Keith Block - it's all about growth, not cost-cutting, for disruptive CEOs

Profile picture for user slauchlan By Stuart Lauchlan September 17, 2015
Summary:
It's all about growth and the front office for today's successful CEOs, says Keith Block, no matter what his old boss Larry Ellison reckons about cloud ERP.

Keith Block
Keith Block

Day 3 of Dreamforce and company president Keith Block has come hot foot from hosting the conference’s Executive Summit stream.

This is the part of Dreamforce that’s for the really big, really high-level customers and their CEOs.

It’s clear from Block’s mood that it’s been a good week engaging with that audience:

There’s a lot of enthusiasm. Our customers are feeling a lot of attention from us.

Our agenda aligns with the agendas of the Office of the CEO. That agenda is all about growth and shareholder value. When you have conversations with those CEOs, it’s clear that companies can no longer cut their way to prosperity. It really is all about growth and success.

Block alludes to the inevitable slide in every Salesforce corporate presentation that outlines the evolution of the three waves of computing, from mainframe through client-server to cloud. He says:

Each wave had a different effect on companies and how they work. Sixteen years ago, we created the cloud. Today we have this convergence of cloud and social and now the Internet of Things. The pace at which companies can innovate and disrupt today is just unprecedented. It’s all about disrupt or be disrupted.

Ten years ago we were all about being Amazon. Today we’re all about being like Uber. Uber is not just about taxis, it’s about changing the entire transportational logistics industry. No industry is immune to disruption.

That’s why we have this unprecedented number of business executives coming to Dreamforce. That’s not happening to Oracle or to SAP. CEOs of big global companies are coming because they want to talk about transformation and how to change their businesses.

What this focus on growth also means is that, despite claims by Oracle CTO Larry Ellison - Block's former boss - that it will the ERP providers who will ultimately win cloud market dominance, Salesforce still has no direct ambitions regarding the back office. Block argues:

We’re not in that business. You can’t cut your way to prosperity. There will be some companies who continue to buy back office, but that is about cost-cutting. CEOs are all about growth.

Customers should have ERP. They have to close their books and manufacture products, but really the age of ERP happened at the end of the 1990s. That’s when the cost opportunities were. If you haven’t done that by now, then you’ve lost the opportunity.

Vertical or horizontal?

Another way that Salesforce is having those all-important CEO conversations is by starting to focus on vertical markets and industries, with the launch in the past few weeks of what Block refers to as “the health and wealth clouds”.

There are two particular aspects to this strategy of industry cloud that have implications for the Salesforce operating model. The first is the need to work with industry-expert partners, the second is the need for domain-savvy sales people.

On the first point Block cites a new partnership with Accenture as a case-in-point:

Accenture has been an incredible partner of ours. They have worked hard to be an ISV in the consumer packaged goods (CPG) company market. They are building trade a management and promotions platform, which is very important in the CPG marketplace.

That relationship serves as a model for others. I've already had conversations with two of the other largest systems integrators outside of Accenture on the basis that if Accenture’s doing this, they should be.

As for the sales domain expertise issue, Block is keen to emphasize the need for a pragmatic evolution in this direction:

Some companies just pivot from a horizontal model to a vertical model overnight and get into trouble. What we’ve done over the past couple of years is to start to build out vertical capabilities very carefully. So, we would pick a city, such as London, that’s big in financial services and we would then create a financial services team based there, rather than have it operate all over Europe.

Over time, you’ll find industries that you want to go into really hard and then you go national with your vertical team. We’ve done that in the US with lifesciences, financial services and government. So it’s about evolution rather than flipping on a dime and causing yourself a lot of disruption.

It’s also all about trust, he says, with the industry teams working closely with the ISV teams so that everyone is on the same page:

What’s really important with an ecosystem is trust. Partners want to know that you’re not going to compete with the,.

Trust is our number one value. We sit down with our ISVs and we say, this is what we’re doing here. There are 25 different industry verticals, then micro-verticals within those. We like to work with partners and be transparent and predictable. It’s not 100% perfect and there will be some tensions, but this is how we relieve that tension.

There’s also an awareness of the need not to try to do everything or have fingers in every pie and dilute the focus of Salesforce. On this subject Block reckons that the company displays great discipline as a result of its use of V2MOM, an acronym that stands for vision, values, methods, obstacles, and measures.

This starts with CEO Marc Benioff creating his own list of priorities that map onto those five categories, setting out visions, metrics, potential obstacles etc. That passes down to line of business executives and then out into the wider company so that everyone has the V2MOM list against which to measure any new ideas. Block says:

This is an incredibly disciplined company. We can’t do everything. So if someone has a bright idea, we say ‘is it on the V2MOM list?’. If it’s not on the V2MOM list, then it doesn't exist. It’s a constant process and it keeps up very focused on discipline.

All of which allows Block to say of the direction of travel for Salesforce:

I’m very confident - but not cocky!

My take

I said last year that the pairing of Benioff and Block was a very positive dynamic that seemed to bode well for the future direction of Salesforce.

I see no reason to alter my opinion.

 

Disclosure - at time of writing, Oracle and Salesforce are premier partners of diginomica.