Asana, Inc. (ASAN) Earnings Call Transcript & Summary

All right. Good morning, everybody -- well, actually, afternoon. Good afternoon, everybody. I guess, good morning on the West Coast. Thank you so much for joining us for day 1 of the Morgan Stanley Technology conference. My name is Stan Zlotsky from the Morgan Stanley software research team. And with me today, I have a pleasure hosting Dustin Moskovitz, the CEO of Asana. Dustin, good morning. How are you?

Good morning. Great. Thanks for having me.

Awesome. Also, before we begin, just very quickly, for important disclosures, please read the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. So with that out of the way, let's get to the more interesting stuff. So Dustin, thank you so much for joining us today. Obviously, you're CEO of Asana, and Asana is a recent public company. Maybe just for people who are a little bit newer to the story, start a brief overview of the company, with the products, what we do. And maybe -- just maybe get into the founding story, right? What was that aha moment that you had when you came up with Asana?

Yes. Absolutely. So first of all, Asana is a platform that helps teams orchestrate all their work from daily tasks all the way to strategic initiatives. And the way we got to that. So basically, all starts with Facebook. And so that was really at the beginning of my career, and I was a brand new manager in my first job, and I was running the engineering team there. And I was just consistently shocked and frustrated by how difficult it was to coordinate everyone. And just started sort of doing some naive approaches to try and get a sense of what everybody was working on and try to coordinate them and would basically have one-on-ones with all of my direct reports every couple of weeks. They would have one-on-ones with their direct reports every couple of weeks. And at the end of that cycle, I'd have a pretty good sense of what was going on roughly 1 month prior. And I didn't feel that, that was good enough. And so I started looking for better solutions and thinking about technical solutions, and this was 2005, 2006 time frame. So there were some existing products on the market, including Gira, which started quite a long time ago, but they weren't really coming at the problem the way that I wanted and just felt really limited. So being an engineer, started designing something myself to help everyone track their work. And the results were really great. So almost immediately, everyone across the company became a lot more efficient, had a lot more clarity about what they're responsible for and what everyone else was doing and the number of meetings we had for sharing status, dropped off a cliff, and everyone just became a lot more leveraged in their work. And it was started getting used for purposes that I didn't originally intend. So the IT team wanted to use it for lightweight inventory tracking, sales team wanted to use it for lightweight CRM. And I sort of got a glimpse of this idea that there was something bigger here. And now I'm a student of the space. So looking back, I understand that the problems I was experiencing were quite universal. So people just -- it's sort of a -- this is water situation for knowledge workers, where you're constantly in these cycles of chaos and confusion. We have a bunch of research just consistently showing that the average knowledge worker spending 60% of their time, so majority, on what we call work about work. So participating in those status update meetings, these long e-mail back and forths or just otherwise trying to find information that somebody else already has. Since they only have a minority of their time to spend on the creative or specific work that drives results for the business. And so at some point, at Facebook I was faced with a crossroads and continuing to develop this internal tool for one company or deciding to leave and recruit a team dedicated to this task. So really, Asana was designed to solve that personal pain of trying to coordinate teams and establish clarity on exactly who's doing what by when, and that's really the genesis of the company.

Yes. No, there's certainly a very interesting founding story. And obviously, it makes a lot of sense given how historically people have worked. But what's interesting now, right, we're in this new environment where, obviously, because of the pandemic, things have changed, right? And hopefully, we're -- in the coming months, we're going to have very high rates of shots in arms, right? And we all go back to the office. But I don't think anybody is really going to be questioning the fact that the way that people interact and collaborate and work with each other has foundationally changed, and Asana is just very much squarely positioned in the -- within that change. And you guys, interestingly -- you recently published this survey, the anatomy of work that really dug into those findings as to what is actually changing. Do you want to walk us through some of the findings from that survey?

Yes. Absolutely. So this is a survey we did with 13,000 knowledge workers all around the world in a bunch of different industries, just trying to understand what their work lives are about. And we actually ran it in 2019 and again in 2020. So we're able to see what's same and what's different. And one thing that is the same across both surveys is the stat already mentioned of if you ask knowledge worker, how much of their day is spent on work about work versus doing the sort of creative role-specific work, they'll very consistently say 60%. And I was surprised to see this even in 2020, especially alongside something that change, which is people are working longer hours. So they don't have their commutes, but they're basically just driving that street back into work. And the average knowledge worker is spending on average an extra entire hour every day. And they're still saying 60% of even that extra hours work about work. So they're spending another half hour on work about work. We can see a lot of that is in the form of additional meetings and just trying to struggle to stay in sync. We can also see the burnouts on the rise. So about 70% of the knowledge respondent said they had experienced burnout in the past year. And we're also seeing quite a lot of people struggle to onboard in the remote environment. And so one of the interesting stats is nearly 8 in 10 people who onboarded in 2020, said they experienced some posture syndrome, which makes a lot of intuitive sense. So there's a lot of people still struggling with the realities of work even when you're in a co-located environment and then moving to a distributed environment really exacerbated a lot of those problems. And it's like to say, the work got harder as a consequence of that, but life also just got harder. And so those things combine to creating a lot of stress for knowledge workers out there.

And what's interesting is that this is an annual survey that you guys do and -- Dustin as you mentioned. The 2020 version, I'm sure, was quite eyeopening. But maybe if you compare the first survey that you ran back in 20 -- the initial survey that you ran in 2019, what are the -- the survey in 2020 versus 2019, what does it tell you about the cycle of chaos, whether you've talked about? And how is the cycle of chaos unfolding in this new remote or distributed working environment that we have?

Yes. So I think the cycle of chaos is what I think of -- it's people lacking clarity about what's expected of them, lacking clarity about what their teammates are doing, not having a good understanding of the top-level company goals and initiatives, and this creates a lot of confusion. So people are sort of drowning in a firehose of information coming at them. They're constantly getting pinged with requests, and they lack clarity about where they should focus their attention and what's most important. And I think in an office environment, you often get that clarity by turning to your neighbor or perhaps having a daily standup or discussing the project over a meal. And you've lost a lot of those sort of natural interactions and affordances. And so people are finding ways to compensate, but usually, that takes the form of an additional Zoom call or something that kind of has a lot of overhead and takes a lot of your time. And so people are still experiencing that chaos quite a bit, and they're compensating in the form of more work about work, more meetings to try and get a handle on things.

Right. That certainly is a great perspective, I think, for investors to have as they think about the space more broadly and as we head into 2021 and settling into whatever the new normal is. Maybe digging a little bit deeper underneath the coverage of Asana. One of very interesting component, obviously, of Asana, the product, is the work graph, right? And you've talked about this during the roadshow in recent earnings calls also, right, that this work graph data model is an important competitive differentiator that you have versus -- which is what is now becoming a quite busy competitive landscape, right? Can you tell us a little bit more about what the work graph is and how it stands apart from the competition?

Yes, absolutely. So the work graph is really the key to how Asana functions. And what it is, this is complete, fully connected, accurate and up-to-date map of all the work in your team. And so it represents all the units of work. So there's things like tasks, ideas, goals, agenda items, the information about that work, like relevant conversations, files and status information and how it all fits together, importantly, who's responsible for each piece. And so what you get is a living system of clarity that emerges in real time to represent a team's past state, current status and the future plan. And the work graph is really enabling our 3 key differentiators. So if you talk to our customers, the work graph itself is kind of an invisible concept, but hopefully, they'll replay these messages that, number one, Asana is very easy to adopt for individuals, and it's designed to maximize personal productivity. Number two, it's the best platform for cross teamwork. And number three, it's the only platform that connects work to the higher-level goals and initiatives that, that work is working to achieve. And that helps create clarity for everyone, but it also creates these really powerful overviews for senior leaders and executives. And the work graph creates those differentiators by giving you the flexibility to put individual units of work into as many contacts as they're relevant to. So to give you a concrete example, next week, we're doing our earnings call. And so we have a particular task that represents finalizing that earning script, as all the pertinent details, status information and -- are crucially linked to the current script. And that task is multi-honed into projects that are owned by Investor Relations, by marketing, the legal team, and it also shows up in my personal My Tasks. And that way, we're all working off the same source of truth. So there's no confusion, for example, about what the most up-to-date version is, or who's currently responsible for the next step. So those links are really crucial. That's why I described the map earlier as fully connected. And just to quickly contrast this to the alternative, the alternative is what we call the container model, and that's what all of our key competitors use. And the easiest way to think about a container model is it's like using spreadsheets for project management, which many of the audience members are probably experienced. And when you use spreadsheet, everyone has to work out of that file. So the rows in the spreadsheet, which are representing the units of work, they don't live anywhere else. And so if you want to know what you're responsible for, for example, you open that file, you search for your name, maybe filter to the rows that are assigned to you, and that ends up being really limiting because it forces every -- forces teams to optimize for particular constituent and then everyone else is kind of a guest. And that leads to a bunch of problems like the cycles of chaos. So people missing context and other workflows, dropping balls, duplicating information in work. And then those problems lead to the work about work, since the typical solution is to have the status sharing update meetings, or long email threads, just to keep everyone in sync. And so the work graph data model gives you a lot more flexibility. And that means that everyone can build the views and workflows that optimize for their own needs, while still working off a shared source of truth for the individual units of work. And so that makes Asana the best solution for individuals, teams and the entire organization, including executives.

That is really helpful. I think at least for -- when I remember when we were first learning about Asana, that's definitely an area that we spend a lot of time on trying to understand. Maybe to help investors first further contextualize Asana, maybe trying to tie the work graph data model into just the more holistic concept that you guys put together, which is the pyramid of clarity, right? How does -- how do those things all fit together, along with just reducing the work about work and the whole -- the chaos that goes into it, how do all these things fit together?

Absolutely. So just to describe the pyramid of clarity. So the idea is you have these different things the organization needs to be aligned on, starting, of course, with the mission. So that's the very peak of the pyramid. And then you have your top-level goals and strategic initiatives. So for many organizations, that takes the form of OKRs. And then you have portfolios or groups of programs and then individual projects. And then finally, the individual units of work that are the base of the pyramid and the most numerous. And we really think that organizations work best when everyone understands how their work fits into that higher-level picture. So exactly how an individual task that's assigned to them fits into the context of a larger project and how that project ultimately helps to achieve the mission. And so the basic way that work management presents in the world is the sort of base of that pyramid, right, tasks and projects. But the Asana work graph sort of uniquely allows you to connect that up to the higher-level structure. So projects can be grouped into collections of projects, we call it portfolios. They can be in as many of those portfolios as they want and then those connect up to higher-level goals. And so anyone can sort of start from any part of the work graph and either work their way up or sort of dive down. And so for senior leaders and executives, this really creates just a really powerful command center where they can sort of start at the top-level objective and drill down to an arbitrary level of depth while getting these sort of powerful overviews and reporting at every stage. And then conversely, individuals can see a piece of work in front of them and understand and sort of walk up that daisy chain of exactly how this is helping the company achieve its mission. And that can be really motivating because you understand why it's important. And it's also really clarifying because it helps you understand which thing you're working towards and where you should be focusing your attention on any given day. And this helps eliminate a lot of that work about work because induvial can come in and can see exactly what's expected of them. And it also just helps create a lot of alignment because everyone's working off of that same map of how everything fits together.

And obviously, the whole vision that you created for Asana and the work graph and now the pyramid of clarity, that's taking some time to put together, right? When you think about the architecture that you guys have created, what are some of the biggest challenges that you think you've had to overcome over the last 10 years of working on it?

Yes. So one of the key thing -- design principles for Asana that we have from the beginning is that we wanted it to be really fast and performant. We didn't want it to be software that felt like it was getting in the way of your workflow. And so really, we had assigned goal of making it feel like the desktop app. And keep in mind, we're starting to build this in 2010, 2011. So this was a much rarer concept for web-based products, but we had some experience with those kind of principles coming from Facebook because it had a very responsive experience and felt very easy to navigate between pages. So we designed a custom architecture to help achieve this, this is what we call the Luna architecture. And it was very groundbreaking at the time. And for related reasons, we made some mistakes in the architecture. And so it ended up being fairly complex. And while some things were very fast, so it was very fast to interact with the client, other things were very slow. So when you needed to the low the application for the first time, we just take too many seconds and cause people to get distracted and start working on something else. So that was not hitting the customer value experience that we're going for. And we actually had to rearchitect entirely starting in roughly 2015. So if you ever worked with a company that's had to go through this, it's just an enormous lift and it kind of stops forward feature development for a while, while you focus on that re-architecture. So that was really the biggest challenge for the company and definitely slowed us down for a bit and executing against the vision. But ever since we got past that architecture, we've been moving really quickly and able to launch functionality much quicker -- much faster for our customers and pursue the vision much faster as well. So yes, glad to be on the other side of that, but certainly a big challenge a few years ago.

Yes. No, it certainly sounds like that was a lot to do to get the product to where it is today. But look for what it's worth, right, what we have today is -- it's a product that is very easy to use. We hear it all the time, we do our customer checks. The product is very easy to adopt. And once it gets into an organization, which usually happens very organically, it then spreads -- I don't want to use the word viral, it's quite a negative word these days, but it does spread through an organization, right? What have you seen as far as like the adoption trends of Asana within customers? And what have those adoption trends been? And where do you think those adoption trends will go forward over time?

Yes. Well, I think we were fortunate to come into the market in a time when it became much more of a norm for teams to a trial and select software like Asana on their own rather than necessarily going through a centralized process. And so we designed Asana to meet that moment. And as you said, to be very easy to adopt, and, I can really appreciate that pitch, we should hire you for the sales team. But we wanted it to be, what we call, consumer-grade enterprise software. So this really great out-of-box experience that's not only lightweight and joyful to use, but just really simple to start. So the basic concept of Asana is just a single project, organized your way, and you can start with that very simple structure and then build it up into this much more complex map in the system over time. So it's kind of starting -- so to use the map analogy against kind of like starting by driving to an individual neighborhood, and then you can kind of put it in the context of the county, city, state. And yes, so that's been design principle from beginning. We've, over the years, just really reflected and iterated and tried to stand down off rough edges to make that as smooth as possible, understand where individuals are getting hung up and just remove those roadblocks. And this is really important for collaborative software because unlike most consumer software, it's really a collective decision. And so if you have a group of people trying to adopt something like Asana and even if one or two of them just refused to use it, that can really undermine the whole team and cause them to revert back to status-quo behaviors like sending email threads or using a shared spreadsheet. And so we knew we just had to nail it across the board for a team. So I think that's gotten much better over time as we've created better user experiences. And then we've also -- as we've moved upmarket, we've matured our own organization to be able to meet customers where they are. Because if you have a larger organization, they're still going to want to go through a more formal process when they start to deploy something like Asana at larger scale. And so we have a real sales team, who can go and engage in those longer processes. We have customer success teams, who can help you bring along an entire department or division of your company and adopting new software, and that's become part of the adoption playbook for us in addition to having that great sort of self-serve experience.

And the interesting thing is that this whole collaboration, the landscape for collaboration tools, right, it's a very a very busy one, and it feels like it's only becoming busier, right? There's more vendors popping up here and there. When you look at -- from your vantage point, when you look at the competitive landscape, where do you see Asana fitting in?

Yes, absolutely. So we think about overall collaboration as these 3 big sort of swim lanes, we call the 3 Cs. So on the one hand, you have content services. This is things like files and file sharing, Dropbox, Box, as well as a lot of the G Suite to actually create those files or Office 365. Then you have communications. So it's things like email, messenger services like Slack and Teams as well as voice services like we're using now. And then the third C is coordination, and that's really where Asana fits in. So coordination is all about answering who's doing what by when. So what steps are left between now and accomplishing my next milestone, who's responsible for each of those steps? And when are they expected to be done? And it's really important for products in the coordination category to partner really well and integrate really well with the other 2 categories. So if you look at our top integrations, they're going to come primarily out of those 2 big swim lanes. But we really think there's a huge opportunity in coordination itself to really solve through those cycles of chaos and help teams eliminate all that work about work and get their time back.

Got it. No, That makes a lot of sense. And when you think about your competitor positioning and just how big this addressable market can be over time, even today, it's already a huge adjusted market. When you think about Asana, right, and if you look x number of years out and Asana is y times bigger than it is today, what do you think would need to happen in the market or maybe for your product for that type of growth of Asana to really come true?

Yes. So the way we think about the TAM is there are a little over 1 billion knowledge workers worldwide. So it's a really enormous, shows up in almost every industry. And we're really trying to build a product that can best serve all of those knowledge workers. We still have a long way to go. It's part of what makes the category exciting. And really, a lot of it is just about adoption of the category in the market. So it's still enormously a greenfield opportunity. And so I expect that Asana and a lot of our competitors will continue growing quickly just as more teams discover work management for the first time. In fact, among our very largest customers, so customers spending more than $50,000 a year, we're actually only 3% penetrated into their employee bases. So we can grow quite a bit even without adding any new customers, just by expanding to reach the other teams in our existing ones. So that's really a huge opportunity. And I think getting into a larger part of the market is a lot about just sort of the classic crossing the chasm and making the product experience feel more familiar and easier to adopt for people who are -- for this category of software might be even more foreign. And then, of course, there will be a lot of sort of industry- and vertical-specific things we need to do in order to meet regulatory requirements and specific workflows for customers in those particular categories.

And when you think about how the world is changing, and how the world is adopting to this new way of getting things done in distributed remote environments, right, what role do you think artificial intelligence plays in that, right? And you guys have already started to work and do a lot of work on with Asana and artificial intelligence. How does all of that come together as we move forward from a product perspective?

Yes. So I described Asana earlier as basically creating this map of all of the work in the organization. And so the way AI comes into the picture for me is basically by providing the navigation system for that map. And I think that will start in relatively small ways to helping you understand where there's a bottleneck or maybe somebody has too much work on their plate, it might be helpful to kind of rebalance things for them. But the ultimate expression is really giving you the path to get to your destination. So you can imagine, from an individual's perspective, this almost Spotify play was like experience where you come in, in the morning, the system knows everything you're responsible for, what the due dates are, whether anybody is waiting on you to complete that work and can tell you exactly in what order work on things because it understands the actual priorities of the organization. And then from the flip side, basically, team leaders and people starting new projects, giving the system a little bit of about that project. Here's some of the tasks we need to accomplish. And the system actually telling you, well, based on all the prior work we've seen, we think these things should be assigned to these people, these things should you be assigned to these, here are all the dependencies, we think exists in this work. And here's how long it's going to take you to get to your goal, how long it takes you to get to your destination. So really creating that kind of beautiful navigation experience within the context of work management, I think, is really the holy grail of AI for us.

Got it. No, that makes a lot of sense, Dustin. And I want to be -- I wanted to comment on the time, we're coming up on the top of the hour. But I think an interesting topic for us to finish a conversation would be culture, right? And culture, I know from working with you guys for quite some time, the culture is something that you really have started to think about for Asana a very long time ago. As the CEO, right, how did you architect that culture at Asana to make it what it is today? And how important is it to what you do in the very quarter as a company and your mission?

Great. So I really think that it makes sense for all companies and especially Asana, to treat culture like a product. So it to be something that's designed intentionally, nurtured from the beginning, really with a set of principles and practices. And I think this actually contrasts to a lot of start-ups, who really focus on their actual products, first and foremost, and then kind of let the culture manifest organically in a path-dependent way and then later trying to bring structure to it or do things like document their values. But it's much harder to change things at that point. So you've kind of just inherited what your culture turned out to be. Whereas with Asana, we sat down literally in the early weeks of the company, thought about what the product is going to be, what our mission is going to be, but also started writing down cultural values and principles and trying to manifest them even when it was just the 2 of us. But then as soon as we started adding people, we're able to kind of bring them into that way of working. And I always say that when somebody joins an organization, they become a lot more like the organization, the organization becomes a little more like them. And so it's really helpful to understand this, not only to kind of indoctrinate those people to the culture that you want, but also to be able to select them and make sure that they're going to be able to work in that kind of environment and not just trying to take it in totally different direction. And I think this is an important for every company, but it's particularly important for us given our mission because the mission is to help the world's teams work together effortlessly, and we don't think that stops at the boundaries of our product. So we've really tried to become students of what makes for effective teams and effective organizations at every level and try to, where we can, build that straight into the product. But where we can't, just try and teach our customers and other teams out there through our blog, through speaking and just engaging with the community. And so we're really just trying to do everything we can to just make work better and better, including helping people understand best practices for culture.

Perfect. Well, Dustin, I think that's a great place for us to end our discussion. Thank you so much for joining us this morning -- this afternoon. And I hope you have a great rest of your day.

Great. Thank you, and have a great event.

Thank you.