AJ Tennant: How to Build a Sales Machine and Where Most Go Wrong | E2118

Intro (0s)

• Effective collaboration in sales requires driving one's point of view, which involves some tension, and steamrolling others can lead to people not wanting to work with you (16s).
• The conversation is taking place in person in London, which was a change of plans from the original remote setup (39s).
• The discussion starts with the topic of sales leadership skills and sales skills, questioning whether they are innate or can be learned (44s).
• AJ believes that sales skills can be learned, contradicting the common notion that they are born with, and thinks that humans can learn anything if taught and motivated (56s).
• AJ's philosophy is based on his career experience, where he has seen people with introverted personalities successfully navigate sales roles due to their work ethic and desire to learn (1m15s).
• Ultimately, sales skills are about inputs and not just about being a personable or gregarious person (1m37s).

The Hardest Sales Skill To Learn (1m45s)

• The hardest sales skill to learn is dealing with rejection, which can evoke feelings of shame and failure when interrupting potential customers and being told they are not interested (1m45s).
• This sales skill is particularly challenging for those who start their sales career doing in-person sales, such as selling print ads to small business owners, as it involves directly facing rejection (2m0s).
• The experience of rejection can be tough, with salespeople often facing repeated failure, making it a difficult skill to master (2m35s).
• Mormons tend to be good salespeople because they often have to sell the Book of Mormon to people in various locations, such as Africa, which helps them develop resilience to rejection (2m41s).
• The initial experience of rejection can be especially difficult for salespeople who start their careers selling to small business owners, such as "Mom and Pop shops," as it involves interrupting their daily activities and facing potential rejection (2m7s).

What Do Young Reps Struggle to Learn Today? (2m48s)

• Young reps today struggle to be creative, flexible, and nuanced in live conversations, often relying on a structured and prescriptive approach instead of actively listening and adapting to the customer's specific situation (2m59s).
• Junior sellers tend to struggle with navigating and adjusting to the customer's needs, and instead follow a rigid approach that doesn't account for the unique circumstances of each conversation (3m37s).
• Many young reps prioritize volume over depth in their outreach efforts, sending a large number of generic messages rather than a smaller number of well-crafted, tailored messages (3m49s).
• The most effective outbound messaging involves tailoring the message specifically to the customer, doing research, and coming in with a point of view, while also being willing to listen and adjust based on the customer's response (4m4s).
• Account Executives (AEs) should be doing their own outbound efforts, as it allows them to develop a deeper understanding of the customer's needs and preferences (4m17s).
• While AEs may receive support from product marketing, content marketing, and field marketing, those who take the time to do their own outbound efforts tend to perform better (4m44s).

The Sales Playbook (4m51s)

• A sales Playbook is a strategy that outlines the approach to sales, including outbound messaging and plans, and it should be flexible to accommodate different clients and situations (4m52s).
• The concept of a sales Playbook can be seen as a fancy word for a sales strategy, which includes defining the target ICP, messaging, product, content marketing, and outbound approach to convert interest into opportunities (4m57s).
• The sales process can be broken down into simple steps, including getting net new meetings, converting them into opportunities, and working them through a sales funnel (5m49s).
• Founders and CEOs should be heavily involved in creating the initial sales process and Playbook, especially during the early stages of the company, to help get the first customers and achieve product-market fit (6m23s).
• Examples of successful companies, such as Slack and Glean, had founders who were very involved in figuring out how to get the first customers and make them successful (6m37s).
• However, there comes a stage where the founder and CEO should not be deciding the exact messaging and sales play, but rather leveraging their expertise to inform the strategy (7m4s).
• The goal of the sales Playbook is to show the sales team that the CEO and founder are invested in their success and willing to work together to achieve it (6m54s).

Sales Team Structure (7m22s)

• When building a sales team, it's essential to consider specialization, especially when selling a relatively horizontal product like Glean, which caters to various types of Enterprise customers, including fintech, healthcare, consulting, and financial services (7m29s).
• Initially, it's not recommended to try to sell to everyone at once; instead, focus on a specific market segment, such as the Middle Market space, to achieve product-market fit and increase sales cycles (7m52s).
• The Middle Market space refers to companies with 500 to 2,000-4,000 employees, which are not considered true Enterprise customers but are on the cusp, with average contract sizes around $100,000 ACV (8m28s).
• In the early days of Glean, the sales cycle in this segment averaged around 4.5-5 months, but it has been reduced to around 90 days for companies with fewer than 1,000 employees (9m1s).
• Founders should focus on a specific market segment to gain more sales cycles and increase their chances of success, rather than trying to sell to a broad range of customers, including Fortune 100 companies and SMBs (7m59s).

Takeaways From Working at Slack (9m22s)

• One of the biggest takeaways from working at Slack is the importance of collaboration and tension between Research and Development (R&D) and Go-To-Market (GTM) teams, which is crucial for driving feedback to the product organization and challenging them to meet customer needs (9m42s).
• In the early days at Slack, the organization was focused on inbound and product-led growth (PLG), but struggled to support enterprise customers, such as Comcast and Walmart, which led to challenges in customer success (9m59s).
• The tension between GTM and R&D teams was driven by fundamental questions about the company's strategy, such as how much to focus on the enterprise market, and different parts of the engineering team had varying opinions on supporting large customers (10m36s).
• To address these challenges, it was essential to bring R&D teams onto customer calls to hear their feedback and challenges, which helped to build empathy and drive solutions (11m2s).
• The second biggest lesson from working at Slack is the importance of moving upmarket faster and more aggressively when a product has achieved product-market fit, as seen in Slack's growth from $6 million in revenue to $1.5 billion (11m53s).
• Slack's horizontal product and product-market fit enabled the company to expand its customer base, but required a more aggressive approach to moving upmarket to capitalize on this opportunity (12m3s).

Moving Upmarket (12m8s)

• Moving up market is a challenging decision, as it's essential to balance the risk of distraction with the potential for significant contracts, and the right time to do so is when delivering clear, repeatable success in the middle market segment and getting experimentation into the upper end of the market, with companies having 5,000 to 15,000 employees (12m16s).
• To move up market quickly, the company needs to make wholesale changes, including product adjustments for security, compliance, and permissioning, which is not an easy transition (12m58s).
• Sales segmentation needs to change as the company moves up market, with a clear distinction between SMB and Enterprise, and resourcing more expensive sales efforts on bigger accounts (13m30s).
• At Slack, the team was cut into SMB and Enterprise segments, with Enterprise defined as 1,000 employees and above, and at Glean, the team was segmented with 2,000 employees and above as the threshold for Enterprise (13m47s).
• To accelerate moving up market, it's essential to strategically pick key bets and focus on proving success in those areas, such as Glean's focus on T-Mobile as a key account (14m47s).
• The biggest challenges to going up market include security, deployment, PoCs, pilots, and navigating the nuances of getting through these processes, as well as legal and contracting complexities (15m29s).
• Building a strong relationship with key accounts and investing time in understanding their needs and concerns is crucial, as seen in the example of the 20 hours of calls with a single account to address security issues (16m0s).
• A playbook is used to navigate the largest companies in the world, but it's not applied to every account, focusing on detailed questions and deep analysis of aspects such as data protection and security (16m16s).
• To scale up the market quickly, various elements need to be considered, including the need for a legal team, changes in the sales team, customer success people, and security personnel (16m34s).
• Phasing the growth process is essential, and one approach is to assign one or two key large accounts to a team while still allowing them to work on smaller accounts with a clearer product-market fit (16m47s).
• The sales team should not segment too early and focus solely on large accounts, as this can lead to a significant delay in revenue generation, potentially taking 9-12 months (17m23s).
• Focusing solely on large accounts, such as the Fortune 50 or Fortune 100, can be a nightmare for early-stage sales organizations, as it would take a long time to generate revenue and would require sustaining the sales representatives during this period (17m33s).
• It's crucial to balance the pursuit of large accounts with the need to generate revenue and sustain the sales team in the short term (17m46s).

Small Contracts for Big Customers (17m50s)

• Large companies often lack confidence when signing their first deal, and being willing to do small contracts can be beneficial in establishing a relationship with mega customers, with the goal of expanding the contract in the future (17m56s).
• To successfully structure small contracts with large customers, it's essential to have commercial alignment and executive alignment on the success criteria that need to be met to achieve a larger contract (18m29s).
• Having clear success criteria allows companies to tie specific goals back to dollars, increasing the chances of turning a small contract into a larger, seven-figure deal (19m1s).
• Many companies are still in the experimental phase with AI tooling, and it's crucial to capture AI demand while turning it into clear business value with success criteria (19m31s).
• Defining success criteria is essential, and companies may need guidance on how to do so, as seen in a meeting with a large telecommunications company where they asked for prescriptive advice on deciding success criteria (19m53s).
• Having a specialized sales team can be beneficial in understanding specific verticals and core problems, but it's also important to consider the scale of the company before going too granular (20m5s).
• Companies may need to reach a certain scale, around $200-250 million, before hiring specialized sales teams for specific verticals, as managing a large number of account executives can become complicated (20m30s).
• Companies can start to see success in specific verticals, such as financial services, and begin to develop more specialized enablement, but it's essential to balance this with the need for generalist sales teams (20m47s).
• Having a generalist sales team can be beneficial in scaling learnings from one account to another, especially when dealing with global companies that require a broader reach (21m57s).

Buzzwords (22m1s)

• In the experimental budget phase, certain buzzwords can make boardrooms take notice and show excitement, while others may elicit a cynical response. (22m1s)
• Current buzzwords that get people's attention include "generative AI," "driving AI transformation," and "turning employees into AI-centric employees." (22m15s)
• Using these buzzwords can make people lean in and take notice, especially when paired with a differentiated solution and a unique value proposition. (22m35s)
• Highlighting real customers who have gone through an AI journey can also be effective, as it allows potential clients to learn from others who have already implemented AI solutions. (22m51s)
• Using customer testimonials and examples, such as a Telecom CEO discussing an "AI-enabled workforce," can help bring buzzwords to life and make them more relatable to others. (23m8s)

How to Sell AI Tools in 2024 (23m19s)

• Many companies are still in the experimental budget phase with AI due to a lack of clear definition and tie-back to business issues and ROI, with budgets often based on the need to quickly enable AI-centric employees without a clear business outcome in mind (23m30s).
• Companies are willing to spend big on AI, with some accounts spending $5-10 million annually on AI initiatives, driven by the need to keep up with innovators in the space and the fear of being left behind (24m46s).
• Public company CEOs feel pressure to have an AI story, with one CEO stating that having an AI story is a necessity for public companies (25m7s).
• The largest contract size for Gleen is well north of $5 million, indicating that some companies are willing to invest significant amounts in AI initiatives (25m21s).
• Despite the willingness to invest, many large enterprises struggle to implement new AI technologies, with implementation taking 6-12 months and often requiring a significant services budget (26m18s).
• The challenge in implementing AI technologies is often a change management and security issue, rather than a product issue, with many customers feeling that AI tools are not delivering the value that was advertised (27m5s).
• One common misconception about selling AI tools is that it will be easy, when in reality it often requires significant effort and investment to implement and deliver value (27m12s).
• Many companies struggle with implementing their sales strategy, and this is often due to a lack of proper planning and execution, with a focus on closing big deals without considering the deployment process (27m19s).
• To address this issue, a deployment success plan should be put in place, and sales teams should be incentivized to ensure successful deployments, as this will impact future upsells (27m36s).
• One approach is to tie the compensation of Account Executives (AES) to the success of the deployment, rather than just the initial sale, and to involve them in the deployment process (27m47s).
• Customer Success (CS) teams should also be involved in the deployment process, but their primary focus should be on metrics such as Net Dollar Retention (NDR) and active users, rather than upsells (29m0s).
• The goal is to create a partnership between AES and CS teams, rather than a handoff, where both teams work together to drive deployment and success (29m30s).
• This approach can lead to significant growth, as seen in the example of a healthcare company that increased their contract from $60,000 to over $500,000 in nine months through a focus on deployment and success (29m41s).
• However, this approach may not be suitable for all segments, such as commercial or SMB, where a velocity motion strategy may be more effective (30m7s).
• The key is to find the right approach for each segment and to prioritize deployment and success in order to drive growth and revenue (30m5s).

When Does It Make Sense to Scale Up CS? (30m14s)

• It makes sense to have a built-out Customer Success (CS) function when considering a combination of company size and contract size, rather than just looking at Annual Recurring Revenue (ARR) for specific accounts (30m15s).
• A more effective approach is to tie CS to clear metrics, such as employee count and upsell potential, rather than just ARR, to drive future upsells and revenue growth (30m59s).
• One of the biggest mistakes founders make when building out their CS teams is not tying it to clear metrics, such as leading indicators for future upsells, Net Dollar Retention (NDR), and Gross Revenue Retention (GRR) (31m18s).
• Gross Revenue Retention (GRR) is a crucial metric, especially in the Enterprise space, as churn can have a viral negative network effect (32m0s).
• However, leading indicator metrics such as time to launch and active user adoption are also important, as they can help prevent churn and ensure successful customer deployment (32m38s).
• If a company can nail time to launch and active user adoption in a systematic way, GRR is likely to be a non-issue (32m56s).
• The AI tool industry may see a large number of churns in the future, as companies reassess their experimental AI budgets and shift to more effective solutions (33m20s).
• Some vertical solutions that have layered on AI may not deliver enough value to justify the incremental spend, leading to potential churn (33m42s).

Should CSMs Be Compensated for Upsells? (34m2s)

• There should be some type of kicker or incentive for upsells, but it shouldn't be the primary key metric (34m5s).
• In the sales development world, there is a push to give a kicker or bonus to sales development representatives who source leads that become opportunities and close, incentivizing the right behavior (34m25s).
• Compensating customer success managers (CSMs) on closed deals, rather than new opportunities, is considered too long-term and not ideal (34m41s).
• A model that gives bonuses to CSMs for achieving specific goals, such as multi-million dollar expansions, can be effective in recognizing and incentivizing the right behavior (34m52s).
• Strategically giving large spot bonuses to CSMs who achieve significant expansions can be an effective way to recognize and reward their efforts (35m5s).
• Implementing a structured bonus system for CSMs who achieve upsells and expansions should be considered as part of next year's planning (35m21s).

What Would You Change About Glean’s Sales Comp Plan? (35m24s)

• If given the opportunity to change anything about Glean's sales compensation plan, the first modification would be to implement more aggressive accelerators (35m25s).
• Accelerators are mechanisms that allow sales representatives to earn accelerated compensation when they exceed 100% of their quota, enabling them to progress faster in terms of earnings (35m35s).
• The purpose of accelerators is to reward top performers, including Customer Success Managers (CSMs), Business Development Representatives (BDRs), and Account Executives (AEs), which is considered a positive approach (35m52s).

Hiring Sales Team (36m1s)

• Hiring is a challenging task, especially for early-stage founders, and it's an area where most of them go wrong (36m17s).
• To build a strong sales team, it's essential to understand the deep history of an individual over a chronological period, which is a hiring methodology known as the "Who hiring method" or chronological interview (36m43s).
• This method involves asking the candidate about their past experiences, starting from high school, to understand their deep motivations and what drives them (36m48s).
• To determine true grit and quality in sales skills, one approach is to ask the candidate about their previous bosses, including the hardest person they worked for, and then quiz them on how that person would provide constructive feedback (37m27s).
• Another approach is to ask candidates to send materials of their previous work, such as a deck or an email, to assess their skills and thought process (38m16s).
• After the initial interview, a panel interview is conducted, where the candidate is given a prompt to talk about their history, biggest career challenge, and a large win, and then walk through an example deal (38m39s).
• The goal of the panel interview is to assess the candidate's deep thought process and preparation, rather than their presentation skills (39m22s).
• To further evaluate the candidate, a surprise question is asked mid-interview, where they are given a hypothetical book of business with 100 accounts and asked to prioritize and manage them (39m51s).

Are Sales Reps Truly "Coin Operated"? (40m5s)

• To prioritize a book of business, 10 data points are necessary, including employee count and industry, but these are not sufficient on their own, and more in-depth analysis is required to stack rank them from 1 to 10 (40m11s).
• The competency required for success in customer calls is creative problem-solving capabilities, which involves higher-level thinking, strategic planning, and the ability to map solutions to specific job requirements (40m38s).
• Junior account executives (AEs) often struggle with the early stages of creative problem-solving, which includes listening to prospects, adapting to their needs, and thinking strategically (40m51s).
• To be successful in sales, AEs need to possess both razor-sharp intellect and high energy to articulate a vision and map it to customer needs (41m29s).
• Many AEs lack insightful thinking and often get stumped when asked to provide more than five data points, which is a concern for the sales industry (41m39s).
• Sales is a challenging field, but it has the potential to capture some of the smartest minds, as it involves driving transformations within companies and requires strategic thinking and problem-solving (42m51s).
• Enterprise SaaS sales, in particular, offers a high level of learning and depth, as it involves figuring out how to make companies successful through the right product technology (43m12s).
• Believing in the product technology and choosing the right one can drive true business transformation, as seen in the example of working with T-Mobile to drive success (43m41s).
• The smartest people coming out of top universities often want to work for the best technology companies, but they tend to pursue roles in product, strategy, or consulting rather than sales (43m48s).
• In technology companies, there are two primary paths to making a big impact: product and sales, as learned from David Han, VP of product at LinkedIn (44m46s).
• The smartest people may initially be drawn to product, but if they realize they are not suited for it, they should consider sales as an alternative path to success (45m26s).
• Not all successful sales reps are "coin-operated," but rather those with high insightful IQ, who want career development, challenges, and coaching (46m11s).
• A hiring panel can be an effective way to assess a candidate's ability to read a room and present, which is a crucial skill for sales roles (46m54s).
• Some companies, like Slack, use writing exercises as part of the hiring process for sales roles, while others, like Glean, use take-home assignments that ask candidates to follow up with a specific artifact (47m31s).
• Rachel S, a Northwestern grad, was convinced to join sales and became a successful sales development representative, demonstrating that sales can be a fulfilling career path (45m42s).
• Advanced prompting methodology can be used to prepare for customer calls, and an example of this is a methodology built by Pine Cone using Enterprise chat GPT and Glean (47m49s).
• When interviewing for a job, it's essential to show how you've used artifacts before, such as sharing a methodology or a business case, to demonstrate your skills and experience (48m19s).
• Researching a company's customers and interviewing them about their experience can be a valuable strategy, but it's crucial to approach it in the right way to avoid any potential issues (48m33s).
• Having relationships with key people in the industry and networking in a warm intro way can be beneficial in gathering information and making connections (48m55s).
• Being creative and proactive in your approach, such as building an artifact or sharing an example of how you've solved a business case, can demonstrate your skills and passion for the product (49m35s).
• Sharing examples of how you've been more efficient in your work or demonstrating your passion for the product by talking to customers and gathering information can be valuable in showcasing your skills (50m0s).
• Interviewing customers and gathering information about a product can provide valuable insights and demonstrate your interest in the company and its products (50m10s).

How To Improve Glean’s Interview Process (50m18s)

• To improve the interview process at Glean, Arvin, the CEO, could have challenged the candidate to present a point of view on a couple of problems the company is facing, which would have two benefits: giving the CEO ideas and assessing the candidate's problem-solving skills (50m25s).
• This approach is beneficial because senior leader interviews are precious in terms of time spent by the leadership team, and it's essential to make the most out of them (50m49s).
• Another strategy used in panel interviews is to ask managers to choose an account the candidate is prepping for a new prospect, which helps to assess the candidate's skills while also potentially generating new business ideas (51m26s).
• It's essential to identify when a salesperson is not performing well, which can be determined within 90 days for the Enterprise segment and 30-45 days for the SMB segment (51m55s).
• The company has a 20% turnover rate for salespeople, and some might argue that they need to be more aggressive in cutting underperforming employees (52m7s).
• The biggest commonalities in why salespeople fail are a lack of creative problem-solving and collaborative tension, which is a term coined to describe the ability to collaborate effectively while driving one's point of view (52m17s).
• Creative problem-solving can be assessed by observing whether a salesperson comes up with solutions and ideas or just presents problems, and collaborative tension is essential for driving progress in hypergrowth companies (52m39s).
• The best employees are those who come up with ideas and solutions to problems and seek feedback from their bosses or stakeholders, whereas underperforming employees tend to just present problems without solutions (53m0s).
• Collaborative tension requires a prescriptive and direct approach, and if a salesperson cannot collaborate effectively, they may not be a good fit for a hypergrowth company (54m19s).

Hiring Mistakes (54m32s)

• The biggest mistake made by hiring leaders is moving too fast in the hiring process, which can lead to overlooking red flags and ultimately making poor hiring decisions (54m32s).
• This mistake can result in having to let someone go, which can be a painful and dramatic process, emphasizing the importance of taking extra time to find the right candidate (55m23s).
• The biggest mistake founders or sales leaders make in new rep onboarding is not doing it, and not investing in enablement early enough (55m46s).
• Not investing in enablement can hurt the company in the long run, as it is crucial for the success of sales representatives (57m19s).
• Having a good enablement leader can change the trajectory of what good enablement looks like, and it is essential to invest in enablement early on (57m40s).
• Molly Golden, a world-class enablement leader, has been instrumental in changing the approach to enablement, and her expertise has been valuable in this area (57m37s).

Quick-Fire Round (57m52s)

• Discounting is not always bad, but it should be approached with caution, especially once a company reaches $10-15 million in revenue, as it can impact the market discount rate and subsequent logos; having a tight discount matrix is crucial (58m0s).
• Getting a marquee customer and making them successful is more important than just acquiring the logo, as a successful customer can provide reference calls and introductions (58m27s).
• When starting a new sales role, it's essential to get hands-on experience with deals, learn the product, know the people in the organization, and understand the position; this framework is referred to as the "three Ps" (58m57s).
• To win a deal with T-Mobile, creative strategies can be employed, such as building relationships with retail staff and customer care agents, and even befriending the CEO; understanding the customer's differentiators and pain points is key (59m42s).
• Maintaining morale in a sales team when goals are missed involves refocusing on the vision and why, celebrating small wins, and setting effective stretch goals that can be achieved and outperformed (1h1m12s).
• Effective goals are those that can be achieved and outperformed, whereas ineffective goals are those that can only be achieved 80% of the time; setting the right goals can help maintain morale and motivation (1h1m20s).
• The most desirable change in the world of sales is to shift the perception of sales and its importance in driving business growth and success (1h1m36s).
• Tech sales is a viable career path that can lead to becoming a CEO of a company, as it is a key pillar of what makes companies great, specifically go-to-market and sales strategies (1h1m43s).
• There have been examples of CROs moving into CEO roles, such as Frank Slootman, who transitioned from being a CRO to a CEO (1h2m22s).
• Whiz's partner and channel strategy is impressive, as they have effectively turned their sales team into a larger force by partnering with hyperscalers, cloud service providers, resellers, and channel players, essentially turning 100 account executives into 5,000-10,000 account executives (1h3m7s).
• Sales and go-to-market (GTM) strategies are essentially distribution strategies, and companies that fail to lean into effective distribution strategies can lose out, as seen in the case of Slack losing to Microsoft (1h3m50s).
• The hardest part of a career in this field is dealing with people's doubts and negative feedback at every stage, and having to be the one person who believes in themselves, despite the criticism and hate that comes with growing and becoming more prominent (1h4m25s).
• The drive to succeed often stems from a realization that one must work harder than others to achieve their goals, as conventional rules may lead to a mediocre life (1h6m6s).
• Building great companies often involves solving "grind problems," which require intense effort and perseverance rather than exceptional technical difficulty (1h6m30s).
• Examples of companies built on grind problems include Plaid, which overcame integration and data challenges through sheer man-hours (1h6m40s).
• Consistency and persistence are key to success, as demonstrated by doing five shows a week for five years, with the first 18 months being particularly challenging (1h6m53s).
• The majority of podcasts do not make it past episode 10, and only a small percentage survive beyond episode 50, making it a game of endurance (1h7m5s).
• Many people struggle with creating content, but it can be developed over time with practice, much like going to the gym and getting comfortable with the routine (1h7m24s).
• Sales, like most skills, can be taught and are not necessarily innate, with only a small percentage of people having a natural talent for it (1h7m52s).
• Even professional athletes, such as Roger Federer and LeBron James, have a natural ability, but others, like Steve Nash, have achieved success through hard work and dedication (1h7m59s).
• The idea that some skills are innate is not entirely accurate, as many people have achieved success through persistence and effort (1h8m34s).