Transcript

Be a painkiller AND a vitamin, w/Clara Shih (Hearsay Systems)

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Welcome to our mid summer episode of Masters of Scale. This episode we'll be joining Clara Shy, CEO of Hearsay. But first, we'll celebrate this midsummer moment with our annual episode of Masters of Scale. Theater. This one is titled

The time traveling mailbox. You'll shatter the bounds of the fourth dimension. In persuit of our ever illusive Theories on scale. And yes.

We're traveling in a mailbox. Because it's mid summer. And my producers. Find that funny. To which theory is the mailbox taking us this time, Penelope?

I don't know, Navigator. But this feels like a wild one. Whoa It must be a long time ago, navigator. What is that?

It Looks to be some kind of cyber cafe. We've gone back! Through the 1990s. I thought I detected an elevated level of flannel.

You, what could I get you? Well answers for one. What's your Wi Fi password? My what?

Your sign. It did say Cyber Cafe. Oh yeah man, we got two desktop stations in the back. Right past the Arcinio Hall bobblehead and the candle box poster. Do your customers often avail themselves of that immunity? Uh a veil?

What he means is Do your customers demand internet service? I mean they like it, but what they demand is their coffee. Man, we got this new thing called expresso.

Well thanks so much, you've helped prove today's theory. Hey, if you want theories I got lots of'em. Like. What's really going on in those magic eye puzzles?

We've got to get out of here! We hope you enjoyed this episode of Masters of Scale Theater. If you're wondering why we took you on a quick trip to the nineties, here's why. In that little cafe, internet access for customers was considered a perk.

Not a necessity. But today. It's non negotiable. Companies often strive to deliver the thing their customers most urgently need. And let go of the things.

They just kinda like. There's an expression for this. It says be a painkiller. Not a Weileman. But I don't think it has to be either or.

As we saw in our little radio play. The nice to haves of yesterday become the must haves of today. That's why I believe you should strive to make your business a vitamin and a painkiller. Solve your customers urgent needs while anticipating

Their future desires. And you'll add rocket fuel. to your scale. You gotta have incredible talent at every position. Huge push. There are fires burning when you're going out. Can you believe it? Such an idiot. And then you go back to this is totally gonna be amazing. There are so many easy ways. Sorry, we made a mistake. But you have to time it right. We're gonna add a three-bedroom apartment.

Not all ten years later and like, well, that's just how you do it. We haven't made it just how you do it. This is masters of scale. I'm Reed Hoffman, co founder of LinkedIn. Partner Greylock.

And your host. And I believe you should strive to make your business a vitamin and a painkiller. Solve your customers' urgent needs while anticipating their future desires. And you'll add rocket fuel. to your scale.

There's a common saying in Silicon Valley. Some products are vitamins and some are painkillers. Be a painkiller. Meaning. You're either something customers like but don't desperately need.

A vitamin. Or you're something they need acutely, like it or not. A painkiller. It's not my favorite metaphor. For one.

It paints a picture of customers. As addicts. But I also don't think it has to be either or. Products that serve an urgent need and also Offer vitamin like prevention.

Or soul filling delight. We'll go farther. than ones that focus only on need. And as we saw in our little radio play at the top. The nice to have's of yesterday.

Often become the must haves of today. I wanted to talk to Clara Sche about this, because as co-founder and CEO of Hearsay Systems, she has found success layering what a customer needs with what they might want down the road. She got me thinking about the old vitamin painkiller metaphor. By using it. Everything else that we were doing just seemed like

A vitamin, not a painkiller, and we had a painkiller. We'll find out what Claire is referring to a little later in this episode. But first, let's borrow that time machine from the top of the show. Oi! You.

Where do you think you're going with my mailbox? Let's take a quick journey back, this time to the nineteen eighties. In Akron, Ohio. I was four at the time, my brother Vic

was eleven. Claire and her brother were the children of professors who had just moved to the Midwest from Hong Kong. Well I was only four, but I remember feeling Like Akron was shockingly different. I mean, you can just imagine suburban life. Versus all the hustle and bustle of Hong Kong.

plus language, plus how people Talked and looked and acted in what they ate. But despite her parents having advanced degrees, the fact they were from universities in Hong Kong meant it was hard to find work. Because it dawned on my parents that they wouldn't be able to get the same jobs

Here in the States. I could sense their anxiety and their growing concern. Having watched her family struggle to get a foothold, Claire worked to inoculate herself against the same fate. When I got to Stanford.

My dad had just lost his job. It made me grow up fast. Without a safety net at home, Claire looked for every opportunity to build her credentials. She was named a Mayfield Fellow, which is a program for future CEOs, and she became a Marsh Scholar, which as it happens, I did too.

After graduation, Claire headed to Google, where she learned a lot about the intersection of content and An advertisement. One of the areas that became really interesting to me was the consumerization of enterprise. And so I really wanted to learn more about that and I ended up joining Salesforce in product marketing. And probably the most relevant part,'cause obviously there's a whole bunch of things learned at Google and Salesforce, but

You are one of the folks trying to connect Salesforce to the new social world. It was two thousand seven. And at this point, MySpace was the most visited social networking site in the world. Facebook was just making the transition from colleges to mainstream. Public perception placed a brick wall between personal platforms like MySpace or Facebook.

And the professional. Like LinkedIn. However In Silicon Valley, it was still an open question where there was a role for enterprise on Facebook's pages. That's when Clara took her programming skills and some open source code.

And proposed an answer to that question. So you had this idea for an app. Face force. So tell us a little bit about how the idea came about. I joined Salesforce as a product marketing manager to help launch the App Exchange, which is their partner. Integration marketplace.

And Separate from my day job. I was a Facebook user, right? That's how I kept in touch with a lot of my friends. I remember First waking up one morning and logging into Facebook and it dawning on me that Facebook is like a CRM.

CRM Customer relationship management system Except your contact records or your friends. You updating the contact record, the contact records

push update you when something interesting has happened. So that was the first aha moment. If you didn't quite catch that, we'll break it down. If you're a sales associate You work hard to keep your customer files up to date.

Every time someone moves or gets married, you put it in the file. But one of Facebook's oldest features is the status update. When someone changes their status from single to married. All their friends get the word in an instant. So

Every time your customer updates their Facebook status. They're updating your Rolodex. For you. The second one was a friend of mine was working on Facebook platform at the time. And so I scored an invite to their first F8 developer conference. I was so inspired by their APIs and this idea of a social graph.

that I started thinking right away, how would I connect The social graph. Yeah. It conjured up memories or feelings. Of seeing my friends who are in sales

to cold call into accounts. And Observing that when they were successful It was because they found some sort of common ground.

Right, alma mater. Both from the Akron, whatever it is. My idea was to combine The social graph.

with CRM Contacts leads and accounts. The result of this two step aha moment was face force. The first business social third party app on Facebook. It was a free app. I actually built it for my friends.

who worked in sales at Salesforce. But as you may remember at the time, if you installed A social graph app. It would show up in your newsfeed and all of your friends would see. And so my app I did up.

Going viral. in the Salesforce customer admin community. It's fair to say face force is ahead of its time. And it pointed Clara toward the problem she wanted to solve. How can salespeople use these new emerging social platforms to both gather touch points from customers?

And Improve future offerings to those same customers. And that's what Clara wanted to do more of. Not just put out today's fires, but build tomorrow's fireproof doors. I started getting invited.

to give talks, webinars, and Salesforce customer admin. Meetups. After one particular talk I gave A publisher She was in the audience.

And she said, have you ever thought of writing a book? That book became the Facebook era. Which had on the cover an old school Rolodex whose pages are Facebook profiles. As someone who remembers using an actual Rolodex That illustration rings very true.

Although this obviously raises reasonable questions about which Facebook data shouldn't be part of a company's Rolodex. Clara's book led to more public talks and appearances, and eventually to striking out on her own. It's twenty five. They don't have a safety net. This is all happening in two thousand eight when

The the the bottom is falling out. I felt a lot of anxiety. And self doubt. This is a moment shared by every startup founder. The moment you decide to leave safety behind and jump off the proverbial cliff.

It's exciting. But often painful too, and our willingness to take the leap. May depend on our tolerance for risk. As Claire waves that decision, I thought we'd take a detour to consider how you make that decision. Should you take the risk?

Here's how one of our previous guests approaches it. The question I ask myself is what is the worst that could happen? And can I live with it? That's Shelley Arshambo. Former CO of Metric Stream.

You've heard Shelley on this show and on Rapid Response too. Shelley is one of the Tech World's first African American female CEOs. Her upcoming book. Una politetically ambitious is about taking risks. On your own terms.

So that's how I've always done it. Here's the objective. Okay, yes there's a back up, and then what's the worst that can happen and can I live with it? Because if I determine that the worst is something that I actually can't live with that I'm probably not gonna take that step. When companies look at their products, they ask Is this a painkiller?

Solving my customers immediate, urgent problems. Or is this a vitamin setting them up for a better future down the road? Well That's true when we look at our own choices. Two

Like Clara, Shelley was faced with a bracing decision about whether to leave a company she'd put years into. In Shelley's case, the company was IBM. I was born and raised in IBM from a career standpoint. If you sliced my wrist to my blood blue. All of my friends and my network were IBMers. My husband had worked for IBM. So Leaving IBM the mothership? Was definitely a risk.

As a junior executive, Shelley didn't see a viable path forward to our ultimate goal of becoming CEO. So she checked back with her own risk assessment strategy. Can I live with it? Can I not? But it gives you a so much more freedom when you realise that you can. Shelley decided she could live with it. So she left IBM and went on to an impressive executive career.

And not. Brings us back to Clara. У лев Сейлсфорс. Yes. During the financial crisis.

She approached an old classmate, Steve Gardy, about building a new startup based on the idea behind. Face force. Steve was one of my closest friends from Stanford. Fellow Mayfield Fellow. We'd talked at Stanford about starting a company and then

Both felt like our time had come. Idea which is still A big part of our social product today. was How do we help?

Perhaps. hear what's happening in their network. That's the hear part of hearsay. So someone changing their last name, someone having a baby, someone Tweeting a picture of their new home. And then the say part of hearsay.

Ways Based on what's happening in your network. What kinds of content? Should you be sharing? That would be the most relevant.

Hearsay offered a range of social selling tools. It was an extension of what FaceForce had set out to do, make it easier for salespeople to use their social media connections to personalize content for clients and prospects. Because we just wanted quick feedback. We initially sold direct To consumer or direct to prosumer.

So there were individual real estate agents Avon ladies. insurance agents who signed up. And they mailed us a check. Every month.

For fifty dollars. But then As their platform grew, something happened that threatened their entire business model. Within a few months We started

Going viral among Different insurance Groups. And then we started to hear from corporate. And it wasn't friendly. It wasn't like oh I I want five thousand of these. It was cease and desist.

What caused that cease and desist order? We'll find out. When you've built substantial wealth through your business, it's often tied up in a single equity position. The upside is real, but so is the risk, and knowing when to act isn't always obvious. Creative planning works with business owners to build a strategy around concentrated equity.

When to diversify, how to manage tax risk, and how to protect what you've spent years. Building. Creative planning where wealth works together. Lear more at creative planning dot com slash masters of scale. Hey listeners, Bob here. If you listen to Rapid Response on Masters of Scale, you may be missing half the show. Because every Friday we release a second rapid response exclusively in the Rapid Response feed. The guests and topics are just as compelling and timely from Ford CEO to NASA's administrator to the lessons from The Devil Wears Prada.

It takes about 10 seconds to find, just search rapid response wherever you listen to podcasts and hit follow to make sure you never miss an episode. I hope to see you there. Oh Humans will never be more intelligent than AI. There can be two types of companies.

Those were great at AI and those that went out of business because they weren't how do we build a future. That is human centered. I'm Rana El Chaoyubi. On my podcast Pioneers of AI, we answer that question and so many more. As an AI scientist, entrepreneur, and investor, I know what it takes to build AI that works for everyone. Every week, I sit down with the pioneers shaping our future. And we take you behind the scenes of the AI that's transforming our lives.

Find pioneers of AI wherever you tune in. Before the break, Clara Sche and her brand new company Hearsay. We're getting cease and desist letters on behalf of sales reps who are using their social selling platform. We started to hear from corporate. And it wasn't friendly. It wasn't like oh I I want five thousand of these. It was cease and desist.

You don't understand there are a bunch of industry regulations that preclude our agents from being able to go on LinkedIn or Facebook. In solving their customers' pain points, hearsay ran headlong into one of their own. compliance. For all the financial managers listening, you know how many rules there are.

Governing individual agents' behavior on social platforms. There are certain things they can't say to prospects. or the runafoul of the FDIC, the SEC, and other regulatory bodies. There are rules on what messages they send on the bank's behalf. What device they use?

How they phrase. A new offer. In short, every time individual agents used hearsay on their own, they opened up their financial institution to liability. It seemed like Hirsa would have to drop them. as customers.

And just as we were to cut them out of our tam, the realization was well wait a minute Maybe there's an opportunity there to address the compliance gaps. And actually Get much bigger deals. far more reach much sooner.

And then we began to prioritize by industry vertical, which I think it With a crystal ball, we would have done that from the beginning. You may know this because you know some of the PayPal crew. But one of the funniest things that I was in the room for when I was on the board before I joined the company full time.

Was the whole idea was mobile cash payments. Then all of a sudden all these eBay people started using it. And the discussion for the first week at PayPal was we gotta get these eBay people off. This isn't the design. It was meant to be mobile payments and all the rest. And of course, nobody was using it for mobile payments. The eBay takeoff curve was a fast ramp takeoff curve. And then all of a sudden it's like No, these are our customers. Yes. That pivotal moment was the decision to build compliance because it's a big commitment. It's many lines of code and it's the kind of thing where

An MVP doesn't cut it. You really have to nail compliance, being Compliant ninety percent isn't enough. But once we made that decision. We were so mission critiqual. for any bank, insurance company, financial firm.

That we became a must have. Not a nice to have. Everything else that we were doing before it just seemed like A vitamin, not a painkiller, and we had a painkiller. And there it is.

The phrase we've been teasing throughout the show. Is your business a vitamin? Or a painkiller. Here's how that typically plays out in the proverbial Silicon Valley sense. Well vitamin it's a nice to have, right? When you remember to take it, you take it. If you don't take it, you usually don't even notice.

A painkiller, you have a major issue. You have a burning platform and you have to take care of it right away and every Moment that you don't take care of it. You're at risk. That's what compliance breaches are like. If you're in a highly regulated industry.

But Claire and her team would find a way to be both a painkiller and a vitamin. They started filling a role for enterprise that was essential and immediate. A must have in classic Silicon Valley parlance. But must have First.

Nice to have. isn't a simple binary. Instead of serving individuals despite their employers, here they started working with their employers, the banks and insurance companies who'd been sending those letters. Hearsay built their tools in a way that helped the institutions stay industry compliant. And the agents, through their employers, got the same future proofing tools as before.

And then some. Hearsay has become A digital engagement layer for sales reps. Social selling is part of it, but we also manage, for example, financial advisors we have there.

Local Website. We have their one to one email. And then perhaps most importantly We have their phone.

We're like a compliant Google voice. Notice how Claire pivoted hearsay toward being a painkiller for enterprise clients. But she didn't actually give up the vitamin. Their product still offers the future facing social tools that make sales easier and more efficient. And it's this formula.

being a vitamin and a painkiller. That's magic. To make that concept a bit clearer, I thought we'd take a look at a business design around meeting one of the most urgent and painful needs out there. Adult Driving School.

You know. The place you're sent. After you have an accident. We never use the word accident. We focus on the word collision.

That's Gary Alexander, CEO of a very special kind of online driving school. And I stand corrected on my wording there. accident as a ward applies that oops, I could have not prevented it was an accident, just one of those things that just happened.

which is not true ninety nine point nine percent of collisions that that happened on a road can be avoided. For twenty five years, Gary's online defensive driving school has been proven to reduce future collisions. It's secret. Is in the name.

Myimprov dot com That sounds like A place to hone your SL audition material. Not. Your three point turns.

But Gary thought comedy was exactly what driving school needed. Defensive driving is not necessarily the most exciting content typically people Don't jump out of the bed in the morning'cause there's how else I can spend six hours.

To become a better driver. Traffic school itself has long been something of a punchline. Something you do anything. To get out of. But

For thousands of drivers each skipping out. Isn't an option. The way people end up in this course is I call it either a characteristic approach. In New York, for example, there is a very strong carrot incentive. In a form of the premium discount.

And the stick being a judge or maybe an employer says, Hey, you have no choice You have to take the scores. Gary and his partners knew that. So they hatched an idea that would make this medicine. Go down smoother.

Their courses would be taught by improv artists and And comedians. What if we use comedians and what a better place to find comedians than at The famous improv. I actually happen to live right down the street from the regional Hollywood Club in West Hollywood.

Gary Pitch, the owner of the improv. The legendary Bud Friedman. On a partnership that would hire the club's Funny people. To teach safe driving courses.

I kinda mumbled through the presentation. He looked at me like I just fell off. of the moon and called me two days later and said it sounds crazy enough. Maybe we should give it a try. We had a adaptation of our version of Traffic Trivia or uh

Traffic family feud type of a game. So we would break the class into the teams. So the group was participating throughout the day and versus just presenting with a straight down lecture. The school is still going twenty five years later. And their record speaks for itself.

When two different studies were the only school that show that our online course actually was effective in reducing future collisions and future violations. But why are comedians teaching proper deceleration technique? Or when to use your turn signal. It's really not about comedy. Their goal wasn't really to get a lot of laughs, but really to keep

The audience engaged. Attention span of an adult learner. It's in line with a butterfly. So Comedy.

might seem like a nice add-on, but it's actually the ingredient that makes the whole thing work. A traffic school is only as good as it is effective, and comedy is what makes the lesson stick. Humor Is the vitamin.

Painkiller. When we left Clara, she had just found the way to make Hearsay a vitamin and a painkiller. They had jettisoned their consumer business and went all in. on enterprise clients. Specifically financial institutions who value the compliance products they built.

But Any time you fully commit to a new path. One that's both vitamin and painkiller. Or Fire extinguisher and fire door.

You're going to shut out some customers. For hearsay. To successfully pivot from public facing To enterprise. They might need to leave.

Some customers behind. We realized that we were investing heavily. We were going deeper and deeper into These industry workflows. And Our non financial services customers started getting mad.

And it just didn't feel like the right thing. Our company value is customer success. And Though they weren't paying us a lot, we had these customers who not only were they not successful today, we had no plans to make them successful. And so it just felt like the right thing to do to fire them. And some of them did not want to be fired, right? There were a few that really hung on and they said, We don't care if you don't prioritize our requests, we still want to use you, but it didn't feel right.

Yep. And that's the only way you're gonna really get to scale. So right decision, yes. Yeah. Hard to do when you're a startup though, and not profitable. Making changes to your company's mission can feel less like taking a vitamin and more like invasive surgery. But if the surgery is necessary, it must be done. You don't skip a major operation because you're worried the stitches will hurt.

Hearsay's mission is to deliver the human client experience at scale. We guide proactive last mile engagement. And so it's very clear to us. If something is not a human client experience

and it's not proactive and it's not at scale, then we can't do it. And just being very transparent with customers about that and walking away from business that doesn't align with that. That focus on one type of customer. Allowed her company to scale. Fast.

So It took a little while. For Claire to realize. Something else. might be wrong.

We were two years into the company. And twenty ish People. Yeah. I had a strange feeling.

Where I felt Disconnected. From everybody else at the company. Even though it was my company.

And I had helped hire Every single person there. And I didn't know, like it was just this feeling I had that I couldn't articulate it. To myself, much less anybody else, I felt sad about it. CEOs are often encouraged

To focus only on the problems that are urgently hurting the business. Like revenue loss. Or customer attrition. A feeling of sadness might not seem urgent, but But in truth, it's only

Not urgent for now. The head of a company that feels disconnected from the body. is a problem that will manifest. Down the road. I'll never forget.

One day. Our employee number one, his name is Chris. He's still at the company. Chris set up time to have a one on one with me. I don't even know how he brought it up.

But it was so Candid. He basically said that He felt that he could tell that I wanted to be a part of the company and be really integrated but he

He said that I was doing things and acting in ways that made me come across as not being authentic. Even coming from employee one. That kind of message can be a tough pill to swallow. But Claire listened.

He talked about how I wasn't bringing my whole self to work. And He also contrasted me. To my co founder. Steve.

Who on paper, if you look at Steven our experience We look very similar, if not identical. But how Chris observed That's At every step along the way,

Right, getting to Stanford. Majoring in C S. Getting into the Mayfield Fellows program. Chris wondered out loud whether Maybe that was presumed for stief.

But that for me It was the opposite. And so Chris is like look, Clara You have fought your way to doing all these things.

But now You did it. You're the CEO. Put your elbows down. We're all on your team. And that was firstly very brave of him to say.

And secondly, it was life changing for me to hear that I love the insight that comes out of the story. Because it's such a good example of a CEO and a trusted colleague doing exactly What they're supposed to do. Just as companies create painkillers for customers, they need to take care of their own house as well.

Because today's vitamin deficiencies become tomorrow's illnesses. Clara listened to her callie when he came to her with honest feedback. And that prevented a feeling of disconnect. From becoming a systemic rupture. She integrated this idea of honest feedback into their company culture.

A lot of people say that they have a growth mindset. But then when you give them feedback They get super defensive. And so at least for the people I've interviewed. And learn from Chris. Give him really direct feedback.

about their interview and I just see how they react. That makes total sense. Some people like they panic and then we can never hear from them again. But that's good. It's the wrong fit. The fit is We wanna be always learning and we want people to go feedback great. Exactly.

Cultivating an environment that values honest feedback. That's one vitamin. If you will. That builds a healthy culture. Another one.

Із креати абос. This was a really hard one for us because We didn't define what we meant by customer success. And so for many years, customer success became interpretive. Some people define customer success as, Oh, my customer likes me.

I know their wife and kids names or their husband and kids' names. I have customer success. Some people define it as they've renewed. The customer is successful. That's not good enough. Customer success. needs to be defined by measurable

business outcomes that the customer sees. And how detailed do you track that? What we're doing for new customers gets very specific we do a kickoff After they sign To remind them

What they told us. were the reasons that they were buying and to make sure that the project team that they've assigned. is aware of and We mutually agree on what outcomes we want to achieve in what time frame.

And then we start to have a plan. For existing customers, we're having to go back and do a reset and say Hey, like we've been working together for Seven years. Let's realign.

You guys have changed. We've changed There's a lot of new features you're not taking advantage of. Let's talk about what we're trying to achieve. What were some of the things that you learned to do that realignment well? The first is to be proactive.

Don't wait until they're mad to have the conversation. Right there in that last piece of insight. That is what I mean by being a vitamin. And a painkiller. Claire is talking about solving their customers' current problems.

But also helping them. Write their wish lists. Let's look at what killer app Clara sees on the horizon. The one that might be A nice to have today.

Pra Must have. Tomorrow. One of our Large

Bank customers. Have deployed our Hearsay relate phone and texting. to ten thousand of their advisors and so they're texting back and forth, especially these days. This was Pre Covid, but

One of the advisors had gotten a text message. From his client. Seeing that his father had passed away. And you can see the empathy in the text exchange right there, and you can see in the phone records that the advisor calls

the client right away, certainly to reassure them. And then they're talking about don't worry about the trust, I'm gonna handle All these things. Meanwhile The corporate Systems.

don't know this and the advisor hasn't manually logged this information in CRM. So then meanwhile The corporate marketing cloud. automatically sends their usual email campaign to the same client who has just lost his father. Offering a mortgage refinance.

It just makes the bank look bad. Yep. And so Bringing these together I think that's gonna be the next wave the next decade of enterprise software is Creating a cohesive

experience that's not siloed, but actually Cuts across the Marketing Sales Service. Commerce. And both human as well as automated digital.

Maybe the secret to looking at must haves versus nice to have. Essentials. versus amenities. Urgent versus important.

Is to develop a new phrase. Perhaps what you really want to be is more like A pair of glasses. Perfectly suited to your customer. In a way they can make their own.

You help them see ahead clearly. And Help them understand the fine print. They'll always need you. And they may just love you too.

I'm Reed Hoffman. Thank you for listening. Masters of Scale is a white water original. The show is recorded remotely with sanitized audio gear. Our executive producers are June Cohen and Darren Treff.

Our supervising producer is Jay Punjabi. Our producers are Chris McLeod, Adam Skuse, Jenny Cataldo, Jordan McCloud. Catherine Clark Gray. Hali Bondi, Christina Gonzalez, and Ben Manila. Our editor at large is Bob Safian. Original music and sound design by Ryan Holliday.

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