food to speakers — reflects well on your business and conveys your message.

We planned a small cocktail party at the Grand Havana Room in New York. Eleven customers and prospects came, and there were eight people from our company. We drank scotch and smoked cigars and talked about salesforce.com. The bill was almost one-tenth of a standard City Tour, but the net effect was virtually the same. Customers learned from one other, and the prospects were swept up by the customers’ gusto.

The most effective selling is done not by a sales team but by people you don’t even know who are talking about your products without your being aware of it.

In October 2003, after years of denouncing the SaaS model that we had been trailblazing, Siebel Systems announced that it would launch a Siebel CRM on-demand service. Less than two weeks later, it bought UpShot, a provider of on-demand enterprise software.

A market doesn’t exist until there is a competitor and ideally two or three competitors. Competition is good.

If you are going to compete with someone at his or her own game, always remember to step up the innovation.

Our current battle: we have to save the customer from Microsoft, Oracle and SAP.

Strategies evolve as your role shifts, but you should continue to:

  • Plan killer events
  • Continue big-bang efforts with the press
  • Heavily invest in customers’ success and leverage their voice

The Sales Playbook

Although a free trial has evolved into the industry standard, this was not the case in 1999.

That first pioneer came in the form of Blue Martini Software, one of the small software companies in which I had previously invested.

Our design partners’ insights were essential to the development of our application. We contacted them frequently to discuss their experience using the service and they became the eyes and ears of the engineering team. They discovered features and tools and functionalities that they needed. We added a button that allowed any user to immediately send us an idea and we could react very quickly. We created “bugforce” a scaled-down database to track bugs and new ideas, which helped us rate the frequency of the problems or requests.

In December 1999, an article titled “Salesforce.com Takes the Lead in Latest Software Revolution” appeared in the Wall Street Journal. The story was written by Don Clark. The day after the article came out, the phones began ringing like mad.

A lead capture screen, where visitors are required to enter their contact information, is an effective way to find hot leads.

The heart of marketing was our internal database of leads — the core that kept our company ticking.

We committed to follow up on any lead within twenty-four hours. The sales team classified the leads into categories (working leads, qualified leads). The goal was to convert a lead to a deal in thirty to ninety days.

When salesforce.com was founded, there was a preconceived notion that you could not sell CRM applications over the phone. Although our approach is similar to what other companies might call telesales, we called it our “corporate sales” model and found that recruits responded more positively to that term.

We offered an extensive training boot camp and gave sales reps three to six months to build a pipeline. They were then expected to close business and those who didn’t perform were moved elsewhere.

Outline for a Sales Call: The Top Five Points for a Winning Conversation

  • Leverage the experience the prospect has had with other solutions.
  • Introduce the value your product offers.
  • Provide success stories from customers. Build and maintain a strong referral program.
  • Verify success stories by offering customer testimony.
  • Provide a customer for the prospect to contact.

Unlike the rest of the industry, we charged the same per seat, whether someone wanted two licenses or two hundred.

Our selling strategy — to be priced to the value of the market, keep costs low, and not favor anyone — not only was effective at closing deals but also became an essential part of our brand.

Our salespeople were closing $ 50,000 to $ 70,000 per salesperson per month. We quickly discovered that the more salespeople we hired, the more we saw revenue increase. This proved that we couldn’t simply encourage salespeople to sell more. We needed to increase the number of salespeople. This was the key to growing revenue.

25 to 50 percent of the employee base should be salespeople who report to the head of sales.

It turned out to be a very good decision to focus more attention on smaller businesses. The close rates were higher and the sales time and cost of sale were low.

Because of our mandate to target small business and in what was probably a reflection of the times, a large proportion of our customers in the early days were Internet start-ups.

Then, suddenly, everything started to unravel. Many dot-coms, once flush with venture capital money, began to run out of cash.

By October 2001, the crash had deeply affected our business. We were burning through $ 1 million to $ 1.5 million every month, and we were severely cash flow negative. The potential for bankruptcy was at hand.

Ultimately, we needed to make this change in order to survive. We created two factors to justify a discount: the total number of users and the length of the contract. Frank recommended that we pay the reps two months’ worth of sales revenue for every twelve-month contract. By collecting up front — and offering sales reps a real motivator to ensure that we closed multiyear deals — we went from cash flow negative to cash flow positive in less than a year.

In the very beginning, we cast a big net, fishing for any customer who bit.

Creating a world-class field sales force — the kind of team we needed to win large deals — was not an easy proposition. Although the corporate sales team did a fantastic job on the phone, they weren’t the right group to build enterprise sales. We asked salesforce.com executive Carl Schachter, previously salesforce.com’s VP of business development, to start the field sales team.

Carl created two sales approaches. Pitch A embraced practicality: it highlighted the success of the product and its low risk, which made it a perfect solution in uncertain times. Pitch B evoked the vision: it introduced how the cloud computing model brought democracy to enterprise software and how it empowered customers.

We needed a leader to grow our worldwide sales and distribution effort. Jim Steele, the executive VP of worldwide sales at Ariba Corporation, came highly recommended by our executive search firm. We also get David Rudnitsky. Jim and David had been with us only for a week or two when an incredible opportunity unfolded at SunGard, a NYSE Fortune 1000 company.

The best salespeople are driven by instinct, passion and a powerful work ethic. Ultimately, though, closing great deals always comes down to execution.

Think big when strategizing with your customers, and focus on their entire potential enterprise needs, not just the immediate opportunity in front of you.

Every deal should be touched by multiple people. Trust the people around you and divide and conquer. Don’t dial for dollars! Never cold-call; always call with a plan. Learn about the company and use your network to find the right individual(s) to approach. Everyone wants to think about why a deal will close, but it’s more prudent to focus on why it might not. If a deal is ready, close it. This eliminates such risks as the buyer leaving his job or the market tanking. You can’t learn everything about your customers over the phone. Walk their halls — frequently. Know all you can about how other customers are specifically using your product. Don’t get caught in the momentum of the deal and avoid the paperwork. Great salespeople have the confidence to say no. Always consider what else you can get before you say yes. Ask for more users, a certain close date or a press release about the deal. Celebrate successes — and learn from them. Pursue deals that help move the company to the next level. These deals are revolutionary in a company’s evolution.

We learned that when you are starting out, you can’t try to capture an entire company at once. Start in a small division. Companies are looking to limit their investment risk and they appreciate an opportunity to take a smaller position, experience the benefits and then make additional purchases.

One of the changes we made was the introduction of a more complex trial — a proof of concept that demonstrated to larger companies that we could customize the solution to their needs. We built a customer success managers (CSM) organization to ensure that current customers continued with our service. The CSM organization works: renewal rates at salesforce.com have been about 90 percent.

Our service designed for large corporations was more robust, and these customers, especially when embarking on a very large implementation, were seeking and expecting more formal guidance than we had previously offered. To meet this need, we focused on building a professional services group.

There is an important part of professional services that partners with outside organizations such as Accenture, KPMG, Deloitte and other consultancies that recommend and help enable our service.

It’s amazing to consider that no matter what size customer we were pitching, or where in the world we were selling, a singular idea drove all our accomplishments: we never sold features. We sold the model and we sold the customer’s success.

These are some metrics that you can use to measure your sales team’s success. Knowing these metrics helps the sales organization predict revenue and build a financial plan:

  • Inbound sales
  • Raw Web traffic
  • Capture rate
  • Lead conversion rate
  • Close rate
  • Average deal size
  • Percentage of business that is from new customers as opposed to customers that are adding on (If you are adding on more than you are closing, there won’t be anything to add on next year)
  • Sales cycle length
  • Sales productivity (the average amount the sales rep closed on a monthly basis)

The Technology Playbook

The engine that really drives our company — the one effort that our success wholly relies on — is producing a service that customers love.

We call this technology model “multitenancy” and it’s easy to think of it as an apartment building where the tenants of the building share common costs, such as building security or the laundry facilities, but they still have locks on their doors and the freedom to decorate their apartments as they wish.

There was also a philosophical reason that we couldn’t offer a hosted choice. We believed in the End of Software — that all companies would eventually use the Internet to replace all the software they once installed on PCs. This was our religion.

Our philosophy was to write code that lasted for the long haul. Practically on day one, Parker, Dave, and Frank developed their own guiding principles about the system: “Do it fast, simple and right the first time (and did we mention fast?)”.

We knew that the initial prototype set the foundation for the entire product. If it’s messy out of the gate, it can’t hold up over time. In fact, it’s common for the code to explode as developers try to transition and scale. These so – called success disasters have plagued the software industry. They don’t have to.

When it came to building innovative technology, we took a bet on a few existing things. First, we took a big bet on the Internet and on Java as the programming language for the Internet. Second, we relied on the Oracle database.

The cloud computing model saves time and capital. All companies benefit when they can afford to focus on innovation rather than infrastructure.

The difficult decision to launch the trust site — to “open the kimono” as Bruce Francis called it — differentiated us. Transparency and trust became a strong part of our branding and identity. We found, however, that open communication, in tandem with quickly fixing the problem, is the only way to build and retain trust.

Initially, as I saw in my dream, we had five tabs: Contacts, Accounts, Opportunities, Forecasts and Reports.

It wasn’t long before we began to notice fairly consistent feedback that the initial five tabs were not enough for all customers.

Our decision to add tabs had been an exciting part of our evolution, but it was the blank tabs that were revolutionary. Responding to customer demand, we expanded from renaming tabs to including the possibility of renaming fields, and eventually to creating new fields.

We made a significant leap in the technology when we offered integration capabilities by providing an application programming interface (API), or a way for salesforce.com to communicate with other programs.

One of the most pivotal decisions we made as a company was to make our code available to let other companies build their own complementary online services.

The “platform in the cloud” effort became a pet project of mine. Part of my drive stemmed from the intellectual challenge and my eagerness to innovate. The rest came from the potential the platform had to transform salesforce.com from an SFA application to a massive Web services company. I hired Steve Fisher. We saw PaaS as the natural extension of the SaaS business model. We ultimately branded the salesforce.com platform as Force.com.

The first decade of salesforce.com was dedicated to building a killer application to replace expensive shelfware.

The second decade of salesforce.com, which I think is even more exciting, focuses on PaaS, which allows customers to run all their enterprise applications and their Web sites and intranets in the cloud.

We needed to make people aware of the amazing developments, so we decided to create an on-demand marketplace that packaged and distributed applications. We called the marketplace AppExchange.

It’s flattering when other companies build something to further develop or enhance your product or service, but don’t accept everything that comes your way.

We created the ability for customers to vote on and rate ideas posted by the community. We called it IdeaExchange.

In this new age of nonstop, immediate communication in blogs, wikis, Twitter and YouTube, you can be fairly certain that your customers are having a very public conversation about your products and practices.

  • How can my business be a part of this conversation?
  • How can my business learn from it?
  • How can my business use it to innovate?

Providing developers with both a platform and a community (and a lot of free T-shirts) has generated a fleet of one hundred sixty thousand developers who are innovating more rapidly than ever before.

A normal development cycle in the technology industry is three years. At salesforce.com, it’s ninety days.

Intelligent reaction — or going where our business takes us — is what has always dictated our next move and how we evolved from an application to a platform company.

The Corporate Philanthropy Playbook

Parker, Dave and Frank, the salesforce.com cofounders, were receptive to the idea of building a business that simultaneously gave back to the community.

The commitment to set aside 1 percent of equity was the first step to building the 1 – 1 – 1 model that would eventually guide our foundation. The idea for the second 1 percent commitment — 1 percent of employees’ time — was inspired by the program at Hasbro, the creator of such toys as Mr. Potato Head and G.I.Joe. Building on the 1 percent allocation of equity, we decided to give employees more than 1 percent of their time — six paid days off annually — to volunteer. Last 1 comes from 1 percent of product: facilitating the donation of salesforce.com subscriptions to nonprofits.

A number of years ago, I was speaking about our programs at a Stanford lecture hall where two young entrepreneurs, Larry Page and Sergey Brin, were sitting in the first row. “We are starting a company named Google that will do no evil” they said. (I had never heard of it.) “We want to do this”. And they did. “Google.org was thrilled to copy, emulate and steal the wonderful salesforce.com model of 1 percent equity and 1 percent profit”, says Dr. Larry Brilliant, the former executive director of Google.org and the president of The Skoll Foundation’s Urgent Threats Fund. “Marc Benioff is a visionary, and Larry and Sergey have continually acknowledged him as the inspiration for their plan for Google’s philanthropy”.

The Global Playbook

We had considered the international potential of our service from the very earliest days of our company. We had built the Salesforce application so that the user could configure it to any currency and almost any language (even character-based languages) with just the click of a button.

We centered our sales operations with a corporate sales team (what other people call telesales) in one city to leverage training opportunities and build critical mass, just as we had done in the United States. At the time, Dublin was a prime place to establish our headquarters.

This system went against the current model of selling enterprise software in Europe. At the time, it was believed that a CRM company would never be able to build business in such countries as France, Spain or Sweden selling over the phone. The traditional model was to build a presence via a network of partnerships. It was the partners, operating in different countries, who did the groundwork to win customers and market share.

One of my mentors in global business, Chikara Sano, the former CEO of Oracle Japan, demonstrated the power of this idea when he committed to focusing Oracle Japan exclusively on becoming number one in database management.

In thinking like a start-up, abide by these three rules to help save infrastructure costs:

  • Translate the product on day one to the major languages, but only add additional languages as customer demand builds.
  • Build a bedrock of small customers in each country before hiring local employees.
  • Don’t overhire. Employment laws overseas are complicated and largely favor the employee.

We have made strategy changes and added new leadership to our European business, but overall, we have continued to run the Europe, Middle East and Africa (EMEA) region the same way we do in the United States with a bifurcated business model that has corporate sales (selling to the smaller customers) and enterprise sales (selling to the largest customers) running as almost separate businesses.

The system includes entering a country, establishing a beachhead, gaining customers, earning local references and then making hires. Next, we seek partners, build add-ons and grow field sales.

Our U.S. brand is about success, scrappiness and customer centricity. Our international PR and marketing strategies embrace those same values. Similarly, our brand is about our unique 1-1-1 integrated philanthropic model, so the foundation has a presence in each of our global offices.

When building a presence overseas, always leverage local resources — especially local experts. Look for a minority-owner joint venture partner that can be a sounding board.

As always, salesforce.com targeted the end user — not the person who controlled the budget — and these individuals were impressed by the superior customer management that our service offered.

After some time building the business in Japan, we found that Oracle’s model — that of using partnerships to sell the service — was not working effectively enough for salesforce.com. We decided to go back to our basics and build salesforce.com as we first had in the United States and Europe, through aggressive marketing and a direct sales team.

As Uda-san had predicted, winning Japan Post as a customer captured tremendous media attention. The story made top page of the Nikkei, the equivalent of the Wall Street Journal and subsequently we were the subject of more than two hundred news articles on this topic alone. Whereas we were able to start with smaller companies in the United States and Europe, the top-down model is the way to succeed in Japan, where the largest companies provide the most powerful references.

There are incredible benefits to temporarily sending the best people from your headquarters to help establish or grow a new market. These expats — or missionaries, as I call them — are tasked with hiring key people, building up a region, and ultimately finding a local executive as their replacement.

International leaders are specialists in their local markets. They are advisers who are aware of the area’s history, culture, laws, buying behaviors and customs. They know best how to serve their country and region. Global leaders are executives who specialize in ensuring that international offices fit within the rest of the company. A combination of each of these leaders is essential.

A well-drafted contract with “light and love” is a one-page document that is bulletproof and executed perfectly — with as little legal language as possible. The brilliance of this document is in its brevity. Anyone — not just the legal team — should be able to understand this contract. The key is that it is tight enough to be binding, but loose enough to give latitude so that each party can operate freely.

We needed an office in the heart of Asia-Pacific. Singapore, an English – speaking international business center that offered aggressive economic incentives, provided us with a prime place from which to target the large developing (and geographically equidistant) markets of China and India.

Aaron Katz spent the first six months recruiting star salespeople from Microsoft, Oracle and Siebel who were working in Bangalore, Hong Kong, Mainland China and Korea. We relied on these local experts to teach us everything about pricing, positioning and marketing in their respective countries. We have always invested in building market awareness and demand before we build a physical presence.

In Asia, business is conducted face-to-face, and anyone with whom we wanted to do business expected to see us a lot more often than we had first planned.

In every relationship, in every market, commitment counts. A company must consider all the ways to become a local asset.

The Finance Playbook

I seeded salesforce.com with $ 6 million, which I had saved from working at Oracle and earned through my investments in technology companies, but the rapidly growing company required more capital than I had expected. Unlike other software companies that charge big up-front costs for their products and use these checks to finance the company, we were only charging a small fee every month. That model meant that we needed significant capital to stay afloat and grow.

Apply professional standards in structuring and documenting all investments. Create a plan that includes formal projections and an assessment of when investors will see a return.

More than two-thirds of the time, VCs replace founding CEOs.

Thanks to the falling cost of hardware, overseas coders and on-demand services, start-ups need less capital to get off the ground.

We made a critical change to our financial structure by evolving to a subscription model with annual contracts. The changes required that we build a formal process to execute contracts and manage renewals. These financial housekeeping systems allowed us to better predict revenue and become a more stable company.

In a fast-growing business like salesforce.com, we needed to focus on revenue growth and capturing market share. To do so, everyone had to be measured on finding new customers and expanding sales with existing customers. We determined to measure everyone on revenue — not profitability.

As part of the internal restructuring, it became clear that we needed someone who could help lead us through this transition and help us scale. In 2002, we had about $ 25 million in annual revenue, and I began to query my network. I asked my neighbor in Napa Valley, Steve Cakebread, the CFO of Autodesk, a billion-dollar software business, if he could recommend any CFO candidates. He said, “Why not me”?

It was always our goal for salesforce.com to go public. First and foremost, we wanted credibility. We had built the SaaS industry, and now we wanted to be the first SaaS company to go public.

Ernst & Young issued a revenue recognition position paper for SaaS companies, which covers the key concepts and issues that arise in determining when and how to recognize revenue. Now all SaaS companies do their accounting the way we do.

Although the SEC’s scrutiny of our accounting principles was a serious challenge for our company, it did not sour investors on the salesforce.com deal.

We were the first SaaS company to go public, the first dot-com to go public in several years, and the first dot-com that would trade on the NYSE. Ringing the bell at the NYSE on the morning of Wednesday, June 23, 2004, was one of the most exciting moments of my career.

One of the people we recruited to help us scale was Ken Juster, former U.S. undersecretary of commerce and a former senior partner at a major law firm. Under Ken’s guidance, we instituted a series of processes, practices and programs to help make us more systematic in the way we approached a number of issues. For example, our legal team began to monitor the acceptable degree of risk in customer contracts. We also became more focused and strategic about our international expansion. We also put in place formal procedures and processes for personnel matters, such as stock refresh grants and performance pay raises, which previously had been handled on an ad hoc basis.

The Leadership Playbook

While a company is growing fast, there is nothing more important than constant communication and complete alignment.

When I was at Oracle, I struggled with the fact that there was no written business plan or formal communication process during our growth phase. What I yearned for at Oracle was clarity on our vision and the goals we wanted to achieve.

Over time I developed my own management process – V2MOM. An acronym that stands for vision, values, methods, obstacles and measures. This tool (pronounced “V2 mom”) has helped me achieve my goals in my past work and helps make salesforce.com a success.

  • The vision helped us define what we wanted to do.
  • The values established what was most important about that vision; it set the principles and beliefs that guided it (in priority).
  • The methods illustrated how we would get the job done by outlining the actions and the steps that everyone needed to take.
  • The obstacles identified the challenges, problems, and issues we would have to overcome to achieve our vision.
  • Finally, the measures specified the actual result we aimed to achieve; often this was defined as a numerical outcome.

I never liked org charts as a management tool. They are narrow, they don’t capture the nuances of an organization and they aren’t empowering for employees.

Salesforce.com’s First V2MOM – 4/12/1999

  • Vision: Rapidly create a world-class Internet company/site for Sales Force Automation.
  • Values: World – class organization; Time to market; Functional; Usability (Amazon quality); Value – added partnerships
  • Methods: Hire the team; Finalize product specification and technical architecture; Rapidly develop the product specification to beta and production stages; Build partnerships with big e-commerce, content and hosting companies; Build a launch plan; Develop exit strategy: IPO/acquisition
  • Obstacles: Developers; Product manager/business development person
  • Measures: Prototype is state-of-the-art; High-quality functional system; Partnerships are online and integrated; Salesforce.com is regarded as leader and visionary; We are all rich

I rewrite the V2MOM every six months.

We have created an application on our Force.com platform called “Peopleforce” which enables us to track all of the V2MOMs.

The right people and the right number of people set the pace for the entire company.

We take hiring as seriously as we do revenue. Some people say I am obsessed with hiring, and they’re right. The demand for top talent in today’s market, especially in IT, is ferocious.

It’s not just the pitch that we borrow from sales; we also utilize the seed-and-grow philosophy. Instead of having an HR department that acquired talent, we wanted to build a machine that generated a huge pipeline of talent.

Much like our sales team, the recruiting team uses every effort possible to generate leads. Don’t wait for resumes to come to you. Consider recruiting to be part of your job. Include employees in the talent quest. Add people to your leadership level first. As a company grows, the biggest challenge is the constant pressure to lower your hiring standards. It’s very important for hiring to be consensus driven. To that end, we use the “all yes” rule.

It’s necessary for every company to integrate mahalo — the Hawaiian spirit of gratitude and praise — into its corporate culture.

The very best and brightest people can quickly overcome challenges and be ready for the next step. It’s imperative to offer them new opportunities to keep them engaged and firmly committed. One of the best ways to keep employees engaged is to evolve positions frequently.

Hire A players. Demote B players. Fire C players.

Industry-recognized certifications allow partners and independent software vendors and administrators to advance their skill sets, as well as improve job security, career advancement and compensation opportunities. Using education as a way to extend our service and expand our capabilities is our strategy for future growth.

The Final Play

The final play from our salesforce.com playbook — # 111 — acknowledges that through making all our stakeholders successful, we ignited our own success.

In all industries, especially the technology industry, people overestimate what you can do in one year and they underestimate what you can do in ten.

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