Sramana Mitra: One thing to remember here is that some of the most successful companies in the world have been led by Founder CEOs, whether it’s Bill Gates or Mark Zuckerberg. Steve Jobs, actually, got into a tremendously traumatic situation being fired out of Apple.
By the way, the Steve Jobs that came back to Apple is not the same Steve Jobs that left Apple. He got fired. He matured and came back as a very different CEO. I will defend a little bit the founder’s desire to often drive the vision of the company. Fred stayed in that role for a long time before he handed things over.
Anita Sands: He did and he stayed in the role as Head of Product after that. I’m not at all advocating that the founder needs to disappear into the horizon.
Sramana Mitra: It’s a very tricky transition. I’ve gone through the transition myself and I got fired. We brought in a CEO and the first thing the CEO did was fire me. As a result, the company lost its entire product vision. It can be very tricky. The personality dynamics can be very tricky.
There are two things going on in a hyper growth company that I want to discuss. One is the internal innovation structure, especially for engaging the grassroots in innovation. The second point is external innovation and M&A. ServiceNow has acquired a lot of companies.
Could you speak about both of those in separate segments on how does a company think about structure and framework for internal innovation and external innovation.
Anita Sands: Great question. I think the two of them are linked or certainly can be linked. When you think about companies making acquisitions for the talent that’s involved as much as the actual product or intellectual assets, ServiceNow has done quite a bit of M&A, but they have an incredibly disciplined approach to it. They had a very clear philosophy about what they were going to do.
As we look to going to $10 billion, our philosophy may change and have a different approach. Up until the point where we got to a billion, they felt that it was important to be disciplined about the potential targets they looked at. They had a very fundamental belief that unless that technology could be written into the code base of ServiceNow and be completely integrated, it wasn’t something they were going to do.
When we were in discussion with startups, that had to be something that the founding team were willing to work with us on. We felt very strongly that we did not want to get into having multiple code bases. We didn’t want to get into a situation where we would make that more complex for our customers. That was core to our philosophy in the past. Going forward, will that approach differ?
If you look at the Oracle’s or Cisco’s of the world, they have very different philosophies around M&A. That’s okay. I’m not advocating one for the other. I just think what’s important is that you are thoughtful about what your criteria are and why. That may change over time but that was what we did up until this point. In terms of internal innovation, what I would say sets ServiceNow aside.
My observation is, they very much focused around the feedback they were getting from customers. They really kept that loop very tightly in place. They didn’t let themselves get distracted by the shiny object syndrome. It’s back to what we were talking about earlier. Innovation has to connect what’s possible to what’s valuable. They stayed very focused on what was going to add value to the customer. What were they hearing in terms of feedback? That was one element of the vision.
The second thing they did was, they were very thoughtful about keeping the product piece, sales piece, and their financial piece lined up, making sure that all three elements were very much aligned. They didn’t let the product innovation get way out ahead of what the sales team could actually sell.
I guess I’m back to this point of discipline around how they approached innovation. The other thing that they recognized is, it’s one thing to be a single product, single channel company and when you make that move to become multi-product, multi-channel, multi-geography, they set themselves up structurally in a different way. That was a bumpy transition for us. It was rough over a couple of quarters as everybody realigned into the new organization design. It was so critical to do before we needed to do it so that we were set up on the right way. That was important for us as well.
The singular piece that I think some startups struggle with is, what is act two? A lot of them have this amazing original vision. They spotted a gap and a problem. They developed a solution. They’re up and running. They’re making a success of it but at some point, there has to be a second act. You have to know what’s coming next.
I’ve seen companies struggle with that and leaving it too late. Unfortunately, the times are such that the expectations around sustained growth at incredible levels are so high. Once that growth starts to taper off, people start to think about what’s next. It’s important to be way ahead of that as well.