How Salesforce’s Marc Benioff Revolutionized The Software Industry

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Marc Benioff


Consumer websites were taking off at the dawn of the internet in 1996. But cloud-computing pioneer Marc Benioff was already looking farther ahead. He saw the future in delivering software applications to businesses in a new way online.

Benioff is chairman, co-CEO and founder of Salesforce.com (CRM).

“I was intrigued by websites such as Amazon.com, which revolutionized the way consumers shopped,” wrote Benioff, in a book he co-wrote with Carlyle Adler in 2009, “Behind the Cloud.” “I thought the internet would change the landscape for businesses, too.”

Benioff started Salesforce in 1999 with a “goal of making enterprise software as easy to use as a website like Amazon.com,” he wrote. “That idea — to deliver business applications as a service over the internet — would change the way businesses use sophisticated software, applications and, ultimately, change the way the software industry works.”

Blazing A Path

Turns out Benioff was right. He not only built Salesforce into the world's No. 1 customer relationship management (CRM) platform, he also revolutionized the way software is delivered. In turn, customers benefited financially, and a new industry was spawned.

“He was the father of cloud software as a service, and the first person to convince companies to trust him with their valuable data,” Rob Oliver, Baird senior research analyst for software, told IBD. “When they (Salesforce) came public (in 2004) they said the addressable market was in the high-single-digit billions. Now the market is $120 billion. That gives you an idea of how bold a visionary he was to see the world differently and having the ability to solve problems for customers and expand the addressable market.”

From the start, Benioff wanted Salesforce to be a different kind of company. He envisioned a new technology model — on-demand, or delivered over the internet, now called cloud computing; a new subscription business model; and a new integrated corporate philanthropy model.

Today, following Benioff's vision, the company's cloud-based CRM applications for sales, service, marketing, and more don't require IT experts to set up or manage. They just log in and start connecting to customers.

Under a new management model, Benioff shares the CEO post with Keith Block. Block was promoted to co-CEO last August from his prior post president, vice chairman and chief operating officer.

On Day 1 of the company's founding, Benioff created the 1-1-1 philanthropy model. The model leverages 1% of the company's equity, employee time and product to help improve communities worldwide.

Leadership Strategies

Benioff abides by a few leadership strategies that have helped fuel Salesforce's success.

“I strongly believe in over-communication,” Benioff told IBD. “I'm constantly reinforcing our values to our executives and our employees and to our customers and our key stakeholders … and also what our vision is, that is, what we actually want; how we're getting it; what is preventing us from having it; and how we'll know when we have it.”

The answer to these questions lies in a management process created by Benioff called the V2MOM (an acronym for vision, values, methods, obstacles and measures).

“Without a doubt, this process has been our best-kept secret to the fast growth and excellence we have achieved,” Benioff wrote.

Benioff writes a V2MOM every year, as does every Salesforce employee.

The V2MOM consists of five levels, which Benioff described to IBD this way:

“Vision is, what do I really want, what is my dream?

“Values. What's truly important to you? What are your values for the company, for yourself, for your products, for your relationships with others and what is the prioritization of those values?

“Methods. How will you get what you want? How are you going to achieve your dream? And that also needs to be prioritized … In many cases, our methods become our operating budget, for example.

“Obstacles. What is preventing us from achieving our success? What is preventing us from achieving our dream?

“Measures. How will we know when we are successful? What are our metrics or our measurements?”

Salesforce broadcasts its management meetings to employees all over the world.

“The most important thing is getting alignment with our employees with the V2MOM,” Benioff said. “That's where over-communication comes into play. And it's that kind of a triad of alignment, awareness and over-communication that helps to make the V2MOM successful.”

Commitment

Salesforce is committed to a set of core values — trust, customer success, innovation and equality.

For Salesforce, company success is synonymous with customer success.

Said Benioff to IBD: ” … We're passionate advocates of our customers. This is also translated into us being the fastest-growing enterprise software company of all time.

“We've grown our business from an idea 20 years ago to what will be $16 billion in revenue this year with a market capitalization of over $100 billion, and we also continue to grow at a healthy pace and have great success. So that is very exciting because, of course, customer success is one of our core values, and by focusing on our customers it's helped our business in the same way.”

Laying The Foundation

Benioff, 54, always wanted to be an entrepreneur, he wrote.

When he was 14 years old, he sold his first piece of software, “How to Juggle,” for $75. He founded his first company, Liberty Software, which created video games, at 15.

Benioff earned a B.S. in Business Administration from the University of Southern California.

Before launching Salesforce, he spent 13 years at Oracle Corp. (ORCL), where he was the youngest vice president in the company's history.

Benioff was guided by some of the lessons he learned from Oracle's co-founder Larry Ellison.

Benioff lists them in his book: “Always have a vision. Be passionate. Act confident, even when you're not.”

Finding A Purpose

The Salesforce saga started to take shape when Benioff was on sabbatical from Oracle. He was getting restless after 10 years at the company and wasn't sure what he wanted to do.—”Quit? Start a company? Or take Oracle in a different direction?” he wrote.

To get some answers, Benioff did some soul searching for three months in Hawaii. Then for two months he traveled to India. He met with spiritual masters, including His Holiness the Dali Lama, who talked about “finding one's calling and the importance of community service,” he wrote.

One meeting with guru Mata Amritanandamayi, known as the “hugging saint,” had a strong impact.

“It was she, who introduced me to the idea of, and possibility of, giving back to the world, while pursuing my career ambitions,” Benioff wrote. “I realized I didn't have to make a choice between doing business and doing good. I could align these two values and strive to succeed at both simultaneously.”

And that's what Benioff did. When he started the company he integrated culture with service. That strategy has served him well.

Salesforce estimates fiscal 2019 (ended Jan. 31) revenue will be $13.23 billion to $13.24 billion.

“They're growing revenue by 20%,” said analyst Oliver. “That says it all. And they're going to grow again at 20% in (fiscal 2020). That defies the law of large numbers. When you get to that kind of scale and are still growing at 20%, they're doing a lot of things right. There's a big appetite for what they do.”

First To Market

Benioff stands out as a leader and industry pioneer.

Strategically, Salesforce came to market at a good time, says Richard Davis, research analyst at Canaccord Genuity.

Enough dissatisfaction with now gone firms like Siebel, Baan and Act! gave Salesforce an opening to come to market with cloud software that was easier to deploy, easier to use and less expensive to pay for through annual subscriptions,” Davis told IBD.

Adds Oliver: “Marc is a visionary. For me personally, the most important vision was the radical idea of pioneering hosted software, which became cloud software as a service (SaaS). Everybody knows today he was the guy that pioneered the idea that software can drive revenue and success for the customer. Now these are all industry standards, and they all are incredibly important. And they all come from Marc Benioff.”

Doing The Right Thing

Benioff's core values are reflective of Benioff's leadership style, personal philosophy, and management approach. They have stood the test of time.

Benioff is known for his social activism and is one of most outspoken business leaders on promoting equality in the workplace and the community.

He cites as one example of how Salesforce has recently acted on one of its core values, equality, in the company's home base of San Francisco.

In October 2018, Benioff and Salesforce announced support of San Francisco Proposition C, a ballot measure that would tax companies in San Francisco with more than $50 million in annual revenue to generate funding for homelessness programs.

Combined, Benioff and Salesforce contributed more than $7 million to support the proposal, according to CNBC.com.

The citizens of San Francisco ended up passing the proposition in November. The tax reportedly will generate up to $300 million a year in new funds for shelters and mental health services.

Benioff says the company's work on supporting Proposition C is “very much a great illustration” of Salesforce acting on its core values.

“You can't just have values on the front door,” he said. “You have to put your values into action. Are you willing to take an economic consequence when values are tested?”

Benioff says it's important to ask oneself: “What is truly important to you?”

Trust is also key for Benioff.

“There's nothing more important to me than trust and the faith that I have, and my belief in the world and how things are created,” he said. “And that core value of trust that I have inside me then also translates very well to my corporate value. … I make mistakes and I have to come back to that core value. … When we get back trust (we can) create the world that we want.”

Looking To The Future

Benioff wants Salesforce to the most trusted software company in the world.

“We're in a world today that's in a crisis of trust,” he said. “And when I look at what Salesforce can offer the world, maybe it could be that we can be an example of trusted leadership.”

So far, investors have been impressed with Salesforce's consistent performance. Its stock rose 31.18% in 2018.

Can investors count on Salesforce for another banner year? Analysts say 2019 might be a choppy year.

“To use a trader's phrase, that means stocks take ‘escalators up and the trap door down,'” analyst Davis said. “That's the kind of market where you want a company like Salesforce in your portfolio. There aren't many companies where you get about 20% revenue growth and 20% free cash flow margins at scale out there.”

Benioff's Keys

Pioneered cloud software as a service.

Overcame: Threat of bankruptcy during the dot-com disaster.

Lesson: Walk the talk.

“You can't just have values on the front door. You have to put your values into action. Are you willing to take an economic consequence when values are tested.”



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