The SMB Race: Speed, Relevance, and Scaled Growth Ft. Kristine Henley, AWS

Rajat Kohli: Hi, welcome to another Zinnov Podcast series. I’m Rajat Kohli, Partner at Zinnov, and today is a very interesting conversation I’m going to have with a senior leader from one of the platform companies. We’re talking about one of the segments that is debated and misunderstood, but frankly, it is one of the key segments for technology adoption.

We are going to talk about SMBs, small and medium businesses. Today, with me, I have a leader who has been in this industry for many years and brings together strategy, technology, and SMB market dynamics. Welcome to the podcast, Kristine Henley.

Kristine Henley: Thank you so much for having me.

Rajat Kohli: We are super excited to have this conversation.

Before we get into those tough questions, it’d be good to understand who you are, what your role is, and why SMB.

Kristine Henley: Absolutely. As you mentioned, my name’s Kristine Henley. I’m actually a Seattle native, born and raised here. Amazon and Microsoft are my local companies, which explains a lot about my career.

I currently am at Amazon Web Services. I currently lead our Public Sector go-to-market with partners, but I previously led our SMB global go-to-market through our partners.

Rajat Kohli: Wow, so you’re a Seattle native. A Seahawks fan?

Kristine Henley: A big Seahawks fan. Really exciting to win the Super Bowl.

It’s been a good year for us. The Mariners made it pretty far too, so we’re happy over here.

Rajat Kohli: Before we get into those market dynamics, Kristine, I wanted to understand—and I want to start somewhere personal—why the SMB segment? Why did you pick it up?

Kristine Henley: Yeah, it’s a great question. I’ve always been really passionate about small and medium businesses, and that’s partly because both sets of my grandparents were small business owners.

So I really grew up in that dynamic. I have some really early childhood memories of sitting in the main office of our cab company, listening to dispatch and the chaos around me, doing little odd jobs, and watching my family wear so many hats around the business.

Every day you’re interacting with a small business, whether that’s a local market, a dentist office, or your hair cutter. It’s incredible to be a part of that community and do anything to serve them.

Rajat Kohli: That’s very interesting. So you bring that business dynamic for sure. As you said, it’s one of the biggest economies everyone is going after.

Looking at the size of 400 million SMBs, the GDP contribution of more than 45%, and the fact that 98% of all businesses are SMBs, how do you see the segment today versus three years back?

Kristine Henley: Goodness, I think one of the most interesting market dynamics in SMB is that, first of all, they can be seen as technology laggards because they’re not going to adopt something unless it truly serves them and their end customers right there in that moment.

But the flip side of that is when there is a technology that does bring real business value, they’re able to adopt it overnight, and they can actually leapfrog enterprises in that speed of adoption.

That’s one of the things I believe we’re seeing today with AI, where AI is helping automate and augment business processes and help these SMBs scale and deliver better customer outcomes. They’re able to overnight move from an on-premise workload to an AI-native SaaS application.

That kind of speed is really changing how technology companies can interact with SMBs today in a way that, three years ago, just wasn’t the same dynamic.

Rajat Kohli: Wow, that’s interesting. If you look at the SMB segment, do they understand technology really well, especially in today’s world where technology is advancing at a much faster pace? How do you see that?

Kristine Henley: First of all, you mentioned 400 million companies, and I think that part about 45% of GDP is so critical because we think about SMBs as being small and small in revenue, but in aggregate it’s a huge portion of the economy.

One mistake I hear commonly is referring to SMBs almost as a monolith. Within those 400 million businesses, you have every kind of business, segment, technology adoption level, and persona.

The answer to almost every question is going to be yes. Yes, they understand technology. No, they also don’t understand technology. It’s really going to be about how you sub-segment.

We really see both sides of that market. There are some small businesses where technology is very much at the core and center of what they do, and even though they’re small, they are at the forefront of AI adoption, cloud adoption—you name it.

But many SMBs don’t have a full-time IT staff. They don’t understand the ins and outs of AI, how it works, or why they should move to the cloud.

They understand what’s impactful to their business. How are they handling customer service? How are they managing bookings? How are they managing inventory?

So when you’re working with them, it’s really about translating technology into those business outcomes.

Rajat Kohli: Awesome. If I look at that from an SMB angle, what exactly do they want from the ecosystem that somehow is not being delivered? Where is the mismatch between their expectations and what technology companies are delivering, and how they’re delivering it?

Kristine Henley: You know, one is really understanding the speed that the SMB can move, and also the speed at which they expect results.

So you don’t want to take an enterprise mindset and do a proof of concept and then a slow implementation rolling through each component of their company. They really want to see impact right away.

So thinking more about maybe deploying one feature across the company and then adding more features if you need to phase it out, rather than deploying a proof of concept, tearing that up, and starting over.

So I think really just making sure that you’re matching the speed of the outcome to the speed that the SMB really needs. That is a place where I see the mismatch.

Another aspect is that SMBs are a very hyper-local market. When I refer to the community, as I mentioned, they’re the people all around you that you interact with, and they also expect to interact with companies who are right there with them.

And so sometimes I see a mismatch in global vendors trying to reach SMBs in local markets with a very globalized approach.

Rajat Kohli: Right.

Kristine Henley: So I think really being thoughtful about how you’re distilling your message and your approach, and then even your implementation resources to give that local experience.

Rajat Kohli: And when we look at it from a local experience, do you talk about the industry? Do you talk about the geo, or do you talk about even what specific use case that SMB is trying to solve? How do you define the local flavor?

Kristine Henley: First and foremost, I would say it’s the geo and all the way down to the city.

Rajat Kohli: That’s a great point—even to the city.

Kristine Henley: Yeah, absolutely. Well, I had great experiences in India and Brazil as well. They really opened my mind to how different markets can be.

I was in São Paulo, Brazil, just learning about how different the market is in Minas Gerais, a few miles away from São Paulo. Or in India, where they talk about Tier 1 versus Tier 2 and Tier 3 cities.

And there are, what, 16 different languages across India?

So that’s when I say hyper-local. It really breaks the enterprise convention of saying geo and country. You have to get down to the portion of the country, the city, and the culture of the person running the business in that city.

That is what I would say is the predominant force. You really need to be able to speak in terms that that SMB owner is going to understand.

Secondarily, I would say industry.

Rajat Kohli: Okay.

Kristine Henley: Both market research and personal experience really show us that SMBs first identify with their industry and then as a small business.

Meaning, if you’re a small dentist office, you’re going to look for healthcare solutions and then filter down to small dentist office healthcare solutions.

You’re not going to SMB solutions and then choose healthcare.

So it’s first about local language, local presence, and local currency, and then secondly, industry, making sure you’re speaking to the business problems and the customers that those SMBs serve.

What I advise is that oftentimes we can’t verticalize our actual solutions into SMBs. So it’s more of a translation layer.

Your solution might be the same. Maybe it’s document processing, but you need to speak about that for that local dentist, with examples of how other dentist offices have used automated document processing.

If you’re working with a restaurant, how have they used automated document processing in the retail and restaurant industry?

So just having that translation layer really helps the SMB understand why and how this technology can help them.

Rajat Kohli: That’s a great point, Kristine. As you mentioned, local flavor matters a lot, and so does articulating that business story.

How are platform companies like Amazon Web Services putting that messaging into the ecosystem? When I say the ecosystem, these are the partners, the distributors, and the MSPs who are taking that solution and outcome to customers.

How are you working with this indirect model?

Kristine Henley: Yeah, absolutely.

I would say platform companies, but I see it even from ISV vendors. Almost everyone has a partner-led approach to reaching SMBs because of exactly that.

How are you going to get hyper-local without having a strong network of local partners that you can work with?

So that’s a very common approach, but it also brings challenges. How do you ensure consistency of messaging and quality of delivery of your product through this network of partners?

I would say we’ve learned a lot over the years at AWS as well.

One approach we initially started with was, let’s really enable these partners with a turnkey solution. We’ll create something really packaged, really easy to deploy, really simple for the SMB to understand, and we’ll push it out through the partner network and magic will happen.

Rajat Kohli: Sure.

Kristine Henley: We didn’t sell a thing.

But when we bundled it together, we found that, look, I like to say SMB is not simple business.

It’s all the complexity of an enterprise customer at a broader scale and a smaller entity. So, no surprise, all these SMBs didn’t need the exact same package.

In fact, they all needed something customized to their own business.

For example, ISV vendors that work together well may need all three systems. They need an ERP system, a CRM system, and an accounting system. But any given SMB might have one of those—

Rajat Kohli: Right.

Kristine Henley: —or two of those. So they don’t necessarily want to buy all three at once. They need something that’s flexible and going to work with them.

Even if they get to all three eventually, that might be on different timelines.

We learned very quickly that it’s about packaging the 80%, or packaging your selling process and your core messaging, and allowing for that 20% of variation at the edge.

So how do we enable that partner network on the core value proposition, the 80% of the solution build, but then empower them to make sure they’re differentiating that last 20% and customizing it to the end customer?

Rajat Kohli: So are you saying that SMBs prefer point solutions, or are they moving towards a platform story as well?

Because there’s a low ACV. I’m sure the closure cycle is faster compared to enterprises. Is it really an attractive business for platform companies? Where do you see that?

Kristine Henley: Absolutely. I’ve seen IDC projections that say SMB cloud spend will reach over $500 billion by 2027.

So I think the first answer is absolutely, it’s incredibly attractive.

One benefit that SMBs have is they can actually use the best-in-class solution for everything.

Just like I was explaining why bundling doesn’t always work out, SMBs have that luxury to say, “Why would I use a less attractive product for where I’m at in my market? I can simply go and buy 30 different SaaS solutions that are each best in class.”

Whereas an enterprise might have central governance and procurement, so they might tend towards, “If you’re going to sell me three things, it’s an easier procurement cycle, I’ll do it.”

SMBs don’t need to do that. So absolutely, they want what’s best in class and what’s really tailored to their needs.

That said, we’ve also seen SMBs using, on average today, over 18 different applications. Medium businesses are using over 35 different applications just to run their business.

Think about the last time you went to a doctor’s office and saw the receptionist entering all your information into one app, then pulling up another app and re-entering it there, and then pulling up another one and checking something else.

So they’re having to manage across so many different applications.

I truly believe there’s a huge opportunity in front of us to build more connectors and more cross-application platform capability.

How do you run security across all those applications? How do you integrate those applications? How do you have AI agents from those applications that speak to each other and really simplify that SMB business process automation step?

I see marketplaces, for example, being a huge opportunity. We do see SMBs increasing their marketplace spend.

Rajat Kohli: Okay.

Kristine Henley: I believe right now, on average, about 22% of SMB transactions are going through marketplaces.

That’s up over the last year, but it’s still only about a quarter.

If I had to make a bold prediction, I would say in the next three years we absolutely flip that, and 80% of SMB transactions go through marketplaces.

Because you really have the ability to buy all those applications you need in one place, with similar comparison, peer review, and procurement processes.

So there’s a huge value proposition to SMBs in platforms and marketplaces that I think hasn’t yet reached them.

Rajat Kohli: Wow, that’s very interesting. That number will increase.

It’s a tough question, and I want you to be honest. You mentioned the opportunity is a $500 billion SMB market.

If the leader in your organization says that we need to accelerate and do it in half the time projected, what would be your strategy?

Kristine Henley: Absolutely.

First of all, you have to assess where you’re at. If you want to accelerate, where are you today? What’s your trajectory today?

I would say some common mistakes I’ve seen. I’ve had vendors and ISVs call me and ask for advice on SMB targeting.

Rajat Kohli: Really?

Kristine Henley: Absolutely. I’m happy to help.

But the first thing I ask them is, “How do you define SMB?”

Kristine Henley: Because there is no universal definition. Every company actually has its own definition.

I ask them that question, and their answer is very telling. Sometimes they tell me, “My leadership told me it’s everybody we’re not selling to today.”

Rajat Kohli: Oh.

Kristine Henley: Right? So I see a lot of that.

I see a lot of companies saying, “We have an enterprise solution over here, and then SMB is code word for everything else.”

So if you’re in an “everything else” strategy, it’s going to be really hard to accelerate.

You’re being opportunistic.

The first thing is to be very, very targeted.

We just talked about the breadth, right? Ninety-eight percent of all businesses.

So which ones are you saying you want to accelerate your go-to-market with? Which cities? Which verticals? Which solution areas?

Once you’ve drilled into, “Okay, I have a plan. I know where my biggest addressable market is within SMB,” now you need a very clear partner strategy.

I would say the biggest accelerant you could bring in right now is AI in a very big way.

In fact, we have a program I developed at AWS that actually co-funds our partners to buy AI applications to use in their selling cycle to SMBs because that’s how much I believe the technology is helping us.

So at each stage, how are you bringing automation and AI?

Because the faster you can deliver, not only is it faster revenue to you, but it also delivers that business outcome to SMBs at the speed that they want that business outcome.

One of the biggest deal killers that I see is actually the vendor’s internal approval processes.

Rajat Kohli: Can you give me an example?

Kristine Henley: Yeah. If you want to do a migration for an SMB from a different vendor to your solution, and to get that funding you need to go back and get approvals, and that approval process takes two to three weeks, that SMB may have moved on.

That’s where I see that the companies that are really stellar at selling to SMBs—and are seeing hundreds of millions of dollars of revenue from the SMB segment—are very intentional and would call SMB a core component of their business strategy.

They build their operating processes for that segment.

So it may take two to three weeks to get an enterprise approval for a migration because it’s a large amount of money. You need to vet the solution, and you have the luxury of time.

In SMB, you need to consider that it’s a very small amount of money to approve a migration.

So how do you create an automated approvals process, or a wallet for your partners to use, or empower your sellers with a certain amount of budget that they can use?

Really thinking about how to prioritize speed over accuracy, while keeping a cap on it so your risk is limited.

These are smaller deals. If you’ve miscalculated, or if your seller gives more money than they should have, it’s a small risk. Overall, it’s going to pay back in breadth and speed.

Rajat Kohli: That’s interesting. You touched upon co-funding—that’s one aspect you spoke about.

The other aspect is co-sell. There’s a lot of talk around co-sell, and co-sell is built for enterprises.

What is the definition of co-sell specifically, and would it really work in the SMB segment? Do we need to redefine it?

Kristine Henley: Yes, absolutely. You took the words right out of my mouth.

When you think about SMB, you have to redefine what co-sell means.

One exciting thing we’ve been able to pioneer at AWS—and I’ll talk a little bit about what we learned from it—is that we built a real partner-led selling motion.

To do that, we created a new role in the company called a Partner Territory Manager.

Rajat Kohli: Okay.

Kristine Henley: That seller holds quota, but they don’t go deal by deal.

They manage a whole territory of customers, which is typically geographically based, so back to cities.

We have one of these territory managers for São Paulo and another one for Minas Gerais.

They work with targeted partners. They down-select a few partners that want to play in the space, have SMB solutions and strategy, and together they plan a go-to-market strategy.

That’s the messaging we put into market, the digital marketing strategy and campaigns, physical event campaigns, and industry events.

We also work with local chambers of commerce.

These are events where you can reach hundreds of SMBs with a single investment.

So they plan and co-sell at that level.

When it comes to individual customer deals, we’re completely hands off. We allow the partner a good amount of trust, and we base the funding on the results for the quarter.

Within that, the partner has complete freedom to close those deals at the speed they need to be closed.

That’s one example of how co-sell can look very different in this segment.

It’s not at the qualified lead or technical validation stage. It’s actually at the go-to-market stage.

Which solutions are we going to jointly prioritize? What’s the right marketing message? What’s the better-together story around those solutions?

It’s deep collaboration, but thinking about it a little differently.

Another way I see strong co-sell happening is with agents and AI.

You can rapidly share information.

When you get to a place where companies can share real-time information, “Hey, we’ve caught this market signal,” your agent can say, “Here’s everything we know about that customer. Here’s how we would propensity score it.”

Those agents can surface insights to the respective sales teams.

Does this customer require a human to lean in and support the deal? Or can we simply pass the information to the partner so they have what they need to close the deal?

That’s another great example of how co-sell doesn’t have to be two account managers jointly on the phone or flying to the customer.

It may look like two agents sharing information and packaging that information for the seller so they have a complete view from both companies.

Rajat Kohli: Interesting.

As part of our study, we found that in the SMB world—and you touched on industry associations—how important is the influencer ecosystem in cracking the SMB market?

Kristine Henley: Huge. Huge still.

The research I see is that peer review and peer feedback remain the number one factor in SMB buying decisions.

Second is industry reviews, commentary, and forums, which is really another form of peer feedback.

So one and two are already peer feedback.

The third is Google search.

They’re simply going online and searching things like, “Local dentist office in Seattle, best CRM application.”

A lot of times what comes up are influencers and industry publications.

That’s why influencers are so critical.

They understand SMBs. They’re often similar companies operating in the same space.

SMBs trust that they know the problem set, understand the customers, and know what’s needed.

When they say a solution works, SMBs trust that it’s going to work for them.

Rajat Kohli: That’s very interesting. If you look at the SMB world, Kristine, and maybe you agree or disagree, what we know is that SMB is all about accounting software, productivity, CRM, and website hosting.

How do you see the future? Especially with AI coming in and the security layer coming in. Does that excite them?

Kristine Henley: Absolutely. Absolutely, it’s exciting.

As I mentioned, I think SMBs are actually at the forefront of AI adoption in a lot of ways.

I think I disagree with the statement that it’s about accounting software and CRM. I think those are important components, just like they are in enterprises.

But SMBs often have even more unique business models.

You’re also talking about desalination companies. I was just at an industry event speaking with an SMB, and all they do is trade weather futures.

I personally, just to be honest, didn’t know that industry existed.

But that’s their entire business model, and they are very tech-savvy. They’re entirely a technology company.

Just because they’re small doesn’t mean they don’t use technology.

I really see that AI can help them in so many ways.

What’s really important is to remember that SMB is a B2B sale.

So always be thinking about who the end customers of that business are.

That’s what the SMB is getting up and thinking about. How do I serve my customers better, faster, with higher quality, and at a more efficient rate for my company?

Rajat Kohli: So you believe that AI is fixing SMB problems in today’s world, and that it will accelerate going forward as well?

Kristine Henley: I think it has the potential to fix them. I still think we’re very, very early in the AI lifecycle.

If you think about where we are today compared to two or three years ago, the trajectory is incredible.

I think we’re still just scratching the surface of what it can do and how widely it’s implemented.

Kristine Henley: I would stop short of saying, “Okay, we can all go home now. SMB problems are solved. AI is here.”

It’s going to take a lot of hard work over the next 10 years to really get to that place.

But I think we’ve already seen signals of what’s possible.

I think that’s very exciting, and I think SMBs see that opportunity.

In fact, we saw a rise in cloud interest from SMBs after ChatGPT debuted.

Now you have business owners starting to use AI on their phones in their personal lives, and they’re saying, “Whoa, this is interesting. Now tell me more about what this technology could do for my business.”

So I do see AI playing a role in the future of SMBs. I don’t think it will solve all the problems.

I think we have to be very thoughtful and intentional about how we use it, how we think about responsible AI, and how we put the right guardrails around it.

And especially how we help SMBs use it.

We know that SMBs are very frequently targeted for cybersecurity attacks.

Rajat Kohli: Oh, we see that in the SMB world as well?

Kristine Henley: Yes, yes.

SMBs face a huge cybersecurity risk, and over 50% of cyberattacks are on SMB companies.

This is very front and center, and we need to make sure that as we enable those companies to use AI or other products, we’re also enabling them with the right controls, security, and training.

That way, they’re implementing AI in a safe, secure, and responsible way.

Rajat Kohli: Got it. If you’re sitting on the other side of the table as a strategic acquirer and evaluating partners in the channel ecosystem, what kind of channel partner would excite you enough to invest in them?

Kristine Henley: I think it would be exciting to see a partner who understands their target customers very deeply and knows where they’re succeeding today, while also having a clear plan to expand that success by adding markets, target customers, or feature sets.

I can’t overstate this. I know it sounds simple, but I talk to many vendors who still aren’t very clear on where their success is coming from.

Who is that ICP—the ideal customer persona—that they’re reaching today? Where are they succeeding? And how do they grow and add new ICPs?

I think having that foundational, data-driven approach is important.

If I were an investor, I would be excited to see that on paper and know that the company understands what’s working and where its growth opportunities lie.

I’d also like to see a smart usage of partners and partner networks.

If you’re reaching SMBs, distributors can provide incredible reach and scale.

So I’d really be looking at what markets and segments they want to reach and how they’re going to reach them.

Rajat Kohli: Interesting. Final question: How do you ensure that SMBs are buying through the marketplace? What needs to be done?

Kristine Henley: Well, first, they have to know it’s there. How are you reaching them?

It’s about awareness and ease of use.

I talk a lot about meeting SMBs where they’re at.

One example—sorry to steal from AWS—but I was recently really excited to see the launch of Marketplace Storefronts.

We allow partners to create their own AWS Marketplace customized on their website.

Now you’re reaching more SMB customers because if they’re already buying a product from one of these vendors, they can access additional third-party solutions through the marketplace on that vendor’s webpage.

That’s one way.

When I say “get the word out,” it’s really about where you are and how you’re meeting SMBs where they’re at.

And for vendors, it’s important to think about follow-on sales, because that’s really how you become profitable in the SMB space.

We talk a lot about profitability because you have to operate at such scale.

A great way to do that is to make sure you’re selling more than just the initial product to the SMB.

What’s the second, third, fourth sale? We see much higher ticket sizes in that second and third sale than in the first one.

So ensuring you’re bringing the SMB to a marketplace is a great way to do that.

If you’ve sold one thing, how are you introducing them to a marketplace full of second and third sales? And how are you potentially using AI to help surface the best-fit next step for that SMB?

Rajat Kohli: That’s very interesting, Kristine. I think this was a wonderful conversation, with a lot of insights to define the strategy and the playbook.

I’m sure SMB is one segment that is untapped, but a significant opportunity exists for platform companies like Amazon Web Services and others.

But there are many things that need to be done to ensure that speed accelerates and adoption increases.

As you mentioned, it starts with simplification, clarity on which SMB segment to go after, going down to the city level, and the right processes, including co-funding and co-sell.

Awesome. We’ll do some rapid fire to know a little bit about your personal side as well.

Favorite city you have ever worked from?

Kristine Henley: There are so many good options.

San Diego. I’m really partial. The weather is always amazing. My oldest was born there, so under pressure, I’m going to say San Diego.

Rajat Kohli: What’s something on your bucket list you haven’t told many people?

Kristine Henley: I do have a dream of one day being able to speak six languages.

I’ve lived in a couple of different countries, and at one point in my life I’ve spoken Italian, French, Spanish, and English. I’ve also studied Greek and Latin.

I’d love to continue learning. I think it’s incredible to communicate with people in their native language.

Rajat Kohli: What is your go-to activity for stress relief?

Kristine Henley: It’s got to be working out. I think just going for a walk, especially if I can get outside. It’s always better.

Rajat Kohli: If you were not in this industry or career, what would you be doing?

Kristine Henley: I love books. I’ve always loved reading.

In fact, when I started at Amazon, I started in Kindle Publishing.

So I think I would be in the publishing industry.

Rajat Kohli: The book or the podcast—what interests you more?

Kristine Henley: Books.

Rajat Kohli: What is the last book that you read, and any learning from that that you use in your daily life?

Kristine Henley: Well, look, I am a huge fan of Project Hail Mary.

I read it many years ago, but I just saw the movie. First of all, I think they did a great job with the movie, and it was incredible to relive that story.

It was just really fun to revisit it.

I also love The Martian, by the same author, Andy Weir. I love his books.

Rajat Kohli: What keeps you awake at night?

Kristine Henley: My kids.

I have a three-year-old, almost four-year-old, and an eight-year-old. They’re often up. If one isn’t up, the other one is.

And then we have two dogs, and sometimes they’re up too.

There’s a lot of noise.

Rajat Kohli: How would you explain your role to an eight-year-old kid?

Kristine Henley: Oh, goodness.

We talk about the internet and how content can be shared on the internet. That’s probably the level we’re at.

But she’s already learning coding at school, and she’s already aware of AI. She’s used Claude and ChatGPT.

So increasingly, she’s getting hands-on experience. There’s not as much explanation needed anymore.

Rajat Kohli: Thank you so much for the rapid fire, Kristine.

Kristine Henley: Thank you for having me.

Rajat Kohli: Thank you.

Rajat Kohli: Thank you for listening to this episode of the Zinnov Podcast.