The Secret Sauce to Scaling to $1B: How to Achieve SMB and Mid-Market Success with Zendesk

Hi everyone, Sharon Prosser here and just by way of a little introduction, I have over 20 years of experience in the business through experiences at Oracle, Amazon Web Services and I joined Zendesk almost two years ago as Caitlin mentioned, I run the worldwide SMB segment for the company and really excited to be here to talk about how we've taken a balanced but assertive approach at growing our business.

Thanks Sharon. And I'm Astha Malik and I've been working again in sales and marketing for the last 22 years as well. And I think I can safely say that at this point in time I've covered all asset classes and various segments across different companies that I've worked with. I joined the Rocketship Zendesk post ipo, which is kind of like odd to say a post IPO company and call it a Rocketship, but we've seen so much growth, tremendous growth over the last few years. So I joined about four years ago as the global VP of Product Marketing and Platform marketing and now I run the Go to Market strategy and planning team globally. So really excited to be here and look forward to having an interactive conversation with all of you and hope that you can send us questions as we are presenting. So maybe we'll start with a little bit of introduction about Zendesk. We are a service for CRM company and we build support sales and customer engagement software. We're helping companies build better customer relationships. And I think there are a lot of numbers here, but I'm going to go through some of the key numbers that tell you a little bit about the scale at which we are operating at. We have about over 4,000 employees at this point in time headquartered in San Francisco, but obviously we have global offices. We also have over 165,000 customers worldwide, which means that at some point in time you've interacted with our software, whether that's through chat, phone or email, when you reach out to different companies. So we've had again an incredible journey and just beyond the numbers as well. It's been very unique. I think we are one of the few companies that has had a strong presence and considerable share across different segments. So you know, many of you might know this already, but we started as a darling of the unicorns, the SMB and mid market companies, but many of them grew into enterprise companies and then there was a shift in the market, a trend towards better customer experience that forced enterprises to think differently as well and created a ton of opportunity for us. So today actually we have over 40% of our revenue coming through Enterprise and we just hit the $1 billion goal in our revenue, which is again very important and incredible milestone for our company. But it hasn't just been because of some happy accidents. We put in deliberate efforts strategies across various segments. And I'm going to hand it over to Sharon who's probably going to talk a little bit about what that has meant specifically for SMB.

Yeah, but before we dive into those details, I'll say across the, you know, the audience here, I would imagine that, you know, all of us are looking at our organizations and we're interested in understanding where we can flex up, up market, down market or into entirely new markets and not at the cost of what you're doing today. And unless that's a very calculated and intentional move. And you know, there have been some really exciting times at Zendes as I joined the company. We had just entered into the SFA market through the acquisition of Future Simple. We had launched our development platform called Sunshine and we had acquired Smooch to advance our messaging capability. And so while all of that was happening, there was still a very concerted interest in continuing to focus on SMB which as Asta mention was really where we grew up. And so my job was to continue to make sure we were taking advantage of all these other new levers that were brought into the business, but also continue to grow SMB from my perspective. And I've run SMB organizations for quite a few, quite a bit of my time. And it's a unique market segment in that it's got a wide spectrum of customers and it's one that Zendesk cares deeply about because of just the variety of use cases that come up, the different types of customers that stem from SMB. And a lot of them don't stay in SMB. A lot of them are on really fast growth trajectories and we want to be part of that journey. If you think of the likes of a mailchimp. In fact they were mentioned yesterday in a roundtable session because of their profitability and were complimented for that. We'd like to think that we were some small part of their success having Zendesk in place to be the medium between their customers and support. Now clearly they've graduated beyond SMB, but those are the types of opportunities and we all want to be a part of ourselves. But as Zendesk, we want to make sure we're tailoring our approach so that we're appealing to those types of fast growing customers. As I got my mission statement to make sure that we continue to have great success with SMB, be it really came down to, you know, I would say a pretty simple model and you know, I refer to it as sort of finding the X factors. And this is, you know, a set of areas within the segment that we looked at really carefully. And again, it's breaking each of these down and making sure that we're capitalizing and evolving in order to find that X factor of growth Target market setting up geographically is one approach. Do we also want to tailor our segmentation around industry startups? Are there other types of customer cohorts that we need to think about and make sure we're lining up around, you know, do we have all the customer use cases identified and are we bringing the right messaging to each of those, whether it be, you know, B2C, B2B or B2E from a Zendesk perspective, product positioning, you know, do we have the right assembly of products that we're bringing that will help solve a customer solution? If I drop into Deal Motion, we, you know, we had a really good transactional engine in SMB, but could we also think about those higher potential customers and is there a more complex sort of engagement that we want to bring to the table for those customers that are maybe more technically demanding given their use case and or they're on this fast growth trajectory? And so these are the kinds of ways in which we really started to break down our strategy within SMB. And given the success that we were having upmarket, what really started to fuel the innovation and the evolution of SMB was the success that we were having in the enterprise realm. And if you think of landing a Lighthouse account in the enterprise realm, we very quickly looked at those wins and said what other companies are within that supply chain of that company or within that ecosystem that maybe are still small and looking at ways to grow and can we be a part of that growth strategy as they serve their customers? Looking at the use cases and if we were having success across the larger account space with a use case that we hadn't quite delved into in SMB, could we learn from that? And is there approach to take that use case and bring it into SMB so that it's right sized and suitable for the smaller company? Deal Motion was another area where we really felt like again, really strong transactional engine, but could we bring a different deal motion to some of the SMB customers that had the app appetite? And it was a matter of looking at some of the assets that were being built for the larger account teams, such as account plans and you know, account management, influence maps and things like that. Can we bring those back into the SMB realm and have success? Programs was another area where again we were putting together custom programs for the enterprise customer. But we have really important customers in SMB as well. And so can we take some of those VIP programs and higher touch programs and bring those into SMB and really start to apply those to get customers closer to Zendesk and to increase the adoption of our software? It was the back and forth and the sharing of information that really helped to fuel the growth and the continued growth in SMB. The other approach that has really lent itself to again focusing on all these other levers that are important to Zendesk but also really helping to make sure each one on their own was having a lot of success. There was an org model design that has really helped to enable this and support it. And what I'm sharing here on the screen is really just the areas where we've chosen to specialize, which of course across sales and go to market. We need sales reps and sales managers, you know, waking up every day thinking about the segment that they're focused on and what, how, what the drumbeat looks like for that particular segment. Same with pre sales again for SMB we need a pre sales organization that can move really quickly. We think that there are a lot of repeatable motions that, that a pre sales individual needs to be really good at illustrating through a demo. So we believe specializing in solution consulting makes a lot of sense for us in terms of our success teams. Again within SMB we need to think about doing a lot of things at scale, a lot of one to many sorts of programs. So having that specialized to the segment has made a big difference for us at Zendesk. And then field marketing again having folks who look at each of the regional markets and think about how can they build SMB community, how can they stand up listening posts so that we're really sort of hearing from our customers and helping them hear from one another. And then there's a whole set of centralized resources that you know, each of them, you know, have a bird's eye view of the organization and it's really that centralized team that's you know, on the lookout for the opportunity to cross pollinate and share resources and approaches and programs and techniques and the list goes on and on. But having this support reporting org model to enable the sharing of success across the segments has really helped to fuel the SMB growth. So I think there have been some key learnings and so why don't we touch on some of those?

Thanks Sharon. That was a great overview of some of the things that we've implemented from a strategic perspective for the SMB segment. But I think for the overall growth of our company, we knew that we obviously had to cater to all the other segments we wanted to play in, including mid market and enterprise. And of course another thing that was clear was that was not going to come through just efficiency, right? We couldn't just rely on that, but we had to diversify our revenue streams in various forms. As I talked about before, like what did that look like from a segment perspective, what did that look like from a use case perspective and even from product portfolio perspective and the investments we had to make. So there was definitely some re engineering required across product go to market and people motions. But the good news was that we didn't really have to pivot 180° as we were making some of these big bold ambitions part of our ongoing strategy. I think the one thing that worked in our favor was that we didn't really have any barriers to entry in any segment. We obviously play in the customer experience space. It applies to every segment, every company. So what we really had to do was refine our emotions, think about where we wanted to play and where we wanted to exit. So that's sort of like, you know, summary of the key learnings I'm going to go through individually here. I think the first thing was we learned that we needed a clear narrative for growth and you know, that too with measurable outcomes. I Remember back in 2016, our visionary CEO Mikul made this hairy, audacious goal of hitting a billion dollar in revenue in 2020 with a lot of skeptics even within the company and some outside. But what that really did, other than the fact that we actually accomplished it this year, is gave the organization a purpose. It helped us put together again a long term strategy in place that could then translate into an annual focus. So the whole idea of having a billion dollar in revenue started make us think in terms of like, you know, the key investments we'd have to make on a yearly basis in different areas to get us there. So you know, I think what we did was like we started thinking about where the annual focus would be, right? So certain years would be the year of like focusing on a segment or the year of like you know, making acquisitions to expand into adjacent markets or you know, just investments in specific functions within the organization. As we started thinking about maturing our execution overall. The other thing is around Organizing and galvanizing. This was again a key learning. I think when you have the ambition to get sizable share in different segments, you really can't have the same people and the same teams focusing on everything. It will end up diluting the purpose. So you know, you'll see this in many companies where you have the same sales teams focused on different segments. The focus then becomes more around hitting the overall goal and number. So it's like, you know, not a about how you make it, but you know, the fact that you need to make the numbers. So we wanted to be very deliberate about making sure that, you know, we didn't have those competing priorities in place. And when we had the billion dollar ambition in mind, we were really thinking about the execution in terms of different segments and not just hitting that goal one way or the other. And it's a hard thing to do. It's a hard thing to do when you're resource constrained. It's a hard thing to do when they're again like, you know, competing priorities. But we started again thinking about in terms of like, we don't have to execute on all those changes upfront or in one go. But we started taking again like the approach of this is the year of doing X and then next year we're going to be focusing on Y. So I think that really helped not only just, you know, just deliver that clear narrative to the organization, but galvanize our troops in the right direction in a very focused way. So that helped. And I think investing in people. Sharon touched upon this in her previous slide a little bit too. I think we wanted to kind of make sure that we were doing almost taking a bifurcated approach here. One was obviously as we were thinking about specialization, going into different markets, owning a big part or chunk of these markets, as we went along, we wanted to bring in specialization. There was no doubt, right. Again, if you're going to start building out the teams with a specific focus and charter, you need people with that kind of experience at times, with that kind of background. Sharon came into the org with a ton of SMB experience and that's exactly what we did. But on the other hand, we also knew that we had to preserve the institutional knowledge with the folks that we already had in the organization. So how do we give them the right opportunities? How do we invest in them and investment in terms of not only just rewarding them for the performance, but rewarding people for agility? Because again, we are all about long term strategy, we're all about annual strategy, but we work in A very, very fast moving, fast paced environment which requires you to be very flexible. So I think almost like the DNA of people that we had from the beginning, from our grassroots and being a startup, that agility, that grit, we wanted to preserve that and we wanted to give people those opportunities that could again become almost like a long term advantage for Zendesk. So that was the other thing we did and then just defining our strengths and ownable territory. This was important for us from a variety of different perspectives because I think when you start looking at the different segments, each segment can present a very vast opportunity. Enterprise is a big space, so is SMB and so is mid market. So when we say that we have ambition and playing in all of these markets and we want to have a decent share in these markets, we have to be very specific about what our ownable territory really looked like, what we really did well, and how do we actually define that and carve that out. So we did that with different approaches, whether that's based on again, the size of the companies that we wanted to target within each of those segments, specific verticals that we knew that we played well in, and then almost trying to look at the lookalikes of like, you know, our ideal profiles that we had created with the learnings over the years. So you know, we wanted to make sure that, you know, we were just, you know, giving blind guidance around go and like, you know, make your number or you know, show X percent growth in XYZ segment, but more prescriptive in terms of giving that guidance. And don't get me wrong, like, you know, there were pivots along the way. Sometimes as we were thinking about how these pockets of customers were reacting, responsibilities, responding to our message. So you know, and the solutions that we were providing. So again, going back to investing in people, you need people who can pivot quickly, who can be flexible, who can work in sometimes even ambiguous environments where you just sort of like, you know, making hopefully a safe bet, but you know, with the assumption that things are going to change if they don't play out the way that you expect them to. So I think that was a very important thing to do to really carve out the specific pockets and then think about where to scale and where to exit depending on the performance that you were seeing. And then I think, you know, establishing some guiding principles. Zendesk is again, you know, we entered a market, the CRM space, which, you know, many could call that, had very big incumbents already and you know, strong players. So, you know, it really stood out. Because of the beliefs that we have from the get go. One was around being a beautifully simple solution for our customers. I mean, there were other choices in the market that were really complex. People wanted more simplicity for their agents, they wanted more simplicity for their customers and just start competing on customer experience rather than sort of like checking a box that you have a team and a software that can deliver the basics. So that simplicity, that point of view around really providing great time to value, helping customers be successful in a shorter period of time, along with being a very different company from a transparency perspective, just talking about our prices very openly, talking about our products, our limitations and the way we do business very openly, I think those things really made a difference in our ability to execute and win the market. So we wanted to make sure that even as we scaled, as we went into these other segments, we wanted to keep those guiding principles. It was almost like this joke that, you know, we might not be for everyone, right? This is Zendesk and we do these things really well and this is why our customers love us. But you know, we're not going to compromise on some of these core values. And if there was a compromise expected, then maybe we're not the company for that business. And then last but not least, flexibility and execution. I briefly talked about it for. I think this is so important in companies that are scaling and growing and I think most of you already know this, but it's a hard thing to again get your teams around because if you have ambitions, you've been talking about a specific goal, people can quickly get attached to the things that they're working on. They can have pride and ownership with certain things. So you want to set these expectations up front with the team that focus on the North Star, focus on the long term strategy, but be really flexible in execution in how we actually get there. Right? Keep an open mind. And I think the flexibility and execution, if you continue to remind your organization that it's not the flexibility because a bunch of folks within the team or the senior leadership wants you to be flexible, it's the flexibility for the benefit of the customer. How do we serve them better and how do we ultimately achieve our goal? And I think that mindset of customer first can really help again execute on this flexibility that is much needed as companies scale. And so did we.

So keeping up with the four Cs and these are, each one is really important customers culture, you know, changing trends and competition. And if I, you know, Asta, you know, just mentioned keeping, you know, the customer at the center of, of all that we do and you know, we, we are fortunate that we have a lot of customers and we want to be seen as a partner as they invest in ways to, to support their, their customer base. And it's important as we think about customer feedback and do we have the right listening posts out across the various touch points so that we can listen and learn from customers. And that again, based on a lot of the key learnings that ASTA shared, can we be flexible? Can we be agile and moving to some of the requirements that they're sharing with us? So everything we do has the customers, you know, at the center of those decisions. They're, you know, the lifeblood to our organization. The second point is around culture and I think that the key word here is collaboration and making sure that there's, there's, you know, a lot of motivation and incentive to share across departments and org boundaries. We have a word that describes our culture. It's humbledent and it's humble and confident, smashed together. And it really does set the stage for who we are as a company.

And.

And how we expect you to show up every day that you're humble, but you're confident and then put that at the cornerstone and then have a lot of encouragement around collaboration and you've got a good recipe for success there. And we've certainly realized that.

Yeah. And I think the other two Cs that you got to keep up with is one is changing trends. And I feel like if, if talking of like changing trends and uncertainty, I think 2020 is the year that defines it. So we had to keep again, a lot of flexibility in our execution and we had to be comfortable with the fact that we might not always have the best answers. But again, going back to the guiding principles, for us it was almost like when in doubt, go back to what we do best. Right. It should tell you where to focus, even if something has hit you, which is absolutely new and you don't really know how to, how to handle that situation. And Covid definitely was one of them. So again, going back to simplicity, serving our customers best and time to value, these were the things that we really wanted to focus on and standardize on almost as we learned how the market shifted. But other than that, I think obviously when you think about the changing trends, we made programmatic investments in a lot of things. Voice of customer, community being the other one. And I think the key part there is that a lot of companies have these initiatives in place. Right. And they're great long term in terms of like, you know, Just building out champions and building that trust with your community and your customers. But at the same time, like, you know, I feel like it's many a times one way. So we, you know, we've seen in voice of customer programs where you've taken the feedback from the customers but you never got back to them. So you never told them like, you know, when, when that would align with the customer or you know, the company strategy, if that would actually be addressed or not. And I think, you know, we started being deliberate over time and again. Some of these things, like I said, are short term inefficient but long term efficient. And some learnings come along the way. But we wanted to make sure that we had goals around it. Not only just on capturing the information, but we, what we actually do with the information, you know, do we actually make it a part of the product strategy? And if you're not one way or the other in both scenarios, keeping our customers informed because you know, they took the time to tell you and help you inform that strategy. And then last but not least, it's competition. I think again, you know, when you think about competition, you don't always have to follow the competition. That's what we believe. But it's good to be a little bit, maybe a little bit of healthy paranoia is good. It's good to keep tabs on what your competitors are doing. But ultimately, as a company, we chose to focus on our core principles and what our customers were asking and the customer trends were going instead of following what the competition was doing. So we've never really entertained any cheap tactics, marketing gimmicks or anything like that when it comes to competition. But we do have a competitive team and obviously many companies have investment in those kind of teams. But the purpose of that team is mostly around making sure that we're understanding how the customers are responding to some of the innovation in the market. Where do we need to focus? Where do we need to play? How does it actually influence our own strategy? And you know, the other thing I would say about competition is like, you know, one of the better ways to beat competition is just to actually go to war for talent. So, you know, going back to investing in people is like making sure that you have a team at the end of the day that's going to help you execute better than others.

All right? So just from a conclusion standpoint, it's remembering what you do best. And again, as we've emphasized through this discussion, we knew that being beautifully simple and offering that through our software to our customers was incredibly important and that SMB was and is a strong growth engine for the company. And it's not letting go of that strategy while still going out and pursuing other initiatives. And then, as Austa had mentioned, it's investing big in people. They are the game changers in all of this and making sure that you're hiring top talent and talent that also fits the culture.

Yeah. And I think, again, you've heard us talk about some of these things already, so we're not going to spend a lot of time. But I wanted to talk about the first bullet a little bit. I read this book some time back, which was about, you know, what got you here will not get you there. It was about professional and personal development. I do have to say that that is not what we did at Zendesk. We wanted to preserve the good things and, you know, our core principles that got us here. And I think, you know, that along with obviously, you know, the evolution that we had to make. But we wanted to make sure that, you know, the changes or the evolution and the pivots that we were making were tied to actually customer trends and our ambition of like, diversifying in different segments. So that was definitely one of our key learnings. And I think I talked enough about people and going to war for talent and preserving institutional knowledge. That has been definitely a focus of the organization and probably again, one of the biggest differentiators for us. And, you know, specialization and focused execution and customer always first. These are things that you hear a lot, many times. But I really believe that if you don't have okrs or goals and measurable outcomes tied to these things, they can quickly become backburner items. So. And again, you know, again, it's a part of our journey too. I'm not saying we had like okrs in place from day one. It's definitely been a learning for us. As you know, we decided to be more deliberate as we've decided to focus on specific segments. But, you know, those measurable outcomes is what will drive your team, will give them a purpose and frankly, will keep you on your toes in terms of what's working and help you again, make changes along the way as you go.