Salesforce may have started as an elegant CRM solution, but they’ve stayed on the forefront of the space by recognizing when it was time to mature into a bona fide platform through their AppExchange.
Knowing when it’s time to become a platform is a delicate thing, as Mike Kreaden, Managing Director of Salesforce Incubator, discovered. Transitioning into an effective marketplace required keen attention to the evolving needs of their customers – who wanted to connect to third-party partners.
Mike has been in and around startups for the better part of three decades: as a consultant, as a co-founder and now as the Managing Director of Salesforce Incubator, which propels new startups into the marketplace. He joined me for a chat that ranged from the role of AI to how they choose startups to incubate.
Short on time? Here are five quick takeaways:
- Mike is looking for two characteristics in the companies he chooses to incubate: one is customer validation, and the second is strategic fit into a promising theme Salesforce has identified.
- Salesforce now receives thousands of applications for its Accelerate program, but the fundamentals of a good candidate remain the same: good ideas, good insights and an entrepreneurial drive.
- Making the jump to becoming a platform requires humility. As Salesforce found, having a list of partners on its site wasn’t enough; they needed to facilitate discovery and promote community advocacy around their solutions.
- It’s now so inexpensive to go to market that having a great tech vision and product isn’t enough. Any startup that’s going to make it needs to have a compelling answer about its team and how they’re going to execute.
- Customer nurturing now starts from the first touch, and AI can help with that. Machine learning can get the right message or recommendation out in a responsive way – not just from the customer’s next best action, but from the sales perspective, too.
If you enjoy our conversation, check out more episodes of our podcast. You can subscribe on iTunes, stream on Spotify or grab the RSS feed in your player of choice. What follows is a lightly edited transcript of the episode.
John: Mike, welcome to Inside Intercom. You’ve had a number of roles at Salesforce since you joined the company back in early 2002, from product management to startup relations. Can you give us a quick introduction to what you’re doing today at Salesforce and how you ended up there in the first place?
Mike: Thanks, John, for having me. It’s actually been quite a wild ride with Salesforce from the early days. When I started in 2002, I was the first product manager for the API. And I remember Marc [Benioff] interviewing me, like he did every employee, and painting the vision for what the platform would be. Little did I know, we would actually be here today with quite a large ecosystem.
But just in terms of my journey, I had my own startup from the late ’80s through the mid ’90s. I had done some software consulting. I was the technical co-founder of a company, but for the most part, I was just rolling from startup to startup. A friend of mine was one of the early guys at Salesforce. And he said: “This is going to be a good thing. You should really consider this.” So I got my start there, and little did I know I would continue to be working with startups.
John: What does your current role involve?
Mike: I’m actually reprising a role that I had in the mid 2000s. I’m running an accelerator program of sorts called Salesforce Accelerate. And this is actually a continual evolution we’ve had on an incubation theme. We’re helping startups and scale-ups that are strategically aligned with Salesforce, which is actually very important in terms of actually delivering solutions. We help get them to the AppExchange in an accelerated fashion, but ultimately we’re focused on rounding out the solution mix around Salesforce so we can deliver additional value to our customers.
Choosing the right companies to incubate
John: What are your criteria for identifying promising companies for the incubator?
Mike: There’s the standard fare, in terms of what you’re looking for in any company – whether it’s a startup or someone that’s a little bit more advanced. Specifically, we look for customer validation, and we’re really trying to accelerate success. We’re not trying to invent it. There are plenty of companies that actually have that initial success. It’s less expensive than it’s ever been in terms of actually getting a product to market, whether it’s leveraging platforms like Salesforce or GCP or AWS or Heroku. It’s very easy to get something out there and get some initial validation. That isn’t to say that we’re shy against taking someone who’s in that early stage and actually working getting to MBP.
“We’re really trying to accelerate success. We’re not trying to invent it”
But predominantly we’re looking for two key aspects. One is that customer validation. Another one is a strategic fit with respect to the solution space around Salesforce. If it’s already a crowded category, for example, we’d likely not be extending an offer to a startup in that space. And then the last piece is that each cohort has a particular theme, so the startup would have to fall into that. Our current cohort, for example, is FinServ, FinTech and InsureTech.
John: And presumably those themes are both what you think as current or popular right now, but also what Salesforce needs to round out its ecosystem.
Mike: Exactly. We aren’t completely self-serving in that. We take input from the perspective of customer demand and from Salesforce’s own inclination in terms of where we’re going. The objective is to put all the wood behind one arrow. So if we’re moving hard into a particular area – whether that’s a particular vertical or whether that’s rounding out a particular solution that we already have in market – that’s clearly a strategic opportunity for a startup.
John: I think a big part of Salesforce’s strength right now is its remarkably robust ecosystem. And you helped the company transition to becoming a platform rather than just a product company. Can you take us back to the early days of Accelerate and what the original vision was?
Mike: When I started in the early days as a product manager for the API, one of the things I did as a product manager is think about the constituencies that we were going to be serving from a persona perspective. We’re obviously driven from a customer point of view, and at that time, we actually didn’t have any partners. As I joined, we were just signing on our first “partners,” and that was not necessarily rounding out a particular solution space, per se. It was really to overcome key objectives or objections we were facing. But along the way, in terms of actually progressing to what would become the platform, key pieces came into play, one of which was an understanding that personalization was key for a SaaS product to be successful.
That personalization lent itself to additional solutions and tools to be put in place to actually help achieve that particular goal. And that was the early days of building out an ecosystem around Salesforce. That quickly evolved, because we took that cue to actually build that out in a direction. And one of the early offerings we had at Salesforce was actually moving into a notion that was driven from the consumer side of things. For example, Amazon at the time wasn’t necessarily revolutionizing, but they had perfected online reviews and an element of what we now consider as a customer advocacy in terms of recommendations. So we said, “Hey, why don’t we do that with enterprise software?”
“We knew that if we were going to be successful, we needed to establish that critical mass quickly”
So we actually created something called the on demand marketplace. This was the predecessor to the AppExchange. And that was done like many things that all of us are familiar with in terms of actually doing something experimental, and it caught on, it actually struck a nerve with our customers, they really like that. So we embarked then on the AppExchange project. And that project was roughly about a year and a half in the making. And part of that exercise was, and this was my transition out of product management, was actually to seed this marketplace, because we knew that if we were going to be successful, we needed to establish that critical mass quickly. So we actually worked very closely, hand in glove so to speak, with respect to key chosen willing participants in terms of emerging partners, and that actually provided the seed for the AppExchange. So in 2005 when we announced the AppExchange, we actually had at that point 70 applications that would then be ready for launch in January.
Marc is always wanting more. It’s like: “Okay, great. We have 70. How do we get 1,000?” So we thought about it long and hard, and that was the emergence of the first incubator, and we incubated 37 companies. Specifically, it was driven from a marketing standpoint in order to provide validation that there was a market here. We were very fortunate in that, and it wasn’t really because of our selection process; I just think that there was a keen opportunity, great entrepreneurs and people with insights. And they gravitated towards Salesforce, which was just an emerging company at that time. But we had companies from Appirio, which was very successful on the consultancy side that started at the incubator.
Aptis actually did their native offering out of the incubator. We actually tracked 23 exits out of that initial group of 37, so it was very successful in the initial days. We learned a lot, and after the end of that exercise in the first year, we actually went from 70 to 400 apps very quickly. The next year, we had 800 apps doubling. We had already achieved the mission, so after 2008 we backed off the pedal, so to speak. The ecosystem was growing organically but at a very high rate at that point in time. Just in the last year, we finally celebrated – because we actually don’t celebrate the number of partners. The success is actually from the adoption of customers. And our 6 millionth app install just happened a little bit earlier this year, which was a great milestone. Enterprise software is a little bit different than consumer-based software, because there’s an opportunity obviously from a value perspective to make a lot more revenue on the enterprise side.
Scaling support for early-stage startups
Inside the Salesforce Accelerate program
John: Is it harder to find startups now? You got 37 the first go-round. What supports did you have to provide back then versus today?
Mike: Really the fundamentals are still there, in terms of what’s needed. You need to have good ideas, good insights and that entrepreneurial drive. The ability to execute is going to really weed out the ones who actually can be successful with this. But just in terms of there being more or less, I think we can just look around and see that the startup ecosystem in general is more than thriving; it’s successful in its own right.
Just for our Accelerate program itself, we received hundreds of applications for ultimately what’s – roughly speaking to each class – roughly a dozen placements. It’s very competitive, like I think most accelerator programs are. We’re not shy about what it is that we’re doing: we’re a corporate accelerator program of sorts, and it’s narrowly casted into that audience. But I’m impressed every time we do this at the number of very impressive companies in each cohort. Remember I told you that the minimum bar is having some customer validation, so we get to read the applications as they come in – not just from a pitch perspective but in terms of customer success stories, and it’s very impressive to see what people can do early stage.
John: There are so many moving parts required to build a proper partner ecosystem. I think something we’re experiencing now with our Intercom app store. We’ve got 100 apps already, but getting to 700 is probably a target pretty soon. How did you prioritize things early on?
Mike: In terms of the marketplace itself, fundamentally we need to understand that there are three pillars of a really effective ecosystem. One of the problems is that there can be too much internal focus on who you are and what your place is in the ecosystem – I’m speaking as the vendor. It’s really important to turn things around, and we all know about customer-centric design and engineering. That’s commonplace especially within enterprise SaaS, now. That’s something Salesforce can feel very proud of pioneering, and looking at things from the customer’s viewpoint is fundamentally a cornerstone to building a marketplace.
“In terms of customer and partner experiences, those are two equally weighted dimensions of this three-dimensional space you’re also involved in”
At the same time, you also need to be taking the partner viewpoint into account. So in terms of customer and partner experiences, those are two equally weighted dimensions of this three-dimensional space you’re also involved in. Part of the trick is understanding your role in delivering to the customer, but taking a step back, you need to eliminate as much friction as possible in terms of not just finding or seeking solutions but actually ingesting and adopting.
On the enterprise side or on the B2B side, we think about implementation, and we need to move that out of the way. With modern SaaS platforms, there’s no excuse for not having prebuilt templates for being able to ease from a single sign-on perspective. And from an experiential point of view, what is the ultimate experience you’re looking for with respect to these third-party solutions you’re bringing into play? It can’t just be casual, like in the old days with an iframe drop-in. We really need to think about how the customer is going to be using the solution – and the solution is the combined solution between the partner and Salesforce or a third party like Intercom.
John: Were there healthy debates early on in terms of, “Hey, what should we leave for third parties?” Or, “Where do we draw the line?”
Mike: I think it’s quite interesting – there are some great leaders out there. I don’t know if you followed the news, but we actually just lost a great leader in the SaaS space: Ron Huddleston. I consider him as the godfather of the AppExchange with many leaders before him, and he, I think, really built the ecosystem from a commercial standpoint. And just one of the things we look for in terms of building a thriving ecosystem is that healthy channel conflict is a natural outcome. If you’re a company that’s already building solutions in this space, your product organization and your sales organization is going to want to own everything. From the sales organization and share of wallet, they have 100% as their goal. And from a product organization, they want to have complete control over that and the customer experience. That tension is natural, and it needs to be embraced. Fundamentally, channel organizations are built for this. As long as you have the executive buy and the support coming from the highest of high levels, you’ll be able to manage that. But it’s one of those natural beings.
How to know when to become a platform
John: Are there any lessons from those early days that you could share for listeners who are running SaaS businesses and maybe thinking about how to get ready to be a platform?
Mike: I may not be able to provide anything new here, in terms of the platform debate and statements. Fundamentally, you can build a platform in terms of having the requisite elements, but the success of a platform in terms of actually being recognized only comes after you have the customers on one side and a thriving partner base at some point. Declaring that you’re a platform before then, I think, is at best self-serving and aggrandizement. But Salesforce got to the point where we could say, “Okay, we can take that next step forward.” It was really enabling the natural evolution for an effective marketplace to be born from.
“You can’t be a platform without having that marketplace point of view”
In that regard, it’s about understanding that you need to be able to pair up the third parties with the customers. Salesforce happened to have a vehicle for this. We were just talking before about Dreamforce, but Salesforce has a particular strategy around that: from the very early days, we would always bring customers and prospects together. It was just a natural Petri dish for us to be able to introduce partners into that conversation as well.
That’s one of the key elements in terms of on the platform side: being humble enough to understand where you are in the genesis of developing that platform concept. Then you have to understand that you can’t be a platform without having that marketplace point of view. Salesforce figured out in 2003 that just having the list of partners on our site that integrated with customers wasn’t enough; we needed to facilitate the discovery, the ranking and the promotion of community advocacy around these solutions. Those are fundamentals to actually building an effective marketplace.
You can be platform, but you have to lead with, “We’re a platform for this, and we have this many customers.” It’s that sort of thing. I was just thinking that everybody would be a little bit better off if we’re humble in terms of understanding the true merits of how a platform defined and declared. Then you move on from there.
Maintaining an innovative edge
John: You guys have made a lot of investments or bets on early stage companies. How does backing these startups really help Salesforce maintain its competitive edge?
Mike: I think it was built on the premise that we were, like any startup, born to rapid innovation. We’re keenly aware of our customers’ needs, and we’re listening to them. As you grow, I think that there’s just this natural lag that develops within the company itself in terms of being able to effectively turn out innovation. I’m very proud that Salesforce, being such large company, is still at a very high clip in terms of delivering innovation with three major releases a year.
“Ventures and strategic partnerships on the product side really to help drive that innovation from a solution perspective”
When you think about what startups are doing – and the agility that a startup has – we can’t deny the fact that they’re where innovation is key, and that’s where we really see it. So we use our relationships with startups from a startup-relations perspective. Ventures and strategic partnerships on the product side really help drive that innovation from a solution perspective. At the end of the day, it’s not really about us in terms of how many features we have for release; it’s ultimately about how much of a solution are we actually putting into market around the customer need.
John: You’ve worked with startups since the mid ’90s, and now you’re at Salesforce working with startups. Obviously we’ve seen a lot of changes in terms of tech and business models, but what would you say has stayed the same in that space?
Mike: Even if we go back even 15 years, I think that the fundamentals are there. If you go a little bit beyond that, it gets a little fuzzy. But I think that Salesforce helped to establish the business optics – if not the metrics and KPIs – that are needed to actually effectively run a business. That hasn’t changed. So effectively running a SaaS business is fundamental to success, and that’s something that you can teach. But ultimately the founders need to be receptive. In terms of what we’re looking for in companies we bring into our program, we’re looking for the balanced team. It can’t just be a guy or a girl with a great tech vision saying, “Here’s my product.”
They need to answer the question of how they’re going to execute. That’s why that initial stance – in terms of customer traction – is so important. But those fundamentals are still there. In the last five to 10 years, the economics of getting a product out to customers have dramatically fallen. Just from a platform perspective, we can look at it: everybody knows from the AWS perspective how inexpensive it is to go to market. We have similar programs with Heroku and also on the Salesforce platform side of things. If you want to bring a solution to market with Salesforce platform, you actually have zero carrying cost from the time of conception of product through development all the way to actually onboarding your first customer.
Revenue has only garnered after that fact. Business models are in your favor in terms of hosting, deploying the product and ultimately scaling. It’s so easy now to get something out there, which I think is the fuel for innovation that we’re seeing. And that’s why we’re seeing such amazing progression within the industry itself now.
The role of AI
John: One of the big technological shifts we’ve seen very recently is AI, and you’ve had several companies come out of the incubator that are using Einstein, Salesforce’s AI-powered CRM assistant. How do you see that relationship between automation and salespeople playing out?
Mike: It’s interesting, because with respect to AI, we have been doing that at Salesforce for quite some time. We actually started early on with our acquisition of RelateIQ, which became SalesforceIQ, which has since been sunset in terms of our product because the AI strides we made within the core platform element are now pervasive across our products. But nonetheless, I’ve been able to see this now over a period of about four or five years. We incubated a cohort early on in the genesis of Einstein, and where we thought AI and machine learning was going to be used has changed. One of the things we’re seeing is that AI and machine learning in particular is actually a fantastic tool which can actually make, with respect to sales reps, them better.
We’re seeing, for example, deflection in a good way in terms of inbound being done more effectively. Thinking about it in terms of response times, we can use effectively machine learning to get the right message out in a very responsive way to a customer to ensure that nurturing starts from that initial first touch. It’s very tactical, but that’s one of the things we’ve seen.
“I’m predicting that any of our end users effectively can be a top performer now”
The other point is from a recommendation perspective: recommendations are not just from the customers’ point of view in terms of next best actions, they’re also from the sales perspective. We’re also seeing that now bleed into the marketing side, making marketers that much smarter. Just a few years ago, you would have some consciousness in terms of more advanced analytics and understanding the makeup of the model or the data lake that you’re actually pooling from. But nowadays, that’s already become abstracted in just a few years. Within four or five years we’ve seen it move from something that was very techie to something that’s now more mainstream.
In terms of the future, I’m predicting that any of our end users effectively can be a top performer now, because you get to benefit from those insights, which are served through machine learning to suggest to you what that next best action would be.
John: Mike, it’s been great chatting. We could go on for ages, I’m sure, but thank you for joining us on Inside Intercom.
Mike: It’s been my pleasure. Thank you very much.