Thought Leaders in Mobile and Social: Alex Dayon, Executive VP of Applications, Salesforce.com (Part 3)

Sramana Mitra: Right now you’re talking to thousands of entrepreneurs. You have the ears of thousands of entrepreneurs. Many of them are working on cloud startups and social startups, things that are very much in your ecosystem. What guidance can you provide for them in terms of what you are looking for? Where do you think your other blind spots are? What areas are you looking at?

AD: It’s an excellent question. How do we measure success when we look at a startup?

SM: That is a different question. The question I’m asking is where are you, when you’re scouting for acquisitions, where are the next few trends or segments that you would be looking for acquisitions?

AD: Well, the first thing is that’s really deep into our DNA and our playbook. I’d like to share a good read for most of the people who read your blog. It’s called “Behind the Cloud” by Marc Benioff. He wrote an interesting book that I think is a cookbook for entrepreneurs. I’ll summarize some of the key points. From a product perspective, which is my job at Salesforce, the first thing we look at in the new world of cloud computing is, obviously, adoption. Today, the world is not about technology and complexity; it’s about adoption. Customer success is our first metric. If you pay close attention to the way Salesforce communicates, we always communicate around our customer stories. It’s not about us. It’s about what our customers are doing with our service. When we look at companies, we look at that capacity to be able to get adoption and be crisp about their customer stories. What are their customers doing, and why is the service so successful at adopting their service? It’s all about adoption because at the end, we believe the technology at this stage is a subscription service. I think the days where you spend millions of dollars on the IT system and then deploy it for years are gone. Today, we consume and activate stuff. You download an app in one click, and you just run it and pay as you go. So, it’s about adoption. That’s directly related to the consumerization of IT. The first metric is what are your customers doing? Are they successful? What’s your adoption level?

The second element in terms of looking at the business is the distribution model. At the end of the day, what made Apple successful was the capacity to build distribution. If you read carefully all the statements, all the launch events with Steve Jobs, distribution was a permanent focus. At Salesforce, distribution has also been a permanent focus. We often see entrepreneurs failing because they have great ideas; they have great customer stories; but they didn’t build an early enough distribution capacity. Distribution capacities can be very different. On the low end, it’s about the marketplaces. Are you on the app store? Are you on Google Marketplaces? Are you on Android Marketplace? It’s about your partnerships. Are you Dropbox partners? Are you driving traffic to your website? If you’re more of B2B vendor, it’s about how many salespeople do you have. Distribution is very important. Today, that’s the key to the right execution. Of course, at the end, what’s important – at least for me – is the barrier to entry in any given market. If you pay attention, we buy technology that has a pretty steep barrier to entry. If you look at Heroku, pretty high barrier to entry. If you look at Radian6, pretty high barrier to entry. If you look at Assistly (now Desk.com), extremely high barrier to entry in terms of functional knowledge of that space. It is always important to build strong assets in terms of technology or business knowledge as part of your business.

SM: Alex, what is considered as a high degree of customer traction? How do you measure that? I know the sizes of the acquisitions that you’ve done so far. What is the thought process behind what you consider as good traction? In each of those spaces, whether it’s Ripple or Assistly and other companies, you decided to choose those specific ones, can you walk us through the thought process on why those? And what is the level of traction that is appealing?

AD: The way you measure customer traction varies according to your sweet spot market. That’s actually touching a very interesting point. A lot of startups we see – my job is to see at least three or four startups a week – that come and visit and pitch to us at Salesforce, clearly, the biggest mistake you can make as an entrepreneur is try to be everything to everybody. It’s important to pick a segment. Are you targeting the low end? Are you targeting the low end? That’s going to drive a lot of things in terms of your chosen marketing execution. And you can be successful on many segments of the market. But when you’re a small company, you’d better pick one. You can’t be everything to everybody because you can’t implement the right go-to-market and measure the right customer traction. Salesforce itself, 10 years ago, was the CRM for the little guys. That was OK. The first years of Salesforce, CRM people were selling the big enterprise deals in Salesforce. The amazing thing started 10 years ago by serving a segment of the market, and the traction was viral and the technology was easy to adopt. Once you know what your sweet spot market is, as a startup or early stage business, then you measure things differently on the high end. What’s your capacity to capture big deals because you have fewer target customers. If you want to build a big business, you’d rather be able to create a big value proposition. On the low end, it’s your capacity to acquire thousands of customers every week, every month and how expensive is your customer acquisition? How viral is your service?

Heroku is an amazing example where Heroku, today, is the only cloud-based offering if you want to build a Facebook app. I think they launched their service in September, and they had hundreds of thousands of customers in a matter of weeks at zero cost. So, depending on which market you target, we look at different criteria. Obviously, the economics are different.

This segment is part 3 in the series : Thought Leaders in Mobile and Social: Alex Dayon, Executive VP of Applications, Salesforce.com
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