Reinvent Culture for a Collaborative, Scalable, and Risk-Aware Future with Dan Zugelder of Dynatrace

It's going great, Phil. How are you?

Okay. Well, my role is CRO at Dynatrace. I've been at Dynatrace for, as you said, almost a year. And for me, it was a transition as my first CRO role. Previously, I was at VMware and I ran the Americas at VMware, and prior to that I was at Dell and EMC before that. So it's my first year into a new role, so it's been exciting.

Well, actually quite different. One is just scale. Dynatrace has approximately about a one and a half billion dollar ARR business, where VMware was closer to a 12 billion business, so you had a substantially different scale. Companies now, Dynatrace has been around for quite a while, but really has been on a significant growth trajectory over the last three or four years. We went public just over four years ago, whereas VMware went public nearly 20 years ago, so you just had different maturity curves and different scale. I'd say that would be the biggest difference.

Well, it allows you to see what a business at scale looks like. I've been fortunate to be a part of Dell, which acquired EMC. All were significantly larger than Dynatrace. What I got to experience is how businesses run at scale, how they operationalize their business, how they do things that allow them to grow in a more automated fashion versus every single thing being a heavy lift.

Well, I certainly compared notes with a number of CROs that have taken over businesses I'll call a little less mature, and all the things that need to be considered to get them to maturity. Some of the things that you took for granted that were in place, maybe it was your hiring, how you profile your hiring, how you did your compensation, how you did some things that you took for granted they were just in place for you, so you were just leading, worrying about customer set and driving the business. You didn't have to worry about that, whereas I have to look at all aspects right now. Some of these things are in place, but many of them are not, so you kind of have to look at it from the ground up, if you want to call it.

Yeah, we're transitioning as a business because when you're growing 20% a year and you're a $500 million business, that's adding $100 million a year, so it's a lot. 20% is a lot, but it's $100 million. When you're $1.5 billion and you're adding 20%, now it's $300 million you're growing. So you kind of look at everything you did and say, 'I can't do this without the team all in it together.' I think that sometimes when you're smaller, you have the ability for everybody to be kind of off doing their own thing. But as you start to grow and scale the business, you need every part of the organization to be aligned and in lockstep to allow for those bigger dollar growth that you need to achieve every year.

Yeah, I think, Phil, we talked about this briefly before. I was fortunate to be a part of some very different roles, although all sales roles, very different. I started at ADP as a first job out of school, and I spent nine years in what they consider a small business segment, so a very high transactional business. You didn't spend a lot of time with customers; there wasn't a lot of relationships, if you want to call it. So a transactional business gives you knowledge and experience that's very valuable in a high velocity business. Then I went to the opposite and I spent close to 15 years running global accounts. Global accounts were the top 100, 120 of the largest accounts, which were all very relationship based when I was at EMC and Dell. Those were very intimate relationships with the customer. Some of our teams would have one customer, and they would wake up and all they would do is think about how to make this one customer successful. So I went from a very high volume, high velocity transactional business to the opposite end, a global, very intimate business in global accounts. Then fortunately, I was able to go into the Americas role where I had the Americas all the way from our transactional business all the way to our global accounts from an Americas lens. So coming into Dynatrace, I was able to leverage some experience I had in a transactional business, some experience I had in a global business, and some experience I had in the Americas business. It was good to have all those different experiences as I'm kind of handling all those different aspects in my current role.

I think the biggest past experience I've had that has helped me is that I came from a culture that was at EMC, and that was such a customer centric culture. You basically operated as a culture that if we make our customers successful, we will be successful. That seems intuitively very easy to get, but many companies sometimes start with themselves and think of their own products and their own success, and 'oh by the way, we're going to bring our customers in, we hope they're successful, but we care more about ourselves than we care about them.' So I think understanding how to have a mindset and a culture built on customers being successful, and in turn if they're successful you will then be successful, that was such a positive impact in my career that I tried to share some of that at Dynatrace, saying, 'Hey, if we just fixate all of our attention on our customers and what they're doing and their success and their outcomes, ultimately they'll see us as a trusted partner and they'll want to do more business with us.' So I think that past experience has led me to some of the way I lead today at Dynatrace.

They did. I think anytime, you know, they had a strong culture. I was able to join a company that has a strong culture, and in fact that was one of the reasons why I joined, is I saw this strong culture there. So I don't think I have to completely change or rip up what was in place before, but just evolve it. And evolve that culture so that is a much better place to be than having to start from scratch. So I think it's evolving an existing culture that existed. I think that's more how I would frame it.

Yeah, I think one that jumps off to me is spending years in running global accounts is how we did account planning. It was a process in which we got the whole team together to really look at the company, take your customer's goals at the highest level, how that trickled down through their IT organization, how their goals align to their company goals, and then how you align your solutions to their challenges and their goals. That process of account planning was something that we did every day, and you saw the value. So when you walked into a customer, you said, 'I know what you're trying to accomplish, I know what some of your challenges are,' and so your whole conversation about your products and solutions were all geared to solving those. It was so well received. So one of the things that I'm trying to bring forward is to bring that account planning process to Dynatrace as well, so we have strong account plans so we're aligned to our customers' challenges and goals. So we go in and we're talking about our products only in context of how it helps them. That's one thing that I think is evolving some of the past experiences to Dynatrace.

Yeah, I think that's a great point. One of the things I was fortunate in my background is just that where you have this kind of high velocity business being a part of, to this very intimate business in your largest accounts. So I think you have to do it all. One of the things that we've done historically very well is the velocity business, what I'll call a land and expand business, where customers are able to take on your solution in a small bit, use it, get the value out of it, and then expand that. We've done that for many years, in fact we've grown our business that way, and it's been very effective, and we'll continue to do that. That's a bit of a velocity business that we have. So for us, that's why you called it an evolution. Some of those parts we'll continue to do that, but then we take some of our business at the top end of our customer base and say, 'Hey, how do we kind of mature that?' So we still will do the velocity business, it's one that's very important to us, but we know we have to segment our customers a bit. So you have your customers that you're going to say, 'Hey, we just don't have the time to spend that kind of energy on every single customer.' There are tens of thousands, hundreds of thousands of customers around the world, you just don't have the manpower to spend all that time there. So you start to segment your business to say which customers are we going to spend that kind of time with, which customers are we going to spend a little less time with, which is going to be a little less intimate, and then ultimately you get to the low end of the market, commercial, you just do the best you can to satisfy that market. It's certainly a velocity volume play there.

Well, I think you brought up a great point and something you referred to earlier about my partners in the business. So I have a number of partners at Dynatrace, but two of them I'll mention is my marketing partner, our CMO, and our Chief Customer Officer and our customer success organization. Those are two parts of the organization I depend on incredibly important to our success. Because think about that segmentation: how you market to the commercial market or your velocity market, and how you market to the top end of the market, we'll call it your strategics, is a very different marketing machine. How you support those from a customer success is also very different. So having alignment from your marketing all the way through your customer success within those segments, that alignment is the difference between success and failure.

Well, we actually use analytics throughout our business. Everything from putting territories together to product propensity to buy. That's used in each segment of our business. We use slightly different tools and different approaches to that, but it's all used in an effort to make sure that we have the right territory built, we have the right target set on that territory. All that is ensuring we have people being given the right tools to achieve the outcome that we've asked them to do. So I think analytics is a big part of delivering that. We've done that for many years. I actually had that experience coming from VMware where we allowed analytics to help tell us, 'Hey, what is the right target for this set of customers and what should you put on that?' Doing that manually, how we did it many years ago, it's roughly a guess. You're doing a guess. Now you're able to put some good analytics to that to give you a better outcome.

Yeah, it's a great question, Phil, because that's been a big push of ours to better understand what's resonating with our customers, where they're seeing the value, what the feedback they have, what are their needs, how are their needs changing, how can we be positioned for the future, what are the new challenges they're facing so that we can get ahead of that. Remember, product development is not something that you turn on in a matter of days or weeks or months. It's sometimes years to do product development. So you want to make sure you understand where your customers are going, what their needs are in advance, so your innovation machine can be delivering those outcomes to match their needs and challenges.

How we handle that is to ensure that we have the right products to each of the customer segments. So you want to make sure that you're not going in with a scaled product into a small commercial operation, right? So how do you have the right products in your team bringing the right solutions to that customer in the right type of needs? We know where the customers generally have the propensity for what type of needs and challenges they have, and now how do we customize that offering to match that? That has to do with pricing, packaging, and sometimes the solution overall. So it does become custom, not necessarily to the individual customer all the time, but certainly to the segment of the business what we typically have good feedback on what their general needs are.

Well, I think the best stories are always the ones where we customize something for a specific customer. For us in the banking vertical, our customers were asking for us to have, because they're highly regulated, they wanted to make sure that they were able to show our technology to the regulators. So we were able to help them present our product to the regulators so that they could feel comfortable with how they're managing their applications, because the regulators care about business resilience as a big piece of what they manage in the banking environment, to ensure they are. Our technology helps give visibility to that business resilience. So customizing to that vertical would be an example where we're able to alter our product for an overall vertical because of the challenge they have with demonstrating to their regulators that they have a solution in place.

The hardest thing is to prioritize your product group, right? So you have a product roadmap, and now when you bring and say, 'Hey, we need this special,' it's like, where does it fit into the priorities? So it's always trying to make sure our product development teams have many different deliverables on them, and you have a lot of customer needs out there. It's how do you deliver and prioritize? It's one of the hardest things for any software development group is to say, 'Okay, what's most important? We can do it all, you just got to tell me what's most important.' I think that's the biggest challenge you always have, is saying how do you prioritize what's most important, because there's a lot of customer requests out there.

You know, we have a lot of requests that come up, and as you said, sometimes from different parts of the business and all different places. You try to have a way to make sure it's not one-offs, and that all these requests aren't coming to your development groups one off without context and without a business case. We run our business like everybody does, you have to have a business case. So if you have a request, you have to say, 'Okay, listen, there is a customer satisfaction issue if we don't do this, there is a business opportunity if we do do this.' So we have to put together a business case for each one of these requests, and that's how we help prioritize those. It's no different than probably what everybody has to do. You can't just do everything, so you have to figure out how you prioritize them, and we prioritize them to a process that we put into a business case.

The topline growth for a lot of companies is still very important. You look at most companies out there, obviously to drive topline growth is highly important. So then you start weighing in, for example, what's it going to cost us to do this and how much topline growth are we going to have? I think we pull in, and that is generally one of the levers that moves your CFO. So if you want to talk about where the money comes from, I joke our CFO is the money man. You have to be able to convince them of where we're going to spend money that may not be in the budget or so forth. Typically, that lens is, does it deliver topline growth? If it does, we can figure out how to manage it. And sometimes that's not always, it doesn't deliver topline growth and you still have to do it. It may be a customer satisfaction issue where you have some business risk that you would take on. But for the most part, I think working with the CFO primarily it's a, how does this drive our topline growth and is it worth the additional investment?

Probably one of the most difficult things that anybody in my seat has to deal with. That is a great framing of what happens every day. There are a lot of opportunities that are brought to me and come across my desk on a daily basis, and those opportunities come in various different forms, but they all fall into different levels of upside and risk. To be able to quickly put those into a clean bucket is not always easy to do. But how much risk are we taking on, how much upside exists, how many of those do you do versus how many of what I'll call sure things that you do that have limited upside? I find that would be one of the bigger challenges that I face on a daily basis, because it is a business case, but it's not because there's so much of that, especially those ones that have this high return but high risk, but it's hard to gauge. This is art and science as you said. But I deal with that almost daily where I see, do I hitch my wagon to this highly speculative opportunity that could have this huge return? It could have very major impacts to the business, meaning you would have to transform your business to do that. And now what if it doesn't pan out? You've now transformed and moved the business, altered the course you were on, and now all of a sudden you didn't have all the information or you learn new things and it doesn't pan out. So those decisions could be the hardest decisions. I don't make those alone. Those are made with our CEO, our CFO, and all my peers. You bring those things forward and you talk those through, but I think it's one of the more challenging parts of all of our jobs to figure out which ones those are.

So I got a perfect example, a today situation. We had to make a decision on making an investment into a country in the Middle East. That required us to set up a legal entity in a country, which included having set up an office there. So there was a pretty significant investment, not just a one-time investment but an ongoing investment. So now you had all the information, the team brings a business case about what it is, but now you need validation. We had a partner that we work very closely with, one of our strategic partners, where we went out to them and said, 'Hey, do you see this same situation? Do you see this with your other customers? Can you validate for us this business case that we have?' So it's an example where do we make this investment, not as a one-time investment, it's an ongoing investment that we could use in a lot of different ways that would not only take time and money but also focus. But how do you ensure that then you reach out to somebody that can validate that? That was a today situation. When you do that, having now going into the CEO and the CFO and say, 'Here's what I want to do, here's the business case, and by the way, we validated with a very trusted partner that they've seen the business case the same way we do,' that is a perfect example of what happened.

Wow, you're hitting hard, Phil. These are the root of what makes our jobs challenging. Because one of the things that all these decisions have is it distracts you sometimes from your focus. So you have a business plan, typically we all start our year with a business plan signed off by the board, and you're going into that year saying, 'Okay, these are the major things that we need to get accomplished this year.' And now you have this new opportunity come across, and you're like, 'Do we do that? Do we lose our focus on the existing things? But if we don't look at new things and as things change, are we missing an opportunity?' I think that's probably for me personally, I find that to be one of the hardest things I do. Some other people may not find it as difficult, but you want everybody rallied around your goals and your objectives as a company. You want your entire team knowing what they are, knowing what role they play in that. But now all of a sudden you go, 'Oh, but we're talking about this,' and instantly everybody's head turns to the shiny new toy. People's head turns to the shiny new toy and they're going, 'Oh, what's that now over there?' Now what happened to your existing focus and maniacal focus on these priorities and these objectives? So I find that scenario you described, I have not conquered that answer yet, because you don't want to just ignore this new opportunity that may be presenting itself, but then again, how do you prevent the whole company from losing focus on the objectives? All of a sudden, by the time you look back, now you've lost time, energy, and focus, and now you're not on track to achieve those that you set out to do for the year.

Yeah, it is. You know, it's funny you bring it up. One of the things that I've enjoyed so much of being at a company, we're not exactly tiny, we have nearly 5,000 employees, we have $1.5 billion in revenue, but we are nimble and we are able to, and we have a culture of collaboration, that we are able to have a lot of these discussions as a team in a relatively short period of time to quickly assess that. So I have actually found it refreshing. I think that was more difficult at a VMware, which had close to 35,000 employees. At that scale, some of this was more difficult to do. And even Dell had 130,000 employees or more, so even more difficult to do at that scale. So yeah, it is great to be able to have that nimbleness. But I think it does start also with, no matter what size a company is, do you have a culture of collaboration and do you have a culture that people are quickly to work well together, trust each other, and enable you to make these decisions quick, either adopt them, put a plan together, or move on?

We've been fortunate to be an incredible innovator in our space, so technology innovation is core to what we've done and our success. We're trying to continue to ensure that the innovation is meeting the challenges of our customers. Meaning, you can innovate and have great innovation, but yet it doesn't solve customer problems, and then it's innovation that's cool but may not then translate into business opportunity. So what we're trying to do is maintain this incredible innovation machine that we've had for many years, match that up with the customer requirements and challenges, and ensuring that that innovation matches that. Because that's where the business opportunity comes, is when you can innovate with the biggest problems your customers are facing. Typically it's in or around or adjacent to your space, of course, where you're in your core. But when you're able to do that, now innovation has a direct return on investment. What you don't want to do is have innovation happen that your customers really aren't demanding. You're going out and you're speaking to your customers like, 'Look at this cool new thing we're doing,' and they're like, 'Yeah, well that's great, but I don't really feel the need to buy it because it's not where my biggest problems are.' So I think where you marry that customer, that's where the field marketing and even our innovation team, as they get out and interact closer to the customer, you're able to understand where to focus your innovation. That to us is, if we get that right, because we've been such an incredible engineering and innovation company, I feel like we'll be in a position for many years to come.

Well, start with the team aspect. I think anybody, it's easy to get focused on your own team and your own part of the organization. Everybody's held very accountable to their different goals and objectives, and sometimes it's happened to me in the past where you lose focus on your partners and your peers within the organization. I think my lesson learned is that's never a good outcome. Meaning, you can't go it alone. You need your partners, whether it's marketing, product, customer success. You need to be in it with them, and that's where you really achieve the outcome. So I would say we all do get, I get sometimes focused on my own organization and what we're supposed to deliver, but knowing that ultimately the best answer is when it's highly collaborative, that we're working together, because we'll really achieve a lot more that way. It sounds very cliche, but it's something that's easy to forget sometimes because you have sales objectives, you have marketing objectives, everybody has their targets that are put on for good reason. But to get two heads down and not pick your head up enough and collaborate could be a mistake.