Back in the early 2000s, people didn’t entirely accept that a virtual machine could be as good as a physical one. Of course, we all know how that turned out.
Ed Lenta, the SVP and GM of Databricks, had the rare opportunity of scaling three hypergrowth companies — VMware, AWS, and Databricks. All of which were disruptors when they first came on the scene.
Is there a recipe or formula that will predict the success of a pre-growth, high-potential company? Lenta shares his lessons learned through scaling these early-stage companies, so you can too.
The Secret Formula For A Successful Company
If you look at these three things, you’ll have a good idea of your company’s size and potential growth rate.
- Is there a big Total Addressable Market?
Does this market need disruption? Is it particularly inefficient? At Databricks, the answer is: absolutely. Customers’ data architectures today are an incredible mess with massive amounts of legacy.
- Is there tech you can work with that’s disruptive and on the right side of history?
Lenta learned that “there is no point pushing the ball uphill.” You must embrace the tailwinds of tech where the ball is rolling downhill.
The hypergrowth companies Lenta worked at would have found success with or without him. It was inevitable. Customers were going to virtualize data centers, and you want to position yourself in that kind of inevitability.
- Do you and your founders have a growth mindset?
Do they think that one day, they’ll be a really significant company? Databricks has raised over $3B in funding and has a team of over 4,000. As far as they’re concerned, it’s just the beginning.
You’re in a good position if you can answer these questions favorably.
Your Commercial Market Will Define You
Throughout Lenta’s experiences with these three journeys, he’s learned some key lessons for those looking to do similar.
The commercial market you choose to build and offer your customers defines you, yes. But it also defines your GTM efforts.
You need to marry your go-to-market strategy to specific commercial structures that you, as a SaaS company, decide to offer your customers.
At VMware, they priced based on physical CPUs customers chose — a hugely transactional service that constrained growth.
They asked themselves, “what if we moved to some motion of licensing contracts?” This changed the conversations with customers. Instead of selling products, they were selling aspirational concepts and business value.
A consumption model is about removing friction.
Moving to consumption is about removing friction, enabling customers, building capacity, and focusing the buying experience on starting rather than committing.
Take Your Company Global
If you haven’t read Crossing The Chasm by Geoffrey Moore, you should, especially if you want to take your company global. Silicon Valley-based venture capital companies might tell you to build productivity models around hiring salespeople and scaling your organization that way, but it’s not the way.
The country maturity model is critical.
The best way to build a country maturity model is to go back to Crossing The Chasm. It’s necessary, in every new market you go into, to go in and soften the beach. This means creating conditions where product market fit and demand start to be facilitated.
To “soften the beach,” you need to expend as little energy and investment as possible while learning as much as possible.
This is called the minimum deployable unit as a country expansion model.
What are the smallest resources that are cross-functional and specific to your market? Invest in and put that into the market to start softening the beach. Create those first few partnerships, some kind of resale mechanism, and your first lighthouse customers to get things moving.
You’ll start to cross the chasm and make big bets on that market. It’s warmed up, prepared, and ready to go.
The next stage is the market-making unit.
Market-making units aren’t a single salesperson or solution. It’s you now saying, “we fixed the demand side and have demand signals coming from a particular market. Now, let’s work on the supply side.”
You know they’ll demand your products, so it’s time to show up with the right leadership, support, services, training, and whatever else you decide you’ll need for your business.
Starting with a minimum deployable unit and determining how to move to a market-making unit will save you a lot of time and, hopefully, a lot of money.
Sell To Customers How They Want To Be Sold To
When Lenta first started building AWS in Australia, they were crude in how they thought about customers. They were either enterprise, mid-market, or commercial. It wasn’t thoughtful.
You have to sell to customers how they want to be sold to and let them buy the way they want to buy.
Of course, this doesn’t mean infinitely segmenting your customer base because you shouldn’t segment them at all if they’re uniform. But if there are valid differences in how they want to be sold to, you must segment them — thoughtfully.
If you have enterprises and startups, they’ll likely want a completely different sales motion. One probably wants a proposal and face-to-face meetings, while the other likely wants a highly technical, bottom-up experience.
The Customer Journey Isn’t Linear
Well, sometimes it is. But customers don’t need to start at the beginning and end at the end. By developing a deep understanding of the customer journey within different segments, you’ll know how to start them on the journey and help them through the various steps.
You’ll likely see different points of entry. One type of customer may like the path of innovation, while others may be tech-driven, like IT teams and global CIOs.
Once you figure out the entry points, you can ask your team, “How do we affect that?” A customer-obsessed perspective allows you to think like your customers instead of just a company selling to customers. Get inside their heads to understand why they’re buying and how they like to do it.
If you’re going to be customer-obsessed, you need to:
- Let customer-informed tactics drive the strategy.
- Experiment constantly and everywhere in your global GTM organization.
- Get customer feedback, and figure out how to scale what works.
Balance Linear And Nonlinear Investments
Be incredibly thoughtful about linear and nonlinear investments. You don’t want to make it a game of linear expansion or say, “Hey, I’ll have this productivity metric and assign salespeople to it in my organization to scale revenue.”
Then, one day you end up like so many tech companies over the last couple of months who start laying people off.
So think about making as many investments off your balance sheet as possible. Think of the mix of possibilities and make nonlinear investments, so you don’t wake up one day and think, “Gee, I have 10,000 salespeople and everything that goes with it. Who do I start laying off?”
You want to get this balance right.
If you want to scale a field organization across the world, you have to have strong beliefs and then find a way to communicate those core tenets across the organization in such a way that, as your company gets bigger, the decisions founded on those beliefs can be made without you being in the room.
And as you think about the big picture, remember these key points of moving from early-stage to hypergrowth.
- Build a commercial model that is best for your customers. And if you do that, ensure you have a go-to-market approach specific to that commercial model. Otherwise, it won’t work.
- Think of country maturity models as you start to move out of your own country. Read Crossing The Chasm. Figure out how to work with those initial innovators in the market and move the conversation around building out supply-side capabilities to ensure a fantastic customer experience.
- Segment your business only if you have to. And you have to if you have customers who want to be sold to in different ways. This is important. If you do it right, it will allow your growth to continue.
- Think deeply about the customer journey. Develop tactics to inform the strategy you’ll bring to help customers start the journey and facilitate their process and progress along the way.
- Invest in more than just linear resources. Otherwise, prepare for large-scale layoffs. Invest in nonlinear resources that don’t sit on the company’s balance sheet.
- Use core beliefs to drive velocity. Ensure those tenets are strong and well-understood, and guide the path as you build a significant GTM organization.