Why performance is down & what to do (With Jacco van der Kooij)

You've seen the research, maybe the problems. Performance is down across the board.

In this episode, we talk with Jacco van der Kooij from Winning By Design about where we're coming from, what's change - and how to solve performance going forward.

• (00:00) - Introduction
• (02:18) - Where is SaaS today?
• (05:13) - Who do we blame?
• (07:48) - Then everything got worse
• (15:10) - Abusing PLG
• (18:50) - What are we dealing with?
• (21:51) - So.. What's changed?
• (23:26) - Nothing has changed
• (26:10) - Underperformance comes down to this
• (30:27) - If you want to run a good revenue organization, do this
• (35:42) - But.. We need to make an impact this quarter
• (43:56) - To make an impact now.. do this
• (49:31) - Wrapping up: The new game we're entering

Research paper mentioned: Solving underperformance: How to lift up the 40%
For more, check out WbD research here or their YouTube channel.

Creators and Guests

Host

Mikkel Plaehn

Marketing leader & b2b saas nerd

Host

Toni Hohlbein

2x exited CRO | 1x Founder | Podcast Host

Guest

Jacco van der Kooij

Founder of Winning by Design. Recurring Revenue is the result of Recurring Impact.

What is The Revenue Formula?

This podcast is about scaling tech startups.

Hosted by Toni Hohlbein & Raul Porojan, together they look at the full funnel.

With a combined 20 years of experience in B2B SaaS and 3 exits, they discuss growing pains, challenges and opportunities they’ve faced. Whether you're working in RevOps, sales, operations, finance or marketing - if you care about revenue, you'll care about this podcast.

If there’s one thing they hate, it’s talk. We know, it’s a bit of an oxymoron. But execution and focus is the key - that’s why each episode is designed to give 1-2 very concrete takeaways.

TRF Guest - Jacco WBD
[00:00:00] Toni: Hi everyone, this is Tony Holbein, you are listening to the Revenue Formula.
[00:00:03] In today's special episode, we are chatting with Jacco, founder of Winning by Design. We are talking about where SaaS has been coming from, where SaaS is going from here and what you can do about it. Enjoy.
[00:00:22] Mikkel: It's not as cool as his stuff though. You know,
[00:00:24] our
[00:00:25] Jacco: get the same because I got a road cost as well, right? That's looks like a roadcast that you have
[00:00:28] Mikkel: Yes. Yeah, it is. Yeah. So, I mean, we can start now and I can say we, uh, we have a person on the show we've been following for quite some time. Uh, we both apparently have the same equipment and really enjoy. No one else has that. And really enjoy, music while presenting.
[00:00:47] It's a person who has a dog. I can emoji in front of his name. I think a lot of people know that now, actually differentiation and my, my little stories. Uh, we recently were invited to the same, to speak at the same digital event. Um, and he went the day before me and I opened the whole session with like, you know, I'm so happy that I'm not following this guy because I couldn't match the energy level.
[00:01:08] And what happened? Uh, the guys running the show basically literally played a clip of you just like
[00:01:16] Toni: literally in that second. I was like, okay, cool.
[00:01:18] You know, still following that guy. But we are obviously, everyone knows this already by now, uh, we're talking about Jacco van der Kooij, uh, you know, a founder winning by design.
[00:01:28] So, uh, wonderful to have you on the show, Jacco.
[00:01:31] Jacco: Thank you for having me. It's a pleasure. It is a treat. Um, what are we going to do today? What is this all about?
[00:01:37] Mikkel: Yeah. So beyond talking about, following you on digital conferences, you're heading up, I believe, uh, also research and winning by design. And not so long ago, you launched a, uh, paper talking about solving underperformance. And I think it also hammers into some of the challenges a lot of companies, uh, specifically SaaS companies face.
[00:01:58] So that's definitely some of the stuff we're going to get into today. But I think before we hop into the nitty gritty of the report, uh, I think it's good to maybe just for you to set the stage a bit and tell us where, where are we coming from as a SaaS industry? Where have we been and where are we today, uh, as, as an industry?
[00:02:17] In five minutes. Yeah.
[00:02:18] Jacco: Okay. So essentially we are currently in the best way to describing it as an American saying is we're using this Ferrari as a lawnmower right now, this Ferrari of a SaaS machine over the past years have been used as a lawnmower. And let me explain to you what I mean by that. SaaS by definition is a customer centric approach to sales.
[00:02:43] It should generate that. Why? Because if I create the right impact for a customer, the customer will renew the revenue with me. If you don't do that, you know, you're going to stop, stop buying from the customers. Not like in the old days where you're, you know, like in those days that I used to sell, you would sell a couple, you know, like millions of dollars of worth of hardware.
[00:03:04] The equipment would be shoved onto a pallet. And as soon as the pallet hits the truck, the revenue was recognized. And the cash 30 days later was in the bank and profits was, was, was. Was earned like, no, no, no. Today you have to do that for, in many cases for years. That means for years you have to serve as your customer. However, the unfortunate part in this process was that somewhere in the middle of the journey, let's call it like, like 2014, 15. People figured out that the growth of the company generated more, access to more capital. And as a result that the value of the company would go up almost irregardless of what the customer did with the product.
[00:03:45] And so if you see how companies go public in the midst, you know, like in, in the late, uh, 2018, 19, 2020, 21, it's all about what's my valuation and how can I increase my valuation? It has nothing any longer to do with. Is my customer happy companies, you know, like CEOs at major SaaS events get on stage, not, uh, not to brag about, you know, like how great their customers are telling, uh, thinking about them, but how much, how much funding they raised the other day.
[00:04:12] I kid you not, I kid you not their press releases. About companies who are announcing their debt financing, like congratulations, people, you close the 2 million dollar debt round or a 10 million debt round. Fantastic. Like folks,
[00:04:28] Toni: You got a loan. Great. Yeah.
[00:04:31] Jacco: right?
[00:04:32] Mikkel: Yeah. The, um, I think the,
[00:04:35] um,
[00:04:35] Jacco: that, was that an uncomfortable silence or was that a comfortable silence? I don't know what that was. What was that?
[00:04:40] Mikkel: no, I think it was some delay actually. It's, it's, it's. It's. Good. So just so we know, we rarely edit anything out. So we're going to say we're going to edit it out, but probably it's going to stay in there. Yeah, probably it's going to stay in there. But the, so, uh, I mean, uh, obviously a lot of that was about, you know, growth, growth, growth, growth, growth, but this whole NRR topic or NDR and so forth.
[00:04:59] I mean, that hasn't been only around since, you know, last year. Right. I mean, those are topics that have been like, you know, ongoing and ongoing, and, and I think it did feed into some of those valuations that, that were achieved by those, by those folks raising those rounds. Right.
[00:05:13] Jacco: That's right. Uh, a quick thing. I don't want to, I want to make sure that we realize. We're not going to point to VCs and say, they are to blame. Okay. And we can point to founders and say they are to blame or two companies like us and say, you're to blame. We're all to blame. Everybody is to blame. This is not like one person did something wrong and everybody, you know, like respond would, you know, like follow it or something like, and it's not the case.
[00:05:36] I can tell you, I speak to a number of venture capitalists or a lot, like a lot of them, and they are saying the same thing. It's like, look, I had no choice because, you know, like during the 2018, 19 year timeframe, they were telling me that if. If I wouldn't fund them, they will get the money elsewhere. And I got to, you know, like they too have to make good investments and good companies, which is simply driving up that valuation for which they then said, good, Hey, look, if you want a valuation of 20 X, you got to show me the growth.
[00:06:05] Right. And so, so this was just, uh, you know, an entire ecosystem that chose to go that route. And I add the tool vendors in there, right? Because now we add the tool vendors that write email sequences on top of that. And, you know, like you start to see the marketing style and everybody just piled on, right?
[00:06:21] We have, uh, recruiters bringing in lower level talents and charging a hundred K for like a person who started their job on Monday. First job ever gets paid a hundred thousand dollars, right? Like everybody piled on, there was money to be made by everyone. And we all, we were all partaking in it.
[00:06:38] Mikkel: And I think, um, so I mean, you know, late teens, that was, that was still kind of considered a normal state. Right. And then I think it went into a fever pitch early, early 2021, you know, basically, you know, the, the post COVID boom on the, on the valuation side, on the digital side and SaaS and so forth, where some of that stuff that you're kind of pointing out as an issue.
[00:06:59] Even became, you know, I don't want to say worse or better, but even went more crazy. Right. And I still remember a post of you, you know, during that time, and this was pre, uh, let's just say Ukraine. So pre before, you know, some of these, uh, some of these valuations came down pointing out that, and you were, you were the unpopular voice in the room, by the way, and then the LinkedIn room, which was, um, Hey guys, this is not sustainable.
[00:07:23] You know, you, you cannot keep doing it this way. This will come to a crash at some point. And you, you sounded like one of those economists that's always, you know, ranting around at the, the recession. Right. But you know, you were, no, you were right, obviously. Right. And kind of, you saw some of these things, not in terms of a, this is going to happen, but through the x ray of I guess kind of winning by design and the, uh, the bowtie and, and think like, Hey, that cannot actually work out.
[00:07:47] Right.
[00:07:48] Jacco: That's right. But I want you to, to, I think that, like, put it, inspective of time around 2000, 2018, 19, uh, I for sure I was already speaking at, at, at conferences like SaaStock about sustainable growth and that we needed to move there quickly in order to, you know, like make sure that we protect the, the, the assets aka investors interest and, and, and the v and the founder's interest.
[00:08:12] So this was already happening. The problem with Covid is, It essentially put a hold on that and told everybody see you were wrong and it threw more oil on the fire. Right. And, and it just made everything worse because suddenly who am I to tell, you know, like a zoom or a DocuSign that they should have sustainable growth.
[00:08:30] Yeah. Like they just went gangbusters at that point in time. Right. And so like, For, for a while and you know, like we all had to, to take, yeah, there was, there was no more needs to tell anybody what to do. No more process needed. It was just hire people, put them to work, get going. And like, like it was madness, right?
[00:08:47] That is 2021. What I want you to see and what I want you to experience. And also, if I go to the paper, um, that I wrote on this topic, I want you to think that there was a golden age of SaaS. And that golden age started in 2000, uh, early 2012 with Mark Andrews, his paper suffers eating the world.
[00:09:05] Right. And it ended on right early December, late November of 2021 when DocuSign was the first company, was the first top 10 SaaS company that toppled and saw its, its evaluation and, you know, like it's, it's stock price dropped from whatever, $300 to $50, something significant, not like 20%.
[00:09:25] No, it became a fraction of what it was. That was the first that was like, and, and still at that point in time, a few companies started to realize that it was happening, you know, like three, six months later, the entire market, right? Don't forget early in P in Q1, 2022. PE firms and VC firms are still advising, most PE firms and VC firms in those days are still advising people to hire, invest, invest, invest, spend that money, spend that money, right?
[00:09:54] It's only in April, May, that's, that's the, the, the lead VC start to start to hint at it. And it's only May, June, July, that the whole kit Singapore starts coming down. Right. It took
[00:10:07] that
[00:10:08] Toni: I,
[00:10:08] I I still remember, I think David Sachs, I think he was the one pointing this out, right? Kind of, Hey, you need to go to 24 month, uh, runway actually 30 instead, I think the Y Combinator guy went to, Hey, you know, the, the default alive, kind of that kind of playbook. Right. And I think you're right.
[00:10:26] That was around April, May last, uh, um, yeah, 20, 22, one, I'm mixing things up now, 22, I guess. Um, and it's also actually also when we erased our seed round, kind of, I think we were one of the last ones. Uh, not that this matters for this podcast actually, but you know, we were one of the last ones actually kind of being able to benefit from that upswing market.
[00:10:47] And then after that, you know, after the summer of 22, it basically kind of, uh, basically kind of flatlighted from, from there on.
[00:10:53] Jacco: Yeah. And I think that, so we have to put in context that, that, that this industry while giving clear and indicative signals that it's torpedoing, AKA this large SaaS company, and one of the largest SaaS companies in the world starts to tremble and fall right before, for Christmas. Right. That even then it still took us three, four, five, six months to let the reality sink in where, you know, like where people like myself, but also, also, you know, like more notable people in the, in the finance, in, in, in, in, in financial industry, we're clearly signaling, like the folks is, is can't come.
[00:11:24] The point I'm also trying to make is like, look, it is not that we are, that I have some incredible foresight that this was going to happen. Right. If anything, I'm more like. Everybody, we all see this. Why are we not believing that what we are seeing, like, what is it that, that we're in this psyche? That it is clearly visible that this won't work.
[00:11:45] It's clearly the, you know, it's clearly expensive. Um, clearly the response rates on emails have gone down. The SEO, uh, effectiveness, right? Getting on the first page and how much money you have to pay for that. All that was already getting into shambles. So why are we, why are we not holding, uh, yeah, why are we not holding seances right now in order to go like, what do we do, what do we do?
[00:12:07] Toni: Yeah.
[00:12:07] Jacco: I can tell you why, because you want to know why you want, do you want to know why,
[00:12:13] Mikkel: Please tell us.
[00:12:14] Jacco: because we do not know what to do, what to do else. We don't know what to do. If we knew what to do, we would have done it. We have nothing else. That was it. The only thing we can do in this industry that we do very effectively, hire people or fire people.
[00:12:32] This is like, you have to understand that there's about probably 10 VCs that, that know what they're doing. Mark Susser is one of the ones from LA that I have a tendency to follow. I, I think he's a good bellwether, uh, that gives me a good idea. And Mark, you know, like everybody else, they follow the other VCs and they just look and act like the smart way by just copying and pasting what the others saying.
[00:12:52] If these 10 people are not saying anything where to go today, the number one play that every VC will still play, which have been playing for the past 18 months is fire more people. Cut costs. That's the play. You
[00:13:06] Mikkel: so, so I think you're totally right. I also think that up until the, the, the cash train was closed, there was also no need to come up with something else, right? So it's not only like, oh, we, we don't know what to do, but there was also. You know, you didn't have to really kind of force yourself to do that.
[00:13:23] Right. And, and obviously, that cash problem then created its own snowball effect within the SaaS industry. Right. I mean, this is, I think you called it the biggest churn event in history, or I'm not sure if it was you actually, but it's really, that's what we've been seeing, right. And some of that is probably attributable to.
[00:13:39] Um, Hey, the, the way we've been doing, you know, sales wasn't sustainable and we sold a lot of crap and people bought a lot of crap. And, you know, that is coming to a little bit of a halt, but at the same time, also people are going through a cash crunch, at least on the SaaS side, or people that, you know, have, uh, you know, investor backing, so to speak, instead of being profitable.
[00:13:59] and they're basically trying to find ways to cut back, right. And if you're cutting back 40, 50, 60% on. On the FTE cost, you're always going to look at your vendors and do the same thing there as well. Right. I mean, I think those were, those were then some of the, um, you know, results coming out of this and that then is now driving lots of efficiency and, or, you know, uh, you know, other ways to try and, you know, still, you know, grow and be successful with the same resource or with rather less resource.
[00:14:24] Jacco: The startup world using venture capital, uh, funding is the largest unregulated scam in the world where you can get money easily if you want to. And this has been proven again and again. And I'm not talking about the good companies that earn it and that deserve it and stuff like that.
[00:14:47] That's not what I'm talking about. Like there's 10, 20% of that market has a full right to be there and should be driven by it. But if you go back to the 1990s. Internet launches, what is the quickest way to get rich? Launch a website. A few years later, what is the quickest way to get rich? Get a million visitors on your webpage.
[00:15:06] Toni: It was eyeballs, like a lot,
[00:15:07] right? Kind of, it wasn't, it was basically, that wasn't where they're
[00:15:09] counting. Right.
[00:15:10] Jacco: Eyeballs, right? If I go back and I worked in the hardware world, it's what, ship equipment. How do we do that? We created warehouses in Atlanta called resellers, and we would simply ship equipment to that. It wasn't going to customers. But we recognize revenue bookings based on shipments. So as long as we had a, uh, had a, had an air bill that the QQ equipment went out, the revenue got recognized.
[00:15:35] Okay. If you go down this line, you end up in SaaS that we, you know, like the metrics of SaaS can, so can be so much manipulated by a founder that people can drive revenue. The current way, which is currently falling on us, what has been, what I've talking about. Behind the scene that is unaccessible, which we can bring out today in the world is how PLG has been abused in order to drive up NRR.
[00:16:04] What we have seen and what I have advised numerous founders of companies that are associated with this approach that you cannot do is the following approach. Let's say I have a 20,000 dollar platform. Pick any number you will. And this is not reflective of one customer, this is reflective of dozens of customers that have high valuations. What they would do, they would drop the price on the first sale, let's say to 8,000 dollars. So instead of 20,000 dollars, I'm dropping the price to 8,000 dollars. I call it PLG. Hey, low price, two users. You can put 10 users on it, but let the product sell itself. Product led growth, let the product sell itself. And I discounted so much for all I care.
[00:16:47] I could make it 0. That customer goes into year one. And as that customer sits there, it goes like, Hey, this is a reasonable, good product, right? As they enter year two, they go like no more discounts. I told you in year one, you could test it out, but now you're in year two. You need to pay full price. And so automatically NRR is gonna to catapult because the price of the customer goes from $8,000 that they got discounted to $20,000 that they got listed.
[00:17:12] That that list, that my NRR dollar goes through the roof, I suddenly are looking at a hundred to 60% NRR or something like that, right? And yeah, I put that in the books. It's fantastic. Okay. Now the customer starts to grow normally and the NRR keeps growing, goes back 124 in year two, 118 in year three.
[00:17:31] And so it's, it slowly, you know, tapers out. And everybody thinks this must be the best investment ever. It's not, you're just, you're like, no, is this legal? Absolutely.
[00:17:41] There's nothing illegal about this.
[00:17:44] Toni: yes. And I think, you know, I think, um, so we actually call it NRR hacking. uh, this, this exact kind of play, I think, uh, placing this on PLG, I think you also kind of, and maybe this in the, in the podcast is invisible, but you know, Jacco used air quotes a lot when he was saying PLG, because that's obviously not referring to the.
[00:18:01] You know, the, the idea, the, the, the wonderful idea of PLG where people can use stuff and, you know, getting in there, but really this, uh, you know, sell low and then kind of graduate them or force them basically into this thing. And, and, you know, de facto kind of then, uh, increasing your net retention, kind of using that, that's kind of the trick that you're, that you're really referring to here.
[00:18:20] Right.
[00:18:20] Jacco: That's right. And I think, you know, obviously, you know, like PLG today is used as a marketing lead generation campaign and as a sales methodology. And, and like, if you, if we would only go back to the. Origins of PLG, um, you know, people who, who, who, who use PLG did it because they hated marketing campaigns and they hated sales methodologies.
[00:18:41] And so for it now to make it full circle, to be used as a marketing lead gen campaign is like, I'm certain that somebody is like cursing themselves for
[00:18:49] ever having come up with it.
[00:18:50] Toni: before we go on with the next topic here, did you see the latest Inside Partners Research that actually shows that, uh, sales and marketing expense of PLG are higher than, uh, of sales led motions? Did you see that
[00:19:01] Jacco: and we saw it, we noticed it, we've participated with our insights on it. Like, like, look, this, this is the thing that the thing that we deal with. Is and what I want you all to realize is we're dealing with hero ball that the reason why this market is the way it is is because we're dealing with hero ball.
[00:19:20] Hero ball is a term in America that you use when you play basketball on a team but you throw the ball to one person that person keeps dribbling and shooting doesn't pass the ball around it's just That person takes the ball, hogs the ball, and then does something with it. Soccer, same thing, right? There's probably a good analogy of me putting some Dutch soccer player in here, but I'll let that be for another day.
[00:19:41] we're in the middle of Hero Ball right now. And this Hero Ball is done by any conference in 20 minute slots. They are putting somebody on stage. It doesn't matter as long as that person has a good stage presence, can tell a story, provoke the audience, and they laugh a little bit, right?
[00:19:56] If you do that, then the organizer of the event is happy, right? Because the organizer of the event gets paid by butt and seats, right? Butts and seats and, and, and, um, investment dollars by, uh, by those who are sponsoring, right? Which requires again, butts and seats. So we all know how this works. And so the organizer is just putting, putting heads on the stage in order to entertain the audience, like, like a musical artist, right? Is that person speaking? Is that peer tested? As in, did people review if he or she is right? No. Is it scientifically proven? No. Is there data behind it that is often presented? Absolutely not. What we are seeing is pure hero ball. One person stands on stage, giving a story of how they won the lottery last month, right?
[00:20:40] Which numbers they won the lottery with. As if it's a famous thing, right? And then that's it. And so then the audience goes away and goes like, and now if there's five people, five people on stage within the morning and the keynote involves PLG, and then the two of the following speakers talk about PLG, then PLG is a trend. Now we have a trend and then everybody goes out and goes like, okay, let's go. Let's go. Let's go. None of this is scientifically proven. None of this is data driven. None of this has any merit of why we should be doing it. Other than this is the trend. And so we went to the past cycles. We had the inside sales trend.
[00:21:20] We had the ABM trend, target your audience trend. And now we have the PLG trend. And so we go through these trends, right? Because we think that these trends are the next big wave of things, and they are not, doesn't mean that inside sales doesn't work. Of course, inside sales work. For a company that can benefit from it.
[00:21:37] It is not a, it's not a hammer that you can put in your toolbox and use everywhere. Right? And same thing as PLG and same thing as ABM. These things work when you apply them correctly, when you've done the research and you apply them to the right accounts or the right situation or the right market.
[00:21:51] Mikkel: do you so so I have to be the referee now. That's it. Okay. I mean, we are having a wonderful conversation and we could probably do a two hour podcast. And it would still be great by the way, um, but I kind of want to progress a little go. Now we've talked about the golden age of SaaS, right? Um, what has actually changed for business and what challenges are they faced with today?
[00:22:15] Jacco: Please keep that silence in if, do not cut it out. That was the answer.
[00:22:23] Toni: Oh, wow. How many, how many times did you deliver that
[00:22:25] one that was actually like,
[00:22:26] like pretty smooth on that side. So, but so, uh, you know, explain that a little bit more obviously, right? So nothing has actually changed, right? That's your point.
[00:22:35] Jacco: That's my point. Nothing changed. And, and like I said, because people don't know what to do. You know, like there's exceptions, right? I'm not talking about like, like, like I want to talk about the nine out of 10, not the one out of 10 who's doing something right. But people don't know what to do. And, and so this market is at this point in time is in an, in a full standstill, catatonic mode.
[00:22:58] And, and as a friend of mine, uh, uh, Ted McKenna said is the fear of messing up is now bigger than the fear of missing out of missing out is what fueled his entire market over the past decade. But now the fear of messing up because the penalty for failure is a radically low valuation and most likely your hopes and dreams that what you have worked on over the past 10, 15 years, for some of them, their entire life, dedicate their entire life to is going to be like, you know, like squabbled away within, within 18 months.
[00:23:26] Toni: So, I mean, this was, there was actually, you know, one of the, one of the points I had and, you know, I can't fully square it in my head and then maybe your silence helped it with this a little bit, you know, when you look at some of those research firms like Gartner or, you know, now even, even G2 is doing those kinds of analysts kind of jobs.
[00:23:43] They're all predicting it spending or, uh, you know, these, these kind of categories to actually increase. I think Gartner has 2023 increase on it spending at, you know, almost 10%. I think G2 for next year has something, something similar, which, you know, when you compare it to all the other categories of spending is kind of going in the right direction, right?
[00:24:01] So it's like, it's, it's hard to square the circle here when you think about like, wait a minute, you know, some of these arrows actually pointing in the right direction. But we're all here doing so, so badly, right? The conversion rates are down. The sales cycles are longer, ACVs are down, you know, some of that stuff you've, you've also been, you know, doing research on, um, it's that kind of, uh, you know, basically kind of leading to this, Hey, actually nothing has changed, but actually the, the approach and the mindset has changed fundamentally.
[00:24:28] Jacco: Um, I don't think the approach and the mindset has changed for, for the, the founders and, and, and VPs of revenue and revenue leaders, VPs of sales that I work with that they have not, I mean, they're, they're all like still holding back. I mean, I don't see like there's, I'm going to give you the answer to this, by the way, don't get me wrong, but I just want you to know there's nothing has changed.
[00:24:47] The answer is clear what needs to be done, but people are not doing it right now. And, and, and there's an, again, an explanation for why that is happening and, and, and so on and so forth. But, um, yeah, people are like sitting, I was sitting on their hands, hoping that they either can cost cut their way to growth, which you can't right lion's share, cannot, um, or to hope that, uh, That the circumstances change, which they will not, you know, like, like, and then just a brief moment, many people will say, Oh, money got expensive.
[00:25:16] And that's the reason why this change that that is the case. It was a cause, but the cause that caught that made that problem is we shouldn't have been spending that much on growth anyway, right? Like we were already spending too much money on growth. The fact that VCs are, we're willing to fund that. And that, then it went in hyper mode cannot be said, Oh, money is now expensive.
[00:25:33] No, no, it's important to play the role and cost a lot of this too. To uh to come to an end But the fundamental problem is that we're spending too much on growth By companies who shouldn't be growing we're forcing growth into companies. So we're forcing their valuation up. So we're forcing their exit strategies and then we're telling you know, like this happens all the time After the company goes ipo we're telling the public markets.
[00:25:57] There you go. I made my money. Good luck with it, right? This is the common trend, right? Like, like, let's not misunderstand that the VC firms have little to no interest in a company after they go public.
[00:26:08] Toni: but let's go to the solution side, Mikkel.
[00:26:10] Mikkel: Well, so I think you, you move a bit further in the report to actually pinpoint some of the challenges, this underperformance. Can you tell us a bit more? What, what is the underperformance we're looking at today?
[00:26:21] Jacco: Yeah. So the underperformance comes down to this. We are sitting post 2008. We have a large scale of the workforce who actually does not know how to do their job. Has been underinvested in and which I refer to as unskilled labor. So we are dealing with unskilled labor. I'm not pointing to the finger to the people and saying, is your problem to be unskilled?
[00:26:42] I'm not pointing to like, Oh my gosh, this has gone wrong. Or that is wrong. I'm just saying we got to be realistic. And we got to know that a large part of the workforce is unskilled to do the job that they need to be doing. Second, we do not have enough experience any longer from the 2008 area. When we were in 2008 in a financial crisis, almost every revenue generating person that was in a, in a, in a leading function.
[00:27:07] Had gone through in our world, had gone through the dot com bust, right? If you think, we had a lot of crises in 93, 98, 2002, 3, 2008. So by the time we got to 2007, 8, there was a lot of expertise at senior level on knowing what to do. today we lack that. Today, most of the VPs in position, the CROs in position, were not in a high enough position during the 2008 years that they actually can leverage the insights from boardroom conversations that they learned then. They may have been a director or a manager, but they weren't in the boardroom.
[00:27:40] So we're missing this experience on what to do down here. And as a result, we have a whole generation of executives that have learned from the TV, cut people, cut costs, cut, cut, cut. Right. Let's go like, let's burn it to the ground and rebuild it back up. And, and they do not know that this is the time of opportunity, right?
[00:28:00] This is the time that the best, you know, uh, entrepreneurs in the world perk up and go like, okay. Like, and there's a saying, I'm like, you know, some of these sayings are a little bit, uh, fatigued and tired, but the Ayrton Senna saying still goes well, and it is like, hey, it's really hard to pass 12 cars in, in a fantastic weather, but if the, if it's raining.
[00:28:20] And the weather is bad. Okay. Then you can start passing lots of cars in the Formula One race. And that's the point that we're seeing right now. And that, that's where I'm trying to point to. And as we get to the solution, obviously, we need to tackle the problem, unskilled labor. One, you need to tackle that.
[00:28:34] Number two, over dependence on tools. Because of the unskilled labor, we have deployed a gazillion of tools inside and we have asked these tools. To deliver for us, there is books written about like the efficiency of tools versus efficiency of, of, of humans. And Steve Jobs did a fantastic little short on that, right.
[00:28:53] But the man on the bicycle and, and in the end we are infatuated by tools. Look at the madness that is around chat GPT right now, you talk to any point in time and, and I replayed to you a conversation about how that relates. Uh, I was on another podcast. Somewhere earlier this week. And, um, and then the conversation was about chat GPT and they, they asked me, how did I like chat GPT?
[00:29:18] a fantastic tool. Um, do you think it will help us? Absolutely not. Um, you know, like it will destroy, we should be very careful. And, and, you know, like these things, I think chat GPT is a tool. The tool is not the problem that uses it. And the person said, but yeah, but the emails are now so much better. I'm going like, that's fantastic.
[00:29:34] I agree. The emails are better because the average. Writer cannot compete with an automated tool that could. And so here we have the overuse of a tool to write better emails. Now, are you going to open up more emails that are better at it? Do you walk into the morning, go like, dang, that's a good written cold spam email.
[00:29:51] I'm going to open that email, maybe one, but then you're going to get a thousand of them from a thousand different vendors, all equally powered, all using the same tool, all using the same algorithm, all getting the same email 18 months from now, email will, will no longer, we will be desensitized by email.
[00:30:07] Our LinkedIn posts are automatically generated, so people won't post original thoughts. They will be published. LinkedIn inMail messages will be coming from spam. So all this is gonna, if you, if you foresee what is happening right now, you extend this forward. Like, I don't have to be brilliant down here to let you know, this train will hit that wall.
[00:30:27] It is going to happen. There is no question about it. What is the outcome of this? The outcome of unskilled labor that is overusing too much tools is skilled labor that doesn't use tools. It's as simple as that. If you want to run a good revenue organization right now, teach your people to pick up the phone, dial the number, and call your customer.
[00:30:50] Get on an airplane, have a drink with them in the other side of town. Go meet with them. Right. This is where this is as clear as day as the trend where it's going. And we already see the signals. Uh, it's the data that shows that that is right. I'm part of a community. No longer are we going to measure you?
[00:31:09] If you have like 80, 000 followers on LinkedIn, that is no longer of interest. What we want to know is that you have 300 followers on LinkedIn and those 300, you can reach out to and connect with and have conversations with, right? And those 300 people are the right kind of people. So we're going to go off this entire volume.
[00:31:25] Which you already know, because you brought it up, the eyeball volume, the visitor volume, all these things that we have seen in the past that were volume based. We're going to go right back to quality. The pendulum is going to swing. We're going to end up with very skilled salespeople in two, three years and organizations that invest in their sales teams and marketing teams and meet their customers are going to succeed.
[00:31:45] And that's going to drive NRR from the right customers. From that's all the point from the right customers.
[00:31:53] Toni: So, I mean, to a degree, what you're saying, we, we talked about this hacking NRR piece, uh, we talked about hacking growth or forcing growth, I think you mentioned it, and the tools used unskilled labor, tons of, uh, sorry, the, the, the ways to achieve this tons of unskilled labor, because that was just available in the market.
[00:32:09] And tons of tools used in order to scale the whole thing up, right? And now everyone is sitting there and, you know, wondering, so what's, what's the next, what's the next play going to be? And, and you're basically very old school and maybe very, very correctly so pointing out, folks. It's, we're going to go back to basics.
[00:32:28] It's going to be smart people, skilled people working pretty hard, doing human interactions, doing true, true, building true connections with other folks. That's how we're going to conduct business going forward. Right. Is, is that your message?
[00:32:40] Jacco: That's my message. I want, if you're a listener, you're a VP of sales. I want you to look up whether you have, uh, call it a meeting call recording tool of choice. I want you to stop listening to those calls. I want you to start measuring how many calls they are recording. I want to know how many meetings in person meetings do my customers, do my people have with my customer?
[00:32:59] Because if they have an average four meetings a week. You know, like, look, and I come from the days of, um, uh, what's the Cisco, uh, guy again, that guy,
[00:33:10] Mikkel: Yeah, we know, we know
[00:33:12] Jacco: if you do not meet,
[00:33:14] Toni: we know who we also, I can't, I can't pick up the
[00:33:17] Jacco: it's like, that's how old we're getting. And so, but the point is like, if you don't meet with a customer, I, my CEO that I work for the person I worked, Rob from Nostroburg said to me, one thing, I need to see expense reports for you. If I don't see flight expense reports, you're not doing your job.
[00:33:33] I don't need to see visit reports.
[00:33:34] I need to see expense reports.
[00:33:36] Toni: question on this, right. And this is something that you guys at Winning By Design has also been popularizing this whole concept around, you know, ACV and matching that to a motion, right? So jumping on a jet, going to see someone in person, that's. That's an enterprise piece. Suddenly you're talking 50 K and up, right?
[00:33:52] Do you, do you see a squeeze than happening below that? You know, if, if you say, Hey, that's the way forward, is, is there going to be, uh, um, you know, an issue coming up from, for the smaller, the smaller ACV ranges you think,
[00:34:04] Jacco: of course not. Of course not. I want you to jump on an airplane to fly into New York to meet with your 25,000 dollar customers. But while you're there, I want you to organize, drink and invite three customers and 16 prospects to have drinks with you. Then the next morning, I want you to go running with a friend of you.
[00:34:21] Who's going to introduce you to three more accounts. You know, like then that afternoon, you're going to have lunch with a channel in the area or a partner, you know, like you're setting up business trips. You're not just visiting one customer and flying back. That is a week on the road. Look, you're like, I grew up Monday.
[00:34:35] You leave the office, you come back on Thursday night and Friday, you do all your paperwork, right? That's the word. That's the world I grew up in. Welcome back to the good old, you got to go out on the road, right? Fantastic that you work remote. I truly don't care where you live. If you live in sales, you can live, you know, like in, you know, like somewhere outside of Salt Lake City of 20 miles south of Salt Lake City or 30 miles north of Denver, right?
[00:34:55] Get on an airplane. We lived and the world that I grew up in is I don't care where you live as long as close as, as long as it's close to an airport that has many connections. That's the world of remote working, right? And we're going to go back to that. We're going to go back to that for the successful companies, right?
[00:35:11] Don't get me wrong. There is obviously room for inside sales, for smaller deals, higher velocity inside sales teams are a niche tool that should be applied appropriately. PLG is an approach that a company based on a very product centric, uh, group of people that came together. That is an approach. PLG is not a marketing, uh, lead gen campaign or a sales strategy.
[00:35:34] It is a fundamental product design strategy that was generated five, 10 years before it has gone to market.
[00:35:42] Mikkel: so I wanted to, surface one of the points you had in, uh, in the paper itself, which is to be honest, a bit dark and gloomy. It's that two thirds of reps are no longer able to hit target. And, uh, I think if you're right now sitting and listening and you're a revenue leader, if that was me, I would wonder, Hey, that's, that's cool.
[00:36:03] There's a couple of basics we need to have in place, but I need to make an impact, uh, Jacco, Toni and Mikkel the next, you know, 60 days, what am I going to do? and I know that's also something you kind of addressed a bit, uh, and that's, I would love to hear your, uh,
[00:36:16] your take on that.
[00:36:18] Jacco: Now, so we now have like, um, an incredible sample size, you know, like over the past three to six months, we've noticed that there is an, uh, we notice what it takes to perform. Uh, I wrote this paper quite a while ago, but at this point in time, we know what the solution to this is. So that, that's good. In those days, we were still poking at it.
[00:36:37] we have multiple problems taking place that can, there's no single solution. If somebody says, you know what, I'm just going to hire a rep that, that, that, that is fantastic. Do that. But there's limited wraps of that, so you, you can't at this point in time, just to, to relate the statistics properly.
[00:36:56] And I, I, I, um, I, I simplify it a little bit. The top 20% is no longer the top 20%. What historically has been the top 20% is 4.4%. Today, the bottom 10% is no longer the bottom 10%. It is approximately the bottom 28%. If you manipulate, if you simplify the numbers about one out of every three, uh, is not motivated, is not performing and has no role, no rhyme or reason why they should be in the role they are.
[00:37:24] They were overhired. This has happened in 2002 and three. It has happened again and again. It's not a problem, but those people are not in a job that they're contributing to the company. They're just consuming. Not just money, but often resources and opportunities of people who can do better, right? So, whether they won't, whether they can't, that's not the point.
[00:37:40] The point is, they're not accountable and there's no value for them in the role that they're currently at. Whether they should be fired, I'll leave that up to other people to determine. But there's one third that doesn't contribute. There's one third, the middle third, that we don't know what to do with.
[00:37:56] I'm going to come back to that. And there's the upper third, there's about like 28% of the people. That actually does reasonably and is on average above 80% performance, whether that is on quota, on sales, on boardings, expansion, NRR generation lead gen generate all that, right? Crossed in time. So about one third of the audience, actually, of your workforce actually delivers two thirds, that middle one third and the bottom one third are below performance. The problem is what happens with that middle one third. I call it the normal performer or the sub normal performer. The normal performer is the, is the top performer that hits reasonable quota. The sub normal performer is not delivering right now. The group of underperforming. And under normal, normal performing is 60 as close to 70%.
[00:38:45] That group is so big that they have dragged the average down. So I can no longer talk about averages because the averages has gone, or I need to talk about historic averages, but that is so far off the chart right now. We're talking about, you know, like if you have a sales team of 10 people. Five or six people are not even, are able to hit 50 to 60% of quota, right?
[00:39:05] Like, like normally that's your bottom 10%, your bottom 10% is now 28%. And there are 20 and there are like 30% of quota, right? Like this, this performance curve has shifted drastically. And many of you who are listening to the pod are probably listening to this podcast, because you want to know, like, this is my world.
[00:39:23] I have no way how to do it. I need somebody like Jacco to tell me what to do in a second. I will tell you. This is the problem. The problem is that the one third at the top really performs. The middle group, I want you to listen to this because this is super important. The middle group is looking at the group above them and go like, dang, these people work hard.
[00:39:46] And they look at the bottom group and they're like, dang, these people have fun. And that middle group is trending towards the fun group, not towards the working hard group. That's the problem that's been happening over the past six to 12 months. Nobody dares to call about it. And I have, I have this tendency to say, Simon Sinek.
[00:40:03] I need a word, I need a word here. Like, like companies are doing everything that Simon Sinek explains in his book and the workforce, and you're empowered to do that. And welcome. You decide, don't take my orders. No, that is what gets us into this problem right now. We have now reached the point is we know at this point in time, what works.
[00:40:25] We know what you need to be doing. And as odd as this may sound, can you please do what I asked you to do? And as I stated, you can do it your way after you have proven that you can do it my way, because my way works, right? But this, this mindset is I can't rely on people that are, that are in their late twenties, early thirties are telling me how to do my job to do the job where everybody else doing clearly not showing any results and then blaming the market.
[00:40:55] Of course, the market is challenged. Of course it is. But you're supposed to be able to be functioning in the challenge market. That is why, why you're supposed to be, uh, you know, like a superstar, why we hired you or, or why we pay you so much money or why your valuation is so high. So that's step number one.
[00:41:09] Step number one is execute proven process to work, do more of what works and stop doing what doesn't work.
[00:41:17] Toni: Yeah, sounds, sounds pretty simple. So, I mean, I think it's, um, so just kind of summarizing this from my perspective, right. And there's stuff obviously going on in the market and you mentioned this, I would say it's, it's probably a little bit more than just kind of the middle group wanting to have a little bit more fun.
[00:41:34] Right. I mean, you know, it's, it's.
[00:41:37] It seems a bit simple pointing it out like this and, and obviously kind of the, the simplicity of this message kind of is, is really entertaining and also powerful, but I mean, there's, the, the, the market has been getting tougher and, uh, just blaming it, you know, that all the time is also not the right answer, by the way, I totally agree with that, right.
[00:41:53] Um, but the, you know, I think you guys, uh, published some research on conversion rates going down and a couple of other things actually happening and being under pressure and you basically are saying, Hey, listen, all of that stuff is because. Those reps, uh, stopped doing the rigorous process. They stopped following kind of the, I don't want to say the orders, but the, you know, the direction that was set up or that was taught or kind of is, is, is that you think kind of all encompassing as an, as an answer to, to some of the overall stats that we're seeing.
[00:42:22] Jacco: No, no, you, you, you did, like, I love your point, I love the debate, it just, you made a very wrong assumptions, you, you, you, the, the, the assumption that you made that, that tripped me was the reps stopped doing. No, no, there's no stopping them. They never started this again. We can't blame the rep. You, you can blame the newcomer on the team for the failure.
[00:42:48] What, what we are seeing is a catastrophic failure at vice president and director, manager, managerial level of not developing the people, of not asking accountability, of not giving them the right tools of, and so on and so forth. Look, if you're a rep, The primary training that 99 out of a hundred reps get is a three day sales kickoff, you know, uh, during a three day sales kickoff, two hours worth of training and everything else.
[00:43:16] They are being force fed through a YouTube channel of some sorts, right? Like, like that is, that is not training, right? That is entertainment that whatever you, what you call, that's not training. Right. And so, and then the manager, the historically, however, managers manage people that are currently in a managerial role, primarily manage on volume metrics.
[00:43:36] And results, Hey, Oh, you don't hit quota, make more calls. You don't have enough onboarding, do more of this. It is like volumetric a you're below the volumetric revenue, onboarding, whatever it is, do more effort. Yeah, that's not coaching, right? That's not like, if it would work that simple, I would have done it.
[00:43:56] Right. And so, like I said, it's a system wide failure. Now system wide, we can improve upon this for people to turn this around in 60 to 90 days. You need to do this in the function that you manage. If you're a VP of sales, listening to the call, you go like, okay, then you focus on the sales cycle. If you're a VP of customer success or a success manager, then you pick the success part.
[00:44:21] If you're a marketing, you pick something. What you pick is you pick a moment that you know matters most to your customers and sales is almost always the discovery. What we've noticed is that those people of that group. That, that subnormal group and the normal group, the normal group outperforms the subnormal group. It does one and a half times as much revenue. One and a half times as much revenue is delivered by those people who simply can extract from a discovery call what the customer intends to do with the product. If you get to the conversation and you get to understand what the customer intends to do with the product, not the pain they're trying to solve, but what is the metric they're trying to hit?
[00:45:10] And you simply what we call uncover impact. If they get that in the discovery call, it leads nearly flat down the line measured against tens and 1. 53x The revenue against the same opportunities, the sample size is so big. It is like, it is crystallizing how clear it is. What is the difference? The subnormal group sells the product they have on a truck.
[00:45:36] They hear the pain and they start, this is what I can do. And so on simply that discovering and diagnosing what the customer wants to do. You get 1. 53 X. In order, therefore, to make that subnormal group active, should I let them flounder on the ground and say, well, let's see what you don't do again. No, I should teach them how to uncover impact by that what is working by the other group does.
[00:46:00] I don't need to teach them the 16 disciplines of sales and, you know, like advanced provocative selling and how spin selling question be like, can we just learn them like in a single task, teach them for two hours, how to uncover impact. Implement this over the next four weeks, listen to a few calls, share it as a team, do that for 30 to 60 days, and you're going to see your revenue increase because customers are buying impact.
[00:46:23] They're not buying product, not buying features, not buying solutions. They're buying what comes out of that machinery.
[00:46:29] Toni: And I guess, I mean, so I really like this, The sprint approach, this agile is, it's part of the agile framework and the methodology, right? So we're talking a lot about this as well, you know, road mapping as RevOps and so forth. But the, basically the point is you take a metric that matters, right?
[00:46:43] That's part of your, uh, revenue engine, basically. and, uh, you try and, you know, with a specific coaching effort, try and tweak this up. and then basically you could decide to move on and kind of, you know, work on a different thing, right? Obviously there's a human element to it, so you need to do follow ups and so forth.
[00:46:59] But basically kind of that's, that's kind of the, uh, the, the point that you're making is kind of with those very targeted specific points, right? It's almost like you're playing golf, uh, and you, you do it for the first time and you mess up completely. It's not like your coach tells you everything that's wrong.
[00:47:13] No, he just tells you, Hey, you know what, put the shoulder up a little bit higher, you know, it's not like everything is, you know, f'ed up with you. It's, you know, tweak this one thing and, you know, once you get that right, you move on, right? Is that how you would, uh, you know, obviously in your case, kind of a coaching sales rep kind of thing, but it's really, uh, you know, this is applicable across the whole revenue engine and, and it's kind of a very much a structured approach to tweaking a specific thing and ideally holding onto that over time to actually make it work on continuous.
[00:47:42] Jacco: It's way more, it's way more important to teach one skill and let them do that well than rather than teach them 10 skills and, and y'all like they don't implement it. Um, and yeah, there's many mathematical ways I can, you know, like, I can explain why, why you need to focus on that one skill and the other is simply no, and then you need to make it stick.
[00:48:03] Thank you. Right. You need to listen to some of the calls. You don't, if you have a hundred reps, you don't need to listen to a hundred reps. You can listen to one sample call, listen to what worked and show others. This is how to do it. Right.
[00:48:13] Mikkel: but wouldn't just to kind of throw this, maybe this is, you know, maybe this is not as controversial as I think, but you've been kind of pointing out a little bit the leadership here also as well, right? Isn't there also some kind of a leadership coaching? I'm not sure that needs to go on. That's not only on the rep level, but it's maybe, you know, one level above that.
[00:48:30] Jacco: yeah, I'm, I'm, uh, I'm going to plug my product. We have a, we have a course called revenue architecture. The one thing that we need every executive to understand is they need to take that course revenue architecture. So they fundamentally understand where growth comes from and how it is being generated.
[00:48:45] That's it. Once you understand how SaaS machinery mathematically works. It is blatantly clear, marginal gain leads to disproportionate impact. Small things have a huge impact. That's how the SaaS machine works, has a recurring engine that recurring engine compounds and so on and so forth. And not only on the, on the NRR side, it, it has an effect everywhere in deal closing and lead generation and so on and so forth.
[00:49:08] Once
[00:49:08] Mikkel: to, I
[00:49:09] need to, I need to, plug our product then, you know, if, if the data model from you guys is getting too complicated in Excel, you can try and do the same thing in Growblocks. It's, it's fantastic. but say no, that maybe it's enough on the, on the, on the side to be like the polite podcast manager referee in the corner because we're, we're coming to an end here.
[00:49:28] I'm sorry. I'm so sorry to say it. Yeah. I'm pretty sorry about that.
[00:49:31] Jacco: I want you to think, and I want the listeners to think to this point, it's like, look, let's establish a few rules of the, of the new game that we're entering. The few rules are nobody knows anything. If somebody knew we would all be doing it right now and it would be working, we wouldn't be in this mess. So it doesn't matter whether you're a plentiful, you know, like VC or, uh, or a person like Jacco and so on and so forth. We all are trying to find our way out. Yes. That's number one rule. We cool with that. Nobody knows. We're all in it. Number two rule. History will tell us what the future will look like. We just have to look back and learn from the past.
[00:50:15] This problem has been solved before. And it generally has been repeatedly solved before, okay? Number three, communities are going to rule this game. So your community with the podcast and your listeners to you, they are not part of a community, they're not talking to each other, but they have a, have a mini community of your listener with the two of you.
[00:50:34] That's a form of a community. And so you have an important role to play in this because you are an educational audience. So you should look for data and you should make sure that you probe people. And that you do not let it happen again, that some cool dude with a new product launches an ABM product and then stands on stage and tells everybody, this is the way to do it.
[00:50:57] Right? Like, or a PLG product, like that is unacceptable. Right? And so that's the third rule. The first rule, and I'll leave it at that. And then we'll, but like, look, if you're in a recurring revenue business. I want you to embrace the following principle. It's a very basic first principle. First principles are so undeniably true that you, you can no longer deduce them to anything else.
[00:51:19] Like it is what it is. The first principle of any subscription recurring revenue based machinery is. Recurring revenue is the result of recurring impact. If you do not deliver recurring impact, you're not going to get recurring revenue. It's as simple as that. If Disney will stop putting on new Star Wars episodes, we will stop the subscription.
[00:51:40] We actually just stopped the Disney subscription. If Netflix will put new, stop new, putting new TV shows on, we will stop the subscription. If I don't get the impact I pay for, I will stop doing it. Recurring revenue is the result of recurring impact. That means that the goal that you need to set forth as a company is not one to achieve recurring revenue.
[00:52:01] No, that's an outcome. You need to achieve recurring impact. If you focus your company on achieving recurring impact, your attention goes up. Your expansion will go up. You will keep the right customers. Your NRR will go up. Your valuation will go up. You will go public. You will be as a public company successful.
[00:52:16] All that just from helping your customer achieve the impact that you promised.
[00:52:22] That's, uh, Jacco van der Kooij for you guys. Thank you so much for being here. Thank you, Jacco.
[00:52:27] You're most welcome.