Twilio CEO Jeff Lawson explains why software developers are misunderstood and underutilized, defends company's 2020 value surge

Published Tue, Jan 12 20218:40 AM EST

Alex Sherman @in/alex-sherman @sherman4949

Key Points

Twilio CEO Jeff Lawson has written a book, 'Ask Your Developer,' which highlights how software developers should be more integrated with corporate strategy decision-making.
Lawson said companies have had to accelerate digital transition plans by an average of six years because of the Covid-19 pandemic, based on Twilio research.
Twilio, whose market capitalization surged from $13 billion to about $55 billion in 2020, aims to be the world's 'leading customer engagement platform,' Lawson said.
U.S. regulators should crack down on the algorithms that drive 'what we as consumers see and read every day,' Lawson said.

A View from the Top is a Q & A series exclusively available on CNBC Pro . Alex Sherman will regularly speak with a business leader about decision-making, investing and industry news. 2020 wasn't all bad. Just ask Twilio CEO Jeff Lawson. As companies had to rapidly adjust last year to serving customers remotely, Twilio's application communications products became essential for companies from Netflix to Uber to Nike to interact with customers. Investors noticed. Twilio's market capitalization surged from about $13 billion to $55 billion over the course of the year. Now Lawson has written a book entitled 'Ask Your Developer.' Lawson told CNBC why he wrote the book, why cloud company valuations reflect the growing understanding of software's global power, and why he wants government regulators to crack down on social media algorithms that can lead to the spread of disinformation. Here's the full Q & A: (This interview has been lightly edited for length and clarity.) Alex Sherman, CNBC: You wrote a book. It's called 'Ask Your developer.' I read the book. Very good. I enjoyed it. Why did you decide to write the book? Jeff Lawson, Twilio co-founder and CEO: I wrote the book because I have a pretty unique vantage point. I'm a software developer turned CEO who's now running a public company. And we have, at Twilio, we power companies who are building software to compete in the market. They're building digital experiences in order to succeed in the digital economy. And we have 200,000 customers across every kind of industry you can imagine, from startups to Fortune 500 companies. And a common question that I often get from companies is 'how do we succeed in building a great developer culture? How do we succeed in actually getting developers to build great software to power great customer experiences? How do we act more like Silicon Valley startups and actually innovate and more quickly?' I had that conversation so many times that I finally wanted to put it down in writing and say, 'here are the things that I've learned along the way as a software developer and as a business executive.' And so, how can I share that back with companies who are all at various stages of digital transformation? Because if you think about it, we are now in an era where the digital experiences that a company creates for its customers are so important. Why? Because the interface we have with nearly every company is a digital one. How many of the companies do you work with now do you primarily perceive as a mobile app or website? It used to be if you had a bank, if you've got a bank account, your bank was a physical place. It was a brick-and-mortar retail store. And when you walked in the door, you decided whether or not you liked your bank because they gave your kid a lollipop and they smiled. But nowadays, your bank is not really about that at all. It's about a mobile app. And how good is that experience? Is it easy to use? Is it fast? Have they anticipated things that make your life better? So, the competitive ground now is a digital one. And so the companies who really succeed in unlocking their talent -- who are building all of these digital solutions -- is really key to the future of all these companies. And the people building this digital future at most companies are software developers. One of the things that I found, however, is that businesses don't necessarily engage their software developers in the most productive way to get the most out of that talent. A lot of companies use software developers as people who just write code. They hand specifications to those developers. They say, 'if I just hand the right requirements and documents to them and put some pizza and Mountain Dew out on the other side, we'll get some code that makes us successful as a digital company. But I actually think developers are incredibly creative problem solvers. In order to get the most out of those developers to engage their full brain, to get them thinking about how to move the company forward using all the skills they have, companies need to share with those developers problems, not solutions. Executives need to go to their technical talent and say, 'here's a big hairy problem we're trying to solve. What ideas do you have about how we can solve that?' Instead of going to the technical talent and saying, 'here's a specification I want you to go for.' And that's the essence of 'Ask Your Developer.' Bring problems, not solutions, to those developers. I think organizations that do that excel at building great digital solutions, moving quickly and really thriving in this digital era that we're in. Did you have an audience in mind while writing the book? It seems to me that you were writing to executives -- CEOs. That's right. Primarily, I'm thinking about the business executives who have obviously lofty goals for their organizations and how they're going to succeed in the digital era. They feel a lot of pressure to do so but probably don't necessarily know how developers work or what developers are capable of. And oftentimes executives, you know, we get these kind of mysterious answers from our technical organizations. Things like, 'I can tell you when the product is going to ship, but I can't tell you what features it's going to have.' Or, 'I can tell you what the product's going to do, but I can't tell you when it's going to ship.' It can be infuriating. And so part of what I set out to do is to explain things I've learned about how developers work and how software engineering works to a business executive so they can understand how better to engage with that technical talent -- how to bridge that gap a little bit to ultimately create a common parlance between business executives and technical talent to achieve the joint goal that really every organization has. If you talk to developers and the technical leaders you have, their goals are the same as a business executive. They want to win in the market. They want the company to make money. They want to build solutions that millions and millions of people use. They want to build things that are successful in the market. And so having the same parlance, a toolkit, for business executives and technical talent to work together is really the goal. And so 'Ask Your Developer' is aimed at those business executives who may not know a lot about how software is built or what it takes to build a high performing engineering culture in order to help them understand the things that they can do in order to foster a spirit of innovation, to foster a culture where people can do their best work at the technical level. One of the interesting things about your book is you talk about your own experiences with Twillio, but you also talk about a number of other people's experiences. So it looked like there was some real reporting that went into writing this. I've talked to a lot of developers over the years. I talked to many while I was writing the book, to really capture various ideas about what makes developers successful. One of the key things that I believe is that code is creative. A lot of folks think of software developer coding as -- it's like more math or science than it is like a creative endeavor. Like, writing code is like solving quadratic formulas. And that's what developers wake up every day wanting to do. Whereas I believe the writing code is actually a creative endeavor. You know, software is this medium that you can use to go solve problems. And there's a variety of ways for how you can go do that. And so figuring out how to take this technology to solve somebody's problem, that's a creative exercise. So, what I'm trying to bring out is the point of view of many developers, many of whom are actually intrinsically very creative people. Many developers play musical instruments or do arts and things like that on the side. That shows the complete person that a developer is. And I talk about how oftentimes developers, when they're in a company that doesn't see them as creative problem solvers, they don't last long in those companies. They sort of say, I'm using a part of my brain, but really I'd rather use my whole brain. Creating a toolkit for saying, 'how do you unlock that full talent for developers?' not only allows you to build better solutions and build faster, but it also allows you to retain the software developer talent that you may have. And we all know that there's a shortage of developers in the world. It's incredibly hard to hire developers and it's even harder to retain them. I read a stat, the average tenure of a software developer at a company is two years. Why is it so short? And what can we do to actually make it so developers actually want to work in our companies longer and want to contribute more of their full capabilities? I talked to a number of developers to hear their insights about what makes them really engage in the work they're doing, what makes them really want to stay in a company and actually use their full brain to to engage. And I think that's the role of the voice of the software developer that you see in the book -- to explain a little bit how developers work, how they think, and what really engages them. Along those lines, one of the things I found to be notable about the book was your own career path. You had some pretty sweet jobs along the way. You were a founding CTO at StubHub. You were at Amazon Web Services as it was just kind of flourishing and developing into the behemoth it is today. But there was something clearly gnawing at you the entire time. A feeling of, 'this isn't quite right for me. I'm not quite where I need to be.' And obviously, you found it at Twilio. Do you think that that gnawing sensation is in everyone, but many people just kind of ignore it? I think there's a pretty fundamental human thing, which is we want to be performing to our maximum level. When we go to work, we want to use that part of our day to really achieve three things: autonomy, mastery and purpose. At work, we want to feel like we've got some agency over what we do. And if you don't have agency, it's going to decrease your excitement for what you're doing. Mastery: are you getting better at what you do every day? Are you learning from great people and are you increasing your skill as you go through life and on purpose? I think most people want the work that they do to result in something bigger. They want to be part of something bigger. They want to build something. And I think that is not just entrepreneurs or software developers. That is what most people want. And I think that's particularly true with software developers, because it's a creative field. I think about mastery. There's so much to learn to become a great technologist. I think about autonomy. There's so much creative freedom in a job -- autonomy -- to actually take everything you know and all that creative energy and apply it. That's incredibly enticing. I feel very privileged to have been able as an entrepreneur and as a software developer, to be able to continue to grow those things. Part of what Twilio is all about is enabling that for many other people. One of our core values is 'empower others.' And that goes to both inside the company -- how we run the company, small teams that are fairly autonomous -- but also outside of our walls. We're a platform. We enable companies to build on top of us. We're empowering those companies to help build their digital future on top of us. Almost every person wants to unlock those three things: autonomy, mastery and purpose. And in the job market that there is for technology or software developers, if one company isn't providing those things, then another company might. And that's the key to retaining your talent and getting the most out of them -- really creating an environment where they can do their best work and unlock those aspects of everybody's personal growth. Let's talk about Twilio. Your company has done very well this past year. By the way, for anyone reading this right now, or listening, if you've never heard of Twilio, I'd advise you not to look at Twilio's one-year stock chart. You'll be filled with longer that you didn't invest. How do you strategically change running Twilio as a $55 billion dollar market cap company as opposed to, say, a $10 or $15 billion dollar market cap company? I think that as a CEO, I have to continually evolve how I approach my job. I was also one of the founders of the company. So, I was actually one of three founders, and now we're over four thousand employees. I find the size of the company, the number of people in the company, is actually the biggest determinant of our leadership style, because you need different leadership practices in order to lead a company of three people versus 50 people versus a thousand people versus many thousands of people. And what I find is as we are building the culture at Twilio -- building a culture of what we call owners and builders that enable people to do their best work, enable people to see a customer problem and be able to sprint every day to serve that customer -- it requires you as a leader to think of yourself as an enabler of people's best work as opposed to a dictator of work or outcomes. We have a bottoms up culture -- one where we invest in small teams that have a mission, and a customer they service, and metrics that define whether they're succeeding or not. Once you really define those core attributes of why a small team of 10 people wakes up every day and comes to work, that frees them up to go sprint for customers. So, as I think about building the culture of Twilio, it's really one about creating an ecosystem inside the company of people who are really focused every day on the customer as opposed to more focused internally on the organizational chart or politics -- things that often bog companies down. Our goal is always to figure out how do we actually take the vast majority of our employees' energy and have it outwardly focused on our customers instead of the mechanics of the company. And that's one of things that I spend a lot of time on at Twilio. Because your value growth has been so sudden, are you concerned at all that some of the valuation growth will come back down to earth? I think there's a reason why companies who operate in the digital realm have been able to see outsized growth, not just during Covid, but for the last decade or more. We live in a digital world. When your audience is essentially the internet and every company out there with access to your technology, the internet's a huge place. There are billions of people on the internet. And that goes for companies who are building to serve consumers on the Internet, but it also goes for companies like Twilio that are B2B that serve companies who are serving that enormous audience. That's why digital companies have shown a track record of fantastic growth over the last decade. This is a fundamental reconfiguration of how the world does business using software and using technology. I think about every market. We have the privilege to serve over 200,000 companies across every industry you can imagine. We have a front row seat to see how every industry is becoming a software industry. When that happens, you need a more mature supply chain. You need a software supply chain that's going to arise to enable every company to go build and compete successfully in the market to win the hearts and minds of customers in the digital realm. Being one of the early innovators in this software supply chain, providing building blocks like APIs that enable companies to go serve their customers, to innovate and build better customer experiences, enables those companies to win. That's what Twilio is all about. And that's why it's been a time when software companies -- and especially those like Twilio -- have grown at such a fast clip. You guys have done a couple acquisitions -- you bought Sendgrid and Segment -- for $2 billion, $3 billion. You guys are much bigger company now. Do the targets that you look at also increase as your value increases? We have very ambitious plans. Our goal is to be the leading customer engagement platform. I think of customer engagement as every touch point a company has with its customers. Those are areas where a company can differentiate itself, build a great customer experience, or can potentially get a customer down. And you think about all those touch points. They start with the moment a customer meets a company during their sales and marketing process through while they're actually using the product. What's it like to use the product, through, maybe when you need help and support with customer support or field service -- all these touch points that companies have with their customers. This is a really a wide open field. I can't imagine a market that is bigger in the world of software than helping companies to serve their customers. If you think about it, every company has three basic things they do to drive growth. They acquire customers, they keep those customers happy, and they turn them into repeat customers. Building great customer engagement across all of those lifecycle points is how you do that. And so we see this really wide open field ahead of us on how we can help companies to do that on this mission to become the leading customer engagement platform. As we think about how we do that, obviously we build a lot. We have a large investment in R & D. We think innovation is key to how we're going to unlock this opportunity. But also, there are times when we see the opportunity to bring a company into Twilio that has already solved many problems that we want to solve for our customers. And it can accelerate our roadmap, accelerate our unlocking of this vision. And I think that's what you see when we acquired Sendgrid or Segment -- to bring them into the fold. It accelerates our ability to achieve our mission. There's a line in the book when you talk about strategy: Build things our customers want for which they'll pay us. But, you could sell office supplies to customers, and I bet they'd pay you for them. So, there must be more to it than that -- especially as you think about which companies to buy. When you think about the restraining bolts of going into the office supply market, the restraints on that would be what is this mission? The way I think about it is, the mission is this far place that we're trying to get to. Some distant land that we said, 'that's the promised land, that's where we're all going and it's in that general direction.' But the path there, how we're going to get there, that's driven by customers, and that's driven by when we talk to customers, seeing the big hairy problems that they need to solve in order to succeed in this realm of customer engagement. So that's the restraining bolt. That's how you know if this a good part of our strategy that's taking us in the right direction versus, actually, that feels like it's going in the opposite direction. So, when I think about it, our mission is to help every company to be builders of great digital experiences and some things that enable that. And where we hear customers say, 'hey, we're trying to build these great customer experiences, we are trying to be a digital innovator, but these are the things that are really challenging. These are things that get in our way.' One example, when we talk to a lot of customers, startups all the way up to Fortune 500 companies, they said, 'you know what, we've bought all these different pieces of software for the years. And every one of these pieces of software, whether it's our marketing, automation or sales systems, they all have a slice of knowledge about our customer. They all have a piece of our data. So, we have all these data silos throughout the company that make it so we actually can't assemble a full view of our customer and therefore know how we can best serve that customer, because the data fragmentation is a really big unsolved problem.' And when we heard that so many times from so many customers, and then you see what Segment does -- they solved that problem. They help companies wrangle all the customer data from all the different places where lives, to get that data where it needs to go ultimately to build a complete view of the customer. That's a really hard problem. That is a blocker to actually building great customer experiences. So that's why Segment makes so much sense in our vision of building this leading customer engagement platform. Is there a particular CEO who you model yourself after or who you say, you know, that particular person, that's that's who I aspire to be. Is it Jeff Bezos? Is that Marc Benioff? Those are two CEOs who are in the book. They are representative of some of the CEOs that I have learned a lot from and who I want to model [myself after]. I really admire the intellectual clarity of Amazon and the processes -- the way they go about serving customers, the intellectual rigor they put into a lot of their decisions. I am inspired by essentially the brain that was Amazon. I'm also very inspired by the heart that is Salesforce. And one of the things I've learned from Marc Benioff is how to build a company that has a great soul and takes care of communities around the company and thinks about the societal impact of their product and their employees and their existence. I'd like to think that I've combined the brain of Amazon and the heart of Salesforce to build a unique culture in Twilio that we call the Twilio Magic. Salesforce just did a very big acquisition. They paid a huge multiple for Slack. Is that the new normal? Is the going rate of doing business now that you're going to have to pay 20-times revenue for a growthy software company? I can't speak to a particular deal. But what I can say is that when I think about where Twilio is going, when you see opportunities to accelerate our vision, there is value in acquiring leaders in markets, and there's value in being a leader in the multiple markets where you serve your customers. And so I can understand, generally speaking, the strategy of wanting to work with the leaders in markets. And that comes in in terms of M & A as well. One last consolidation question. As you think about 2021, do you expect this to be a year where we see some really big, transformational software deals? When I think about software, the stakes are so high because the internet is such a big place that the opportunity to build very big, fast growing, meaningful businesses is so apparent. So that's why I think you see lots of transactions happening. That's why you see companies really investing in this future. Because when you think about these markets that are, for all intents and purposes, unconstrained by how far we can go. That provides so much opportunity to build and grow, as well as incentives to acquire companies and to accelerate leadership in those markets. So, yeah, I think we will see more M & A because the internet and the size of the software market is just so astoundingly large, and companies are growing so fast, that it makes sense to continue to build leadership. You're a public supporter of Joe Biden. You donated money to his campaign. As you think about the last four years of the Donald Trump presidency, what is your lasting takeaway? For leaders of a country that is as large and important, with the resources that we have, as the United States, what is really important is that we are led by the science, we are led with good policy, and we are not led with tribalism. And that's what I see in Joe Biden. He's a leader that is going to do that. As you think about how Joe Biden's administration may lead from a regulatory standpoint, this issue is front and center right now, with the FTC taking a look at all the big tech companies. There's a lot of talk of should we break up Facebook, do Apple and Amazon and Google have too much power? How do you view that? Has the power dynamic gotten out of whack to the point regulators need to get involved? I think a world where tech companies essentially get to do whatever they want -- not even tech companies, but any company -- is not necessarily the world that I want, nor do I want a world where government is heavily involved in business. So obviously, there's the right place for regulation to ensure that externalities of business that harm society are accounted for in how our society grows and enables business. And so I think it is worth society and governments and regulators asking hard questions of leading companies in our economy -- and especially digital ones -- because they have such reach. Now, I don't know if a particular regulatory outcome is right. But I do think that asking mature, sophisticated questions of how technology impacts the lives of citizens, and more importantly, impacts society, is very important. I think that from a governmental standpoint, we're actually behind. If you think about our government leaders, they don't really understand how technology works. If you watch some of these congressional hearings, it's clear that they don't really understand what's going on. I think it is important for our government, our leaders in government, to build the knowledge and build the capabilities to understand how technology affects society and then make wise decisions about where to interject and where not to. I think no involvement is a problem, but I also think there could be a knee-jerk reaction which would also not be helpful. Is there a particular issue you have in mind that you think is particularly ripe for regulation? I think our government leaders should seek to understand the role of algorithmic systems in driving what we as consumers see and read every day, because I think that is uncharted territory for how technology is affecting individuals all the way up to the societal level. Government officials should seek to understand how algorithms work and what they optimize for and what's the societal impact of that? Because that's the biggest externality that you see today in some of the technology that society has not figured out what to do with it. And I think the impacts of it are pretty wide-reaching. Do you have any political aspirations of your own? I don't have any political aspirations. I love running Twilio. I loved starting this company, and I love building it. Just in the past month or so, we've seen several IPOs -- DoorDash, Airbnb -- go through the roof. Do you have a good idea of what's going on here? Is this just irrational exuberance? Is there something potentially harmful in the way retail money is following institutional money? Could people be setting themselves up for a crash? I think IPOs have always been in some ways a speculative market. When a company is newly public, when they haven't executed for a long period of time as a public company, there's a lot of unknowns, and there's certainly a lot of hopes about their performance. That's why IPOs often draw in investors with the hopes that they're getting in early. And many times those investors are getting in early. I've thought about how we went public. That was the beginning of the next stage of our company. And going public was in many ways graduating from the minor leagues to the major leagues. That's kind of the metaphor that I drew inside the company when we went public. It's a new stage in order to execute the next era of the company. I think in those scenarios, then, IPOs are investing at the early stages of the next wave of growth of a company. But I just think nobody knows. The one thing I think we can say for certain is that technology companies have a tremendous opportunity because of the things I said before, because of the scale of software, the scale of the internet, the fact that you can now build a company by writing code, putting it on servers that reside all around the globe with a few keystrokes and have an audience of millions of people to buy whatever it is you're selling. That's unprecedented territory. I want to say, it's never been a better time to be a software developer because you can write magical code into a text editor, hit publish, put it on the internet, and billions of people can use it if it turns out that it's the right solution to the big problem. That leads to a world where technology-oriented companies that successfully leverage that power of software, that innovative spirit of software and the scale of software, can build some pretty amazing businesses with relatively little inputs because of the leverage technology gives you. I think that's the idea behind a lot of people's excitement, not just in 2020, but for the last 20, 25 years in what technology companies can do to build meaningful, impactful businesses at a scale that's pretty much been unheard of in the history of humanity. And that's what's so exciting about technology companies at this time. In the epilogue to your book, you talk about how you don't think the world is going to get back to normal post-pandemic. Specifically, are there certain things where you're particularly confident that as the vaccinations roll out and as people do go back to work and experience life, you think X, Y and Z, these things will not return to normal? One thing that I know is that every company's adaptation to the digital world was something that companies had to deal with prior to Covid. And so you have these companies with digital transformation roadmaps building digital experiences. We did a survey earlier this year and we asked customers, how much did Covid accelerate your digital plans? The average was six years. What I think you're seeing is we are getting the future that we would have gotten otherwise. We're just getting it a lot sooner. And some of those things evolve more flexible work environments. The more I talk to other leaders and other companies, our own employees, etc., it's clear that people are going to have more flexible working environments going forward. I don't think that once the vaccine is rolled out and people can return to the office full time, I think it's pretty clear that a whole lot of people are going to want some degree of flexibility in their work environments. And I don't want to work from home always. That's getting old. I don't want to work in the office always either. And so I think a hybrid work environment -- the way I think about it is creating an agile work environment, one that can adapt quickly to changing environments, one that can adapt quickly to the changing workforce. Some people wanting to work all the time from the office, some people want to work all the time from home. I think the nature of a much more agile workforce is here to stay. As you were speaking, it dawned on me that not only are cloud software companies supplying the products to support a hybrid work environment, but they're also some of the best positioned for it. Other businesses may be attached to having people be in a certain place at a certain time. Do you feel like that's a real advantage for the companies that are actually building the products for this environment -- because they also can run their companies more flexibly than others? You know, it's interesting. I think that the digital enablement of the workforce is more widespread than just knowledge workers. Clearly knowledge workers have more freedom because where your brain is is what matters. And yes, we want human interaction. Yes, we want to be face-to-face with our colleagues. We want to talk to them. Absolutely. But also, there's times when we want to be working from home, not having a commute, or potentially living further away from where the office is to increase quality of life. Those things are great. But we've also seen a digital enablement of more frontline workers. So people you might have considered, oh, well, they don't have flexibility. Actually, It turns out that they do in a lot of cases. I'll give you an example. John Donahoe, the CEO of Nike, spoke at our customer conference earlier this year. He told a story about how they had been building on top of Twilio to give a way for their sales people who usually are in the stores to be able to serve customers on the digital channel. So if you go to Nike's website, and you have a question about this product, or I'm just getting started running -- which kind of shoes do I want? They've got all these product experts in the stores. They said, can we let those people take their product expertise and actually help those customers who are on the website? So they built an app using Twilio to serve customers digitally. Now, when Covid came around, and those stores closed and Nike went to 100% e-commerce, that product knowledge and that way of serving customers became absolutely critical to helping customers online. So I think about going forward, it's like when Nike opens its doors again, are they going to shut that whole thing down and just send everybody back to the stores? Well, no. They're going to want to have a great experience on the website. And a whole lot of those digital e-commerce customers are going to stay digital e-commerce customers. And so they're going to have a more agile workforce. They're going to have those in place. I think you can have hours when you clock in and work from home answering questions for my digital customer base. And so I think that agile workforce can apply not just to knowledge workers, but also to the frontline workers. And we've seen examples across so many different industries where the role of a frontline customer-facing person that used to be thought of as just face-to-face and just in a particular physical location is actually going to become much more dynamic as those companies serve customer bases that are now more digital than ever before.