By Chad Harrington
25 August 2015
I've written on the topic of how "Zendesk and hiring" for ERE Media here and for Relode here, but I haven't written on the topic of Zendesk as a startup in general, which is my focus here. While making great hires was clutch for them, the key to their startup success was bigger than that: a focus on creating healthy relationships all around. This insight doesn't come from me, but from their CEO, Mikkel Svane, who says that's what it's all about in this land called startup.
It seems like this principle can go without having to mention it, but as will become obvious, it can't. Too many people neglect exactly how the importance of relationships plays out in a startup. (And it's not just business relationships that are important—personal relationships play a major role in the success of your company, too).
So in this blog you will learn exactly why relationships are clutch for startup success, as well as six key relationships to focus on making healthy as an entrepreneur.
It's all about relationships
“It’s all about relationships,” says Mikkel Svane in his 2015 book, Startupland. This statement is what he wants everyone to take away from Zendesk’s startup story.
I added "healthy" to "relationships" in the title of this blog, because in one sense, everyone has relationships with others—it might be a terrible relationship, but it's a relationship nevertheless. Kind of like "temperature," "relationship" is neutral until you define it. The key to Zendesk's startup success was not just relationships, but healthy relationships.
It seems common sense on the one hand—that relationships matter—but for startup, his words carry profound implications. For example, relationships are vital for keeping customers loyal, which means sales and long-term ROI of initial connections. If you don't maintain that initial critical anchor group that Gabriel Weinberg and Justin Mares describe in Traction, you may have a hard time when the rubber meets the road.
Here's how a focus on relationships, not money, saved Zendesk from ruin in the early days. I'll call this focus "the relationship principle" of business.
How to handle "irate" customers
If Zendesk’s CEO and co-founder, Mikkel Svane, had ignored the relationship principle in founding his software company with Alexander Aghassipour and Morten Primdahl, he might have plowed over customers and run his fragile company into the ground. Their 5,000 customers at the time were irate over a subscription pricing rate increase that he implemented. No one saw it coming.
They were so mad at Zendesk for this sudden pricing change, that within hours a TechCrunch’s headline read, “Zendesk raises prices, pisses of customers.” Not exactly good press for Zendesk. Instead of “sticking to his decision,” though, Svane publicly apologized.
Raising the subscription price was a good decision, but it was about how they changed the price, not that they changed the price that upset customers. Svane decided that the relationship was more important than anything else (and yes, the decision fell on him as CEO at the end of the day). Zendesk ended up grandfathering in existing customers, allowing them to pay the previous rate, which was a great move.
Conclusion? “It’s all about the relationship,” Svane says throughout Startupland, a narrative on how Zendesk went from a messy apartment in Copenhagen, Denmark to unicorn status (worth more than $1 billion) as a public company in Silicon Valley, California.
Even on their homepage (at the time of writing), Zendesk has "relationship" literally written all over: “Better customer service comes from better relationships with your customers.”
Apparently, Martin Buber’s famous I and Thou philosophy applies to the world of startups, too.
Svane says, “In some ways the customer relationship is just like any other relationship. You have to consistently put in effort and not rely on the past. The moment you take anything for granted and stop investing in the relationship is the moment you start messing things up.”
Zendesk now has 50,000+ customers, only five years after the pricing incident, so you could say they bounced back a little bit.
‘Relationship’ is the stuff of business
Svane's maxim—“It’s all about relationships”—is intensely practical for any business, especially new enterprises, and here's how on six levels of life. These are key relationships for entrepreneurs to make healthy:
- The business to community relationship. As Zendesk grew, they made company decisions that impact their community. For example, not having free lunches in house so employees could spend their lunch money in the local economy and literally serving the community.
- The business to customer relationship. At least in the early days, Zendesk tried to make a personal touch with every customer. In fact, one of their customer service agents called me as I was writing this! I had just signed up to give Zendesk a try, and without even know that I was writing this, they called me as a potential customer. I liked it; more importantly, I remembered and valued it as a potential customer.
- The CEO to staff relationship. After a large growth-spurt, Svane embraced that you can’t be close to everyone on your team even if you want to as a CEO. This may be counter intuitive, but setting boundaries is also a healthy way to relate. If there's question, tell your staff what level of relationship you will have with them (and why) so they don't make up reasons why you're avoiding them.
- The VC to founder relationship. They avoided a huge mistake with a VC by going with their gut and admitting some relationships just don’t work out, as I learned my first three weeks at Relode.
- The founder to co-founder relationship(s). Mikkel, Morten, and Alex spent a lot of time together as co-founders early on in their story, annoying habits and all. They embraced one another’s quirks. Had they not done so, Zendesk might not be here today.
- The founder to spouse-of-the-founder relationship. Work often needs to stay at work, which saved his wife, Mie, from knowing too much, according to him. Share as much or as little as makes for a healthy marriage. Sometimes, a late launch is worth saving a marriage. Okay, a late product launch is always worth saving your marriage. Again, you'd think that could go without saying, but it can't.
I like Z's style because it's relational, which makes total sense to me, but don't forget relationships are complicated :)
Relationships cannot be managed
Business leaders must remember that relationships must be cultivated and nurtured, not “managed.” Svane writes,
Unfortunately, in business, as in life, relationships cannot be managed. And while a business-customer relationship is not the same as a personal one, all relationships are personal on some level. When people buy a product, they are buying the product of a group of people; when they email the organization, it is a person who responds; and when they decide whether to return to an organization again, they are individuals making a decision. Focus on the individual.
Relational advice: Establish trust
The lessons I learned from Startupland are giving us perspective as we move Relode further along as a team. We’re in the business of making finding and organizing job candidates modern and efficient. Svane emphasizes the relationship above all, even for a software startup. As a software startup ourselves, one practical takeaway is maintain our focus on establishing trust with our customers, which our team spends a lot of time doing right now, especially Jen, our Director of Quality and Training.
Without trust, you might as well pack your bags and go home.
Svane says, “the only way to establish trust and loyalty is to show your cards.” That’s why we at Relode have decided to “show our cards” by publishing our numbers every month.
A final word
My simple takeaway from Startupland is that relationships are everything in entrepreneurship. While this can be taken for granted, when understood for all its implications, can change business operations from bottom to top, beginning to end.
Chad Harrington is Creative Content Director for Relode, a modern way to find and organize job candidates. Hiring starts here. You can connect with him through LinkedIn, Twitter, or email chad[at]relode.com.
Listen to podcast interviews here.