Latest / What's Broken in GTM and How to Fix It / Goodhart, Governance and the GTM Machine

Transcript

Goodhart, Governance and the GTM Machine · What's Broken in GTM and How to Fix It

• 0:00
  Simon: Louis, this week on the What's Broken in GTM and How to Fix It podcast, we're asking why organizations keep making the same mistake by correlating measures with success and turning them into targets.
• 0:12
  Simon: What's the TL;DL(Too long, didn't listen), for anyone who doesn't have time for the whole episode?
• 0:18
  Louis: Targets change behaviors.
• 0:21
  Louis: Revenue operating governance asks the harder question: if that's inevitable, how do we design the system so the behavior we induce is driving the outcomes we actually need?
• 0:32
  Simon: Stay with us for around 35 minutes or so to learn more.
• 0:37
  Simon: Hello, and welcome to episode 57 of the What's Broken in GTM and How to Fix It podcast.
• 0:42
  Simon: I'm Simon Daniels…
• 0:43
  Louis: …and I'm Louis Fernandes.
• 0:44
  Simon: We are exploring the challenges facing SaaS GTM leaders that Louis has been discussing in his newsletter, drilling into the topics a little further to provide some solid practical guidance for SaaS GTM success.
• 0:55
  Simon: Now, Louis, before we get into things, you have firmly and fully moved to Porto, and per your LinkedIn post the other day, you're now in a place where you can kind of focus, having got all the moving and all the shenanigans out of the way on, uh, on what's next.
• 1:11
  Simon: So what, uh, what does that look like for you, do you think?
• 1:14
  Louis: Well, as, thanks for, thanks for pointing that out, first of all.
• 1:17
  Louis: But yes, um, we, we finally made the full transition to Porto.
• 1:20
  Louis: So rather than having a foot in each camp, we're, we're, we're firmly here in Portugal, which is great, and surrounded by about 2,763 boxes at the moment because we're, we're, we're moving our entire lives, uh, from London to Porto, so now it's, it's onto the next chapter, I guess.
• 1:38
  Louis: Um, and that for me means, very much looking for a new challenge, a new senior GTM leadership challenge a business where I'm helping scale a SaaS business from that magical sort of 20 to 60 million revenue.
• 1:56
  Louis: but in a European sort of role, whether it's, uh, sales leadership, revenue leadership, or GM kind of thing.
• 2:02
  Simon: Right.
• 2:02
  Simon: Right.
• 2:02
  Louis: But that's what's up for me next, and yeah, anybody out there who, uh, maybe is experiencing challenges of scaling a SaaS business um, sitting there thinking,"What got us here isn't gonna get us there," let's talk.
• 2:20
  Simon: Absolutely.
• 2:20
  Simon: And I feel like Porto is such a great location because it's got its own thriving kind of startup scale-up scene.
• 2:26
  Simon: We've talked about that in the past.
• 2:28
  Simon: It's GMT.
• 2:29
  Simon: Uh, you can be anywhere across the continent in a couple of hours.
• 2:33
  Simon: Uh, I know, Louis, that, you know, you, you, you speak English, German, Portuguese, I think.
• 2:38
  Simon: Um, you've got friends from the Baltics to the Balkans, from Lisbon to Lviv.
• 2:43
  Simon: Not only is, is Europe your, your oyster, you are the pearl of Europe, I feel.
• 2:48
  Simon: So yeah, get in touch, everybody.
• 2:51
  Louis: Well, thank you very much for that very, uh, nice testimonial Simon.
• 2:55
  Simon: You're welcome.
• 2:56
  Louis: The cheque's in the post.
• 2:57
  Simon: Yeah, absolutely.
• 2:58
  Simon: Very good.
• 2:59
  Simon: Well, we better get onto things.
• 3:00
  Simon: So, what we're gonna be doing today is talking of LinkedIn, picking up, uh, on a thread from a, an article that I wrote recently on the GTM measurement trap, if you like.
• 3:12
  Simon: And Louis, you, you were kind of kind enough to say that you wanted to explore that a bit further and bring in a kind of wider conversation about governance, incentives, and, and what actually keeps go-to-market teams honest.
• 3:24
  Simon: So let's get to it, shall we?
• 3:26
  Louis: Let's do it.
• 3:29
  Simon: Now, Louis, in his 1975 paper, Problems of Monetary Management: The UK Experience, Bank of England economist Charles Goodhart wrote,"Any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes." Now, if that sounds vaguely familiar, you might know it better as when a"measure becomes a target, it ceases to be a good measure".
• 3:57
  Simon: Listeners may be wondering what 1970s monetary policy has to do, though, with go-to-market.
• 4:03
  Simon: Can you enlighten us?
• 4:05
  Louis: Yeah.
• 4:05
  Louis: I mean, so it, it's kind, it's kind of interesting for me because we, we go about different targets for different departments in different parts of the GTM engine.
• 4:15
  Louis: And to the point that Goodhart makes, when the measurement becomes a target, everything tends to fall apart.
• 4:25
  Louis: And this talks directly into some of the points that, you know, I've made in revenue operating governance, where we talked about how incentives drive behavior as a, as a good starting point.
• 4:38
  Louis: So if I take something like, uh, an SDR function, and I've recently been talking to Gerry Hill about this, which we may come back to at, at some point.
• 4:46
  Louis: If you start incentivizing your SDRs around booked meetings, and you say,"Well, that's actually a measure that we're trying to get," because the, there's correlation between the number of meetings that we have, we believe, and the revenue that we actually end up having.
• 5:02
  Louis: But actually I'm incentivizing on the number of meetings that we book, not the actual revenue.
• 5:07
  Louis: Guess what?
• 5:07
  Louis: You end up with a lot of meetings.
• 5:09
  Louis: Doesn't say anything about the quality of those meetings, whether they're in your ICP but the point is, it's, it, it starts generating a very different behavior.
• 5:19
  Louis: And that, I think, that really is the crux of what you were talking about in, in your article, that basically as soon as you set a, a target that is actually a measurement, that becomes your focus.
• 5:32
  Louis: The focus then shifts the behavior, and you end up with, for want of a better term, a bit of a shit show.
• 5:38
  Simon: Exactly.
• 5:39
  Simon: Yeah.
• 5:40
  Simon: And it, it is, it is kind of weird how, you know, 50-year-old monetary policy echoes down the, the ages long before SaaS was even anything anyone had heard of.
• 5:52
  Simon: And, um, you know, e- even through successive governments because not wanting to get wrapped up into the politics of it, you know.
• 5:58
  Simon: It was, it was the Labour government in the late'70s that were, were trying to, to, to, you know, manipulate monetary targets and then of course Thatcher famously, was, was all about kind of monetary policy and, and trying to set that as a, as a target when really it, it should have just been probably just a, a way of, of measuring the, the economy.
• 6:19
  Simon: Um, so it, it's very interesting how that, that kind of has that, that resonance.
• 6:25
  Simon: And so I guess the question then becomes, you know, why does it keep happening?
• 6:29
  Simon: Why do we keep building these management systems that depend on, on people altering their behavior to achieve a target that, that really is just a measure?
• 6:41
  Simon: And so I, I think that's what we wanna, wanna try and get into.
• 6:45
  Simon: Of course, the, the, the kind of archetype as, you know, you, you touched on meetings there.
• 6:50
  Simon: The, the other archetype and, and, um, you know, favorite topic of the podcast is, is around MQLs, which again, businesses don't exist to generate MQLs.
• 7:02
  Simon: Marketing functions, go-to-market functions don't exist to, to generate MQLs, yet, you know, they've become the the lingua franca or the, or the, the, the currency that, that everyone orientates around and, and that, that just introduces its own very similar problems, doesn't it?
• 7:19
  Louis: Yeah, and it's interesting actually.
• 7:20
  Louis: I mean, one of the things in your recent post is you, you, you linked to a post that Mark Walker, had actually done.
• 7:27
  Louis: Maybe you can just say a little bit about that post,'cause I thought that was really interesting, the, the points he made.
• 7:33
  Simon: Yeah.
• 7:33
  Simon: Well, what, what Mark was saying was really along those lines that, there's, there's lots of different things that, that, you know, very legitimately need to be measured.
• 7:43
  Simon: It, it could be MQLs, it could be meetings, it could be, could be dials, um, you know, oth-other activities and so on.
• 7:49
  Simon: At the end of the day, though, businesses exist to generate revenue, and that ultimately is, is what everyone should be working towards and, and orientating around.
• 8:00
  Simon: Um, and, and that's the kind of the ultimate objective that, uh, the, the go-to-market team should have so that it's clear what, what everyone's trying to achieve.
• 8:10
  Simon: And like I say, it, it's not that there aren't leading metrics and, and steps along the way.
• 8:15
  Simon: Nevertheless, if GTM teams don't keep that end goal in sight, then that's when they, they, they risk losing their way.
• 8:24
  Louis: Yeah, and I think that's kind of the, the, the point that we were making a lot with revenue operating governance, um, is that, you know, everybody can be hitting their individual targets based on the measures that we're using, but you still have the company failing overall.
• 8:39
  Louis: Because again, none of this talks to, you know, the quality of things that we're doing.
• 8:43
  Louis: And I, I think this is where it, it's, it's kind of becomes interesting to look at the different measures that we use because we tend to focus on one or two.
• 8:52
  Louis: You've just cited MQLs, right?
• 8:55
  Louis: It's a measure, we focus on it, we get fixated about it.
• 8:58
  Louis: Great.
• 8:58
  Louis: We then look at the other end and we go, revenue.
• 9:01
  Louis: That's the other thing we, we, we get fixated on.
• 9:04
  Louis: you know, to an extent rightly so.
• 9:07
  Louis: But we don't look at any of the things in the middle.
• 9:11
  Louis: You know, what happens about conversion rates by stages?
• 9:13
  Louis: Do, do we think about it in these kind of terms?
• 9:15
  Louis: And, and this is where I think the work by Winning by Design and the whole revenue architecture piece becomes really useful because rather than looking at, you know, a traditional funnel where we, we say,"Okay, well, what have we got into the top of the funnel?
• 9:32
  Louis: Here are our MQLs." And then we sort of w- we, we, we know there's some other bits and pieces in the middle, but then we're really looking at, you know, bookings, and it is bookings that we're looking at most funnels are measuring bookings.
• 9:46
  Louis: What it does that's slightly different by looking at the bow tie saying,"Well, actually, let's look at conversion rates by stage," and the goal is not bookings, the goal is sustainable long-term revenue.
• 9:59
  Louis: And this is one of the points that we sort of argued a lot in revenue operating governance, dovetails, I think, into some of the points that you, you pointed to that Travis Brown made when we interviewed him, uh, on an earlier Cognoscenti episode the uh, revenue operating North Star.
• 10:20
  Louis: I'm, I'm sure we'll touch on that a little bit later.
• 10:22
  Louis: But my, my point I think really is that once you align around understanding what is happening at each stage and what converts at each stage and how that creates long-term sustainable revenue, you start saying,"Well, actually, my bookings necessarily aren't all, all equal." The ones that fit into my ICP well are going be very different to the ones that maybe that haven't fitted in that well and have had to discount massively.
• 10:51
  Louis: And let me give you an example.
• 10:53
  Louis: If I sign two bits of business, both at a million dollars, euros, pounds, whatever, one of them is a fantastic ICP fit and I haven't had to discount it at all, the other one was marginal ICP fit, and I had to give them a 40% discount on my list price just to win the business.
• 11:11
  Louis: Which one of those two pieces of business is more valuable?
• 11:14
  Simon: Well, certainly the first one.
• 11:15
  Louis: And why?
• 11:16
  Simon: Well, you haven't, you haven't discounted it for one thing, and I feel like even if you had discounted it, it, it's still the better fit.
• 11:24
  Simon: It's going to most likely be, um, a longer term customer, better retention.
• 11:30
  Simon: Um, they, they're gonna get more value from, from the, from the solution.
• 11:35
  Simon: So it's just a much better situation all around.
• 11:37
  Louis: And that's exactly the point.
• 11:39
  Louis: It's a much better solution all round because we retain that value for longer in our business and we realize more of customer lifetime value.
• 11:47
  Louis: So the customer's getting more benefit out of it.
• 11:49
  Louis: We have that thing that I keep on coming back to, annually recurring impact for the customer, which means that they're much more likely to renew, they're much more likely to buy more, they're much more likely to move into other product areas.
• 12:05
  Louis: And, and this is where we, we really see the value that translates to shareholder value ultimately within the business that we're, we're running.
• 12:16
  Louis: And I think that, that's the, the point that we're making with things like connecting, uh, the bow tie and revenue architecture back to customer lifetime value and shareholder
• 12:26
  Simon: value.
• 12:27
  Simon: Right.
• 12:28
  Louis: And those things are all interrelated.
• 12:29
  Simon: And there's a couple of other points here as well, I think, that, that, that you've made.
• 12:33
  Simon: One, one is around the, the kind of the mantra, it, it's the, the kind of classic, you know, work, work smarter not, not harder.
• 12:42
  Simon: So you, you frame that as, you know, working harder is just volume.
• 12:46
  Simon: It's, it's MQLs, it's meetings, it's, uh, it's activity.
• 12:50
  Simon: Um, whereas, you know, being better is, is focus and, and smarter is where the quality ultimately lands.
• 12:57
  Simon: And I, I think that's kind of summing up what you're saying a little bit there in, in overall terms, isn't it?
• 13:02
  Louis: Yeah, and, and this is the point.
• 13:04
  Louis: I mean, you're- you've hit the nail on the head.
• 13:05
  Louis: The, the volume piece just becomes about theater.
• 13:08
  Louis: You know, it looks great on a dashboard, doesn't actually tell you what's moving forward.
• 13:11
  Louis: Once we actually start getting into the focus area of like saying,"Actually, these are the things that we're going to do, and most importantly, these are the things we are not going to do." And this is part of the problem, because once you tie measures and incentives to targets, then actually there's no incentive at all for qualifying out.
• 13:34
  Louis: Because we then turn around and say,"Well, actually, that's an opportunity lost." Whether it's a good opportunity or bad opportunity is neither here nor there.
• 13:39
  Simon: Yeah
• 13:40
  Louis: The whole point is we need to have within our systems and our processes and our governance, discrimination.
• 13:47
  Louis: We need to discriminate against the deals that are never gonna go where the way we want them to and are not gonna fit our business model.
• 13:53
  Louis: And we need to say,"Thank you, but no thank you."
• 13:56
  Simon: Exactly.
• 13:57
  Simon: And I want to give you the opportunity to, uh, to use the M word again that we've used, uh, in, in previous episodes where we've been talking about, you know, revenue architecture and some aspects of the bowtie and so on.
• 14:10
  Simon: So, you know, we've, we've touched on the dangers of additive departmental volume metrics versus, you, you say it, you do it so much better than me… multiplicative conversion thinking.
• 14:23
  Simon: So, hey, I did it.
• 14:25
  Simon: Wow.
• 14:26
  Louis: I, I really hate that word.
• 14:28
  Simon: You made me say it.
• 14:30
  Simon: Well, anyway, let's move on.
• 14:31
  Simon: So, we've talked about the danger of the, the classic danger really of individual teams and functions hitting their targets.
• 14:40
  Simon: So marketing hitting MQLs, sales saying the w- the leads are rubbish, and then, and then, you know, just focusing on pipeline build, customer success, kind of focusing, you know, quite rightly on, on retention plays, perhaps regardless to, you know, again, to your point as to, you know, do we even want to keep this customer?
• 14:58
  Simon: And this is where we, we kind of get into data attribution and the, the blame that arises around correlation over, over causality and, and that's obviously something that we've touched on in, in previous episodes as well.
• 15:14
  Louis: Yeah.
• 15:14
  Louis: And that was, uh, I think the conversation we had with Mark Stouse and, and you know, that's exactly that, that point.
• 15:19
  Louis: And, to your point, Simon, I mean, this whole thing is the central tenet of something I know you and I have been talking about for 20 years, and that's sales and marketing misalignment.
• 15:32
  Louis: Because we end up running in different directions.
• 15:35
  Louis: I mean, I, I remember talking about this, what's it been?
• 15:37
  Louis: 15 years ago at a marketing practice S&M forum.
• 15:43
  Louis: Not that S&M, sales and marketing…
• 15:45
  Simon: Yeah, the boring, the boring S&M.
• 15:48
  Louis: And there we go.
• 15:50
  Louis: Well, I don't know.
• 15:51
  Louis: I think sales and marketing's quite interesting, but that's a different conversation, but I remember talking about this, uh, 15 years ago, and, you know, I've, I've said it before, I must have done a really terrible job because nothing's fundamentally changed.
• 16:03
  Louis: We still have those conflicts.
• 16:06
  Louis: I think intellectually the conversation's moved on and we understand more about it, but to your point right at the top of this conversation, we understand that half a century on, you turn a measure into a target, people change their behavior around it.
• 16:21
  Louis: But we still keep on building management systems that depend on people doing exactly that.
• 16:28
  Louis: So, you know, I, I…
• 16:30
  Simon: Yeah.
• 16:31
  Louis: …what are we supposed to learn?
• 16:32
  Simon: Exactly.
• 16:33
  Simon: Exactly.
• 16:34
  Simon: And, and revops has got a role to play here as well, right?
• 16:37
  Simon: In, in terms of bringing this together, kind of driving that architecture of, of, of the system and, and trying to make sure that, go-to-market, while it's got it-its individual targets and, and kind of, you know, leading indicators and measures is, is ultimately, you know, pulling towards that, that final goal.
• 16:58
  Louis: Yeah.
• 16:58
  Louis: But I think one of the complications, and we've touched on this before, is the fact that revops often gets seen as a,"Well, we build the dashboards," rather than actually being the arbiter of truth within the system.
• 17:09
  Louis: And this then goes back to, well, what is the truth that you're actually trying to move towards?
• 17:13
  Louis: Because we then talk about, well, if revenue's the goal what do we mean by that?
• 17:19
  Louis: And this is where I, I think that, you know, part of what Travis was talking about when we interviewed him, and also it's a, a real point that we make about the, uh, revenue operating north star.
• 17:34
  Louis: It's what do you use as a measure for that?
• 17:38
  Louis: Now, if we think about the different types of revenue that there are within a system
• 17:43
  Simon: or
• 17:43
  Louis: any sort of SaaS business, the most obvious one that we, we look at is we go,"Well, we're gonna look at bookings." And we all start getting fixated on bookings, and that's a form of revenue, absolutely.
• 17:54
  Louis: Trouble is, bookings creates that hero culture, and it rewards the moment of acquisition well before anybody understands anything about life cycle economics.
• 18:06
  Louis: So then they go,"Oh, okay.
• 18:07
  Louis: Well, b- bookings is fine." And then maybe more sophisticated GTM operations, we then say,"Well, actually, we're, we're gonna look at ARR." And you know, ARR's become- been a goal for a long time.
• 18:17
  Louis: We're looking at ARR this, ARR that, ARR the other.
• 18:21
  Louis: And yes, it can be managed a bit better, but it still skews net new logo rather than reflecting retention, contraction, and expansion our business.
• 18:36
  Louis: And let's face it, once you've got a SaaS business that's over about 20 million ARR, actually, the majority of that revenue is in the retention and then increasingly the upsell, cross-sell.
• 18:52
  Louis: You get to 50 million and actually new bookings is a relatively small part yet, and we've talked about this before, you look at the focus for most of these organizations, think about marketing budgets.
• 19:04
  Louis: 95% of the marketing budgets get, get moved towards net new name acquisition.
• 19:09
  Louis: How are we gonna attract new logos?
• 19:11
  Louis: How many-- How do we get more leads?
• 19:13
  Louis: It's all about the, the leads.
• 19:15
  Louis: We've talked a lot about Burnett and Field in the past, and how we need to start saying,"Well, actually, what...
• 19:21
  Louis: How, how much of marketing's effort in a B2B context we look at, brand activation versus sales activation?" And those two things really should be working in conjunction with each other.
• 19:32
  Louis: And I, and I think this is where we, we sometimes lose the way a lot.
• 19:35
  Simon: Yeah, that's right.
• 19:36
  Simon: And I can remember being in a situation, you know, on that new business where, you know, marketing was just about entirely focused on new, new business.
• 19:45
  Simon: And yet, as you say, this, this was a, a business with, with, you know, several hundred million in recurring revenues.
• 19:53
  Simon: Um, and marketing was chasing, you know, I, I can't remember, 10, 20 million, you know, sort of net new.
• 19:59
  Simon: And it, it put an awful lot of focus on a relatively small number, and then, you know, effectively the rest of the business, sales and customer success, were, were left to, to keep the, the, the kind of home fires burning.
• 20:13
  Simon: And to a certain extent, that, that's not invalid in the sense of if you've got good motions across account management and, and customer success and, you know, it's a, it's a kind of recurring business and a relationship model and so on, then it, it probably doesn't require a huge marketing lift to, to do that, um, uh, renewal and so on.
• 20:35
  Simon: At the same time, it, it's almost just recognizing where the focus is, where the effort is, and, and what it is you're trying to achieve.
• 20:42
  Louis: Yeah, and I, and don't get me wrong, I think, I think winning new logos is important.
• 20:46
  Simon: Right.
• 20:46
  Louis: But I'm going back to, like, the, the 1970s when I start quoting Kotler and talking about the, you know, it's six times more expensive to win new revenue than it is to retain existing revenue.
• 20:59
  Louis: So what, what, why are we not focused on those kind of things?
• 21:02
  Louis: And you sit there and you think,"Well, actually, even if I have that leaky bucket," the classic idea of the leaky bucket, I could be filling the top, which is very expensive, and losing at the bottom, which is equally expensive, and I don't move forward at all.
• 21:15
  Louis: It's like treading water.
• 21:17
  Louis: I, I need to make sure that I'm retaining customers, that my attrition rates uh, are low, I've got low levels of churn, and this is why I think ultimately when we talk about, well, what's a better measure and what's a better objective?
• 21:29
  Louis: We settled on something like net retention rates as a stronger revenue operating North Star.
• 21:37
  Louis: Now, it doesn't mean it can't be gamed.
• 21:39
  Louis: It can be, but it just means it's harder to optimize locally without damage becoming visible within the system.
• 21:48
  Simon: Yeah, yeah.
• 21:49
  Louis: And the good news is that it also spans the entire life cycle because we're talking about, well, okay, well, what contributes to it?
• 21:56
  Louis: Well, we're talking about acquisition.
• 21:59
  Louis: Great.
• 21:59
  Louis: We're talking about retention.
• 22:00
  Louis: Great.
• 22:01
  Louis: We're talking about churn.
• 22:02
  Louis: Great.
• 22:03
  Louis: We're talking about, expansion.
• 22:04
  Louis: Great.
• 22:05
  Louis: All of those are factors, so it becomes a much better metric to look at, we believe.
• 22:11
  Louis: But that's not to say that it can't be other things.
• 22:12
  Simon: Yeah.
• 22:13
  Simon: And you-- So you introduce-- Th-there's a couple, couple of things here that I, that I wanna unpack.
• 22:16
  Simon: I mean, first of all, well, just as a slight aside, the, the-- that point you made about different types of revenue, it's interesting.
• 22:24
  Simon: I'm doing a little bit of working in banking at the moment, and obviously banking is all about capital and capital allocation.
• 22:29
  Simon: And, you know, i-in that situation, capital is not the same.
• 22:34
  Simon: You know, some clients, um, it, it's actually worth putting, you know, capital towards more than others.
• 22:41
  Simon: And so again, it's that same kind of thinking of, you know, what, what is the actual quality here, not, not merely the volume.
• 22:48
  Simon: Um, so that, that's just a, I think an interesting parallel.
• 22:51
  Simon: The other thing is, in talking about the, the, the North Star and what that really means, and as you say, we had, uh, we had Travis Brown on, um, recently, and we touched on this, um, within the sort of, you know, revenue governance conversation.
• 23:10
  Simon: And then afterwards, he actually posted kind of in follow-up to, uh, to being on around, you know, what, what is a North Star or what should a North Star be?
• 23:20
  Simon: And I, I've always felt that, I mean, uh, it-- I've always felt it's a slightly overused term, to be perfectly honest with you.
• 23:25
  Simon: Nevertheless, pe-people assign to it revenue as if, you know, the North Star is, is our revenue goal.
• 23:31
  Simon: And, and Travis was, was very specific around saying if-- I mean, he, he literally ended up by saying,"If, if your North Star is, is a revenue goal, that's not a North Star, that's a quota." Um, the, the North Star needs to be kind of bigger than that, maybe more qualitative than that, and point the business, you know, to wa-towards where it's going.
• 23:52
  Simon: And then you've got other targets and, and measures that, that actually tell you whether you're, you're on your way to it.
• 23:59
  Simon: Does, does that resonate with you?
• 24:01
  Louis: It does because I think, you know, the thing that we always miss, I guess, is, is the purpose piece.
• 24:07
  Louis: And the reason-- there's a reason organizations have, mission statements, they have a vision, you know, they, they talk about this is what our strategic direction is.
• 24:16
  Louis: That's all very well and good.
• 24:17
  Louis: My challenge with some of this stuff is that it's, it's great on a piece of paper.
• 24:22
  Louis: How much is it lived and breathed by the people within the system on a day-to-day basis?
• 24:29
  Louis: And the challenge there is, and, and it almost goes back to something that Simon Sinek said believe it's almost 20 years ago now that we- he started talking about start with why.
• 24:40
  Louis: And this whole idea was around people don't buy what you do, they buy why you do it.
• 24:46
  Louis: So in that whole sort of hierarchy, most people in an organization can explain what it is that the organization does.
• 24:55
  Louis: You know, we, we build widgets.
• 24:58
  Louis: Some of the people in the organization can explain how the organization does the what.
• 25:03
  Louis: This is how we build the widgets.
• 25:05
  Louis: Very few people in the organization can explain why we build the widgets in the first place.
• 25:12
  Louis: What is the outcome that we're driving for our customer?
• 25:16
  Louis: Do we understand what our purpose is?
• 25:18
  Louis: And people pay lip service to these things, and I think they are actually incredibly important.
• 25:24
  Louis: If you understand why you're getting up in the morning, why you're turning up, why you're doing the work for your customers, why they value it, you're in a much stronger position, I think, as an employee, as an employer, and as a going concern in terms of how you return value to your shareholders
• 25:47
  Simon: That's right.
• 25:48
  Simon: And that makes for a much better North Star, I think, than just, you know, this is our revenue target.
• 25:54
  Simon: The revenue target is the revenue target.
• 25:56
  Simon: Let's bring that back to, to, the, the kind of revenue governance, uh, angle, if you like, and th-this, you know, idea that we can't just design on the assumption that, that people will ignore incentives.
• 26:13
  Simon: Um, we, we need to be treating behavior under pressure as, as predictable and, you know, recognizing that, that people are gonna kind of revert to type almost when, when the chips are down.
• 26:26
  Simon: How, how do, how do we kind of handle that, that aspect?
• 26:30
  Simon: You know, it's all very well saying,"Don't, don't let the measures be the targets," but, um, as I say, un-under pressure, you know, behavior can not, not always be what we want it to be.
• 26:42
  Louis: And this is, this comes back to incentive design and how that then ties into a lot of the other things that we talked about in revenue, revenue op and operating governance.
• 26:50
  Louis: So if we then sit there and we say,"Okay, well, how, how does that tie into qualification?" Do we make sure that people have some gates that they need to get through on qualification?
• 27:00
  Louis: Because going back to the point we made earlier on, not all revenue is equal.
• 27:04
  Louis: h- how do we do that?
• 27:06
  Louis: Do we actually incent people to say no when it's appropriate?
• 27:11
  Louis: Is that a question we need to be asking?
• 27:13
  Louis: Do we make sure that the checks and balances are in place so that actually when people follow the system, it's a lot easier to follow it than to try and game it, because actually that just makes life hard.
• 27:23
  Simon: Yeah
• 27:24
  Louis: So it's about creating these paths of least resistance
• 27:26
  Simon: Yeah.
• 27:27
  Simon: And I, I think that gaming piece, I think actually that I was gonna touch on that.
• 27:30
  Simon: Th- the, you know, the, the fact that it's-- with, with, with some of the interim measures, it, it becomes all too easy to game.
• 27:39
  Simon: You know, it's not tremendously difficult to, to, um, conjure up MQLs or meetings like you were saying, or, or some of these other, you know, d- you know, a- a- any of the kind of activity metrics.
• 27:51
  Simon: Um, whereas, you know, revenue in its, in its different forms, and, and, and cert- you know, certain other objectives are just harder to, to game.
• 28:02
  Simon: Not impossible.
• 28:03
  Simon: You, you can, you can channel stuff or, end of period discount and, and lot- lots of other things, I mention them in, in the article, uh, that, that can temporarily boost revenue.
• 28:15
  Simon: But it's quite easy to see that happening.
• 28:17
  Simon: And the, the point being that the, the, the softer measures are easier to game and, and harder to, to see that, that it's actually happening.
• 28:27
  Louis: But, but this is exactly the point when we look at some of the other tenets of revenue operating governance.
• 28:32
  Louis: We talk about optimizing for the long term rather than the short term, and the exact thing that you're talking about, discounts and, you know, last minute sort of changing what we're doing just to win a quarter and the heroics that sit inside it, that's exactly the short-ter- short-term behavior that then should show up and give us pause for thought.
• 28:52
  Louis: We need to make sure that it's okay to challenge these things and say,"Actually, I don't wanna take the short term dopamine hit".
• 29:01
  Louis: What I want to do is I want to say, actually I'm on, I'm on, you know, the serotonin train, and what I wanna do is I wanna make sure that what we build now and what we close now lasts because it's better for the overall health of the company.
• 29:15
  Simon: Right
• 29:16
  Louis: And this is one of the things, I mean, actually when w- you might remember w- equally, when we spoke to Kevin Brown.
• 29:21
  Simon: Yep.
• 29:21
  Simon: No relation
• 29:22
  Louis: He was saying that even in his, even in his sort of startup environment, he feels he's got, you know, the little Louis voice on his shoulder saying,"Should we be taking this bit of business?" whilst in a startup environment it's very difficult to say no to things, the fact that he's even thinking about these things and considering them...
• 29:41
  Louis: And there are things he said,"Actually, do you know what?
• 29:43
  Louis: We then realized that actually taking this piece of business was not gonna be good for our long-term health, and we've said no."
• 29:52
  Simon: Yeah, yeah.
• 29:53
  Louis: And, and that's a really brave decision, but it's the right one in the longer term.
• 29:58
  Simon: Exactly
• 29:59
  Louis: So we, we do have these constructs in place we, we, we can do these things.
• 30:03
  Louis: And ultimately, this is where I think one of the other things we talked about was enablement.
• 30:07
  Louis: We enable the teams and show them the path of least resistance and create those good habits and those great behaviors early on, and we reinforce it through coaching and we reinforce it through the governance.
• 30:23
  Louis: And like I say, everybody thinks governance is a dirty word.
• 30:26
  Louis: It's not.
• 30:26
  Louis: It's basically just making sure that we do what we say we're gonna do and keeping people on the straight and narrow and giving them the constructs, the processes, the tools, the guidance, the support to ensure they keep on doing it day in, day out.
• 30:43
  Simon: That's right.
• 30:43
  Simon: And talking of long term and having started the conversation on politics, I know you were kind of interested to move, move it into or draw a, a parallel with the environment and maybe, maybe environmental politics, I, I don't know.
• 31:00
  Simon: But how, how do you see that if we zoom out the, the, the kind of climate change angle in all of this?
• 31:08
  Louis: The first thing I want to give a little plug to The Rest is Politics, um, I've been listening to a miniseries they've been doing with, um, Caroline Lucas about the environment and climate change, and I think it's, you know, particularly relevant this summer where in the UK, I can say this now, in the UK you guys on your fifth heatwave, I think.
• 31:29
  Simon: Yeah.
• 31:30
  Louis: And it's unprecedented.
• 31:33
  Louis: We've had areas, uh, where, where I used to be near Walton-on-Thames in Wisley, uh, Ro- RHS Wisley, they didn't have rain for over 40 days.
• 31:42
  Simon: Well, I think actually, and I think literally it, it is Wisley that they just broke 63 days without rain last night, um, and had like f- three millimeters of rain or something.
• 31:55
  Louis: There we go, and that's the point exactly.
• 31:57
  Louis: Now, thing is, we're sitting there all going,"Oh, well, now we're starting to talk about food security.
• 32:02
  Louis: Now we're starting to talk about, you know, what's gonna happen with farming.
• 32:05
  Louis: It's becoming a real problem.
• 32:07
  Louis: Now we're gonna talk about, uh, what happens with migration," all these different political things that are all coming into it because of the climate change.
• 32:13
  Louis: We were talking about climate change 30, 40 years ago, saying,"Actually, we- we're starting to see the effects of these things." There weren't any incentives in place to mean that people started to take note, and the feedback loops are so long in terms of, you know, governments changing, and I've got a f- four to five-year horizon, then I need to go and get elected again, that people are like,"Yeah, but this is a long-term problem, we, we...
• 32:36
  Louis: Manana, manana.
• 32:38
  Louis: We'll just kick it down the road and into the long grass," until right now it's, it's biting us in the arse.
• 32:43
  Louis: And this is the same across the whole of Europe.
• 32:45
  Louis: We've had wildfires across Spain and, and France.
• 32:49
  Louis: We've seen it in, uh, North America with the Canadian fires.
• 32:53
  Louis: Uh, you know, it, it's coming home to roost.
• 32:56
  Louis: This is no different to...
• 32:58
  Louis: And I don't want to turn this into sort of some p- big political, environmental thing, but this is The, the analogy is it's no different in GTM.
• 33:05
  Louis: We do these things all the time, and then we wonder why two years down the line we've got the wrong revenue, our numbers are falling off a cliff, we're not retaining customers, the signs were all there, but we incentivized the wrong behaviors, we incentivized all of the drill, baby, drill kind of stuff.
• 33:25
  Louis: And ignored the long-term effects.
• 33:28
  Louis: And hell, we're only burning our own house down the long term, is the analogy.
• 33:33
  Louis: We've got to live on the planet in the same way that in an organization, the organization has to survive till tomorrow so that you still remain employed and you can pick up a paycheck at the end of the month.
• 33:44
  Louis: Maybe there are some parallels.
• 33:45
  Louis: Who knows?
• 33:46
  Simon: Yeah, I think so.
• 33:47
  Simon: I think so.
• 33:47
  Simon: It, it, it's, it's that long-term thinking.
• 33:51
  Simon: So we, we need to wrap up.
• 33:52
  Simon: Bringing it firmly back to GTM then, what are the, the, those parallels?
• 33:59
  Simon: How, how do we land this?
• 34:01
  Simon: What, what should go-to-market leaders be thinking about within their businesses?
• 34:05
  Simon: You know, we, we've touched on kind of short and long-term thinking, thinking about, you know, visibility of, of a kind of immediate outputs and, and delayed consequences.
• 34:16
  Simon: What, what are the sort of other considerations around that, do you think?
• 34:19
  Louis: Right.
• 34:19
  Louis: So, uh, for me, this is pretty straightforward.
• 34:22
  Louis: Just think about how your organization operates.
• 34:26
  Louis: Does every rep on every opportunity come to you and ask for 30% discount?
• 34:31
  Louis: If that's happening so that you can get deals across the line, Houston, you've got a problem You know, because they're, they're not being able to sell to value.
• 34:39
  Louis: It's maybe not the right ICP fit.
• 34:41
  Louis: But you now, as a leader, have got to take it upon yourself, itself to ask that question that Simon Sinek started off, why?
• 34:49
  Louis: Why is that happening?
• 34:50
  Louis: You know, again, likewise, if you're a marketer and you, you're looking at MQL volumes and you're still looking at MQLs and you're still getting incentivized, yes, the behavior may be driven by what you're getting paid on, but be better than that.
• 35:04
  Louis: Ask why does this matter?
• 35:07
  Louis: You may not be breaking the system and you may actually be, ha- finding that everybody who's operating within it is operating within it perfectly because it's rewarding exactly the behaviors that it's set out to reward.
• 35:21
  Louis: It's just that those behaviors are damaging the overall health of the system.
• 35:27
  Louis: And the point of governance is it exists to make healthy behavior the rational response to that system, not the other way around.
• 35:37
  Simon: Let's leave it there, shall we?
• 35:39
  Simon: So Louis, if we try to land all this, what's the closing thought you'd leave people with?
• 35:45
  Simon: How would you bring all this together?
• 35:47
  Louis: So there's three things really for me.
• 35:50
  Louis: I mean, the first is really that the goal is not to find a metric that nobody can game, okay?
• 35:56
  Louis: 'Cause that, that's gonna take you a long, old while and you won't be successful.
• 36:00
  Louis: It is, however, to build a system which gaming the metric becomes economically unattractive
• 36:07
  Simon: or
• 36:08
  Louis: immediately visible.
• 36:09
  Louis: that's the first point.
• 36:11
  Louis: The second point here is that perhaps the real lesson isn't that history repeats itself, it's that human behavior repeats itself whenever we re- recreate the same incentive architecture, we do this all the time.
• 36:23
  Louis: We say we wanna achieve X, then we produce these incentives that drive people towards Y.
• 36:30
  Louis: Stop doing it.
• 36:32
  Louis: It's not that hard.
• 36:33
  Louis: And then third, I think, and this goes back to what you were writing about, the lesson from Goodhart isn't that measurement is pointless, it's that the moment you use measurement to govern people, you've changed the system you're measuring.
• 36:46
  Louis: So the real job isn't to choose better dashboards, it's about designing governance that anticipates how people are gonna respond to them.
• 36:55
  Louis: So just to return this to practical go-to-market, if we're able to recognize this behavior in economics and in politics and in society, then revenue leaders really have got no excuse for continuing to design funnel incentive and reporting systems produce it inside our own organizations.
• 37:16
  Simon: Those are our takeaways for this episode.
• 37:17
  Simon: Thank you so much for listening to episode 57 of the What's Broken in GTM and How to Fix It podcast.
• 37:23
  Simon: Check out our LinkedIn page where you can find show notes relating to the episode.
• 37:27
  Simon: You can also get in touch with us via LinkedIn and follow us for regular updates.
• 37:31
  Simon: And don't forget to subscribe in your preferred podcast app to make sure you don't miss an episode.
• 37:36
  Simon: Next time, we will be speaking to Gerry Hill about managing an SDR function at scale, so please join us.
• 37:45
  Simon: Until then, it's goodbye from me, Simon Daniels…
• 37:47
  Louis: …And it's goodbye from me, Louis Fernandes.
• 37:49
  Louis: Have a fantastic day.