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7 Secrets of Success from SUCCESSFACTORS

SAP’s announcement this Saturday that they are buying SuccessFactors for $3.4 billion has left many in Silicon Valley asking, “How did that happen?” The simple answer of course is that SuccessFactors is smack in the bullseye of what enterprise software customers want today – Cloud Applications. But the real answer is deeper than that. As a former advisor to SuccessFactors, I had a front-row view of their game. I believe their success leaves us with some key insights into how to build a fast growing, highly valuable technology business:

1) Start With a Different Point of View

Lars Dalgaard started SuccessFactors in 2001 with two ideas that were very different from the norm at the time. The first was that business software should be delivered as a service over the Internet – Cloud Computing. Lars was right behind Marc Benioff, founder of, on this insight. With that said, it is important to note that in 2001 very few people believed in this approach. Today, thanks to these pioneers, almost all new software startups are cloud companies. Additionally tech giants like SAP, Microsoft and Oracle are quickly building and buying cloud technologies.

The second area of difference was the type of application Lars decided to build. Back in 2001 most human resource software was transactional, automating things like payroll and benefits. Lars’ idea was that functions like performance appraisals, goal setting, and succession planning were strategic to a company’s success and needed to be automated.

Both points of view turned out to be very right.

2) “A Little Nutso” Goes a Long Way

Victoria Murphy Barret of Forbes famously described Lars as “a little nutso” in a 2007 story. In my 25 years in business, I’ve learned that you have to be a little crazy to start a company, never mind build one that is worth $3.4 billion. People used to describe Steve Jobs as living in a “reality distortion field.”

Entrepreneurs need to be “stupid” enough to think their ideas are possible of becoming a big business. And crazy enough to “will it into being”, as a company founder once described it to me. While being nutso can make you hard to work with, executives without a crazy vision and the drive to build something revolutionary, rarely do.

3) Leading Technology With Relentless Customer Focus

Very quickly in any conversation with Lars, Jay Larson (SVP of Field Operations), or any other SuccessFactors executives, you hear about their customers. This may sound obvious to some, but it is surprising how many Silicon Valley executives can talk non-stop about their technology, products, and industry trends, without mentioning customers. SuccessFactors was smart enough to build both a cutting edge cloud application and a customer-obsessed culture.

4) Strong Board and Executive Team

Early on Lars convinced the storied investor, Dave Strohm of Greylock Partners, to invest $1 million in his company and join his board. Over time he added seasoned board members, executives and technologists to help him build the business. The simple truth is that “A players” build legendary businesses. The press tends to only focus on the founders and CEOs as they tell stories about great companies. Don’t be confused, SuccessFactors was built by a deep and strong team, not by one guy.

5) Culture Focused on Winning

Many startup companies value things like building cool products and technology over everything else. They believe that the best technology wins. This is often not true. To create a multi-billion dollar business you have to be willing to do what mixed martial artists call “punch through the back of the skull.” SuccessFactors leaders drove the company to win new business and pound competitors into the ground.

6) Pivot with Power

In 2009 SuccessFactors was a public company, leading a new HR software category called “people performance.” They had approximately $140 million in revenue and, in a weak economy, were growing at a rate of over 40%. Most companies re-position when they are in trouble. Rather than rest on their laurels, SuccessFactors decided to play a bigger game. They believed that they had out-grown their original point of view and were now able to help their customers on a broader level.

So they decided to embark on an expansion strategy, launch new products, and yet again create a new category. They called the new point of view, “Business Execution Software”. Their new mission was to improve their customers’ ability to execute on their goals by getting every person in a company “rowing in the same direction.” This new approach and products helped make SuccessFactors more relevant and valuable to the C-suite, doubled the size of their addressable market, and drove their average deal size and market capitalization higher.

7) Expand Product Lines With R&D and M&A

In order to have more products to sell, SuccessFactors made a series of acquisitions and launched a number of new home-grown products under the Business Execution banner. They did not suffer from the “not invented here syndrome.” The combination of buying and building new software allowed them to expand quickly. And these new products, in the hands of a strong sales organization, allowed them to sell more to existing customers and gain new accounts quicker.

As SuccessFactors now begins their next big challenge – becoming part of SAP, they leave us with some powerful insights into how to build a leading enterprise application company.

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