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Xero: Building Your Platform The Right Way

AUTHORS:

Avanish Sahai

Tidemark Fellow and Board member at Hubspot

Xero’s growth story has been nothing short of incredible. By building a powerful product supported by a robust platform and developer ecosystem, the company has soared with over 3 million customers in 150+ countries, and  4 trillion+  transactions every single year.

 

A key component of that success has been the company’s platform strategy. By building a product with a flexible API, developers around the world could build apps on top of Xero. This partner strategy allowed for a rapid international expansion for the business and propelled Xero to be the category leader it is today. 

Xero is a really special company that represents the best of what SMB SaaS can be. We are pleased to share an episode on Xero from the Tidemark-produced podcast The Platform Journey, which is hosted by Tidemark Fellow and industry veteran Avanish Sahai. In this episode Avanish sat down with two guests from Xero - Damien Tampling, Chief Strategy and Corporate Development Officer, and Nick Houldsworth, Executive GM of Ecosystem, to unpack the company’s impressive platform journey. 

You can read the full transcript below or give the episode a listen here

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Avanish: Fantastic. Welcome, everybody, to this edition of The Platform Journey. Today, I’m especially excited because we have a fantastic company, Xero, that some of you may never have heard of. It’s based out of Australia and New Zealand and has done amazing work in the accounting and financial services space. Our guests today are their Chief Strategy Officer, Damien Tampling, and the Executive General Manager of their ecosystem, Nick Houldsworth. Let me turn it over to them to introduce themselves. Damien, let’s start with you—just give us a bit of your background, and also talk a bit about Xero itself.

Damien: Sure. Thanks for having us Avanish, it’s lovely to be here. I’ve been three years at Xero now, and before that [I spent] 20 years consulting and being in and out of professional services—working with a lot of great tech companies around the world, and venture capitalists (some of the people at Tidemark, even). In the last three years, it’s been an amazing ride watching Xero scale from a business born down in the Antipodes, out of Wellington, New Zealand, and really start to become that truly global company. 

Xero is a small business platform that was started because the founder, Rod, realized how painful the experience was to be doing his financials and accounting for a business and also collaborating with his accountant and bookkeeper.  Nick will talk more about the ecosystem part of our business, but the original platform was the software that brought those two parties together and made the collaboration between them a more powerful one. I think accountants and bookkeepers realized that it was a smarter way to work. They’ve become such a large customer group of Xero’s that it evangelized the platform and propagated it out to all their customers. 

That’s really where Xero has come from. It’s got 3 million-plus customers around the world, 150-odd countries doing 4 trillion-plus transactions a year. It has payroll, scheduling, time and attendance, and financial services components to it. That original invoicing and accounting piece is really a centerpiece of the business, but we’ve extended to other areas where we’ve worked with ecosystem partners, net partners, that Nick will talk about in a second. It’s been an amazing journey.

Avanish: Fantastic. Nick, let’s turn it over to you and connect those dots with your background and your particular role at Xero.

Nick: Thank you very much. My real title is Executive GM Ecosystem. I had a conversation with Scott Brinker from HubSpot—I believe HubSpot was one of your guests before—and his role is VP Platform Ecosystem. We joke that sometimes you have to explain what an ecosystem is and what the job title means, and that you’re not a marine biologist! 

I think I’ve been a sort of nerd for platforms and ecosystems for over 12 years. I started using Xero myself in 2009. As a freelancer, I needed a way to invoice and reconcile payments, and my brother put me onto it. I’d tried every accounting software, and this was the first one that made it easy. There was just a dashboard that showed money coming in and money going out, and I was like,”I think I can understand this now!” What really clicked for me was two things: first of all, my bank information came in automatically. That data sync from your bank, that allowed you to send an invoice and get payment and close the loop, was amazing. Secondly, the add-on marketplace probably only had about five solutions at the time, but I discovered one that did time tracking. I found that I could track my time, invoice my clients, and then send an invoice through Xero in a few clicks. It was a seamless experience that showed me how these pieces of software could connect together to create something greater than the sum of its parts.

At the time, most B2B software was pretty badly marketed. It was stock photos and brochures of people high-fiving around a whiteboard. But then you had the emergence of these amazing applications like HubSpot, Mailchimp, Shopify that were really appealing to small businesses. Xero was the same. People were raving about it on Twitter—I couldn’t believe people were raving about accounting software! I got really tuned into the small business ecosystem and how these products stitched together, which actually became a role for me at a company called Vend, one of Xero’s early application partners. We were one of the first five or ten there, and Xero was a big part of our growth story. Together, we solved the front and back office for small business retail. Xero provided a platform for us to grow internationally, alongside many of our other app partners. That was one of the motivating factors of joining Xero: to create an environment where lots of small startups can grow alongside us, help us grow, and work together to benefit small business. That’s really the focus of my role—primarily our developer API and platform, and more recently the app store where we help small businesses find, try, and buy their solutions.

Avanish: That’s awesome. What a great story. And when you said 4 trillion, Damien, I had to rethink if that’s actually what you said. That’s phenomenal.

Let’s dive into that. Since you’re the chief strategy officer, talk to us about the platform strategy behind what you’ve built, and how it all came about. How do you think about the platform strategy?

Damien: For sure. I think it comes back to that original understanding of the relationship between the small business and their advisor. It’s embedded in our purpose, in fact, to make small businesses, their advisors, and their communities more prosperous. We’re thinking about those different customer groups and how they interact, but the accountants and bookkeepers that work with the product are often working on configuring and using it to service all of their customers. They are platform users, but they’re also customers for us. That relationship was almost the original realization that, if you have these cohorts of audience and customers that can kind of one-to-many extend your product, that’s a pretty powerful thing to lean into. 

As we got into bank feeds, invoicing—the fundamentals of an income-sided balance sheet and cash flow statement, understanding where your money is going and where it’s coming in from—there were other areas around that, payroll being a great example, that have compliance attributes. Things that we found accountants and bookkeepers often dabbled in for their customers. When you started to stitch up the data, it brought the product alive to another level, but as we went further out, we found this long tail of amazing opportunity as well that was just never going to be feasible to get into. We found huge amounts of reporting applications which were being born off the back of Xero and being used (and raved about) by our customers, but were all quite nuanced in the way they were working. Even as we went into different geos, different apps were popping up that were solving problems based on the nuances of that geo and what was needed, or based on how people conducted their small business management in that market. It became evident that thinking about a clever approach to APIs and actually opening up the product to allow those organizations to lean in was a logical next step.

It became almost a part of Xero’s brand—being very open about wanting to work with others because we win, the customer wins, and our partners win, which is the way to go. As we’ve gotten bigger and bigger and evolved even in recent years, we’ve acquired other assets, and Nick and I have also been starting to get nuanced about almost, like, sub-ecosystems. For example, payroll and time scheduling and attendance is its own domain unto itself. You look over at FS (functional services) or fintechs, and that’s a whole other domain. We were thinking about what combinations of APIs we could do to actually foster an ecosystem that specializes in that area. 

We started out with something in and around that accounting area but as the ecosystem has gone to a thousand-plus apps, we’re starting to see these clusters pop up. We’re thinking about how to service those clusters with more fidelity in terms of what we offer them and how we support them with the developer tools that Nick and the team have been creating over time. We’re thinking about what we can do for them to help them develop more on top of Xero, which benefits our customers and theirs. That’s been part of the journey and how we think about it. There’s a lot going on as well in terms of using other channels to market and how you collaborate with them. There’s elements of platform in that as well.

Avanish: Fantastic. We call this a platform journey, and I think for every company we talk to, it is a journey, right? No matter how you think about it from a strategy perspective, it is a journey. It’s an investment from an R&D perspective, from a developer ecosystem, from recruiting and managing the network partners, and so on. Where do you feel you are on that journey? It sounds like there’s been some amazing progress, but how do you think about it from the continuous journey perspective?

Nick: Oh, that’s such a good question. You’re never satisfied, right? You’re never quite there. It’s really heartening to be invited to shows like this to talk about what we’ve done, and every now and then someone will reach out and say they love the way we’re thinking about developing and marketing, or they’re interested in what you’ve done with your subscriptions API, and it makes you feel like you’re doing things right. But then we spend a lot of time looking at companies and aspiring to be even greater, even more successful. We look at the Salesforce journey, we look at Atlassian, we look at the IOS App Store, for example, and think, what choices do we make today so that we can unlock potential in the future? 

I think Damien touched on a really interesting point around strategy. As he was talking, it made me think that strategy is about making choices. Platform strategy is almost about creating choices. When you’re making choices about where you focus, that’s strategy; on a platform, if it works well, it’s also creating options that you’re not expecting. Sometimes the tail wags the dog. You open it up, you work with a network of developers, and you’re never quite sure what’s going to come out of that—what magic, what customer innovation. It can continue to be in the ecosystem or become much closer to part of your corporate organization as well. When we think about our journey and where we’re at, it is always about ensuring that we have that playground for developers to solve for our customers in ways that we can’t get to, or didn’t even think about.

I think, in the early days of Xero, there wasn’t really a lot of strategy; there was a founder with a vision. He liked what Salesforce was doing and said, “Let’s have an API and see what happens.” I think that was probably the first 5-10 years of the Xero ecosystem—publishing APIs, working with early stage partners, building momentum in the community together. The journey isn’t a straight line, either. It’s not start-to-finish. It weaves and moves and goes up and down, and sometimes you’re the best partner in the world, sometimes it’s a real struggle. I think we’ve matured a lot in the last few years, not only in how we provide technology capability for developer partners and how we build a great community together for our small businesses, but also in how we think about ensuring that we continue to feed and water that community. How do we build both technical and commercial relationships together? What are the right incentives on both sides to ensure that we continue to drive mutual growth for each other? Inevitably, part of platform strategy is that tension between things that the company could do and things that our ecosystem could do. In the last few years, we’ve really focused on getting that commercial incentive structure right so we can continue to invest in the great innovation that will take us through to the kind of companies that we aspire to be. It’s very early days for us, and there’s still a lot of work to do.

Damien: Nick touched on a really good point there. Nick, you and I in the last few years have been working with a number of other Xeros, and have been thinking about putting a little bit more meat on the vine in terms of how people think through the decision of where we might play or are playing versus not. As you get bigger, you need to provide that scaffolding because it becomes less about just a couple people gathering together and making some general decisions; it’s our ecosystem partner. Even when we acquire an asset and domain—like we did with Hubdoc because we felt it was a really important one to have close in our product stack—we’ve maintained fantastic relationships with Receipt Bank and others. We did the same thing with Planday, and we’ve maintained fantastic relationships with Deputy and other players. We really, really try to walk the walk when it comes to that because we do feel, at the end of the day, it’s about the customer choice. We can provide great experiences with partners as well as with things that might be closer in, but that shop selection has become a really important part. It is the culture of encouraging and continuing to foster that sense of openness and partnership as you go from hundreds of people to many thousands.

Avanish: Well you actually answered the question I was going to ask! [Laughter] All of us have been in this role, and that is one of the big challenges. The build-versus-buy versus partner discussion is an ongoing one, right? From a strategy perspective, you’re accountable to your stakeholders and shareholders, and you have to do what makes the most sense for your customers.

What I heard, and I just want to make sure I play this back in the right way, is that you are developing or have developed the discipline to have that transparency, both internally and to your ecosystem, to describe where you’re going, what decisions you’re making, and allow them to figure out whether and how deep they want to continue their relationship with you. Is that a decent summary?

Damien: Yeah, you’re spot on, Avanish. There are a few components to it. There’s the component from a strategic perspective, what we feel is our core business. Let’s call that one street over. And then there’s two, three, to a hundred streets over. We have to be very, very intentional on [the priorities], so that we can be clear internally on our choices and know that these wide-open spaces may be areas where we proactively seek out partners. One good example is around carbon credits, carbon calculations, and sustainability. It’s a huge topic, but it’s quite a niche area. We can see it in our strategic work that it’s important to our customers but we might feel like there’s not enough coverage in our ecosystem. That will be an area where we’ll proactively look to find the best of the best. Getting that right internally is important. 

We’ve also really moved toward a lot in terms of the onboarding process, and the care that Nick and the team take when they’re thinking about bringing a partner on—the steps that they have to go through to make sure that we’re [Inaudible 16:03] our customers and making sure that the experience works the way it should. We’ve also really been bolstering, like a lot of tech companies, what we’re doing in data and AI and ML, that domain, as well. We’ve made some pretty big steps in terms of data governance, principles, and publishing those out to the market so that we’re not just clear for our customers, but also with our app partners and the people in that ecosystem. 

We want that like-mindedness that we foster in the ecosystem, and we think it comes back to that community of care. We’ve done a lot of work in that. It’s a system of a couple of things that, as we’ve been maturing as a company, we’ve been putting in place to allow the boat to go faster without needing to rely on individuals, necessarily, as it might have when we were a bit smaller. But Nick, you might want to talk on that, because you’ve been right at the heart of it as well.

Nick: Yeah. Historically, there was always a kind of unspoken understanding that you can join an ecosystem but you might get sherlocked. I think you can be quite intentional around that. Our strong belief—and it’s been evident through our activity over the last number of years—is that the market is significant, especially in small business. There’s an overwhelming space for many players to play. We found that the best way was to create transparency. 

One of the specific pieces of work we did over the last few years was to define our ecosystem platform principles. We socialized them internally; we published them externally. We make it really transparent for our partners that we will continue to foster customer choice, but that doesn’t prevent our teams from building and acquiring in certain spaces. However, we will continue to provide fair access on the platform for small businesses to choose the solution that works best for them. We found that to be quite a good rallying way to get the business aligned around the healthy tension that often exists between buy, build, and partner. I think [it’s important to have] a team that thinks about developers, continues to evangelize for them, thinks about the app ecosystem, and sometimes polices it, too. There are people at Xero who say they're app partners. We have mutual customers together and we have a lot of shared value. Oftentimes that helps educate people internally on the balance between first-party and third-party propositions. There’s been a lot of work in that space for us. 

When we move into a category, or when we acquire a partner, we’re very thoughtful about the communication with other partners in the category. We put a lot of effort into talking to them, giving them a heads up, and reminding them of our principle that customers will still have the option of choosing. What we overwhelmingly see is maybe consistent with what you’ve seen as well in your time: once you expose a certain category or use case with your core brand, interest in it skyrockets. It actually creates more opportunity for everybody. Think about the number of small wireless headphones that exist in the market today that never existed before Apple AirPods—you can’t move from them. They’ve gotten the lion’s share of the market, but there’s a pretty good business being the second largest producer that’s not Apple. We see this as well across our landscape. It raises the tide for all boats.

Avanish: I think that’s a great perspective. I love the notion of a documented ecosystem platform principle. It just puts so much credibility into what you’re doing. Kudos to you all for thinking about that. 

I have one question that I think is maybe more unique to Xero, but might be an issue that a lot of other global companies out of the gate will have to deal with. You’re in the bookkeeping, accounting, and financial services space. That has highly regulated requirements. It sounds like you’re finding one partner or a small set of partners in any particular category—you mentioned payroll, you mentioned some of the other areas. How do you think about which partners to bring on? How do you ensure that you’re aligning with the different business priorities, but also acknowledging that if you go to Country X, you may have to triple the number of partners because it’s not just a one single partner covering all of those?

Nick: Yeah. I think there’s probably a great strategy question there for Damien about mapping customer needs and actively pursuing partners, but I can speak to the inbound. It is a bit of inbound and outbound, right? You kind of create a platform and an attractive proposition, the developers love to build with you, and you open up for people to come and work on your platform. Then you have good governance processes around ensuring that they can build their integration, that they can have it security certified, that they can manage the listing in our app store, that we can present it to customers. 

It’s an area that we’ve continued to refine over the years, both in terms of people – developer relations is a big one – but also in terms of processes, by automating the onboarding, and having click-through terms. We’ve worked a lot, actually, on our terms of use and security terms, particularly as a compliance platform and because we are in a unique position in that we also have integrations with large banking partners and the government. Part of our obligation to the tax office in Australia is that we have to maintain a certain security standard within our ecosystem. We worked with them on defining those principles, getting clear on what the requirements would be, but also having a threshold. Part of the balance of an ecosystem is you want to make it interesting, attractive, and easy enough for a small developer to come up with an idea, but you also have to ensure that you’ve got good governance in case that becomes wildly popular, or likely to breach or create issues for your customers. 

We’re always trying to walk a fine line between increasing security and compliance but also making a platform that developers love to use and can innovate on. From an inbound point of view, there’s that onboarding and process. I guess it’s about creating surface area on the API so that partners can build with you, but also being thoughtful about what those use cases and categories are. There are some use cases where we actually say no, because it’s not aligned with our strategy or it’s directly competitive, but they tend to be rare. We work very closely with our strategy and product development teams to get clear on what those cases might be, and for the rest, it’s fill your boots. 

Then there’s the outbound approach. If we’re entering a new market or a new segment, we need to be much more thoughtful about defining what the jobs to be done are and who we might work with. Damien can probably speak to the tremendous amount of work that’s gone into this as we’ve evolved our corporate strategy.

Damien: That last one’s really interesting because it’s kind of a double-edged sword. A good example is our partner Float, based over in Edinburgh, which pulls on a number of different pieces of data in an API—with the customer’s permission, of course—to put them into a budgeting tool. That’s kind of amalgamating what surfaced through Xero to provide an add-on that really helps them. They started in their home markets over in the UK, but Xero has helped them take their product to all these other markets around the world, just by nature of Xero being there.

Back the other way is a little bit different. You might have a country up in Southeast Asia where we don’t actually technically operate in the market, but you’ve got organizations that potentially want to become part of the ecosystem. You need to be a little bit more intentional with that, to think about what the experience would be for the customer. If you’ve got a payroll product and some other piece of the equation, but you don’t have enough of the pieces or all the right pieces, considering that experience in a very thoughtful way is something that we are very concerned with. Just because you can end up getting pulled into a place in a market—not that it’s not tantalizing and interesting—[doesn’t mean you always should]. You’ve got to fully commit to it. In fact, if you’re not doing it that way, you end up doing the wrong thing with the partner anyway, because their expectations of support might be a lot higher than you’re able to offer. When it comes to geo, it’s certainly something we’re very thoughtful about.

Nick: The dynamics are vastly different as well. Like you said, most listeners may not have heard of Xero, but if you’re in APAC or the UK, it’s very, very common and very well understood. There are parts of the world where we have gravity. 

Gravity is one of the metrics we measure as a platform. How many people are interested to come and join our platform? When you go into Southeast Asia, you’re still new, and therefore you have to be intentional. You actually have to convince partners of the value proposition and why it’s helpful to work with you. It takes a little bit more heavy lifting sometimes. When we do it, because we’re spread across so many different geos and we have slightly different brand awareness in those different geos, it does tend to inform our strategy based on whether it’s an inbound or outbound approach.

Avanish: Perfect. Thank you. 

I want to switch gears a little bit and talk about two other important topics, one of which you already alluded to, Nick. The one that you alluded to, which I think is an important one, is incentives and incentives alignment. Are there particular things that you have designed/defined in that incentive alignment that you think are helpful to both the recruitment and the engagement, that you would say are somewhat distinctive or unique?

Damien: Avanish, like Xero employees? Or do you mean more for the partners?

Avanish: Both actually. Because ultimately, if you don’t align internally, that also causes problems, right?

Damien: Avanish, I’ll talk about Xero as employees, as our people, our most valuable asset. We’ve been on the journey to think about how we integrate relationships with the partners—encouraging, attaching, as we call it, internally. Getting Xero customers to see the benefits of the partners and what combination of applications and partners might be ideal for them, depending on who the Xero customer is, their country, their size, what kind of business they are. We’ve been trying to embed that within the KPIs of the organization and our people, to make sure that… 

I use the hamburger and fries analogy [Xero is the hamburger, the main draw, and their partners are the fries, the auxiliary benefit]. Sometimes it’s the other way around. Sometimes it’s the ecosystem partner that’s actually the hamburger. They’re saying they love Xero, so if you’re thinking about using an accounting product and it doesn’t look like you’ve got one, you should definitely hook up with them. They know that the experience of their product will be better when we’re brought into the conversation or purchasing decision. We do try to encourage that two-way street, and do it right. That’s kind of where we’re at on the internal side. 

As for the partners, I mean, Xerocon, just as an example, is an event—a Dreamforce equivalent, if you will. So much has gone into that. I don’t know what they call it, Coachella is it? For the…

Avanish: Coachella for accountants, yeah. [Laughs] I think the UK called it a Glastonbury for accountants, for those who are listening from there.

Damien: Right. You’ve got to go to one to see why anyone would put those two things together. A big part of it is the accountants and bookkeepers, who are a huge audience for us—important customers, an amazing channel. But also the rooms, the events—the Canary Wharfs of the world, if you know that facility—are filled with app partners. Some of what we’re trying to do is encourage and incentivize them, and bring them into the fold of the conversations that encourage them to invest more with us. But that’s just one example. Nick, I know you do a lot with the developer tools and other things as well, right?

Nick: Yeah. There are different segments of partners, right? There are those whose customers are asking for Xero features, so they need to go and build it so they can sell more products. Maybe they’re not interested in building a relationship with Xero, but really just want the tech work to be easy. We try to make sure that the onboarding, the development tools, and the SDKs are good to go, so it reduces the friction for those building those applications. There are some customers that are just trying to solve a particular pain point for themselves, and maybe they just want to build a custom integration. 

Some of my favorite stories, actually, are customers that start solving a need of their own and then quickly realize that there are thousands of other customers with the same problem. We can actually help them get in front of those customers. We’ve got a number of success stories of accountants who didn’t like the reporting that was out there so went and built their own reporting; there was one called Futurely that was recently acquired for a significant sum of money after seven or eight years of building in the ecosystem. I think that’s kind of the third cohort, those that say, “If I build this integration, I solve for my customer need. But Xero has over 3 million subscribers and tens of thousands of accountants all around the world. How can I leverage my relationship with Xero to grow my own business?” How can they solve the pain point in one market but then expedite market entry into the UK, for example? 

For a long time, we’ve tried to work on what those incentives are through our partner program, making it really clear by letting our partners know that if they achieve certain milestones, they get additional benefits. It has to be fair and it has to be transparent, and it has to work for both the small apps that are starting out and the larger ones that are growing. More recently, we’ve introduced an app store model, which is effectively a standard commercial model where we will help customers discover, try, and buy your application, with a success fee to Xero for those businesses that we drive your way. I think this is a really important thing that has allowed us to be much more intentional about driving growth to our partners. We can actually drive eyeballs from our millions of customers, track that they’re trialing applications, and measure the CAC to LTV on those. 

For those partners who are really motivated to work with Xero, they recognize that by having shared skin in the game, it makes us motivated on both sides to drive growth. We’re starting to see the real positive benefits of that. But evidently it’s a change for some partners too, so we’re being thoughtful about how we work through that. I often use shared commercial incentives. This is something I would advise anybody who’s joining a platform or building their first Shopify integration or Salesforce integration. You have to work out what makes that platform tick and how you can lean into it. What’s likely to motivate them? That’s the best way to raise your awareness and raise your profile and get something mutually out of the relationship. I do believe that shared commercial incentives are one of the key drivers of that. Here’s an example (it might get me into trouble): it’s much harder to break up if you’ve got a shared bank account. [Laughs]

Relationships are much more formalized when you’re both winning and making money together. You have a real motivation to continue to drive growth. I think that’s a big part of how we’ve tried to level the playing field around those incentives.

Damien: Avanish, it’s the ability to allow an app partner to acquire a customer more efficiently than they could otherwise. That ability being consistently compelling is really one of the hearts of the premise. We’re constantly thinking about what we do on various content platforms and Xero events that we have. It’s a concerted effort of a whole lot of instruments we’ve got to be able to bring to bear. If someone’s coming to our app store or working with us, they’ll always look at that label, that API connection, or that extra subscription they’ve got and go, “Wow, that’s the best CAC we could ever spend.” There are app partners in our ecosystem that have hundreds of millions of dollars valuation, billions of dollars valuation, and they’ve got 30%, 40%, 50% of their customers with Xero. We’ve literally created these huge companies, and many of them have literally ridden off the fact that that relationship is symbiotic. Where we’re winning, they’re winning—and they’re really winning, and we’re good with that. It’s fantastic! The numbers are material enough to know that the CAC is working. If they’ve got any view of a similar audience group, or a similar set of markets, then it’s a partner that we welcome into the fold.

Avanish: That is awesome. It brings a big smile to my face. Those are the kinds of things that really make it work. Having been on a few of these journeys, I’m truly, truly impressed by what you’ve built and how you go about doing it. 

Let’s wrap up with one question which I think is important. You’ve described some amazing insights and experiences here. What are some of the lessons you’ve learned that would help someone thinking about building their own platform strategy? What are one or two things each of you might say are key lessons?

Nick: Where to start? I think I’ll have a stab at it. It’s a big question, and there’s a lot of ways to cut it. I think you’ve really got to start with your measures of success. Get clear and aligned on how you define success in a platform. For us, it really is ultimately about customer usage. How do we deliver more value to our customers in ways that we can't deliver on our own through leveraging our partners? The more customers that are discovering, connecting, purchasing, and installing apps on Xero, the more it demonstrates that our platform is providing value to those customers. Whether that customer started with Xero and then purchased the app, or vice versa. 

The healthy sharing of data and apps installed on Xero is a really important measure of us delivering for our customers. And it also has a huge positive impact on churn. Once the customer connects two or three apps, they’re much, much more likely to stick around for a long time. Therefore, as a business, we have to come back to those first principles. What is the outcome we’re trying to achieve? It’s customer value. How do we measure that? And then how do we build a strategy around realizing that? There are a lot of important metrics that drive that number, but it’s really important to start with your North Star.

Avanish: Yeah, love it. Damien?

Damien: I’d say it relates to what success looks like, but think about the why first. We’re pretty passionate about small business. Small businesses do it tough. You’re the mom, the dad. You’re the mentor. Sometimes you’re the accountant, and you’re the person running the business as well. Anything that really makes great software or tools that make your life better, and helps you focus on running the business, not worrying about some of the other things around it as much, is helpful in creating success. Small businesses have such a big part in people’s communities and lives. A small business is a kind of a family, if you know what I mean? It’s around the dinner table. 

I would encourage people thinking about a platform, depending on what business they’re in, to make sure you don’t think it’s just for the top of the town. Being able to think about platform as a business model and a tool to get more of this benefit of technology out to small businesses around the world is a really great thing to motivate you. Think about the why before you think about the how. There is some magic in that, I think, if you can get it right. Also, you can inspire your employees and your people with why you're actually doing it.

Avanish: Love it. It almost has an element of social impact to it.

Damien: A hundred percent. We believe that.

Avanish: Fantastic. Well, Damien and Nick, I can’t thank you enough. Amazing insights. Any final thoughts? The audience here is a lot of your peers. Anything to add?

Nick: If you are thinking about building some accounting software, come and talk to us. We’ve got an amazing platform, beautiful developer experience, and an opportunity to get in front of millions of small businesses and accountants around the world. I always close with a call to action. I can’t help it. [Laughs] It’s my marketing heart.

Damien: Unique times at the moment, Avanish, in the market, isn’t it? Interesting times and some volatility. For a tech founder or tech entrepreneur, for a fast-growing tech company, it’s always a good time to think differently. But boy, you can double down on that when the markets are moving around a bit. Change is something you can lean into or step back from. I think the discussions of platforms, some of the things that you’re evangelizing and the podcasts that you’re doing, couldn’t be more timely, in terms of people thinking about dealing with change in the world.

Avanish: Well, I really, really appreciate that. Thank you both again. Congrats on the phenomenal success. 

Damien: Thanks, Avanish.

Nick: Thank you so much for having us. This conversation could have gone on for a lot longer. It’s great fun. 

511

Xero: Platform Strategy
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