Leading Edge: A Sales Masterclass w/ Mark Roberge Former Hubspot CRO Mark Roberge | ASU+GSV 2022

[Music] [Applause] [Music] hi everyone i hope everyone's uh filling with kay welcome to the morning after the first night being away from home for a while um so my name is paul uh fifield i'm the ceo and co-founder of sales impact academy so we're a live uh learning and development platform uh for go to market teams sales and go to market teams and we support the development of typically uh teams at fast growth tech companies one of our investors amazing investors is stage two capital um founded by mark roberge and i've got a guy called jay poe and i'm really thrilled to be introducing mark today he is the former cro of hubspot he wrote probably the one to embarrass you mark one of the best books on sales i've ever read called the sales acceleration formula if you haven't haven't read it i'd suggest absolutely reading it it changed the game for me as a cro uh mark's also a professor at harvard business school teaching all things go to market and as i said he's also co-founded stage two capital which is an incredible incredible venture firm all of the lp's 300 lps it's a very interesting model uh basically 300 of the most elite go to market leaders in the world and they're the ones that have basically created the the fund so without further ado as they say mark over to you thanks paul i'm gonna bring you around with me all right so uh thanks for coming out folks it's a couple of years ago um a company that was doing around 30 billion in revenue software company uh they were bringing a new product to market and it was kind of mission critical for them and i was brought in to help them to make sure the strategy is right and they told me you know we've heard that this fails like 50 percent of the time and i said i think you're right maybe even underestimate so i'm like let's take a look at your sales strategy on how you're going to bring this new product to market so they showed me this huge plan they were going to launch it in three months they had all the product roadmap stuff done all the engineers were lining up with the features they were going to kick this off at the conference the ceo had the slides ready to go to talk about it marketing had built those things marketing had pulled together the whole new website launch to support the new product offering they were training the sales team they had this whole training initiative to train their 5 000 sales people on the new product so they could go pitch it they had the support training going on for the whole support staff so if someone called a problem they could know what to do and they're like what do you think and i said i think you just increased your failure rate to 80 percent and they're like what are you talking about we we spent like a year putting this super detailed i'm like it's impressive and they're like well what what's the issue and i was like i think i can sum it up as you're scaling while you're learning and that's why i think you're going to fail and you've probably all been through product launches and i don't know what your success rate is on them on the first pass but i think that's the kind of the underlying failure point of where we go wrong on these and this applies to going into a new market i know some of you are doing that etc is we just assume we can get it right out of the gate and we try to scale while you learn and so that's what i talk about i'm going to introduce a couple of frameworks to you and like i said this doesn't just you know here's how i think about like expansion of your adjustable market and your revenue potential is you're in a particular market with a product and a go to market channel and as you try to grow you can either introduce a new product or go into a new market like i know i talked to some of you before or you can try to sell through a new channel and these are all ways for you to expand your growth potential and this particular framework applies to all three of those i think we get cocky about our ability to do something new right out of the gate and i i don't know are any of you in like uh a startup that's like sub 10 million okay it's it's kind of like the equivalent of you back in the day when you were two people with a business plan an idea and you walk into a investor and you're like yeah i've got this idea i'm like great what are you going to do in the next quarter we're going to hire 50 sales people and start selling it like we don't do we used to do that in the 90s when we did entrepreneurship but thanks to like lean startup and all this stuff we don't do that anymore so why do we think when we're this big multi-billion dollar company that we're going to come up with an idea that works for the first time and it's just going to go and so like on the sales side one of the kind of like underlying line pieces let's just think about this for a sec you probably will get it wrong you probably will get the product slightly wrong you probably will get the message slightly wrong and when you go out and train your 500 you know 500 sales people on it and they're going to spend 30 percent of their time selling a message in a product that's slightly wrong you've just decreased the productivity of your sales team by 30 percent and distracted them furthermore all those opportunities all those sales calls are opportunities to learn and you've spread all those opportunities to learn across 500 brains they're not going to see the patterns imagine if instead you had just chosen 10 people 10 people to do all the new product pitches now they're going to see the patterns and you put them in the room every day to talk about those patterns you keep your sales team focused on what you know and scale and you isolate a team to learn the new stuff and adapt okay and so the first framework i'm going to introduce to you that i thought was brilliant is done by a peer of mine at harvard named michael tushman called the ambidextrous organization i don't think it's as well known as it should be and it's funny that um i read this framework for the first time in 2016 and i was shocked because we had successfully launched a new product critical to hubspot's success in 2013 and followed every step of his framework before i even knew about it and i just love it when i see very broad reaching frameworks that i look back and i'm like holy cow that like fits all like the example success stories that i saw along this and so let's talk about this for a second it has three pieces to it that we're gonna kind of um pull apart using hubspot as an example okay and these are the three principles around it okay so let me take you back to like 2012 and hubspot we were um so if you don't know hubspot where i'm we're we were originally a marketing software company and in 2012 salesforce.com does anyone here work at salesforce okay i love salesforce but i like they bought one of our competitors and they started selling the product for a dollar a year i don't know if that's ever happened to you because we sold our product for maybe 10 000 a year that's tough that's a tough battle right but smart smart and so we're like all right this is do or die at the time i think we had like a 100 200 million in revenue we had like a thousand employees and we're like we had we're supposed to go public in 18 months we have to go into the crm space to survive because salesforce is offering the whole go to market suite and we're going to get creamed so we have to launch a crm and so let's kind of use that challenge with this particular framework okay so first off if you went to our website at the time this is what it looked like create marketing that people love so if i'm telling a vp of sales to buy my crm and they go to this website i'm not that psyched about that and that's what tushman says about like create an overarching strategy is if you're serious about launching a new product then you have to reinvent your messaging and brand and positioning to encompass the new but also embrace the old because sometimes we go in one of two directions either we are a wimp about it and we don't lean in and don't change our website and we don't set ourselves up for success no vps say i was going to buy a crm from this company or we go so far that we changed the website to like our new crm look at us hey vp as a sales and all the existing marketing customers like what the heck right and so to his point i think the famous example that tushman says is if railroad companies in the 1950s had defined themselves as transportation companies they probably would have been disrupted by the airline industry that's how we have to think about it so we leaned in and came up with growth and to this day hubspot is very much about it used to be all about inbound marketing and at that point it was just about growth and that checked cushman's box and worked really well the second one was embrace hold tension at the top so typically when i see these product launches happen it is owned by a product manager who's in charge of this new product and they report to the director of product management in that region who reports to the vp of product marketing in that region who reports to the chief product officer who reports to the ceo that's how it's done but we all know that like if we're serious about bringing this mission-critical product to market they're gonna need the core businesses help but the core business is focused on what they know and how to drive revenue and they're not going to give it to them so someone needs to be in charge of putting out that tension and most companies who assigned it to that product manager that's five six levels down in the organization they don't have the political power to do that and so twitchman says hold tension at the top don't think about your company structure org structure based on p l size think about it based on strategic value and so he claims even though this the core business is doing 20 billion dollars and this new product isn't even doing 100 million even in doing not even doing a million they need to report really high up in the organization and that's what we did we didn't bury it this is what hubspot's sales whole company looked like before we introduced the crm everybody was focused on the marketing product and then when we launched the crm we stuffed the whole marketing business under the co and the person running the crm reported the ceo 200 million dollars in revenue zero but huge strategic value and now the ceo took ownership on the tension that came up i need this to launch the crm core business is like we'll never hit our number if we do that ceo makes the decision sometimes in favor of the core business sometimes in favor of the new but that's their call okay the last and final piece and this is i know there's probably 15 or so hands went up around our early stage startups i think what i've done what we've talked about so far you do well you're kind of forced to this part i think even the early stage startups mess up i was over the last five years when i uh after the hubspot ipo i as paul had mentioned i left and joined the faculty at harvard full-time and worked with lots of startups served as an independent board member places like asana and drift and companies that became unicorns worked with them when they had no revenue so i got to study all these companies that were bringing products to market and i started to see patterns on why they fail and really the patterns came down to when they chose to scale and how fast and so i want to talk about this at this moment so what tushman says here is the last piece is embracing consistency and what he says is the core business is measured by the p l the revenue and the profits most people when they launch a new product even an entrepreneur the first goal they set is revenue i actually could not disagree more with that strategy and i want to kind of bring that to life for you on why i think that's not right and i've seen that contribute to unnecessary failure with every product launch including the entrepreneur ecosystem so tushman says measure the core business by the p l measure the emerging business by the pace by which they're learning okay so let's talk about that so like i said i find that most product launches and most early stage ventures fail unnecessarily because of kindergarten mistakes on choosing when to scale and how fast and so think about like when when do you think you're ready to scale half the half the entrepreneurs i asked that question to say i think we're ready to scale when we have you know uh a hundred thousand in revenue when we have 20 customers and i i think that's market message fit that just means you know how to sell doesn't mean the product works i can sell ice to eskimos doesn't mean they need it right so that has nothing to do with whether you're willing to scale the other half of the entrepreneurs will say we're ready to scale when we have product market fit i talked to a couple of you before today before this uh this time and you said that product market fit now what's interesting about that is if you ask a hundred entrepreneurs what is product market fit you get a hundred different answers i mean what do you think product market fit is that's crazy that like again thanks to the work of eric reese and lean startup and steve blank in the other part of this century great we don't sell vaporware anymore we try to get product market fit first but what is it it's not a revenue line if you look at the wikipedia page for product market fit you have amazing entrepreneurs talking about you just it's a feeling you just get there's a pull in the market you just know it when you have it really that's what we're going to base one of the most critical strategic decisions in our business is on a feeling i don't know like i did my business school work at mit and i'm a very quant oriented person i just can't i can't get behind that now the best definition i've seen out there is a guy named sean ellis up in the valley growth hackers is his original business and he says you have product market fit when you survey your customers and you ask them how disappointed would you be if your product didn't exist and if 40 say very disappointed then you have product market fit i like that that is so much better so much better than a million in revenue or a feeling it's data driven and it's based on the customer value their perception of value my only issue is it's a survey i just i think surveys are riddled with false positive i mean you've taken these surveys with your friends like hey do you like my product of course i love your product it's their baby you're not always truthful and again i'm a little worried about that so for me if i had to choose a metric i would choose retention or if you're not in a subscription business i would choose the fact that they re they buy something else from you if you sell clothes they buy something else if you sell books they buy another one because they used your product and they decided to buy it again so i'm going to use retention to summarize that but if you're not in a subscription business i mean like buy more stuff from you that i like that metric the only issue with that is it takes a long time for you to know what your retention is and if we're in the early sequences of burning a product market whether we're an early stage entrepreneur we're a multi-billion dollar company i don't have a year to know i need to know in like a month so the key within this model is to come up with a leading indicator to retention what is the leading of your customer attention what is it that you could see in the first month of a customer's life cycle with you that if that happens they're going to be with you forever and if it doesn't they're going to churn what is it think about that for your product what what is it that you could see in the first month if it happens ninety percent of them will be with you forever if it doesn't 90 of them will churn let me bring that to life a little more and give you a framework around it so p percent of customers do e-event and t-time okay so now we've isolated our leading indicator attention to three variables p e and t i used to code in the early part of my career so some of that comes out here if you're a coder you might respond to this type of thing let's bring it to life slack if 70 of customers send 2 000 team messages in the first 30 days we have product market fit i love that and that's kind of what it was there if you read about them i love that imagine the founder of slack stood up in front of the company when there were 10 people and said our first goal is a million in revenue that's what a lot of entrepreneurs do versus our first goal is to get seventy percent of our customers to send two thousand team messages in the first 30 days or every 30 days those are two very different companies that come out of that i will invest all day in the latter the former maybe and that's what a lot of vcs ask right a lot of vcs just ask you how fast you're growing if you're going over 200 i'm in if you're not i'm out i think that's blatantly wrong i ask like show me these numbers if these are happening i'm in if you're going 200 a year revenue and this is a mess your churn is 50 no one's using your product i don't want to fix that you don't have a company if you have this and you just can't sell we can fix that that's easy that's the next step well it's not easy but it's that's the next step let's go that's a great foundation of a business and we've destroyed amazing i mean i don't know if anyone worked at groupon but i kind of feel like we went public and never figured this out all right so dropbox you know 85 of your customers back up their device every day hubspot you know we caught this one late because we were pretty early in the sas journey we didn't really know how important retention was if 80 of customers use five or more features in the platform every two months that's what predicted retention it's really powerful when you this becomes your north star and the product people the engineers the customer success people the sales people are aligned with this in fact like let's just talk about sales for a second i mean almost all the customer attention issues i see out there if you have a if your customer attention is not quite where you want it to be most people look first to the product and second to the customer onboarding team and i think the issues rarely are in there like let's think about if you have 50 churn and 50 customer attention that's really bad half of your customers are succeeding so if all you did was sign up people just like that you'll have a hundred percent customer retention issues are mostly sales issues it's the customers that your sales people you're like the vp of product just punched the vps sales in the back by the way there um the the um the issue is because of the the customers that your sales people choose to sell and the expectations that they set like we have amazing like sales qualifying matrixes out there like bant budget authority need timing what's the ban what's the ban it tells us how they're going to buy whether they'll buy do you have the sister of that which is whether they'll succeed did the sales people check off the stuff necessary for the customer to succeed classic example in like a technical setting is did they get the cto on board before they sold the product the business unit head loves the product it's going to help them solve everything but there's a month's worth of implementation work that needs to happen the cto needs to do the sales person doesn't need to do that to get the deal but if they don't do it there's no way the cto is setting that up but if they get the cto involved before the sale that product's going to succeed that's just one of many examples so a classic you know if we're just compensating our sales people on getting a signature and a contract you're probably going to have a lot of churn but if you compensate them half when the contract is signed and half when the leading indicator of retention happens you'll have really good retention so it's slack you get half your money when you sign on the customer and you get the other half when they send their first 2000 team messages guess what's going to happen the sales rep is going to set them up in a free trial and get them to send 2010 messages before they even sign the contract and you're gonna have really good retention okay so just and then how are we gonna measure this so let's measure this by when the customers were acquired so let's pretend this is slack's data it's not so this company acquired 24 customers in january and after a month only three percent had sent those 2000 team messages that's not good after three months 33 we're sending 2000 t messages a month after six months 39 that is not good if you're a collaboration software company and less than half of your company are sending 2000 t messages a month that's not good but they made a lot of changes hopefully they changed the comp plan the onboarding process the product and by september when they signed up 50 customers two months in almost 70 percent of those customers were sending 2000 t messages a month that's awesome so we can look down the row down the column and see our improvement when i'm like on the board of a seat or series a company i am so bored in that board meeting until this slide comes up you're oh you acquired this customer you have this pipeline is it working show me this first please that's that's the north star cool all right so that's the product market fit are we ready to scale so hopefully it's like okay product market fit when should we scale this product when we have product market fit hopefully now we understand how to measure product market fit not based on a feeling not based on some other company but based on our data and we're all aligned around are we ready to scale now no because at this stage at product market fit stage paul graham the founder of y combinator famously is quoted saying do unscalable things early i think it's perfect for this stage there's a company called drift the through the chat bots out of boston david cancels a good friend he was a founder they just sold for a billion dollars in q4 last year and in the first year of drift he as the founder ceo was flying to personally on board customers that were paying him 50 a month that's not scalable but it's brilliant at this stage it's brilliant so you have to throw every you know there are so many entrepreneurs that come up with an idea if you can prove that like most of your customers see the value that you envisioned kudos to you you've accomplished something that like less than five percent of entrepreneurs will ever accomplish in their life congratulations and you need to throw everything in the kitchen sink to make that happen but at this point all you've proven is if you put 20 customers into this product this month or this quarter that most of them are going to succeed you don't know if you can do that profitably that's why you're not ready to scale and so after product market fit we have to work on go to market fit and the same way we can quantify product market fit with customer retention we can quantify go to market fit with you in economics why don't we use gaap accounting profitability because gap accounting profitability doesn't it doesn't quite measure the scalability of your go to market and the ability to serve your customers uni economics tends to isolate better and just like it's going to take a year for us to understand our customer attention it takes us a quarter or more to understand our unit economics so we have to figure out the leading indicators of the uni economics as well now take a big sip of your coffee i know it's 10 20. uh-oh there we go i'm gonna this is a little bit of an easier a more standard way to conceptualize the lead indicator of unit economics unlike the leading kid of retention but it's algebraic and so i'm just going to give you an example like um one of the metrics that like the sas businesses love to measure unit economics is your lifetime value to your cost of customer acquisition ratio three to one you might have read about that so theoretically when you hire a 27 year old account executive and they say what's my job you kind of say to create an ltv cac of three but that doesn't mean anything to a 27 year old account executive so algebraically we just have to extract this back into things that they can understand which is like how many leads they work and the close rate and the average sale price and measure it so ltv is usually calculated as how much our customers pay us the annual contract value times the gross margin divided by the churn rate and the the cost to acquire customers how much does it cost to generate demand plus how much does it cost to sell that demand and the cost for the demand is how much does it cost to generate a lead sales qualified lead as sql divided by the close rate and the cost to sell it is how much do i pay my reps per month or per quarter how many customers do they sell and how many customers they sell is the close rate on the leads sorry i went fast these slides will be posted and you can stare at it but you get the point all i did was take this ultimate goal of uni economics and extract it back to something that a 27 year old can understand right and now i can put together a business model if we sell an average ticket size of 20 thousand dollars with a close rate on our leads of 5 and average cost per lead is a thousand dollars we have a business and i can dashboard it as long as the blue line stays above the red we have go to market fit the red's not going to happen no way but at least we understand our business maybe the close rate's a little higher maybe the ticket size a little lower i don't know but at least we understand quarters ahead of our competitors whether we have a business so when are you ready to scale your product your company this new product line or if you're a brand new company when are you ready to scale you're ready to scale when you have product market fit and go to market fit and these need to be tackled in sequence i can't work on go to market fit before i have product market fit because i might be optimizing on the wrong product and they're on market yet we work on these together oftentimes we have to do them in sequence and i hope this like illustrates a much more data-driven definition based on how your company's not doing not by some other investor or advisor's experience with another company okay all right the next question the last one we'll tackle is now that i have product market fit and go to market fit how fast should i scale so you're there you know like you're you did it you showed this to investor they gave you 10 million bucks in your series a they valued at 40 million dollars and their first question is can you show me the annual plan for 2022 how fast are you going to scale you have 15 people at the company you have two sales people you did a million dollars last year what are you going to do in 2022 how do you answer that so i'll tell you what i get the answer like 99 of the time real true story san francisco company 15 employees two sales people they were doing they did a million dollars in revenue last the year before and i said what's the plan for 2022 and they said 9 million dollars so that's fast how are you going to do that and they said that they had hired 20 sales people in january oh god the sales leaders understand but you've been pressured into doing that how did you come up with that our sales people are doing half a million in revenue and that's what the excel model said oh and the growth investors told them to do it oh my god and i told them that they're going to have to lay off 20 sales people a year later and they did because you know like we they're fine the excel model says that but like do we have the leads to feed these people did anyone note that like half the customers that those two sales people got were introductions from the board and that's not going to scale did anyone look at what the average rep to manager ratio is in software is eight to one so now you need two managers and who are going to be the managers do you even know how many candidates we need to interview to get to 20 good sales people crazy so how fast can you scale it's not about some like excel model with like the triple triple double double from silicon valley and like hiring a ton of sales people at the beginning of the fiscal year it's about a pace great congratulations you have product market fit and you have go to market fit move into scale mode how fast should we scale i don't know hire two reps every other month for six months how about that let's try that let's hire two reps every other month for six months and let's watch the lead indicators or attention and the limitation in economics that's our speedometer like most people are trying to figure out if they're growing too fast or too slow by doing the quarterly p l review at the board meeting the quarterly p l the board meeting is what happened nine months ago like i i would have a bad quarter but my board wouldn't know for like two more board meetings they just weren't on top of it your competitors are using the p l to decide and if you use the speedometer that's what's happening today you're going to manage your business like six months ahead of your competition so let's hire two reps every other month and let's see if the speedometer stays green and if it does let's hire two reps a month for six months and if it stays green let's do four reps a month for six months and if it stays green let's do eight reps a month for six months and congrats you're a unicorn and you did it in a very data-driven way it's gonna break it's going to break but you're going to know six months in advance your competition so you can intervene fix it and get back on track all right so the last thing we have here is not only does this framework give us a very internally data-driven way on when we're ready to scale and how fast but it also tells us how to design our go-to-market system based on the phase that we're in because it changes the first rep you hire is way different than the 10th rep you hire i made this mistake the 10th rep is like give me the playbook give me my territory give me my commission plan and let me go make a lot of money and make you a lot of money love it coin operated rep that's a terrible first rep terrible you're you're in the product market fit phase you don't have it right yet that person is going to come in and pitch 20 customers they're going to say no and they say this thing's not working you need like a half product manager half account executive you need someone that's going to go out there i mean a huge hire this is the first person in your company that's going to talk to 30 customers a week that's super valuable but they need to have the ability to take a step back and pattern recognize what they're seeing and then communicate to the engineering team that's a good first hire these are people who are like they're not yeah they want to make money but like they don't really want to optimize it they might not need a commission plan at the first place they love dramatic change they want to be there early building things they're out there you often find them like in your local city go find like a series b or series key c company that's succeeding now it's scaling these people hate their life right now they're in the factory they don't belong in the factory that's where you find them first couple reps at that company that's who they are and like at this stage don't talk to me about the like don't talk to me about your cold calling strategy your pricing model your comp model it doesn't matter we're just trying to get like 30 customers or so to like see if we can get product market fit but that all changes at the go to market fit phase we need a playbook we need a team to build the playbook we definitely need one scalable to manage channel like content marketing or demand or uh cold calling and we need to get our price in our compensation model right don't talk to me about those things during product market fit i don't care i just care about that chart with the cohorts but at this point this is when we have to get this right we can't add 20 reps this year without a scalable demand gen channel and then a different set comes up with growth remote okay so hopefully that gives you a little bit of color if you're bringing a new product to market even if you're going into a new market i think you got to use this channel you got to use these frameworks and so just the um before i go i'll do two um two things is uh as paul mentioned um for stage two capital you we're the first vc firm that's run and backed by um let's just see we're right here we're the first vc firm running backed by cros and cmos we have 300 cros and cmos as our backers of all pretty much all the the public company software companies you know so salesforce sap zoom asana atlassian and we help companies usually when they're around a million in revenue to figure out their go to market we just we did introduce a sales accelerate um a uh sales accelerator this month that we're taking applications for so if you're in like the tens of thousands or hundred thousands you can go to stage two capital and click on accelerator we're taking apps and then um paul mentioned my book i wrote it after the hubspot days about using different than the stuff we talked about today but like how to use a very data-driven approach to building a sales team you can check that out it's for sale out there i'm doing a book sign at 4 30. i do want to note that 100 of the proceeds are donated to build.org is anyone involved in build.org um this is an organization that um they're in like 27 cities they partner with the three worst high schools in the city like gains and all this drug use and that kind of stuff and they introduce them to entrepreneurship when they're a freshman and with the intent to get them through high school and into college and they have been able to get 99 of their kids through high school and 88 into college which is way higher than what those high schools are doing so if you do support the book note that you're supporting build.org and i thank you very much [Music] [Applause] [Music] you

Channel: Global Silicon Valley

Views: 2,770

Keywords: ASU+GSV Summit, ASUGSV, EdTech, Mark Roberge, Paul Fifield, education keynote, Leading Edge: A Sales Masterclass w/ Mark Roberge Former Hubspot CRO, The “New” Competitive Edge: Skilling / Learning @ Work, ASU+GSV 2022, ASU+GSV Summit 2022, GSV Summit, GSV Summit 2022, GSV Ventures, Arizona State University

Id: aBA5KYU6cbA

Length: 40min 31sec (2431 seconds)

Published: Wed Apr 13 2022