Behind the Cloud - Book Summary

Unleashing the secret formula of turning your venture into a billion-dollar enterprise and reinventing an entire sector

Every single year, millions of entrepreneurial ventures are launched worldwide. Yet, the harsh reality is that a large proportion of these businesses collapse within their early years. However, in this cut-throat world of businesses, Salesforce.com has emerged as a triumphant anomaly. Now, the question arises — what sets this corporate giant apart from the rest?

A classic tale of success always commences with a compelling idea, a deep-seated belief in that concept, and the bravery to diverge from the crowd — even when confronted with skeptic venture capitalists or tumultuous market conditions.

But how can one transform a nascent idea into a soaring success? The answer lies in establishing clear distinctions from your competitors, placing customers as the nucleus of your business strategy, and fearlessly challenging the industry Goliaths. By following this approach, you not only pave your own path to success but also pave the way for a sea change in your industry sector.

In this narrative, you'll grasp:

How Salesforce.com brought about the twilight of the software era;

The reason why standing out in a sea of competitors is crucial; and

The formula to attain success and popularity in a market as distinct and challenging as Japan.

Hold on to your vision and aim high to transform a start-up into a rapidly expanding corporation

Every global conglomerate begins its journey as a simple idea. However, if turning ideas into reality were as easy as snapping your fingers, the world would be swarming with successful entrepreneurs. So, what's the secret ingredient that powered the meteoric rise of Marc Benioff and Salesforce.com?

Here's the first piece of wisdom from Benioff: Once you recognize the potential in an idea, embrace it fearlessly, even if it means going against the tide alone.

The genesis of Salesforce.com was not the outcome of a painstaking quest for an innovative business concept. While on a sabbatical following a decade-long stint as Oracle's Vice President, Benioff found his eureka moment as he swam amidst dolphins in Hawaii.

At the same time, Siebel Systems, a Customer Relationship Management (CRM) company, was going public with a software solution designed to enable salespeople to manage contacts, track leads, and account information. However, like other similar solutions, it was costly, had limitations, and required high-maintenance.

Benioff noticed the concept and saw the potential to refine the software using a "Software-as-a-Service" strategy, primarily through a cloud computing model. He shared his idea with Tom Siebel, the founder. Though supportive, Siebel was skeptical about the idea capturing a significant market share.

However, Benioff remained steadfast in his vision and decided to pursue it single-handedly. He was aware of the need to aim high. To attract the top engineers for his new venture, he pitched his idea as the potential disruptor that could spell "the end of the software business and technology models." He knew that this audacious goal would pique the interest of any proficient developer.

By March 1999, Benioff managed to hire three seasoned application developers who joined him in a one-bedroom apartment in San Francisco. By summer, the burgeoning team of ten members had outgrown the apartment. To house his rapidly growing company, Benioff decided to lease an 8,000 square-foot office space at the Rincon Center.

Launch a bold advertising campaign for your product right from the outset

Marketing is the most potent tool to capture the spotlight when your company is in its growth phase. If your ambition is to scale the same heights of success as Salesforce.com, it's critical to either position yourself against the market leader or project yourself as the new market leader right from the get-go.

The first task at hand is to establish your distinctiveness in the public eye.

Just half a year post the establishment of Salesforce.com, Don Clark from the Wall Street Journal published a front-page article, highlighting the birth of a new industry. This exposure did wonders for the company, spreading the word about the impending "end of software" era. Benioff was well aware that he needed to articulate a distinct message and educate journalists about what sets Salesforce.com apart from the rest of the pack.

Next, Salesforce.com needed to create a unique brand identity. For this, Benioff brought onboard Bruce Campbell, a renowned marketer credited with designing the "no software" logo. This logo had the word "software" encircled with a red line running through it. While some team members had their doubts, Benioff was confident that their apprehensions were overshadowed by the most fundamental rule of marketing — set yourself apart from the crowd.

And indeed, he was right: Post the widespread display of the logo in magazines and newspapers, the campaign earned the accolade of Hi-Tech Campaign of the Year by PRWeek.

However, merely standing out in a crowd isn't enough. It's also essential to challenge the industry's biggest players head-on.

Buoyed by the positive media coverage, Salesforce.com started taking jabs at their competitors. In a clever move, they hired actors to pose as protesters brandishing "no software" placards outside a conference hosted by their key competitor, Siebel User Group. Every attendee was handed an invitation to the Salesforce.com launch party, and many of them made an appearance! The press lapped up this David versus Goliath narrative, adding further buzz to the event.

Maximize media visibility through strategic use of public events

As Salesforce.com grew bigger, the focus shifted away from taking potshots at their competitors. Instead, it was high time to promote the unique benefits of their service.

One of the most effective ways to achieve this is to use events strategically to amplify the reach of your message.

Two marketing tactics stand out for driving the highest rate of sales conversions: one is editorial content, which refers to unbiased write-ups in media outlets. The other is testimonials, or the word-of-mouth buzz generated by customers sharing their success stories.

Rather than pitching their product to potential investors, Salesforce.com decided to host a series of roadshows in various cities, aptly named City Tours. These events featured keynote speeches, customer presentations, and product demos, providing a platform for potential customers, journalists, and analysts to exchange ideas and experiences.

This customer-centric approach led to a significant improvement in the company’s marketing success. Traditional software companies targeted executives who, despite controlling budgets, were less likely to use the product themselves. Salesforce.com, on the other hand, prioritized celebrating their actual users. They highlighted their customers through posters and incorporated them into their presentations. These events, which came to be known affectionately as “love fests,” enabled the company to seal deals with a whopping 80 percent of new prospects.

In the final stroke of genius, the company replaced tedious product demos with exciting cocktail parties.

As the City Tours grew in popularity, Benioff had doubts about continuing these expensive events in every city.

However, an East Coast salesman came up with an innovative idea: he loved the networking opportunities presented by the after parties rather than the presentations. So why not just focus on hosting these cocktail parties? Salesforce.com decided to give it a shot in a small venue in New York, inviting just 11 customers and prospects. At a fraction of the cost of a typical City Tour event, the net outcome was remarkably similar.

Center your business around your customers - they are key

In the 90s, selling enterprise software typically involved customized presentations, prolonged negotiations, and months of costly groundwork. However, as the era of the internet unfolded, Salesforce.com discovered a far superior method of delivering and enhancing their product: by empowering customers to evaluate it themselves.

Benioff realized that prospective clients wanted to experience the software firsthand before entering into any agreement. So, he began offering free trials via the internet, enabling customers to try the product without the need for a salesperson's intervention. Although commonplace today, this approach was far from the norm back in 1999.

Initially priced at fifty dollars a month, the software was a low-risk proposition for customers.

Moreover, Salesforce.com initiated "bugforce," a scaled-down database where customers could report issues and contribute fresh ideas for the software.

This continuous stream of customer feedback allowed the company to make immediate adjustments and fine-tune the software based on the customers' requirements.

This customer-focused approach proved immensely beneficial, particularly when the dot-com bubble burst.

The dot-com frenzy initially gave a significant boost to numerous websites. However, in March 2001, they, including Salesforce.com, faced a severe setback. Many firms decided to abandon Salesforce.com, and by October 2001, the company was hemorrhaging up to one and a half million dollars every month, leading to severe cash flow problems.

The company's response was to shift from a monthly to an annual billing plan. While this was a more cautious approach that restricted the customers' payment options, over half of the clients readily agreed. Within a year, Salesforce.com transitioned from bleeding red to turning a profit, all while maintaining a substantial customer base. This was possible solely because they had previously earned their customers' trust and loyalty, making the customers feel comfortable about paying upfront.

Devote your energy to perfecting one product at a time, instead of scattering focus

Traditional software companies like Oracle built bespoke solutions tailored for each customer. However, Salesforce.com took a different route by concentrating on a single service that could cater to everyone.

They accomplished this partly by enabling users to access their service via the internet.

Salesforce.com employed a tech model known as “multitenancy.” Much like an apartment building where tenants share the costs of the entire structure yet retain individuality within their apartments, in the Salesforce.com context, this meant users could use the software hosted on the company's servers while managing their own data.

This approach sparked concerns among venture capitalists, who worried about a potential loss of control and subsequent customer attrition. However, these fears were unfounded. The multitenancy model made maintenance easier, with users automatically receiving updates or new features. Additionally, backing out of this approach would contradict their motto of “the end of software,” as they would essentially be reverting to the very model they intended to disrupt.

Beyond multitenancy, Salesforce.com recognized the importance of speed and simplicity.

Before their modest development team even started coding, they chalked out the core principles of the system on a whiteboard. They agreed that the system had to be fast because salespeople required swift access to information, and any hindrances could lead them to abandon the service. They also decided to keep the code as uncomplicated as possible, which would aid in easily identifying and resolving bugs.

Their strategic principles proved effective: in the first quarter of 2009, the service boasted a 99.9 percent uptime and processed over 200 million transactions daily.

One crucial decision was to open up the code to external developers, allowing them the freedom to craft their own applications. This resulted in high-value implementations, such as that by the $300-million healthcare service provider, the Schumacher Group, who utilized it for more than 90 percent of their operational programs.

Bearing cultural nuances in mind is crucial when taking your business across borders

By now, Salesforce.com had firmly cemented its presence in the United States. Given that the demand for CRM was global, Marc Benioff set his sights on international expansion.

So what steps should one take to compete on the global stage? Start with picking the right location for your headquarters.

Salesforce.com made its first international foray into Europe. To kickstart their journey, they established their headquarters in Dublin, Ireland, in 2000. Dublin was a magnet for large corporations like Oracle or Microsoft at the time, thanks to its English-speaking population and an attractive tax rate of 12.5 percent.

The company also made a conscious decision to hire native speakers from various countries. This way, when a customer from Germany connected, they would believe they were interacting with a representative in Germany.

Despite having an office for necessary administrative tasks, most of their meetings took place in luxurious London hotels — a feasible arrangement given their software's internet-based nature. Conducting meetings in hotels not only projected a successful image to their clients but also proved to be a more economical choice than renting high-end office spaces.

Furthermore, the company began customizing their marketing strategies for individual markets.

Salesforce's bold marketing strategy had yielded excellent results in the United States and Europe. They now turned their attention to Asian markets, kicking off with Japan. After conducting preliminary research, they realized that their approach to the Japanese market required a significant overhaul, given the local businesses' traditional caution towards foreign products and preference for relatable elements.

Salesforce.com learned this lesson from their direct sales manager, Eiji Uda. Whenever he presented Salesforce.com to potential Japanese clients, he cleverly sprinkled in references to other rising companies like Google or Amazon, entities that Japanese audiences could easily recognize. Then, when two of Japan's largest firms — Canon and Japan Post — integrated Salesforce.com into their workflows, many others readily followed suit.

Blend creative thinking with prudent financial management when dealing with capital and finance

Assembling the necessary funds can be one of the most challenging and strenuous aspects of starting a business. Even if you are a zealous entrepreneur, your passion alone cannot provide the financial backbone your enterprise needs.

The silver lining is, start-up capital is often much closer than you might imagine.

A study revealed that 79 percent of small businesses launch with a significant funding deficit. Eager to sidestep becoming a part of this statistic, Benioff reached out to potential venture capitalists. It appeared a logical step for a rapidly growing internet firm seeking hefty investment.

However, the “no software“ model did not captivate anyone. Rather than giving up, Benioff drew inspiration from other firms such as Starbucks and Cisco, which had also faced rejection from venture capitalists.

So, Benioff turned to those who believed in him: his family and friends. Much to his surprise, he discovered a solid base of support within his immediate network. Impressively, he managed to raise $65 million across five rounds of fundraising between 1999 and 2002. The venture capitalists who had dismissed his idea could not help but regret their decision — an initial investment of $1 million would be worth a hundredfold today.

Benioff chose to concentrate his efforts on boosting revenue and expanding Salesforce.com's customer base, as opposed to streamlining the company and pursuing profitability.

In 2002, Salesforce.com had their sights set on becoming a billion-dollar company and decided to go public. However, with the market just recovering from the dot-com bubble burst, it was crucial for companies to show substantial revenue. Breaking from convention, Salesforce.com began internal auditing ahead of going public.

By December 2003, after over a year of intensive internal preparation, Salesforce.com saw their annual revenue spike from $25 million to $100 million — a feat that dwarfed the achievements of other firms.

Shortly thereafter, on June 23, 2004, Benioff had the honor of ringing the bell at the New York Stock Exchange, marking a pinnacle moment in his career.

Wrapping it up

Salesforce.com serves as a shining example of a corporation that skyrocketed to success by adhering to a few pivotal principles: remain steadfast in your vision; master the art of positioning yourself across diverse markets; keep customers at the heart of your enterprise; focus on one product or service and execute it impeccably; and do not shy away from challenging the industry giants.