Janis Zech: Hello, and welcome to another edition of the RevOps Lab podcast. Our guest today is Jacco van der Kooij, best selling author, renowned keynote speaker, founder of Winning by Design, and an experienced operator with a wealth of hands on experience as well. So, yeah, very glad to have you, Jacco. Warm welcome.

Jacco van der Kooij: Thank you for having me. It is a pleasure and a treat.

Janis Zech: Great. Yeah. And you can see, Janis and I, we're standing together in a hotel room. We're actually at the RevOps AF 2024 conference in San Diego. So it's a bit of like a makeshift setup here today. We hope it works out. And apologies for any like audio or video issues that you might experience with this episode.

Jacco van der Kooij: You folks sponsored that event, didn't you?

Janis Zech: Yep. Yep. We don't sponsor many events, but this is supposed to be a really good one for the RevOps community from RevOps Co-op, one of the largest communities out there. Let's see how it's gonna be. We're excited.

Jacco van der Kooij: Fantastic. Well, thank you for contributing to the well-being of our community of RevOps people.

Janis Zech: Thank you. Yeah, I think we're just really big fans of real operators. We do hands on work and yeah, really go into the details. So that's why we love this community a lot.

Jacco van der Kooij: Yeah.

Janis Zech: I think actually you also did a great contribution just recently. Right? So you published your latest book, Revenue Architecture, which we both read and absolutely loved. So what we wanted to kind of like get started with in this episode today is just to hear what inspired you to write this book on revenue architecture.

Jacco van der Kooij: Well yeah, I think for me the number one thing here is as an engineer I'm able to produce things over the years and you know one of the things that I used to produce down here is one of the PCBs. This is what I generated or created a few years ago, a seven layer multi PCB. This is an MPEG-2 Descrambler Demultiplexer that I once created for the launch of MPEG-2 as a standard in the world. What we noticed, what I find is that many trades we can apply scientific principles. But when it comes down to GTM, it feels like it's just a free for all. Anybody with a voice, young, old, inexperienced, experienced. If you can deliver a pitch well, then you can create a business for yourself in GTM, regardless whether you know what you're doing or not. I wanted to overcome that with a more scientific approach.

Janis Zech: Sounds good. It makes a lot of sense. In the first chapter of the book, you also talk about how the markets are changing. Maybe you can give a bit of an overview of what you've observed in the last couple of months, I think particularly since COVID ended and a lot of other big world events happened?

Jacco van der Kooij: Obviously what we have seen is that for the past decade, and I would say since late 2011, when Marc Andreessen came out with the article Why Software is Eating the World, the launch of many SaaS companies came into being. Today we are looking at over thirty five thousand SaaS companies. And through that decade, the way they grew, they exploded, was primarily through an approach, a GTM approach, a go to market approach referred to as the grow at all costs. Now, when we see today, what you see here behind me from the book is that we see that growth actually has started to slow down and over the past twelve quarters, this is from the eighty seven public SaaS companies provided by David Spitz from BenchSites. What we see here is that that growth has slowed down to about half. Now, if we take a look, that's not the only slowing down. Also, we take a look at the cost increase, you'll see that again, down here, we see that the cost per dollar acquired. So if you divide, if you put the cost of marketing and sales against the amount of revenue acquired, you'll see that that dollar of revenue acquired, which was late 2021, about one dollar fifty has now broached two fifty and is hovering around two sixty dollars for every dollar acquired. That means that grow at all costs, simply said, half the growth at double the cost, right? And that's no longer working. And obviously that's the reason why so many are scrambling to figure out how to solve for this.

Janis Zech: Yeah. I think it's one of the big challenges in software right now, and it's actually not easy to overcome. In your book, you speak a lot about go to market motions and the revenue factory. What is a go to market motion for you?

Jacco van der Kooij: Yeah. Well, first what I want to bring up is like, we believe that when a company surpasses ten million dollars it functions and operates like a factory. And just like any other thing, any other thing that you produce in volume, it creates a factory element. And so what you'll see down here is that we too believe that your SaaS business works like a factory. And like I depicted down here, if we look at the growth of a factory or if we look at the goals of a factory, they're primarily looking at growth, sustainable growth, because it needs to be more and more efficient. But one of the things that is off that we find constantly is like, hey, you know what? It's not just about growth. I also need to make sure that I make money. And then when I start lowering the cost of the production and starting to increase the revenue, sooner or later the quality comes out, and that brings in the third goal. I gotta produce quality. And that's what is depicted down here. Revenue factories produce growth cost efficiently or sustainably and must deliver quality which is in a durability way. Now that third part will come to a later part. First things first, we need to create sustainable growth. It goes beyond that. We can also think that if you think of a revenue factory, that every one of your GTM motions operates like a production line. And that production line could be your PLG production line, could be your SDR AE production line, could be a deep enterprise sales production line. GTM motions, like a PLG motion or like a high touch motion can create production lines of revenue, and when you add up the revenue of all those different GTM motions, you get your revenue growth. As simple as that. Once we start looking at business this way, it becomes a lot easier for us to tackle what the challenges are today and how to solve for them.

Janis Zech: Yeah, when I read your book, I was absolutely amazed because if you don't think about it in that way, how you describe it, it is actually quite difficult to depict the different motions, right? And I think that's maybe the starting point. So what's your like experience? Like how do you diagnose the go to market motions you actually already have? And then, you know, how do you go further in measuring the profitability? Do you do that by go to market motion? Yeah, but I'm super curious about that.

Jacco van der Kooij: Yeah, so first things first, there are five GTM motions that we know of today. Now we can, you know, like often when we think about GTM motions, we think about terms such as a PLG motion or an enterprise motion. So what I bring up here is five GTM motions. And you'll see down here vertical axis, that is the number of customers served per year, horizontal axis is the annual contract value. At the top you see five different GTM motions: the no touch, the low touch, the medium touch, the high touch, and the dedicated touch. And what we noticed over the years is that five different GTM motions serve different markets. So pick a number. Let's say you sell a product, pick any number. What is your average contract value of a product that you normally sell?

Janis Zech: One hundred k.

Jacco van der Kooij: One hundred k. One hundred k in this case puts you right down here, right? And that says that you most likely are field sales dependent, targeted, and by saying your sales organization is a field sales organization, marketing campaign is targeting, probably a form of an account based marketing, and your customer success organization is organized by segment. In other words, by pharma or by construction, and so on and so forth. Then what you can also see is that you're probably still a little bit dependent on inbound and it starts to wane off down here. So your inbound goes up to a certain point, but then it becomes more and more networking. And so those are the GTM motions that you see down here. Now, what we have learned from that is that the discrepancy between these GTM motions at the top, every time you move from one motion to another, the cost goes up by anywhere from 2x to 5x and in some cases even to 10x. So if I move from a no touch to a low touch GTM motion, the costs double. If I go from a low touch to a medium touch and I start to deploy an SDR and AE, they may again double or even quadruple. If I go from a medium touch to a high touch in enterprise sales, where I deploy a sales engineer now comes into play and I have to do a proof of concept, I have to run an ROI model, then suddenly a high touch becomes into place. If I use a dedicated strategic account manager to that, then again the cost goes up two to 5x. The last one can be very big. If I run a one hundred million dollar account, I may have a team of twenty people working for me. So what you'll see down here is this creates five different production lines and these production lines we can do different things with over time.

Janis Zech: Do you think that there's also sort of like a stuck in the middle issue here? So, like, the medium touch is really, like, probably not, like, really good, but then it's better to either, like, have, like, a clear decision. Okay. I really wanna go low touch. I wanna go high touch, and I wanna go there as quickly as possible. Do you think companies need to go through the different motions step by step to really scale?

Jacco van der Kooij: What we see today is that there's just a lot of randomness going around. A lot of people doing different things without knowing it. They're just going to a conference and they hear something new. You know what, we need to do it that way, or we need to do it this way. They constantly are changing their opinion and coming to a different kind of conclusion. So one of the examples that you sometimes see is that we run into this: a company sells a one hundred and twenty thousand dollar ACV product, uses an ABM campaign for field sales organizations, but also deploys an SDR AE organization somewhere along the line, uses outbound, like more spam, like volume based outreach. On top of that has a help desk and has an inside sales organization, like they operate at like eighteen million. And it's like a mess. What you'll see down here is why, because we rotated through three VPs of sales. We rotated through two VPs or CMOs. And so it becomes this kitchen drawer. You no longer are running a well organized, structured factory. You are running an artistry firm that's messy. You walk on the production floor and you see everything is a mess. This is very common. And that is what we were trying to say. Your question was, which one should we pick? Why is it all different? Folks, mathematics tells us what we should pick. We can say scale it. If it's scalable, is it also sustainable? Scalable means if I change the number of inputs, will my outputs change accordingly? And sustainable means, can I afford it? If I buy a lead at a hundred thousand dollars and the product sells at ten thousand dollars then I'm not affordable. Right? So we can calculate whether it makes sense or not to run that specific GTM motion.

Janis Zech: So the way I understand you is most companies actually don't really have this concept in mind of a revenue factory and different go to market motions and being really clear on where to invest and where not to invest and what not to do, right? We are basically at a point where growth has actually become more expensive and is stalling. So I would expect a lot of folks now to react like, okay, we have to do more. We have to do, you know, better, faster. And what, I mean, what's your approach to, you know, like that, right? Like what do you tell the folks? How do they diagnose? What should be working? And then how do they go about it?

Jacco van der Kooij: We have a few ground rules that may help. First thing is up to about ten million dollars focus growth on one GTM motion only. Do not try to run multiple GTM motions. When you run multiple GTM motions, like at the pic down here, you're going to see, there we go, and this is all from the book, I'm showing you pictures from the book. What you see down here is this company runs three GTM motions. It sells a product at eighty thousand, one hundred fifty thousand, and five hundred thousand. Now those are all high ACVs. You can also have a product that sells at one hundred dollars, at ten thousand dollars and thirty thousand dollars. But in this case they show they use three GTM motions. That means that your website must adhere to three different ICPs. Your salespeople must sell to three different customers. You get three different product lines. You get three different customer success approaches. All that makes the company spin very thinly across these. And so that is ill advised early on because you wanna create momentum. Now, if you think about HubSpot, what is the main HubSpot approach to go to market? If you think about HubSpot, which go to market motion does it line up with? What do you know HubSpot for?

Janis Zech: I would say inbound for sure.

Jacco van der Kooij: Inbound. Inbound and HubSpot. What you'll see is they're a match. The go to market motion that they have and the product they sell are a match. If I tell you Slack, what GTM motion do you think of?

Janis Zech: Yeah. PLG at its best, right? Virality and then self checkout, low touch, no touch actually.

Jacco van der Kooij: Okay, now what you'll see is, okay, so HubSpot and inbound are really matching up like a product and the GTM motion matches up. If you think of Slack and PLG, they really match up. I can even tell you that many cases here in the US, people are buying their Tesla online. You buy a self driving car with a self-service portal, even in a weird way, that's a match. If you go up to ten million dollars in revenue, you need to make sure that your one GTM motion that you pick is a match with your product that you sell. You need to push the pedal on that, really identify that. And so as you push through that, then you scale to ten million dollars. Up to fifty million dollars we then go deploy three GTM motions maximum. And so now we are deploying a second and a third, and you may start testing already at five, six, seven million. You may start testing what your second GTM motion is, but to get to twenty million you've got to launch your second GTM motion, and to get to fifty million you've got to launch your three GTM motions. Once you start to surpass fifty million dollars you need to be working on another product. Your product needs to scale. That is a basic ground rule of generating revenue. One GTM motion up to ten, three GTM motions up to fifty, and following that you need to launch a secondary product like marketing and sales or sales and customer success for example.

Janis Zech: Yeah, that makes sense. I think I always have this simple calculation on top of mind when thinking about the complexity of GTM models or just revenue models in general. It's like you have one product, one country, one go to market motion. It's relatively simple complexity, but then as soon as you add a second geo, a second product, a second motion, and so on, the complexity increases massively. And suddenly you have one motion, one country, one product. Complexity is one. If you just multiply it, then you add a second geo, then suddenly you are at six, then you add a second product, so on. Grows quickly. That makes a lot of sense to me.

Jacco van der Kooij: So down here you'll see, and I'm going to zoom in a little bit, down here what I'm depicting is a single GTM motion. And what you'll see down here, I buy an ABM campaign. I am targeting an organization. I then use an ICP description, which leverages messaging, content, and a buying center. I'm using a MEDDIC based sales methodology in order to create a commitment. If I don't get it, I start nurturing it. So you see down here, this is a relatively straightforward kind of approach. This would be a high touch GTM motion. Now look what happens when I start adding another GTM motion to that. Now, before I do that, every time I use the four key blocks down here, ICP, MEDDIC as a methodology, a nurturing campaign in the background, and an ABM outbound marketing technique. So these are my four building blocks that I'm building my high touch organization around. Now watch what happens when I start increasing that and I add another GTM motion. How many interconnections I have to have. So now in this case I added a low touch GTM motion. So you suddenly see content becomes super important. I need to have SEO because I'm inbound. I may have a freemium model. I have my inbound motion needed. And all these things start to interconnect with each other. That's your second GTM motion if you're not careful. That is the problem that people feel every day when they launch multiple GTM motions. Every time you launch a GTM motion, more and more things need to get connected. Your website needs to do more and more things and answer to more and more masters.

Janis Zech: Yeah, makes total sense. Complexity increases drastically. I want to switch gears a little bit and talk about one of the models that you discuss in your book. I think overall six essential models that you discuss, like different models that basically help operators govern their recurring revenue business. So you have the revenue model, you have the data model, mathematical model, operating model, growth model, and GTM model. Probably we don't have time to focus on all of them and since we are a RevOps podcast, thought it makes sense to focus on one of the favorite topics of those people and that is data, so the data model. Maybe you could give a brief overview for those who already work with a lot of data day to day how you think about the data model in the revenue architecture and the revenue factory.

Jacco van der Kooij: What you see down here, as you correctly depicted, there are six models. Now I want you to think of the following: If you think building, you think about, hey, you need to explain to me, like, explain to me how human motion works. What are the elements of a human body that I need in order to make a human body walk? What are the structures that you think of?

Janis Zech: Muscles, neurons, bones.

Jacco van der Kooij: Bones. Okay muscles and bones. Now if I look at the bone structure right and I just lay the bones out, nothing just pure skeleton right, look at that, will that body walk just based on the bones? Probably not. But I can give you a hundred percent accurate picture of the bones. This is a hundred percent accurate, you look at the bones you go like this, for ninety nine point nine nine percent of all human beings is one hundred percent accurate, but I need the muscular so I need a different model. Now I can give you only the muscular model without the bones and you would not know how it works either, so these two models combined, each being one hundred percent correct, when you overlay them on top of each other you start to get the idea. Now if I add the cardiovascular system, if I add the nervous system and so on and so forth, layer after layer that I'm building, I'm building the human body, one of the most complex systems. I can do the same with a bridge. When I'm building a bridge, go like, okay, what is the infrastructure? Now in the world, there are about arguably between six and ten different bridge types. And each of these bridges has approximately the same model. If I take a suspension bridge, it has pillars, it has a suspension cable, it has the deck hanging from the suspension cable. These are basic elements. And all of these elements I can model. So if I want a suspension bridge and I need to make a bigger span, I can either make the tower higher or the span wider. These are just mathematical calculations. The more models I'm using, the more accurate my picture becomes. And so I can do more of that. And so what I see is I can use in our world, I can also use models. And I can also start using techniques. Now, the models that we use are the six models that you talk about, the six essential models. Now of these six essential models, the model that you're referring about is the data model. Now the data model sits on top of the infrastructure of the revenue model, and the data model plays up to the mathematical model. The same way how a bone structure and a muscular structure are combined need to work. The data structure by itself and the data model won't work. Now, the model that we use is an extension of a version of it. Previously, we had different kinds of versions, but today we have in general the bowtie, the extension of the marketing and sales funnel to cover for the entire thing. Now many listeners of yours are already familiar with the bowtie, you have seen it plenty enough. The bowtie provides us the structure and tells us what we need to do. It tells us where we are coming from, it tells us where the recurring revenue takes place. Then from the bowtie, I can now start extending the data structure. I separate model and structure into two different things: model, funnel to bowtie, structure. I'm now starting to name them: volume metrics, conversion metrics. The problem that you as a RevOps expert has to realize is that every GTM motion uses unique nomenclature. If I go on an inbound lead motion, I'm talking about MQLs and SQLs. I go outbound, I may also talk about MQLs and SQLs. But if I go account based, I'm talking about marketing qualified accounts. I'm talking about opportunities, qualified opportunities. And if I go into a PLG style, no touch motion, I'm talking about product qualified leads, PQLs, and so on and so forth. Each of these has different motions, so the data structure needs to be robust enough that when you overlay multiple GTM motions on top of it, that you can compare them against each other. That, what I'm talking to you about folks, is proper engineering that is long overdue and that we need to do these days in our world.

Janis Zech: Yeah, I think that's great. Finding this underlying base data model that you can use for all the different GTM motions that you have in place so you can actually make them comparable and so on. I think one thing that I find always quite intriguing around data and numbers is that actually a lot of people are afraid of them. Operators are afraid of them, sales leaders are afraid of them. So I'm wondering how can people lose their fear of it? How can companies find a common language that really helps everyone in the organization to understand why data matters and what these numbers mean?

Jacco van der Kooij: Okay, so numbers is simply forms of metrics. What you see down here at the bottom, many of you will see the bowtie. For those of you online that were just listening to this, at the bottom layer there's a bowtie and the bowtie is the model. It tells me what am I measuring where, what is a prospect, what is a lead, what is an opportunity, qualified opportunity and so on. In the middle of that bowtie, I convert that. Now understand that while I'm on the left of that bowtie, the acquisition part, I think in numbers. I think in like number of leads, of opportunities, number of qualified opportunities, number of wins. And on the left it decays. I start with a thousand, I end with one win. It decays. On the right I grow. I start to grow if a customer that spends a thousand dollars ends up spending like six thousand dollars over his lifetime, a customer that pays a hundred thousand dollars a year, but after three years pays a hundred and sixty thousand dollars, I increase. So on the left is decay, on the right is accumulation. Now on top of that are layers, and the layer is kind of like the same thing that you have in Google Maps. You can open up layers and you can see more and more information. You got to think of that as layered information. Now, in this case, the lower layered information is the more detailed, the higher layered information is the more like, hey, snappy kind of data metrics that you need. So I start at the lower level. At the lower level I have time metrics measured in seconds in case of PLG, in days in case of medium touch, and it may be months, sometimes quarters in case of large scale sales that are deep, high touch and dedicated touch. I have volume metrics. Think of volume metrics such as number of leads and so on and so forth. I have campaign costs. How much does a campaign cost? Either a customer campaign or a lead campaign. How much do the people cost? What's the salary? All these are highly detailed information. Now, us operators work a little bit at that level. We work at that lower level. I can go up one level higher, I get unit economics. What is the average revenue per sales rep? What is the cost that we spend on a deal? And so on and so forth. I can create a growth formula. It takes us a thousand leads to create one win. I can create productivity metrics. There's two hundred k per rep per month generated. It's a higher level of the lower level. The tactical or bowtie metrics can be translated into more operator metrics. What do I need to push in order to get? If I double the leads, what do I get? If I hire twice as many salespeople, what do I get? On top of that is another layer, and this is more just what we refer to as the strategic or financial metrics layer. You now see NRR and ARR, which is a combination of the metrics that lay behind the layer lower. I get LTV, which is the average contract value over the number of years. I get client acquisition costs. What is the cost that I spent in order to acquire the revenue? I get free cash flow margin. That is all at the financial metrics. And then all the way at the top, I'm going to get the executive or investor metrics. What's the growth rate? What's the CAC payback period? What's the LTV to CAC ratio? What's the rule of forty? And the above are really just shorthands used by investors in order to make a judgment. Now, if I ask you, if I go from the bottom layer to the next layer, to the layer above, every time I go up, I am further removed from the actual metrics, which often means that time wise I have a bigger time window. All the way at the top, I am often three to six months behind what happens all the way at the bottom. It just takes time to propagate. That means that if I run a business with my eyes on the top layer like so many companies are, I'm not running the business. It's like I'm steering the boat and then I have to wait six months for the boat to actually make a turn. You can't steer the boat that way. That explains people that are new to metrics on how to use metrics properly.

Janis Zech: It reminds me so much of the annual planning cycles and the top down and bottom up process and how much that is broken when you talk about it, where it always feels it's misaligned. And it's too late usually as well.

Jacco van der Kooij: That's right. What you'll see here is a simple way of producing and creating something that we already know for the longest time. We already know this is how it works. No surprise to us on how this works, but we are now — look, this is an engineering perspective. I go back on bit level, that's bit level, that's byte level, that's network level, application layer, it's the same thing. It's the same thing, but we are afraid of it and, as a result, we often run the business the wrong way. At Winning by Design, we have now helped over one thousand SaaS companies, big and small. I think we help about at least twenty, if not closer to twenty five percent of all public SaaS companies. These are things that RevOps people inside these companies — oh, let me ask you this. Where do you think RevOps operate?

Janis Zech: On the lower three levels, I would say. Actually, actually, no, let me change my answer. So I think actually on all of them, if they're like in a really strategic position, which most of them unfortunately are not, but then if they are like more on the admin level, I would say on the lower two levels mostly.

Jacco van der Kooij: Okay. Where does financial planning and advising work on? Which one?

Janis Zech: Fourth, yeah.

Jacco van der Kooij: And so what you'll see is like, we all say everybody, you know, an investor should know all — I may never ask what should an investor know, an investor says I should know all four layers. That lower level is twenty pages of detailed information. And so what you'll see is everybody has a focus area. The focus area of FP&A is probably on the financial metrics. Of RevOps, it's probably on operator metrics. Of investment, it's probably at the investor metrics. So everybody has a layer to follow. Everybody wants to know everything, I get that. But nobody can operate on every layer accurately. And so you'll see that each layer has a person that should focus on that, associated to it. That has to make sure, at that layer, the data is accurate and correct.

Janis Zech: Yeah. Which I mean is a huge problem in itself and something that, if you think about what we discussed earlier, you have not one of those models, or like a layered cake, but let's say three or five, right? Complexity becomes even higher because you have to make sure that the data model supports, you know, your financial and investor metrics for all these different go to market motions, right? Which is extremely hard to do, in itself if you think about it from an operations standpoint.

Jacco van der Kooij: Yeah. And this is the reason why I wrote the book Revenue Architecture. This is the reason why I put down and accurately describe and say like, hey, can we just lay down a framework the same way how at one point in time — to what I earlier depicted, this MPEG board — like how we depicted how a video packet is gonna be created, and how a video packet becomes a pixel on the screen that you can see with your eyes. This is no different. As the famed Steve Jobs says, we connect the dots. Well, my dot did not go through calligraphy like his dot went. My dot went through MPEG engineering and my dot went through network application, network layer, application layer and whatnot. And I see that with GTM, we have the exact same problem that we had in the 1980s where GTM motions were different TV standards like PAL and SECAM and NTSC, and nobody could receive TV signals from the other side of the world because it was operating at a different frequency and a different voltage. And through MPEG, we all made it uniform. I believe the same thing is in play right now. We need to make all these GTM motions start talking the same language so we can compare them against each other. And that's the job of revenue architecture. That trait, I believe, is a fundamental trait for RevOps people, but also for FP&A and also for executives. Maybe we're the lighter version of it. But everybody needs to understand how does this machine work that generates and turns million dollar companies into billion dollar value companies.

Janis Zech: You know what I find so interesting is that many of those different go to market motions didn't exist twenty years ago. And now we have all these different ones. And then I remember, you know, four years ago, everybody had to move to PLG, right? So everybody moves to PLG, not understanding that it's also a fundamental change in product and that usually takes a long time and it's even not said that it's going to be successful. And so now we're here at a situation where we have all these different go to market motions and everybody took a bit of, you know, different ones and combined them into something where, you know, all the fundamentals you're just talking about are just really broken and it's not easy to solve this, I think.

Jacco van der Kooij: Yeah. Obviously with revenue architecture, we're trying to solve that for you. And going to give you what you just brought up is a fundamental piece to understand why that works and what the challenges are. So I'm gonna bring that up for you. Okay, so what you see down here are the five GTM motions at the top. No touch, low touch, medium touch. And you see what I said before. Now what I'm going to do, I'm going to overlay the different engines. So on the low end, the no touch is primarily driven by product. The product drives reputation and the reputation drives users to generate word of mouth. That's the engine where we work at