Zendesk CEO Mikkel Svane - agility is key to a long term response as COVID-19 flattens short term growth expectations
- Summary:
- COVID-19 has led to lots of uncertainty, so it's important to be able to react and adapt, says Svane.
Zendesk’s Q1 2020 earnings announcement yesterday followed what it is becoming a familiar pattern as COVID-19 overshadows strong revenue growth in the current quarter with lowered expectations for the next.
For Q1, revenue was up 31% year-on-year $237.5 million with a loss of $42.8 million Previous full-year guidance has been withdrawn in light of the uncertainties caused by the COVID-19 crisis, but the firm is offering essentially flat growth estimates for Q2 of between $237 – $243 million.
It’s an increasingly familiar story and not unique to Zendesk. CEO Mikkel Svane observed on the post-earnings release conference call:
The pandemic has disrupted day-to-day life [for] everyone in the world. And clearly there is a lot of uncertainty for every single business out there…I am convinced we are not going to go back to business as usual anytime soon. We expect - and we are preparing for - financial impact in the near and immediate term to ourselves [and] of course to the world around us.
The nature of the current crisis does however play into an increased focus on customer service, he said:
It's more important now than ever that for companies to connect with their customers globally and across the channels that customers expecting to use today. So we have seen a rise in customer service almost for many of our customers, some dramatic rises for a large segment of our customers. We have also seen much more reliance on self-service, on automated reflection and an increase in messaging and chat conversations.
One customer is trying WhatsApp chat box through our Sunshine platform that helps people to self diagnose COVID-19 symptoms. We have another customer that has deployed self-service for government track and trade applications and our call center product. Our voice products are helping multiple healthcare providers, managing medical conversations to healthcare.
Despite the short term flat growth prediction, there are customers who are upping their usage present and some are asking for different things to get themselves through the crisis, said CFO Elena Gomez:
Some of them want extended payment terms. Some of them want perhaps one-time discount. It's all different flavors. But the important thing is we're trying to retain and do everything we can to show empathy and make sure that we keep these customers for the long haul.
And the firm is plotting what that long haul might look like in practice, she added:
We are running various scenarios. We even started with a quick recovery, which we all appreciate has not happened. But without being an economist I think we're basically evaluating a couple of scenarios, one which is a longer recovery into 2020 and another one which is a longer recovery into 2021. That's sort of the time frame we're thinking about. But...it's a super-fluid situation and continues to evolve.
Response
That fluidity is informing Zendesk’s own response, said Svane:
One of the principles we started with in our response to this is that we need to make the organization very, very agile and that means that I really focus on some things with true impact…It’s exactly to give the organization agility so we can quickly scale up and down given kind of the conditions in the market.
I think that's very important because it's a very fluid situation. It's a very volatile market and we have to constantly adapt to what we see and the signals we are getting from everywhere in the world. So we're really focusing on giving the organization as much agility as possible so we can be very fluid in our motion and accelerate investments where we think it makes sense, but also be ready to move those investments over to other areas.
He added that the need for agility goes wider than the company:
We need to be more agile not just in our IT systems, but as a population to come through this and to make sure we can get the economy up and running again and to make sure that we can come out of this stronger, not just as companies, but as a population, as a world.
My take
Difficult times for all. Zendesk’s response to date has been pragmatic. There are reasons for the firm to positive - it’s well-positioned in its market sector with likely increased interest in both cloud and customer service as whatever the supposed ‘new normal’ turns out to be.
It’s also been philanthropic in its support for the likes of start-ups on the COVID-19 front line. Svane says:
I do believe that we as a company we have a responsibility to help customers through this and come out stronger on the other side. We're doing that because we want to [build] our relations and trust with these companies and as a business we've always been the kind of company that got up every morning and try to earn the trust of our customers…this is a defining moment for us.
As indeed, for so many.