HubSpot's Brad Coffey on Getting Strategic - Part 2
Brad Coffey, HubSpot's Chief Strategy Officer, joined us for our Strategic BizOps Meetup on July 12th. In 10 years at HubSpot, Brad has been responsible for business operations, product, pricing, packaging, strategy, investments and acquisitions. We covered so much ground in the fireside chat, that we decided to break up the transcript into three parts. Here is Part 2 - Getting Strategic. You can find the complete transcript here. At the end of this post, you can also find the audio recording of the entire conversation with Brad.
In this section of the fireside chat, Brad told great stories about how he was able to have more and more of a strategic impact at HubSpot. Brad also pays it forward by sharing advice that helped him along the way.
Alex: Moving forward in time a little bit, you ended up gaining responsibility over product, pricing, packaging. Was that something that came from the ops job or was that something that came from the evolution of the HubSpot business?
Brad: Well, over time I ended up in a really interesting role because I knew the data and the systems and how they worked. I would get pulled into board meetings and into our executive team meetings. One role I found really successful, we call it a chief of staff role now, I was working with whatever operation role at the time, but there was something very magical around doing a lot of the reporting, plus actually owning the agenda for our executive team meetings, and then owning a few things that fell thru the cracks, like pricing and packaging. I was kind of in the middle, a little bit of Switzerland, everyone has an opinion and somebody needed to make the decision right? And what was really powerful was I didn’t have a huge group of folks that would report to me or own a big part of the company, but I found I could get a lot done. If there was somebody not doing it the right way, the first thing I would do is run a report, and say hey, here’s this report and you are at the bottom of it the list. It turns out sales reps really care about their comp, they also care about not being the bottom of the list, they are quite competitive that way. That was always the first tactic and if that didn’t work, my second tactic was like, Joe, these things really aren’t working, why don’t you come and present to the executive team on how are you going to fix that thing? And what I would always do at the same time is back channel and say, I don’t want you to embarrass yourself, why don’t we review what you are going to present and I will give you some advice and feedback on what I think people are going to ask about. In that way I could basically convince them to make the changes exactly the way that I want. And so, then they are presenting it and they are locked in to making those changes, right? And if that didn’t work, I would actually change the pricing and packaging or the way people are paid and that was the hammer that I could really drop at the end of the day.
But I think that allowed me to branch out. I think something that was very valuable was that I was running the reports and legitimately helping in some of those presentations because I was pulling the data that they would present. I could then have an eye towards what I thought would be helpful and valuable. That was the big part of what got my foot in the door.
We have a little bit of a saying around Hubspot which is ‘no uninspired compromises’. I believe as companies get bigger and bigger, it’s easier to say no to things. So anybody with a sufficiently bold idea may end up watering it down until they can get enough people on board. We try to avoid that by naming people, typically low in the organization, to be in charge as the designated responsible individual (DRI). Their job is to make bold decisions and that was big. That’s why I owned pricing. We found we were just sitting in conference rooms staring at each other, a lot of navel gazing. One time we spent all day, wrote up on the whiteboard what we were going to do, and we literally signed it. Then in two days we came back and our CEO said, I don’t think this is right. That was the day we decided to assign one person to own it. So a bunch of stuff I had picked up earlier in my career was just stuff that someone needed to be the decision maker on. I actually applaud Brian Halligan our CEO. I remember the first time when I got pricing, our head of sales at the time, went to Brian and said he had a pricing issue. I think a lot of leaders at that time would have listened; instead Brian just stopped him in his tracks and said wait, why are you telling me about this. I told you Brad is in charge of pricing now. Go talk to him. That was hugely empowering for someone junior in the org. There were a few key moments like that along the way that really helped.
Alex: And there was some moment where your title changed. Was that later? Or was it like, don’t worry about the title, just do the job and the title came later?
Brad: Yeah, I had a bunch of different bosses in that job. I think they didn’t know what to do with me for a while. The big turning point for us was, figuring out and getting the unit economics; that was one of the most important things HubSpot ever did. We had a lot of help; we were raising our Series D from Sequoia and they taught me a lot about how to do that analysis in different segments. So through that basic analysis, we could do things like run a correlation between our retention and what part of the product people were using or our retention and sales reps performance. We had sales reps we thought were our very best because they closed a lot of deals, but it turned out that they were over-promising. We looked at it one time and there were always some people at 130-140% of quota and we thought they were the best, but they had really high churn. Then we looked at it one rep who was 95-100% of quota, but had never lost a single customer… Woah! What if our business looked like that. The big change was after looking at that we came up with our first strategic piece of paper, we called it MSPOT at HubSpot. It came from Salesforce’s V2MOMs. I thought, I’m going to copy that but came up with my own name. Literally, just translated the letters over to our version of it. That was really important and kicked off a multi-year effort to go up market for us. The strategy was “Mary-MOFU-Monetization” (you have to have good alliteration to make it very memorable), we went slightly up market and wanted to focus on the middle of the funnel, which was email marketing automation tools, and ended up acquiring Performable, David Cancel’s company, probably you know him. And then we changed our pricing very dramatically for the very first time. When we acquired Performable and did a bunch of those changes, I moved over to product and worked for David, trying to bring some of the rigor that we had in our sales funnel and productizing that more and leaning more into automation and engineering. I think those are kind of some of the big steps where my title changed and I started to do more things.
Alex: It’s fascinating, listening to the stories, it’s clear that you were moving into the product but you were intensely involved with strategy. So now you are in the strategy phase. Is that a common thread that goes thru all 10 years that you have been at Hubspot or is there something different from your current role that is all about strategy?
Brad: I think one of the things that I always tried to do from the beginning is from this great piece of advice from when I was consulting. I remember so distinctly, I was meeting with my boss, and he said
Brad, you are going to go work on developing this project plan with Mary. I said, great, I am going to schedule time with Mary this afternoon, no problem. He was like, what do you mean you are going to meet with her this afternoon? I said, yeah, we are going to come up with the plan, right? He said no, what you need to do is come up with the plan yourself. And there are two major benefits to that, one is, it’s a lot easier for Mary to react to something already written down than to hand her a blank sheet of paper. (That’s a good point). He said the other big benefit is you’ll learn your own assumptions; you’ll try to figure it out and then when you show it to her she thinks three parts are broken, but hopefully the other parts are right, and you’ll figure ‘why did I think that was true’. You’ll learn and get better about it, like a way to test and practice.
I carried that through to HubSpot. And I remember one of my early mentors, Mark Roberge, who ran sales, he’s a professor over at HBS now, had very similar advice:
When you get asked for a specific report, like can you give me the productivity per rep, by region or something, a lot of people tend to say, no problem, I’ll do it. What you should do is wonder why I asked for that data. And understand that I’m trying to figure out where we should staff next and actually staff in the areas that people are being successful, it shows there is demand… okay I get that. Then you do the analysis and check yourself, like is he actually asking the right question, is it enough to say, I want the productivity per region? I probably want to know the tenure of people, because we have already staffed a bunch of junior people into an area and their productivity is going to be down. What questions would you actually ask, what data would you do?
So, I always show exactly the data that he or Brian or anybody ask for, but then I would say I actually think you asked the wrong question; this is the question I would have asked, and actually this is my answer, and in fact, based on that, here’s what I would do.
Especially where I mentioned the Mary-MOFU-Monetization, it was a methodical assault on our retention. We didn’t have great retention then in 2009, we had about 70% customer retention, only about 75% revenue retention. It’s hard to grow the business when a third of the customers are leaving every year. It’s not easy, so we had a methodical elimination of retention and a lot of that was not just running the analysis to learn ‘if people use product X they are sticking’, or ‘if they use Y, they don’t’. But it’s like, how can I get more people to use X? Oh, I know, I can train the sales team and compensate them on retention and not just new sales. I can require onboarding to give my service team a shot to get that part of the product set up. Oh, I can find a way to actually build on setting up that thing that I want them to set up, and so there was a bunch of things to do throughout the organization, it doesn’t just stop at the analysis, but how to turn that into action that is actually going to drive the business and measure the impact of that overtime.
Listen to the full conversation with Brad here
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Alex is CEO and Founder of Rekener. Previously, he served as President and COO at ZeroTurnaround and as President of the Delta Division of BBN Technologies. At ZeroTurnaround, he grew high velocity inside sales by 6x in 3 years. At BBN, Alex co-founded RAMP and AVOKE, both recurring SaaS businesses based on BBN's world class speech recognition and natural language processing tech. Alex started his entrepreneurial career as founder and COO of NBX Corporation, which led the transformation of business telephone systems to Voice over IP. Alex’s companies have generated $500M in liquidity events and more than $1B in sales.
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