The Importance Of Customer Discovery In A Crisis

A few weeks ago, I wrote about some best practices on how sales organizations can keep their revenue machines running through the COVID pandemic.

One thing I didn't spend enough time on in that post was the importance of understanding how things have changed for your existing customers. Your customers were living in a different world when they purchased your product. At the time, your product was likely solving a top 3 problem for your buyer. With COVID, things may have changed. Your product might be significantly more valuable now than it was prior to COVID — or significantly less valuable. Either way, you need to find out quickly.

Most companies are going to be cutting expenses, and you must understand whether or not your product is on the shortlist of things to cut. Reversing that reality may require hard pivots, so you need to know now.

Here are some key questions to ask your customers as you have conversations or complete account reviews:

1/ How has COVID impacted you? How has it impacted your customers?

2/ How have your top 3 or 4 priorities changed due to COVID?

3/ What kinds of products are you buying now (if any)? What kinds of products are you cutting?

4/ Are you cutting staff? Will the users that historically have used our product change?

5/ Before COVID hit, our product was addressing a top 3 priority for you. Is that still true?

6/ Is our product more or less important to you than it was prior to COVID? Do you expect to use it more? Less? Why?

7/ Are you using our product differently now than you did prior to COVID? How?

8/ What parts of our product are more useful to you now? Less useful?

Push your customers to give you hard answers to these questions — even if you don’t want to hear them. And make it easy. Send simple surveys. Quickly run through these questions at the beginning or end of calls or Zooms.

Finally, it’s worth noting that commercial teams tend to be extremely optimistic. This project requires intense pessimism and a search for the real truth. This is not the time to sugarcoat what's happening in your market. Get to the truth as quickly as possible. If needed, reset expectations, find ways to repackage your solution around new problems, or (in rare cases) rebuild your solution to solve the emerging problems your customers are facing in this new world.

Working For Jeff Bezos

I’m reading Amazon’s Management System by Ram Charan and Julia Yang. I absolutely love this excerpt:

As former Amazon executive John Rossman put it: “If you want to succeed in Jeff’s relentless and fiercely competitive world, you cannot:

• Feel sorry for yourself

• Give away your power

• Shy away from change

• Waste energy on things you cannot control

• Worry about pleasing others

• Fear taking calculated risks

• Dwell on the past

• Make the same mistakes over and over

• Resent others’ success

• Give up after failure

• Feel the world owes you anything; or

• Expect immediate results

The most successful are those who can excel in the pressure cooker, week in and week out, shaking off the occasional failure and the subsequent tongue-lashing, put their heads down, and keep on driving.”

This is a near perfect description of the best people I’ve worked with over the years.

Hiring Your First Head Of Sales

By far, the most frequent question I get from founders is this: How do I go about hiring a Head of Sales? I've literally received this question four times in the last six or seven weeks.

Hiring a Head of Sales at a startup is a very difficult, important, and scary thing for a founder. Making a mistake on this hire can set the company back several quarters. I try to avoid making declarative statements to founders because context is so important and each situation is unique. That said, here are a few things that will help reduce the risk associated with hiring a Head of Sales for the first time:

1/ Ensure the candidate has been an ultra-successful individual contributor. I know, I know, the best salespeople aren’t necessarily the best managers. You don't need the best salesperson in the world, but you do need someone who has done it before. In startup sales, you can't lead the calvary if you can't sit in the saddle. Strong sales capabilities (both to sell direct and to sell salespeople on joining the company) are crucial in this role. If this candidate can't sell, they likely can't recruit. It’s not worth that risk.

2/ Ensure the candidate has sold into (roughly) similar-sized organizations in the past. If you're selling to large enterprises, don't hire an SMB expert, and vice-versa. It's not impossible to make the transition, but it's relatively unlikely that it will be successful. Often, the things that make people good at SMB sales make them bad at enterprise sales. Also, do consider the candidate's experience with the vertical you're selling into. Ideally, you will be able to find someone who has sold into that vertical in the past. I wouldn't make this a requirement in every situation. The importance of this is industry dependent. But if the industry has a steep learning curve, optimize around that set of experience.

3/ If you have the capital, hire a headhunter to help. Doing this search right requires an expertise and time investment that most founders can't afford. This is a good opportunity to outsource.

4/ Hire a “stretch VP.” A stretch VP is a rising star (generally Director level) that needs to level-up a bit to become a sales leader at a larger organization. This type of candidate will generally lean towards execution but will have the potential to recruit and run a team. This is a good hedge. If the candidate levels-up and can run the whole sales organization, that's great. If they can't, it'll be easier to “level” them with a more senior candidate. If you hire someone too senior, you run the risk that they won't be execution-focused, and it will be difficult/impossible to level the candidate if things don't work out. A stretch VP is a good way to reduce risk.

5/ Overinvest in intrinsics. This candidate is going to be accepting a very difficult job. Make sure they have the intrinsics that will make them successful in a high-pressure startup environment — grit, humility, adaptability, and curiosity. More on that here. Also, this is hard to do, but make sure the candidate is someone that is at a stage in their life and career they simply aren’t willing to fail. Some call this “personal exceptionalism” — more on that here.

Things That Don't Scale

I recently started using Superhuman, the popular $30 per month email application, that's getting lots of buzz. It's a wonderful product. It solved my email overload problem.

I would've started using it sooner, but before they would grant me access, I had to complete a thirty-minute consultation with one of their staff members to configure my email and learn how to use the product most effectively. That seemed unnecessary to me, so I passed.

I eventually got desperate and agreed to the consultation. I now see why they force this — they go deep on how you use email, do some real-time customizations, and make sure you know how to use the product. All of this makes users much less likely to churn.

That said, it's surprising that Superhuman, an application with thousands and thousands of users, would make this kind of investment in onboarding new users. For a $30 per month consumer email application, this seems like the definition of something that won't scale.

I recently came across an interview with Superhuman's co-founder, Rahul Vohra, where he talked about the importance of these consultations and was asked if he thinks they can scale. He responded by saying that organizations need to identify the things they do that won't scale and decide which of them they should keep on doing. These are things that, from the outside, may seem small and wasteful but are actually core differentiators consistent with the heart of the organization's strategy and competitive advantage.

I've been thinking about this a lot lately. As an organization scales, the things that aren't scaling start to become really obvious. And smart companies find ways to outsource, automate or completely stop doing them.

The hard part of all of this is identifying those things that, on the surface, seem like they obviously won't scale but actually drive big value.

At the Ritz-Carlton, every single employee (even the maintenance folks) has a budget of $2,000 per guest to make things right. On the spot, without asking.

Zocdoc, the medical appointment booking service, sends a $10 Amazon gift card to users every time a doctor reschedules an appointment.

Zappos maintains a 24/7 call center, posts their phone number on every page of their website, and doesn’t have a phone tree.

In the early days, most startups will tend to overinvest in high-touch and high-cost activities. They have to do this because they're forcing their way into a market. They can't cut corners and scale isn't an issue.

One-on-one product training. High-touch recruiting and employee onboarding. Ultra-fast customer service response times. Even small things like sending hand-written holiday cards to every customer. These are obvious and easy to do in the early days. But many of them won't scale and there’ll be pressure to stop doing them over time.

The easy part is dropping things that don’t scale. The hard part is continuing to do them.

Some Notes on Managing People

Earlier this week, my team went through a day and a half management training. It surfaced a bunch of things that I've learned about managing people over the last several years. I made some notes and thought I'd share them here.

1/ Some managers see their role as being the one that needs to smooth things over. This is the wrong approach. As Karl Marx said, it's best to "sharpen the contradictions." Bring the conflict up to the surface so everyone can see it and deal with it.

2/ When managing managers, sometimes the most important thing you can do is help them make the hard decisions they already know they need to make. Give them the support, safety, and clarity to execute on the hard stuff.

3/ Self-awareness and general awareness are two of the most crucial attributes of a leader. You have to know how you're being perceived and you have to know the issues on the team. You have to be in touch with the 'water cooler talk'. You have to make sure people understand that you know what's going on in their worlds. A clueless leader is the worst kind of leader.

4/ Create a habit of regularly expressing unsolicited gratitude to your reports. This is rocket fuel from an engagement and loyalty perspective.

5/ Use the writer/editor analogy when thinking about how much leverage you're getting from your reports. If you're doing a lot of writing, you're not getting enough leverage.

6/ Giving feedback is a muscle. When you do it a lot, it's easy. When you don't do it a lot, it's hard. Make giving feedback a regular part of the way you interact with your team.

7/ In a conflict, try to understand the other person's argument so well that you can make their argument for them with more clarity than they can. Don't make your argument until you can do this.

The Sales Evangelist Podcast

Several weeks ago I had the chance to appear on Donald Kelly’s Sales Evangelist Podcast. The topic of the podcast was How To Deal With The Pressure Of Hitting Your Quarterly Number.

We discussed how to project sales results, how to be analytical about what’s working and what’s not, empathy, transparency and a bunch of other things related to working in a high pressure environment.

Check it out below on Stitcher or on iTunes.

I’ve done a bunch of these now so I’ve added a Podcasts category to the archive.

My User Guide

Several months ago, my company’s CEO, Jay Desai, was featured in the First Round Review in a piece titled The Indispensable Document for the Modern Manager. The feature was about Jay’s “user guide” that he had written for his team that outlines the way he works and how his team can work with him most effectively.

From the piece

“He’s seen too many immensely talented and productive teams stall because of a subtle misunderstanding on how to best work with each other. After consecutive year-long searches for his Head of Product and Head of Operations, he didn’t want to squander that investment because he couldn’t figure out how to work with them.

So what did Desai do? He penned a user guide — similar to the kind that’d accompany a rice cooker or bassinet — but this one deconstructed how he operated optimally, when he might malfunction, and how others could use him to their greatest success.”

This guide has been a great help to Jay’s direct reports and many others across our company.

As the piece mentions, Jay inspired me to write my own user guide.

I’ve found it to be invaluable — especially for my newer hires. Rather than taking several months to figure me out they can cut right to the chase and get lots of context on how to quickly start working together most productively.

I highly recommend writing a user guide and sending it to your team and asking them to do the same.

See my user guide below. I’ve embedded it as a Google Doc so any changes I make to it will flow through to this post.

Dealing With The Pressure Of Hitting Your Number

Like many jobs, sales leadership can be quite stressful. Success in many ways is binary. You set a goal at the beginning of a period and you either hit it or you miss it. Lots of jobs don't have that level of clarity around success or failure. In sales you can’t hide. There’s no grey area.

This kind of pressure isn't easy to deal with. Here are some of the things I've picked up over the years to make the stress a bit more manageable.

1/ First and foremost, set goals that are attainable and that you believe in. Don’t let finance or your CEO or your board dictate the number for you. You have to believe you can hit the number.

2/ Have your own financial model and forecast. Your finance team and others will have their own models. Have your own as well. Ideally, the elements of the model will consider the following assumptions: 1.) quotas by role 2.) headcount and hiring plan 3.) ramp-up time for new reps 4.) quota attainment % and 5.) rep turnover rate. If you have 10 ramped-up reps with a reasonable quota of $250k and, on average, the team hits 80% of quota then you should be comfortable with a $2MM quota. The math isn’t hard. The hard part is getting comfortable with each of the above assumptions. And that takes time. I'd encourage you to create some slack around your assumptions while you're still figuring out how accurate they are.

3/ In the early days, you won’t have any of those assumptions. You’ll have to calculate your target from a bottoms-up perspective; e.g. what you can accomplish based on current pipeline and your current understanding of deals are likely to close. This means you’ll have to set shorter term targets (monthly or quarterly instead of annual).

4/ Approach your job as a police investigator would approach an investigation. Always look for clues as to what’s working and what’s not working. Create your own dashboard in your CRM that shows you what's happening in real-time. The dashboard should include things like revenue, opportunities created, pipeline dollars created, speed to close, etc. All of these reports can be broken down by sales stage, rep, market and customer segment. Watch these numbers on a daily basis and have a borderline obsession with what's happening. Find the bottlenecks. Write up and document wins and learnings every week and have your team do the same. Those tools will give you the clues you need to track down what things you should do more of and what things you need to change. I’ve written a bit about pipeline management here, here and here.

5/ Create a weekly meeting where you review the learnings and findings above and invite your sales leadership. The topic of the meeting is one thing: are we going to hit our number? Don’t leave that meeting until you have consensus on that answer. And if the answer is “no” then get consensus on what’s going to be done that week to get back on track.

6/ Be as transparent as possible with leadership and your board. Think of this as a see-saw. When you’re on track to hit your number, the see-saw goes to the left (numbers up, need for transparency down). When you're not on track, the see-saw goes to the right (numbers down, need for transparency up). When things aren't working people want to know why. Don't wait for them to ask.

7/ Build a process around how you update various stakeholders (weekly meetings, email status updates, pipeline reports, deal reviews, etc.). Again, be proactive on this. Nobody should have to ask for these updates. Make sure people are getting what they need.

8/ Learn from others that have the same challenges. Some sales books and blogs are great but I've found sales and sales leadership podcasts to be the most effective way to get smarter about this topic. Listening to an actual person that does what you do is a great way to gain insights and generate ideas for what you and your team can improve. Check out a couple here and here.

9/ Finally, and most importantly, take care of yourself. Create healthy habits and get more aggressive about following those habits when the pressure increases. Get enough sleep. Eat well. Drink lots of water. Exercise. I also encourage meditation. I'm not as consistent with meditation as I could be but there's no doubt mindfulness gives you important perspective on the pressure you’re under. I use the Calm app and love it. Again, I've found that doing all of these things is more important when the pressure increases. When you're feeling good no problem is insurmountable.

The SalesQualia Podcast

I recently had the chance to sit down with Scott Sambucci from SalesQualia on his Startup Selling Podcast to discuss: The Selling Process vs. The Buying Process in the Enterprise Sale. We covered a wide range of topics, including the most common mistakes entrepreneurs make when selling into large companies, selling innovation and building and managing teams. Check it out below on Soundcloud or on iTunes. 

Quick Decisions

Whenever I interview someone that recently worked at a startup that went out of business I ask them why it failed. How analytically someone answers this question says a lot about them. But the truth is that I'm mostly asking because I'm curious. I want to know what to look out for.

More often than not, the answer comes down to one thing: dysfunctional leadership. More specifically, for some reason, leadership didn't communicate well and couldn't make quick decisions. 

Tomas Tunguz had a great blog post on this topic recently, titled the Challenge of Uncertainty. From the post:

“The management team of a company is a decision-making and productivity chokepoint. Critical decisions flow through them. If the management team ruminates on most decisions, the company’s progress stalls. In a 100 person startup, five slow-to-decide executives limit the productivity of 95 employees. In a 1000 person startup, the ratio might be 10:990. There’s enormous leverage in a hierarchical organization if the leadership moves quickly. The converse is equally true. Sluggish decision-making halts all progress.

The cost of deciding slowly seems small. Just a day or a week of more research; one more experiment. But a day’s delay in a 1000 person organization costs the company more than $400k in lost productivity.”

Slow decision-making can be paralyzing for a company.

Management teams should check themselves occasionally on the speed and quality of their decision-making. It will almost always deteriorate over time. There are dozens of little things that can weigh down management and cause them to slow the pace -- too many direct reports, too many meetings, not enough meetings, new personalities, fear of telling the truth, personal issues, different communication styles, poor prioritization and on and on. All of these things will come up at some point. How well a leadership team weeds through this stuff and finds a way to continue to make good, speedy decisions might make the difference.

The Issue Of The Day

I’ve found that one of the most important things an executive can do is to regularly identify the “issue of the day” for their company or their team or their group and to address it with urgency.

Peter Drucker refers to this as identifying “what needs to be done?” Ideally, it's one thing, but definitely not more than two.

The discipline to continuously have this in mind and to have the emotional intelligence to be able to accurately identify the issue of the day is difficult and something that separates great leaders from the rest.

The issue of the day could be a number of things: some are opportunities, some are problems, some are strategic, some are tactical, some are elated to business problems, some are related to people problems. An example could be launching a product that will create a large growth opportunity or retain a specific set of customers; onboarding new managers and making them into productive leaders or something as small as fixing a commission policy or plan that is frustrating for top salespeople. The key is the ability to recognize the issue and measure its importance and urgency in comparison to the hundreds of other burning issues that could be addressed.

One of the most difficult things about determining the issue of the day is that different people will often have different perspectives on what the issue of the day actually is. The board, the CEO, the executive team, the line managers will often have different opinions. Getting alignment here is crucial. And, just as important, if alignment can’t be gained across all relevant stakeholders, the executive must make the call on what's most important now and focus on that thing more than any other.

Silo And Un-Silo

Back when I was working at Next Jump, an e-commerce company that enabled big brands to offer their products and services at a discount to large employers and customers of large consumer marketers, our primary objective was to drive spend through our website.

My specific job was to drive user acquisition. I was focused on acquiring more companies to buy the product for their employees and then to get employees (users) to register an account and keep coming back. My colleague, I'll call her Jane, was in charge of site merchandising and had the job of converting those users into buyers once they came to our site. So my job was to get people to our site, and her job was to get people to buy once they arrived.

Every week our teams would meet to review results. We’d start by focusing on the total spend on our site during the previous week. Some weeks the numbers would be up and some weeks they'd be down. In the weekly meeting, our leadership would look at Jane and ask what happened during the previous week. Frequently, Jane would look at me and say, “we didn’t have a lot of spend on the site because we didn’t have a lot of traffic.” Other weeks I would look at Jane and say, "we had plenty of traffic but that traffic didn’t convert into spend."

This was obviously unproductive. We were pointing fingers at one another and defending our impact on the overall number which meant that nobody was responsible for the overall number.  

Our solution to this problem might seem counterintuitive: we created silos.

We came up with something we called “the box.” My team had the job of getting people into the box (get people to the site) and Jane's team had the job of making good things happen once they were in the box (get people to buy things once they were on the site). My primary metric was weekly unique users and Jane’s primary metric was conversion of those users (spend per unique user).

This changed everything. We set up specific metrics for each team where neither one of us could ever blame the other. My team wasn’t measured on overall spend (something we couldn’t control alone) and Jane’s team wasn’t measured on overall spend (something her team couldn’t control alone). We were measured on our slice of the spend metric (users and conversions) and if we both did our job we had a great week. This change created crystal clear ownership and accountability which led to lots of creativity and powerful initiatives to drive each teams' numbers. Our overall spend numbers started heading up and to the right.

Over time, though, things started to break down. Because we were so silo’ed my team wasn’t focused on the overall company goal, we were focused on our team goal. So my team would do whatever we could to drive users to the site regardless of the impact on spend. We would repeatedly promote offers from Target and Best Buy (brands that had 'mass appeal’ and would drive traffic but had relatively low value discounts with low conversion rates). This would drive a ton of traffic to the site, but the traffic didn't convert. Similarly, Jane was focused on conversion so she would promote the best offers on the site (30% off Juicy Couture, as an example). Users would come to the site expecting to see an offer from Best Buy and would see a great offer from a brand they had no interest in and a not so great offer from Best Buy. This led to a low-quality experience, lower spend, and user churn. Overall growth in spend began to slow down.

In response, we quickly setup processes to begin working more closely together. We had to fix the disconnect. We had to collaborate.

We built a monthly merchandising calendar that every team member could access in real-time. We set up several 10-minute check-ins so that the acquisition team knew exactly what the site merchandising team was promoting each day and which offers were converting at the highest rates. The acquisition team would send all marketing emails to the merchandising team prior to sending to users to get their sign off. We used data from the acquisition team to convince the mass appeal brands to offer deeper discounts. 

At first, these efforts forced collaboration. But over time the collaboration became much more organic. The teams became inclined to be collaborative. After a few weeks, the numbers started to head back up. That said, we definitely didn’t abandon the silo’ed metrics for each team. Hitting those metrics was still the primary job of each team. What changed was the approach we took to hitting each of our metrics. It was about transparency and collaboration and a broader focus on what was best for the company as a whole.

The point here is simple: not having silo’ed metrics is a bad thing and being too silo'ed is a bad thing.

As an example, sales teams need to have silo’ed sales metrics that they’re accountable for to force ownership and creativity and high performance. But if the sales team is only focused on one top line metric and nothing else, over time they’ll be motivated to close deals that may be bad for the company and will lead to high churn rates. They have to have a silo’ed metric but also be forced to consider what’s best for the company as a whole.

Companies get in trouble when they lean too far towards one side. Telling groups to just work together to drive an overall number leads to a lack of accountability and creativity. And too much separation leads to a lack of collaboration and focus on the broader goal.

Well run companies find a balance and learn to silo and un-silo.