In his latest book, Amp It Up, software leader Frank Slootman discusses why he did away with the customer success departments at ServiceNow ($110B+) and Snowflake (80B+). At almost $200B in public market cap between these two companies, Slootman represents ~20% of the total public enterprise SaaS market. Said another way, Slootman probably knows more about scaling successful SaaS companies than anyone else alive.
New orgs demand new resources and create politics
“The urge to rearrange people into new departments reminds me of the US Government. Where the proposed solution to every problem is a new layer of bureaucracy.” - Amp It Up
Shared responsibility is always a bit of a conundrum for departments. Things are easier when the lines are clear. Unfortunately, rather than find ways to drive cross-functional accountability, companies and governments often decide the simpler solution is to just create a new department. Slootman highlights the Department of Homeland Security (DHS) as an example. DHS was introduced as a result of the intelligence failures by the FBI, CIA, and Pentagon around 9/11. Instead of coming up with ways to solve those failures within the existing structure, it was decided that a new department was the optimal approach. Maybe it was the best course of action in this scenario and maybe it wasn’t, but either way, it’s instructional around how and why new departments emerge in both politics and business. Mainly, new departments mostly pop up when someone needs answers and it’s easier to get them from one mouth rather than five. Unfortunately, the approach doesn’t come without tradeoffs. Not only are new orgs sometimes created as scapegoats, but the creation can also create inefficiencies, politics, and the same kind of competition for attention and resources that created the situation in the first place.
Thinking in First Principles
“If your product is so bad that it requires an army of hand holders, then apply extra resources to fix the product.” - Amp It Up
Getting back to our customer success department: Slootman believes this is a shared problem that can only be solved collectively. You have to make every department responsible for Customer Success rather than having a single named org to which the buck can be passed. He offers an example from ServiceNow, where the CS team had commandeered a lot of resources around customer challenges when he felt they should have been handled directly by either sales—who owned the relationship—or product, who owned the issues around usability.
To that end, Slootman argues for a first principles approach to customer success. Since there’s nothing more important to a SaaS business than customer adoption, understanding the root cause of any issue is a top priority. Specifically, he points to heavy support or implementation—two things often handled by customer success—as a symptom of a deeper issue that needs to be solved. A product with long and difficult implementation, for example, may require better documentation or new interfaces rather than a separate department. The problem with just throwing a team at the problem is it that it may actually exacerbate the issue by covering up the underlying systemic cause with human ingenuity.
What is the Role of Sales?
“Our business is relationship-oriented not transaction or deal-oriented.” - Amp It Up
Slootman might be best known for building incredible sales teams that go through multiple evolutions of hyper-growth. He is a firm believer in having a direct sales team and never outsourcing your sales motion to a third party. With that as the backdrop, it is interesting to highlight that he believes in a seller managing a customer relationship even after the first sale. In this world, as Slootman describes, a seller's job is not about transactions, but about relationship building. Sellers in Slootman’s companies are outcome-oriented. This is not a small shift for a sales motion and comes with incredibly different sales skills for someone to acquire, Frank doesn’t go into this in the book and it is the area I would like to hear from him most on how he pulled it off.
At Snowflake, for instance, sales owns the relationship post-first-deal and the biggest windfalls for sellers come after that initial signature. And it’s worked. Snowflake has been able to show they can retain and grow customers, with an industry-leading 160% Net Dollar Retention rate.
You can debate whether or not Slootman is right about needing a CS department, which we will do in further posts with some great CS and Sales leaders, but it’s harder to debate his results.