Ep. 362: The Future of the Customer with Bernadette Nixon, CEO @ Algolia, Jay Snyder, Chief Customer Officer @ New Relic, and Nick Mehta, CEO @ Gainsight. Customers’ expectations are higher than ever with more access to information and options. This dynamic trio of SaaS experts share how to stay customer-centric and set yourself apart in today’s rapidly changing environment.
This episode is sponsored by Linode.
SaaStr’s Founder’s Favorites Series features one of SaaStr’s best of the best sessions that you might have missed.
This episode is an excerpt from a session at SaaStr Summit: Enterprise. You can see the full video here, and read the podcast transcript below.
Ep. 363: Small, Medium, or Enterprise, SaaStr CEO Jason Lemkin sits down with Shopify Plus GM, Loren Padelford, to discuss how to keep your customers happy at all stages.
This episode is sponsored by Guideline.
This episode is an excerpt from Jason and Loren’s session at SaaStr Summit: Enterprise. You can see the full video here, and read the podcast transcript below.
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Jason Lemkin
SaaStr
Bernadette Nixon
Jay Snyder
Nick Mehta
Loren Padelford
We’ve shared the transcript of episode 362 below. You can also jump down to the transcript of episode 363.
Transcript of Episode 362:
Nick Mehta:
Thank you so much and welcome, everyone. Really excited for engaging discussion on something I’m passionate about, the future of the customer. So I’m Nick Mehta, CEO of Gainsight and you probably have heard of Gainsight in the world of customer success and really excited to have two different voices in the world of how companies think about their customers. So Bernadette Nixon recently joined Algolia as CEO. Has been CEO before, was CEO of Alfresco Software and long career in software and comes in, I think, with a lot of passion for customers and customer success, which I’m excited to hear about and also comes in live streaming, my understanding is from a boat right now, right Bernadette? You’re on a boat.
Bernadette Nixon:
That’s right. I’m on a boat in Rhode Island.
Nick Mehta:
On a boat in Rhode Island and then our second guest Jay Snyder, who just recently took over as Chief Customer Officer of New Relic, publicly traded SaaS company. I’m sure many of you use New Relic. Comes out of a long background in EMC and Dell and has worked in the world of customers for very long time. And today is potentially broadcasting from the Italian Alps or maybe…
Jay Snyder:
I am. I actually just got off the boat, Nick, and scurried up to make sure that I was ready to go for the presentation.
Nick Mehta:
I got to say pretty good internet up there on the Italian Alps, so I’m impressed.
Jay Snyder:
Got hotspot on my phone, so hopefully we’ll hold still.
Nick Mehta:
So we have got a good group and we’ve got some good stories to tell as well.
Nick Mehta:
So let’s dive into the future. So we talked about where things are today. A lot of these themes probably resonate with what people are seeing. We’re going to next talk about what’s the near future. So what’s happening right now and trends, and then we’ll do a little speculation about the far future and where to those trends go over time. Near future, I think it’s pretty obvious. There is a big set of trends happening right now, which is with the downturn and I tweeted this a while back like at the beginning of the downturn that like every customer is scrutinizing, do they really need this technology or not? It’s not just about it being cool, it’s about what Jay said, is it delivering value, right? And whether it’s Algolia, Gainsight, New Relic or anything else, you’re being measured on value, not just adoption and at the same time, even outside of COVID, there’s all these other trends happening.
Nick Mehta:
Power of the developer, or the API economy, both of you play very much in both those trends. So let’s talk a little bit about the near term trends you’re seeing.I’m going to start with Jay, because Jay, you described it in the prep call this proliferation of technology. This sprawl that’s happened and you’re in the middle of it. A lot of your clients use New Relic heavily. Talk about what the near term trends are.
Jay Snyder:
Yeah. So, you teed it up really well. Quite simply, and I guess no pun intended, things are too complex. I mean, they’re just too complex. And so I’m speaking specifically about the space that I’m operating in within New Relic. Customers live in a world of tools, and for everybody listening in here, I’m sure this isn’t shocking to you, but mass proliferation and sprawl has become a real problem and it’s created mass complexity, not just at the technical level, but at the business level, because that sprawl is expensive and worse, this fragmentation minimizes the ability to deliver value at scale, right? If everybody’s just doing a little sliver of the work, how do you roll it up into a meaningful business case? I don’t know anyone right now. I mean, maybe you do, but I don’t know anyone right now with extra money, time, or people, right?
Jay Snyder:
So the pressure is to simplify. Provide a platform, not a tool, that can be a consolidator and something that can drive costs, but still have all the features necessary to get the business results. And I’m not saying this is easy, but that’s what we’re striving to do. I always say, companies are trying to do three things when they buy something. It comes down to, they’re trying to make money, they’re trying to save money, or they’re trying to reduce risk. And the good news at New Relic is we can do all three, but only if we align to the business drivers and keep in mind just how dynamic those are. So we ensure that we are constantly measuring and refreshing. Our challenge and our opportunity in customer engagement is staying tightly aligned with the business drivers, having the discipline to manage long term customer journey even when the short term options might be easier.
Jay Snyder:
So I guess I’d say it’s forcing us to both challenge our customers more than ever, and by extension us to be educated and in tune with the customer’s business, more than ever. I know it’s something we’ve always aspired to do, but I’ve never seen it be pushed to the brink like it is right now. Generic business or customer success plans, they don’t work for me, but more importantly, they don’t work for our customers. Right? And for some folks that’s a lot of pressure and they have to dig deeper. They have to work smarter and they have to do more. So I think that’s what’s happening and that’s what we’re seeing on a day in and day out basis.
Nick Mehta:
I’ll just ask a follow up on that, Jay, because it’s such an important point. I see it all the time, which is, you said it super well, make money, save money, reduce risk. It’s hard to find any other uber categories than that, but then for CS people sometimes, it’s challenging for them to make that connection from using a feature of New Relic to driving business value. They don’t know enough about their client, they don’t understand the business. Maybe they’re early in their career. How do you help your team make that link to value?
Jay Snyder:
I mean, that is the, what would you say? The $24,000 question that I’m actually going through right now. And it’s a combination of things. One, it starts high up in the sales process, right? Because you need to start to deliver, deliver is the wrong word. You need to discover in the sales process. You need to do a lot more asking and listening than talking, right? So we need to create a template which I’m working on right now, which is what are the foundational elements that would drive a business case. And again, this would be somewhat generic to get the basic discovery done. Then it’s about really understanding the customer’s business and using the levers within that business case to determine is the goal, make money, save money and reduce risk. So it’s about operational efficiencies, productivity gains, digital experiences and making sure we’ve captured those.
Jay Snyder:
That’s an enablement exercise that is not to be minimized, right? We’ve got a lot of training to do with our sales teams to get them to start to speak in these types of terms versus feature function. And we’re going through that evolution right now within the company. And then your question really is how does CS do that? I mean, what do they do? And again, if it’s not teed up correctly in sales, CS is already at a disadvantage. So it starts there. But then instead of a success plan, it’s a business plan. That business case becomes the success plan, right? And we’re constantly aligning the metrics in that business plan back to the technology and understanding which dials we need to turn, which types of implementational product feature functions do we need to use that will directly equate to these types of things.
Jay Snyder:
I think the thing we’re doing Nick, to be able to force that is we’re getting a little bit more intelligent around account management. So today we do a good job there, but at the technical level, the deeply integrated technologists, that’s the piece that’s going to play a critical role in connecting those dots for our customers. And I’ll talk more about this later too, but I mean, the handoff from pre-sales to post-sales has to be crisp. Otherwise you’re going to lose that momentum and lose that connective tissue back to that business case and then the thing starts to fall apart. I mean, we can talk a lot about this, but that’s a little bit about where we’re headed on that, but it’s definitely a change in selling process, and then it’s definitely a change in the journey.
Nick Mehta:
Yeah, I think you said it really well and we’ll come back to it. But so much is discovered in sales that’s lost often in that process. So really well said. Bernadette, you came into a company that’s very well respected for the technology built in the search world. What trends are affecting the way you think about your customers near-term?
Bernadette Nixon:
So I think there’s a couple of things. There’s a macro point that I’ll make and then I’ll give a specific Algolia example of how we’re seeing it manifest. So, I think every organization right now can get constrained within their silos and in order to truly respond to your customers, you really need to be a nimble organization now. That doesn’t mean to say, you’re going to do away with the functions. You’re not, but you need to find a way of getting outside of those, come together as teams, squads, whatever you call them in order to be able to drive value for your customers. And it’s particularly poignant for us right now because we’ve made our bread and butter selling to the tech visionaries, the early adopters and now increasingly that early majority.
Bernadette Nixon:
And so there are different things we need to do to bring to the table in crossing that chasm for our market. But as we look at our market, it’s not all created equal. We’ve got everything from self-service all the way up to the enterprise. So how we accomplish something at the enterprise level in a one to few or a one-to-one or a one to few is very different to how you would accomplish it in a self service model. And so I think when we start to look at some of the frictionless models at the lower end of that spectrum, I mean, we’ve got nine and a half thousand customers. So at the lower end of that spectrum, what we’re finding is your product has to be intuitive enough for the customers to be able to self direct their own journey.
Bernadette Nixon:
And so it’s another spin, I guess, on the notion that you mentioned Jay, which is simplicity. But that simplicity is multifaceted. You’ve got to have it in the product, you’ve got to have it in how your customers can realize that value. And then you’ve also got to have it so that you can have it in a one-to-one or a one to few framework for your enterprise customers. So, there’s a lot of change going on right now. That’s the only thing that’s constant, frankly. And so trying to keep pace with it across all of those different sectors really requires you thinking deeply about how to deliver that value to your customer.
Nick Mehta:
That’s great. Yeah. And well, that simplicity theme obviously is so massive and also just doing more in the product when you have that massive scale that you all have at Algolia and New Relic has as well. So that’s a good way to say, what are the things that are trends that you think over the next five years, you think are here to stay. Some of you probably know that… There’s that great Jeff Bezos quote that says, “Don’t focus on the things that are going to change, focus on the things that aren’t going to change.” Right? And that’s why you predict the future. What are some of the things, when you look at the next few years, that feel like this is just an unstoppable trend. And then we’ll go to the other side and talk about things that we think are going to be radically different in the future. Bernadette, I’ll go with you first.
Bernadette Nixon:
Sure. So the thing that is here to stay is the maniacal obsession with adoption, adoption, adoption. So real estate is location, location, location. I think for anybody in the SaaS business, it’s obvious, but it’s adoption, adoption, adoption. And there’s no one key holy grail metric that’s out there in the market right now. So I think there’s a lot of experimentation going on here. I think that simplicity in the product is a key driver. I think in product telemetry, in product training are absolutely key.
Bernadette Nixon:
Your goal, no matter where you are on that spectrum in terms of customer segment, the goal is the same. The question is how do you help and encourage and enable your customers to get to that maximum adoption point so they are really getting the value that they were hoping in the pre-sale cycle. How you deliver it will just be different depending on the segment. That’s here to stay.
Nick Mehta:
Great. And Jay, what from your perspective?
Jay Snyder:
Yeah, so I’m terrible at predicting the future. I turned down an executive role at ServiceNow six years ago, Nick so this is not my sweet spot. But Bernadette just said it incredibly well. I mean, I think she stole some of my thunder and she should have, because I agree with her 100%. It’s about adoption. I’ll say the same thing, but I’ll say it maybe a little bit differently. So if I had to say, what’s going to definitely be here five years from now, it’s this whole concept of customer success where customer success truly owns the customer. And sales would be just that at initial sale only. Customers want to know that someone is responsible and not just there to do the sale or the expansion, but there to get them to, as Bernadette said to adopt, consume and drive value from the platform, right?
Jay Snyder:
We talked about needing to have an understanding of a customer’s business, their drivers, and also ensuring adoption or the business case breaks. So I’m not saying the role of a salesperson will disappear. I just think that definition of responsibility will change where they may simply be a sales and marketing person who’s focused on new logos, but immediately is handed to success from that point forward. And if I’m a customer and I’m asked to pick who I’m going to bet on for my future, when I signed the check, is it going to be that salesperson or that success person? And I think we’re already starting to see that lockstep with customer success is customer adoption, which means you have true engagement, which means you’re delivering true value. It’s one plus one equals three, it’s a simple math equation to me.
Nick Mehta:
That’s great. Awesome. And if you flipped it around on its head and said, what are some of the things that as we go forward are going to seem almost dated? I showed my kids Back to the Future II last weekend, and if you remember that predicts the future, but they predict in the future that there would be fax machines everywhere. So they kind of got that wrong, right? What are the things, the concepts that we take for granted today that will seem dated five, seven years from now in the world of software. I’ll go to Jay first.
Jay Snyder:
Well honestly, I’m going to come back to something we just talked about. I think in the future, we’re going to see a lot about low friction models and I’m going to be a little bit repetitive here, but I do think that we’re going to see a lot more intelligence built into the product as Bernadette said, that gives you… and not just intelligence from being able to extract metrics, but also enablement, right? I think that you’ll be able to self enable to a degree that we have never seen before. And you’ll have the applied intelligence, the AI in the product itself that will, they’ll make you smarter, right? It’ll be watching what you do, guiding you how to do it.
Jay Snyder:
Today I have to manage and track health and my customer success, right? This will be built into the product. I believe that technology will become more and more intelligent to throw off these health metrics and it’ll put the CS team really in the driver’s seat to engage in a much more meaningful and prescriptive manner. One that is completely, almost custom for each account and very low touch. So I think you’re going to have this combination of low friction, but high impact, which is a real difference from where we are today, right?
Jay Snyder:
We think about low touch to some degree as low impact and I think that paradigm shift can change. I mean, if you think about, if we can build more intelligent products and leverage the AI, you’re literally going to have the answer to the tests from the technology itself. I mean, wouldn’t it be something, if you could show up with a script of exactly what the customer needed and wanted based on the data in the technology to help them do better, go farther, move faster, right? Or better yet, you don’t even have to show up. You could just send them a Slack with the details and the enablements right there, and they can run. So I see our future allowing for a much more low friction, high impact way to leverage the technology and to involve change.
Nick Mehta:
Yeah. I see. I think one thread I want to make sure people take away from that, Jay, is that low touch or low friction doesn’t mean a poor quality of service or not focused on the customer [crosstalk 00:32:52].
Jay Snyder:
100%. And I think it does today, right? That the nomenclature today implies you’re not as valuable a customer. So you get a digital touch where somebody else gets hugged and visited by a real life human being. That’s true, but I think that shift is going to happen and we’ll see it in the next five years where the opposite becomes the value add.
Nick Mehta:
That’s great. And Bernadette, from your perspective, what’s going to seem dated years from now?
Bernadette Nixon:
Sure. I would actually just add onto what Jay was saying there just for a moment and say, it also depends upon the market you’re in. I mean, New Relic and Algolia, we’re very focused on the developer. So honestly, a lot of developers don’t want to speak to a human. They want to be on the self serve. They want to have a tech touch and that is a better solution for them than a high touch. So I completely agree with your point Nick, but what will seem dated in five years, hopefully clicking, okay to accept cookies on every freaking website you are going to have to go visit.
Nick Mehta:
That’s the [crosstalk 00:33:50]. Well said.
Bernadette Nixon:
But on a more serious note and perhaps a controversial one, I think a thing that will be a thing of the past will be concierge CSMs, because I think that there is a portion of the population out there that have come up and the relationship aspect and the soft aspect has been so important because it needed to counter balance. Sometimes the hard charging sales approach. There was a very high value placed purely on the soft skills. So to me though, the days of the concierge CSMs are numbered and there has to be value that the CSMs deliver beyond just the relationship. So I’m not saying that the soft skills aren’t important, they absolutely are. High EQ is always going to be critical, I think for that role, but they also need to be able to deliver value beyond that and what that form that takes will depend upon your business. But I think that connected to the in product telemetry and some of the stuff we talked about already will provide a powerful combination.
Nick Mehta:
That’s so well said. It’s interesting. I did an event with CIOs recently. So probably some of your customers, I asked them what they thought of CSMs and they gave some of that feedback, Bernadette that they felt like some CSMs are super nice people that respond to emails, but don’t add a lot of value in the process. And I think for CSMs that are watching you do have to plot a course to having value either in the product knowledge or domain knowledge or being consultative or whatever. You can’t just be a nice person that responds to emails.
Jay Snyder:
I completely agree that this is what we… I think we’re all talking about the exact same thing here, right? They’ve got to be able to bring a business case to the table and make sure it aligns to those drivers and when things start to stray, they’ve got to get everything back on track. Their success managers/program managers, they got to run that customer journey like a program and understand what that means. And they’ve got to be able to use all the data available to them, to be able to understand when the customer is going off their journey. And it’s not just about showing up to run the QBR, it’s driving the entire experience to get to the QBR. And that is a shift in mindset for a lot of folks.
Nick Mehta:
One of the last questions we had talked about in prep was the org that’s most impacted in changes outside of CS in the future and Jay and Bernadette, you both said some thoughts on that. Jay, I’ll go to you first.
Jay Snyder:
Which orgs are changing the most?
Nick Mehta:
Yeah, which orgs change the most outside of customer success. What orgs have to evolve and change in this new world.
Jay Snyder:
Yeah, I think if I was going to pinpoint this I would go to pre-sales and the reason I would go to pre-sales is I talked about the fact that a customer would like to be owned soup to nuts by somebody who is going to be responsible and look after their entire experience. And if you think about what pre-sales does, they build that connective tissue at a technical level with that customer early on, and that’s the mind meld, right? That’s incredible value. I’m not diminishing what a salesperson does. I’ve been in sales a long time, but ultimately that technical connection and a lot of times when you’re selling a harder technology product wins the day, right? But yet if you’ve created this model where that pre-sales person does the sale and then disappears, where’s that connective tissue and what happens beyond that?
Jay Snyder:
So I think that we’re going to see an evolution in how pre-sales works with post-sales and maybe becomes one and the same so that you can have that long standing, truly intimate, technical engagement that our customers are looking for. Someone that spends the time upfront and then stays long term after to be with that customer based on that relationship, that mindset and that experience they already have. So I do see that getting upended, and it’s impacting them now because where isn’t formal, Nick, they’re doing it anyway. So I’m seeing pre-sales being heavily impacted by the fact that while their job is to be on pre-sales, they’re spending half their time in post-sales. So whether it’s formalized or not, it’s bleeding across that impact sales productivity, it has other ramifications to the business. And so we need to solve for that. I don’t know if the word is impact. I think there’s an opportunity to do something more intelligent around the pre-sales, post sales hand off.
Nick Mehta:
I think it’s really well said and I think that what I’m seeing, actually, in some cases as chief customer officers getting value engineering, like you have in pre-sales, underneath them as well to tie that altogether. Bernadette, how about from your perspective, what org do you think is going to evolve the most in this new world?
Bernadette Nixon:
I don’t think I could have said it better than Jay. I think he’s got it. There’s a lot of value to what he said and I think generally the sales org will face a lot of change coming out. But I’m going to pivot if I may, to one of the other questions that we talked about in prep, which was, in a downturn, what’s going to be the most important? A lot of people are saying that, “We’ve seen the worst of the downtown,” and you’ve got the other side of that saying, “There’s still more to come when furloughs and everything are no longer funded by governments and what have you throughout the globe.”
Bernadette Nixon:
And I would say on that topic that the thing that is going to be most important is having the human touch, or should I say the humane touch and customers that you do the right thing by when they’re in a bind, not that you’ll be able to say yes to everything that they want. That’s not what I’m saying, but when you do the right thing, it’ll be recognized and those customers will remember that in the good times.
Nick Mehta:
So well said. I think it’s a great segue to [crosstalk 00:39:28].
Jay Snyder:
Yeah, I was just going to say, I literally had almost the same answer for that. I said the one thing that I’m telling my team all the time you need to have in this downturn and what’s the biggest impact to CS at the same time is you need to lead with empathy, right? You really do. I mean, because the people we’re talking to, their jobs are at risk, their companies are at risks, they’re being put in very difficult positions and we’ve got to really embrace and understand that. And that’s a difficult thing for a lot of folks because we’ve got a company to run, right? But if you really want to build customers for life, this is the time where empathy will shine and doing the right thing long term versus short term is going to make that customer either be a customer for life or not.
Nick Mehta:
That’s well said, that’s a good way to close out. Well, a couple of key takeaways for folks, I do believe in this concept of human first leadership, which is really what customer success is all about and what the future of the customer. Wrote some thoughts about that online that you can find on our website and then for people who want to dig into future of the customer more, we just published our book, The Customer Success Economy, which is all about this concept and where we’re going in the future and actually just in partnership with SaaStr, we made this available for folks listening actually for free go to gainsight.com/freebook, and you fill the form, you’ll get a copy of it. And thanks so much to Jay and Bernadette. This has been phenomenal. Really appreciate it and next time I think we’ll have to do this with some karaoke as well. So think of your song selection.
Jay Snyder:
Oh, boy. Be careful what you ask for my friend.
Bernadette Nixon:
Hey, come and do it on the boat.
Nick Mehta:
Yeah, that sounds good.
*****
Jason Lemkin:
Welcome, everybody. Super excited today to have one of my favorite thought leaders, in general, and enterprise, Loren Padelford from Shopify. It’s especially insightful conversation today now because we can talk about the intersection of two interesting things. Loren, among other things, has spearheaded Shopify Plus, which is Shopify’s enterprise platform from the early days, to now announced today almost 30% of the revenue. So that’s like a Slack-esque going up market, which is fascinating. Loren’s also, like many of us that are here, a longtime scholar and student of enterprise sales and what works and the tactics, and came in and has applied that at Shopify. And so every conversation, we did an incredible podcast, you should listen, that was one of our highest rated ones. But talking about how to become more enterprise, what trade-offs to make when you can’t do it all. When you don’t necessarily have a startup there. When you start out… always one of my favorite thought leaders. And I wanted to thank Loren for coming. And talk about this and leverage us to talk about a million customers at Shopify. A million right? I don’t know it was announced today maybe 1.1 million. It really doesn’t matter, does it? It’s a lot.
Loren Padelford:
It’s a lot. We didn’t announce any new customer numbers today.
Jason Lemkin:
It’s probably gone up.
Loren Padelford:
Thanks for having me. It probably has gone up. So yeah.
Jason Lemkin:
So Shopify today–we’ll touch into it, announced just kind of the jaw dropping numbers, it is the archetype of the COVID beneficiary. Shopify was on fire before, which is one of the first things I want to talk about. But just today announced essentially 100% year over year growth that essentially a $3 billion run rate. And we just have never seen this in the cloud before. So I want to talk about that and I want to talk about what we can all learn about going up market and serving customers of all different sizes. And please again, if you haven’t before, click into the Q&A, ask questions. We’re lucky to have Loren and we will get to a bunch of them toward the end of this session.
Jason Lemkin:
But Loren, I wanted to tease on a couple things. This was a tweet you made the other day. Aaron who’s the next and final speaker, “Amazon’s a $1.6 trillion company. We’re living in Amazon. Not if we can help it.” I want to talk about that exactly in the third point but before we talk about everything that’s changed in March 15th. Step back for a minute, I want to talk about one thing, why is eCommerce exploded? I almost get it. But my first job in internet was in eCommerce and I get why that was terrible, back in the day. But what’s changed in the last two years? What really has gotten better in terms of tools, technology, software? Why have we finally reached the age of eCommerce? I don’t totally get it. What’s changed? What’s the tech stack or awareness that’s gotten us to this next level finally?
Loren Padelford:
So I think that’s a really good question. And I think it’s part of the reason why the enterprise is changing so fast, which we’ll get to. If you go back to when we started Shopify, Tobi didn’t want to build a software platform, he wanted to sell snowboards. The problem was he couldn’t find a platform to use. There wasn’t something for entrepreneurs to just start an online store and then go sell things. You had to spend a million dollars, you had to have developer experience. You needed all this infrastructure to just get yourself online. That became a gargantuan barrier to entry, which meant the sheer amount of choice we as consumer had was very limited. So when you went online to buy there wasn’t that many options. Well, technology comes along, SaaS comes along, Tobi comes along. Starts building a next generation of online platform, Shopify in this case. Built on a newer stack, built in SaaS and built for entrepreneurs to rapidly start up.
Loren Padelford:
So the whole game here for us is, lower the barrier of entry to bend the proverbial curve down, so that starting something is very, very easy. As we’ve done that, as you alluded to, a million entrepreneurs jumped on that bandwagon and started to launch online stores. Well, these two things of, consumers got more choice, entrepreneurs launch more things, hit each other and boom, eCommerce became what it is today is, I can go online now as a consumer and find a huge variety of options to buy, for products that I want. And if I have a good idea, I can start it overnight. These two things drove both aspects, entrepreneurism and the proliferation of online stores, and consumers getting more and more comfortable purchasing online. I think that’s what you have the last two years is just, both are spinning together to create a more accessible market.
Jason Lemkin:
And we probably won’t talk too much about Amazon through this discussion. Although your tweet is very interesting. Is some of the acceleration last two years, is it a reaction from vendors to Amazon’s monopoly? Is it wanting to control their brand? There’s something in here that as an outsider, it’s a little bit hard to see. It seemed like Amazon might crush everybody. Not from a Shopify perspective, from an outside perspective but a thousand blossoms bloomed out of this Amazon growth. What’s the interaction here with owning your brand and owning your channel versus a third party?
Loren Padelford:
Yeah. So I think as an entrepreneur, you start a business because you want to interact with customers, you want to provide value. And so this idea of having a one-to-one relationship with your customer is very attractive. And it’s what we’re trying to support. And it’s bi-directional. Consumers, I want to know who I’m buying from. We as human beings love stories. We love underdogs. We love the little guys. We love Main Street. We love this entire idea of entrepreneurs and our economy is driven by entrepreneurs. So there’s this innate desire as a society to have more and more choice. And entrepreneurs have this innate desire to have a one-to-one relationship. These two things meet in the middle, and so it isn’t about a competitor, it is about satisfying what is our natural desire as a society and as humans. And as entrepreneurs is to create one-to-one relationships and one-to-one stories. And you can’t do that on central marketplaces and these kind of central clearing houses. That’s not what they’re designed for.
Loren Padelford:
They might be seemingly cost effective or time effective, but they erode at the fabric of what is human nature. And so, my tweet there is kind of like, society can’t let our choices be consolidated into a single option. That has never worked, historically. It cannot work in the future because that isn’t how society functions. We need more voices and more choice. And so Shopify is on the side of entrepreneurs, trying to support their one-to-one relationships with merchants–or with their consumers. And I think that’s an attractive proposition and why you see this proliferation and this move towards more entrepreneurs and platforms like Shopify. Because it is that you and I can talk as a consumer and the brand, without this middle in the way, right? Taking the money, taking the relationship, taking the leverage. And I think that’s a valuable proposition for a merchant and for the consumer on the other side.
Jason Lemkin:
Yep. And I want to talk about digital transformation and then enterprise, but let me hit the second point on traditional retail because you and I are having a backstage conversation, before we talked. Let me skip, this was a bit of data that we need a few more weeks on, but this was one that circulated across the internet on the right, right? Which our jaws dropped and then showed up in Shopify’s public announcements today. And you see it on those data and eCommerce, our jaws dropped, right? It’s literally almost one-to-one with Shopify giving its market position. I want to talk about, is it a bump or permanent in a second? But let’s talk before about, will retail recover?
Jason Lemkin:
And when I look back, maybe the fourth SaaStr post I wrote in 2012, I was walking, bumming around downtown Palo Alto and the last boarded up retail reopened. It’s now West Elm. But so it was four years, the last time when the cloud was smaller, right? When commerce was different, it took four years for retail in Palo Alto, which is pretty bougie, right? It’s pretty upscale. It took four years for the last retail. Will those boards come down? What are downtowns going to look like? What’s retail going to look like? We’ve seen five years pulled ahead and will retail recover?
Loren Padelford:
Yeah. So I think that, I think I’ve said this on the podcast, and I’ve said this before. I’d actually go as far say it pulled 10 years forward. COVID is a time machine to pull 10 years ahead.
Jason Lemkin:
10 years. That’s the insight right there. 10 years.
Loren Padelford:
But if you go back before COVID, we were in digital transformation already. There were headlines constantly about how shitty, pardon me for swearing on a live broadcast. About how shitty retail was over. It was just done. No one wanted to go to a crappy retail experience again. So people were going to have to focus on the experience and customer behavior and all that kind of stuff. There was a lot of talk about physical retail being consolidated. We just had too many. I heard a great quote, I can never remember who said it. That basically said, “There are 300 great malls in the United States. The problem is, is there 1400 malls.” And so you had this… this was already happening.
Loren Padelford:
And so this consolidation, this refactoring of what retail and commerce was going to be was already underway. COVID hit and just dragged 10 years forward. So everyone thought they had another five, six years to sort themselves out. Now they realize they don’t and they’re all trying to refactor now. Physical won’t go away. So, let’s just be clear, it was never going to die in the sense of just disappear. eCommerce was never going to be the only way you’re going to shop. Humans still value tactile interaction. And so that will still exist, it will just be less so. So you can look at brands now, who even as we open back up, are saying, “I’m not going to open all the stores. I’m going to open some of the stores because I don’t need them all.” You’re going to see that. You’re going to see a real focus on that optimization of location and optimization of experience.
Loren Padelford:
And because of this chart, and there is an updated version by McKinsey just a couple days ago, which shows it over three months and it’s even more stark. Because of the acceleration online, you’ve seen a whole lot of brands–the ones that will survive and thrive in this market–really refocus on how to create that digital experience, the way that consumers wanted. And that’s going to become a more dominant channel. So where it used to be physical retail was number one by material level and eCommerce came in under it. We’re seeing this equal itself and then it’s going to tip the other direction, right? Which will be eCommerce and online, the digital. Whether that’s mobile on your online store, whatever it happens to be, will become your dominant interaction style with your consumer, and your physical locations will be that tactile, real world experience that a consumer may encounter once in a while.
Loren Padelford:
But it won’t be for most retailers. It won’t be their dominant anymore. Because we’re getting too used to the phones, our computers, our tablets, being isolated inside has kind of pushed us back there. But also the technology gets easier and better and so those experiences can be great. But I want to stress again, it’s not that physical goes away, it doesn’t go away. It’s just the change that was already happening, is now just going to happen a lot faster. And going to force a lot of physical first retailers, to become digital first retailers that have physical components. And that’s going to be a hard choice.
Jason Lemkin:
That’s interesting. The 10 years. I mean, you have the most… but the date is there, right? As is the Goldman aid and the others, but 10 years pulled forward. Right?
Loren Padelford:
Yeah.
Jason Lemkin:
So it’s just inverting that ratio, and I think that means overall, when we talk with other cloud leaders and executives and CEOs today, the answers are more guarded. They’re like, “It’s faster.” But we’re not sure but eCommerce is at the… because of the nature of this little global pandemic, it’s at the cutting edge, right? And this 10 years is, it’s crazy. It’s unprecedented rate of change.
Loren Padelford:
And it is. And it has been challenging for some folks because they were not prepared. They thought they had 10 more years. And so you saw major retailers go from hundreds of millions of dollars to zero in a day. Because they had to close the stores and that was their only line. There are still major retailers who have no online presence today. They are still transacting at zero. This is not a winnable solution. Right? You’re going to have to either innovate or the other option. And the other option is not existence.
Jason Lemkin:
And let’s talk about that. It’s interesting, this next slide on pull forward customers and what you’ve learned. Because if Shopify Plus, which is the enterprise segment, the largest segment, already grew to 29% already. As announced today, that’s a public metric. Right? And it’s increasing. It was 20 something percent when we did the podcast, right? So that’s huge change. That means customers deploy much faster. I mean, they deployed overnight, Shopify Plus. And they had no choice because their revenue went to zero. But what did you learn? What trade offs that folks were willing to let go? Or how did they change their teams? How do they actually implement this level of change? Right? Because business process change, even using Shopify, it’s not easy for big companies.
Loren Padelford:
Yeah. I think if we go back, so Plus has been existence now for about five and a half years. So it started at five and a half years ago. And we started it because Shopify customers who were growing up, and we wanted them to stay. We couldn’t understand why you’d have to keep re-platforming just because you got bigger. Why can’t you just start on one platform and stay on it forever? So we created Plus for that. And so the whole premise was, what do customers actually want to do versus what the market has created for them? And so I mean that in, I’m not a huge fan of legacy enterprise software, because I think it created a set of realities that is not true anymore, but everyone believes is true. And so one of them is, it takes a long time and lots of money to deploy software. It is fundamentally false in a world of SaaS; it is just not true.
Loren Padelford:
And so what we started to go to customers and say was, “Why? If you want to launch, let’s just launch the store. You don’t need to have this 12 month engagement with some consulting firm and all this work. You don’t have time for that, don’t you just want to be a brand?” That I think was our fundamental question. “Do you want to be an IT company or do you want to be a brand?” And if you-
Jason Lemkin:
When we chatted before on the podcast, we had a fun conversation about the high end of the customer. And some of them might want a lot of custom functionality and maybe even things Shopify didn’t do today. And you were okay for now letting them go. Right? We may hit that in the next slide. I suspect things have been different since March 15th because your priorities have changed.
Loren Padelford:
They have.
Jason Lemkin:
I’m willing to let an esoteric integration with SAPR four go, because I need my business to run.
Loren Padelford:
Right. And so these-
Jason Lemkin:
Were there examples like that? Where customer priorities just changed. Literally examples that you can think of?
Loren Padelford:
Yeah. So I mean, I think I’ll give you three kind of real world examples of things we saw move very, very quickly that we wouldn’t have seen before. So Impossible Foods is a good one but like the CPG spaces, all these folks who were selling food and selling things traditionally through grocery stores and stuff, suddenly realized these channels were not available to them or were competing directly against them. And so they said, “Okay. We want to go direct to consumer but like… Oh, I guess it’s going to take us two years and look at all the systems we have.” And we’re like, “What if it takes you seven days?” Right? Because you just want to sell stuff, right? It’s not that hard. It’s like we’re going to put pictures online with a price and you’re going to start marketing it and that’s the thing.
Loren Padelford:
And what the trade off was, was almost philosophical. It’s like they couldn’t understand how you could move that quickly. And so we showed them and so we have a whole bunch of examples of these massive CPGs launching in under a week, right? From contract signature to launch. Right? And that transformed their ability to innovate. They could just now start experimenting. So then you go and you take a much more, traditional retailer, like Staples, as an example. They had foresight, right? They came to us before COVID and they said, “Hey, we want to transform the business but this thing makes us nervous. We don’t know you. We don’t know this thing. It sounds too good to be true. But we’re willing to make trades,” and what we focused on was outcomes. What do you really want to here? You want it to be fast? Do you want it to be nimble? You want people to change it. You don’t want to have a big team supporting it. Okay, great. If that’s what you’re into, that’s what we are.
Loren Padelford:
So we’re going to give control to the business. This isn’t an IT driven process. We’re focused on outcomes. And most importantly, your consumers don’t want all this crazy customization. It’s not a thing anymore. Hyper bespoke environments no longer convert, they just annoy everybody because we’re too lazy to go through it. Right? I just want to get to a store, see what I want to see, be able to buy it fast, not have to type in a bunch of stuff, right? Not have to go through 15 screens to do it. And big enterprises were so stuck in that model. Before COVID, we were like, “Okay. Fine, we can’t help you. If that’s what you want to do, call one of the legacies. They’ll gladly take your money.”
Loren Padelford:
But when COVID hit they all came to us and like, “Okay, we give up. We don’t even know what to do anymore. But we’ve got to get off of this thing that costs $100 million. We’ve got to get back to talking to our customers. I don’t have an online store that can transact.” You saw on COVID so many of the legacies just go down. They just broke. You’d go to their websites and it was like, “We can’t help you right now. We’re busy.” And it’s just like what is happening? I saw one retailer, literally tell you to call them to place order. They gave you a phone number. Yeah, I was like we’re going backwards in time. And so I think what we said is, let’s get back to basics. You got to sell. You got to sell fast. It’s got to be fast. It’s got to be extensible. It’s got to be scalable because you are big, so you have to do a lot of volume.
Loren Padelford:
But you can do this much faster. You just got to give up a lot of this like stuff that doesn’t matter anyways, and COVID forced their hand. Even if they didn’t want to, they didn’t really have a choice. And what they all learned very rapidly was, “Oh wow, It actually does work, you actually can do that. And you’re going to end up getting what you want. It doesn’t take the massive amounts of infrastructure investment that it required before. It doesn’t take a huge IT process to drive. You can move a lot faster and still get the outcomes that you want. You just have to think about it differently.”
Jason Lemkin:
Yeah. When we chatted before COVID on the podcast, I may be misrepresenting it or or misquoting a little bit, but we definitely talked about how even in the high end of Shopify Plus, a lot of your buyers were lying buyers. They own the business model and they were going… whether they were literally going around IT, they were making their own decision. I suspect since March 15th, your relationship with the CIO and IT has changed radically. And they’ve become your ally or much more of a stakeholder, in outcomes than before March 15. Maybe that’s wrong, but I suspect-
Loren Padelford:
[crosstalk 00:20:01].
Jason Lemkin:
… you’ve had different conversations.
Loren Padelford:
It’s totally true. So before COVID, we were heavily in the marketing department, right? We were talking to the brand owners.
Jason Lemkin:
Yep. Empowering.
Loren Padelford:
They were the side stepping in the business and they were taken over and that was great. Post COVID, it’s still happening. It’s still brands are important, obviously. But the CIOs are definitely at the table and the CTOs. And I think, in large part, this is an opportunity for that organization to help their companies transform. Where before they thought they saw it as potentially a threat. It’s like, “Oh, the size of the organization is going to get smaller. You don’t have to own the infrastructure or the security or all that kind of stuff.” And they saw that as like, “Oh, you’re encroaching on the area I’m responsible for.” I think they see this digital transformation now as their next opportunity to support and lead a transformation of their companies. And that has changed dramatically and to the better, and I think the CIOs and CTOs have become huge partners in this. And can play that role for their companies. They just have to kind of… It’s not the same, right?
Loren Padelford:
I think that’s still the thing is like it feels so different that they’re a little hesitant. But you’re not alone like… Now Plus, there are 7000 Plus customers, are now enrolled. And a number of them are a billion dollars or more online. These are big businesses. This is no longer bleeding edge. It’s the other way. It’s like if you’re still on the other system, you’re in trouble. I don’t know what to tell you.
Jason Lemkin:
And let’s tease on the second point. Folks like you and me and others, we’ve been talking about consumerification the enterprise or whatever version of that malapropism you want, for more than a decade, right? We like the idea of ease of use products with great design, that would consumerify the enterprise. And it’s true, but it hasn’t been totally true, right? There are other issues in the enterprise, right? There’s workflows, there’s integrations, there’s dashboards and analytics. And just because some app we can find on Product Hunt is easy to use, it’s not enough in the enterprise. But maybe this is the era when you… are the CIOs you’re talking to, are they using Shopify themselves? Touching it, playing with it in a way a CIO or CTO might not before? And does that kind of validate how we think about user experiences?
Loren Padelford:
So yes, so they are using it themselves. What was always interesting before, COVID as an example, is you would talk to the CIOs and they’d be like, “Yeah. My cousin uses this for their sweater store, right? I know who you are, but you weren’t built for us.” There was the stigma associated with size. And what we’ve seen now is now when they get into it, they usually call after building a store. And they’ve built-
Jason Lemkin:
After?
Loren Padelford:
Yeah.
Jason Lemkin:
Even the CIO is after even the enterprise. Yeah.
Loren Padelford:
They’ve quietly built it in the background. And then they’ve been so stunned they thought they did it wrong. And so they call us and they’d be like, “So I built this thing. Is that it? Do you just turn this on?” And we’re like, “Yeah. It’s been… sure turn it on.” When I talk to them, they’re like, “Well, how can we test and play with it?” I’m like Shopify.com, enter your email address, build yourself a store. And that is so hard for them to understand. You can have this easy to interact with tool that also scales to this level and supports this complexity, That you end up in a lot of conversations, just trying to explain to them how that’s possible.
Loren Padelford:
And it’s possible because we built a platform to manage the scale of millions of merchants. So by default, it can manage the scale of any individual large merchant. And we built a platform that was API first. And so this idea of headless which is brilliant marketing but total misdirection of reality, is just you want to plug it into other things in your ecosystem. Guess what, we built an ecosystem and so you can do that with Shopify. And it’s like that’s the thing that ratchets them down to like… and it’s SOC 2 compliant. And it’s all this saying, it’s like security, check. Size, check. Integration, check. And they start running out of the check boxes and then they’re like “Holy crap. This thing is so much more usable,” right? “I can now move faster. I can actually innovate rapidly in the system,” right? Which allows them to showcase the capability of their organizations. Instead of being an anchor, they now get to be an accelerant to the business.
Jason Lemkin:
Yep.
Loren Padelford:
And they start grappling onto that and are like, “Oh, man, we could do this, and this and this, and this and this.” Because retail is experimentation and their CEOs are saying, you gotta experiment. I want to try this. I want to try that. And Shopify becomes that thing that allows them to go experiment. And so it becomes, what feels like a consumer app, right? And an enterprise experience. Right? And that’s such a powerful tool for these businesses.
Jason Lemkin:
Now as the CEOs are deploying themselves, like literally, I mean, that’s sort of every founder’s… that’s what they want to build in the beginning. Right? Is the CIO, any customer goes and builds and then they inbound, right? That’s the original dream. Are you finding maybe quietly in the background, you need a little bit more services, a little bit more onboarding, a little bit more things that maybe weren’t anathema a couple years ago. But as this torrent has happened, you do want to make this even easier for folks that maybe are still firing up IE or are struggling a little bit, or have other systems, right?
Loren Padelford:
Firing up IE…that’s amazing. Yes. So I think for us, there’s some core… as we stretched up market, and I use that term intentionally. Shopify has never moved up market. We stretched up market. We took our current platform and pulled it up market. We have not moved Shopify in that sense. We are still heavily oriented to SMB and to entrepreneurs. The large ones are just a unique kind of entrepreneur. But as we’ve gone up, as we’ve gotten bigger, and so like when I started Plus, the largest merchant on Shopify was 10 million annually.
Jason Lemkin:
Yes.
Loren Padelford:
Largest merchant today is over a billion annually. So this is a materially different customers, much more employees, much more breadth, global, all this kind of stuff. So as we’ve gone up, we tried to help hold a few principles. One, we don’t custom build software. So I don’t care how much money you have. You can’t get us to custom build you anything, right? Because that doesn’t scale. And this is a trap companies fall into all the time, is a big company with a big brand shows up and says, “I got $10 million, just build me this thing.” You build it. And now you’re their software company instead of your own software company. So we’ve really held on to that. We’ve held on to the idea of not everyone’s a fit. I’m not good for everybody. We still say no to a huge number of customers every year, because we just can’t do what they want us to do. And we’re okay with that. We’re here for a long time. We’ll get them back later.
Loren Padelford:
Also intentionally said, “I never want to be a services shop. I don’t want to be $10 in services for every $1 in software.” However, as we have gone up market, we have had to think about services more and more in a, where do we provide ultimate value that moves a customer from pre sale to launch as fast as we can? Versus consult with them on BPO and process optimization and all that kind of stuff. And we’ve just keep drawing the line, it keeps shifting slightly. But we have an amazing ecosystem where we push most of the services to and say, “You want to build the store. That’s the ecosystem for that. We don’t build stores. You want to customize an app? That’s the ecosystem for that. We don’t do that.” What we do is help you pick the right partners, help manage those partners with you. We will do some support work, some aggregate benchmarking, things like that, that we can provide.
Loren Padelford:
And that gets more and more as we get higher and higher because expectations get more. But we are still constantly trying to hold this line, saying, “Do not become a consulting shop. We want to be a software company.” But it has expanded as we’ve gone up market just because we see things we have the data, so we’re the best position to support the merchant in that space. But I ultimately am trying to build an ecosystem that does it, instead of having Shopify do it.
Jason Lemkin:
I mean, even Salesforce which is obviously a very powerful software, but much more Byzantine than Shopify. I mean, they’ve struggled with this from the early days, as we know, right? They needed services much more but to outsource it, right? To build the Piraeus and PWCs and train them. So it sounds like it’s the same process. You don’t want to own it, you want to have best of breed partners. But there’s more and more to do. You say that Shopify is an SMB customer when I see 29%. I think Slack the majority of their revenue is enterprise even though their roots is SMB. I think it could happen to Shopify. Shopify could have the majority of its revenue be enterprise even though its roots are Slack-like.
Loren Padelford:
And so, that’s true. I would say revenue is a terrible proxy for what a company’s trying to do. It just happens to be the thing that everyone wants to talk about. I’ve always thought employee base is a terrible proxy for success. Right? Having lots of employees doesn’t mean you’re actually successful, it just means you have lots of employees. So there are very large companies in the world with tons of revenue who have no customer value. And so I just don’t see this… I’m not arguing your point, I think our perspective would be the merchant mix is a better indication of our interests and what we’re doing, than where our revenue comes from. Because revenue is mathematics in our space. There’s monthly fees, payment fees, that kind of stuff. By mathematics, the large ones will overshadow the small ones but when you have a million small ones and 7000 large ones, ask me what the company’s doing, right? We’re doing both but no one could claim we’re not doing the small market just because of where revenue comes from.
Loren Padelford:
So I think that’s a nuance I’d suggest is, your revenue is an interesting indicator of where some of your cash comes from, but it doesn’t tell you necessarily what the company cares most about.
Jason Lemkin:
Yeah, it’s a good insight. And it’s a fun, as all of us who have been doing this and this founders too, it’s a fun tension to watch right? And watching Stewart Butterfield start wearing a tie more often. I haven’t seen Tobi wear a lot of ties yet and suits. I am going to tweet at you if I see one. If I see the Kangol hat come off and the tie. Just one Bloomberg interview, at 10 billion run rate and then we’ll have a laugh about it. I’m not saying it’s going to happen, but-
Loren Padelford:
I’ll tell you that, I would be more shocked than you if that were to happen because I think he’d get more internal chirping than he would external. But this is the, we are okay to say no to things. This is who we are, we say no constantly. And so I’ve said to my team, we say to Shopfiles, “Hi. We’re not trying to become the market. We’re trying to get the market to become Shopify.” And so it manifests itself in that kind of way. It’s like, yeah. If us showing up in a suit, is the reason you will or won’t talk to us, let me help you with this conversation. We’re out. Right? Because it’s just not like that, if that’s the thing you value, we’re having the wrong conversation. And it’s not about disrespect or anything. I’m sure there’s a scenario under which he would wear a suit, or I would wear a suit.
Loren Padelford:
But when you think about it from a market perspective, this is the same as the CIOs. Is when the CIOs are like, “Well, we have to have all these things are we’re not doing business with you.” “Okay, great. Don’t do business with us then.” I’m sure there’s a bunch of software companies who will comply with this ancient way of doing things. We aren’t one of them. So when you figure out a different way or want to talk about a different way, we’ll still be here. And I think that’s been one of the keys to our success as we’ve stretched up market, is not falling for the brands or falling for the money and just saying, “Look, we’re trying to build something that not everyone’s going to believe in. And a lot of people will say no to us. But we’re here for a long time. And we’re going to do this and we think this is the right way.”
Loren Padelford:
And it is a bit philosophical more than it is logical. But if you’re going to try and do something no one’s tried to do before, it is a little bit philosophy more than it is standard business. And I don’t know, I mean, Tobi’s tweet this morning was, I think indicative of, if you’re into this kind of thing, I think we’re doing okay.
Jason Lemkin:
All right. Just one follow up of that and then talk about boomerangs. We talked about it before, but then I want to make sure we have time for questions. So, because there’s usually at least a couple good ones. But just this, it’s a super interesting idea of 29% of the revenues from Plus, from enterprise. But you can’t let that be your North Star. It has to be the corpus of customers, right? The million and what they want. But at some level, when you’re doing resource planning, and Shopify is a big company now. It’s a tiny company. It’s a rebel but it is a big company. Do you have to do some of it that way? Do you have to allocate 29% of engineers and 29% of the team meeting? Because I find that a useful exercise even if you don’t follow it, it’s a useful paradigm to think about. Because if you don’t, the distribution can be based on passion or emotion and not data. So do you divide anything up based on that 29 versus 31 or 71 rather?
Loren Padelford:
No.
Jason Lemkin:
No?
Loren Padelford:
I think that the better way to think about how we make those kind of trade offs is, the mental model I have is Shopify is a flotilla.
Jason Lemkin:
Yeah.
Loren Padelford:
And the big central cruise ship in the middle is that core merchant. And what you have outside of it are all the other ships in the flotilla. Plus is one of the ships. Retail is a ship. Shopify Money is a ship. We’re all ships. We’re all tethered to that middle and we’re all building along a continuum of merchants. It’s like there are small Plus merchants that are doing half a million dollars in revenue that are still on Plus, because they need some of the features. And then there are big Shopify merchants that are on a Shopify plan, and not on Plus because they don’t need some of the Plus features. So we’re building on this continuum. And the flotilla is pulling all the time. We’re each pulling in slight directions, and there’s this near constant discussion about resource allocation based on opportunity, but isn’t financial opportunity. It’s how do we make eCommerce better? How do we support more merchants? How do we give more flexibility and more extensibility?
Loren Padelford:
It’s never a financial discussion where, “Hey, I can make you a whole lot of money if you just give me all the resources.” Because again, money is a bad proxy for success. And so we are in a constant discussion as a flotilla, about course alteration, right? It’s like, “Oh, we’re going to nudge it a bit this way this time and nudge it a bit this way this time.” But it’s not nearly as pragmatic as, “Oh well, X amount of the revenue comes from over here. So we’ll dedicate X amount to the resources.” And to give you the example of that. Plus is about 700 people worldwide. Against a 6000 person company, and is 29% of [inaudible 00:35:42].
Jason Lemkin:
That’s sort of the question. Yeah.
Loren Padelford:
Right? And so it’s just like it’s disproportionately small. But it is amazing what you can do with small teams.
Jason Lemkin:
With just 700.
Loren Padelford:
With just 700. Imagine.
Jason Lemkin:
All right. One more I want to do and then I want to make sure I get a couple questions offline and a couple questions online I wanted to get. But when we chatted before, you chatted about letting customers go or you weren’t the right vendor, having the confidence to do that, having the confidence about your mission, and that they might boomerang back later and that’s great, right? I assume there’s been a lot of boomerang since March 15th. Maybe not. Maybe it’s all actually been folks that had different solutions or different… but has boomeranging changed since March 15th? Have you learned about any lessons on how to handle boomerangs? Because if you go along, they will come back if you have a great solution.
Loren Padelford:
Yeah. So this is a core belief of mine is, you have to be able to say no to customers. They’re not all good. Right? I mean, statistically impossible that every customer we talk to is going to be a good one. So you have to know what you’re good at. We’re optimized for success, not money. So I need customers to be ridiculously happy. So they go out and tell all their friends and all their friends come to us. And so we say no a lot and we still say no. But the premise is gracefulness. Say no gracefully. Right? It’s not you, it’s me conversation. Like, “You’re a great business. If you want to change… here’s the things we don’t think we can complete.” Either it’s you want to do the thing this way, and we want to do it this way. But you always leave the door open. Never close the door, never burn a bridge. You leave it open. “Hey, if you want to keep talking, we’re here. We’ll keep talking.”
Loren Padelford:
So when they come back round again, you’re gracious. It’s not, “We told you so.” It’s not, “Oh, look at us. We were the right, you were…” It’s, “Hey, great. What would you like to do?” It’s the same discussion. “We’re still here to make you successful. If things have changed, let’s talk about it again.” But I see so many companies who just say yes to everybody, under the auspices of any money’s good money. And the problem is, it’s not because it’s a resource distraction. And ultimately, what you need is happy customers more than you need the money, because happy customers will lead you to the money.
Jason Lemkin:
Well, that’s the real answer.
Loren Padelford:
You get both.
Jason Lemkin:
Right.
Loren Padelford:
Right.
Jason Lemkin:
Sometimes I think you should take the customer if you could make them happy, if you don’t want to do it. But it’s the happy customers that matter more than the money. The money usually [crosstalk 00:38:06]-
Loren Padelford:
Totally. Totally.
Jason Lemkin:
Yeah.
Loren Padelford:
And so I think that’s we’ve done. So your Boomerang question is 100%. Right? 100% we’ve had boomerangs that three years ago were like, “We’re never talking to Shopify. You can’t do what we want.” Who are back in our pipelines. And I think that’s great. We’ve developed a lot. The market’s developed a lot. They’ve developed a lot. Tobi has a great saying. He says, “We can all wake up tomorrow smarter.” Right? And so if we woke up the next day-
Jason Lemkin:
Indeed.
Loren Padelford:
… and we were smarter, great. We get to make new choices. Right? And so those boomerangs I think are just, we all woke up smarter, new choices to be had, let’s move on and figure out how to make people successful.
Jason Lemkin:
One question because I think this is interesting to founders, even though it’s going back in time. But Adam asked, “What customer number or revenue?” But it may be more milestone based for you. Did you take the steps to do the SOC 2 that you reference to? To do more enterprise grade security and compliance? How did you think about that and sequence it, as you grew Plus?
Loren Padelford:
I don’t think we did SOC 2 until last year.
Jason Lemkin:
Yeah. I’ve seen it. So that’s late. Stop fighting a lot of things late.
Loren Padelford:
Well, and here’s the reason.
Jason Lemkin:
And it’s done pretty well.
Loren Padelford:
So I don’t have an SLA. Okay. We have no SLA’s, at Shopify. Right?
Jason Lemkin:
Yes. The CIOs I bet asks since [crosstalk 00:39:21]-
Loren Padelford:
Every time they ask.
Jason Lemkin:
Every time. Where’s your SLA?
Loren Padelford:
And so, when we first got asked that everyone was like, “Oh my God. You’re going to have to SLAs.” The number of times I got told, “When you get to the real world, and sell to real customers, you’re going to have to change all these behaviors because no one will buy it.” That real world place sounded like a terrible place to live, so I just refused to go there. And so SLAs as an example of “enterprisey” things that we just avoided. When they showed up I was like, “Why do you want one? What do you think is going to happen if we go down?”
Jason Lemkin:
Well, nothing. SLA in some ways is the stupidest thing if you think about it, right? It accomplishes nothing. Even if you got $6, there’s nothing to do with it and it doesn’t make the app better. But they want it.
Loren Padelford:
Okay. And so I had that exact conversation over and over again. And so I can count on one hand, the number of deals we lost because we didn’t have an SLA.
Jason Lemkin:
Yeah. I would have made one in a Google Doc, but I’m with you. I’m with you.
Loren Padelford:
No one has time for that, I don’t have time to make you an SLA. Right? So I think we have avoided a lot of the “enterprisey” standards, by just questioning the standard. By being like, “Why? Why is that important to you? What is the thing you think you need here?” And then what we found is no one actually had good answers. What they were used to, is just like the big five legacy software companies would show up with the standard package, it became the norm. They asked everybody else in the world to comply to it. No one ever pushed back because they were big companies. And so all small companies adopted what those five legacy platforms created. And we just refused to adopt it. We just kept asking, “Why? Why do you want that? Why do you need this thing? Why do you need that thing?”
Loren Padelford:
And so I’d applied for contracts. I have a one year contract. I mean, I don’t actually care if you sign it or not. I mean, I kind of care. Right? But if you sign that-
Jason Lemkin:
Yeah. In many ways contracts are just as stupid. Let them go.
Loren Padelford:
Let them go. I want you to be here because-
Jason Lemkin:
Let them go. Let them go.
Loren Padelford:
… this is the greatest platform in the world, not because I have you locked into some five year agreement you can’t escape from.
Jason Lemkin:
Yes.
Loren Padelford:
Right? It’s backwards. I’m here to make merchants better, not to lock them into things. And so there’s so many parts of enterprise, which are fiction. They don’t actually exist in reality, it’s just been created by organizations to make themselves more money. Right? Which, “Okay. I mean, you want to make more money. It’s fine, but there’s better ways to do it.” To lock in customers to platforms with crappy outcomes, so they couldn’t escape. Right? Once you’re there and it didn’t work, you can’t leave anyways.
Jason Lemkin:
A three year contract is powerful.
Loren Padelford:
Yeah. And so my advice to everyone is, hold off longer than you think. Just keep asking your customers what they expect to get from you and those things. What do you want? And you’d be surprised most of them, they don’t really want that stuff. Right? What they want is the outcomes. They want to sell more stuff. They want to use your platform to get to some end goal of theirs. There’s a lot of lawyers, maybe they ask for things, but I don’t know. Don’t be-
Jason Lemkin:
It’s a good challenge.
Loren Padelford:
… the enterprise.
Jason Lemkin:
No one agrees with you more that an SLA and a contract are stupid. They’re literally stupid if you think about them. They’re stupid. And they’re even antithetical to building a great product because you want to be held accountable every nanosecond right? Having said that, it is interesting that you say you lost some deals to it right? And so in the end, you want happy customers, it’s okay. But it’s an interesting comment on both sides. There is a trade off right? And that trade off doesn’t necessarily work for everybody at every stage of their life.
Loren Padelford:
Sure, but let me clarify. I lost less than five, in six years.
Jason Lemkin:
Okay. Fair enough.
Loren Padelford:
I did not lose customers over this, right? And the amount of time and effort it would have taken to comply with that, would have far exceeded any money I was going to make on those six customers. Right?
Jason Lemkin:
Well, that’s the more analytical than the ethical or moral example. The juice wasn’t worth the squeeze at the time.
Loren Padelford:
Right. Totally. And it still isn’t. And so SOC 2, look, great thing to have. I’m glad we have it. We avoided it for a long time. And again, we never lost deals because of it. It’s one of those questions. Security shows up and ask, well, look we built this giant platform. We have an amazing security team. They talk to merchants all the time. They convince them that we are doing it and they get off this idea of needing this certification. That is 99% of customers. Now we did it because we’re also at scale. And we have some government customers and stuff like that. It’s like there was a good reason to do it. But we avoided it for a long time. The vast majority of our customers never ask if we have that kind of stuff. You’re talking about super outlier scenarios. So I think enterprise startups, and I really hate that term. We’ve got to come up with a better term.
Loren Padelford:
Startups who serve large, complex customers, get convinced they need all these things in order to win. And what I’d suggest is that’s not true. Sit down with your customer, ask them what they’re really trying to do, what they care most about, right? What the outcome is and then walk them through how you operate. When we were early it was like, “Well, you need all this stuff because what if you go down?” “Mr. Customer look, my entire business is SaaS. My entire business is about being online. If I go down, I have much bigger problems than talking to you.”
Jason Lemkin:
It’s what I think about every moment of the day. It’s logical. I like the pep talk here. I’m feeling better about this approach.
Loren Padelford:
And most customers will just be like, “Yeah. Okay, I get it. Let’s move on to the thing I really want, which is your platform that helps me do what I want to do.”
Jason Lemkin:
I’m with you. Let’s break. I think we’ve all just been through the brutal security audits. Those 500 page documents that come through procurement-
Loren Padelford:
Oh, I never do them.
Jason Lemkin:
… that come through department, and that department is still here in July 19th. And we’ve all lost a deal, maybe it’s only five. But we all lost the deal for not responding to that questionnaire or not checking the boxes, when we’ve been in a multi vendor situation. So-
Loren Padelford:
Don’t do RFPs.
Jason Lemkin:
… it’s a good challenge. What’s that?
Loren Padelford:
Don’t do RFPs.
Jason Lemkin:
Yeah. We all want to not-
Loren Padelford:
Don’t do RFPs.
Jason Lemkin:
We all want to not do the RFPs too but… and I’m with you. I’m aligned with your values. But sometimes as a small startup when you’re building your brand, when you don’t do the RFP, you don’t get to go to the dance. And it can be-
Loren Padelford:
Okay.
Jason Lemkin:
If it’s a game changer deal, if it’s closing a Shopify or a Microsoft or Google, sometimes you got to do the RFP, I think. But I’m not saying you’re wrong.
Loren Padelford:
I would agree. What I’d say to all the founders is, do the math. 80% of RFPs are decided before they ever send them out to the public.
Jason Lemkin:
That is really [crosstalk 00:45:45].
Loren Padelford:
If you aren’t talking to the customer already, before you get an RFP, the odds that you win are less than 1%. And so, is it worth it? I’m sorry, it’s just math. It’s not an opinion. It’s just the math. This is why we don’t do them. It’s like you can’t win. I didn’t write it so I can’t win it. If I wrote it, I can win it.
Jason Lemkin:
That is the art of the RFP. All right, it’s good. I know we’re exactly at 1:50 where we’ve got to end. Loren, this was amazing. Anything you want to add at the end that we didn’t touch or anything you want to hit? Any book tours or any new YouTube channels or anything you want to hit? Anything about Shopify Plus you want to highlight before we break?
Loren Padelford:
Everyone in the enterprise space, stop acting like the enterprise, right? This was a world created by five software companies that worked perfectly for 50 years. It’s over. It’s over. Now they’re big, it’s going to take them a while to wind down some of this stuff. But that world is over. And it’s over the more we push on it. So don’t just comply to a world created by others. Let’s create a new space. There’s enough… you’re going to talk to Aaron shortly. It’s like, there’s a new version of enterprise in the world, led by everyone probably listening to this call and everything else. We all got to stop acting the way that the enterprise software space has acted for the last 50 years. Because-
Jason Lemkin:
I’m with you.
Loren Padelford:
… it’s not worth it.
Jason Lemkin:
I’m going to try to quickly ask him about SLAs and RFPs but I am with you. Loren, it’s always more than a delight and a learning experience being with you. So thank you again for joining us. And this was terrific and stay safe.
Loren Padelford:
Thanks, Jason. Appreciate it. You too.
Jason Lemkin:
All right.
The post SaaStr Podcasts for the Week with Bernadette Nixon, Jay Snyder, Nick Mehta, Loren Padelford, and Jason Lemkin appeared first on SaaStr.
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