History may repeat itself, but past successes aren’t easy to duplicate.
Tien Tzuo had experienced large-scale success as the chief strategy officer of customer relationship management (CRM) software provider Salesforce. As its 11th employee, Tzuo had been instrumental in the rise of the company that broke new ground in technology.
“Salesforce’s vision in 1999 was to reinvent software using the Internet,” Tzuo says. “It used the cloud model and offered a new product—a subscription, pay-as-you-go model. That vision turned into a billion-dollar company in 10 years.”
When Tzuo left to launch the subscription billing software provider Zuora, he figured what worked before would produce the same results: “Rinse and repeat,” he says, but the reality was different. “Success comes from learning in specific situations; not blindly repeating the past.”
Unfortunately, it took two years for Tzuo to come to this conclusion. Zuora experienced success upfront, and customers embraced their product. Tzuo’s experience with Salesforce had been launching a product quickly and hiring salespeople quickly, too. He repeated this process with Zuora, quickly growing his company to 200 employees. After 12 quarters of consecutive revenue growth, however, Zuora hit a flat quarter. When churn was higher than new bookings, Tzuo realized there was a problem.
“We were starting to lose touch with our customers,” he says. “We had become more focused on the metrics that mattered to our departments than the ones that mattered to our customers. And because our product is complex, it was hard for any single employee to understand everything we do for any customer.”
Tzuo says his company’s processes touch people in all departments, from marketing to sales, customer acquisition to finance. “We realized that it wasn’t obvious how to bring customers on board,” he says. “The sales team knew how to sell, the implement team knew how to implement, and the support team knew how to support. Where we lost touch was in what we did for customers. The departments weren’t communicating, and customers were frustrated every time they had to explain their needs all over again.”
To get on track, the entire company had to rally around a deep understanding of customer needs: “I realized that our sale is more complex than Salesforce’s,” says Tzuo. “With Salesforce, each salesperson could close four sales a month. At Zuora, the product is complicated and our salespeople close two deals a quarter. This required a different type of salesperson and pricing model.”
Tzuo says he also realized that he hired too fast. “It’s blindingly obvious, in hindsight,” says Tzuo. “We didn’t take time out to think things through; we were eager to reproduce success.”
To understand what it takes to make customers successful, Tzuo took the entire company—from the receptionist to engineers—offsite to develop a customer service formula. He and his team came up with the nine keys and decided to wrap the whole organization around it. “It’s a framework that runs through Zuora’s entire customer engagement cycle,” says Tzuo.
The process was transformational, says Tzuo. “We came out a company unified,” he says. “The keys are in the DNA of all 200 employees.”
Tzuo wishes the exercise was something he had done early on. “It would have been much easier to take 50 employees offsite to start moving in the right direction,” he says. “Getting 200 people moving together is much harder. We learned the lesson, but it was much later than it could have been.”
Zuora recently closed over $100 million in funding and is prepping for a 2016 IPO. Through the ups and downs, Tzuo admits he experienced the sophomore entrepreneur syndrome: “I forgot that success is hard,” he says. “First-time founders don’t know what they don’t know, and they approach everything with freshness. I tried to take a shortcut by replicating the success of Salesforce. Surprise, surprise—that doesn’t work.”