Even within the relatively narrow confines of B2B software, successful market segmentation can go beyond small/mid/large accounts, and industry-specific verticals. Andrew Filev, CEO of work management system Wrike, makes the case for function-based segmentation, and explains why a hybrid approach can be the key to winning across all account sizes.
Tim Anglade, Executive in Residence at Scale Venture Partners: So for people who don’t know Wrike, what do you do? How would you describe the company?
Andrew Filev, CEO at Wrike: We’re a collaborative work management system. So basically how people manage their tasks, projects, processes and teams. Whatever they set as their goals, we help them accomplish those goals faster.
Tim: And do you have any view on what kind of segment of the market you look at? Because there are tools like that for big companies, very different process maybe than smaller startups, and things like that. So do you have a sweet spot, or do you try to talk to everybody?
Andrew: Yeah we do, so right, and let me give you a little bit of our personal background. So before I started the company, I was running another startup. We had about 100 people, and I was running multiple functions at the same time. I was running our digital marketing, I was running software, with about 20 projects in parallel, I was running the sharing, some other things. And so, for me one of the biggest challenges that I had through the growth phase of that company, was trying to get tabs on all of it. So it wasn’t necessarily, oh I’ve got like three people that I manage, and like how do I get them all started, but it was getting the visibility across separations, coordinating and making sure that we run in sync. And so, when I started Wrike, I wanted to solve that problem I wanted to give businesses that visibility, complete visibility to what’s going on, so they could better align and coordinate. Because I feel that there’s a lot of inefficiencies that lie in that area. Like if you look at some teams, you got, and compare like even apples to apples, you got very smart people here, very smart people there, both working very hard and some working overtime. And one could be like 10 times more productive than the other. And so there are often times a lot of productivity either gained or lost through, how do people interact with each other. And I feel that the bigger is the team, or the more diverse it is. If you add a distributive factor, like somebody’s working here versus in New York. If you add multiple functions, for example in marketing, you gotta coordinate designers, with marketing communications, with sales, with legal interviews and so on and so forth. So as you add those complexities, things start falling through the cracks and you lose a lot. So for me, what I wanted to solve on, is start small, so that you could use the product even if you’re a fairly small team, like 10 people, but help you grow with you, and help you solve problems at scale. So even when you’re running dozens or hundreds of projects, you can still coordinate nicely, and run as a well-oiled machine, or kind of high performance team.
Tim: Right, so it sounds like you don’t really think about like market segment in terms of size, because you think about the scaling aspect of it, but you maybe think about it more like by function, and what kind of tools and help does like a person in this job, or in that job need to succeed.
Andrew: Yeah, absolutely, and so, there, when we started we were a little bit more generic, but I already still had this vision that I want to build the project for business users. Because in our market there were a lot of products for engineers, people know Atlassian, there were many others like Pivotal and so on, and so forth. I wanted, and although my background is engineering, I wanted to build a product for business users. That would be very friendly, very collaborative. And that was original vision, and it was still pretty horizontal, right. What we’ve learned later is that, that works well for early adopters and innovators, because they’re super smart, they love your project, they jump in, the figure everything out. And they ultimately learn and know your product ever better than you do, and come up with all those amazing use cases, and you’re like oh my god, I didn’t even know that, like you could stretch it to do so much. But then as you scale, and we’re right now you know, in double digit million revenue, we’ve got more than 10,000 customers, we’ve got a huge number of customers joining every month. We’ve got about 30,000 to 40 trials coming every month, so as you get to that scale, you’re not only talking to innovators and early adopters, you’re talking to a mass audience. And then, they no longer want a switch knife, right. They want something that talks directly to them, and give them very clear blueprint. Okay, here’s the problem that we’re solving for you, and here’s exactly what you should do, like step one, step two, step three. So as we kind of going through that shift, somebody, some people call it cross into chasm, right, as you go into that mass market. We have to deliver the whole product, and we have to customize it for specific needs. And the first segment that we went out there, is we decided to not do it by industries, but do it by function. And we went very hard off the marketing teams. And it was both a strategic decision top down, when we looked at this as a huge underserved market, where software engineers have tons of tools, versus if you look at marketers, there are 10 million of them, they’re doing critical work for the company, their work is almost 100% digital, and the don’t have that digital system of record for the work that they do. So we went after marketing for that reason. But we also went after it because we saw a lot of existing customers from marketing and creative teams, already using the product. And some of those best, you know, ninja champions that I talked to you about, that knew the product in and out and could get a lot of value out of it, we saw those in the marketing segments. So we decided to double down, and last year we spent about six months developing the product, put all our engineering muscle behind it and then launched right for marketing. And it’s been super successful. We’ve been in our regional sales plans, and it’s something that we continue to be excited. And for us, the vision is not, doesn’t stop there, right. It’s, it actually starts there, right. We still want to be that horizontal platform that ultimately captures all the work that you do in a company, and gives you that complete visibility, and transparency. But it helps as we go into that mass market, and as we go to bigger and bigger deals, it helps to say, okay here’s the exact problem that I’m solving for you, and we want to have that core audience that would love us, and you know do everything for us, and then from there we expand to other, adjacent audiences as well.
Tim: So that makes sense, right. That you start from this kind of core competence that you have with that function, and then you do have to move up market, you do have to chase bigger deals and do all that, but at least you have the stronghold inside of each account you might be talking to. So that makes tons of sense. But you still have to worry about that segmentation and that scale, right. So what else changes? Do you kind of go and talk to bigger and bigger companies? You know, even if they have a marketing function. You know what have you learned about what it means to adapt your own product, and your own marketing to the need as you move up?
Andrew: Yeah, we’re going through this pretty big cultural transformation internally. And it’s not the culture, in terms of the basic tenets, which is still the same. We’re focused, I could talk later about what we’re focused on, but culturally in terms of our marketing changes, the way we, like before when we mostly talked to SMB’s it was purely digital, it was half of it was very performance oriented, half of it was content marketing. And right now as we go up market, it’s bigger focused on top leadership, and what we could bring to the table to the whole industry. It’s also more focused on offline, and like we’re a big sponsor of one of the Adobe events, and things like that. So our budget changes, our marketing changes, because of that we have to go through the hiring, the kind of growth spurt, right. We got to hire the right professionals who can do that. Similar on the sales side, we’ve nailed down transactional sales in the SMB, where I believe the best in our market to, who kind of, with that capabilities. But now as we more into up market and enterprise, we’ve built strategic account teams. We’re doing a lot of things, we’re focusing much more and the upsell, because with those large customers as you come to them, you’re still not the top item on the CIO agenda, so you gotta prove yourself first. And so there’s a big focus on like landing, and then expanding to a much bigger deal. So there’s a lot of transformation that we have to do within the company to support that growth up market. And product wise, you’re right that there’s some changes that you got to do there, but luckily the core product from day one, it was built for that scalability. So in terms of their core value, it’s great. And over the last two or three years we’re build enterprise IT grade support, for it. So things like, you know SSO and SAML, and then go into ISOC and HIPAA, and all that stuff so. And encryption at rest, and all the other good things. So we’ve done that transformation over the last two, three years. So I think product wise, we are already in good shape, it’s more about go to market.
Tim: That makes sense. And so it seems like you’ve kind of tried to do, you’re really out of this base of operation, you know in having the function kind of really cornered, of like understanding marketing and being able to build from that. It seems like you also are able to expand into upper echelons in the market because you have this SMB data revenue that you think you can just harness, and you’ve been really good at. And then you also have this technical, kind of a vaso operation, where like the product is sound, it’s good and we can add those CIO-level features, right to that to make those cells. So what about that traditional one, the industry segmentation? You said you didn’t want to go there, do you think that’s gonna change in the future, do you have kinds of words of advice for people who are evaluating whether they should segment their market approach based on industry?
Andrew: Yeah, I definitely think there are a lot of growth opportunities. And for example, we’ve got very good wings in finance industry, we have very good wings in automotive. And those industries are traditionally known as the ones that are fairly cohesive. So it’s easier to get them one by one, not with the function message, but like we said, okay, this model company that everybody aspires to be is a great customer. And here’s the value that they’re getting, so you can get the same value for your business. So as we’re getting those super exciting anchor, enterprise customers in those key verticals, we’ll go after the more from the perspective of customer marketing if you will. We’ll like, leveraging those success stories, and explaining what’s the value that they’re getting so you can get it as well.
Tim: Right, that makes a lot of sense, yeah. Well thank you so much, Andrew.
Andrew: Thank you
The Startup Tapes chronicle the highs & lows of building a startup, through candid, immersive interviews with founders, operators & advisors. Tim Anglade, an Executive-in-Residence at Scale Venture Partners and formerly with Realm, Apigee, and Cloudant leads the project with the goal to de-mystify the process through which startups emerge, grow & succeed. His unfiltered interviews transcribe the conversations we often hear in the boardroom, amongst our portfolio community and with entrepreneurs and partners we engage with every day.
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