In Episode 25 of the B2B podcast Pit Stops to Podium, Mark Roberge speaks on how to operationalize finding new areas of revenue growth, developing an overarching strategy for revenue growth, overcoming tension at the top, and embracing inconsistency within an organization. Hear more on how companies such as Hubspot unlock the full potential of revenue growth and what can be implemented to build on that growth.
Mark currently works as a Managing Director at Stage 2 Capital and a Senior Lecturer at Harvard Business School. Previously, he worked as Chief Revenue Officer at Hubspot, responsible for expanding annualized revenue from $0 to $100 million, growing the customers base from zero to 10,000 customers, and making remarkable efforts in expanding the Sales and Services organization from 1 to 425 employers. In his free time, Mark enjoys practicing yoga and running.
Take 20 minutes to listen and then head back to the races! 🏁🏆
Pitstop Highlights
Developing an Overarching Strategy for Revenue Growth
In developing an overarching strategy, Mark turned to Tushman’s work, “The Ambidextrous Organization.” Within this framework lies the strategy of an organization's ability to scale the known and learn the new. Essentially, most companies need to maintain a variety of innovation efforts, whether it be constantly pursuing incremental innovations or coming up with a discontinuous innovation that alters the basis for competition in the industry.
When Mark partnered with Christopher O’ Donnell at Hubspot in 2012 to expand Hubspot from solely marketing to a CRM, the two utilized Tushman’s framework–and it worked. Mark then continued to use this framework with other companies he worked with.
Holding Tension at the Top
Sometimes, proposing a project or a new product can create political tension at the top of an organization. Much of the time, these projects require resources from the core business that may affect the organization's ability to scale, thus creating tension. This can cause projects to become overlooked and often, thrown out entirely.
According to Mark, what has to happen in these situations is for the CEO to look at their organizational design, not based on their profit and loss size–but on their strategic value.
Embracing Consistency Within Organizations
Mark’s approach to measuring businesses is divided into two key segments. First, measure the core business on unit economics, p&l, and revenue growth, Next, measure the new business on 1) product-market fit, 2) growth go-to-market fit, 3) and growth and market health.
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Full Transcript:
Brendan: Welcome to Pit Stops to Podium. The RevPartners podcast, where we talk execs who compete and won, taking the companies from high growth to high scale. My name is Brendan Tolleson. I am the co-founder and CEO of RevPartners, and I'm delighted to have with me today, Marc Roberge, for this episode of Pit Stops to Podium. Welcome, Mark.
Mark: Thanks, Brandon, great to be here, Thanks for being flexible for my car ride here. So I like it. Hopefully this will be an interesting conversation.
Brendan: This is our version of comedians in Cars Getting coffee, so this is different. We have the car version. So for the audience that doesn't know who is and Mark, I'll let you expand on this a little bit further. But mark is currently the managing director at Stage 2 Capital and advisor to HubSpot and the former CRO of HubSpot. And I think I'm going to steal one of your fun facts, but you are also a senior lecturer at Harvard, which is pretty cool. But Mark, before as we're getting started, it might be interesting to understand who stage two is with your current gig.
Mark: Yeah, so, you know, as you mentioned, Brendan, I was an entrepreneur for like 20 years. The last gig that I was part of the founding team was HubSpot and I, after the I scale them through the IPO and CRM and then left enjoy the fact of the Harvard Business School. So what was cool about that was like it gave me a lot of room to help startups, which I did for like four or five years, help them set up their sales team. And then I was approached by a young, talented investor, J. Poe over at Bessemer to basically he was really intrigued by like seeing, basic miss execution on the go to market side by a lot of these young startups and wanted to partner up on some content, which we did, and that led to the idea for him on stage 2 capital, which is the first VC fund run and backed by go-to-market executives. So we have we are backed. Our latest fund is an $80 million fund. We had 250 CRO’ and CMOS and CEOs and heads of rev ops basically back our fund, everything from the CRO of or the c-suite of Snowflake and Asana and and, you know, Zoom and Salesforce and SAP. And like a lot of the software unicorns out there and we try to bridge that platform of exceptional, you know, go to market thought leadership and bring it formally to the next generation of great startups.
Brendan: I love that. It’s infusing the operator mindset, which is a really neat way of going about that. Mark, before we get to our big idea, we do have a tradition here at the podium, and that's to get to know our guests outside of what they do. So what are three what are three fun facts that our audience should know about you?
Mark: Yeah, sure, I love I'm actually really good at making scrambled eggs, I have them most morning, a little cheese and hot sauce. It's all about getting the heat right.
Brendan: What's your what's your go-to hot sauce?
Mark: I’m Buffalo hot sauce guy, you know, like I don't care in the brand, but that's kind of my favorite. And I also like salsa Verde, sometimes the green one. That's really good. And then I'm a big Yogi and runner. I ran a 420 in high school, can't do that anymore, but and blessed that as I'm in my mid-40s, I am still getting out there every other day and do yoga every other day. And then one that's like, not, you know, very important to me that I talk about a lot is I have an anxiety disorder. I've been on medication and in therapy for almost a decade, and I try to speak off as often as possible about publicly because I just think it's crazy that we get our teeth cleaned twice a year and everyone's embarrassed about going to see a therapist. I can't imagine anyone in the world. It doesn't mean I shouldn't have a therapist, and it's just a shame that there's such a stigma around it, especially like right now where we're walking into a sort of mental health like perfect storm between the pandemic and social media and the pressures it creates for our next generation and all the other normal things of life is I just hope that by speaking about it, we can kind of be more comfortable about it. And I'd encourage you, if you don't have a therapist like check your health insurance, they might cover it and then go find one. And I'll just say, like, oftentimes the first try doesn't work. Just set yourself up for doing three or four. And what do you do? Find that person? It'll change your life.
Brendan: I appreciate you sharing and being vulnerable and to your point speaking into it normalizes it and gets the stigma away, so thank you for doing that and being vulnerable with our community. Well, those are great fun facts about you. Let's transition into the meat of this podcast, which is really a big idea. And in light of what you just described was Stage Two and your experience with Hubspot, I think you have a unique position to speak to it. And the big idea today is really how to unlock sources of revenue growth for a scaling company. And so before we get into that mark, you have a kind of a framework that you think about in terms of learning while scaling versus learning before scaling. So let's start there and then we can apply it into like a HubSpot case study that you were able to experience.
Mark: Yeah, every company needs to at some point figure out how to operationalize finding new areas of growth, and I, I, I classify areas or segments as three dimensional. It could be a new product, a new market or a new channel. So it could be like, I want to move upstream. Now The new market it could be. I want to create a new product that's tangential to us and sell it to our install base. Or it could be like currently we sell everything through an inside sales team that gets chemicals. And now I want to go through a partner channel, right? Any time you change one of those dimensions, you need to refigure that out. And for whatever reason, when a company gets to 5 or 10 million or above, they get really cocky about being able to do that instantly. Like they literally like they'll do the they'll do the annual planning and be like, OK, we've got a scale from 20 to 40 million next year, but our current product market channel combination only gets us to 35. So I have an idea. Let's tell the board that we're going to build a new product and get $5 million in revenue from that. And it's like, like why? Why do we be like no one wakes up with an idea as a seed funded startup and it's like, I'm going to build this product and get $5 million revenue. Why do we do it when we're like at 20 million, it's like it makes no sense. And it screws our businesses up. And so that's really the point of this framework that was invented by Michael Tushman, a great professor at Harvard Business School that helps us understand when we crawl out of that $5 or $10 million arena, whether we're a billion in revenue or $5 million revenue, we need to get good at predictably creating new growth avenues. And that's what this framework allows.
Brendan: That's great. So let's dive in into how that applied to you and your experience and leading HubSpot sales organization. And so using HubSpot as a case study, there are three topics that I want to unpack with you. The first is going to be developing an overarching strategy. The second is going to get into hold tension at the top, and the third is going to be around embracing inconsistency. So let's start with the first one, which is developing an overarching strategy, right?
Mark: So this is Tushman’s work, right? Those three things he calls it the ambidextrous CEO or ambidextrous organization. And we both know ambidextrous as you use it, right and left hand. And what the analogy he's making is you as an organization are good at scaling the known and learning the new. That's what he's talking about, right? And this framework allows us to do that. So the first one to develop. And it's funny, because I found his framework in 2015, three years after I, I teamed up with Todd Christopher O'Donnell HubSpot to expand HubSpot from just marketing into the CRM space. And I was like, holy cow, I read his framework and I'm like, this is exactly what we ultimately ended up doing. That worked. So I was like, this is awesome, right? So I started using this with a bunch of companies to help them predictably create new avenues of growth. So the first one on, you know, to expanding the messaging is basically what a lot of organizations do is like, OK, cool. We're now going to go into this new product and they'll either completely lean into it and like, rebrand the entire home page, which is terrible, because then they're like, do you even do what you used to do? Or they won't lean into it and keep the home page the same? And then they're like, wait a minute, you're pitching me this new product, but you guys don't do that right? And that's what happened with HubSpot is like. So Brian and Dharmesh wanted to move it in the CRM space, but our homepage was inbound marketing. It was like, make marketing that people love, and there's no way we're going to pull off selling a CRM with that messaging, right? And so we dotted around and were like, OK, how can we encompass both, just like Tishman advises? And he basically we basically ended up with growth as the new meme. So that was the turning point for us as an organization to move away from inbound marketing, which was too constrained and one product arena to growth.
Brendan: Yeah, I love that. And to your point that it's not an easy pivot to make, and it's bouncing that tension between going all in and confusing or just kind of putting your toe in the water and also creating. If you confuse, you lose. So that's a hard one to navigate, and you clearly did a very good job at that.
Mark: Yeah, this is getting interesting now. I'm going through the tunnel. This is making for such an interesting coffee coffee chat here.
Brendan: Yeah, I should have brought my scrambled eggs with some hot sauce. Well, let's transition into kind of your second topic within this framework, which is holding tension at the top.
Mark: Yes OK, so then what people do is when they do this like, OK, cool. So we're going to build this new CRM and obviously there's no revenue. And at the time, we're doing like 80 million in revenue. So most people will bury this as a team, four levels down to the product engineering team. And for this company, this project to succeed, there's going to be a lot of political tension that needs to be overcome. They're going to need resources from the core business. They're going to affect the core businesses ability to scale, and the core business is not going to want that. And so this new project is going to get squished. And so what has to happen is Tishman says the CEO needs to look at their organizational design not based on P&L size, but on strategic value. And so collagen basically had sweetheart and I report directly to him. He put almost the entire marketing function under our CEO, JD Sherman. And what that allowed us to do is it gave Halligan the ability when tension occurred and we needed resources from the core business. He could make the call as to whether we were asking too much or whether he should. We should allow it from the core business. So that's Tushman’s whole attention to the top.
Brendan: I think you call the balance trade off right of innovation versus profit and growth, right?
Mark: Exactly, exactly.
Brendan: At what point I'm just out of curiosity. Like in the Hudson context, where you said, hey, this is no longer-, I don’t want to use the word distraction, but like this is now it. You kind of have it as a separate, but when does it get integrated back in or does it always stay separate?
Mark: Yeah, it does, that's the tricky part, and maybe we should- like usually I talk about that after but let's just handle it now for 1 minute.. If it works, you do have to figure about how you scale it at that point and you essentially have a couple of options. You can keep them separate. Right and that often works if you are selling to different buyers. And especially if you're selling at different companies, you can keep those separate, right? Usually doesn't happen because if you're completely sold to different companies and buyers, where was the synergy to get it right? You can roll it into the core business, or you can let the new business disrupt the core business. And that's essentially what we. What is, I think, most common. And essentially what we did at Hubspot, because not only were we trying to move into the CRM, but we are already we were also trying to transform from a like MQL inside sales like demo closed on board motion to a product like growth motion. And the marketing product didn't allow us to do that. It was too difficult to create value, but the CRM did. And so we, you know, once it worked, we slowly let that motion take over the existing legacy motion. So we kind of disrupted ourselves. But it was tricky because like when we were building as people would be using the CRM and call our 24/7 support line with the support team wasn't trained on the CRM. So this is not this is not come without pain, but that didn't necessarily mean that you have to like temporarily lift through.
Brendan: Yeah and I think that probably is a good segway way to your point into embracing inconsistency, which which is your last kind of topic within this category.
Mark: So the point there is like, you know, you don't measure these the core team and the new team in the same way, like the core team at this point is measured by you in economics and revenue growth. And churn rate and P&L and all that stuff. And like, you would never measure a seed funded business like that. And so you have to measure the new business first. Unlike their ability to does it work, you create customer value. And so this is where we'll put a framework in a framework where if you look at my science of scaling work, that's how I advise companies to measure the new business, measure the core business on unit economics and on revenue growth, but measure the new business on three sequential Northstar metrics first, product market fit. Second, go to market fit and third growth in both. All right, so with product market fit, you know there's a lot of debate out there. What is it? How do you measure it? I really get concerned when people say I have product market fit when I get a million in revenue. I totally disagree. I think that's market message fit. You know how to sell the message that does your product actually deliver value? I just don't think that measured it. I think the best measure of product market fit is customer retention, that someone used your product for some period of time and then decided to reuse your product. But the problem with that is it takes a long time for that metric to surface. So I like I encourage companies to create a leading indicator to customer retention. So what is it that we can see in our customer use case within the first month that if that happens, they'll probably be around forever, and if it doesn't, they'll probably choke? And so like HubSpot was, if they use five or more features in the platform, Dropbox was if they back up their files within an hour slots was if they send 20 messages within the first month. Like there's a little bit of an innovative art to figure out what that lead indicator retention is, but that's your first goal. And then once you do that consistently, like 80% of your customers that you acquire hit that every month, then you can move on to go to market fit, which is doing that profitably. So do that with good economics, right? So like, you know, can you? Can you? Can you get that customer with reasonable and at an appropriate price that's don't do that first, do that second, and that's your go to market fit is the measurement of unit economics. And then once you have that, then you can measure it. Just like the core business, you measure it in growth rate and revenue and that kind of stuff. So that's kind of our framework. And the framework. But if we Zoom out, it's all about like, you got to measure the success of these two teams differently. The core team is measured by P&L, and the new team is measured first by product market fit, which is the lead indicators of customer retention. Did I go too fast there Brendan? Does that makes sense?
Brendan: Well, there's a lot to consume, but it was really good and I think, you know, to come full circle to use the HubSpot case study. I mean, if you look the messaging now husband is the CRM platform for scaling companies. And so they successfully made this to, as you were describing of that tension, the inconsistency. And now there is a unified message that everyone's rallying around, which which is pretty neat to see that full circle.
Mark: Yeah, that was it for the CRM. It was like, hey, what's your leading and kind of retention was just like, we need to acquire. We were acquiring probably like 10 or 20 new users a week in the beginning through Facebook, Instagram ads, and our leading indicator was like, do they do they log into the CRM every day? It's very simple. That's it, right? And we rallied. And if you could do that, gosh, what a foundation for a business, you know?
Brendan: Yeah to get, you become much more proactive than reactive to your point, the leading versus lagging. Well, Mark, this has been fantastic. I love learning about the framework that you incorporated. I think this is our audience is going to learn tremendously from this, from a practical next step perspective. You talked about the science of scaling. What are some ways in which our audience can either engage with you or with stage two going forward?
Mark: Yeah I mean, we try to be pretty proactive about posting all this stuff on the Stage Two websites. So there's a 45 page book on the science of scaling. There's a bottoms-up sales and marketing planning guide, so check that out. And then I'm very active on LinkedIn or try to be. So you can hit me up there.
Brendan: All right, Mark. Well, thank you for stopping by. We really do appreciate it. And safe travels wherever you're headed right now.
Mark: Thanks, Brendan.
Brendan: All right. Talk to you later.