The Revenue Formula

Here's the method used by Toyota to run root cause analysis. It's called the 5M framework, and helps you look at problems from multiple angles - so you can prevent them from happening again.


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Creators & Guests

Host
Mikkel Plaehn
Marketing leader & b2b saas nerd
Host
Toni Hohlbein
2x exited CRO | 1x Founder | Podcast Host

What is The Revenue Formula?

This podcast is about scaling tech startups.

Hosted by Toni Hohlbein & Mikkel Plaehn, 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.

[00:00:00] Toni: Hey, everyone. This is Toni Hohlbein from Growblocks. You are listening to the Revenue Formula with Mikkel and Toni.
[00:00:07] In today's episode, we are talking about root cause analysis using the 5M Framework from toyota, enjoy.
[00:00:21] Mikkel: So I reflected a lot over sports, and how stupid it is. You don't care too much about sports. I care a lot about one sport. It's football. And it's only the Danish league. I get the question like, ah, what about Liverpool? Like amazing players and coach. And I was like, I don't care. I don't, I have zero emotions for any team beyond my immediate team.
[00:00:43] And what do I do? I spend an entire Sunday. It's easy with your team because they're never in the pitch league. No, exactly. There's a, yeah, it's all downhill. a big detail of making sure
[00:00:53] Toni: that it doesn't take too much time, right?
[00:00:56] Mikkel: But
[00:00:56] Toni: a losing
[00:00:57] Mikkel: that's actually the point,
[00:00:58] Toni: it even still being televised, the team, or is it Shut up. Um,
[00:01:02] Mikkel: I resign. Uh, so I spent the entire Sunday, we met up 1130, you know, barbecue, have fun, go watch the game.
[00:01:12] They just needed to win to win the Danish championship, just needed to win. Obviously they lose. And you just stand there and look at the crowd. Everyone is just in disbelief. And now comes the task
[00:01:23] Toni: They were about to win the Danish championship. Yeah, yeah. Oh really?
[00:01:26] Mikkel: And then comes the task of 60, 000 people in the middle of nowhere needing to get public transportation home because cabs is just not possible and no one can drive because you had
[00:01:36] Toni: oh, you were at the
[00:01:37] Mikkel: Yeah. No, not in the stadium, outside, but that's fine. Um, and it just takes you hours and I spend those hours basically looking at some of the trashed No, no, no. Looking at some of the trashed folks and just. questioning this life choice, trashed those who were completely drunk, you know, um, and then reflecting over the life choice of watching sports.
[00:02:01] And I, fortunately, I concluded, well, it's definitely not a rational thing, because I would just like, no, cut it. It's, it gives so little, you know, at least this year, terrible. It is an emotional investment for sure. It's an emotional investment.
[00:02:15] Toni: No, I can, I can see that. And also, so the, the, the thing is I've, I've sometimes tried to get myself to care a little bit more about it. Like I tried, But it's, it's really difficult. And also, and this is, this is also where then hate it, right? Because you, you like this whole thing for the positive emotion it gets you, right?
[00:02:34] But you cannot have true positive emotions without also having the negative emotions, right? You cannot. Um, and that's why I think people are joining winning teams all the time. It's like, Oh, Bayern Munich. And it's like, Oh, you know, we won again. Um, and, uh, and like, Oh wait, high five, high five. Um, but I think that's shit also to kind of always join the winning team, right?
[00:02:57] Because then it's, it's like, you kind of expect the win and it's different, you know, for a team like yours, for example, that's an upside when they win, right? Um, and, uh, I don't know. And I could never, I don't know, I could never, could never get myself to it.
[00:03:09] Mikkel: So the thing is also like they were so close, they overperformed on every metric. If they now go and try and analyze
[00:03:16] Toni: Like what metric?
[00:03:17] Mikkel: No, no, not just the but expected goals and blah, blah, blah, blah. Like they overperformed for sure, like their budget is less than half of the two teams that we're competing against.
[00:03:27] Let's, let's leave that on the side, but still, they're actually looking at, it was a great season on all levels, actually with the talent and the team and everything. But everyone goes like, yeah, you suck because you didn't won. Even I, like, that's the immediate attitude you have. Um, and I think when they sit down and actually assess the season, it's like, no, actually we, we did a lot of things right.
[00:03:49] We need to keep on cracking. Right. And I think that's the segway, actually. it's, uh, root cause analysis, which we're going to talk about today.
[00:03:56] And we're not going to talk about how to run root cause analysis on the disaster that is my team's season now. because we kind of looked a bit at what are some of the bigger companies like, A Toyota of the world kind of doing when they
[00:04:09] Toni: just pick a random
[00:04:09] Mikkel: Let's just have random like, you know, uh, what are, what are they actually doing? Because I think I've at least experienced this when you encounter a problem on the performance, you miss target, whatever, usually folks are pretty quick to point. in a direction and say, you know what? It's Greg. It's his fault.
[00:04:30] He was lazy. He didn't, you know, process those meetings and close those deals. That's why we're up short. Let's fire Greg, right? Um, and I think it's often when you look at a SaaS business, there are many nuances to why you're performing like you're performing. It's rarely just one point of failure. I think it's the same for Toyota.
[00:04:50] They realize there's more than just one dimension of being able to ship and deliver a car. Uh, so they have a specific framework we're going to run through today. Yes,
[00:04:59] Toni: and it's called the 5M and maybe 6M,
[00:05:02] Mikkel: Maybe, if we get time. Mostly
[00:05:04] Toni: it's 5M. Um, and, uh, it basically goes like this. And I think the way people should be looking at, and it's obviously kind of, yes, 5M, that sounds like catchy and, you know, totally, wow, we need to roll this out.
[00:05:17] It's
[00:05:17] Mikkel: like 3M, just better.
[00:05:19] Toni: Yeah, but plus two. And the, um, the way you should look at this is like, what are the different, what are the different components in your revenue factory? And this is like a car factory, obviously. What are the different components That might, um, cause a break in your organization.
[00:05:41] And let's just go through them one by one real quick, and then we're going to, you know, spend a little bit more time. So what are the five M's? The five M's are number one, manpower, number two, machinery, number three, material, number four, method, and number five, measurement. The bonuses. Uh, management, yeah, we, let's see if we're going to talk about this.
[00:06:02] We're going to now go through them one by one and how we think they apply to our world, uh, because obviously it's a little bit different. We're not producing cars, unfortunately. Um, but, uh, but there are total, uh, parallels here that we basically kind of want Uh, want to uncover and help you to potentially use in your own organization to kind of learn a little bit from what Toyota has been doing.
[00:06:22] Right. So let's jump right into the first one, manpower. Yeah. And manpower, let's just say if you're kind of moving away from this M thing. We would call it people. Today we call it people. Um, and, um, that has to do with something that we sometimes, at least on this show, not really appreciating
[00:06:43] Mikkel: Yeah.
[00:06:44] Toni: because it's not about how many people you have.
[00:06:46] Um, it's actually about, you know,
[00:06:49] Mikkel: uh,
[00:06:49] Toni: Do they have the skills required to do what they need to do? Have they kind of built up the habits to do what they're doing on a really high level? Are they motivated? You know, I read, I read the revenue architecture thing. Motivation doesn't really come up that much.
[00:07:04] Mikkel: that's a shocker.
[00:07:06] Toni: Satisfaction of the workforce, kind of these things, right? They are pretty key. And when you, you know, when you miss a quarter, which by the way, you know, will happen for so many reasons. And right now the number one top pick of every organization is always like People were lazy.
[00:07:23] Mikkel: Yeah. Let's fire someone.
[00:07:25] Toni: It's, it's, it's a manpower problem.
[00:07:27] That's the issue. Um, and basically kind of, they're, they're failing to even get to level two here. Right. It basically kind of stops there. Yeah, Greg, it was Greg again. Um, we knew it. and, uh, what this also means is you need to obviously, hire good talent, keep them motivated, keep them having fun at your job.
[00:07:48] I mean, we know those things intrinsically as, as a leader. Um, but we don't incorporate this sometimes in our, this is how the machinery needs to work kind of thinking. And, and I love that Toyota, by the way, put in this first and said like, Hey, you know, this is, you know, think about that one. Right. Um, so that's kind of the, the, the people side and, uh, I don't, do you have like a good example?
[00:08:11] Mikkel: Um,
[00:08:13] Toni: Uh, the typical thing, um, you know, uh, sales rep unmotivated because they cannot possibly hit target. Um, or you think about giving someone a PIP, Performance Improvement Plan. Um, but you know, just giving this to someone in your organization has a terrible reputation. It basically is a, Pre firing statement.
[00:08:38] and what's going to happen, motivation is going to tank. So you probably like, you're like, ah, I'm going to the paper and the person go directly. So these kinds of things, people need to think about this. And also this whole job satisfaction, kind of how you're learning, how you're mastering, how you're kind of progressing.
[00:08:51] Really important for people to continuously, especially in like, Process roles do the same thing that they think maybe is boring or they don't even like doing it. Um, you know, how do you keep having them do this? And this is, you know, motivation, satisfaction, and so
[00:09:07] Mikkel: Yeah, I think it's heavily how, how do you take care of the team, right?
[00:09:10] You and I talked, uh, I think yesterday about you and your first run in a couple of years. And all of a sudden, you know what? Slept better. And I think there is a factor where there's a saying where if it's shit at work, it's shit at home. And if it's shit at home, it's going to be shit at work, right? So everyone will go through a phase where maybe, you know, people aren't motivated because of something at work.
[00:09:33] It can also be at home, but then the question becomes, what, what do you do as an employer to facilitate that? What does it do to your engine? When that eventually will happen, when you're operating a team with hundreds of folks, right? It will happen that someone goes through something personally and you need to be there as an employer.
[00:09:49] And I think quite frequently, you look at motivation and go like, you know, I'm Let's get a ping pong table. Uh, let's do a Friday bar, but actually it's going to change depending on what stage of life folks are even in. Right. So, um, And I
[00:10:02] Toni: And I think it also opens up this, the door to, yes, sometimes you not hitting target might be because of motivation.
[00:10:12] Ultimately, as a leader, a manager, I'm like, well, is that a, is that a people problem? Or is it a management problem? Kind of who messed up here? Um, but ultimately kind of this, it's a, it's a way kind of to, you know, look at the first layer of the root cause analysis, which is like people.
[00:10:26] Mikkel: Yeah, yeah. But that's also the point. When you run root cause analysis and you have an AE who didn't hit target, you can start dissecting whether it was because the person was not motivated, didn't have the qualifications, or haven't developed the habits, or, and it could be multiple reasons for it.
[00:10:40] And some of them you will have very little control over, by the way. That's, that's totally fair, but you still have the problem. Yes.
[00:10:47] Toni: So moving on to the next one, machinery, right? And when you kind of think about Toyota, you always kind of have all the machines there that put stuff together. So how does that translate into our world?
[00:10:57] Well, it's really, Um, let's just say software and automations, um, in terms of the tools you use to do your go to market stuff done, like the GTM stack. Right. And I think, um, I think even doing this a year ago, we would have been like, yeah, and you know, your lead score and, uh, your marketo and, you know, the validation rules, all of this is really important, really higher sales, marketing ops, rev ops.
[00:11:22] I think today, this whole thing is a completely new spin. It's basically kind of AI. Right? Kind of, that's, that's, that's basically the jump from, Hey, we're on the Ford factory line from Henry that he built. To when you now look at a, like a modern factory line, it's like, you have all of those yellow robot arms that do all of that stuff automatically.
[00:11:42] to you. That's that jump that's happening right now, right? And it went from people that, you know, are really skilled with a screwdriver and a hammer or something to a bunch of folks that basically became really skilled at like, okay, how do we program those arms and how does
[00:11:56] Mikkel: that work and
[00:11:57] Toni: and how do these things come together and so forth?
[00:11:59] Mikkel: forth.
[00:11:59] It's like engineers standing on the production
[00:12:01] Toni: Yeah, so, and this is, this is where we actually jumping to right now, right? So I think, um, this, this machinery item here is starting to be more and more important, right? Did not only your, did the software do the process in the right way? Did it flag that this was the MQL and, you know, do you need to change things and yada, yada?
[00:12:22] Um, but also, um, did the AI do that workflow in the right way? And do you need to tweak it? Do you need to improve it? And so forth, right? See it as, see this as, stuff that people do.
[00:12:34] Just not being people, right? Meaning, yes, you might not have a motivation or satisfaction problem with them, but you still have a qualification and are they doing the right thing and so forth kind of problem with that, right?
[00:12:45] So think about this layer, uh, this machinery layer like
[00:12:48] Mikkel: And I think the classic, if you look at the factory, they will look at uptime of, uh, Like the Kuga that assembles, puts the door on the chassis, right? Um, and obviously the problem is if it breaks down, that can be a factor, nothing to do with humans, but then you need to figure out, well, why did it break down?
[00:13:04] Was it because we didn't service it frequently enough? You know, the lifetime we didn't account for. And I think it's the same with, with the software. Always you, you gotta, you gotta basically look at whether it's facilitating some of the things you want to accomplish and whether it's being serviced properly.
[00:13:21] It's probably not going to be the cause for you not hitting target exclusively, because usually once you set it up,
[00:13:26] Toni: No, but I think it kind of, the, the role is changing from, Oh, here's the software that we do our work with to, Oh, wait a minute, this is stuff that's doing the work also. I think there's something changing right now and people haven't kind of fully kind of adjusted to this.
[00:13:43] But, um, you need to see this as a, as a separate layer. Um, and you need to kind of, that, that could, you know, cause trouble or you could use it to improve or whatever might happen, but that is another layer you need to look at, right? People. Then software and automation. Uh, that's how we're looking at this.
[00:13:59] And automation, generally speaking could be AI, for example. Right. Um,
[00:14:03] then the next one material. So this was like a little bit, you know, Mikkel and I were like, Oh, how's that? How's that going to work out
[00:14:10] Mikkel: screws and iron plates and
[00:14:13] Toni: Do you mean lunch? Is that material at all? Um, so for us, this is actually, um, you know, think about it more as the customer journey, um, and the, the ultimate assembled product.
[00:14:23] product, so to speak, that goes through your, you know, revenue factory is a new customer that's happy and successful and so forth. But to assemble that, it sounds so super weird, to assemble that customer, you will need to have multiple leads that turn into opportunities and so forth. Right. So really the stuff that is moving throughout your factory that you need to piece together, right.
[00:14:41] To then become revenue. Um, and, um, the, the, you know, on the material, right. You can have a couple of questions around this, right. Is it, um, Do we have, um, enough of them?
[00:14:54] Mikkel: Yeah, inventory.
[00:14:56] Toni: Right. Think about that just in time, all of that jazz, which we kind of don't have, but have a little bit. Um, do you have enough that's processing through for you to even hit your target?
[00:15:05] Right. Kind of, we talked about this so many times, but in, in Toyota was like, do you have enough, you know, you know, you want to produce 400 cars and you need, you know, 400 doors, do you have all of them? You know, if you only have 300 doors. Uh, how many cars can
[00:15:21] Mikkel: produce? Well, I was going to say, if you have 400 doors and you want to do 400 cars, you Obviously got to come up short, but
[00:15:26] Toni: I, anyway, you got me there, I guess. Um, but also, um, this is just on the pure volume and then you have this quality issue, right? Kind of, are those the right leads, the right opportunities and so forth. And, and that kind of sometimes in our revenue architecture, well, we're kind of blending this with the other one, which is the composition of these things.
[00:15:48] Right. So we're basically saying like, well, if your lead quality goes down. That probably has something to do that, you know, your, your demo request with this webinar composition changed. So you have more webinars now comparatively speaking to before, and therefore the quality goes down. That's like one way to assess quality, if you're like looking at this in an unblended world, basically.
[00:16:09] But if you do look at it, uh, in a, in a, in a world where kind of really kind of understand all of these different pieces. It might also be that your demo requests are just going down, you know, the quality of it. So for some reason, and yes, the answer might be, well, there's more SMB, there's a mid park and yada, yada.
[00:16:25] But, you know, looking at, you know, how this is, how the, each of the, uh, you know, once you kind of strip everything away and, you know, all the different excuses for, it could be a composition issue, there still might be a quality issue there, right? Which you need to keep an eye on. Um, and ultimately you can kind of translate this into an ICP definition and so forth, but you know, when you think about material, those are the things you need to monitor for and kind of understand, um, if some of that is not going in the right direction, you will need to do something about it.
[00:16:53] Mikkel: And I think almost this is where, and maybe I'm jumping a little bit ahead, but where the superpower really is when you, when I think about a company like Toyota, What you've heard in that industry is mass recalls of cars, which is the, probably the ultimate disaster, other than someone dying, obviously, right?
[00:17:11] but I'll bet you, they run an extensive root cause analysis across these m's to figure out where did this break? Was it a human error that we didn't do the necessary, you know, inspections on the material? Or was it a production error with one of the machines? So they can prevent it in the future, which is really what you want to achieve with root cause analysis, right?
[00:17:33] And, and I think it's not just for us in SaaS to say, okay, yeah, let's close the gap this quarter. The question really needs to be, well, cool. Yes. Let's close the gap this quarter. That's also needed, but how do we prevent that from happening again?
[00:17:47] Toni: Yeah, or like, you can even go one step further and you have churned customers, right? And, um, and actually you could do a root cause analysis on each of them if you wanted to.
[00:17:57] Yeah. Why, why did we, why did we get this customer into the funnel? Yeah. Why did we say we wanted to work on it? Um, why did they buy? And ultimately, why did they churn, right? Kind of the, this is basically kind of going through the whole thing. You want to actually understand this. And once you do and see where it's going wrong, or at least have an hypothesis of where it's going and gone wrong, you want to fix it.
[00:18:20] And obviously, you know, there's lots of data stuff here around in order to even achieve this, but ultimately that's actually how you need to think about it.
[00:18:28] Moving on to the next one, which is method. Um, and we're basically translating this into process, right? So this really, what this means us, and you know, this is, we're not getting creative here with this thing to kind of mold it into the go to market world.
[00:18:43] This is actually what this also means for Toyota is basically, um, the process that people are following in order to generate. the output that they need to generate, right? Kind of, that's actually what this is. So, um, yes, we have the right folks, but are they doing the right things? Meaning kind of, yes, we have the right folks, they're skilled, everything is great.
[00:19:02] but are they doing the right things in the right way? And should we kind of change that, right? And this, because it's people, it's almost a self fulfilling thing as well. You know, it could be that we don't have the right methods. aka process to teach the people the right skills to do the other process correctly.
[00:19:22] Right. So there's a bit of a circular kind of thing in here, but ultimately this is kind of what you need to think about, right? Are we doing the right things actually in the organization in order to, um, you know, achieve the, uh, the targets that we want to achieve and, you know, finding stuff here, I mean, what do you like a good example for, you know, where, you You've seen process, sorry, break and kind of being the root cause?
[00:19:44] Mikkel: Yeah, I have one, but it's also.
[00:19:47] I would say almost a managerial thing. Uh, at the end of the day, we, uh, had a design team in the marketing team and everything was running well, we were, you know, relying on getting updates for the website, for ads specifically. And then there was a strategic decision to anchor all designers under one, uh, creative director, sitting in product.
[00:20:10] So all of a sudden we kind of didn't have, That much oversight, that much control.
[00:20:16] Toni: Um,
[00:20:16] Mikkel: And what started happening with the process was it didn't really work. We would put through the requests, would take a couple of days to get processed, then, okay, we can slot it in. Two weeks from now, uh, we couldn't press anything through quickly.
[00:20:30] All of a sudden we didn't have ads to run. Right. So it started breaking, uh, you know, a production stream, quite frankly, in, in marketing at the end of the day. Right. and, and so, yeah, I've definitely seen a process, be kind of an, an issue in, in that sense. Um, it was a mesh of a strategic managerial decision.
[00:20:49] but it, it kind of hamstrung us.
[00:20:50] Toni: Yeah. So this is one example, right? And then there can be like thousands others, uh, to kind of go through this and kind of figure out, okay, actually we have the right people.
[00:20:58] We have the right automation, you know, it's actually the right folks, but we're not processing the whole thing right.
[00:21:02] Mikkel: And I think a great one I saw on LinkedIn was, uh, there was a guy, I forget who, but he had basically decided
[00:21:09] basically I am going to buy this software, requests a demo, hops on a disco, and they run MEDDICC. And the AE, uh, where he ends up talking with, basically has to ask all the things that are just unnecessary.
[00:21:25] Because the person has already decided, has the budget, blah, blah, blah. Everything he just wants to get started. But because of an internal process in the CRM, the AE has to process all these questions, right? Um, and you know, if that deal gets, uh, lost, uh, the root cause of will kind of show, Hey, there's something here preventing.
[00:21:47] Those fast track deals from happening. Yeah.
[00:21:49] Toni: I mean, this is kind of a go to is like how quickly, you know, time to lead, basic, how quickly you can reach out and stuff.
[00:21:56] Those are all things that, that could be an issue. And then they usually are not pointed out as the root cause. They usually pointed out as a way to improve. It's kind of, it's no one's fault that the prose is wrong, which if, when you think about it, is also pretty silly, actually. but that's, that's what they mean with method, right?
[00:22:14] Mikkel: Yeah. And I also think it's like, so we just talked about the composition of the material you're getting.
[00:22:20] If you're applying the same approach to a whatever mid market company from outbound versus an SMB inbound, you're probably making a mistake. Right. And then when you start looking at even stuff like, uh, let's say content leads, right. What is the process that initiates this whole thing? What is the content about?
[00:22:40] Is it close enough to home? And then do you run regular profiling stuff on those folks? Can you get that elsewhere? You can use it now then to maybe ask a qualitative question such as, hey, what's your biggest pain? Because you solve one of those three pain, uh, pains. And guess what? You can fundamentally change the outbound outreach, right? So I think there's definitely something here a lot of folks are overlooking when they run root cause analysis and just shrug it off and say, you know what, webinar leads doesn't work. But that could be something with a process inherently that's broken.
[00:23:12] Toni: Yeah.
[00:23:13] Okay. Moving on to the fifth M, which is measurement. So how do you actually measure this whole thing? How do you measure, uh, measure success across the whole engine and so forth? Right. Um, and obviously. That's just very open door for Roblox to walk through, right? Because, um, we obviously kind of believe that, um, you know, when you think about a Toyota plant, um, or factory, um, I don't think they're running around with, you know, you know, clipboards and pens and kind
[00:23:43] Mikkel: and a time clock.
[00:23:44] Toni: You know? They just don't. They do it, they do it a little bit differently. and, um, I think this is what's simply also necessary in order to keep this complex machinery kind of in check, right? There's so many things that need to go hand in hand. And making sure that all of that stuff is measured to, you know, quickly pinpoint, well, which of the five Ms is probably the issue here.
[00:24:09] That's kind of a part, right? And, and I think measurement is actually kind of splits almost in two. One is, you know, are we measuring this correctly? What are the, what are the tools or the software using in order to do the measurement? Uh, but also. Are we measuring the right things? Are we forgetting to measure something?
[00:24:28] Right. Um, and, um, because you, I don't know, I've never been inside like a car plant factory, never.
[00:24:35] Mikkel: You're German, how does that happen?
[00:24:37] Toni: yeah, that's true. That's true. But East Germany,
[00:24:38] Mikkel: Yeah,
[00:24:39] Toni: have any cars actually. Uh, not even bicycles. We walked, we had shoes. That was good. Um, no, but, uh, really the, the thinking here is, There's so many things you can measure, right?
[00:24:50] So many things you can measure and, um, uh, you know, figuring out what is actually important and not forgetting about something that can be kind of pretty tricky to kind of pull off. Right. So, and I think really the, um, this part here.
[00:25:06] Will also when you think about it, you know, not measuring a specific step might actually lead you to do wrong root cause analysis.
[00:25:14] You know, you will not have that there. I think one, one way to think about this in a go to market world is. If you're quote unquote only, so, you know, let's just say you only do lead to opportunity, right? Kind of you're measuring from lead to opportunity, and maybe you split in all the different ways, but you're not measuring MQL or SAL and SQL and so forth, um, it will be harder for you to figure out where it actually broke, right?
[00:25:41] Where was actually the problem here that we need to look at, um, and only once you can narrow it down further. Then you can start thinking about, okay, um, you know, what could you be improving here? Right. Um, or what went wrong to begin with kind of, was it a targeted thing on the ad side or was it a process thing later on?
[00:25:57] Or is it a qualification thing or what, what is actually the, the, the fricking reason here? And if you only have, you know, one step, it will hamstring you a little bit in figuring out, well, where, where's the actual issue coming from?
[00:26:09] Mikkel: I think it's also like, uh, in a, in a production scenario, if you take it back to that, they will know that a certain percentage of the products, they will go directly into the bin. They know, they know they won't live up to the standards. So they have to kind of discard them. Right. And I think the challenge sometimes for some of the folks, when we look, when we say measurement is the measurement is actual versus goal, and you only have so many goals, but what is actually the expected outcome of the materials you're working?
[00:26:39] I think that is way more critical as well to have. So when you're talking about MQL to SAL. You're not going to have a conversion rate target between those steps, let alone an expectation, right? Um, and I think that is the tricky part. And specifically this piece, by the way, is exactly what Roblox will help you with because we model your entire engine.
[00:27:00] So there are those expectations of, well, if, you know, guess what? If you get a hundred inbounds from SMB, we expect them to behave like this.
[00:27:10] Toni: And I
[00:27:10] Mikkel: think that's also when you look at the factory, they, they will have some of that understanding as well when they go and measure things.
[00:27:17] Toni: And I think some of these things are a little bit different maybe with the factory versus kind of a revenue factory in that sense, right?
[00:27:22] Because for us it's also not only, okay, we have maybe an understanding of how SQL to MQL to SQL should look like, right? But at the same time, based on historical numbers, you also want to actually know, well, what should it then look like for MQL demo requests versus webinars versus trials? What should it look like for MQL demo requests?
[00:27:46] in the US versus EMEA and so forth. Right. And all of that stuff, you can actually derive from your historic information and kind of, Hey, you know, you know, paste against, you know, uh, the past, this is actually what we should be expecting. and operationally speaking is extremely difficult to pull this off.
[00:28:02] Right. But those are, those are things that, you know, for your root cause analysis and for your measurement, you actually want to like, okay, yes, we didn't hit the conversion rate, but why? And you drill in and then there's no targets.
[00:28:14] Mikkel: yeah but it's like if you if you're operating a factory and a machine breaks down and you run root cause analysis the root cause of it breaking down might be twofold it might be that something broke because it wasn't serviced but it could also be you don't have the measurement in place to know that hey something is not Operating well over here.
[00:28:35] And I think that translates also pretty well into the go to market
[00:28:38] Toni: I just also think, I know this is where some of the real factor and revenue factory stuff just breaks because you buy a machine to, you know, put the lid on the bottle.
[00:28:49] And it does that. And how many fricking dimension do you want to slice this? Like none. It's like, is the bottle coming out with the lid on? Yes. Uh, and you know, for everyone who actually knows more about that stuff, there's probably more details
[00:29:01] Mikkel: here.
[00:29:01] Yeah.
[00:29:01] Toni: skipping
[00:29:02] Mikkel: we're oversimplifying,
[00:29:03] Toni: in our world, we would be like, well, well, well, but, was it a US bottle or an EMEA bottle?
[00:29:08] Was it an inbound or an outbound bottle? You know, kind of you in our world, because we're like, you know, digital in this sense. We're basically taking this one machinery item there and slicing it in, you know, as many dimensions as you want to in order to figure out actually now we got it. It's the, uh, the US inbound mid market, uh, segment with Larry, the sales leader.
[00:29:32] That's actually what's causing the problem, right? And, and you don't have that necessarily in a, when you, when you think about one machinery, right? Then you're suddenly thinking about like, okay, we have all of those production lines and kind of all of that stuff, which could also be kind of a way to kind of think about this, but just wanted to kind
[00:29:46] Mikkel: of help you
[00:29:47] Toni: with this.
[00:29:47] Right. And, and ultimately what do you also have in the measurement, which is kind of forgotten here in the, in the rest is, um,
[00:29:54] How does that track against your financial expectations, both in like the, the top line, but also your costs actually, and is that stuff that you're doing here actually efficient and so forth, right?
[00:30:05] Those are some of the measurements that, um, you need to have in place in order to, uh, sometimes have like larger conversations. As well as this. You know, there's no fault in the, the people, the machinery, the process, the, the, you know, whatever. There's no fault here actually, but it's still all wrong. You know what I mean?
[00:30:22] Kind of on the micro level, everyone could do exactly the right things and everything is great. But on the macro level, it's like, um, well, it's too inefficient. I'm sorry. We need to shut this whole thing down or kind of radically kind of, you know, re engineer this thing. And this is where measurement can basically help you to, you know, make those bigger decisions also.
[00:30:38] Right. That's it. Uh, I'm not sure what we're doing on time. The management thing, I think the management thing actually goes across. Um, but, uh, I don't, I don't know. I do, do you have, we don't, we're not
[00:30:51] Mikkel: so it's a pretty fundamental layer. Let's just agree on that because someone has to facilitate all these things that are happening at the business.
[00:31:01] Right. Um, so it is a crucial layer.
[00:31:04] Toni: layer. So the reason why I think it's a weird thing, um, is to a degree, at least this is my leadership and management approach. Whatever breaks between one and five is a management problem anyway, you know, um, it's, yes, the people aren't motivated. Well, you know, it's not necessarily only their fault, it's also the manager's fault, right?
[00:31:26] Hey, the machinery and the automation, well, did you staff it with the right engineers to figure this thing out? No? Well, it's your fault. Uh, the material coming through is like, well, who's kind of, you know, fetching it? Ah, you put the wrong people in place. Um, you know, the math, et cetera, et cetera. All of it, I think, falls back to, um, kind of a management problem, if you will.
[00:31:44] That's why it's difficult to pinpoint this and kind of say like, this is the, you know, this is, I think it overlays the whole thing versus being its own dedicated layer.
[00:31:54] Mikkel: Yeah, that's exactly how it is. Yep. So, we've talked a bit about root cause analysis by now.
[00:32:00] and I think this is just a very different lens you can view GTM through, uh, that's super helpful. So it's not just a matter of, Oh, Greg, I'm sorry. We're going to let you go. Um, there are multiple facets to this. Ultimately you want to find the root cause so you can prevent it from happening again. and, uh, I hope this was a helpful kind of framework to follow.
[00:32:20] Toni: Absolutely. If you liked the show, don't want to miss the next one, hit subscribe, follow, like, whatever, wherever you're consuming this, uh, to help us execute the mission here.
[00:32:29] Thank you so much Mikkel. Thank you everyone for listening. Have a good one. Bye
[00:32:33] Mikkel: you. Bye.