Transcript

The elusive formula for great hiring, w/Workday's Aneel Bhusri

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What We get a distillate component called isoamyl alcohol, and that isoamyl alcohol in the barrel is gonna go through oxidation and esterification reactions to become isoamyl acetate. That's Joy Sethery, and she's describing the science of That I count as my biggest vice.

Though I'm careful not to overindulge. Bourbon is Beautiful. If you can imagine a beautiful golden amber color with a gorgeous aroma of some vanillas and caramel and butterscotch. I'm receiving a strong oak motif with a hint of rose petals and marzaban. It's just it's Bourbon is beautiful.

Joyce uniquely qualified. Talk about both the art and the And science of bourbon. She's a chemical engineer. Master Distiller.

Two years ago. Joyce her family. Found a Jepha Creed distillery. in Shelbyville, Kentucky. Their bourbon making process.

Starts with corn. Grown on their own land. Bourbon has to be made of at least 51% corn. So we grow a beautiful heirloom varietal of corn called Bloody Butcher. Aside from its extraordinary name. Bloody butcher corn.

Is the perfect anchor for Joyce's bourbon. But it isn't the only grain in the mix. Joyce carefully considers how each ingredient will react with the others and contribute to the taste of the final product. We're using rye gives you some spiciness. Wheat is a smoother, more calm grain versus the rye, which our water is limestone filtered, iron free, beautiful water, sourced from a creek. And our barrels literally been put on fire. Like putting your bread into a toas, a little bit of nuttiness you get from that toas. It's a simple list of ingredients.

But the formula is complex. The end product. comes from a cascade of chemical reactions. And to make a truly great bourbon. You have to pay intense attention to the initial ingredients.

Their quality. their quantity and how they interact with each other. And then You have to wait. Part of the uh quote unquote crapshoot of it all is you don't know exactly what you're gonna have until you know two, three years later.

Now, before we actually built the distillery, we did do an experiment, and that bourbon aged to two and three quarter years. When they cracked open the first barrel. The suspense in the distillery. Was as heavy. as the sweet smell of the bourbon.

After the years of planning when we actually got to run our first batch and have it come out gorgeous. We danced a little jig and YEEAA! That's awesome! Joyce New

That the choices she made on her initial ingredients would lead directly to To the quality of our final product. And if you're a founder. Then you're also a master distiller. Concocting the intoxicating mix of ingredients.

That will take you to scale. Instead of artisanal grains, You're choosing the people you work with. The quality The personality

And the talents. Will set the tone of your culture for years to come. That's why I believe that the first one hundred and fifty hires will make or break your business. It's up to you, the founder, to get everyone right.

You gotta have incredible talent at every position. It's like this 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. I have no idea what to do. Sorry, we made a mistake. But you have to time it right. Oops. Working out of a free bedroom apartment. It just seems absolutely nut all ten years later, but 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 that the first one hundred and fifty hires will make or break your business. They are your cultural co founders.

And it's up to you, the founder. To get everyone right. That means you, the founder of your amazing new company, let's call it World's Best Gizmos. You could sit down with every qualified candidate and decide whether they're a good match for your company.

Every candidate. from chief gizmo designer to the gizmo receptionist. And remember You're not just interviewing 150 perfect candidates. You'll also have to interview the thousand plus finalists who are vying for those positions.

That sounds crazy. I can assure you. by the time you sit face to face with candidate number nine hundred ninety whatever It will feel downright. Bonkers.

Because Every one of those interviews. Time that might otherwise be spent on important details. Like how you'll meet payroll.

Or How you beat the other Gizmo startup? And you'll feel crazier still. When you stop to consider how many shortcuts You've taken in every other facet of your business.

Got an ugly first build of your product? Fine. Mr Meeting? Whatever. Reschedule.

Regular listeners of this podcast No, that I'm a huge fan of shortcuts. It's practically The guiding spirit of masters of scale. So why?

What I encourage founders To exercise extreme caution Only When it comes to hiring. First.

Bad hires don't just stick around. They tend to be fruitful and multiply. Second. It's exceedingly hard to fix a company culture at scale. You might be able to revise it.

If you have a C culture. You can revise it to a B plus. But a sea culture. will never become an A culture. The only way you get an A company culture.

is by creating it at the beginning. And preserving. Think of those early hires. as your cultural co founders Their skills and capacities.

Will not only determine What your company can do. It'll also determine Who your company can be. The genetics of your company.

It's culture. Is set by those first employees. You, the founder. Should be personally involved. In meeting and choosing.

Every higher. Our guest on today's show. is a Neil Bushry. And Neil's a partner of mine at Greylock. One of the things he's known for is

is investing in startups that focus on enterprise services. At the end of today's show. Anil and I will go deeper on that topic. But I wanted to talk to Anil about Hiring.

Because he took this theory. fight farther than any other founder I know. Anil is the co founder and CEO of Workday. A company that provides backhand software systems like HR and financial management. To many other companies.

to help them work better. When Anil founded workday. with his co founder. David Duffield They personally interviewed

Not just the first one hundred and fifty But the first Five hundred employees. This dedication Allowed them to set the employee first culture.

That workday is known for today. Even as they've grown to thousands of employees. And if you just gasp out loud at the idea of personally interviewing Five hundred people. As the founder.

You're not alone. I did the same thing. Here's how I responded. When I producers ask me about it. My reaction was

Oh my God, that's a lot of energy and time. Right. It tends to be the we're trying to make sure we have good people. And then oh God, I can't like I j like I only so many hours in the day. For founders the demands are Like every fire that's burning in the business.

But for Neil. Setting the culture and setting an employee first culture. was the most burning fire. His belief in setting the right tone is dates back to his very first day on his very first job.

He was going to work for David, his future co-founder at PeopleSoft in the early 1990s. Everybody was really friendly. Opening doors, saying hi, looking at you when you walk in and saying hi, you know, all the kinda Nice things. Everybody welcome me. People took me under their wing to sort of teach me the ropes.

the personal pieces of it make such a huge difference and sort of sets the tone for No, for your career at a at a company. But the part of workday. That imprinted most strongly on Neil was Was David himself.

Dave hired me right out of business school and he was already the founder and CEO of PeopleSoft, which was At the time a small company but with a great future. Once again. And Neil's impression of Dave. Goes back to their very first interaction.

Dave took me out for a beer. People soft was, you know, a newly minted public company. And I thought, wow, the CEO's taking me out for a beer. I'm 26 years old. I don't know why he's doing it. I want to work for this guy. And when Dave hired me, he hired me without really knowing what he was gonna do with me, told me to take a couple months off and travel and he'd figure it out. Dave saw something in Anil that resonated with him. He didn't know exactly which of Anil's skills he'd put to use.

But he knew he wanted him. As a person. And this emphasis on cultural fitness. on the person and not just their skills would stay with Anil. After he came back from those months off.

He adopted Dave's people first attitude. As his own. When I came back, I basically took on all the new initiatives that he wanted to do. you know, over time really became a disciple of his And he had really focused on culture and

was way ahead of his time on the importance of a positive culture instead of the The stick, it was the carrot. and he built the culture around taking care of employees and taking care of customers, doing it in the right way and having fun along the way. So I grew up in that culture. I didn't know any other culture. Fast forward to two thousand and four.

Anil was now the vice chair at PeopleSoft. When Oracle acquired the company. After attempting a hostile takeover. David and Anil. decided to start workday together.

Their idea was to take advantage of the advances in distributed computing by managing human resources and accounting in the cloud. It was a radical new way of doing business at the time. I found myself musing about it with my producers when we put together this show. An Neil was in a space where they had a head start because they knew exactly what to do.

But none of the competitors were moving to the cloud. Everyone was like, No no no, no one will ever want to put their employee HR data off premises in the cloud. part of their strategy was the build up momentum. Under the radar.

While they were moving. Swanille. didn't have a competition driven clock. He could set his own timeline. And this was part

All the way to five hundred. Anil and David knew the most important hires were the first hires. In fact You could say that a Nealand David's first move.

Was hiring each other. When they famously co founded the company at a diner. In True, California. We started the company At Truckee Diner now called Jack's

We had several meals up there. Once the company got going we would have a regular Chardonnay dinner at least once a month. And work through any issues in places where we might not agree on stuff. A few years later. Before the company went public,

They hired each other again. At that time he was CEO and I was president and his point of view was well, you're gonna take the lead taking the company public and ultimately running the company. So you should be CEO and I'll become chairman and And I said, Well no, Dave, you're the legendary CEO, CO people saw you should be CO. And we went back and forth and back and forth.

We came to the conclusion the right answer was co CEOs. What David and Neil understood with absolute clarity. Was the importance of getting those first hires right. Because the early hires are actually Cultural co founders.

This early cohort Well not just set the cultural norms. But also ensure that they're self perpetuating. And cultures self-perpetuate in two ways. By assimilation.

A cena deixar And by association. Association Cultures self-perpetuate by assimilation. When each person who joins the company upholds the culture. This ensures that each person who joins in the future will absorb how people act and what they value.

What I found is good people with high integrity You can teach them a lot. There's a lot that goes with just being a good person and you can teach them to be a good manager. But cultures also self-perpetuate by association. When you hire a person, you also hire their network. When a new job opens They'll refer their friends, but When you need partnerships, they'll open doors.

The powerful connection of that initial group of hires shouldn't be underestimated. Call it culture, call it mission. When it works, it's critical. to the success of your business. I like what Michael Bush has to say about this. Michael is the CEO of Great Place to Work.

And he can help break this down for us. You can train someone on technical skills. You can train someone as technology changes.

But you can't train somebody on what they believe or what they don't believe. They have to have shared beliefs about the importance of work. They have to have shared beliefs about the customer and what it means to satisfy the customer. They have to have sharfs in terms of what happens when people disagree with each other. The key isn't.

who look alike. Or even Act alike. The key is to put people together.

У Believe in a shared perpass. And it's worth saying it outright. Smart founders. Make sure their team is diverse. From the beginning.

Katarina Fake. Tech entrepreneur and co founder of Yes V C describes it this way. If you have women in the founding team if you have

African Americans in the founding team, if your team is you know, includes Latinos, it just naturally Evolves that way. Deliberately choosing And building a team. At the very outset.

We'll carry through the organization from the get go. I mean you can you know a lot of companies try to graft on These diversity Initiatives.

twelve years after the founding of the company and Those tend to not be very successful. It's because the culture has already been formed. The culture is very, very hard to change once it's been established. Like an eel.

Katerina believes it's the founder's job to personally interview The first employees. Hiring at the outset is the most significant

But anneal numbers? They left an impression. Five hundred is high. That's like that's all I mean Interviewing people.

is very time consuming. I mean I don't have you know, gosh. Just how many people should you consider your cultural co-founders? The exact number will vary based on your company and your industry. So Neil says five hundred. I say

A hundred and fifty ish. If you have a company of twenty people, the answer is twenty. The point. It's on you. the founder to get everyone right.

When founders themselves sit down with prospective employees, they begin the connections with the company culture. Those exchanges of information, from basic pleasantries to personal questions, to value-based inquiries, serve as the beginning of the dance between that employee and the company culture. These early indicators, the hunches. These dance moves, if you will. Will serve as the culture that will endure and self-perpetuate.

And Neil and David were laser focused on hiring employees who fit within the concept of how they wanted their business to feel. Friendly. Open. Like how O'Neal felt on his first day on the job.

Back at PeopleSoft. It was a personality. A vibe. And it was also strategic. David and Anil made some important early decisions that put employees first.

Not as an end to itself, but But as a means of serving their customers. In the enterprise space especially, Anil believes Customer service. is everything.

I think one of the most important things to focus in on is getting value to customers quickly. If they see the value quickly. They'll want to become a customer and they'll want to do more with you. I look back to

the early days of workday, our customers who chose us, they were true believers. And they got us our next wave of customers and they got us our next wave of customers to the point. Yeah, this last quarter we signed Walmart and Amazon. It's that customer success that builds on it and I find a lot of early enterprise companies are very focused on the technology, which is great, but you also have to be focused on customer success. You're one of the leaders and the employee comes first as a way of delivering

you know, magic and delight to the customers. What what were the lessons from that put the employees first and how that shaped a transformative impact for the customers. We are always rated a great place to work, both In the Bay Area and by the Fortune magazine Best Places to Work Institute.

In turn, we've had customer satisfaction above ninety five percent ever since we started measuring customer satisfaction. probably ten years ago. Right now it's currently at ninety eight percent. And You know, I don't think unhappy employees would be able to do that. And here's how a Neil's winning approach to customer satisfaction.

ties into this theory. He believes happy customers begin with happy employees, and happy employees Begin. with a hiring process. We just focus on

A very simple value set. But we live by that value set. It starts with employees, not with customers. Employees are the core of who we are. We hire great employees. Great employees take care of your customers. We have fun, we innovate, we do things with integrity.

We've lived by those core values for Over twenty years. That value has helped make work day seventh. On the list of best places to work. By Fortune magazine.

But let me bring your attention back to something Anil just said. We hire great employees. It's a deceptively simple sentence with a lot of wisdom behind it. See, a company's culture doesn't just happen. So when Anil casually says, we hire great employees, don't think for a minute, he's casual about it. Because what he really means is, We know the kinds of employees we want.

The kinds of employees will fit perfectly. Into our specific ethos and advance our specific mission. We know the specific attributes of those great employees. And we hire them.

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Learn more at creative plating dot com slash masters of scale. Oh Humans will never be more intelligent than AI. There's gonna be two types of companies. Those are 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 Elkahayubi. And 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. 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's 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. And Neil knew it was on him. As the co founder to get each of the first hires right.

And he knew not just what he was selecting for But how to screen for it. It's a rare talent. That sits invisibly behind many of the most successful companies. I asked them to share his playbook.

You know this well, Reed. In the early days it's just you and, you know, a few other people. So we just did it ourselves and we set out to interview the first five hundred people. After our hiring managers had identified people and put'em through the process for skills. whether they were the right marketing person or technic or finance person.

We would then interview the individual at the last stage and it would be purely about cultural fit. Cultural fit is a slippery concept. Different companies have different ideals. And one company's perfect ten.

Zero. Some companies look for free thinkers. Others look for employees who will follow direction. Some prize directness.

And others want diplomacy. But whatever attributes matter to your company, it's up to you, the founder. To screen for them. As Anil describes his methods. You might have an aha moment.

About what you're looking for. But what I want you to pay attention to has less to do with the exact attributes and more to do with a formula. You have to map back. From the kind of company.

You want to build. То не кваліті your employee should have You should ask candidates.

Almost every breakout company. Will have a formula. That matches culture. To hiring. Here's how Anil breaks it down.

He's always had a rich picture in his mind of the ideal candidates. They checked. A lot of boxes. You know, are they gonna be additive to the culture? Are they gonna be great team members? We're looking for people that had a clear driver for why they wanted to be successful. We were looking for people that were high integrity. And you get to that by trying to figure out if they're I people or we people. You know, we're a we company, we don't talk about I We talk about we Those ideals

Can sound a bit abstract. But Anil has a specific way. We people. You can get to that by understanding

The way people talk about their accomplishments. If they talk about we did this and we did that as a team, you know, you've got a pretty good fit there. At the top of his list? Candidates. who are in it for the long haul.

We wanted to build work day with people that would be with us for, you know, five, ten, fifteen years and We're now thirteen years old and I'm I'm just very happy to see so many of the Tenure veterans uh still at work day, very high percentage of'em are still here. We just did a town hall a couple of days ago and We've got tons of people that have been with us ten years, and that's how you build a great company.

So how did Anil predict Who would stay for ten years? We were looking for people that did not job hop. And you can look at a resume. You can sell if they're the shiny new penny type that jumps from one op to another. We were looking for people that were gonna be with us for Seven, eight, nine, ten years.

I think it's important to note. That a Neil specific criteria. Won't be for everyone. In fact. He and I differ on some key points.

He places a premium on consistency and loyalty. As measured. Through the years in a company. And that's valid. But when I hire I think about it differently.

I tend to think If you want an adaptive and creative culture as the top priority You have to hire adaptive and creative people. And adaptive creative people. Aren't necessarily

Кой не стає он. For ten years. So longevity is great and important. But I prioritize Explicit learning.

To what extent has this person actively learned along the way? I always ask people What they would go back and tell their younger selves to do differently. More of X? Or less of why.

This usually shows How consciously They were learning. So you have to know what you're looking for. And you have to know the questions.

That will help you find them. And let me be clear. I didn't understand any of this at the beginning of my career. At my very first start up Socialnet. I didn't pay enough attention to building a unified culture.

This was because Socialnet Was the first organization I built from scratch. And I basically made every error. You can make. And building an organization from scratch.

And I'm not the first entrepreneur. To learn hiring lessons. The hard way. Oh hiring. Hiring is uh unquestionably the biggest challenge.

I've learned a lot about hiring, having made a lot of hiring mistakes. That's the unmistakable voice of Ariana Huffington. The CEO and founder of Thrive Global. Ariana now draws a direct line. Between the culture she wants to be.

and the cultural values she looks for when hiring. A thriving culture is like essential for the business and the bottom line. It's not like a nice to have It's like foundational. And so having Uh two culture interviews that we do now

And having it clear sense of what are the cultural values that this Candidate has to match. And the most important ironically and they want that I have realized the hardest to teach is directness.

So our number one Cultural value at Thrive is compassionate directness. Which means being able to have tough conversations, being able to disagree, including with managers and exekutives of every rank And being able to speak out

when you are upset about something, when you have a complaint. How do you screen for directness? The same way you screen from most cultural attributes. Indirectly. We asked people to give us an example of when they had to have a tough conversation

An example when they were not happy about something. And what did they do about it? We don't even say where you direct, we say tell us A time when you are not happy. There's no workplace where you're going to be happy all the time. That garden of Eden does not exist. I love Ariana's idea about compassionate directness.

But what I really want you to notice here is your formula. Like a Neil. She has a specific method. From the culture she wants.

to the employee traits that support it. To the questions she asked interviews. Another company. with a winning formula is Shake Shack. The breakout food chain.

grew out of a high end New York restaurant business known for paying extreme attention to hospitality. Before Shack. The owner Danny Meyer. Found a Grammarcy Tavern. And Union Square Cafe.

He told me there's one question that customers ask him. More than any other. How do you guys always manage to hire such amazing people? We love the food and everything, but your people that's that's what's really special. I asked Danny how exactly he hired

for the cultural fit he wanted. How did you do that? Was it a personal touch or was it systems that you put in place, or how how how did you go, These are our culturers, these are the people we should be promoting? Well, the technicals were reasonably easy to measure. You know, I can look at a cook for three minutes and tell you

And taste. Whether they're really good at what they do. But I think what we did was to pull out the five emotional skills That we always saw present.

You know, very, very high level in our culture carriers. Oh shit on scale The first one is that they All tended to be Kind and optimistic.

They weren't bullies. And they actually believed that They could make the world better.

Number two was that they were all really curious people. Curious people. They were people who looked at each day as an opportunity to learn something new, not as an opportunity to prove how much they already know. Third, they had excellent work ethics. Excellent work ethics. They were people who looked at each day as an opportunity to do something just a little bit better. than it had been done yesterday. Fourth. Here we go. They were highly empathetic people.

Yeah. People who cared how other people felt. They were

going through the water, they would actually be aware of the wick they were leaving in their path and they would care how that wick was making other people feel. And then fifth, these were people who were self-aware. They knew what their own personal weather report was on any given date. I believe hospitality is a really important team sport. What you do on the field in a baseball game is just as important as what you do in the dugout. You're having an impact on everyone else and their performance.

Did I say five or actually six? Finally, integrity, which is having the judgment to do the right thing even when no one else is looking, even when it may not be in your own self interest. The fat I mean. Danny's team heads into every interview. With those six cultural ideals in mind.

Alongside the technical skills of cooking or serving. It's not easy. We started to sift through people. And it's frustrating because sometimes

There's really, really good performers. Who suck for your culture. And we also found the other thing to be true. Sometimes there's Extraordinarily awesome people who just Can't

Get the job done. So once Danny finds that special group of people who are both great performers and And great for his culture. He recognizes them. As cultural co founders.

And he sends that message. The most powerful thing I think a leader does is to signal through the people that they hire and promote. what are the behaviors that they want to propagate. If you are super careful

About promoting Not just the people who are great at what they do, but the people who are great at how they do it. You are sending the most powerful message. And this is a page straight out of a Neil's playbook.

Anil had personally selected his first five hundred cultural co founders. With the intent. Of sending a message to future employees. We thought hey the first five hundred will get us the next five thousand. And we frankly didn't think that much beyond that next five thousand. We're now eight thousand.

The idea was that was a critical mass and enough of those people would be there in five to ten years that they could continue to Uphold the culture and value system. He was confident that this first group would keep the original DNA of the culture alive themselves. How?

Well. For starters. He told them to. We decided, I think it was at a company meeting, say, Okay, now you guys are on the hook. You interview the next five thousand, make sure the next five thousand people are great cultural fits.

And the first five hundred took it really seriously. They still take that role very seriously as ambassadors of the culture. you know, it's worked out really well. We continue to attract the people that fit our culture well and If we make a hiring mistake, we typically act on it pretty quickly.

Not to lose the culture if you don't. But culture. Із реінфорст through more than just hiring. Anil's For all

Leadership style. enables workday employees to do great work and to pass that ethos on to others in subsequent generations. Two Have your employees be happy. and productive and feel empowered it's a lot of work.

In the early days it's not as hard because it's a small group and you can get everybody in the room to you know, make decisions. But as you get bigger You need to make sure you don't become bureaucratic and process oriented and you don't you don't lose your fun. It's the merry band of warriors when you're a small company, but when you're

over six thousand people like we are today. You gotta focus on still staying nimble, still staying small and fun, and creating environments for people to celebrate success. So we do a lot to celebrate success. We have quarterly team awards, we have quarterly best employee awards, we have the quarterly innovator award. where we're celebrating people's accomplishments. And so everybody is motivated that hey

we get additional stock if we hit that ninety five percent customer satisfaction level. So you drive behavior through the incentives and shares are always the best. Work Day isn't just rewarding its employees here. Workday is rewarding its company's culture. It's saying hey, you amazing people who uphold everything we stand for.

Keep doing what you're doing. This kind of acknowledgement is the nurture. of the original group of workday employees.

You have to continually reinforce That original ecosystem while also allowing it to evolve. Cincinnati is one of the few scale leaders. Who can tell us exactly how to evolve culture. as you grow from five employees to five hundred and five thousand and beyond.

I asked him to paint us a picture. Of how that happens. How does Workday Maintain the culture he invested in. So deeply early on.

My goal is to have a management team that is typically two or three years ahead of where the company is today. The team that got us from zero to fifty was awesome. Absolutely awesome. All hands on deck. The managers or the doers.

when you go wanna go from fifty to a hundred and a hundred to a billion, you then you need to build in process and scale and you need to come in with professional managers Not just being managers, but managers of managers. And that fifty or a hundred million to a billion. That phase was all about

Process. that we could grow globally and we went from a fifth dollar business to a one billion dollar business. Where we are today. And we go from two billion to four billion in a couple of years is

Much more of a Trust but verify model where The manager has to hire managers who they trust, but every now and then they need to dig in and verify. Because you can't touch everything in the business and so it it constantly evolves. Very importantly though, we don't

Let the other group go. Because those people that got you from zero to fifty are really incredible and so are the people that got you from fifty to a billion. So you find them other roles in the company because the skill set does change. So how do you maintain a culture of innovation? as you grow. Because it's one of the things that's I think hardest to do is you begin to get into thousands of employees.

Well, so I think one of the ways you do it is constantly expand the product portfolio. So, you know, we started out as HR, we moved into payroll, we moved into recruiting, we moved into finance. recently we moved into what we call prism analytics. If you're constantly coming up with new products

it drives the culture and for people working on the existing products They can either join the new product team or they can take advantage of some of those new capabilities and those new technologies and within their own products. But we always have an area where we're experimenting and it's really important to our culture and people can rotate it in and out of that area. If they've got a certain passion they want to build towards.

Nothing drives innovation more than continually to expand your product portfolio, not not getting crazy about it. But that's growth that becomes also a way to become more strategic to your customers. The original DNA of the company will give way to successive generations of employees. They will continue to build your company. On that solid genetic foundation.

and they will help it adapt and evolve. That's the end of our investigation into this theory. But stick around after the credits. And we'll share a few thoughts. on the trends he sees as an investor in enterprise startups.

I'm Reed Hoffman. Thank you for listening. Masters of Scale is a Wait What original. The show is recorded on site in California and produced at the studio. Inside SY Partners in New York.

Our executive producers are June Cohen and Darren Triff. Our producers are Chris McLeod, Adam Skuse, Jenny Cataldo, Dan Kedmi, and Ben Manilla. Our supervising producer is Jay Punjabi. Original music and sound design is by the Holiday Brothers. Mixing and Mastering by Brian Pugh.

Special thanks to Chris Yay, Bob Safian, Elisa Schreiber, David Sanford, Saida Sepieva, Christina Gonzalez, and Sarah Sandman. Visit mastersofscom to find the transcript for this episode and be sure to subscribe to our email newsletter. You're in the very rare set.

Spectacular operators and spectacular investors. These next questions are in this intersection. So many folks are familiar with consumer rocket ships like Google, Facebook, and others. What's different with enterprise rocket ships? In enterprise, products that are ten or fifteen percent better

might have a short run of success, but usually The large incumbents can catch them. So if you look at the successful enterprise companies have been built the last fifteen years, they're really disruptive to the existing ecosystem. cloud, whether it was Salesforce or Workday, was very disruptive to SAP and Oracle. Now not only was it a brand new technology model,

That was hard to copy and hard to emulate. It was a brand new business model. And that disruption. gave customers maybe a fifty percent cost savings, enough for a customer to take a look at and say We ought to explore working with this new company even though they're relatively young.

And then I think the second piece, which is missed in enterprise but absolutely nailed in consumer, is the user experience. So I think if you take that disruptive technology platform and marry it with a world class user experience. That can lead to success. What would be some of those

things that you would be looking for in new startup projects today from enterprise entrepreneurs. So I think one of the most important things to focus in on is getting value to customers quickly. If they see the value quickly

They'll want to become a customer and they'll want to do more with you. So get Quick wins. Do whatever the customer asks you in the early days. There's nothing that's more valuable than A happy customer.

And I look back to the early days of workday, our customers who chose us, they were true believers. And they got us our next wave of customers and they got us our next wave of customers to the point. Yeah, this last quarter we signed Walmart and Amazon. I find a lot of early enterprise companies are very focused on the technology, which is great, but you also have to be focused on customer success. Is there anything in particular about the founders of the entrepreneurs?

that give you that right prediction within the enterprise context for who is gonna have the right customer focus? You know, what how do you look at the entrepreneurs? So Different than consumer enterprise Founders typically come from an enterprise background. They don't come out of left field.

You know, they don't come right out of college. Every now and then you'll see a professor come out or a grad student come out with some really cool technology. But you'll still need that business person that knows how to tie the product to the market. And if there's a skill set that I think is really valuable, it's that product marketing skill set. I recognize that this is a really cool piece of technology. And by the way, here's the business problem it solves at a customer site.

And so I'm always looking for that. deep understanding of the problem that's being solved by this new technology, not just the technology itself, but what problem is it solving for the customer. Why is that not being solved by the existing products and why is it gonna be Timeless. Why is someone gonna buy this product and wanna keep it for the next five to ten years? Cause that's how real value gets built. And I'd say the last piece is

Always looking for painkillers as opposed to vitamins. Yeah. Lots of technologies can make your life better. And You know, with all the things that you're working on, great. Makes it better. I'm I'm already feeling pretty good, but this will make me feel better.

Versus I'm in a ton of pain here. And you find somebody that's in pain and you can solve their problem That is a much better place to go. Solve the pain. Maybe you can add vitamins down the road, but first solve the pain.