When I read the rumors about Salesforce considering monster acquisition offers from companies like Google, Oracle, Microsoft, or IBM last month, I wasn’t terribly surprised. Not because I think the company should (or needs to) sell. Rather, the question in my mind was this: What big business wouldn’t want to absorb what I consider to be one of the best tech builds of our generation?
Frankly, I think Salesforce is a hallmark example of how to go about building any company, but particularly an enterprise technology business. Over the years, many of Salesforce’s strategies and creative ideas have become industry best practices. And despite its current size (a market cap of nearly $50 billion) and public company responsibilities, the business has managed to maintain its innovative perch atop an incredibly competitive industry.
All of that being said, I also wouldn’t be shocked if Salesforce doesn’t sell (and never had any intentions to do so). That’s the beauty of building one of the best “software” companies of the last decade and being in the dominant position Salesforce is in now.
So, what can entrepreneurs learn from the way Salesforce built its business?
4 Themes that Define Salesforce’s Growth
Luckily for all of us, Salesforce CEO Marc Benioff was generous enough to reveal the playbook Salesforce used to create and dominate an industry. His book, “Behind the Cloud: The Untold Story of How Salesforce.com Went from Idea to Billion-Dollar Company-and Revolutionized an Industry,” is one of my all-time favorite reads. It contains much of the advice that my team at OpenView Venture Partners gives our portfolio companies, and that advice has great proof points given the amazing company Marc and his team have developed.
The book (which I’d highly recommend every CEO buy, share with their team, and re-read at each new stage of growth), describes Salesforce’s history in 111 plays. Given the rumored interest in Salesforce’s acquisition, I thought it would be good to re-visit some of those plays and group them into four common themes that all entrepreneurs can apply to their growing companies:
Get Your Mission, Vision, and Aspirations Right
Companies generally don’t get bigger than their vision.
I have an example that I use in one of our workshops for portfolio companies where I ask the participants to list all the ways they can make $10 by the end of the day. Once they do that, I ask them which of the ideas can make $100 million. The answer, as you might expect, is always, “none of them.” My point is that you can’t make $100 million with a $10 vision. That’s not to say you should envision being a $50B business like Salesforce, but you do need to figure out what you really want to be and then go build a company around that.
Field Your Best Possible Team
In his book, Marc continually reiterates the importance of hiring, retaining, and inspiring the absolute best people. Without that, you’ll find it very difficult to build a very big, successful company. Of course, that’s not controversial or particularly bold, but the reality is that very few companies execute it in practice. Salesforce did and the results are evident.
At OpenView (specifically, within OpenView Labs), we spend much of our time working with portfolio companies to build excellent management teams and boards. We even employ a team of in-house recruiters who are specifically tasked with helping our portfolio (and our firm) identify and retain the absolute best talent on the market. It’s not always easy, but I view this aspect of our engagement with the portfolio as a one of the best ways to add real value.
Focus on Your Best Customer Segments
In his book, Marc describes how Salesforce SVP of Sales Rob Acker convinced him to focus more attention on the small business segment. The reason: Rob’s research and analysis concluded that the company’s close rates were higher and the cost of sale was lower in this segment. Simple enough. Benioff bought in, Salesforce built a 4-person team to focus explicitly on that segment, and the business experienced phenomenal growth in it over time.
Frankly, I’ve found that many management teams struggle with this concept of “best customer segments,” partly because every customer segment seems appealing in the early stages of building a business. To help address this with our portfolio companies, we put together a segmentation forum, wrote a case study on market segmentation, and created a Research and Analytics group in OpenView Labs that constantly works on segmentation projects on behalf of our portfolio companies.
Create Your Competitive Advantage
Salesforce did this a number of different ways, but it’s most memorable differentiation is probably its “No Software” branding. In an era in which software installations were the norm, Salesforce stood out by using that slogan, putting the logo on all of their communications materials, and having employees wear “No Software” buttons everywhere they went. Over time, Salesforce’s brand became instantly noticeable and unique, and it created a competitive advantage against legacy competitors with traditional installed software solutions.
Ultimately, this allowed Salesforce to achieve positioning as revolutionaries in their market, and it made it incredibly easy for key stakeholders and influencers —journalist, customers, etc. — to instantly recall why Salesforce was different.
Are You Making the Right Moves?
While Salesforce’s success is rare, the lessons that can be learned from how Benioff built his company are universal: Define your mission, hire the right people, find the right market, create a competitive advantage, and execute.
Sounds easy enough, right?
Sure. But only the best — and most successful companies — successfully execute those steps, while those that fail tend to botch one (or all) of the themes above. Question is: Which category does your company fall under? And how will your current execution dictate your future?