Building successful products for SMBs | Michael Cieri (Gusto, Opendoor, Square)

Brett: One interesting place to start, is I think to talk a little bit about building products specifically in the context of small businesses as the primary user. And I was interested, given you've done it in different roles across different companies for a decent portion of your career, are there specific things you've figured out as it relates to building products specifically for SMBs that might be different than building for any other type of potential user?

Michael: You know, I think when you work in technology, it takes a while sometimes to find like what part of technology you're really passionate about. And I've, I've worked in a variety of tech settings throughout my career, and I was so excited to start at Square and like working, working with small businesses back and 2012 or so, um, just cause I've always loved small businesses, like it's been a part of my life. My grandfather owned a bowling alley. I grew up going there every weekend. Um, and just think they have a valuable, you know, part of making a good community. So as a customer, it's a great customer to serve. And I, and I really felt more at home at Square that ever before serving that customer. And there's a few reasons. I think the first was, boy, if you get it right, they love it. You know, you're working at sort of the core of helping them with their livelihood and with something that. To them is, you know, kind of make or break for their life and for their, for their wellbeing.

And so there's a lot of heat on the customer when they sort of respond to like, how's it going? You know, if you did it good, you hear a lot of love and praise. If you did a bad boy, you're going to hear that. And, and I really appreciated that there wasn't much, ambivalence to how, how the product works with small businesses.

They're very direct on like, this is crushing us or it's like super helpful. So, so that was 1. I think a 2nd, you know, really treating a lot of small businesses. I mean, at Square, we worked with super micro businesses, the majority of Square businesses are solopreneurs, they're individuals, individual sellers.

And, you know, the last decade or so, I think the company has really made a successful march up market. So we've got a lot of larger businesses now, but, you know, back when I was first starting there, I think it was north of 70 percent were like individuals. And so we really took with that insight, like a consumer grade, uh, design aesthetic and consumer level sort of consumer product level approach to building traditional business software. And so I think one of the insights that Square had early on was like, Hey, a lot of this business software that's out there is built for larger businesses. I mean, very few are building, you know, for the two person shop, for the mom and pop shop, for the corner store and boy, you know, when you look at what they have to do to glue all this business software together, it's hard. And these interfaces are not easy. And there's no, you know, you might expect an account manager to walk you through how to do it.

That doesn't happen when you're. Kind of building self serve software for SMBs so I mean, we really put a lot of focus, Gusto is similar in this respect, an ease of use, making it simple, treating the customer the same way you might, if you're building a consumer product and like, you know, doing a lot of walkthroughs, not a lot of clutter on the, on the page, things that help people find success, quickly and easily.

So there was this one slide from, When Square went public that I just loved in the investor deck, where it showed sort of like how small businesses do a bunch of their activities using either existing software or offline tools. And it was just like, super hard and complicated.

And then Square, how Square had sort of approached all those with an ease of use mindset. 

Brett: When you think about building software for small businesses, how precise does the ICP need to be, in the world of enterprise software, you may divide the world by 1000 person companies versus 5000 or companies that use a specific type of infrastructure. When you're building for small businesses and or sole proprietors, what's the level of specificity that you tend to try to build for? Is a three person bakery different than a nine person bakery? 

Michael: in the early days of a of a new business, a lot of the problems, look similar. You know, how do I how do I take payments? How do I hire somebody? How do I just start initial payroll phone offer benefits? How do I do that? these are shared jobs that that almost every business has.

And I think when I look at what we're doing with Gusto and really focusing on how to build great teams, a lot of those jobs are shared across industry, across team size. The form that they take and the way that they work needs to adjust a bit depending on how large the company is and what industry there is.

There's, there's minor tweaks that are certainly there, no doubt. Um, but a lot of the jobs are very, very, very shared. Um, it's square because we did a lot more sort of front of house and helping folks with taking payment and being in front of the customer. the jobs diverged quite a bit sort of by industry.

And that was something that became really clear to us, you know, around 2015, 2014, where we had the core square point of sale, which was beloved on tons of coffee counter shop, you know, countertops, retail shops, it's all all over the place. But the, the reality was that as businesses started to get more sophisticated and get larger, you know, that point of sale no longer really worked.

So a full service restaurant that's got multiple locations, has a kitchen, has a front front of house, the core square point of sale didn't work for that and that environment is much different than a multi location retailer, or franchise, or stadium. Um, I mean, you can imagine all the places where this takes different shape.

And so at Square, what we, what we did and what the company is still doing is, is came up with a vertical strategy where we had, okay, we've got our base Square point of sale out of the box, you know, works for, works for most industries with simple needs. And as you start to get more advanced and more complex needs, we had Square for restaurants, square for retail and then appointments, which I led, which was kind of the kind of focusing on service businesses, businesses that run off appointment, run off a schedule, need online booking, so on and so forth. And so we sort of took, the core jobs that are very similar across all industries.

And then extended them with industry specific needs so that we could, so we could have a form fitting solution, to the specific needs of those industries. And that was a pretty big strategic shift for Square and allowed us, I think, to actually be able to meet the needs of more sophisticated businesses, understanding that, like with front of house, a lot of times the way that the things operate are much different.

Brett: What did that process look like? How did you figure out that was the right way to organize at that juncture? 

Michael: To be honest, it was one of the most exciting and fun times of my career. And we were going through that because we were, you know, Square had done extraordinarily well down market. Square was starting to see signs of, having businesses that, um, you know, as they grew, just kind of outgrew Square and boy, that was a, a hard nut to swallow.

And you're like, man, we, we serve this company so well, and now they're just at a stage where they're leaving. And so they're showing up and sharing numbers and stuff like this for, for companies as they got bigger. And when you started to unpack the reason for that, the differences were just, they varied quite a bit by industry.

I mean, on retail, it was like, well, I can't manage inventory and like. That's pretty clutch. If you're, if you're physical, you know, selling physical goods at a retail shop and on restaurants, it was, you know, I need more coordination between the kitchen and the, uh, the point of sale and folks that are in front of house.

And so, you know, those are different problems. It was looking at looking at the data, talking to customers. Knowing that as a company, we felt that we had the ability to add value sort of upmarket with larger, with larger sellers, but knowing that the way that that's going to come to life, it's going to look a little different than like a single, a single product.

Um, and so there was a group of us, you know, some of which are still at Square that, that, um, that really, you know, sort of devise this idea of Hey, we should make some vertical specific solutions, to go after different parts of parts of the market and, and that many of those are still still in play today.

You know, I haven't been at the company for a while, so I don't know the exact exact state of things, but, but I think it was the right move. And I think it allowed us to, like, to serve larger customers better, 

I think we all knew that you know, to kind of be able to live into this premise of an all in one solution. Um, and we all believe and still believe. I mean, I believe this at Gusto today that there's tremendous amounts of value when you have a well integrated set of business tools that work together on behalf of moving the business forward, powered by, you know, a shared platform and shared UI.

 If you follow that through, you can't just have sort of one way that that shows up for different types of businesses because they they operate differently. And so we did have a lot of debate at the time on, like, kind of just the way that it would come to life.

Michael: Like, is it just sort of one super app that you put in a bunch of information about yourself and then it like magically turns into this perfectly form fitting experience for your business, you know, or as we ended up going with, there's actually separate apps that are a little bit more industry specific, and there's still customization that goes on within there, but sort of the initial, the customer's initial choice of saying, "Well, I kind of identify as a restaurant more than as a retailer. And as a result, I'm going to go download your square for restaurants product and get started on that and then configure from there." Was ultimately where we landed. But yeah, we debated a few, you know, a few different approaches to it. But I think we were all very convicted. And looking back, I think, right to say, "Hey, this can't just be like a one size fits all thing anymore."

Like the, differences of jobs to be done across these industries are just too stark.

Brett: At the time you were at square, did you find what toast was doing interesting? And it's a company that I haven't studied that closely, but find relatively intriguing. And that it's quite large, I don't know, it's 14, 15Billion dollar company only doing restaurants. So it's almost the difference between h orizontal versus vertical product strategy. is there anything interesting when you think about companies that are horizontal versus vertical and studying that business and building Square? 

Michael: I have tremendous respect for Toast and what they've done. And I mean, when you look across. The industry, I think you've got a lot of folks that are, you know, up and coming with, vertical solutions, basically saying, "Hey, we think that we can serve specific parts of the industry much better. If we just go all in on, like, what is the end to end solution for vertical X and really focus on the core jobs to be done there." Our premise at square was that when you unpack that quite a bit, a lot of those jobs are shared. A lot of them are similar across industry. And so the belief was and continues to be that building out that base foundation, you can build on top of that in a way that form fits the needs of those, for those various, for various industries well.

And we were just selective in which ones we went after. I mean, you, you know, you kind of break down all the different types of small businesses. I mean, you could have like a square for X and you know, there could be 45 of them when you look at all the different types of small businesses that are out there, but we picked ones that were thought the market was large.

We thought we had a right to win. Um, or we thought, you know, we had in our DNA, a good, a good way to actually build, build solutions that would work for them. But yeah, I mean, it was a constant debate on like, where should we verticalize? Should we not, where should we verticalize? How does it make sense?

What should we, what should stay sort of part of our, like, horizontal offering versus, going deep into one, into one industry. Um, and my hunch, you know, like, looking forward, there's going to continue to be success in vertical, vertical SaaS. Like, I don't think that's done. I think there's, lots of wins to be had by really getting specific on, just serving the needs of a particular particular industry.

The the can catch on that, and like, one of the one of the tricks is just, it's very, very difficult to be able to build awareness and be able to acquire, at least at the bottom of the market, be able to acquire at an affordable CAC, if you don't have really great brand awareness, which comes from having, a horizontal presence like square when you're on you know the countertop of every every shop you buy coffee at, um, that helps, that helps really, like, get the brand name out there and helps things like, product led growth actually work. And so it can, that can be harder, you know, if you're going after particularly an industry, we're not going to have a whole lot of visibility for the customer, sort of naturally, just making, like, the unit economics of the whole business work.

Brett: In sort of the point that you were making about, in what ways do you want to verticalize and in what ways do you want to sort of invest in some sort of common platform or operating system? you think about that in the context of Gusto, when you think about in the context of Square, were those decisions made by product taste and intuition, or did you develop like a structured way to decide on those types of things?

Michael: Coming back to Gusto, I mean, I think one of the things that we really benefit from is that our thesis of helping folks with starting growing and running teams is, those jobs, I think just inherently are much more shared across industry. So if you break down our customer set and we have north of 300, 000 small businesses on Gusto now, and you look at them sort of by traditional industry segmentation, it's very evenly distributed across a lot of industries. And I think the reason for that is some of the jobs we've done for starting growing and running teams, are very shared. So benefits administration, being able to hire off board, employee handbooks, payroll, the paying hourly workers, so on and so forth. There's nuance and we, and we try to, you know, try to build into that nuance so that it form fits various industries in the right way but but a lot of it is shared. If you juxtapose that with Square, Square is trying to do much more. I mean, that's, one part of sort of the SMB stack and they're trying to do that and sort of all, all other parts of it. And I think in parts of the, sort of the SMB stack, if you will, there's just more, more like vertical nuance that shows up faster.

You know, coming back to, to your question, I mean, I think it just was kind of apparent that for the number of ways that we are trying to serve small businesses at Square, there was just really going to be no way to do that without doing some, some vertical specific work. And that that showed up, I think a little bit earlier.

That might show up at Gusto too at some point in a stronger way. but at Square it showed up a little bit earlier because the front of house tools and the payment tools just needed to be, a bit more form fit.

Brett: So many companies start with the idea of we're going to start with a sharp wedge and then build out from there and often struggle to do that.

And oftentimes what happens is the wedge is their one thing. They're kind of like a one-trick pony. How did you approach in both sort of in the context of Square and what you've seen at Gusto? Obviously, you joined the company in a different chapter. What does it look like to do that well? Like you have a wedge in the case of Gusto it was very clearly payroll.

The company was called that at the time. Square was very clearly, "Hey, you want to accept credit cards, use this thing, connect to your phone." What does it look like to start to figure out where you go from there? And in both cases, you could do 40 different things next. You could launch different products in different ways.

Michael: Part of it comes back again, just to the market and to the industry. I think both the benefit and the pain of serving small businesses is that there's just there's so many, I mean, we're catching up a little bit now, but like, over the last decade, I mean, there's just so many places where like they're living in a technology, either technology free or inadequate technology to help run the business.

So the amount of adjacencies as you started to sort of understand the customer better and look at how they're going about, Doing their jobs it was overwhelming. I mean, you would go interview these customers that are using our, our point of sale or just using us to take credit cards and you start asking them about other parts of the business,

you're just like, wait, you're doing what? You know, and, put my technology hat on, I'm like, boy, I could think of a way to do that better, you know. And so, um, there's never been, I think, at both places, any shortage of ideas on how to expand out from the, from the wedge, as you said, and this is where, you know, some of the product taste and just like good strategy comes in it's like, okay, if we're going to expand off the wedge, How does the wedge product, whatever the first one is, really help unlock the door to the second?

What are, what are the sort of unique insight, unique advantage, or right to win? Does the first product open up for the second? And so, as you mentioned, I mean, I'm, I'm joining Gusto at a little bit of a later chapter, but like one of the products I point to there that, the company should be really proud of is benefits.

And benefits is clearly a pain point for small businesses. Is now will be for quite some time. The ability to be able to offer employees benefits and have that be super integrated with payroll, so the deductions are right, the employee data is right, if you do a life event, you move to another state or something like that happens that it's just very seamlessly like integrates across the two, serve Gusto really well to be able to say, okay, we've got like advantage by being the payroll provider, you know, we know the employee, We have the employee system of record, we have data, all the sources on employee data. It's very easy then to say, all right, how else can we serve employers with that? And so benefits was like a very natural next step. And that products doing phenomenally well, I think taking taking advantage of that of that insight.

Brett: Was there anything else interesting about going from mono wedge product to multi product at Square that others might find useful to know?

Michael: Just looking at how the first product sets you up for success, with the second in a way that if you built the second without the first, you can see there's like a meaningful difference in your ability to approach and execute the second product work working off the first.

And a lot of that, I mean, to be quite honest, a a big part is just that you already have the customer in the building. You can reach them. You don't have to go out and sort of, like, you know, win them out of the market. They have a relationship with you. So you already have an advantage in the sense that you can talk to the customer, reach them through email, or if it's a, you know, if you have a smaller, customer base, pick up the phone, you know, depending on what the, kind of what the business is. But being able to leverage data or have something that's just like a very natural adjacency that makes sense to do the second while you're doing the first, has been something that's really worked well for both, for both companies. One of my favorite products, and I didn't work on this at Square, but one of my favorite ones that was just coming up was, was Square Capital that started off the unique insight that like, hey, we kind of have a pretty good view into the revenue of a business.

We don't have a full view on the business. We have a unique view on the revenue coming into a bit into a business. And so that really puts us into a position to be able to lend in a way that like, uh, you banks, small business lending division doesn't have that same level of insight.

And so being able to use that data, to do that super well, we knew that was a pain point, just talking to customers. We knew cashflow was a problem. And that's, that's no secret with small businesses. But you know, to me, that was, that was always been a great example of like, leveraging the data, the unique insight to do a second product that without that payment data, it would have been the same as like any office off the street, you know, lending product, but there was the uniqueness of the data and the insight there that that kind of led to success on that product. 

Brett: What about now, context of Gusto, for example, where you have many products, it's not just going from one to two. How do you start to make those decisions? So, for example, should we create software that helps people manage hourly worker shifts versus the seven other jobs to be done that you hear from customers.

Have you developed an approach to figure out those type of decisions that feel slightly different than maybe even your 2nd or 3rd product?

Michael: You know, the Gusto product suites, is growing considerably. It's a multi-product ecosystem and spans a lot of different a lot of different areas. I mean, we've got products, most of our product suite is focused on helping employers. Um, we also have products to help accountants. We have products to help, employees. So members, uh, we call them. We're trying to add value in many different arenas at this point. And so when we, you know, we use a few frameworks, some of them, some of them novel, some of them, things that I'm sure other companies use, but a big one is, we talk a lot about Horizons and we talk a lot about, you know, how much are we investing sort of in the core versus investing in bold bets and things that might, you know, might be either something we realize success on multiple years out or is it a bigger risk, we might never realize success on so on and so forth. And so we try to think about where we're laying chips, always continuing to add depth into, you know, what we're already doing, but then also, like, on Horizon 3 type things, like, making sure we have some efforts spent on things that might be new things that come to life for us.

Um, and to be honest with you, Brett, there's no science on that. I mean, a lot of it's a lot of it's art, you know, you kind of come up with a framework for how you want to approach investing across Horizons. And you look at where the state of the business and the state of the product today, and for the things you already have in market, kind of how it's resonating with customers, how it's growing, so on and so forth and just try to make some intelligent allocation on, like, investing in current things versus versus starting new things. It's very true at Gusto And I'm sure Square probably feels the same was that there's just no shortage of need and no shortage of adjacencies. To me, one of the best things about working in the small business arena is just there's so many areas that we can help, that I'm sure if we put effort into, would work because the customer pain is there and the market is there. Just kind of deciding how many to take on at once, and like the, handling depth versus breadth. 

Brett: Can you explain that in a little bit more detail and in sort of how you use Horizons or like how you would explain to someone the way that you think about resource allocation in terms of investing in the core, enhancing the core, taking on new high conviction bets, high risk bets, sort of those types of things?

Michael: Yeah, so we're, we're right now, we're like in the first cycle of my time at Gusto going through, um, annual planning and working through, um, what we're going to be doing over the next year. Annual planning for us is a little bit offset. We follow like the more or less the tax year calendar.

So our fiscal year ends ends in April. One thing I really like about our approach at Gusto is we keep we keep a rolling 3 year vision of where we want to go. and so we're working through that right now, like, stepping back from just next year, what does the next three years look like and what does the customer deserve and what, where are we versus, where we think we should be for the customer.

And we use that as an opportunity to kind of think, big it's constrained in the sense that it's three years away. So that's not 10 years. I mean, there is some constraint on that. we try not to get too nitpicky about like, well, how are we going to resource that? And all the questions that inevitably will come up when we talk about a shorter time frame. But we want to think, you know, think bigger in that timeline. And in doing that, you know, that allows that kind of gives us a space to both go, what would it look like to go deep? What would it look like to go wide? And a lot of new concepts and thought and thinking out of that of that process.

So we're in it right now, which is been super fun for me because, you know, all these ideas sort of come up throughout the year, and we have discussions on them, of course, but this is a nice time to, like, get all that thinking out on the table and start to parse through and think about where we want to go.

Inevitably, when we try to round back up to what that 3 year vision is going to look like, we have to make some trade offs, you know, and a lot of those are based off judgment. A lot of them are based off of, you know, how the business is performing. Um, where the most acute customer pain is, and ultimately we try to get to a narrative on where the business will head in terms of, helping customers.

That gives us a bit of a North star for, like, how the next 3 years will look, and this process isn't isn't totally unique, you know, but we didn't do much of that at Square. A lot of it was kind of focused on what is the next year look like. Opendoor where I was for a brief time between Square and Gusto, I thought did an excellent job of keeping it, they did it on a 5 year window, but keeping a vision of where we are headed over a 5 year timeline and always refreshing that year over year. Eric Wu who was CEO at the time, uh, was exceptional at this and making sure that we were always kind of knew where the five year view was so couldn't come back and inform the next year.

Brett: Can you give an example, maybe in the context of Opendoor? Like, what what you thought a compelling 5 year vision was? Like something that makes it more clear, like, what is the altitude that you think is productive when you're talking about a 5 year vision, or in the case of Gusto, a 3 year vision?

Michael: A lot of it, allows you the opportunity to bring a lot of belief on where the world's going to go, like, into, into the conversation and be able to see how that belief might play out. So, like, a central thesis that, at Opendoor, for example, was that over time the consumer will demand a more, an easiest and more seamless way to move that rejects this notion that, like, it's got to take 2 months, you got to get these agents involved, you got to lose 8 percent of the value of your home every single time you want to, like, transact. And that consumers ultimately will want to get into more of an e-commerce type level of home shopping experience, where, of course, there's still the rights, go in and tour the home and everything like that.

They don't need to be handheld by agents that are more or less, skimming out of the middle of a, of a transaction. And so following off that line of thinking, it was sort of like, right over the next 5 years, like, how is that going to play out. And if we're doing that on the sell side of the equation, what, how is that same thesis work on the buy side and how might those two things sort of come, come together and do a full, you know, sort of real estate ecosystem.

And so it allowed us to kind of say, like, okay, here's some of the key insights or key thesis that we have about how the world is going to evolve and how what the consumer expects is going to evolve. And then how do we want to show up in terms of how we live into that? Unconstrained by, like, you know, the day to day, all right, how many people do we have on this team? And like, all these dependencies and yada. And so it's, it's similar at Gusto. I mean, I think the, problem space is wider. So we're, we're looking at informing hypotheses on how the world will change and how we should evolve with it to serve consumers over a little bit of a shorter time window, and building out a narrative around that.

That starts to address and things on on the horizon framework that I gave you on, like, you know, we need to go deeper in these areas because we have the central belief and this and this is why, but also has, a little bit of of measurement on it on, like, how much are we going to go Horizon 1, Horizon 2, Horizon 3 and there's some rationale behind it.

You can think about it is like a Horizon 1 effort would be something that's, you know, usually working on an existing product or an existing offering that we have that we believe, the work will materialize, will realize value at a shorter time frame. Typically, it's adding depth into something that's already existing and continuing to make it better as we learn about the customer.

Not to overcomplicate it, but there are like, even Horizons within a product. So you look, you look at something like payroll, for example. Our payroll product is our is the backbone of Gusto. There's a lot of things we're going to do that adds into what we already have that is, high rate of success, we have high conviction on, we know the customer pain, we know how to solve it. Then there's some things that we're going to do within, you know, a core product that is going to be sort of Horizon 3 work where we're taking some bets, we're going to try some new things, higher risk, maybe higher return, and we want to make the space to be able to do that within that specific product. So we're kind of looking at, bigger bets versus safer, but largely a high rate of success problems and looking at that spectrum for each individual product and then for the portfolio as a whole.

And between those 2 sort of going deep and going wide perspectives, we start to net out with a point of view on where we're headed.

You were talking about the idea of of Horizon 3 bets, and I'm curious when you think about higher risk, higher reward, more ambiguous product building, how do you think about assessing whether that is being done or was done well? And the progress you're making against it. Given that you may have high quality inputs and the experiment was run well, but the experiment proved that there is no opportunity here. It feels like managing that type of product work is different than. Horizon 1 core execution. Yeah, I mean the Horizon 3 work and like starting new things when you're at and trying, you know, experimenting in new, against new jobs to be done, is, you know, again, there's no, there's no off the shelf playbook. So I can give you a couple examples of things that I think have worked and like things that we that we try at Gusto.

So one of the products I led at Square was Square invoices and Square invoices grew to be our second biggest, I'm not sure where it is now or if they disclose all this, but it grew to be, at the point of the IPO, I think it was our second biggest payment product. And that product started, it wasn't like a bunch of smart people got in a room and like figured out the three year vision and one of the parts of it was an invoicing product, there was a group of, I think it was just a couple of engineers that were like, We got this payment platform and we know how to build, you know, websites, what if we just let people send an invoice and then type in their credit card, you know, and they did that as a hack week project.

And, we're like, well, that's cool. Like, why don't we try to you know, just ship that. So we'll just see, we'll just put it in the, in the left rail of the navigation and see what happens. And, and, oh, wow. Hey, has anyone checked the dashboard? there's an insane amount of money that's been moved through this thing.

I'm sure the folks that worked on that, you know, had a thesis on this, but to see it play out when you looked at Square kind of looking now, looking backwards, it was, it just made so much sense. It was like, we were predominantly service businesses, we have, despite the branding on coffee shops and retail, so many of the services says, don't take payment at the point of service. And so they're doing this in the background, and this just kind of gave them an easier way to do it. you know, they're already using us for, like, in person payments, but like, now we're now we're kind of into billing and like, async payments. And, and then we're like, well, we should put a team on this. Right. And then, so it started, I think I was the second product manager, but there, when I, took over the team, there were like two engineers, myself and like a designer that was helping us off the side of their desk or whatever.

And over the course of years, I mean, that, business grew, I mean, tremendously. It was, I think we did a couple of billion dollars in GPV and payment volume inside of like, 2 years. the team grew around up to around 30 when I, when I finally handed that off to somebody else. That that gone into tons of adjacencies, billing, recurring payments, I think they're doing bill pay now, tons of stuff that just sort of all anchored off that one initial thing. So like that turned into, I don't know, what do you call it? Wait, what'd you call it Horizon 3? I mean, kind of, you know, off the bat, but it was really just making the space for smart folks across the company to try some stuff and then having the right mechanisms set up to like, put that in market, just see what see what happens. And, so I think that's one thing for Horizon 3 things is just a lot of it comes bottoms up. most of it comes bottoms up and making the space for that to happen. then shows up in like, an annual planning process or, like, oh, yeah, you know, that 1 thing that we tested that seems to be doing quite well, like, maybe we double down on that.

Brett: If you want to encourage that, other than sort of like traditional hack weeks and stuff like that. Is there anything you do in terms of inculcating that in the culture that increases the chance you're going to have the next couple of engineers work on this little idea over the weekend that could blossom into a really wonderful business.

Is there anything else you would do institutionally or system wide?

Michael: Setting the culture right so that there is a freedom to try stuff and, like, know that not everything's gonna work. So, as long as you can be up front on, like, hey, we're gonna try this thing, it's a bit of a bet, here are the risks. You know, this is, what we're thinking up front. But not sort of penalizing failure on stuff like that, but especially if it's like well articulated up front. That that needs to be there. You know, I've been I've been in some situations where folks feel performance review or for their career growth, if they're not part of the winning team, that that's gonna hold them back.

And despite I think what every company tries to do to counter that, that does show up a little bit from time to time. And so hammering that kind of attitude out of the culture is key. Just making sure it's clear that, like, we have room for risk taking, we reward it. You're not going to be penalized if everything doesn't work.

I think that's point one. Point two would just be ensuring that the space is created for that kind of stuff to do it safely. And this is a benefit that I think you get, you know, when you're kind of getting at the scale that when you're starting product two or product three, is that, you know, at Square when we did this, it was pretty easy and we had the tooling that allowed us to be like, we're not sure about this, we're going to put it in front of 5 percent of customers that we think fit the ICP of what, who might find value from something like this and just kind of see, it's ensuring that you have the infrastructure and tools set up to test some of this stuff safely.

And if it does go south, that there is a problem, I mean, shit, we could have had, a whole bunch of, you know, as the product blossomed, there were risk issues left and right. I mean, there was credit fraud, criminal fraud, like a lot of things that we slowly, like, figured out and fixed.

But let's say those things happened right away. You know, we have the ability to sort of shut it down. And obviously, there's a little bit of exposure, but no harm, no foul. So you kind of need some controls around that that you're managing. Managing the risk of like a, dud or some unintended consequences that's going to get you in a court room you don't want to be in. So making sure those controls are there.

Brett: How do you create a culture that is comfortable with risk-taking? I'm curious if you could talk about it in any more detail. I think it's one of those things, you know, when you talk to people running software businesses, I think it's a common thing that people talk about. in practice in companies where employees have all sorts of different incentives, it's actually hard to do.

And if you think about, like, the decision tree of someone doing something new or something where there's more risk, one outcome is they take this thing on and it's wildly successful and it's like a career making new business line. So that's great. That's very clear. But in all the other cases, when things don't work, it's easy to conflate, somebody who runs the experiment well, and the experiment fails, and someone who doesn't run the experiment well, and it fails, or how many up at bats would you be willing to give someone before you would say their instincts and judgment is actually wrong.

It's not just, uh, the experiment didn't work. And it's all of that that I think. operationalizing becomes very difficult, and I think it's, obviously easier to say we want to be risk-taking the future. You know, we have to be innovative if we effectively want to grow TAM forever, which is the goal of an ambitious software business.

But the details always, I think, tend to get in the way. And in some ways, if somebody is the most, career-oriented, maybe they go make the core 2 percent better every year, and that's going to be the best way for them to grow. And maybe that's fine. Maybe somebody with that personality should just focus on that.

But is there anything you've, you've found or figured out over the last decade and sort of this theme that we're talking about? 

Michael: You know, we kind of, we talked about the hack week example, As a source of innovation, there are, you know, there are, we have a few at Gusto right now, but there are teams, you know, that, it's nice to kind of spin up and be like, look, we're going to try this for a little while, you know, are you kind of have free reign in this space to try some things.

We believe that you're shooting at a real problem. So we buy the problem articulation. And a lot of times, if you find a leader that can convince you on the problem, that's where my a lot of my like, okay, I trust the intuition on this because I can, they can reasonably articulate to me why they believe, we might not know the solve yet, but like, why this is worth charging at and if the logic checks out and I buy the intuition behind it as well as like, how they weave together the story, that kind of checks that I can help check the judgment box for me, to be like, yeah, let's have at it for a while. So carving out teams and giving them sort of the space to to attack and knowing that going in like this is a unknown area, we may or may not find success and trying to set the expectation up front that like, if we don't find success, we need to just be able to have an intellectually honest conversation.

At some point, we can have a rough sense of when that might be where we're like, okay, we might not be here with this one. Try to find something else. I mean, there's different there's different ways in which you can, like, invite risk taking to take place and knowing that it's got, got some controls behind it to have it not go not go haywire.

Brett: if you have an up and coming PM and they have an idea for a new bet. They came across a new problem that they think the company should take on. And you were coaching them on how to go work on this and get the company to allow you to go work on it.

What would you tell them to go do? What memo or deck or work would you tell them maybe in the context of Gusto, maybe it was at Square, somebody came across something and they wanted your advice on how to get it out in the world. What are some of the pieces of advice you would give that type of person?

Michael: One operating principle we had at Square was start small. Like, what is something, what are some things that you can do that would help us kind of validate that this is a worthy problem to go solve and what would be like small start that would help, actually put something in market to see, we have a sense of how we might be able to, to, to solve it.

So, I mean, you can go through all the classical, customer discovery, you know, Marty Cagan, Silicon Valley Product Group level approaches on things and those are important to do. I would call that kind of foundational on like understanding the customer problem really well, doing customer discovery, coming up with what we think the solution might be, trying to validate that through prototypes, like all of that will help save us an immense amount of time.

But, if I buy what you're saying, and we can, and you buy it, and we're continuously getting good feedback on it, like a lot of what, you know, we want to try to do is figure out how do we put something out that allows us to validate, like, that this is actually going to work and gets at the heart of the thesis behind the idea, and see that played back through the market and do it kind of like as a feature.

It's not like we have to necessarily spin up this whole new team and this big decorated thing that's like, you know, um, make a big deal out of it, but like kind of on the invoicing example, like, is, is there a, is there a start small that we can put in market and see if some of your central, central hypotheses can be validated with that?

And you have to put an intense amount of focus on that, on that little small thing to make sure that there's something there. Um, we did a lot of this at Opendoor. Uh, we do a lot of it at Gusto. But it's the kind of thing where it requires just like outside attention, like outsized attention, you're spending a lot of time looking at does the little nugget that we're trying to put out work?

And if so, why what's happening with it, talking to customers, et cetera, et cetera. you know, put a little bit more focus there and hopefully eventually over time, it turns into something real.

But you have to make make space for some of that and the hard thing is just, how many and how much and when do you do that? The hardest part to me is when the idea is like really far from what we're already working on. You're like, well, that's a good idea, but it doesn't necessarily jive super well with the direction we're on right now.

And how do you how do you bridge that gap? Oftentimes it's harder to get things over the line where you're like, all right, I can kind of see it, but it's. It's not in line with anything we're doing right now, and a lot of those, unfortunately, tend to not happen or need more like executive level support to get off the ground versus like being able to just go try something and start small and see if, you know, we get any good signal back. 

Brett: So, do you think when you think about all of the folks in the orgs that you've worked at that have come to you with new product ideas or new jobs to be done and you leave the time with them feeling like it shouldn't be pursued. Is it oftentimes poor problem definition, or did they not chunk it down into that small sort of starting point, or are there other things like if you were to just bucket all the people that have spent time where they didn't do this well, is there a predominant fail case outside of after they run the experiment and build the product, I'm talking about sort of the before part of the process.

Michael: One is that the problem in the pitch is meaningfully away from the current direction that we're focused on. And so it's like I can see that but it's not in line with like how the vision that we're trying to execute on right now.

Those problems are harder to be like, yeah, let's go do that and like change the plan and divert people to that versus what we've already, you know, already already taken on. That'd be one where it's harder. And then the second is when there's just hasn't been a very critical look at like what the "start small" is.

Let's say it's in the vein of what we're working on. I would like to hear a narrative about how with like a couple people, you know, having seen massive success with a couple people doing, doing cool things, like, how can you take a few people and try that? Like, if you have high conviction in it, you know, particularly if you're a leader here, if you're a product manager running a team, engineering leader, running a team designer, running a team, you are also at your, within your team, allocating kind of who's going to work on what and working with the team that, the team's inspired by it, and you can still keep the direction of the team, going against what they're sort of objectives and strategy are for the year, and you can go try this this side idea, those tend to work because you're like, great, I'm going to, I'm going to try this. I'm going to show that it's working. And then if you need more team to basically fund it and put some, put some, put some more wood under the fire on it, then we can have that conversation.

We're doing it now with the validation of customers have tried it and we see, we seem to think that there's value in it. 

Brett: Do you think almost all Horizon 3 type opportunities can be chunked down in that way? Or is there a subset that it's like, it's a massive bet. There's no way to chunk this thing down. And we're willing to take on X number of those every X number of years. 

Michael: You know, when I think about some of the Horizon 3 things that that we're discussing right now at Gusto, and when I think about what they might look like, three years from now, they are materially different than what Gusto looks like today.

So that's exciting and something that's invigorating to want to go do. But when I think about the first step to try to step into that, a lot of these hypotheses have to be like, articulated, validated and rearticulated, validated and rearticulated and validated. So when I think about the first step, it's not that far from where we are today to start on the path to something that's could be really big in a Horizon 3. That's usually where sort of the start would be. And if there's a big fail on step one, then we might have to look at okay, do we still believe in step four? so I'll give you like a hypothetical without like, without going through too much of inside baseball at, Gusto.

But let's say hypothetically, we wanted to get into. email marketing and that was like a big thing for us. I would expect if that was like a big Horizon 3 bet, that we would have some kind of starter effort on that, that we are going to do next, next fiscal year, that we could fund a team on or fund an existing team to take on part of, to try some basics around the, around what it would mean for Gusto customers to be able to like reach their, their customers in a better way and put, what we think maybe our best first hypothesis would be on that in front of them and see if that takes it all. And if that were to take, then that might open up the realm for us to get more into sort of marketing solutions hypothetically for, for our customers. But if that first swing doesn't work, then we kind of have to work, look at like, okay, does that, is that whole arc that we're trying to get at with Horizon, this, this Horizon 3 arc, is that whole arc in question, because we can't actually get step one to take. When you look at it over a 3 year view, you're like, okay, that's a Horizon 3 thing. But then when you break it down into what we're going to do in the next year, it's oftentimes a reasonable adjacency that is, the first step towards that and we can kind of validate if that if that works or not.

Brett: Do you think sort of product taste and intuition is something that is like a learnable skill or a muscle that can be exercised and improved over time? Or at a certain point, does somebody just have that type of sensibility and other people don't?

Michael: No, no right answer. I do really value what I would call good judgment and good judgment is something that is best screened for at the point of interview. And that doesn't necessarily have to mean like this somebody is an expert in all things product and they've used a million products and they can articulate. You know, use a lot of like product vernacular to articulate things. But has reason, you know, can structure problems in a clean way, has reasonable ways that they would sort of break down how they would go about solving, or getting to a conclusion on something ambiguous. These are some of the things that I want to see and like somebody that's trying to take up the product management role in particular. A characteristic we're looking for is somebody who's curious and like somebody who ideally they have gone out and, like, played with a whole bunch of products and, like, can bring in examples of, how product X did something well or product Y did something well, even if it's not the same domain that helps know, like, okay, curiosity sort of, vein is there and you can you pair that with good judgment and they seemingly are, you know, excited about just the product arena in general, like those kind of conditions lead, I think, to success with product managers.

So, yeah, I mean, I think it can be developed, but like, we certainly want to see folks that are coming into that role at Gusto, being able to showcase that they, have some of it off the bat. We look at past work. We put hypotheticals in front of folks. We throw tough questions that don't have perfect answers, gauging on strategy in front of folks to see if they can break down, like, well, these are the main components of that question.

Or to answer that question, this is how I would break it down, I might not have hard answers for you, but like, this is the approach that I would use to get to an answer, and, if I made these assumptions, this would be the position that I would land at. I think what one thing that I'm looking for, and I hope that our interview process is screening for, on the judgment question is also just this sense of, like, being able to have an opinion.

The reality is that this work involves, you know, making decisions without perfect information. And one of the pitfalls I find in some product leaders are they have a really hard time getting to a decision because they want perfect information and their proxy on what enough information is, is, too high versus what I think somebody could have made a pretty good judgment decision on without getting more info. And so you see this sort of like manifest when folks like constantly want to run research projects, or they want to do a whole bunch of A/B tests before we make decisions on something that is relatively low impact if they get it wrong.

Somebody with a good judgment, seven times out of 10, will probably pick up on the right answer with less data. So these are the kind of things like we try to set, not to say we do a perfect job, but the kind of things we try to like suss out in the interview process to, to see if that's the kind of person that we're, that we're bringing in the door. 

Brett: If you think about all the people you've worked with, and or hired and you create one bucket of people who have exceptional product taste or intuition and people who are weaker. What's your best guess at what was going on for the people that have exceptional product taste? 

The first things that came to mind, Brett, were like, Somebody who is empathetic and curious, can put their, can put themselves in the shoes of whoever, and ask good questions you know, try to get to the, root of what's going on with first principle thinking, asks a lot of whys, and like genuinely, wants to know about that.

Michael: I think one, one thing is, you know, in the beginning I talked about just like being lucky to serve small businesses because I like, I truly care about their success. I want somebody that truly care, like really wants to work for the customer, you know, because if they don't really give a shit about the customer and it's just like, well, this company is going to IPO soon, I'm going to make a bunch of money, bad fit, because need to have a real hunger to like get to the bottom of what the hell is going on so you can build good product for it.

So empathy, and curiosity, I think are key to it, and then the second one is kind of what we just said. I don't know how this stuff develops. If it's innate or if it just happens from something, but like, having an opinion, you know, being able to, to say it and being able to, know when it's weakly held.

I think the product people that I see struggle the most are the ones that just like, can't really make their like, well, here's all the options. And I'm like, well, it's your job to tell us what we're going to do. So what are we going to do? You know? And, and, so I don't know how that forms, you know?

But that, that's what we want.

Brett: There was this wonderful interview that a friend of mine shared a couple weeks ago, and it was, a long form essay with Tom Ford, who's this sort of prolific designer. he said that sort of his greatest skill was he could sit down and look at 5 pair of shoes sitting in front of him that his team put in front of him and he could point at the 1 that would sell 100 X more than all the other shoes that would that would be resonant with their customer base. Do you think that there's something to that when you think about just exceptional product people? That there is sort of this ability to sort of identify opportunities in a similar way, or is it more of the scientific method?

Michael: You know, 10 years ago, I would have said more of the scientific method. I'm getting more in the camp of like some people just have a good innate grasp on the wants and needs of customers and not just customers, just people in their life and can read, you know, read the room well, and react well with solutions.

And, you know, it's really hard to find those folks before. Those are the folks you want, you know, I mean, there's there's definitely ways to de-risk, like I truly buy into all of the classical product management thinking that there's tons of articles out there for de-risking product bets and and we coach all that, and we use those mechanisms, and they they're certainly helpful. But it's kind of like, where's the Y intercept on it?

You know, like those are you take someone who innately just has good judgment and good, good gut feel for things, and I think that can get better with time. It's not like where you start when you're 22 is the same way you're going to end when you're whatever, but you start that and then you apply really good practices on top of it.

You might take someone from just making this up, but like, they're at 50 percent. You know, that might bump them up 15 points, you know, to 65. But if you take someone who's at like a 30 or 20 who doesn't really seem to grasp the customer well, and be able to do what you just said, and you put the best process on top of it, like, I still think you're going to maybe net 15 points up.

This is kind of a new thinking for me, but I think as I've kind of aged a bit, I've been around a little more, I put a little bit more stock and like, you know, people that have just that innate sense.

Brett: It sounds almost like, like athletic ability. Like, if you look at the best athletes, there's some innate athletic ability, and then you can layer on training and all the precise things to amplify their ability. But if there's not a core level of athleticism, you could be a good athlete, but it's tough to be a top sort of fraction of 1 percent.

Michael: That's a great analogy. Yeah. Like I'm, I'm a runner. I'm trying to get better. I'm never going to win a race. Like I know that. But I could be, I could be a couple points higher than I am now. but there's, I have a limit cause that's just how I was built. 

Brett: Yeah, exactly. 

Michael: And, and, I'm older.

Brett: Um, last couple of things. One thing we didn't talk about was pace of execution. Do you have any thoughts on how to move more quickly as a product team?

Michael: I forget what book this was in, but it might've been the, um, High Output Management. But there's this concept of you're working on the output of the factory, and then you're also looking at the factory itself. And I think that a lot of times healthy teams have a good balance of the two where they're, they're looking at the factory itself and sense of retroing like, how did that project go? Where did we, where did we slow down? Why were we slow in those parts? What could we be doing to do that better? And so having this culture of kind of looking back on things, even things that you would call successful and sort of figuring out how do we nip and tuck, how we work together and how we get, get things done helps sort of like tent tend and build the factory. Like there's no, there's no perfect way to do this quickly. But examining speed of decision making, did we get, you know, do we run too many A/B tests? Could we have made that call earlier? Did we really need that customer research? how could we have gotten I mean, this is this is very common in multiple-product sort of like platform companies.

It's just my team does this, but I got to get these 3 other teams to do that in order for this product to go, like I need platform team X to build, functionality Y so I can, I can build this thing. That trips us up a lot. And so looking back at how could we have gotten alignment sooner?

If there wasn't alignment, could we have. Unblocked ourselves? Could the team that actually needs the functionality of the platform has to build just go in and build it? If not, why? Like, is it because of skill set? Is because we have some rules? If the rules are there, like, could we change them? And so just kind of getting this constant, self evaluation process on, like, how that how things could have gone better. We have work to do on this at Gusto and certainly had work to do on this at Square. But, in some cases, I think it might even just be good to ask that exact question on like, not only how could it have gone better, but like, how could it have gone faster, 

It's not even so much about what are we doing, for the customer, better or different. And that's an interesting look cause I, you know, I don't know if that tactic works, I don't think we spend enough time and I don't think companies in general spend enough time during the strategic process of analyzing the how they're working.

Brett: What about if you think about, all the teams that you've worked with. Not the companies, but each team, each product team or functional team or whatnot, and you were to look at the top three most productive, fast moving, fast shipping versus those at the bottom three teams.

Like, could you articulate what was going on on those unbelievably productive teams?

Michael: Some of it is just sort of where the stage, of the product or the, company or, or whatever. I think the ones that I've seen move the fastest are one, they're clear on why they exist and what they're trying to get done. Two, they're clear on what they're trying to build.

You know, there might be some nips and tucks on you know, where's the button placed and whatever, but like, mostly they're like, this is why this thing needs to exist. We all believe in it. We can see what it needs to be. Um, so there's a lot of clarity on purpose and where we're going.

Three, they have the right people on the team. A lot of times there are just skills issues or like there's team issues that hurt productivity. So the right people on the team. And then fourth, they are largely in control of their own destiny. They don't need to rely on others to help, get done whatever they need to do. They're fairly, fairly self contained. And then five, and this is where, you know, I think that, um, it does depend a little bit on like stage of product or what kind of company you're in, but like, they're willing to use off the shelf things, not reinvent the wheel, whatever they need to do in order to like move faster.

And they're, they're applying their unique, skill set on unique, adding unique value and not trying to reinvent stuff that's kind of already been done. So, you know, off the cuff, those would be the things that if I look back at things that I think have, you know, teams have moved exceptionally fast, those are many of the characteristics that are in play.

Brett: Just want to wrap up where we always do, which is when you think about sort of product building, product orgs, all the stuff we've talked about. Is there someone in your career that's kind of most imprinted themself on you?

Michael: I think the two people that have had the most impact on me are Gokul Rajaram and Alyssa Henry, both at Square. Gokul was leading product and engineering when I first got there. Gokul was extremely focused on speed and moving quickly. We were spinning up most of Square's product suite.

He started in 2013. When I came there, it was basically like exactly how you described it. Like we've got this wedge product. Great. We're going to build this business operating system on top of this wedge product. Payroll launched, customer engagement launched, appointments launched, invoices launched, all these things.

Just like bam, bam, bam, bam. He had such a drive and sense of urgency to him. He was so, humble and like kind and he's been a mentor to me in my whole career and like, I just like, I love that guy. He's a beautiful human. And he, he's, and so the team's felt supported, but like moving quick.

Brett: I feel like Gokul has just an incredible, what I would define as followership.

The people that have interacted with him are like lifelong advocates. Is there anything else you can share about like, what's going on with that human that you think has led to such followership over the past 20 years?

Michael: I think he puts a lot of trust in people. I think he asks good questions, but ultimately he'll leave a lot of the decision making to you. I think he genuinely cares about, people under him. You know, he cared about me and my role, but also just like how I was doing. He's just like one of those guys in the valley that's like a hub. There's so many people that he supports in one way or another or has throughout his time. And like, over time, that accumulates and you start getting, you know, kind of the perception that you, that you just said. And he's just wicked smart. He's got a good read on things like that. I mean, he can just rattle off very quickly. You know, here are the 2, 3 things that I think are key to whatever this topic is that you're bringing up. 

Brett: I'm a fan of his as well, but why did you mention Alyssa?

Michael: So Alyssa, she was the, the number one person that I really saw figure out how to scale. she really felt, you know, whereas Gokul was just move fast, get new things out, new products. Alyssa was like, how's this all going to work together? The infrastructure needs to be there. We need to think about the platform. What are the primitives that live underneath these products that have to like work together so that we show up as one ecosystem. Really drilling in like the value proposition sounds easy, but it's hard and the value proposition is, this is all in one. It works seamlessly.

It saves time. To do that, there's a lot of things that have to happen under the hood to actually realize that. So to give you an example. when Alyssa came in to Square, I think we had, 13 or 14 different instances of a shopping cart of ways that people put items into some sort of cart object and then ultimately checked out. How is that going to work? You know, you add something like a discount, right? Now you're going to do it 14 times. And recognizing that kind of, stuff that allowed Square to move super fast in the early days, but like, will not allow it to get to the next stage. She was so, in tune with those things that needed to be touched up and invested to get those things touched up and where they needed to be.

And I think that fueled a lot of Square's upmarket move and a lot of like, sort of the. I don't know what you want to call it, like the 10 to 100 chapter, where clearly the company had a ton of product marketing was practically public by the time she got there, but just took off, through a lot of those moves and, just a really great organizational thinker, platform thinker, which was exactly what Square needed.

So I just learned a ton working for her.

Brett: Great place to end. Thank you so much for spending the time.

Michael: Yeah, Brett, thank you for having me. This was great. I appreciate it.