[00:00:00] Justin Vandehey: We had started actually as an email based integration because we said, you know, giving feedback sucks at work. It's hard to do. You often have to go into tools to do that. Let's try to build it into the places where people are to minimize contact switching. And so we did that initially into a Gmail app that no one used. And so we said, huh, that's weird. Like, why is that not the case? Because email actually is not even real time enough, right? Like you typically are in your inbox in between working sessions or meetings.

[00:00:40] Andrew Michael: This is Churn.fm, the podcast for subscription economy pros. Each week we hear how the world's fastest growing companies are tackling churn and using retention to fuel their growth.

[00:00:53] VO: How do you build a habit-forming product? We crossed over that magic threshold to negative churn. You need to invest in customer success. It always comes down to retention and engagement. Completely bootstrap, profitable and growing.

[00:01:07] Andrew Michael: Strategies, tactics and ideas brought together to help your business thrive in the subscription economy. I'm your host, Andrew Michael, and here's today's episode.

[00:01:18] Andrew Michael: Hey Justin, welcome to the show.

[00:01:20] Justin Vandehey: Andrew, thank you for having me in.

[00:01:22] Andrew Michael: It's great to have you. For the listeners, Justin is the Director of Partner Integrations and Development at Culture Amp, the market leading employee experience platform. Justin joined Culture Amp after they acquired his startup, Disco. He and the team had grown Disco to 50,000 customers and was profitable before the acquisition in 2020 at 13 times revenue. So, my first question for you, Justin, is what's next? I'm pretty sure your lock-in period is approaching the end. If not ended, are you thinking about what's next yet?

[00:01:52] Justin Vandehey: So I'll preface it with love culture, and very fortunate to be a part of that team. I think the builder is always curious. I'm just, I got my head in a lot of different categories and spaces, but loving what we're doing right now, but I definitely see another run at it here in the future.

[00:02:11] Andrew Michael: It's definitely a common theme I've seen across all guests, like that I've spoken to up until today is that typically at that end of that lock-in period, everybody starts getting the, or they've already got it. Actually. I've been thinking about it for a while but they've all gone on to do something else next, which is really cool to see. And yeah, so let's talk a little bit about Disco. Maybe you can give a little bit of context about the business that you grew before being acquired by Culture Amp.

[00:02:39] Justin Vandehey: For sure. So Disco was actually the first application that was built on the backbone of the Slack platform. So we were one of the first, I guess, Slack-based Slackbot integrations and we were really specifically focused on employee feedback and employee recognition.

[00:02:59] Justin Vandehey: We had started talking about retention. We had started actually as an email based integration because we said, you know, giving feedback sucks at work. It's hard to do. You often have to go into tools to do that. Let's try to build it into the places where people are to minimize contact switching. And so we did that initially into a Gmail app that no one used.

[00:03:21] Justin Vandehey: And so we said, huh, that's weird. Like, why is that not the case? Cause email actually is not even real time enough, right? Like you typically are in your inbox in between, you know, working sessions or meetings. And so Slack was really this medium that allowed us to play around with this idea of, you know, being embedded inside of a digital space where people were communicating daily and we went actually more narrow there too to focus on specifically on employee recognition because it was easier to be able to share this feedback and give recognition publicly in channels and spaces.

[00:03:55] Justin Vandehey: And so yeah, we launched Disco in 2015. It grew to be one of the top performing apps on the back of the Slack platform. We grew the company. We were, you mentioned, profitable. But what was interesting was the bot. There was this bot. Slackbot hype cycle that sort of came and went. And then we sort of were in this period where we had to figure out how to build a real business and real company. It wasn't just user growth and coasting on the back of all of the really great leads that Slack was sending us.

[00:04:32] Justin Vandehey:  It was how do we actually bring these customers into the customer development? How do we get them collaboratively building the future of where they want to take this thing? And then, more really importantly we hit a global pandemic back half of 20... was it 2019? And overnight companies were trying to figure out how do they bring people together during a global crisis? How do we shift toward an entirely remote way of working? And Disco was like right place, right time. We were at a place where we could help bring teams together, help them feel aligned around their core values and help their people feel valued for the work that they're doing.

[00:05:11] Andrew Michael: Very interesting. I've had quite a lot of guests as well, right time, right place. Sort of the pandemic ended up being an accelerant for their business. And it obviously makes a lot of sense in your case. A lot of different things I want to double down and double click on now that you've mentioned, and maybe let's go back to the very start. Sort of, you said you started out as a Gmail app and realized sort of like the interaction wasn't there that was needed. Can we dive into that a little bit more? So like, what was the hypothesis in the beginning when you decided to launch the product there and then? And what did that look like after launching? Like what made you realize, okay, this wasn't working?

[00:05:46] Justin Vandehey: I think there was a lot around the path to installation and discovery was really difficult. And the other, you know, when we were selling this thing in or trying to get into companies, email oftentimes is a one-to-one communication vehicle. Whereas if you're building, something that is intended to take off. You're trying to build more of a network effect. Slack was just this medium where all of the eyeballs already were. And so, you know, there were certain things that we tested, we tried to play around with to get a viral coefficient going by like dropping Disco in an email signature and then, you know, being able to opt in to be able to share feedback once you got it.

[00:06:33] Justin Vandehey: But I think because it was like the nodes of connection were so limited. We weren't able to accelerate the growth as fast as we wanted to. And I think the other piece of it is like giving constructive feedback in email is just takes time and effort. It's not a very fun job. And so I think we realized like there was a place and a time for this form of feedback, but we also, you know, thinking about our own skillsets, we weren't, I don't think necessarily even the best equipped to solve that. problem.

[00:07:06] Justin Vandehey:  So it wasn't that, you know, we didn't think it was important. It just was probably the right, at what point did we actually want to solve, you know, that specific problem? There is a medium and a reason, or a time to give direct feedback, you know, in work. But yeah, it just wasn't the right time for us to solve that problem, I guess.

[00:07:26] Andrew Michael: It's very interesting because like, essentially the problem you were trying to solve didn't change just the medium in which you're trying to address that problem and the timing. And I think like this comes into like changing user behavior, being like one of the hardest things to actually do. And like you say, like it falls into like people inherently have this bias in their minds, I guess, with email that it feels like it's work and perhaps maybe the type of response that you would give in an email to get someone whose feedback will be a lot more formal than something that will be in Slack, it'll be a lot more quick and instant.

[00:08:01] Andrew Michael:  Like at least that's my perception as well on how I'd feel like the way you're describing it. And it's interesting that the problem you were trying to solve never changed. Just like sort of the channel in which you were trying to reach your customers and the timing made a difference there. That'd be fair.

[00:08:13] Justin Vandehey: That's right. And I think Slack channels really opened it up to one of the things that we observed were that teams are actually creating public recognition channels to celebrate their employees and we said, oh, that's already a behavior that's happening. Let's lean into that behavior and just add to something that is to your point around behavior change, like that is 100%. And we saw the behavior of creating these spaces for people to be celebrated and exchanging feedback already happening, just leaning into that and making it easier and adding value to that workflow is what really helped us crack it.

[00:08:50] Andrew Michael: Okay. And I think Slack also did some interesting things in terms of like the onboarding experience for users. I know we recently had the previous founder of Help, which is also Slack integration on the show. And they sort of had this very interesting invite mechanism, I think, where you could automatically invite everybody from Slack to join Help as a result and just the onboarding experience. I can't remember exactly, but I just remember it being like, wow, how easy it was to onboard new users from your organization into their product app. And I'm not sure if that's something that you capitalized or worked on as well.

[00:09:26] Justin Vandehey: I think there was, we sort of-

[00:09:30] Andrew Michael: You might have been a bit early.

[00:09:34] Justin Vandehey: We were like, yeah, we were early. But that also, when things are a little bit more wild west, you can test some stuff that wasn't now isn't publicly available. You know, when Slack integrations were first enabled, you would get a lot more data than you would previously. And they really dialed that back in their APIs. But it was also, you know, we had this talking about engaging our customers. We actually were able to, at one point, take over communications with bots that were enabled.

[00:10:07] Justin Vandehey: So we had this feature called operator where we could actually direct message anybody in a Slack workspace via our app. At the time it was called GrowBot. But I remember we onboarded, I think it was Business Insider. And we were trying to figure out how to get people to convert from free to paid. And so I was like, you know what I'll do? I'll send a direct message to Henry Blach at the CEO of Business Insider. So I sent him a direct message. I was like, Hey, Henry, are you aware of that? You know, I think it was like 50% of your team is using GrowBot and within 15 minutes, our app was disabled.

[00:10:44] Justin Vandehey: So it was one of those things where, you know, You sort of find this fine line of like, how aggressive are you? How, you know, I think over time, what we realized was like, you can't force it. You have to push the boundaries. But to your point, like, you know, Disco is part of our onboarding process. We actually realized again, they were creating these spaces. So we proactively created a kudos channel for companies that installed the app. And that was like. You know, something that was leaning into the behavior that they were already doing, but it was an action that allowed them to then pull people in and start to engage around the app and do it in a more kind of controlled way. So yeah, a couple of interesting things in there.

[00:11:28] Andrew Michael: What did your metrics look like though, when you first launched that email integration on that app that got you saying, okay, this isn't working. I mean, what was it specifically that led you to say, okay, let's try something else?

[00:11:42] Justin Vandehey: I mean, I think we were looking at MAU, monthly, you know, we were looking at monthly active, weekly active and daily active. And I think our founding team, in particular, had a really strong background in social games and gaming. So everything was centered around, we looked at the world as like, really through the lens of daily active usage. That was the expectation that we had was like, how can we build something that people are using every single day?

[00:12:10] Justin Vandehey: You know, and we just, there was one interaction and then just dormant. You know, it was like we'd get somebody to exchange feedback. They'd install the app, they'd take an action, they'd have one interaction with their colleague and then it would go nowhere. And so we tried to figure out, that was really our key focus was, you know, how do we get really our monthly and weekly active usage up? I can't remember where we ended, what like ultimately where it's been a while now since I thought about our DAU over MAU.

[00:12:444] Justin Vandehey: Because then we shifted our focus once we leaned heavily into messaging was not only are people coming back and uniquely using the app every month, but of that percentage, how do we get more of these people using it, these monthly actives on a daily usage? And we looked at the ratio of daily active over monthly active to say, are these people power users? Are they engaging in a more meaningful way than just those that maybe use it once a month?

[00:13:09] Andrew Michael: Once a month. Yeah. 'Cause I think also like on the frequency of usage, it's interesting like to understand what is the natural frequency of this activity as well. So like you can't really manufacture daily active usage if it's not in the natural usage patterns of users to be able to conduct these activities as well. But, interesting that obviously on the one end, like it's clear then I guess it was sort of black and white why you needed to change things. People weren't using the product. I think sometimes are there sort of this gray area where things look semi-decent and you still not too sure like, is this working? Isn't.

[00:13:43] Andrew Michael: And I think that's probably the worst position to be in because you end up sort of like fishing around in this bad zone for far too long when you could just like take a step back and really say, okay, this is a problem we're trying to solve, like, okay, this medium is not working for us. Like what are the channels can we be focused on to make it work?

[00:14:01] Justin Vandehey: That dead zone is you're exactly right. That is the worst place to be. It's like, I feel like this is working, you know, but I'm not entirely certain. And I think it was, I mean, this is, I think, getting ahead of ourselves a little bit here, but we're talking about usage. But when we were looking at getting Disco to a place of like profitability, because that was always that was our focus was like, how do we create a company that is self-sustaining and, you know, default alive was we just got to be able to make sure that our revenues cover our costs.

[00:14:37] Justin Vandehey: It was that simple. It was like, how do we bring in and retain customers that are covering our Amazon bill every month when we were like really scrapping to try to get the company in a good spot? So yeah, I don't know the retention piece. It hits home for sure.

[00:14:56] Andrew Michael: Nice. And then, so you mentioned as well afterwards that company was acquired obviously from that perspective, the usage itself, like over after COVID you sort of seeing like a decline, I think you mentioned in terms of like the acquisition perspective, you went through this like big hype cycle from the bots and then off to the other end. What did that moment look like? And when did you realize again, like things had changed once again for you? So obviously it's like you're riding this amazing wave and then all of a sudden the wave ends like, what did that moment look like for you in the startup?

[00:15:29] Justin Vandehey: Dark. It was very dark. There was a moment after the money, like the seed check was wired, the TechCrunch article went out, we got some positive press from Slack. We actually had an acquisition offer right around that time for way more than we were worth at that moment. And we passed on it. We were looking at the bigger picture of like, man, this could be a generational company, not really knowing like what that was going to look like.

[00:16:03] Justin Vandehey: And ultimately it worked out. It worked out in the end because the pandemic really made the product right place, right time. But yeah, after the hype cycle went away and the interest around Slack integrations went down, it was okay. We need to figure out how to build real value and really dig into what problem our customer cares most about solving.

[00:16:32] Justin Vandehey: Because I think when we read at that time, like, Disco was a really, it was a cool product. It's a great product, but it was truly a vitamin. It wasn't a painkiller. And I think, you know, people are like CEO now is the statement. He's like, people do pay a lot of money for their vitamins, but when times are tough, you know, you need aspirin.  

[00:16:54] Justin Vandehey: So I think what we did was we really focused on, you know, what are the big questions that HR is trying to answer for their companies, especially when, you know, there was so much uncertainty going around the pandemic. And so, thankfully we saw it to the other side, but there was definitely an, an oh shit moment where we saw a good portion of our customers churn out. And then it was like, okay, we need to get back in to really talk to those that are with us and understand, you know, how do we continue to develop and provide value for them?

[00:17:25] Andrew Michael: That was my next question. Like, where did you get started then? You see this moment, a lot of churn happening and you need to figure this out now. Where did you turn to? Obviously, you started speaking to customers. Where did that take you?

[00:17:40] Justin Vandehey: It was an interesting exercise because we had this basic sort of peer-to-peer recognition product that was working well. But we needed to, I think, you know, HR and HR tech strategy aside, it was like, what are people actually doing at work every day? And we started to learn a lot more about people programs and recognition rituals and how companies think about really important things like defining their core values and introducing their core values and how do values get rolled out and how do they get decided.

[00:18:26] Justin Vandehey: And so recognition aside, like employee recognition was actually a means of not only celebrating your people and making them feel great, but also reinforcing the principles and the behaviors of the company that you define. And so when we anchored in on that and we said like, okay, rather than just like thinking about the HR tech category and employee recognition, like what if we thought about, we flipped it on its head a little bit and said what if we look at this through the lens of a company's culture and values and where these values are showing up and start to build value around how those things and those principles are being reinforced that it totally changed how it became way more than just, this is a Slack integration and a Slackbot.

[00:19:07] Justin Vandehey: This is like a channel by which we can help reinforce culture. And really importantly, you know, we started to do a lot of really interesting work around like who were the core tenants of culture inside of companies. So starting to do some really interesting things around network analysis and understanding, you know, who are the cultural influencers by particular value and trait. And we started to dig into a lot of the data that was coming through.

[00:19:36] Justin Vandehey: That was when we started to be sort of more of a strategic, really a strategic partner to the CHRO. And solve some like really, it wasn't just a cute peer-to-peer recognition app anymore. It became like really valuable in data that these CHROs were using to have the culture conversation with their C-level team.

[00:19:58] Andrew Michael: It's very interesting. I think that culture happens, whether you like it or not. And it's up to you if you want to mold it or not at the end of the day. And I think like, as you say, it is definitely one of the key factors in successful companies is they end up creating these amazing cultures. But I also think we chatted a little bit before the show, like some of the things, like ideas that maybe we had for what was next.

[00:20:24] Andrew Michael: And one of those actually was around like I previously was at Hotjar and I think one of the things we did earlier on was incorporate the values into the way we gave feedback at the company. And it was really powerful because it got everybody always thinking about the values. I think most times, like when you have values, like they five points on a slide deck somewhere that gets repeated maybe once every six months and then everybody forgets about them.

[00:20:47] Andrew Michael:  But when they become part of the way that you like measure each other and the way you give feedback to one another, like it really becomes ingrained in people. And like, then when you ask them what are our values, like people maybe remember four out of five instead of like the one and then they scramble to the other two or three.

[00:21:03] Justin Vandehey: There's like Ben Horowitz says, I think it's what you, what's the book? It's what you say or what you do is who you are. And that's really what, I mean, the values and principles written out are, you know, what you say you're about. But like you said, how you reinforce and what you actually do to reinforce those principles are really what define culture, it's the intersection of those things, like what you say you're going to do and like what you actually do.

[00:21:30] Andrew Michael: And then with the change of this, like how much of it as well do you think was like a positioning exercise versus what was really needed to change within the product? Because I think a lot of it sounds like it's really like product marketing exercise of really like repositioning the product in the markets. And then how much was actually needed when it came to actual features and like the product scope?

[00:21:54] Justin Vandehey: Good question. So it definitely was, it was a good blend of both actually. So the narrative of shifting from peer to peer based recognition to talking about values reinforcement, that was definitely more product, that was definitely a product marketing and positioning. Move that we made.

[00:22:11] Justin Vandehey: But then a lot of the customer development that went into defining that, for example, we found workflows centered around values where large companies in particular, especially those that have been around for 10, 15, 20, 30 years, we had one customer that was a 75-year-old company that was running on Microsoft Teams. And so we built an integration into Teams and they were celebrating their 75th anniversary and wanting to highlight employees that embodied their values.

[00:22:48] Justin Vandehey: And so what they did was they had a forum that was going out that was allowing people to nominate their employees for particular values. And we said, oh, shit, this is a value specific workflow and a product in itself that's anchored around this new narrative that we're telling. And so we started to say like, oh, we can start to pick off all of these different workflows pertaining to this category after we went through the repositioning exercise.

[00:23:14] Justin Vandehey: And before you know it, we had built this new product that we shipped called Nominations that this company paid $150,000 a year to use. And it was everything that was, you know, related to getting the nomination. I mean, there's a lot of human capital that went into this program. And we essentially like streamlined all of the operational components and built this program for them that the software built.

[00:23:441] Justin Vandehey: And so we actually built a product for this customer to solve this problem. But we found that it was a problem that conveniently for us that a lot of our large enterprise customers had and ran because no lot of these startups hadn't been around for 10 years. But you talk to Nestle, you start to talk to GM, it became a pretty interesting opportunity.

[00:24:06] Andrew Michael: We did a similar experiment. I think at Hotjar, at some point we looked to revisit the values and one of the exercises, part of the exercise was really like trying to understand which team members embodied what the team perceived to be the values of Hotjar at the time. And it was very interesting. So they're seeing the findings and that.

[00:24:24] Justin Vandehey: Yeah.

[00:24:24] Andrew Michael: Well, I see we, we're running up on time that I think we could continue chatting for the next hour on these different topics and I'd love to keep digging, but I want to be respectful of the time, I think so like two interesting takeaways for me at this point, there was like first, obviously like being the channel in which you first launched the product, like not much action. Like a lot of people at that stage might have said, okay, this doesn't work.

[00:24:45] Andrew Michael: But really what you realized was that you were trying to change maybe user behavior too much and you weren't reaching them at the right time in the right channel and just making that shift really what sort of helped set you off on the next trajectory and then coming full circle, like once you sort of had that initial wave of growth and pandemic sort of fueled that when things started to come back down, you really need to move away from being that vitamin and to becoming that [inaudible] you learned and really a lot that revolved around like repositioning the product itself and the problem space that you're operating within, unlock the next level of growth.

[00:25:15] Andrew Michael: I think it's very interesting. There's so many different things that need to come right in order for companies to be successful. And I'm sure there's a lot more that you did along the way as well. But it's really cool to see how you overcame these couple in that time there. The question I have is, what's one thing that you know today about churn and retention that you wish you knew when you got started with your career?

[00:25:41] Justin Vandehey: Well, I guess I'll say the first thing is, had we not retained our customers. I think a lot of people over index on, especially early stage founders, how important it is like how important customer acquisition is and growing your top of funnel. But we literally wouldn't have survived had we not renewed our top 10 customers like that the compounding value.

[00:26:09] Justin Vandehey: Not only that and then they're invested, but it also gave us the signal to know that we were on the right direction. Because there was a period where we said like, is this actually working? Should we just fold it? You know, or should we pivot? And that getting customers having the conviction to put down and pay for multiple years. And I just like that saved our business.

[00:26:35] Justin Vandehey: It allowed us to exit. It was everything. I mean, the acquisition piece is like, it's hard, but like really providing value and getting people to come back and pay for subsequent years. Like there's a ton of, you can't replace that.

[00:26:52] Andrew Michael: Ultimately, we will come to you to solve a problem. They're looking at the end of the day and if you're delivering that value, there's no reason for them to get, but most of the time people just don't deliver on that value.

[00:27:03] Justin Vandehey: The other thing I'll say is like in my current role at Culture Amp, it's interesting because I manage partnerships with API-based integrations. And Culture Amp has a phenomenal offering platform and we're building out our ecosystem of connected partners. Oftentimes, you can't do it alone. You need... customers will have... they rely on multiple partners and If you can fit and make your product work, whether that's in Slack or whether it's in another tool and get those things working well together, you know, the tides sort of like all tied on what the expression is around rising tides.

[00:27:42] Justin Vandehey: But basically you make your product stickier and having a point of integration with systems that really matter is also super crucial. We saw that with Slack, our relationship with Slack and being embedded to where people were, but also partners like you know, SAP and Workday on the HRS side, like those integrations and those partnerships were super critical to plug into where our customers were.

[00:28:07] Andrew Michael: Very nice. Well, Justin, it's been an absolute pleasure having you today on the show. Is there any final thoughts you want to leave the listeners with before we wrap up today?

[00:28:14] Justin Vandehey: No, Andrew, I appreciate it. I love the work that you're doing. I love your show. I appreciate you. Let me come on and share my space. If you're, yeah, the only plug I was going to make is if you're an entrepreneur. Also podcasts as well called The Bridge Round, which is all, founders taking their companies from zero to one. So early stage founder stuff. So check that out. And if you're an HR tech provider and interested in the people tech space, I'm always down to connect.

[00:28:41] Andrew Michael: Awesome. Well for the listeners, we'll make sure to leave everything we discussed today in the show notes so you can find it there. And Justin, thanks again for joining and I wish you best of luck now going forward.

[00:28:52] Justin Vandehey: Thanks, Andrew.

[00:28:53] Andrew Michael: Cheers.

[00:29:01] Andrew Michael:  And that's a wrap for the show today with me, Andrew Michael. I really hope you enjoyed it and you were able to pull out something valuable for your business. To keep up to date with churn.fm and be notified about new episodes, blog posts and more, subscribe to our mailing list by visiting churn.fm. Also don't forget to subscribe to our show on iTunes, Google Play or wherever you listen to your podcasts.

[00:29:01] Andrew Michael: If you have any feedback, good or bad, I would love to hear from you. And you can provide your blunt, direct feedback by sending it to Andrew@churn.fm. Lastly, but most importantly, if you enjoyed this episode, please share it and leave a review as it really helps get the word out and grow the community. Thanks again for listening. See you again next week.

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