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February, 2021

Variance in Sales

If you’ve ever worked with a Fortune 5,000 company, you know that their requirements can stretch a mile.

Variance is a favorite topic of mine. I like it so much we decided to name the company after the idea. The concept, at least as we think about it, is that variance is a great way to think about how businesses operate. The different functions of a business can be charted on a continuum from low variance (manufacturing aims to produce precisely the same thing every time) to high variance (research and development exists to create new things).

Sales and marketing have been on a long-term push down the Variance spectrum. If you look at the vast majority of the tools that exist to help revenue teams, they’re focused on automation and compliance. Some, like marketing automation, are even seen as a potential replacement for sales: if we could just turn the full prospect conversation into a drip cadence, we wouldn’t have to hire so many reps.

The early story of product-led growth was mostly focused on this possibility. In 2016, Bloomberg Businessweek ran a story titled “This $5 Billion Software Company Has No Sales Staff” about Atlassian’s unique go-to-market approach. 

Atlassian, which makes popular project-management and chat apps such as Jira and HipChat, doesn’t run on sales quotas and end-of-quarter discounts. In fact, its sales team doesn’t pitch products to anyone, because Atlassian doesn’t have a sales team. Initially an anomaly in the world of business software, the Australian company has become a beacon for other businesses counting on word of mouth to build market share. “Customers don’t want to call a salesperson if they don’t have to,” says Scott Farquhar, Atlassian’s co-chief executive officer. “They’d much rather be able to find the answers on the website.”

A lot of this is hard to argue with: we know that buyers prefer to do their research independently, and we’ve all felt the pain of being forced through a gatekeeper to get the thing we already know we want. The Atlassian model became a kind of gospel to try and find ways to bring down the variance of sales by automating as much of the process as possible. Suppose you could get your customers to research, trial, purchase, and expand without ever talking to a salesperson. In that case, you can pour the money that would otherwise be spent on commission and devote it to engineering or top-of-funnel marketing. When Zoom rocketed into the stratosphere on an even more extreme version of this model, the gospel was chiseled into stone. The smart money was saying that the best SaaS companies are the ones who don’t need salespeople. 

The only problem is that it was never the whole truth, and that’s because of variance. If all your customers need the same thing, then you can find ways to automate that process fully. But if you’ve ever worked with a Fortune 5,000 company, you know that their requirements can stretch a mile and look entirely different than even a close competitor. While there’s certainly overlap when it comes to security and privacy, once you get into organizational design and workflow, you might as well think of the Fortune 5,000 as 5,000 different countries with their own languages, laws, and customs. Even Atlassian recognized this, starting an “enterprise advocates” team soon after they went public. The way former Atlassian president Jay Simons describes it sure makes it sound like sales:

If you’re a large enterprise customer that has more complexity, or potentially more value to us, we have a team that can help steer you in the right direction and answer a more complicated set of questions that you have. We call them enterprise advocates and it’s something that we began to grow about four years ago, with a focus on really complex large customers.

And now we’re starting to see that same trend move downstream as companies recognize the value of layering sales onto products that can be trialed and purchased direct. The lesson seems to be that while pushing down variance through automation is powerful, it’s equally important to balance it with high-variance activities that can only be performed by human salespeople who can answer challenging questions and shepherd complex deals to close. It’s not a new trope in technology, but the idea is to automate the right stuff so that you can focus on the things that can’t be automated. For salespeople, that’s talking to prospects and customers. Increasingly the role of sales has shifted from convincing people to try a product to helping them grow into it. Knowing when to reach out and what to talk about is where we want to help.

February 16, 2021
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