Salesforce COO George Hu on why his company acquires Canadian startups

There’s a “crazy amount of innovation happening right now in Canada”

George Hu, COO of Salesforce

Salesforce COO George Hu speaking at the company’s Dreamforce conference in 2011. (Jakub Mosur/Salesforce)

Few Silicon Valley outfits have taken as keen an interest in Canada as Salesforce, which is this year celebrating its 10th anniversary in the country. The company, which started as a vendor of cloud-based customer relationship management products and has since expanded into a host of online services, set up offices in Toronto in 2004, only five years after its founding in San Francisco. It now employs more than a thousand people north of the border.

In recent years, Salesforce has been on acquisition binge, buying up companies across the country from Halifax-based GoInstant to Toronto’s Rypple to B.C.-based Sitemasher, among others. In some ways, it’s the most Canadian of American tech companies.

Chief operating officer George Hu, who has been with the company since 2002, was in Toronto last week to help employees celebrate the milestone. We caught up with him for an interview about Salesforce’s Canadian ambitions, not worrying about name recognition and the explosive growth of mobile. Here’s a condensed version of that conversation.

Do you remember what the initial impetus was to expand into Canada?

The great thing about cloud computing is that by the nature of the model, where you can sign up for our product and buy it online if you want, is we have customers in well over a hundred countries. That happened relatively early in our history because people heard about us. We just started to see more traction from certain countries and Canada was one of them, for a lot of obvious reasons: linguistic, geographic, word of mouth. That was the impetus for us to come into the market and it made sense also because Canada is a major software market. It made sense from an opportunity perspective and from a customer demand perspective. It was the customer demand that really triggered us taking it seriously.

You’ve made a lot of acquisitions in Canada. Why is that?

It’s not an intentional strategy but it speaks to there being a crazy amount of innovation happening right now in Canada. We’re going to do our acquisitions where the great ideas are coming from and it’s something Canada should be proud of.

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There’s a lot of talk here about how Canadian companies find it tough to grow beyond a certain point. Have you found that with the companies you’ve dealt with?

Looking at all the companies we’ve acquired, there is a strong bias for a lot of start-ups to focus very heavily on being strong in their domestic markets. If you take it out of the Canadian context for a second, when we look at Japanese companies that we’ve invested in, they’re very Japan-centric. It’s very hard for them to go to another country and really focus on it, it’s a very big mind shift for them. For some reason, American companies tend to think a little differently. They tend to think, “Okay we want to start with America, which is a big domestic market of course, but we also want to go to all of the English-speaking world.” Some Canadian companies do that as well. But we’ve seen a reluctance to do multi-language support to really go from, say, Canada to Japan, or Canada to France or Germany. There’s no reason they can’t do that, but there is a little bit of that domestic-centric mind set that’s out there. If you look at the revenue of these companies, they tend to be Canada and a little U.S.-centric.

Is this the continuing pull of historical forces?

There’s a huge premium on the user experience, and it’s easier to create a great one for a culture and a market you understand well. If you look at Alibaba, why are they so successful? All of the U.S. companies failed in China. It’s because it’s really hard to tailor a product in a culture you don’t understand. It’s a lot easier to do that domestically. I don’t know if that’s going to go away. There’s going to be a huge premium to going even more hyper-local because it’s so easy to spin up a mobile application. If your mobile application is two clicks longer than it has to be or less intuitive, you’re going to lose. Companies are going to have to figure out how to get local in a deep way.

Are there any Canadian companies that you’re currently scoping out or that you think are doing interesting things?

We just launched something called the Salesforce1 Venture Fund so we’re looking for companies that are doing really interesting things, especially in the mobile world, with our platform that can help this whole customer success platform message. So one company is Bionym, we’ve invested in them. They’re doing a thing where you’re identifiable through a wearable device without having to use a fingerprint or any other kind of identification.

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How do you explain what Salesforce is to the average Joe, and is it important for the average Joe to know?

The simplest way to think about it is, as consumers, each of us accesses things we need for our personal lives through the internet. We go to sites like Amazon, Google and eBay and we work with these services that allow us to conduct and transact our lives as consumers. What Salesforce does is the exact same thing for businesses. So you go to a website or an app and you access and manage and work with your co-workers with your business information. Is that important for the average person on the street to know? I honestly don’t think it is. We focus on what our customers need rather than on what’s our brand recognition with the person on the street. Our job is to make sure our customers can connect with their customers, but they don’t need to know it’s us doing it.

Salesforce started with CRM but you’ve diversified quite a bit. Can you talk about how and why you did that?

The main driver of our strategy has been what our customers want from us. I just met with a large Canadian bank and what they’re looking for is not just a sales tool or a service tool, they’re looking for an integrated platform to pull together every aspect. That’s what most companies want. Our roots are sales force automation, that’s our name, but then they said, “Okay, you’re doing our sales, but service is just as much a part of the customer experience as sales. So is marketing, and by the way, with the advent of mobile devices, we need to create custom apps too.” So we’ve been pulled by our customers to deliver a broad platform. We do five major things: sales, service, marketing, apps, communities. We’re going to be announcing a brand new cloud [section] at our DreamForce conference in a couple of weeks, so that’ll be our sixth major pillar. All of that is driven by our customers.

You’re also doing predictive intelligence. Can you give an example of how that’s working?

Sure, a great retail customer in the U.S. would be The Gap. Let’s say you get an email from the Gap and it asks you to come to the website. We have these things called “journeys” built into our marketing technology. Every touch point you have with them is recorded as part of a journey and based on all your touch points. We then deliver dynamic content based on that. It’s kind of like how Amazon serves up recommendations, we do the same thing. It’s based on predictive logic that isn’t done by some manager in the back room, the system itself is learning and getting better based on history.

Which of your five pillars is most important and which will be the most important down the road?

“Important” is kind of a tricky word. They’re all important. Our fastest-growing areas are marketing and apps. Those are areas where we have a lot of interest on the platform side, we have almost half a million customer-facing applications built. Our fundamental thesis is that the explosion of mobile devices is what is going to change the need for companies to connect to their customers in a whole new way at a speed we haven’t seen before.

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Do you think companies need to diversify as they grow or can they keep specializing?

If companies are successful and do grow, I think they earn the right to expand their mission statement. If you look at our big, big picture statement, it probably hasn’t changed that much – our mantra is “the end of software.” But if you look at our realistic operational vision, it started off as creating the best sales force automation tool, delivered over the internet. Our vision is obviously much bigger than that [now]. I don’t know if I’d call it diversification so much as expansion. If you look at our statement today, it’s much more, “We want to help companies with their customers in a whole new way,” and that involves a lot of new technologies. I’m sure over time that will continue to expand again.