Behind the Cloud is the tale of how Marc Benioff’s Salesforce introduced the Software-as-a-service model after the dot com crash. Part story and part playbook, he recounts the basic ideas and strategies that enabled him to create and legitimize and entirely new market for software applications.
Starting from his initial ideas behind a multi-tenant Software-as-a-Service Customer Relationship Management software, he talks through how he vetted the idea with friends, got customer feedback, and began promoting the company.
The book is divided into specific sections, with specific sub-topics of interest in each.
Startup: Taking an idea from initial inspiration through to take-off
Marketing: Creating a clear voice and personality for the company and positioning against competitors
Events: Benioff used a series of spectacular events and renegade tactics to hijack his competitor’s events
Sales: A breakdown of various sales channels and tactics, and how to keep existing customers buying more product.
Technology: How to create things that your customers really love
Corporate Philanthropy: Maybe not for everyone, but Salesforce has a charitable mission at it’s core where it donates a percentage of profits and employee time to philanthropic organizations.
Global Markets: How to scale a great business idea beyond your locality
Finance: Raising capital and making sure everyone gets a return without compromising integrity
Leadership: A management playbook for a successful company – How to create processes to manage and monitor a scaled, post product/market fit company.
Overall it was enjoyable, it reads like Salesforce happened to be in the right place at the right time with the right people, but it’s interesting to see a company that started from an idea, found their product-market fit, and then scaled successfully without losing the founder at the helm.
He described three useful strategies to test pricing:
Set a relatively high price and then send out various discount codes: e.g. 10% off, 20% off, 30% off. Analyze which discounted price point brings you the most value on a cost vs volume basis.
Split-test landing pages with different prices
Test a price increase, and if a user buys only charge them the “normal” price. This is useful to prevent any bad feeling that option 2 might cause. (See Amazon’s lessons on this one)
If you’re in the Bay Area, join the group! There was some great advice from Cindy and John in this session, including some great points on what types of questions to ask in a Customer Development Process. Watch the full video, courtesy of David Binetti (@dbinetti) -
Facebook announced their impending internet domination today at the F8 conference. One interesting thing is the ability to add a facebook “like” button to any page on the internet:
This simple bit of social proofing immediately adds credibility to a page in the eyes of a user – Hey! My friends like this, it must be worth a read. That said, they’ve done a lot more. Their graphing API aims to link every piece of information that a user creates online back to their profile. This could get interesting.
I find it interesting to try to figure out where the money is flowing in Tech - it gives an indication of what niche markets are finding good traction, highlights the general sentiment among those with the money towards certain flavors of business, and also, I’m just a nosy bastard.
Here are five good places to see what deals are going down and who’s writing the cheques:
http://deals.venturebeat.com/ - Venturebeat’s deals section ‘dealbeat’ keeps a close eye on the latest funding deals in the tech industry. Great info on where money is being spent, but pretty crappy spam filtering on their story comments.
http://www.pehub.com – Private Equity Hub tends to cover a wider range of industry than just pure tech. They have interesting analysis on the companies covered and provide a broader range of planned events such as planned company IPOs, or stalled funding deals etc.
http://thisweekin.com/thisweekin-venture-capital – Jason Calacanis (@jason) and what is hopefully his permanent co-host Mark Suster (@msuster) cover recent industry deals. The real meat in this is the expert analysis from two entrepreneurial heavy-hitters. There are always great insights coming out of this one.
http://www.crunchbase.com/ – Crunchbase is more raw data than analysis, but is great for getting a timeline on how much a company has raised. Techcrunch offers all the gossip and analysis, crunchbase the info.
The conference portion of the Chirp twitter developer conference happened yesterday, and among the major announcements was that twitter are essentially developing their own versions of popular applications such as Seesmic and Tweetdeck. Fred Wilson (@fredwilson) called it a few weeks ago in an article that described many of the popular twitter applications that exist as simply ‘filling in holes’ in twitter’s service. Now Twitter are actively planning on filling in these holes themselves.
It’s inexpensive market research to open your API for free to developers, see what applications people want to use and then either buy the apps or build them yourself. It’s a good outcome if you get bought such as the twitter iphone app Tweetie, but perhaps not so great if you’re one of the other hundred applications that will instead be replaced by a version created internally by twitter. There are two prevailing opinions:
From Loic Lemeur (@loic), creator of Seesmic on the “Everything’s going to be fine” side of the fence:
The “You’re all screwed” counterpoint by @1938media’s Loren Feldman, amusingly tagged as “Delusional”:
Some interesting links this week. Slightly less original articles from me this week, real life intrudes. Testing out Twitter’s new Anywhere API on these link, I think it looks real purty – Let me know what you think.
Bootup Labs runs out of money, screws startup founders: http://bit.ly/baYbu5 – @bootuplabs, hoping you have a good explanation (Via @cperciva)
We are like prisoners… We do not have a life, only work. http://bit.ly/d0SIlG // A Microsoft sweatshop in China (Via @newsycombinator)
Breaking News: Why Didn’t Stack Exchange Work? – with Joel Spolsky http://ow.ly/173TXb (Via @giangbiscan)
Some interesting updates from my Posterous stream. This week Apple released a restrictive terms and conditions for the App store to prevent developers using third party tools to convert apps written in other languages into Objective C. One opinion is that this is a larger play to kill off Adobe flash, but a larger consensus is that this is to try to lock developers into Apple’s platform – If you’re writing Objective C it’s probably a lot of trouble to develop for other platforms. David Heinemeier Hansson has a good analysis.
Inside the Tornado is a follow up to Geoffrey Moore’s best seller “Crossing the Chasm“. Where Crossing the Chasm described the general layout of market adoption and looked at a few case studies of companies that had successfully gained mainstream acceptance, Inside the Tornado lays out a very specific set of concepts to help a company get there and further describes what generally happens once a market becomes validated. The advice seems mainly focused at Enterprise level software, but it’s also at least partly applicable to the consumer web.
The problem with breakthrough technological innovations that create a new market is that the market doesn’t really exist if you’re the only one in there. Without competitors you’re just a weird little company doing something a little crazy. Then you have the problem of what happens when competitors enter the space and validate that the market actually exists – The market begins to enter a hypergrowth stage and the focus of your business becomes a land grab for market share.
Moore describes the initial strategy for creating a market such as this as the “bowling alley”. A company needs to focus on attracting and dominating several specific niches in order to get their technology adopted as the market standard. Once enough of these ‘bowling pins’ are collected, the goal is to fuse these niches together so that suddenly your disjointed little product is a ‘whole product’ solution that can satisfy really big clients.
Once the market has been validated and success stories start to trickle out of the early adopters, you garner the attention of the pragmatist buyer. The thing about pragmatists is that they only want a new solution if everyone else is going to buy it, which leads to a sort of stampede of pragmatist buyers trying to get their hands on this great new technology. This is where the land grab kicks in and companies can spend a significant amount of money trying to get the lion’s share of the market. Once this land grab finishes, the market will stabilize leaving:
The Gorilla – Market leader. They get to set the bar and the market ‘reference price’.
The Chimps – Companies that at one point could have been the Gorilla, but lost out.
The Monkeys – A selection of companies catering to the edge cases that aren’t covered by the market leaders. This can be a specific smaller set of features that the gorilla can’t get a good return on investment on, a lower price point that services a smaller sub-market, or a niche that the gorilla can’t profit from.
These market definitions can change if a new disruptive technology makes it possible to resegment the market, and former gorillas can suddenly become antiquated if they don’t keep an eye on things.
Main street occurs when the tornado’s land grab dies down. Suddenly the sales funnel is a little emptier and the companies are finding more resistance on price points because simply put, the technology has become a commodity. At this stage, operational excellence drives the ability of a company to profit – process and cost cutting ensure the success.
Very interesting theories on highly competitive markets, and some interesting inside stories from the pre-dot com days. I enjoyed it.