Salesforce stands alone as the titan of the enterprise cloud. It leads all other cloud businesses in market capitalization ($48B) and year-on-year growth (25%). It has become an acquisition target for Microsoft and Oracle, the largest traditional technology companies out there. Salesforce beat these incumbents in CRM and is now hot on their heels in the enterprise market, offering companies a new way to simplify their entire technology stack.
But, market dominance does not last forever. Somewhere out there is a company that will be the next Salesforce. This company is quietly acquiring customers and it probably isn’t a CRM.
Slack isn’t a quiet company. It got to a valuation of $2.8B in just two years and has raised $340M in venture capital. In a recent article, their CEO, Stewart Butterfield spoke about the company’s competitive advantage comes from a laser focus on work communication.
When my team presented our latest Slack integration, I started to play with the interface and learn more about the company. I noticed a number of striking parallels between its origins and the origins of Salesforce. Those parallels, coupled with my recent learnings from Peter Thiel’s book, Zero to One, make me believe that that laser focus may in an asset in the short term, but that this company possesses some additional unique attributes that position it to lead the next wave of digital transformation.
Peter Thiel talks about starting your business in a niche or space that isn’t crowded. While Salesforce had an incumbent, Siebel, most of their early business came from identifying prospects that had no existing sales automation or contact management system. Most were still working in Excel or using other desktop software. This enabled them to quickly acquire customers with a technology that was new and easy to adopt.
Likewise, Slack use a simple value proposition (“Be less busy”) and targets users who currently “do nothing” or use basic tools like email and chat for enterprise collaboration. This enables them to gather lots of early-adopter fans under everyone’s radar. By not challenging the existing tools a company is using, their growth isn’t slowed by those companies building similar features or acquiring similar companies.
We have found in our own business that using better targeting to find companies that are not bombarded by our competitors is an effective way to generate pipeline and close deals faster.
Another attribute of a highly valuable company, according to Thiel, is the ability to create monopolistic markets. He talks about how valuable companies can defend their positions by building monopolies in their markets through network effects, branding or proprietary technology.
Salesforce created their monopoly by creating a marketplace that give many startups easy access to their customer base. This ecosystem of partners made Sales Cloud a must-have platform for every company with a sales and marketing team. The company now beats competitors based on interoperability, rather than usability. A true challenger will require better interoperability and not just better usability.
Slack set out their stall by launching with pre-built connectors into hundreds of other products, from file share to social media to CRM. They have reset user’s minimum requirements for collaboration software. It’s a product that locks in users because it provides access to all of the data and tools across the enterprise.
The Achilles heel of CRM has always been adoption. At its core is a database that requires manual data entry. Many CRM vendors have tried to solve this problem, but nobody has figured it out fully.
Nobody ever got fired for buying IBM in the 1980s, but modern software requires user adoption. Adoption eliminates a huge amount of risk for any CXO looking at tools to deploy across their enterprise. Getting adoption without having to invest hugely in training is the challenge of the future.
The one thing I noticed about Slack is that my team actually uses it. Voluntarily. Now, while some of the use cases are questionable (for example, the cat gif generator and the dog food channel), the tool has proven that it can draw people in and make them more collaborative
I’m a big fan of getting sales teams to be more transparent. For example, when we close a deal, the Datahug Deal Score and history is posted to the entire company.
This is a great way for them to show off their own achievement and for others to learn about what it takes to close a deal.
Finally, the three things that Salesforce struggles with is search, file sharing, and synchronization between devices. These are coincidentally the same features that Slack CEO, Stewart Butterfield, identified as the three most important things that Slack was optimized around from the start.
I’ve often said that CRM can be a good source of contacts and activities. But, where that data will come from and how people will interact with the database in the future is what is undecided. It is highly conceivable that traditional CRM will remain as a commoditized database, while the best-in-class companies that provide integration, usability and analytics will be where you live and do your work. This could enable them to charge a premium and build their own monopolies.
The largest hotel company in the world (AirBnB) doesn’t own any hotels. The largest taxi company in the world (Uber) doesn’t own any cars. Could it be that the largest CRM company in the world may not need to build a CRM?
Time will tell.
If you are interested in company building, Russ Hearl, our VP Sales is running a webinar on 4/14 to discuss ways to build the ultimate sales machine.