What It Really Takes to Be Successful in Enterprise SaaS Sales with Christian Smith, CRO of Splunk

Zaster fans, welcome to another episode of the CRO Confidential podcast. I am thrilled with today's episode. We just have an incredible guest. Christian Smith is this legendary sales leader who has 25 plus years of enterprise sales experience. It's an incredible tenure and run that you've had. You're currently CRO at Splunk, where you have been for over seven years now. Just unbelievable run. Many things have happened during your tenure there. We're going to talk about some of those things. Splunk is a 20 year old enterprise software giant that has accomplished many things that folks listening to this podcast aspire to accomplish. 2012 IPO 2023 acquisition by Cisco north of $28 billion. Big congratulations to Christian and the team on that mil several billion dollars of ARR and we could go on, but excited to have you here. Thanks for joining us, Christian.

Great to be here. I appreciate it.

So let's start with outside of the headlines that I just mentioned, let's just level set with the audience. What is Splunk?

Yeah, good question. And if you can't answer that question, you gotta wonder.

So if anyone can answer it, I hope it's you.

I like to avoid the marketing speak, by the way. And I always talk about it like at your barbecue and you're talking to your friends and recapping the latest football game, then talking about what is it that you do. And Splunk fundamentally is a business analytics platform that allows our customers to pull in all the crazy data that's spinning off of digital systems and applications and then make sense of it so they can spot problems and patterns, so they can create what we call digital resilience so that your digital systems, your apps, your systems, your networks, your devices are up operational, performant, compliant and secure. Some people like to think of that as Google for it, right? But we think of it differently as the empowerment of today's modern business executive to understand what's happening with their digital systems.

It makes sense. I think you've taken complicated business to explain and distilled it down into something that is relatively understandable. So thank you for that. And now let's jump right in. I listened to a different podcast that you were on and something stood out where you and I will have a lot of philosophical alignment. You were asked the question, what are the one or two metrics you go to in assessing the overall health of the business? And your answer was pipeline and pipeline. Let's start there. Folks that listen to the show will be very familiar with this topic. And I talked about this philosophical alignment that you and I have, many folks that I work with focus on the end result and when I talk to them about performance, immediately gravitate to Q4 performance. Here we sit now in Q1 of 2024. We talk about, like, where we landed in Q4 of 2023, and maybe we missed because a couple of our big deals didn't come across the finish line. But there is so much more behind where we finished in Q4 or any time period. And it really does start with pipeline. And so if you're one of our listeners and you want to measure the overall health of your business through understanding pip, where do you start? What are the sort of cuts of data that you are looking at? How do you assess the health of a pipeline in a business?

It's such an important topic. And by the way, it's one that when I spend time with all sorts of different folks earlier in their career, and particularly it gets overlooked because it's hard, by the way, and it's not comfortable really analyzing your pipeline, it takes a lot of work, a lot of data, a lot of time, and a lot of pattern discovery. And you're never going to be done with assessing and developing your slices of the data, partly because your business is going to change through time. So most important rule, by the way, is check all your biases at the door. So the first thing I would ask somebody is how much pipeline do you need to hit your number? And everybody's going to give me an answer, right? You're going to hear 3x a lot. You're going to hear 4x. Generally there's no math or science behind what they're saying. They're just using whatever their biases are. So check your biases, because you don't know yet. Second thing is measure everything, because the more you measure, the more slices you can create and those slices you're going to need at different points in time. So fundamentally, what you need to know is how much pipeline do you have at every point in time, in what stages, from what sources, what activities do you perform against that pipeline? What I mean by activities is sales, activities, actions, et cetera. Measure everything you possibly can, capture it and keep it. Because a whole bunch of the science behind pipeline is measuring at point in time and comparing and contrasting so you can identify what's changing and what's not. The second big rule I always use is think of pipeline as a village activity. Nobody owns one piece of pipeline. The team owns the entire pipeline. This is actually the hardest thing I found in my career, which is to get all the different constituents to agree to be ruthlessly transparent about the state of the pipeline and the health of the pipeline and ruthlessly transparent about what pipeline matters. Because the the big aha is figuring out it's not about the pipeline, it's about the quality of the pipeline. It's about what pipeline actually converts and what are the characteristics of that pipeline and how do we do more of that and less of the other things. And I'm sure you've seen this, Sam, and probably some of your speakers have spoken to this. I've been in pipeline meetings where you have a particular Persona who will stand up and and be clapping about their incredible green results for the quarter. And meanwhile you've missed a sales number. Those two things should not exist in the same company. Right? You shouldn't have one piece of your pipeline dynamics doing really great and everybody excited about that when you're missing your number. And that ruthless transparency is a cultural thing that's really hard to instantiate because most people are built to perform against their metric that they control, whether it's MQL or SQL or conversion or what have your partner generated? Pipe. And if you can get to that, then as a company you can really understand what are the dynamics that matter and how do we do more of the right things. So measure everything and then we can start slicing and figuring out what really matters.

So many things come to mind as you were talking through your perspective on pipeline. I think we could probably spend an entire show or day here and in fact we might spend much of this show on this topic. The two baby things. The first is with so many businesses, what I find the the lowest hanging fruit to influence growth is generating more pipeline. The idea that if you are able, if you think about Splunk at this point is a much more mature business. But for many earlier stage startups, if you just do the math on this, if you're able to double the demand or double your pipeline and everything else remains constant, you have just effectively doubled sales. And that's a far easier task to accomplish than doing something like doubling conversion rates where you are much more effective at pushing the pipeline that exists across the finish line. And so I almost always start with are we in a lead rich or lead poor environment? And what can we do to create a lead rich environment? Because that's oftentimes the lowest hanging fruit. And with that, the second thing that comes to mind is, and you mentioned this around somebody in a pipeline meeting, that can be cheering because we've Hit our opportunity commit or our pipeline commit, but we missed our sales target. The reality is not all pipeline or not all opportunities are created equal and beyond just the n number of opportunities or Y dollars of pipel, you want to have a second level understanding of what are the conversion dynamics of the pipeline that we are generating and that will then heavily influence ultimately the revenue that we're able to close. Let's continue along. Who at Splunk is responsible for generating pipeline? I think the folks that most often come to mind, marketing. Maybe their primary function or first priority is generating pipeline. Sdr, that's the same thing that comes to mind. But then you get into these other roles like account executives, account management. So folks that are servicing the existing book. So I'm curious, extremely mature, comparatively business like Splunk, who is responsible for generating pipeline out of that grouping?

Yeah, it's funny actually, everybody is. And one of the things that we've really matured away from is thinking about just each silo. So early in our stage of growth, we thought a lot about the primary horsemen for pipe generation. Marketing, sales and partners.

Right.

And analyzing what are the different motions inside of those. Today, what we look at is every influence point in the pipeline. You always have to have a final sort of tag of what's the source. Okay. And if you think of it just pure stats, the source, the majority of it is coming from the sales organization. Over 65% of IT marketing is present. About 14% in channel is the balance. And you might look at that and go, wow, that's an opportunity. Actually that's the right mix for our business because we understand the pipe sources and what they create. So your digital demand generation creates a certain type of pipe that converts at a certain rate. We're an enterprise business. To go get that enterprise pipeline, you have to actually do very different motions. Right? A lot of account based marketing and targeted account selling. So we understand that. But we also understand that when you look at any opportunity, typically they've touched 150 different things in our organization to get there. So they've been to events, they've watched podcasts, they've downloaded white papers, they've been to the website. So we understand that even if it's a sales sourced opportunity, they're being influenced by all the different things we're doing as an organization and we want to understand that. So we know how to think about evolving those different touch points and influence points so that we get better conversion so that we can optimize the pipe dynamics. But everybody's Responsible, but we still tag things so we understand what sort of primary characteristics of that pipe.

I love it. A couple sort of tactical takeaways for folks in the audience. The first is at the leadership level. Everyone should be responsible for generating an influencing pipeline. This isn't a bifurcation between marketing owns all pipeline and sales just closing that pipeline. I've seen that all too often and for businesses like both Splunk and Brex, sales actually ends up generating the majority of pipeline. Now to your point, Christian, I wouldn't necessarily be prescriptive about that. It's just what has worked for Splunk and it is what has worked for Brex and in some businesses it is more marketing generated and so you double and triple down on the efforts that are working. So I think the takeaways are everyone is responsible for pipeline. And as we move down to the individual contributors within the organization, salespeople that are also responsible for closing business should also be focused on generating their own pipeline. I see all too often this environment where salespeople are wholly dependent on marketing and SDR to generate demand and leads. And if they miss their number, there's this finger pointing that goes back and forth, forth. And I'm just convinced that if you're not closing business, the next highest ROI thing you can be doing with your time is sourcing new business to close and just some tactical takeaways and reinforcing some of your comments there, Christian. And we'll finish an important point which is when pipeline isn't where you want it to be, which is the position many or most startups are in, what is your approach to fixing that problem?

Yeah, great question. So it starts with really understanding the dynamics as we talked about. So if your pipeline isn't where it needs to be, you should know it. You should have seen that coming by the way, because your your data will show you that your generation is is not keeping pace with where you need to go. So immediately you have to do a couple things. First, to your point earlier, determine what you can do to drive closure rates up. And can close rates go up based on the dynamics of the pipe. Just for example, if your quality is improving dramatically, you can improve your close rates. If you're measuring quality, which could include things like technical validation stage, how much of your pipe is at technical validation? If it's 70% this quarter versus 30% a year ago, you should have a much higher close rate. So that might get you through the immediacies, understand those dynamics, determine how big of a gap you have and how big of a problem? Be transparent about that. Then you go back to the village and you look at what's working and what's not working and how do we do a better job with the different motions that we have. The worst answer, by the way, is to double down on the activities that are creating bad pipeline. That's usually what people do. They go to create pipeline, they just jam everybody. We need pipeline, SDR, BDRs, RSMs, get out there and create pipeline marketing. Drive a bunch of campaigns and you build this huge pipeline that never converts. And I've seen that happen as well, particularly if the board gets involved or the executive team gets involved, because everybody panics. Don't panic. Focus on quality. Figure out what are the motions that are working that drive the best quality. Immediately go to conversion rate, but focus on that quality. Because pipe build. As you depend on your business, it takes quarters and quarters to close it, which is why you're measuring everything to begin with. You should have seen this problem coming and figured out what are you doing about it months ago.

Lots of insights contained in those thoughts, so thank you. A couple things come to mind to reinforce. I think there's this spectrum and pipeline and oftentimes a trade off between quantity and quality. And in the early days, very oftentimes the constraint to growing faster is on the quantity side. And we don't totally have sophisticated data around how customers perform over long periods of time and the conversion rates within specific cuts of data. But in the early days, we're really trying to just get as much pipeline generated as possible. We have a quantity issue, a volume issue, and in that environment, the thing that I see that is most effective is just an understanding of the business, mapping existing resources that we have, whether it be in the form of marketing, sales, SDR and more, mapping those resources to the funnel. Where are our resources placed in the funnel and where's the focus of these resources? Do we have AES that are waiting for pipeline to be generated? And we have way too much resourcing and focus on the middle of the funnel and the top of the funnel is being neglected. We need to change that. We need to shift resources and we need to shift focus to much more emphasis on generating pipeline rather than serving the pipeline that doesn't exist, exist. And then over time you talked a lot about quality. With Splunk being a much more mature business, the equation starts to shift a little bit in terms of we know the amount of revenue that an opportunity will likely generate based off of some firmographic information and pattern matching into the existing book. And so let's actually focus a lot of resources on generating a specific type of of opportunity versus just a large volume of opportunities as a whole. And of course, over time, some balance of the two makes a lot of sense. Moving on, I think last point on Pipeline, where we've spent a good part of the show on previous episodes, we've talked a lot about how to generate pipeline tactically through specific outbound campaigns, customer referral programs, and much more. Do you have any favorite or go to demand gen strategies that you think companies oftentimes over, overlook or under?

So I'm very biased here. I do. I think the most underinvested area is product generated pipeline. And what I specifically mean by that is once a customer is in your product, even as a trial, but certainly as an existing customer, your product experience has a unique opportunity to put new capabilities, new offerings right in front of that customer inside their workflows to drive value. If you can master that, you're creating the best pipeline possible. And it takes a little bit of maturity a lot of customers get. Companies will get that right in the early stage on their trial experience. Right? But they just stop there. The first trial, you get them and you close them. But it's how do you keep that customer building more pipeline with you to buy more capabilities, more products, et cetera? That's way underserved. And we're just getting to that at Splunk, to be blunt. Like we just had our first one last year and I've been driving for it. And it's so exciting because you're seeing pipeline created from non human beings. It's awesome.

So it's a more philosophical alignment here. Oftentimes where I go to just as an area that is under invested in different version of what you're saying. But I think a lot of similarities is the existing customer base. And in product you can generate additional pipeline for expansion opportunities within your base. You can also generate new demand from non customers. Leveraging your customer base to be advocates of your product and your business to generate new demand and new customers, I think is an area where firms focus too little efforts and resources around. So maybe two two sides of the same coin there. Okay, let's move on from Pipeline and talk more specifically about things that come to mind. When I think of Splunk, the first one, and the reason that I think of this is I have had sellers on teams where I've been involved that have moved on to careers at Splunk and many of them wanted to get What I will describe as true enterprise sales experience. And I read that over 90 of the Fortune 100 are using Splunk. So these are the largest businesses in the world that are using your product. Many of them I imagine closed through what I refer to as true enterprise or field sales. And for the last two years I'm seeing this trend in venture backed tech where more than ever startups are moving up market. So if your customer base entering 2022 was made up of other private tech companies, you've seen user contraction, customer churn, tightened budgets, all of which lead to a more challenging selling environment overall. If you're focused on these sort of like further down market venture backed tech companies. And so everyone or many are moving up market. And the benefits, the revenue is chunkier, it's stickier, more highly valued by investors. And let's spend some time on enterprise sales where I think Splunk, at least in my mind is really the poster child as an organization that folks may want to learn from and emulate. How do you think about team structure in terms of inside versus hybrid versus dedicated field sales role? Is there some customer segmentation that dictates where you default to the owner of that account? Would you love to understand first how you all are structured?

Yeah, it's absolutely right. And I think your characteristic is correct. We are an enterprise grade offering. And by the way, the motions match your profit product, right? That's the funny thing. When I talk to investors, sometimes they want to go up enterprise and I will say tell me about your product is your product and enterprise product? Because the enterprise only spends a bunch of money on products that will actually solve important problems for them that scale and perform at a large company level. And a lot of products aren't designed that way. Luckily Splunk was. It was designed from the beginning to solve pretty complex set of problems. And what we found is that segmentation is critical. We keep evolving it. So we've resegmented three times in my seven years as the market has changed and the dynamics of our offerings have changed. And you could read into that even what was a very large customer for us back when I joined, we were about a $600 million company. We're 4.5 billion right now in ARR. A big company back seven years ago was spending a couple of million with us. Today they're spending 20, 30 million a year with us. So you have to keep thinking about your segmentation and refining it through time. We do have a multi tiered segmentation approach where we have our, our Key accounts which are the largest spenders and the largest potential. And those are typically set up with the a patch of one to three accounts per seller. Okay, so you think about that. You've got one account. If you're a sales rep in the audience, some of you are going what?

How does that work?

And others are like, yeah, that makes perfect sense. Because if you're doing the job right, you're living at that account. You are embedded inside of them, you have a badge, they know you really well. And then as we move down into sort of what we call the classic enterprise market, those are accounts that are going to be spending the next tranche down. And typically those ratios are about 10 accounts per rep. Then we drop into the next tranche, which is emerging enterprise, earlier stage, lower spend with us. And those Reps might have 30 to 60 accounts depending on. And then everything else we consider scale and scale is what you might think of as commercial, et cetera, as very partner led motion. But you have inside sales driving and assisting those partners. So that's how we set it up. Commercial and scale. That's our inside motion. All everybody else is a field based rep that's out selling in front of customers wherever possible. We could talk about that more. And all that segmentation is done by the ARR and the ARR potential. So even if we have a Global 100 account, we understand if they're spending nothing with us, they will be in that enterprise segment. But we put them in a very different motion than if they're already spending 15, 20 million dollars with us.

It makes a lot of sense. And so then it sounds like you have a team that you've defined as commercial that is largely inside selling. And then you talked about three different segments within the enterprise ranging from one account and I think you mentioned your largest vendors are 30 million plus dollars. Makes a lot of sense to have a dedicated account manager or salesperson on an account that's generating that amount of revenue. And then the lower end, you have something like folks that have up to 50 or 60 accounts that they are selling into. And they are also primarily in the field. And I think one thing that I observe in these companies that we've alluded to that are pushing up market started as startups with inside sales organizations growing into enterprise sales organizations, closing larger and larger businesses and making that transition is unnatural and more challenging. And one data point that eyesight that maybe helps influence people's influence people's want to meet more customers in person is just around when we actually measured at BREX when we did a customer on site in the conversion rates of customers that received an on site versus customers that we tried to close inside and it was 3x, the customers that we met in person had 3x the conversion rates from the customers that we didn't meet in person. And as you move up market, if you're trying to do so with the model that has worked, being inside selling, you are unnecessarily penalizing yourself by not spending in time, spending time in front of customers. There is something that is sign of the times that I think is helpful to talk through. And it's been a crazy four years.

Crazy.

It's been four years at this point for enterprise sales where, you know, back in 2020, no one was meeting in person. Even Splunk Enterprise salespeople weren't going on site when everyone was working remote. And of course we're now long past restrictions on in person meetings, but many folks haven't returned to the office daily. And so I'm curious, how has field sales changed at Splunk? Are you back to 2019 levels of in person customer meetings? Do you encourage people to get on planes and meet in person wherever possible? Let's just start there and level set with how this has evolved over the past few years for an organization like Splunk.

Yeah, it certainly changed a lot. I, I would say back before the pandemic, a lot of our selling methodology at the enterprise was to be on site, walking the halls, influencing multiple champions, discovering use cases in real time, whiteboarding them, and building demand that way. So that was a big part of our demand generation approach. Obviously post pandemic we, we got very good at selling virtually during the pandemic. Everybody did. We always were hybrid though, meaning you almost never close anything just through one activity. And the companies we sell to typically are very large. They have multiple locations throughout the country. They're often multinational. And so you have to be able to bring different constituents into the selling process virtually and remotely. I would say where we are today is we're traveling a lot more than during the pandemic and a lot less than pre pandemic and leveraging that virtualization more and more because we're matching where our customers are. To your point, some customers would have all been in one site. Today you may have two or three champions that come in regularly and the rest of their team is scattered throughout the country. So you're bringing them in on a zoom call. In an in person, I would say that's the important thing is we put the Customer at the center of everything. That's the key, you know, put the customer right in the center. What do they want from you? What's the experience? How do you help them through the buying cycle? And for some, they're going to need you to be highly virtual, others are going to want that kind of combination. But the one thing that we've seen, and I'm sure you've seen this, and your, your audience has, is that it is harder to build a deeper relationship with somebody remotely. So you and I have met over zoom, but I guarantee if we go have lunch together, dinner together, have a coffee together, we're gonna have a deeper personal connection than if we didn't. And in our type of selling, where we're trying to really build long term relationships with customers and drive most of our revenue through the install base, because 80% of our new bookings comes from the install base. We were talking about this earlier. You've got to get that emotional relationship and it is just harder to do, not impossible to do remotely. And so I think that's what you have to figure out is how are you going to use travel to not only meet with the customer, but make that personal connection.

So much of what you said just totally resonates that we'll start with. It sounds like you all have found a balance between how you spend your time directly in front of customers or virtually and tried to take advantage of the best of both worlds. And the time that you are spending in front of customers. The focus is really on developing the relationship with the customer, which is very difficult to do in a virtual remote environment where you're not face to face, whether it be coffee, dinner, lunch, whatever, the sort of forum where you are developing a relationship with your customer, which is so important. And I think for many folks that are listening, most folks have not yet adjusted quite back to the level that I'm hearing that you all have at Splunk, where many folks that I work with and talk to spend all of their time inside. Many working from home still, many very seldom getting on a plane, traveling, meeting a customer in person. And so if you can be different there, it can be a real competitive advantage where you are spending time with your prospects, with your customers in person, and your competitors are not because of the environment that has changed over the last few years. That gives you a leg up. Jason, who of course runs Saster, he talks about this a lot in many of his posts that the value out of getting on a plane, going and visiting your biggest customer, some of your customers just learning from them how they're experiencing your product meeting prospects in person. This is just really high ROI activity and I think something that has we have not yet corrected back to the place where we should be in especially this enterprise selling environment.

But insider tip I'll offer is just ask your customer. It's really interesting. I keep asking every time I meet with customers. Tell me about do you want to see us in person? Do you want to come out and do EBCs? Are you traveling more? What's your team doing? Are you bringing them together once in a while? Could we help with that? Would you like us to show up? And you'd be surprised how much it's changed because most people are trying to figure out how do they get their teams working together in some way. They're looking for ways to get them together physically from time to time. Not completely, but just to augment the work that they're doing, augment the relationships. And if you can participate in that, they'll appreciate it.

It's such an easy thing, but many don't do it. Going back to your comment around, just ask them, say I'd love to meet you in person. Are you up for going, having dinner or grabbing lunch one day next week? Or I can put on an event for you and the team. We can all get together. We can. Just having these dialogues is such an easy step that so many don't do. With that, Christian, this has just been an incredible episode. I really appreciate your time talking about two of my favorite topics and things that I think so many in the audience will learn from around pipeline and enterprise sales and moving up market. With that, thank you again and we'll see everybody back on the next episode. Take care. Thanks.