Has Behind the Cloud by Marc R. Benioff and Carlye Adler been sitting on your reading list? Pick up the key ideas in the book with this quick summary.
Millions of companies are started globally each year and the great majority will fail during the first few years of activity. Salesforce.com is an impressive exception, but what makes this multi-billion-dollar powerhouse different from other businesses?
We all know that each success story starts with a great idea that someone truly believes in. That person must also have the courage to go their own way even when nobody, from venture capitalists to close friends, believes in their chances of success.
But how does one give wings to a potentially successful fledgling idea? Well, first and foremost, differentiating oneself from the others is an important aspect and so is always putting the customers first. The chances of success and of making a mark on the industry are also higher when business owners are not afraid to compete with the big dogs.
In this summary of Behind the Cloud by Marc R. Benioff and Carlye Adler,Here are some of the things that you will learn from this book:
- how the software era was affected by Salesforce.com;
- how important it is to stand out from the crowd; and
- how to become successful in Japan.
Behind the Cloud Key Idea #1: If you want to build a successful company, think big and trust your instincts.
Did you know that some of the greatest companies in the world were initially mere ideas that not a lot of people believed in? If building a business would be as easy as snapping your fingers, the world would abound with successful entrepreneurs. But what makes Salesforce.com’s creator, Marc Benioff, so incredibly successful?
Let’s start by analyzing this simple advice from Marc Benioff: ‘Don’t be intimidated by an idea’s potential, even if you have to go at it by yourself,’
Despite what people might expect, the idea behind Salesforce.com was not the pinnacle of a strenuous journey of searching for potentially successful business concepts. In fact, Benioff was enjoying a one-year sabbatical after being the vice president of Oracle for over ten years.
The idea behind Salesforce.com came to him while he was in Hawaii swimming with the dolphins in Hawaii.
Simultaneously, Siebel Systems, a Customer Relationship Management company, went public with their innovative software solution. Their platform would facilitate the process of managing contacts and tracking leads and account information for salespeople. Unfortunately, it was high-maintenance, severely flawed, and expensive.
Benioff saw the concept, analyzed it, and decided that he could improve it by using a cloud computing model, which was a new approach known as “Software-as-a-Service”. He then contacted Siebel Systems’ founder Tom Siebel to discuss his idea. Siebel was supportive but did not think that Benioff’s concept would be successful.
But Benioff did what any aspiring businessman should do; he stuck to his idea and made the difficult decision to follow this path alone. He was aware that in order to create a great product, he had to think big, so he hired the best engineers he could find and he aggressively marketed his idea as “the end of software business and technology models.” He knew that no one could ignore this motto and any skilled developer would be intrigued by it.
By March 1999, Marc Benioff was working alongside three extremely talented and highly experienced developers in a tiny apartment in San Francisco. By the end of the year, the team had ten employees and couldn’t fit the apartment, so Benioff decided to rent a bigger space – an 8,000 square-feet Rincon Center office space.
Behind the Cloud Key Idea #2: Aggressive advertising can be a great solution.
The number one way to direct attention towards your growing company is, of course, marketing. If you want to create a business as successful as Salesforce.com, it is important to assert yourself from day one. Aggressive advertising can allow you to compete against renowned market leaders and can even help you become one.
First and foremost, you need to find the features that make your business unique and share them with the public in an engaging and attractive way.
No more than six months after Marc Benioff started his business, Salesforce.com, Don Clark, a reputable Wall Street Journal’s writer wrote a detailed front-page report about a new industry that is emerging. This proves that from the very beginning, Marc Benioff knew that he had to send a clear message and inform as many people as possible, including journalists, about the ways in which Salesforce.com was better than other companies.
The next thing that Salesforce.com needed was great branding, so Benioff hired the legendary marketer Bruce Campbell. Campbell created the famous “no software” logo that consisted of a red circle with the word “software” crossed with a line. A lot of team members were quite skeptical about the logo, but Benioff followed his instinct and decided to choose the logo that would help him stand out from the pack.
Going with the gutsy option proved to be the right decision, as the logo was soon plastered all over the newspapers and magazines. Additionally, Campbell’s marketing campaign was recognized by PRWeek the best Hi-Tech Campaign of the Year.
However, standing out from the crowd is not always enough. Picking strategic fights with big players is also an important part of the process. Encouraged by the positive feedback, Benioff decided to badger his competitors.
One of the most memorable things that he orchestrated was paying actors to wave signs that said: “no software” in front of a renowned conference held by Siebel User Group, Salesforce.com’s biggest competitor. Every conference attendee was offered an invitation for a lunch party held by Salesforce.com and, surprisingly, many actually showed up. The press was all over the event, creating even more buzz around the newly founded company.
Behind the Cloud Key Idea #3: Public Events Are a Great Way to Get Media Attention.
As Salesforce.com grew, they found it was not necessary to focus on attacking their competitors anymore. It was now time to market the values and features of their own product. Using events and maximizing their viral effect was the best way to get media attention.
There are two key marketing strategies that bring the best sales conversions, the first strategy consists of unbiased editorials that would present the business to press readers and the second consists of getting positive feedback through testimonies.
So, rather than officially presenting the product to potential investors, Benioff decided to organize road shows called City Tours in a string of cities. The shows featured demos, keynote speakers, and customer presentations and brought analysts, journalists, and customers together.
This innovating way of putting the user at the center of the business made a substantial difference in the company’s success. More traditional software companies prioritized chasing executives who, although they were the ones who controlled the company budgets, were less likely to actually use the product themselves.
Benioff’s Salesforce.com saw a lot more value in celebrating their actual customers by incorporating them into their marketing campaigns as much as possible through posters and presentations. Eventually, these events became known as “love fests”, and thanks to them, the company was able to close deals with as much as 80 percent of new prospects.
And last but not least, Salesforce.com replaced the boring product demo hosting with fun and engaging cocktail parties. And as Benioff’s City Tours became more and more popular, it became apparent that hosting such expensive events in so many cities might not be a profitable option.
Luckily, because he didn’t care much for the presentations, a salesman from the East Coast came up with a brilliant idea – eliminating the presentations and holding just the cocktail parties, where the company representatives could mingle and connect with customers and potential business partners.
So, the team decided to test the salesman’s idea in New York with a handful of prospects and customers. The results were amazing, for one-tenth of the costs, the cocktail party had the same result as a big City Tour event.
Behind the Cloud Key Idea #4: Putting the Customer at the Heart of the Business Is Essential.
In the 1990s, dealing in enterprise software meant months of extensive work, exhausting negotiations, and multiple presentations. But as technology advanced and the Internet era dawned, Benioff’s Salesforce.com found more effective ways to deliver a product. He understood that the ones who make or break a product are the customers.
He also understood that his potential customers enjoyed being a part of the project before signing a contract. Consequently, he decided to offer free trials of the product over the Internet, which eliminated the middle man. Not talking to a salesperson before having access to a product is common practice today but it was highly unusual back in 1999.
The initial cost of the Salesforce.com software was $50 per month, making the purchase less risky for customers. Furthermore, for the first time clients were able to make suggestions and report bugs thanks to a new feature coined by Salesforce.com called “bugforce”.
Getting constant feedback from the users, the Salesforce team was able to refine and reword the software as soon as an issue was reported. This customer-centric philosophy helped Benioff more than he could have ever predicted, especially when the .com bubble finally burst.
The dot-com crisis affected a large number of sites, and in March 2001, Salesforce.com suffered a serious blow. A lot of companies decided to give up on Salesforce.com, and by October, the company had lost millions of dollars, which led to critical cash flow issues.
The best solution that Salesforce.com was able to come up with was changing from monthly payment to yearly payment. Although this approach was on the conservative side and greatly restricted the customer’s payment plan, more than half of all the users agreed to the new terms.
In less than a year, the company had fully recovered from being in the red to making a nice profit. This was only possible because Benioff had managed to gain the loyalty and trust of his customers before being hit by the dot-com crisis.
Behind the Cloud Key Idea #5: Focusing on One Product at a Time Is Much Better than Working on Several Simultaneously.
The majority of software companies, including Oracle, created custom products for each of their clients, which meant that they had to build many different products simultaneously. Salesforce.com, on the other hand, focused on one great product that would suit everyone.
They did this by allowing their services to be shared by users over the internet.
The talented developers at Salesforce.com used “multitenancy”, which is an innovative technology model. This model acted similarly to an apartment building where all the tenants split the costs equally, but every tenant could decorate their own unit and own a lock. At Salesforce.com, this meant that each user could work with his own data and access a piece of software running on the Salesforce.com at the same time.
Venture capitalists saw this as a potential issue as they feared they might lose control over their assets and shed customers. But, luckily, this was never a real threat, as maintenance became easier as each user received automated updates and information. Besides, if they backed up on the initial idea, promoting “the end of software” would have been worthless as they would have offered exactly what they wanted to eradicate in the first place.
In addition to the “multitenancy” tech model, Salesforce.com also focused on making things fast and simple.
Creating core principles for the core system and laying them all out on a whiteboard came before actually writing the code. They concluded that the first priority should be speed, because salespeople had to have access to information quickly, and if they had to wait too long, they would probably quit the service. Their second priority consisted of being able to identify and fix the ensuing bugs as efficiently as possible.
These two main principles paid off big time: during the first quarter of 2009, the Salesforce.com services had a 99.9% uptime and more than 200 million unique transactions per day.
Making the code public and giving external developers free rein to create and use their own applications was a pivotal decision on the part of Salesforce.com This decision was put to use by the Schumacher Group, a healthcare services provider worth a whopping $300 million. The Schumacher Group used the Salesforce.com code to create 90% of its operational programs.
Behind the Cloud Key Idea #6: If You Want to Expand to Other Countries, Always Consider the Cultural Differences.
Having now laid a solid and reliable foundation in the U.S., Salesforce.com founder Marc Benioff decided to expand overseas. Choosing the company headquarters wisely is one of the main things to consider before becoming internationally competitive.
Salesforce.com chose to go to Europe first, and in order to ensure a promising start for themselves, in 2000, they set up their first European headquarters in Dublin, Ireland. Due to the favorable tax rate and to the English-speaking population, Dublin was the most attractive location for big companies such as Oracle or Microsoft.
The Salesforce.com team also decided to hire native speakers from many different countries. The main advantage of this decision was the fact that whenever someone from a different country would call, they would get to speak to a native speaker. In other words, when someone from France called, they would think that they are speaking to someone in France.
Although they had an office for basic office work, most of their meetings were conducted from luxury hotels in major cities such as London. This was extremely easy to accomplish, as all the company’s software was Internet-based. Using this type of hotels for meetings was a way to project the image of success and wealth to their potential clients and it was actually much cheaper than renting a high-end office.
The company also started to offer a customized marketing strategy for a wide range of different markets.
Their initial aggressive marketing strategy proved to be hugely effective in the United States and Europe, so the company was looking towards Asia and Japan. After conducting extensive research, they understood that Japan was a very special type of market that had to be approached differently. They had to re-think the way they positioned themselves, as most Japanese companies are very cautious when it comes to buying services and products from foreign businesses.
Thanks to a talented Japanese sales manager, Eiji Uda, Salesforce.com managed to create a strategy that would appeal to Japanese customers. By using references from companies that are highly trusted in Japan, such as Amazon and Google, Salesforce.com started to gain traction on the Asian market. Then, when two of the biggest players of the Japanese market, namely Japan Post and Canon started to implement Salesforce.com services into their workflow, a lot more clients started to follow suit.
Behind the Cloud Key Idea #7: When It Comes to Finances and Capital, It Is Best to Combine Sensible Accounting With Thinking Outside the Box.
One of the most stressful and strenuous parts of starting a business is getting sufficient funds together. Unfortunately, even if you’re a great entrepreneur, the experience and passion alone are not enough to support a new company from a financial point of view.
The good news is that emerging businesses can use something called start-up capital.
According to a recent study, more than 70 percent of small businesses will deal with a serious lack of funds. In order to avoid this struggle, Marc Benioff interested venture capitalists that showed an interest in his company. This was a logical solution for a fast-growing internet company such as Salesforce.com and it enabled Benioff to access the much-needed funds.
However, no one was particularly happy by his “no software” business ide. But rather than giving up, Benioff thought of all the other successful companies that had a rough start, such as Starbucks and Cisco.
So Benioff had to rely on the only people who truly believed in him: his friends and family. He was surprised to find that the people who cared about him also thought that his idea was great. Remarkably, between 1999 and 2002, it only took five rounds of fundraising for Benioff to raise over $60 million between 1999 and 2002, much to the surprise of the previously mentioned venture capitalists who refused his idea. If they had taken a risk and invested $1 million in Salesforce.com, their investment would be worth around $1 billion today.
Marc Benioff spent a lot of time and effort raising revenue and expanding the customer base of Salesforce.com, rather than chasing profitability and streamlining the business.
Which is why, in 2002, he was able to set the goal of becoming one of the few billion-dollar companies on the market. In order to achieve that, he decided to go public, but because of the recent dot-com crisis, emerging companies had to show significant revenue. Despite all conventions, Salesforce.com started auditing before going public.
After more than one year of preparations, by December 2003, Salesforce.com had managed to increase their annual revenue from $25 mil to over $100 mil. Their achievements were twice as good as those of other companies.
So, not long after, in June 2004, Marc Benioff finally got to fulfill one of his lifelong dreams of ringing the bell at the New York Stock Exchange.
In Review: Behind the Cloud Book Summary
The key message in this book:
Salesforce.com is a perfect example of a company who achieved success by following a few essential guidelines: deliver a single great service or product, stand by your idea, put the customers at the core of your business, position yourself strategically depending on the market, and don’t be scared to take on big players.
Trust your instinct and don’t let others bring you down.
If you have an idea you truly believe in, don’t let anyone discourage you with their stories of failure. They will say that raising money will be impossible, but it won’t be. There are many different ways to access funds, and if your product or service is good, you will succeed.
Suggested further reading: Crossing the Chasm by Geoffrey A. Moore
Geoffrey A. Moore’s Crossing the Chasm explores the market dynamics and the struggles that new companies face when they try to deliver new products.
This book offers tangible advice on how to make difficult transitions and how to get to the mainstream market.