Mallun Yen, COO and Co-Founder at SaaStr, interviews both the COO at Gainsight, Allison Pickens, and Cloudflare, Michelle Zatlyn, on their early days to present day scaling and managing customer success teams. Both Gainsight and Cloudflare have seen tremendous growth over the past 8 years and can attest that a large portion of their success comes from their dedication to customer success.
If you didn’t get the chance to attend the holiday party last month, that’s okay! SaaStr Annual is only two months away and we will have more content, networking and plenty of leads! We have tickets at discounted prices for the rest of December.
Transcript
Michelle Zatlyn | Co-Founder & COO at Cloudflare
Allison Pickens | COO at Gainsight
Mallun Yen | Co-Founder & COO at SaaStr
Mallun Yen: So we have today. I’m thrilled to have Michelle Zatlyn who is the one of the co-founders of CloudFlare and she actually joined straight out of Harvard Business School when everyone thought she was crazy to just go straight to a startup and her role. I think some people have described it as doing many many things but one of them is translating the technical capabilities of the company into something that customers understand. And she’ll explain to us in a second what CloudFlare does. And then we add Allison Pickens who is the CEO of Gainsight but she joined actually about five years ago when the company was about 60 employees, a million in revenue, Series B. And in fact she actually joined us as Chief Customer Officer of Gainsight which is no small feat when and frankly kind of a daunting task when your business is all about customer success and having a effective platform there. So let’s see both companies are about eight years old eight or nine years old and have had enormous revenue growth over time.
Mallun Yen: So what you can’t really see here are just some headlines which is these companies have had enormous growth over time. You have CloudFlare grows over 80 percent year over year amid significant product rollouts. You have an announcement that was I think maybe just a month ago that said this quarter we’ve released 15 new products. You have this which says that over the past three years Gainsight revenue has grown over a thousand percent. Okay. So 1 you don’t have that kind of growth without having happy customers and two you don’t have that kind of growth without being able to support happy customers. So from at this point these folks both have strong customer success backgrounds but also COOs. So in terms of how do you scale and how do you support that. We invited these two to share a little bit.
Mallun Yen: Ok. So let’s go back to the early days. And. So the early days. Let’s take us back to the early days. So. So I don’t know if Jason’s here. So I remember in the early days of Echosign right where Jason used to sleep you know in our with our in the room we are married by the way. Just wondering. Anyway that the computer used to be open right.
Mallun Yen: Because BT was their first customer and BT is you know obviously in a different country. And so he would sleep with the cut off with the computer open with the volume on maximum so the big ticket came in it would wake us both up now. I would just go back to sleep. But Jason would come in and take that ticket. So Michelle take us back to the early days of CloudFlare. You never did anything like that did you.
Michelle Zatlyn: That’s a perfect description of how it is in the early days and I kind of miss that sometimes because it’s not like that anymore. Take more pictures along the way because you can never go back to those moments. But that’s exactly what our experience was. I mean different industry different but exactly the same. Early on three of us started the company we were three co-founders and we had this idea and we started to make progress and pretty quickly we had six people working on the idea and I just remember those early early days when we were just desperately trying to get customers to come and try and use our product. And it was really hard to get to the first hundred customers we were asking every single person we knew everyone that they knew and we were also super frugal we had no money and so I got like a piece of cardboard for one of the IKEA boxes that we we’d use to build each of our desks. And it was a big rite of passage for each of us to build our own desk. We took one of the cardboard boxes and every day that we got a new customer I would color it in. And the idea was like once we got to the hundredth customer we’re going to take the team which was six of us to Vegas. And it took us a long time to get to 100 customers but we did. And literally I would color in the cardboard box every day. And we eventually got to 100 customers and then we took everyone to Vegas and we just. That was our first team retreat and we just had our ninth one last week with 760 people. So we have since grown a lot since then and we actually showed a photo from that first team retreat and it’s like you know this is what everyone did and what it was like and it’s both amazing in those early days where you would do things like that and the people who did things like that and we had our version of people working all night or what not because they had to keep the network online. And today it’s very different.
Mallun Yen: Michelle I forgot. Give us your your 30 seconds on what CloudFlare does just put it into context.
Michelle Zatlyn: Sure. So CloudFlare we for Internet properties if you have an app or a website or a blog we help make sure it’s fast around the world we help protect all of our customers from online cyber attacks and we make sure you have good reliability. So we do performance security reliability for any Internet property around the world. So we have about over 10 million Internet property that use CloudFlare and every day about twenty five thousand sites sign up. So everyone from Zendesk who you heard about earlier to you know Goldman Sachs to the New York Stock Exchange to small businesses use CloudFlare to be fast safe and reliable.
Mallun Yen: Right. And I got to come back to you in terms of OK. When did you move beyond the six people and sleeping next to the computer with the volume turned on. So Allison so you joined the Gainsight as we the first to the customer success of the first to really lead the function was
Allison Pickens: Actually interestingly I joined in like a jack of all trades business person role. So I was doing everything from selling because back then everyone’s selling no matter what their role was to like prospecting into new markets to building sales up building pipeline even led finance through a little bit and then about sort of eight months in we realized that we’re a customer success software company so we really need to figure out this customer success thing. And so I ended up taking on the team in an early stage and scaling that out. So when that happened what was the first thing that you did. So the first thing I did was to hire an enterprise customer success person. So interestingly at the time you know we’ve been selling to a lot of other SaaS companies essentially was you know people on our network like founders in our network. Most of them were quite small but we recently had closed a pretty big deal with a very large enterprise customer and a couple of others were in the pipeline and we realized that we had no DNA really within the company to serve enterprise customers was a really different kind of thing.
Allison Pickens: So I actually came from a management consulting background I’d worked at BCG and you know I haven’t been familiar with that profile a person it seemed like we could recruit a former consultant to work in a consultative capacity with enterprise clients you know even if they weren’t working on the sort of normal analytics that you see in a management consulting world. They’re working on a lot of the same sort of engagement management project management like stakeholder alignment in a SaaS customer success context so I ended up hiring an engagement manager from McKinsey which is essentially like the first level management role and he joined to manage client relationships to begin with we gave him a few of our largest enterprise clients and he figured out what to do. You know you’d never been at a SaaS company before but he figured it out and then hired a bunch of people under him and sort of created a scalable process around it. Today actually I think four years three or four years later he’s our V.P. of customer success management and support. So it was awesome to find someone who could actually you know scale with the company and build it out.
Mallun Yen: So you hired someone who was not from the industry not not from the customer support or the industry someone who had not actually done that function before but it was a jack of all trades someone you actually could learn it on an otherwise so natural athlete type exactly an athlete.
Allison Pickens: And I think what’s great about that is in the previous conversation was all about like you know the risk of waiting too long to let someone go move someone out of a role like should you be hiring really experienced people sooner. I think that’s probably true in a lot of cases but I think the benefit of hiring someone who can deal with ambiguity is that they can evolve with your business.
Michelle Zatlyn: So Michelle what did what did you guys do when you finally said OK well I guess tell me at what point did you say OK we need to hire someone maybe it was all the three stages that you went through I saw you nodding a lot and so when you finally said Okay I need to hire someone. What did you do. Did you go for the natural athlete did you go to someone from the industry. Did you go to someone from customers.
Michelle Zatlyn: So we started with a very much a self serve business. So we had we start with a free plan and a twenty dollar a month plan and people would just show up with credit cards to sign up. And again of course early on the founders talked a lot to those customers we had good customer support but it wasn’t a traditional sales team. What happened was our customers would come to us and say we love CloudFlare but I have to pay you more than 20 dollars a month. Because they worked at real companies and they’re like if I only spend two hundred forty dollars a year on my performance and cybersecurity needs I will get fired.
Michelle Zatlyn: So I need I need a bigger I need I need a I need a business plan or enterprise plan. And so basically that really pushed us to find a solution that would also cater to large organizations. And so once we did as we had a lot of inbound interest coming in and at some point as a founder you just can’t do it anymore. And so what we had is we also had a really strong generalist it was an MBA student from Stanford who actually really was the first person who would go through a lot of that inbound interest and kind of learn sales and talk to the customers and figure out our messaging and all these sorts of things and around the process and they were very smart and curious and can do a lot of different sorts of things. I think that that works really well up to about a million dollars in ARR and then at that point sales is all about being repeatable scalable process that is what sales is. And as a founder I don’t think we really understood that and very quickly we came to understand that.
Michelle Zatlyn: And so we ended up the first I guess executive we hired for our organization was who is who who is our Head of Sales and he still runs that team today and he’s really grown that organization to over 300 people today. So it’s been pretty amazing to find somebody who came very early and was able to grow it. What. Chris his name is Chris Merritt. What Chris did that was really smart and I remember we talked a lot about this during the interview process is he really admired how LinkedIn build their sales team which was he’s like look I want to hire. Four really smart people I want a couple people have deep sales backgrounds and a couple that don’t and sit in a room together and learn and all learn share learnings from each other. And that worked very well and he was inspired by what LinkedIn which apparently they did the same thing and that worked really well. So the four original folks on his team three of the four still work for us and the other one and went on to do business school at Harvard Business School and so and they’ve really become leaders in different parts of the organization and they join in some had deep sales backgrounds some didn’t and now they’ve become really strong leaders within the company which is pretty amazing.
Mallun Yen: That’s great. So. So in the early days before we get to the growth and scaling stage where where did customer success reside or at your your first hire and that team.
Michelle Zatlyn: Yes. So for a SaaS at business three metrics matter you have to build acquire customers. You have to keep the customers you acquire and then you have to sell more to those customers over time like every SaaS business is measured on those three metrics. And as soon as you start to understand that you start to run your business like that once you have product market fit you say OK how are we going to acquire customers to come in the customers we acquire. How do we make sure they’re happy and stick around. And then how do you do more business with those same set of customers over time. And so for us you know at first you really focused on acquiring customers especially if you’re doing the contract kind of mid-market enterprise sales you know the 60 thousand a year sales one hundred thousand a year sales and then eventually you get up to the million dollar plus a year sales or that’s how it was for us. And it turns out you start by OK we’re going to go sign these 60 hundred thousand or contracts because that’s different and so on coming and putting a credit card in. Nobody spends. A hundred thousand dollars a year with you without talking to somebody and battle testing the product. And so at first our sales team really reflected much more of a traditional business development rep an account executive a solutions engineer to help with because we’re a very technical company very technical so we have a lot of technical sales help. But then once they sign first you want to make sure they implement you. And then you wanna make sure they have a good experience.
Michelle Zatlyn: And in a company like CloudFlare where we have a really full product roadmap and you’ve to think to yourself do you have a full product roadmap and if you do and you wanted to sell more things to your current customers over time and again there’s three metrics that matter. One of them being customer expansions you really want to think about how do you do more business with your customers over time. You then need a team that is managing those customers who are getting to know them because you’re launching a lot of things and you want your customers feel to be able to keep up with it. And so early on even though we really focused on the customer acquisition side early on very quickly we recognize hey we need to win now. Once we have the customers to be checking in doing quarterly business reviews seeing them at dinners and finding out where do they like what don’t they like. And again with a company like CloudFlare we do a lot of things for our customers so if they came in with an asking case a performance need how do we make sure they know that we also have a cybersecurity solution that they can also adopt over time. And what we found is as customers like doing business with us for one use case they are happy to spend more of their budget with us over time because they like our team. And I think that is that if you can figure that out your growth. That’s how you got into these great growth numbers of double digit high double digit growth.
Mallun Yen: So Allison you guys are a little bit behind CloudFlare just in terms of size. So some of the things Michel talked about is right you’ve got to sell the product to them you’ve got to get them to implement it which is sometimes a little of a challenge in and of itself because they don’t have that you they can’t love you right. So talk a little bit about how you guys have dealt with like implementation is that all one team because you’re a little bit smaller. How did that. And then what. What are they measured on.
Allison Pickens: Right yeah. We’ve gone through several evolutions of our organizational structure over time and we’ve learned a lot in the process. I do think that partly we’ve evolved because we’ve learned partly because when you’re in different stages of your company different org structures are more valuable in the early days. We actually had three different V P’s who were each focused on a different part of the post sale experience suite a V.P. of customer success management at one point that was me. We had a V.P. professional services and a V.P. of support and it made a lot of sense for us in the early days to specialize across those three roles instead of having sort of unicorn CSM to do all three activities because each of those activities actually required a different skill set and each of them at least in our business was involved enough that it needed executive level attention. But what we realized over time was that those three executives really needed to be 100 percent aligned. And we ended up seeing a number of cross-functional conflicts. For example the professional services team became known as the super technical sort of database oriented type team customer success team became known as like the client relationship team and we had trouble on the client relationship side figuring out how to pull in the technical people when the client needed it because the professional services folks were oriented around onboarding like closing out project plans. So eventually this sort of complex became significant that we said you know this is a systemic problem we can’t just solve this through one hour fixes.
Allison Pickens: So we ended up organizing all three of those departments under one chief customer officer and you know we found with that we were able to define charters for each team. Talk about the division of labor. What are the metrics that each is responsible for along those lines. We actually became pretty sophisticated in our metrics which at the time was actually a pretty I think provocative thing in the world of customer success. I remember when I joined our company we tend to host lots of conferences and meet ups at Gainsight and I often found in our unity. This is you know four or five years ago that folks were very relationship oriented. It was all about the heroics. Right. Are you staying up all night to serve that client. And did you go on site to build the relationship. Did you take someone out to dinner. We realized those things were super important especially to Bill like word of mouth and build community around your product build advocacy. But at the same time we needed a way to measure whether we were successful. And at the time you know the definition of success was purely is the customer not in a state of escalation which which you know you think about it now is probably not the best definition of success.
Allison Pickens: Maybe a low bar maybe sometimes. He’s got to start somewhere but we ended up you know within first like year so defining our first adoption health score. So you know we needed at three different levels of whether the customer is healthy. They were in Green if they adopted you this degree of intensity they were yellow if it was mediocre and it was red if it was in some sort of state of crisis. And we started to incent the customer success managers on how many clients they were moving from yellow and red into green every quarter. So we literally had a target for movement. And what was so great about that was not only do we figure out one way initially of measuring success but now the customer success managers had something to declare victory over right like sales gets to ring the gong they get to you know proclaim success at the end of quarter when all these deals are coming through but you don’t want to be you know in customer success where you know not being bad is like the death is like is what is supposed to make you feel good. Measured on renewals where they also measured on renewals. Good question. So and so at first all that we talked about was the escalations or and the renewal rate right. And I think in the early stages though we had so few clients that a renewal event was actually not that frequent. I think I think if you’re perhaps like more a scaled volume business like even in the early days like you have that sort of metric but for us it wasn’t frequent enough that we would I mean we get excited when it when clients would renew but it wouldn’t happen all that much that we’d feel like we create a culture victory. I think what was nice about focusing on adoption as well is that it meant that we were more at cause than add effect. So you know several quarters before a renewal event we could focus on the adoption and kind of leading indicators of that success so that when the renewal came around it was kind of a non-event
Mallun Yen: That’s great. So we are OK. So there’s two there’s a couple. I got want to do a lightning round on growing and scaling which is which is. Best piece of advice you can give to someone who’s asked to grow and scale the company to support the customer a better. No pressure.
Michelle Zatlyn: Oh I have so many. Come talk to me after and I’ll tell you all the mistakes I made so you don’t make them. One thing that I will say that I think is kind of not obvious is don’t burn bridges. Because what happens is when you’re growing and scaling is bad things happen. And I think what happens if you’re
Michelle Zatlyn: Whether you’re a founder or just part of that early team it’s really hard not to take it personally. And. It’s better if you don’t burn bridges because the world is incredibly connected and you just have no idea. That means either a customer who didn’t pay their contract and how you treat that or to employee to leaving or someone who just does something you’re like that is just not cool. I would say not to burn bridges.
Allison Pickens: I’d say build a really close partnership between your customer success team and your product team. I think Michelle you spoke to this off a bit. You know ensuring that feedback is very quickly funneled to your product team so that you can close the gap between what your product helps customers to do without human intervention from a CSM and what your product is capable of right. So if you can close that gap it means less CSM require less than the help required fewer headcount requests and ultimately a better client experience.
Mallun Yen: Thanks. Okay so there’s a couple of a couple of things that when I’ve talked to you guys about have really resonated with me. And so one of them Michelle is what I call not you know not all revenue is good. Which is really hard in the early days. So. So tell us a little bit about how all revenue is not good.
Michelle Zatlyn: So for us I’m sure this will resonate with some of you as you know we started to go up market and we started to be able to close these fifty thousand a hundred thousand dollar deal sizes and that was a big change from twenty four hundred dollars a year. And you have to learn and you have to hire different types of people to service that and the expectations with somebody when they’re spending 60 thousand dollars a year with you is very different than when they’re spending you know hundreds of dollars. And so that was going really really well really well. And we are building our sales organization and go to market around that. And then the million dollar contract came. And our sales. Person was so excited. So this is going to make their like quarter of their year are our head of sales Chris. The person I referenced earlier he was super excited about it because who doesn’t love million dollar contracts right. You get to your goals much faster. Great. And I remember Matthew and I Matthew’s my business partner we were just like No no we’re not. We know. And they were like What do you mean no. And it’s like we’re not ready as an organization because the expectations of somebody when there’s paying spending a million dollars with you. I mean is much higher than when someone spending 60 or 100 thousand dollars with you again you strive to make all customers happy. But the level of scrutiny for that customer it was also a very high traffic site and very high profile site.
Michelle Zatlyn: And so we actually had a lot of debate internally but ultimately we walked away from the deal we said we really want you as a customer but not yet. And what was interesting is first of all everyone got behind that decision. I mean we had a discussion but once the discussion was the decision was made everyone got behind it and instead our sale the salesperson who was in charge of that said Hey we’d love to stay in touch. And basically 14 months later we won that contract when we were already and and so I think that you can say no not right now but get to know that customer because. There are actually very few services that a company will give you another bite at the apple for if they’re willing to talk to you at that point. Those people will switch off they’re not happy. And so this was one of those cases where I think we weren’t ready we waited. And it was. Sadly I can’t. There’s no sliding doors. I don’t know what would have happened had we taken it but based on everything I know that happened after that I think it was definitely the right decision for the company and we didn’t want it to dictate our product roadmap and all these sorts of things distract us and I think in the end we got the customer just a little bit later and it was better for our business.
Mallun Yen: I think it’s also interesting because sometimes it’s like well how do you know if you’re ready to take that million dollar customer in for you you said it was actually pretty clear that you are ready at least from your perspective which was what it was from my perspective.
Michelle Zatlyn: But again the hindsight is a very powerful thing. You’re like of course we weren’t ready. You know I think for us it’s they had a lot of. You know products request features and of course our engineering team was like Yeah of course we can do that and all of a sudden you’re like well if we start to do all that what about all these other things that we could build for the rest of our customers and again at the time we had a lot of customers.
Michelle Zatlyn: And so it actually became a forcing function to have a conversation of no. And again it’s not clear look none of the hard decisions are clear. And especially as if you’re a leader in a company or the founder or C-level executive I mean all the grey stuff comes up to you all the other things get your team can take care of you are a great team they know but it’s all the things that aren’t clear they get service so it was not obvious. And and again I think Chris if he was sitting here what had really strong arguments of course we should do it it’ll make us better. It’s true you know since then we’ve taken on customers they make us better or they make our product better they make our organizations better. But there is also a thing of getting to ahead of your skis and that’s an art of science of knowing when and in this case it was just they were very high traffic high visible site where any problem would be magnified amplified in many ways and we were just like this is we’re not ready yet.
Mallun Yen: Thank you Michelle. Well probably time for one question after I ask Allison the final question here which is so Allison has this great podcast about customer success. And I was listening to it as I do and it struck me as something that was very one of your guests talked about which is what is how do you describe the role of a customer success organization and what she said was making the unknown known so which I really love but can you elaborate a little bit on that.
Allison Pickens: Totally I’ll give you my perspective. So we talk a lot nowadays about human machine interaction. It’s obviously like a big theme for us. It’s software is eating the world and you’ve got all these robots and it’s sort of like the complexity of how technology interacts with humans is obviously a huge theme of our time. You know often though we think about that human machine interaction is being mediated by UI. Right it’s all about like how eat how navigable is your UI is is it understandable. But the reality is that in the B2B world it’s not just about the UI. It’s also the customer success manager that’s mediating between those things right like customer successes make is essentially working with that poor human being that struggling with your software to try to get value from it. And so in that sense as I sort of mentioned earlier CSM is kind of like CSM of the gaps it’s the gaps between what your customer is expecting from your product and what your product actually delivers on your own on its own. So you know in that sense if customer success is is constantly filling the gaps and creating bandaids over gaps in your product there is a risk that actually those those facts about your product experience aren’t surface to your product team. So customer success managers can help your client figure out how to use your software and also communicate what’s known to your product teams that ultimately you can scale.
Mallun Yen: I love that Allison’s podcast is called the customer success podcast. Yes. OK. Any questions before we wrap it up? So the question is about how do you manage distributed teams which I think more and more all of us are facing and I know Michelle you have how many different geographies right now?
Michelle Zatlyn: Well we’re in twelves cities around the world but again the Internet never sleeps and we help keep our customers sites online no matter what. And so we from very early we’re in San Francisco and London and then added Singapore very quickly.
Michelle Zatlyn: And so if you have offices around the world like that there’s not one time during the day that all of you can be together. So a couple of things that have worked well for us. We. Early on adopted internal wiki where a big user component was in which which is an Atlassian service. As soon as we I we we should’ve written more down earlier. I used to think we just to get things done writing take the time to write it down because that actually helps with asynchronous communication. So we write a lot more on our internal wiki teams that. Customer Success customer support or technical operations team. They actually do hand offs. So especially in our support team in our tech ops team where their day to day managing the you know when SF who gets the office at 9:00 in the morning they do a handoff with London
Michelle Zatlyn: And then at the end of the day at 5 o’clock they hand off to Singapore and then Singapore and London handoff and so they do that every day where it’s like and they write up it on the they have an internal blog to it. Here are the known issues here is what’s come up. Are other teams that don’t have that they alternate their team meetings between European time or Asia time. And so you’re alternating week after week. Even our company wide meeting because now we have seven. We have a hundred people that work at CloudFlare and we’re in a lot of different geos and we have a company wide meeting once a week where this morning was at 9 15 and next Thursday well next Thursday is Thanksgiving. That’s not a good example. If it wasn’t Thanksgiving next Thursday we would do it at 515 and we alternate it. And so once and then we record it and the other team watches the other geos that aren’t awake during that time watch it as a team the next day.
Michelle Zatlyn: So some of these things that sound silly actually you can instill it. Well what I loved one of our someone on our recruiting team actually just was in Singapore and helped build up that office. She did a great job and now she’s moved to New York. We only have six people in New York and so she’s there to help build that out. And whereas we were just meeting last week and she’s like Michelle like I we’re gonna start to watch beer me and it’s called Beer meeting or company wide meeting. So we don’t watch it as a team and I’m gonna start to implement that. And it’s like it just becomes like it becomes this constant community communication trip once a week across the entire company it holds us together no matter what your GEO is those things matter a lot. And then finally we bring everyone together once a year. And not every company can do that.
Michelle Zatlyn: We spend a lot of money on it. And if you just talk to the people in the company they really value that we bring people together people that they don’t get it. They talk to all the time online but they’ve never met in person. People they work with all the time they get to know better. And that’s been a great investment for us and we make it open to any role no matter how long you been at the company. And we’ve been doing it since we are six people and I think that it’s I mean we we just had 760 people so people say when are you going to when when is it not going to scale anymore and so far it’s it’s scaled right.
Mallun Yen: Thank you so much Michelle. Thank you Allison.
