The Waning Days of the VP of Marketing

Note: This is a guest post I contributed to the Flite blog (http://blog.flite.com/home/2012/9/19/the-waning-days-of-the-vp-of-marketing-guest-post-by-lars-le.html) and reposted here. 

Technology and obsolescence have always done a ruthless dance with each other. That’s why the best technology watchers know that it is as important to forecast when trends will die as it is to predict how long they will flourish. If you happen to maintain an obsolescence calendar, then you should add a particular person to it: the VP of Marketing.

That’s right, start clearing out that corner office.  The traditional VP of Marketing belongs to a dying breed, and technology is driving this.

With urgency, companies are changing the way they engage with their customers. Engagement is more social, and increasingly happens in real-time. A recent study from Chadwick, Martin Bailey, involving 1,433 consumers, showed that 50% of them are more likely to make a purchase after viewing tweets from a company. Meanwhile, comScore reports that 82% of global Internet users use some form of social network.

Deeper dives into bigger data are driving engagement strategies, and titles are toppling. Vamoose goes the VP of Marketing, and in come the VP of Social Media, the VP of Data and Analytics and a new kind of CMO.

The pace of interaction that companies have with their customers has grown exponentially in the past several years. Meanwhile, the fluency requirements for effective marketers bear little resemblance to the tapes that play in the head of the traditional VP of Marketing.  The companies that we believe in used to look for people who played those tapes. Now they don’t.

Mail-based marketing is going through an electronic renaissance. Not only has paper-based collateral diminished, but email collateral is driven by ever more sophisticated platforms. Capable of producing very customized email newsletters, spitting out precise analytics, and steering readers to embedded video content, campaign management tools from companies such as eDialog and Yesmail require experts to optimize their capabilities.

Meanwhile, video is driving a siege on the written word, with epic repercussions for marketers. The new leaders will be fluent with today’s affordable, approachable and sophisticated video platforms, applications and tools. They will produce persuasive, customer-facing online video content themselves, work with business partners on video-based narratives and use platforms such as VideoGenie to tap into customers’ passions through user-generated videos.

The new leaders will be fluent with engagement marketing platforms such as Marketo, and will run campaigns that change with real-time events, as handled by tools such as Flite (Disclosure: Hummer Winblad is a venture partner of Marketo and Flite.) These leaders will empower their advocates through Influitive. They will be buyers of big data analytics and make data-driven decisions in unprecedented ways.

My prediction is that the average age of the head of marketing in organizations will drop by a decade or two, very quickly. It’s not enough to know that the new platforms exist; it’s about having experience with them in your DNA. The new marketing leaders will have grown up on the new, social platforms.

In large and small organizations, they’re already arriving.

Software Defined Networking - Incoming Disruption

Trends and Opportunities in Software Defined Networking

At Hummer Winblad, we spend most of our time focusing on the software space. Within software, Software Defined Networking (SDN) is an area that we are particularly bullish on at the moment. A lot of interesting companies are emerging that are challenging the silicon oriented networking dominance using creative SDN solutions. Imagine a world where you can have the software innovation cycle sitting on top of one of the most important pieces of the infrastructure world; networks. Servers have been virtualized, storage has been virtualized...now the next category to fall is networking. 


It is early in this trend, but if the attendance and excitement at the Open Networking Summit this week is any indicator it will be a very fast moving market. Attendance has tripled since last year and my guess is they will need a new venue for next year.

Challenges to the Cisco Networking Dominance

Cisco has dominated the commercial networking sector for a long time and is a fantastically competitive company. With their acquisition of Linksys in 2003 they have expanded to dominate the residential and small business markets as well. This has typically meant that users of Cisco and Linksys networking hardware were limited by the features built into their devices through proprietary firmware and hardware. This is also true of the hardware provided by many other networking manufacturers. Cisco used to stay well clear of the other technology areas and work well with partners like server vendors. This is changing and forcing everyone to rethink their alliances. Dell has added over 1000 networking engineers in the last year because of this shift. Cisco’s dominance, coupled with operators’ desire to control network flows themselves prompted a new era, and standard…

…Enter Disruption: The OpenFlow Standard
The OpenFlow standard originated at Stanford University, and was founded by Nick McKeow­n and some of his colleagues. We first heard about this from the postgraduate work of one of the founders of a company we funded in 2001 called Voltage Security. Guido then went on to start BigSwitch in the OpenFlow space. The standard was created in reaction to a general frustration that companies like Cisco and Hewlett Packard were essentially “walled gardens”. It was not easy for network technologists to control the flow of data and information through networks. With OpenFlow, McKeown and his colleagues were able to circumvent Cisco and HP hardware to optimize and establish their own desired network flows.

OpenFlow was the pioneer in SDN, and it officially launched as a networking specification in 2008. It was hailed as one of the top 10 emerging technologies in 2009, and paved the way to the Open Networking Foundation in 2011. As of 2012, OpenFlow can be installed on a list of commercially available routers.

Changes in the Data Center

Using software defined networking such as that provided by OpenFlow, a network administrator can quickly implement changes to an entire network or specific segments by writing code which can modify the logical map of the network within the software. This means that network administration can be done remotely, including making changes to the physical network through software. What once required a technician to physically move a cable from one port to another can now be done through software. This is similar in scope to virtual servers and the Amazon Elastic Compute Cloud.

The New Networking Alliances

The development of software defined networking has created new alliances between various networking companies. Currently, Cisco, Juniper, HP, NEC, T-Mobile, Ericsson, and NNT DoCoMo are working with OpenFlow to set the standard for software defined networking. These new alliances will hopefully lead to greater innovation at a pace that looks more like software than 2+ year silicon cycles.

One thing is for certain – SDN will be a widely adopted standard in the near future. I cant say for sure that it will be OpenFlow, or if it will be 2013, but there will be some fantastically interesting and big companies that are created in this technology wave. We are still at the early stages of SDN, and exciting things are bound to happen in the space.

C100 Guest Blog

Here is a link to a recent blog post from me that originally appeared on the C100 website titled

C100 – The Not-So-Secret Canadian Entrepreneur Organization

I am deeply honoured to be stepping in as co-chair of the C100. It is an amazing organization that Chris Albinson, Anthony Lee and other Canadians have worked tirelessly in their free time to build. I wanted to write this blog post to give you a little of the reasons why I'm excited…I will start with a quote from our founding co-chair, Chris Albinson as I think this should be our new C100 motto…

“This is beyond owning some podium. It’s about claiming the podium as ours, painting it red and white, crushing it, and sprinkling the dust into the eyes of our competitors. And not apologizing ever.” [see the video here]




Me and Chris Albinson at the 3rd Annual CEO Tech Forum.

The C100 is going to help make the next billion dollar Canadian tech company. We are going to show people that Canada has the smartest engineers on the planet and founders who run circles around their brethren. I believe this strongly enough that I’ve already invested in two, Brian Wong from Kiip and Joshua McKenty from Piston Cloud. I’m encouraging teams I work with to build out engineering organizations in Canada the way other tech giants like Facebook, Zynga and others are doing. We will do it by being bold, by breaking some rules and by working together. Lets make it so the next great canadian tech acquisition is about a canadian company buying up US companies…I was just at the Digital Puck Growth Stage event for Canadian tech companies and there are some clear candidates for this role including Freshbooks, A Thinking Ape, Vineyard Networks, Intelliresponse, and many more. We are on a roll.

I want the next Canadian who visits the valley like I did 15 years ago to have a team of Canadians rooting for their success and helping them along the way. When I moved here, I might as well have been from somewhere in the Midwest…there was probably a better organized group of founders and tech folks from Minnesota or some far flung eastern European country than from our great homeland. That’s changing, and I’m excited to be a part of it.

I am joined in this pursuit by a fantastic organizing committee and sponsors who share the vision of building something great. We couldn’t do this without the people at KPMG, BDC, SVB, PageMill Partners, Sheppard Mullin, EDC, SDTC and many others. The Canadian Consulate, especially Thierry has had a huge hand in pulling the group together. The C100 is off to a rocking start thanks to the leadership of Chris, Anthony and Atlee. To be clear for everyone, Chris isn’t going anywhere and is as dedicated to C100’s success as he ever was. We are fortunate to have him remain on the Organizing Committee and heading up a few of our important initatives. Here are some amazing stats over the last two years: 

30 Events Organized
100+ Charter Members
 2500 People in the C100 Network
 3000+ Entrepreneurs attended C100 Events
 $417M venture investment into C100 companies
 $3B in exit market cap including Radian6, Kobo, Rypple and many others.

 I believe it's working. The organization is an all-volunteer army of Canadians who care about Canada. We are still a toddler as far as an organization and have lots more growing to do.

 I want to work with people who when they use all the famous start up quotes like ‘hockey stick revenue projections’, ‘skating to where the puck will be’, etc actually give (to use the tragically hip line) a f$*k about hockey. Or at least name a hockey player beyond Gretzky.

 So, I’m sneaking into the arena to put a loonie under the ice, and I’m asking you to skate hard with me. Lets have some fun and build something great together. Go Canada.

Metrics for High Velocity Businesses

Late late year I was at the Freemium Summit in NYC put on by Charles Hudson and it reminded me that I had planned to do a follow up from a previous post on the High Velocity Business Model.

At Hummer Winblad, since we invest only in software companies so we pay careful attention to disruptive trends like the high velocity business model. I describe this model as one that breaks the enterprise selling model to reach both enterprise and SMB customers.

In my previous post I pointed out that these businesses focus heavily on consumer style online marketing, have awe inspiring products that are easy to try (specifically getting a quick time to value without talking to a sales person), leverage web sales plus low touch inside selling teams and rely heavily on metrics. Later in this post I will give a sample of metrics from one high velocity business that I have had the pleasure of working with.

Once a high velocity businesses coalesces on their metrics they have unprecedented advantages on the sales model – I believe this represents one of the biggest disruptions in the application market that we have seen in 10+ years.

There are a lot of people to give credit to here, most notably SolarWinds who went public in may 2009 and is an incredible business engine. If you haven’t spent some time understanding their customer acquisition model, it will be worth your time to download their S1. My current poster child for this model would be Zendesk in the customer support area – take a run through their funnel by doing the google search for “customer support software”, following their link to watch a video, sign up for an account and see how long it takes to customize your own version and start collecting tickets. I would be surprised if you aren’t a customer 30 minutes later. Rumor on the street is that they actually have no sales reps at all, so are really leading the way in the high velocity model. From the recent freemium summit I could add SurveyMonkey, YouSendIt, Yammer and others.

Below is a set of metrics pulled together from a high velocity business that I am familiar with. To protect the innocent, I will decline to name the company or when these metrics were collected. To give a rough order of magnitude for the business, it is profitable at about $15M annual runrate and growing by about 80% year over year. I have sat down with three other companies in the last quarter who validated many of these metrics as either comparable with theirs, or good achievable goals to pull into their businesses.

High Velocity Model

This company runs a true high velocity model where they spend $80K in key word buying to generate about 500 high quality ‘warm’ leads per month. These leads are then fed into a round robin system for eight inside telesales team members. There are no assigned territories and you have to be in your seat in the office to get leads. The team is:
7-8 telesales reps
2 account managers (work on upsell opportunities in install base)
1 hands on VP of Sales

They manage aggressively to weekly metrics, focus on hiring and managing out any non-top performers. The process is highly repeatable and in the eyes of the company the business is an endurance sport – one which you can succeed at if you follow the process and drive your leads forward. The timeframe is interesting to note as most enterprise companies work on a quarterly/yearly cadence whereas high velocity companies are more of a weekly/monthly metrics pace. This is a huge cultural change for most organizations but one that can provide sustainable advantage just like when engineering can truly deliver on a weekly agile deployment schedule.

The Numbers

Sales Cycle 45 days
New Deals per month 45
Deals per rep per month 6.5
ACV per deal 16K (average)
ACV quota per rep per year 1.2M (100k per month)
Target 8% conversion to sales
Rough efficiency model = 80K ad spend plus 80K salary spend yields 1M in ACV per month.

Rep Profile

The average age of the current sales reps is in the mid thirties. The company looks for people with SaaS, domain and inside selling experience and specifically for people who do not have field rep experience as historically they do not work culturally as they cannot transition to the pace and urgency needed for inside selling. The reps are trained for 2-3 weeks and nurtured by the VP Sales with a goal of getting them productive within 3 months. The training is around the product, the value proposition, the sales model (and metrics).

Their hiring model has reached a steady state where they are replacing about one rep a quarter. All of the metrics are public in the company so the culture drives the performance. You can’t walk into their sales area without seeing the whiteboard with all the stats. If you want further details on how the reps are compensated in this model, drop me an email and I’d be happy to share my insights.

Sales Process

The sales process is an eight step methodology that is implemented through (no surprise here) Salesforce.

Step 1 (10%) – lead is qualified (interest, project has requirements, timing is <6 months) If a rep doesn’t act on a lead in two hours it is sent to another rep.
Step 2 (25%) – product identified, value estimated, pricing discussed, discovery process, demo scheduled
Step 3 (50%) – demo completed (prerecorded, webinar or 1:1), tech requirement reviewed, decision maker identified
Step 4 (60%) – trial in progress, SE engaged, verified requirements
Step 5 (75%) – selected as vendor, pricing sent
Step 6 (90%) – awaiting signed paperwork, verbal commit
Step 7 (95%) – received paperwork, submitted to finance for review
Step 8 (100%) – received payment

The sales reps run the process and use the SE’s for running demos. The company uses an prerecorded demo heavily and have tracking to see when a prospect views it. The SE’s run webinars three times a week for contacts that the sales team has in process. Private SE demos are used for well qualified customers and larger accounts that identify themselves early.

Metrics

The process is heavily followed by metrics on a weekly basis. They have weekly commit and review meetings to follow the progress. Typically a rep needs to have somewhere in the area of 30 active deals to make their monthly numbers so this is watched closely. Successful reps are at a >25 calls per day volume. They have found that tracking bookings alone is not enough – you need to pull out the underlying activity rate to get a good pulse on the process.

Tracked (by rep by week):
Activities (moving people through process)
Total call volume
Ave Daily Calls
High Quality Leads
Demos driven (broken out prerecorded, webinar, 1:1)
New trials
Net new deals
Net new large accounts
Seats
MRR

Hopefully this is thought provoking for those of you in, or aspiring to, the high velocity model.

Upcoming Freemium Summit

Below is the details for a great event that is worth attending called the Freemium Summit. The organizer, Charles Hudson, has pulled together a solid list of speakers on this important topic. I will see you at the event!

At Hummer Winblad, we are very focused the freemium model as well as on other new models of B2B and enterprise software. Our name for this new model of software selling is the "high velocity business model" and we have a number of companies who are leveraging this model successfully including InsideSales.com SlideRocket, VKernel, Five9 and some of our open source companies.

The High Velocity Business Model

- Leverage Consumer Internet Techniques on the Front End of Your Cycle. This means reaching your B2B customers by taking a consumer approach to marketing, lead gen, keywords, search marketing, etc. Take all the spend from traditional marketing (trade shows, PR agencies, etc) and put it into well run keyword campaigns.

- Use Only Inside Sales Teams. To make this work you will need a hands on VP of Sales who has run an inside sales team before. The team needs to be able to sell strategically over the phone and resist the temptation to go visit the customer.

- Nurture Prospects. Develop deep content on your site and reconnect with prospects often to keep this material in front of them. Let the prospects start the sales cycle with your content and then have them talk to a sales rep once they have identified themselves as a prospect. Use the new era of tools (MarketBright, Manticore, Marketo, ActON, etc) to automate this process.

- Develop Strong Metrics. The high velocity model is an endurance sport and you need to have your handle on every step of the process. Unlike traditional enterprise models with monthly and quarterly cycles, the high velocity model moves in weeks and months. I will follow up with a blog on these metrics in more detail.

- Make the Product Accessible. This is the core of the freemium and high velocity models. The customers need to be able to rapidly try the product - so you need to architect the product and provisioning system so that there is no friction to having a prospect get their hands on the product. Drive them to value quickly.

The high velocity business model requires a different approach to enterprise sales and marketing. In many cases it takes team members with different DNA and a commitment to continually improving the process. As we have seen with a number of our companies, once you make this commitment it can start to freewheel in a very impressive way.


Freemium Summit
Friday, March 26th, 2010
UCSF Mission Bay Conference Center
San Francisco, CA
Register


The first Freemium Summit is a one day event focused on exploring what it takes to succeed under the freemium business model. Across all segments of the media landscape, entrepreneurs and executives are pioneering models that combine a free offering with a premium, paid offering. This hybrid business model is one of the most exciting areas of business model innovation impacting the world of media and the Freemium Summit will explore the most important topics on the minds of leading practitioners.
Confirmed Speakers
• Toni Schneider, Automattic (WordPress)
• Matt Brezina, Xobni
• Aaron Levie, Box.net
• Phil Libin, Evernote
• Tom Conrad, Pandora
• Drew Houston, Dropbox
• Ranjith Kumaran, YouSendIt
• Ben Chestnut, Mailchimp
• Lance Walley, Chargify
• Isaac Hall, Recurly
• Lincoln Murphy, Sixteen Ventures

Agenda for the Day
• 8:00 AM - 9:30 AM Registration
Join us for coffee and other assorted treats during registration. Bring your ticket confirmation and ID to help expedite registration.
• 9:30 AM Welcome to the Freemium Summit
Charles Hudson, Host, Freemium Summit
• 9:45 AM - 11:15 AM Freemium for Consumer Internet Businesses
Our consumer Internet content block features 20 minute talks from leading companies making the freemium business work in consumer Internet applications.
o Toni Schneider, Automattic
o Phil Libin, Evernote
o Tom Conrad, Pandora
o Drew Houston, Dropbox
• 11:15 AM - 11:40 AM The Abuse that Comes with Free
Switching to a freemium model isn't always easy. What can go wrong when switching to a freemium model? How do you handle the influx of new users? Hear one company's cautionary tale of what can happen when switching to a freemium model.
o Ben Chestnut, Mailchimp
• 1:00 PM - 2:00 PM Freemium and the Enterprise
Curious about what it takes to make freemium succeed when developing enterprise or business applications? Our group of esteemed experts will share their thoughts on what it takes to succeed in this space.
o Aaron Levie, Box.net
o Matt Brezina, Xobni
o Ranjith Kumaran, YouSendIt
• 2:00 PM - 3:00 PM Making Freemium Work on Mobile Platforms
Mobile is a rapidly growing opportunity for people interested in the freemium model. What does it take to succeed using a freemium model in mobile? Our speakers will share their thoughts on this exciting topic.
• 3:00 - 3:30 PM Break
Take a moment to recharge your batteries and top up your tank with sugar or caffeine.
• 3:30 - 4:15 PM Freemium Games - Succeeding with Free-to-Play Games
Free-to-play games are revolutionizing the games space. Why is this working? What does it take to succeed? Our pair of speakers will share their thoughts on how to build a successful freemium games business.
• 4:15 PM - 5:00 PM Building a Freemium Business on Someone Else's Platform
Are you a developer looking to build a successful business on someone else's platform? How do you mitigate risks? Is this something that is in fact doable? Join us for a set of interesting talks on this critical topic.
• 5:00 - 5:45 PM Payments and Monetization for Freemium Businesses
We'll close the day talking about what it takes to succeed in generating revenue from your users. Should you build your own billing system? Should you support alternative payments? Our closing panel will shed some light on this important topic.
• 5:45 Closing
Within the major themes above, the Freemium Summit will focus on the most important specific topics facing entrepreneurs and executives today:
• Product segmentation for freemium success
• Analytics, metrics, and measurement best practices
• Customer acquisition and retention strategies for freemium businesses
• Success stories
• Lessons learned - the limits of the freemium model
• Businesses that looked at freemium and opted for another model (subscription, advertising, etc)
We will start announcing our first set of speakers in early January. To stay in touch with us, you canfollow us on Twitter, join our Facebook fan page, or subscribe to our mailing list

Cloud Computing

Cloud Computing is topic that has been on our minds at Hummer Winblad for a few years now. It represents a very interesting shift in the data center that we are all used to working with.

You can see a recent cloud computing session I moderated here. This event was organized by the good team over at DealMakerMedia who also recently published the cloud computing ecosystem map. This map covers a large and growing (thanks to some creative rebranding of many companies around cloud computing) list of companies in the space. We were pleased to see several of our companies there including Elastra - the enterprise cloud company, VKernel - Systems management and chargeback for private clouds (virtualization), Birst - cloud BI and Aria Systems - cloud billing infrastructure.

Cloud computing is following some interesting adoption patterns. Amazon.com has lead the way by providing a public cloud offering and they are rapidly adding enterprise features and partners such as IBM. The adoption of cloud computing is rapid in the start-up space - almost every company we meet now has some leverage on the back end from cloud infrastructure. From our discussions with larger companies, CIO's and enterprise developers cloud is also starting to get traction there as well. This is one of those trends where if the corporate IT department cannot offer cloud solutions that are blessed, the developers will put their credit card in and start using Amazon Web Services. It just takes too long to get resources inside an organization compared to firing up an instance on EC2 in 5 minutes to beta test an idea.

In our informal survey the adoption of cloud is progressing in the following categories:
- financial services
- technology (including startups)
- Medical
- education
- government

The initial use cases are usually non-core applications and batch processes. It is being followed by more sustaining use cases over time. This wave is happening...and corporate good corporate IT departments are trying to get ahead. We believe the future of cloud computing will include public clouds like Amazon, private clouds run in corporate datacenters, semi-private clouds managed and run by the likes of IBM on behalf of corporate clients - and a common language/infrastructure to move between these infrastructures.

Gartner Gives the Nod to SaaS Model

In a report that was released this Wednesday, Gartner made some bold predictions around the near-term future of SaaS...

(from Antone Gonsalvez at InformationWeek)

SaaS Revenue Growing, Market Set To Double By 2012
Driving the growth in SaaS deployments is businesses' desire to reduce their IT capital expenditure budget and to rapidly implement software that supports a specific business need, Gartner said.

Worldwide software-as-a-service revenue in the enterprise application market is
on pace to surpass 2007 sales by 27% and to more than double by 2012, a market
research firm said Wednesday. Revenue this year is on track to rise above
$6.4 billion, compared with $5.1 billion last year, Gartner said. In four years,
revenue is expected to reach $14.8 billion.

While it is always a little dangerous to follow predictions from analysts with considering your specific market or application, this announcement is an interesting one given the current economic conditions. In essence they are endorsing that the SaaS model has increasing leverage over existing software models as the IT spending tightens.

We share this premise at Hummer Winblad and have invested heavily in the SaaS model...with over 15 portfolio companies to date including Omniture (web analytics), EmployEase (HR management), Aria Systems (Subscription Billing), etc. We see the model having some key strengths in this market:

1) Lower entry point customers - easier to get started, lower risk to trial, limited upfront expenditure. Also, the ability to buy or try without getting all the traditional enterprise sales points involved (IT, finance, etc)

2) Build vs Buy for business services - SaaS models become more interesting as companies debate if they should try to build out the service themselves via internal teams, or go with a known working solution where they can leverage existing best practices.

3) Lower TCO - often the best way to justify a SaaS offering is to have a customer lay out the true cost of the internal infrastructure

The SaaS wave appears to be continuing to gain momentum...lets hope we can really see the category double by 2012...