How Great Leadership Impacts Revenue Processes and Systems with Roee Hartuv

Hi, I'm Warren Zenna, founder and CEO of the CRO Collective and welcome to the CRO Spotlight Podcast. This show is focused exclusively on the success of Chief Revenue Officers. Each week we have an open, frank and freeform conversation with top experts in the revenue space about the CRO role and and its critical impact on B2B businesses. This podcast is the place to be for CROs, sales and marketing leaders who aspire to become CROs and founders who are looking to appoint the CRO or want to support their CRO to succeed. Thanks for listening. Now let's go mix it up. Hey everyone. Welcome to this episode of the CRO Spotlight Podcast. Again, Warren Zenna. I'm the founder of the CRO Collective and this week I had the great pleasure to have a conversation with Rohi Hartov, who's one of the senior consultants over at Winning by Design. What a great conversation this was. He's just a really super smart person and we got into a lot of detail around revenue leadership and how recurring revenue leadership models and processes and systems aren't enough without the right leadership. And I think just the way this conversation weaved in and out of different topics was, was really great. Just had one of those sort of sparky energy to it. So I really, really enjoyed it. I know you will too. So tune in and listen and thanks for all your support. How did you sort of find yourself in the situation where now you're building revenue and go to market models? You know, I mean, most salespeople, they close deals, they make a lot of money, they become VPs, you know, maybe they own their own businesses. You know, you seem to have begun more consulting and sales, let's say, engineering route. I'm curious, you know, like, what, what part of brain you have that had you decide to move into this direction?

Yeah, I'd say I always find myself, instead of chasing customers, trying to figure out what I can improve in the process, what's not working in the process, and try to fix that before I continue to chase my customers. So it's always like, all right, I have my, my targets. What do I need to do in order to achieve those targets? What can I improve? Or let's see how I can build. First of all, I was for myself as an individual contributor. But then when I climbed the ladder, it's like I was always drawn to that process focused science approach rather than the, the art of the sale kind of approach.

Yeah, it's interesting because you're speaking to something that is like this perennial question, which is what Makes a good salesperson. You know, are we artists? Are we scientists? Are we both, you know, you know, I like you, right. I'm, I'm really like a student of selling. And a lot of sales people are. You get together with salespeople and have a lot of close friends. All we do is we talk about, you know, processes and stuff. It's like football. You could talk about, you know, how do you run a third, third and six or something. Third and eight. But anyway, so I asked this question because again it's important for me as I'm developing. What I'm doing is identifying like what are the profiles of people that make good a fit for certain things. So what question I primarily ask is what makes a good Chief Revenue Officer? Well, we're going to get into that more, but how do you sort of reverse engineer people who are successful at something and find out what it is? What I'm hearing from you and it doesn't surprise me. You're a process person. You're like a scientific person.

Yeah.

So you have a natural curiosity of how things work. You're taking a clock apart, you're putting the clock back together again. Right.

And you know, actually it reminds me how I started. I like to tell this story. When I was a young salesperson, I, I was mentored by a fantastic lady. She was brilliant and she could go enter a room and start having a conversation, which is basically a sales conversation. But whatever it was, we were selling to life science companies and she had a PhD, like she could manage a room and start whiteboarding and sell our solutions. And I was like amazed by how she, she, she did that. And I was always trying to imitate her and how she does that, but it didn't work for me because I wasn't as smart as she was. I didn't have that presence in the room. She was also, she again, she was very smart. She was also very good looking. And when she talked into room and let's. We sold to, to white men. That's what we.

Sure, I understand.

Listen to her.

Of course.

And I tried to do the same. Tried to whiteboard and didn't work for me. So I had to find a way, a systematic way to actually reach my targets. And yeah, that's, that's, that's where I came from and that's where I started my pursuit of hey, like there are people that are natural sellers but for the most of us it doesn't come natural.

And yeah, so, so then it's interesting. So then you would say I Don't know if I'm hearing this correctly, but would you say then you fall into the category of people that it didn't come naturally to you and you had to figure it out? Yes. Okay. It's interesting. I mean, for me, it was sort of the opposite, you know, so. Interesting story. So I've told this before, but it's pertinent for this. So I was. I was an artist. I was an art student. You know, I'm really, really more like. My brain is really more of an artistical brain than a scientific one. Maybe. I'm not sure, but to some degree. So anyway, I grew up mostly doing creative work. It was everything, everything communication related. I could speak really well when I was really little. I could read from big. Like, very complicated. I remember I was reading. I think it was Moby Dick, which is a very difficult book, by the way. You know, it's complicated the way it's written. I was reading it when I was like three or four years old. I can read the whole thing. Like, I can stand up in front of room and just read the whole book. I don't know why. I'm not the smartest person in the world, to be honest with you, but certain things I could do really well. And then I was also visually good. I could draw and I could paint and I could sculpt, but I can also sing and I can act. So I was doing all these things like that. So what happened was when I. I got out of school, I met this guy and I was in my mid-20s, who was this incredible salesperson. Like you just described somebody, just this brilliant person who could just sort of convince people of things, you know, and he saw. And it wasn't like I hadn't done sales. I did some. I was selling newspaper advertising. I was just naturally good at it. But what he said to me was, he was like, you could sell anything. I want you to sell some stuff for me. And I just did it. And I. I was successful at it. And then he took the skill that I had of the talent that I had. He turned it into a process. And I remember what happened to your point. I had to mimic him for a while. I sort of had to act like him because he was the only example I had. I listened to how he did things, and he was really good at it. He was like always on the phone, the way he handled stuff. And so it was funny. We were. He was training me for years. We were working together side by side. And I started selling. And the people in the Office would laugh because it was like there were two identical sounding people on the phone. Like we literally had the same cadence and voice and everything. And it took me a while to your point, to make it my own. And it wasn't like him anymore. I had to sort of become him and then find my own version of it to become myself. And it took a while. And we still talk. We're very close. This is like 30 something years ago. We still talk. And I asked, I asked this because he and I talk about this a lot. And in the work I'm doing, more related to this conversation that we're going to have is so as you know, what I'm doing is I'm trying to figure out like how does revenue, how is revenue led? It's not just how much is it done? Which is what Winning by Design does. Great. Like this is how you do it, right? My point of view, and I wanted to talk to you about this is it's as good, as important as is to have a process. You need to also have the right leadership for the process to work. And so I just don't believe that a classic C suite, functional C suite organization is really relevant anymore. I think that if you're running a revenue operation, you need to have a chief revenue officer who has a certain personality profile like you and I are discussing. That's the reason why this is pertinent. Who knows how to do that and can take a process and turn it into a cross functional, aligned, like leadership thing. I think those are two things, not just one. You can't just have a CRO who's really good at it and you can't just have a process for it. You have to have both. And so I wanted to talk to you about that a bit and your thoughts on that because I don't know whether how much you, you Winning by Design talks about this specifically, but that's where I think we, we connect.

We have to talk about that because if we don't, our all our project will fail. Right when we come in, help design, build, implement the processes right and the frameworks and everything that we talk about, whether it's the sales team or the marketing team or even the customer success team. It's all about change management. And the one number one thing in change management is to have that leadership with a vision that leads the way, that tells the entire organization this is where we're going. This is why we need a process in place. If we don't do that and every time that we have a project that we do not have the buy in from the CRO, from that leader, even CEO, even sometimes depending on the size of the company, like the board members a lot with investors that come in and hey, work with winning by design. If we don't get that alignment, in a lot of cases, the project fails. So the number one thing, and again, a lot of the time the people that come to us with a cry for help are the enablement people. Hey, like, you know, I was just, we just hired a bunch of people or now we just let go of a bunch of people and we need to keep the same momentum with half of the size of the team, help us build a process to increase productivity. Let's say that's, that's the case. So usually it's the enablement people we insist to get to know or to get in front of the CROs before we start the project. Because again, if we don't have that leadership in place, we're doomed to fail.

Yeah, well, we certainly agree there. And I would say that the impetus for my business was there's a general recognition of that. I mean, I think anybody would doubt that we have so many books and so many stories about great leadership, because it's true. But I think that it's not processed enough. It's almost like it sort of seems to always be like sort of an accident. Like, oh, we just happen to have this great leader who was amazing and look what happened as a result. As opposed to it being like, well, we have to bake the cake that way. Like, you have to have that. It's not like you hope and pray that the right person is in the job. No, you build the machine with that in mind. And I, I do. I don't think that's happening. So here I'm saying is like, is okay, so, so you look at companies, look at track record success of the chief revenue officer role, and you see most of them fail for various reasons, many of which don't have anything to do with them. What I talk about a lot is, you know, you can hire the best CRO in the world and if the company isn't ready for one, it's doomed, doesn't matter. And you'll blame the CRO anyway. You'll say you hired the wrong person. It's always the case too. Right. Organizations are really bad at taking responsibility for things, you know, and so, so what I'm saying is, how do you look at that then? So if you, if you know that, which we now agree, right, that leadership's critical how do you include that in the way that you build your offering to people so that it becomes codified as a must have as opposed to, well, let's just hope and pray that this works out that way sort of thing.

Yeah. So it reminds me, I recently went to an event and I told Jaco Jocko, the founder of Winning by Design, that he ruined conferences for me because one of the things that he, like, he built this company around, hey, we don't have standards, we don't have principles, we don't have guidelines on how to build. You call it machine, we call it a revenue factory. How do you build that revenue factory? Like ISO 9000 kind of guidelines. We don't have that in our industry. It's all about, hey, I was successful in my previous company. I was able to do this and this and this. We don't know if it's due to their leadership, their knowledge, or they just had a great product or a great product market fit, whatever the reason is. But hey, I did this in this company. That's why you guys should do the same thing. Right? And I recently went to an event and it was somebody that went on stage and said, hey, in order to be a successful company, you need to have your ACV between 30 to 50 and NRR above 120. Because this is what worked for me in the past. And this is great numbers. Yeah, of course. But of course I also want 120nrr. That's great, but it's not always the case, you know, I'm selling to enterprises. So, you know, that's why I say, like I told Jocko, you ruined conferences because I can't hear people that come in and say, hey, this is what worked for me in the past. That's, that's, that, that's the successful way.

So, yep, yep. Success is a lousy teacher. It really is. You know, and you're right. So, so what I'm hearing a lot, and I appreciate this so much, is the feedback I get from a lot of people when I'm delivering. The work I do is everybody wants, and I know they're important. I don't want to diminish the value of frameworks and roadmaps and diagnostics. They're important because you do need to have standards and processes by which to do things. You do, like anything. You and I know that. But they can't live in a vacuum. They have to live inside of a properly LED structure so that they can thrive. And I sort of feel like I battle with the idea that People are very tactically driven and the reason is because they're symptomatically driven. So, you know, and I talk about, again, this is sort of beating a dead horse a bit. But you go to the doctor because something hurts and you know, you, you obviously point to the part of your body that hurts and you want that fixed. There's no question that makes perfect sense. Doctors, good ones, think more holistically and they know that this is connected to this. Right. So what I'm saying is I think that when people are looking for help, they're reaching out for, give me a piece of paper that has a formula and if I use that formula, it'll get me out of my situation. And I think you're obviously nodding your head and when we're talking, you agree with me that you and I both sort of have this sort of red pilled moment where we're like, you know, it's really not the problem. You know, I could probably figure out there's probably other things going on in your company that are actually really going on that you have to do that and they don't want to. So here's the question. How, how do you deal with the issues related to, let's call it short termism or symptomatic approaches to solving problems when you and I both know it's more holistic and more endemic? How do you switch an organization to look at things deeper so that they take the action they need to take to really solve the problems that we know they have?

Yeah. So, great question. We start most of our engagement with some sort of analysis or diagnostic of the situation. And we spend a lot of time in the beginning trying to understand or differentiate between the root causes and the symptoms. Only then we can start really addressing the problems.

Right.

Like win rates. Is win rate a symptom or like the root cause? Usually it's a symptom, root cause, and then we need to find out what, what's the real cause of that win rate. So there's a lot of work around trying to identify the root causes. Then there's a lot of discussions on, first of all, do we all agree that these are the problems that we have? Let's now try to prioritize them. Like, of course we, we want to do everything, but we can't. And you talked about, usually the CROs are the first ones to go. We know that the average tenure of a CRO is 18 months.

Right, right.

And if you don't identify the areas or come up with a plan in the first Four to six months with the average sales cycles that we're currently experiencing. Like, you need to put. As soon as you come on board, you need to start plowing and identifying or coming up with a plan in order to move that organization forward. Yeah, so that's.

So here's the great. I mean, you and I are on the complete same diagnostic. I do the same exact thing. So I'll ask you this because I'm interested in how you handle this. So the way you just described, you're right, of course, that, you know, if you bring on a chief Revenue officer who's responsible for running this whole, let's call it factory, if you want to call it, that's fine. You're right. I mean, the first thing that that CRO needs to do is start the process of investigating what's going on so that the CRO knows exactly what it is they're supposed to fix. But the problem is, and you know this is that they're. The thing, the four things I talk about CROs need to have when they start is they need to have the proper authority, the proper autonomy, the proper resources. And the most important one is the proper amount of Runway. The Runway they never get. They don't get that because the cycles are too fast. The way companies are being financed is quick. Everyone's evaluating everything within probably two or three quarters. That's what. How the truth is told to them, which is a preposterous way to measure anything, but that's the way they do it because the, the market moves that quickly, and they need to move that quickly because the way in which the finance organizations run their portfolios is they all have them on the same model of speed, and they need to see a certain growth. And they have to. They have to codify some methodology across all their businesses or else there's no way for them to look at a dashboard and make sense of it all. But it doesn't make sense anymore because companies are not being led that way anymore. And so what I see is that when a CRO starts, let's just say that they do get, which is very rare, let's say they do get the agreement from the board and the CEO that they need to do a diagnostic first. Let's just say they're able to convince somebody, they read your books, they read my stuff. They go, okay, this makes sense. You and I both know that it will take a lot longer than you, than they think to get the truth out of this situation. And they don't have a process for it. Either. So they don't really know how to do it, you know, which is why they hire guys like you and me to come in and do that for them. But it's still not enough because you and I both know they probably need eight months or so to really figure this out. Right? It's. It's not easy. And who the hell wants to turn the machine off for that long to do it? There's no way we're going to do that. So we'll get it halfway done. And I tell people it's worse for you to do it halfway than do it. Not at all. Because the half of the story will give you a worse false idea of what's going on than doing what you're already doing. You should do it all or don't do it at all. So I'm curious to know what your thoughts are on that and how you manage that problem.

So it's a fantastic point. We sometimes see that we call that again when we come in and work on that change management. There's a lot of how much is the organization capable of undergoing that change? And it changes from company to company. As you said, like the Runway some companies do have, especially nowadays we see that they are getting a bit more Runway to make the change. So let's look at the situations. Right. I had a company a few months ago, it was a major change. Everything from ABM strategy to sales to BDRs to customer success. After we started to roll out the changes, we started to notice change fatigue. We started too fast again. We had a great partner, the CRO. Yeah guys, let's go. Every month we're going to change, we're going to focus everything in parallel. So you guys work on the cs, you guys work on the BDR team. Marketing, account based marketing. We change too much. So I think it changes from company to company. And I unfortunately, I don't know. Tell me if you have figured this out, but we haven't tried to identify how much the company is capable of, you know, adopting, changing and at what speed.

Yeah, I don't know.

And you, you, I, I would have thought that based on. Let's look at the enablement team. I worked a year ago, I worked with a company, they had like 60 between rev ops, enablement trainers, etc. They had like 60 people. They were a big company, massive company. And I thought, okay, so it's, it's. We have all the resources. I can just orchestrate the entire change together with my partner on the chief strategy officer. We're going to orchestrate that it didn't work. So there's no, like, yeah, the more company is, the more change it can observe. Unfortunately, there's no. We haven't figured. I haven't figured out.

Yeah, I don't know if there is a way to do it. And I. You just pointed out something in your description that is, is a factor that I want to talk about. And that is what I call. Not I call, but what I refer to or I'm referencing is the operational complexity of the business. Right. So you just talked about 60 enablement people. That's a big company. If you have 60 enablement people, you can talk in order to support whoever they're supporting, they have to have a lot of people or you wouldn't have 60 of them. So you just described a company just by that one metric that's pretty advanced. They're probably pretty far into their, their growth. I'm intentionally, for all intents and purposes, working with companies that are a little bit of an earlier stage so that the operational complexity is more manageable. So there's a couple of reasons. So if I were, if just it's my thought, and I know you guys work in a different, let's call it, market segment than I do for various reasons, there's probably just a better business. I mean, those companies have bigger budgets and they can spend more money. I get that. But there's also a lot more to work with, et cetera, et cetera. I've had a lot of conversation with people from your company about this, by the way. We've had really good conversations about this. But my, my thought was the, let's say, like the entry point where the medicine should be put into the system, right or wrong, is if a company is at around, let's say, 20 to 50 million in revenues, there's enough complexity there. Where the problem is, you and I are talking about exists. There's no question that they're feeling those things, but it's early enough that you could identify when change makes an impact because the company's small enough that something's going to move the needle enough to go, wow, this really helped us. And also it's sustainable enough because the company is small enough they can withstand like, what it's required because like, any commitment, you know, I'll use a really gross analogy, but it's a good one, is like, you know, it's easier to get out of a marriage in three years than it is to get out of one after 20 years. Right. So you just got more on the transom that you're like, weigh the differences, you know, like the cost analysis is like, maybe I'll just stick this out, you know, and you know, if it's early enough, you'll, you're willing to make bigger risks because you're not in it deep enough, but you're in it enough that you want to make it work. So that solves it for us is that we can say, all right, you know, at 20 million, you've got a business, you've got customers, you can do some ICP identification, et cetera, and you can modify things that will make a huge difference for you when you're five times as big. Whereas if I meet a company that's at 250 or 500 million in revenues, that's a freaking complicated thing to solve. And I can understand exactly why it is that trying to push a lot of different change management initiatives across that organization is going to create problems that or it's hard to figure out how. What's your thoughts on the stages in terms of this?

Same thing, same thing. I, yeah, if, again, if, if it is up to me, I would have, day in and day out, I would work on that. 20 million ARR. Companies, they're, they're much more flexible in observing what we believe are common practices or are the right processes to put in place.

Yeah. I look at it like a company that's, I call it a growth stage company. Like a 25, 30, 50 million dollar company is like an eager teenager.

Yeah.

Like they're just brilliant enough to be great at something, but they don't know enough yet to know it's. Right. So they're very amenable to making changes. Right. Once you and I became, you know, in our 40s, we're like, all right, I'm not learning new tricks. It's really hard to teach us anything new.

Right.

We think we know everything at that point. I think companies are the same way.

So.

So to that end. Right. I'm kind of curious to know, when you work with companies, how do you assess that that company is a good fit for what it is you're trying to diagnose and implement? Like, do you ever say, this company, we can't work with you? Like this won't work for you guys?

I don't think we have like our principle or Our segment is B2B recurring revenue.

Okay.

And what Jocko, the founder has built along the years are different frameworks that we can use depending on the, for us, it's the use cases or what is the company actually doing, which segment are they selling to? What is their acv? And we have models that I think. I'm not talking about edge cases, but to most cases, we are able to create the same processes. I don't mean to say that all our projects are successful, but I think we have some strong frameworks and processes that can cover most of recurring revenue businesses out there.

Right. You've, you've kicked enough tires in that segment that you know pretty much what's going to work or what's not going to work at this point. Yeah.

And there are some principles that you can use. And again, we're talking about the processes or the. But for example, in recurring revenue businesses, it's all about impact. It's all about recurring impact. And that goes a long way. What exactly do I mean by recurring impact? If customers are not getting impact, they will churn.

Yep.

And the entire organization needs to start thinking along that line. I'm selling on impact, I'm onboarding on impact, I'm renewing on impact. All these things need to happen. So this is just one example that this is a framework that works in every situation of recurring revenue. So. Yeah, haven't thought about that.

It's an interesting topic. Right. Because I, I have a certain. And there isn't a science to it, but I have a onboarding process where I speak. The founder or the CEO is my client, ultimately the decision maker. So I'm talking to this person. And as per our earlier part of the conversation, I first want to find out that they have the kind of, you know. Right. Mentality where they know that this is systemic problem and they're not trying to solve tactical problems or that they're open to being convinced of that. Right. And I look the degree to which they're persuasive around that, if it takes a lot of arm twisting, it's probably not a good fit because if I have to twist their arms that much on something that I think is so apparent, then it's going to be twisting my arms on other things. So I probably don't. So that's, it's a mindset, if I might say. But the other part of it too is just, you know, what's their appetite for change? Are they really willing to look at the business differently? And if they are willing to look at the business differently, are the other constraints that they have in support of it. So, for example, let's say the CEO or the founder's like, yeah, this makes sense. That's why I reached out to you you told me, yeah, I want to do this, but my board will never let me. Yeah, right. So there's a constraint there. So I see. That's a leadership problem. I don't see that as a functional problem. It's like, well, why are you agreeing to it then? Like, you're the CEO of the company. Like, deal with that. Like, do you need help in communicating to your board differently? Because that's what's going to solve this problem, not anything else. And so sometimes it's just that it's like, oh, wow. I didn't come equipped with the right conversation or the right evidence to make my board understand what I'm trying to do. And I was afraid or, you know, whatever. I didn't want to rock the boat. A lot of things. And these are leadership things. This has nothing to do with anything. We haven't got the process yet at all. And I just know that until that stuff's figured out, doesn't matter what medicine I give this person, it's not going to work. So those are the ways that I first do. My diagnosis is if I know that those things aren't going to happen, what'll happen is just like you is I'll end up failing, I won't help this company, and then I'll look like my company was a waste of money, and I don't want that to happen. So I'm very quick to first look at that part of it and then the second part also is what kind of business they have. Now, in my case, just so comparatively, I look at all businesses, B2B businesses, as having similar problems. Clearly, I know for sure that the recurring revenue business, or call them SaaS businesses, have a specific type of problem because of the nature of the way in which they capitalize. But I would also say, though, a lot of my clients are service businesses or maybe Service Plus. Right. They have longer sales cycles, but they still have the same problems. I mean, they still have alignment issues and process issues. Right. So what your. I. What was the. I know it's not your company, but you probably know this was the. What was the philosophical decision. What, what drove the reason to stay within recurring revenue business as opposed to moving outside of the other B2B companies that may benefit from the same processes that you guys offer.

So just because there's that recurring revenue part and what it implies and what a company needs to build mostly around that recurring impact and how to achieve that, that's the main theme of all the things that Jocko, the founder, has built. I understand but to your point, I want to go back to what you said. It's interesting because your customer is the croat. Well, sort of.

Just you don't mind, I'll, I'll be, It's a good, good point, brother. Be clear. Yeah, the, it's, I use the same word in a different way, but the person who's most impacted by the work we do as a CRO, but the customer is the person who hires the CRO. And the reason is because I view the CRO, as we already said earlier in the conversation, as an agent of something that's supposed to happen. Right. But that CRO can't do it without the agent being supported properly. So yes, the CRO is my customer in that the CRO needs all sorts of things like help and you know, tools and things to execute. But I'm doing it because the CEO or the founder made an investment in someone whom they feel would be able to fulfill on the company's revenue goals. So the CEO really is my customer because ultimately, if you look at all the little metrics I'm talking about, if the CEO knows that CROs only last 18 months and they don't work out a lot, well, then I have to fix that problem for that person. That person has to last three or four years. That's one. Number two is the person also has to like fulfill on the risk that the CEO is taking on this person. I'm about to spend half a million dollars or more on this person. I'm hanging another, probably double the revenue on this person's shoulders. So so much is riding on this hire that, yes, I'm working with the CRO to execute something, but the CEO is the one who's really most at risk and needs, needs our help. So basically it's sort of like I'm really working for the founder of the company. Yeah.

So our, our approach is different or, you know, it makes me think that our customer is a company as a whole.

Got it. Right.

So for example, if, if on Friday we had a sales call with a company that is considering working with us, we had the, the CRO, the CEO and the cfo.

Right.

And that's a very high, it's an executive level kind of conversation. Eventually we'll talk to additional stakeholders within the company. But yeah, like our customers, the company, we're taking the company into that transformation or implementing, designing something new for the entire company as a whole. Of course, the main stakeholder is the CRO.

Yes.

See that as a, it's interesting.

I, I, we We obviously we work with all those people, but because the company's at a different stage, it's a little more like we can focus on most of the leadership team. They're very hands on at that point still. But it's interesting to me because, you know, I think that I view the. As for the earlier part of our conversation, the world in a way that the most appropriate leader for building a revenue machine or factory or engine is going to be someone who has the capabilities of understanding all the pieces that are involved in running a revenue operation. And it's probably going to be a chief Revenue Officer who has a view across the whole business and reports it to a CEO and can speak to the board. Right. So to that end, I mean, how many of your clients fulfill on that particular model? Do you find that's one that's being adopted more now or do you find more CROs are just running sales?

Just running sales? Unfortunately that's still the case. And of course one of the things that we're trying to promote is that complete view of the customer journey from when it is handed over from marketing all the way to renewal, expansion and having that mindset that again, coming back to what I keep on saying, recurring revenue is a result of recurring impact that takes place outside or beyond post sales. Right. That's. That takes place. So what we believe in a recurring revenue business as CRO should have that. Exactly. Like not focusing just on acquisition, which is sales, but looking at the entire customer journey of retention, expansion as well.

Sure. Well, we're obviously clearly aligned there. And you know, I found that I started this business just close to five years ago. When I first started this, there was almost no CROs that were overseeing the whole thing. I mean every croat was from sales and got promoted to CRO and now they just run sales with the C suite title. Most of the time it was because they didn't want to let go of this person. They gave him a C suite title to keep around. It was nothing more. It's very almost like a vainglorious type of title. That doesn't mean that there weren't some CROs who had a little bit more higher profile. Certainly you look at enterprise businesses, those guys are like superstars and stuff. But at the companies that you and I are talking about, the Sierra was pretty much someone that ran sales and had a partner like a cmo. And so, and I just saw the problem. So I'm seeing a shift. I'm seeing more in the way I look at. It's weird I try and find, like, what's the evidence out there? I look at job descriptions. So I do is I look at the CRO job descriptions, and they're changing. So I'm seeing a lot more job descriptions now that talk more about we're looking for someone to oversee our entire revenue. It's good to see the language is changing. Whether or not they implemented that way is a different story, but they're looking for it. So my question to you then is, if we're in agreement generally on that, what are your thoughts in the place that you're in in terms of this winning by design, having the influence you have over the marketplace, how that can change? Like, what's the way in which you believe companies can start to make the shift to thinking about. And let's just say that you and I agree that the CRO is the right person. We can work at that different time. How do you get companies to just sort of, like, change the paradigm and think about the CROs differently so that you do have that leader in place?

Yeah. So again, it's all about that. We, we point out where revenue is coming from. Let's break it down between acquisition, retention, and expansion. And we're talking about that 30, 50 and above kind of AOR range. Well, most of it's come from retention.

Yep. 100 it does. No question about that.

And in our first conversation, we do some math like Excel, like, hey, guys, what do you think? What is your current retention rate? How much does it cost you to acquire a new customer than retaining and focusing or even expanding that? We have that conversation now. We all know that it's one of those things that of course, we all know that retention, expansion comes at a fraction of a cost of acquiring new customers. But we're still, because we're all. Or most of our CROs that we're talking to come from sales. They are in that acquisition growth mindset. Well, in order to grow, I need to acquire new business. Right. New customers. But when you look at the numbers and tell them, hey, if we focus on just improving retention by 2, 3, 5%, look at how much the upside will be in the first, second, and third year from now. Don't you want to focus your efforts on there? So once we have that conversation, in a lot of cases, again, we start to see that light bulb of, okay, yeah, I understand what you're talking to, what you're referring to. And then we build a plan. Okay, let's see how we can focus on the right side as well. Yeah, we're not neglecting completely the acquisition.

No, no, of course not. No. You need to fill the funnel, but you have to balance things out more so that you're accommodating where the obvious financial benefits are. And I agree. You said something that's important and how much of the stuff I deal with on a day to day basis is no one argues with me. I don't have anybody to say I'm wrong.

Yeah.

It's not like I'm out of my mind or you're out. I mean, you were obviously making sense. But knowing something is right isn't enough. People still do things a different way anyway. And I've diagnosed it certainly it's mostly it's emotional. So there's a couple things. So yes, you know, no one would argue the fact that we'd love to keep all of our customers and grow them because it would be a lot more profitable for us to do that. But yet we put all this emphasis and money on new acquisitions. You know, we're spending all this money on, you know, advertising and marketing and things to acquire new customers. A lot of times that comes from either a fear I don't believe in our product enough. I'm going to lose my customers. I've got to have more in the pipeline. It'll just make me sleep better at night if I know I've got more people signing up. So there's an emotional component to it. The other part of it too is that's how we're being incentivized. Like we were given some money by a PE or a VC backed company and that's what they want us to do. They told us that that's how they want us to spend the money. So we're going do it because I want that money. So they're being managed that way. And when they're managed that way, they can sort of abdicate their responsibility and say, well, you know, that's just how we're being told to do things, so we're going to do it that way. I don't know. They're the experts. They run company all the time, which is lazy. And as opposed to thinking like why? Why they do it all the time, you know, it doesn't cost them anything because they know that if three of their companies in their portfolio hits the mark, they make their number that year. They don't give a crap about us specifically. So it's a different sort of focus. So what I'm seeing is that I think the shift is occurring. I think the pandemic and other downturns in the marketplace have sort of helped to push these ideas because the other ones just don't work anymore. Practically don't work anymore. My question again for you is if we know this, do you think that the shift that's occurring in the market. I guess A, the first question is do you see that shift? And B, if you do agree, do you think it's going to stick or is this just temporary when all of a sudden money comes back and the interest rates go down or there's more, more money floating around, people go back to the same old habits they used to have.

Yeah. Fantastic. A few points here. First of all, before I answer the question, one of the my tricks to see if a company has the right mindset, meaning if the CRO and the organization is thinking of where the revenue is coming from or are we all on acquisition position is looking at the compensation model of the. The sellers.

One of the first things we do is look at the compensation model. Yep. Why are they being incentivized? Yeah.

If it's 100 on on on dollars. Right. Revenue coming from that initial contract. Of course you understand that. Yeah. They don't really adhere to, to the. What we believe is recurring revenue takes place outside of the OR post sale. You're also talking about. What I like to talk about is the paradox that VCs, which in a lot of cases there are majority shareholders, all of them together, the investors in the board, they are defining the trajectory and their business model. You call them financial model or financial people. Their business model is different than what is necessarily or in a lot of cases the business model of the company. For them it's, it's exactly right. That's our business. We want to sell as fast and as high as possible.

You have two competing business models sometimes.

Yeah.

It's a really strange arrangement, you know.

And in the good old days, the founders like the shareholders from the company. Well, you know, if I exit faster, you know, I'm good. Like I take the company public and I'm all taking the checks to the bank.

Exactly. I mean this is weird part of the SaaS business, which is interesting for me because you know, it's this weird insidious thing. You know, the business is a very good model. It obviously has made a lot of people a lot of money, but billions and billions of dollars floating around because of this business model. And it's been perfected over time because of that. And not necessarily because of the value it gives to people, but because it's a good Business model, it makes money fast, it makes it on a recurring basis. Recurring revenue is also a very emotional thing too, because if I know money is recurring, I feel better going to sleep at night. Everybody wants to know that anything they're benefiting from is going to keep coming. They predictably. Right. People want predictability, they want consistency, they want reliability, they want something like that. SaaS businesses provide that. And I think as a result of the business model being so successful, the success of the model has created a industry of businesses that are designed for the businesses to win, but not the customers to win. And I think that that's a problem. So a big part of what we're trying to make clear, and I, I'll get into some other time with you. We built our own framework in which the customer's at the center. And the reason is, and I'll end with this, I want to kind of get your thoughts on this. It's sort of like a little analogy I use. I, I mentioned before about the eager teenager. Right. So when you look at, I don't know, are you married, you have kids?

Yeah.

Okay.

But not teenagers.

Even better from my analogy. Okay, so, so, so I do too. I bet mine are growing up. But you know, when, when you're, when you're first dating your, your significant other, you know, it's a very self indulgent sort of a time frame when you're enjoying each other, you love each other's company and you do all these crazy things, you travel around, you do nutty stuff. I mean, you look back at your relationship for a start, it's like, we would never do any of that crap now, but you had a good time. And the reason was because that was it. It was all about just the fulfillment you got from each other. And all of a sudden you have kids and all of a sudden every single one of your lifestyle changes, changes, right? You move because the schools are better somewhere else. You change the way you shop because the food is better for the kids. You know, you may stop doing certain things because they're not good for the kids. All the priorities change. And the reason is because the kids become more important than your kids. Fulfillment. Right? The kids become the center of your decision making. And I would say your customers are your kids. Your customers should be the same. You should make all the decisions in the company based on how the customers feel about it, not how you do. And unfortunately, that's not the way most companies are operating. Right? They're still operating like they're still dating as opposed to like the customers are important. So I think that we're trying to make an environment where the. How is the customer affected by every decision you make? If you're trying to retain more customers and you're probably going to try to make them happier.

Yeah.

Right. So what are we doing to do that like, or how is everything we're doing around making everybody, like you said, impact them sooner or better so that they, they now the outcome may be that they were new, which is fine, that's a metric. But it's because they're happy that they did it. Right. So if you can hold that context, then I think the company will completely operate differently. Everyone will ask different questions. Right. But I'm just not seeing, and I'm sure you agree, not seeing that most of the time they're run like, well, how can we just make more money? How can we turn this thing around faster? I think that's the conflict we're in the middle of right now in our business. I do, I think we're at a point where the revenue, let's say sales or acquisition focused businesses are losing their meaning. And I think customers have been cannibalized to the point where they're feeling sort of exploited. How many times have you bought a product when it first came out where you felt like you're the most important person in the world by this company? Now you're a year or two in, you feel like you can't even get them on the phone. It feels like a bait and switch. It's because what you really were important for them at that stage in your life cycle with them because that's when they needed you most. They just don't need you anymore now. And I think that that's the way I think the shift is taking place that customers are sort of rebelling and they're not doing it by, you know, picketing and you know, with pitchforks and stuff. They're just not buying stuff as much anymore. Right. They're being more discerning and they're, they're harder to sell to. And so I think that's a good thing.

And there's a lot of other signals and I don't know the answer.

Like, I don't either.

Because on the one hand you see like investors like Bessemer saying, hey, rule of 40 is dead now it's the rule of X, right? That talks about profitability and how free cash flow. So that, that's a good indication. However, I did hear Jason Lincoln. Fantastic, right? A very. One of the best out There and he's still like chasing or searching for that triple, triple, double, double, double. He's still looking for that. He, this is, he says, like this is our business model. It doesn't matter. I'm just looking for those two to three to four winners and all the rest. Like that's, that's what I'm looking, that's. My business model is based on triple, triple, double, double that you talked about. There's also like the public investors, we don't have IPOs. Right. And yeah, one of the reasons is, is that the public investors told the private investors, don't sell, don't, don't sell us. These companies that not even profitable, but they don't have a road map to become profitable as we saw in 2120 too. It's like we're not buying the, the stuff anymore. So like, don't even try. And we see a lot of companies, there are zombie unicorns out there. Right. Companies that haven't done that trip, that missed the train, they didn't do an ipo and now they had evaluations of, you know, much higher than what they can now get by becoming public and zombie companies. So there are a lot of them out there. So there are different signals that we're looking to see if the market has really changed. And I think a lot of it goes back to the, the, to the people that are calling or showing the way, which are the investors that sit on in the boards and our shareholders. And yeah, yeah, I think they're, they're, they're defining, yeah. The strategy if companies are doing that transition or not.

It all really, all ultimately does come down to economics. I'm not naive, I know that. But at the same time too, you know, there's, there's a point where we've over stimulated the marketplace and the consumer base to the point where we've created an environment where they're just not listening anymore and you have to do something different or else it's running out of gas. I don't think that's, that's, that's going to change. So look, this is great. I mean, I really appreciate this conversation a lot. So I think this will be a really good conversation for people to listen to. So thank you. So what are you up to and what's going on next for you and how could we help you communicate what you want to the people listening to this in your world? What's happening with your company, with yourself and what do you want people to know about you and winning by design.

Yeah, winning by design. So as mentioned, we want to create that ISO 9000 for recurring revenue businesses. We have created frameworks and processes to slightly improve the chances of companies succeeding. Right. And you see the average success rate of the companies that you know from seed all the way to going public. And the numbers are against us in a lot of cases. There's things outside of our ability to change. But we believe that companies should not fail because they have the wrong go to market strategy and processes in place. And that's what we're trying to change. There are some frameworks, such as the bow tie, which looks at the entire customer journey from left.

Right.

That's a major part of what we're doing. We're talking about impact, but it's all about impact. So about recurring impact. That's what will get us to recurring revenue and a lot of other things that we're trying to introduce to create that standard across our industry that we currently think that there are currently no standards out there.

Well, great. Well again, like I said, I'm a huge fan, always have been. And it's really great to have you here and thanks for the great conversation and I'm sure you and I will be talking more about this stuff and appreciate your time. So great, great. Thank you so much.

Thank you.

Thank you for listening to the CRO Spotlight podcast. The CRO Collective's mission is to help CROs succeed and help founders and CEOs build CRO Ready organizations. You can find out more information about our services at the CRO Collective. That's the crocollective. Com and we look forward to having you join us next time.