Pieter van der Does
19 January 2021
Pieter van der Does, co-founder & CEO Adyen
Pieter van der Does, co-founder and CEO of Adyen, offered clients a ‘subscription to innovation’, where traditional banks had neglected the payments sector as ‘dull’. He is now aiming for 1 trillion transactions. He speaks to Alexandra Jankovich about this, and his rigorous focus on better products, better talent, and delivering on the right here, right now.
Read the edited transcription of the conversation below the table of contents.
00:30 Adyen’s start as a wake-up call for banks who had neglected the payments department
04:26 The ‘Adyen formula’: The practical implications of Adyen’s strong company culture
06:20 How to keep major clients: “When someone becomes our client, they have to see that they have a ‘subscription to innovation'”
06:56 How the motto ‘launch fast and iterate’ works in practice at Adyen
09:16 Why the lack of innovation in payments led to the traditional banks being pushed back to the end of the value chain
11:40 Pieter van der Does’s advice to a CEO of a traditional bank: improve the core products
14:30 ‘We no longer live in the days of the unicorns, but in the days of the cockroaches.’
15:13 The ‘no blush’-policy at Adyen and how to retain employees
17:17 Looking into the future: Why Adyen has set a goal to reach one trillion transactions
Alexandra Jankovich: Hi Pieter, great to talk to you. As far as I see it, you found a gap in the market. Lots of stuff was bought online, there were serious online players. But the banks were unable to handle the payments properly. They could handle store purchases, but not online, or online plus store purchases. Am I right?
Pieter van der Does: They were using huge old mainframes that nobody dared to tamper with. And then, in 2006, we said: There’s lots of room for quality improvement here. Everyone was saying: When clients complain, you stick your fingers in your ears. ‘It’s a commodity. The price is the only thing that counts. Don’t listen to the client, all you need to do is gather volume. This will give you a winning product.’ But we said: ‘No, we don’t have to.’ With open-source databases and newer machines, you can make this very efficient and you don’t need large volumes in order to compete. What we do, is: we build it and we compete on functionality. Our clients are the living proof of this. We managed to draw major clients, who value this extra quality. If you do 3 transactions per week and you manage to have 2% more successful transactions you don’t know what that is. If you have 3 transactions per second, and you employ a payment manager he’ll think this is great, because he’s making more than what Adyen charges him. That’s the reason why we have clients like Uber, Facebook, Netflix, Spotify. Those clients measure their transactions per second and they see a difference. It all goes back to the choice we made in 2006: The market sees it as a commodity, but we’re competing on functionality. That was totally new at the time.
Alexandra Jankovich: What was the functionality that you were competing on?
Pieter van der Does: Shop terminals will always accept your card, unless you have insufficient funds. Because there are fewer options to do authentication online, there’s more room for fraud. And there’s the extra complication that you’re shopping internationally. We focused on this, so we needed to know how to bring a card to VISA or Mastercard to understand where we needed local licenses to overcome international obstacles and to construct a fraud system that would focus on preventing false positives: When you’re indicated as a fraud, which you’re not. This combination of ours provided more successful transactions. We offer great quality, because we have control over everything. We’re not moving things to another platform, where data can be lost and you don’t know what’s going on. A shopkeeper wants to know why a particular transaction was rejected. All of those transactions yield lots of data.
Alexandra Jankovich: How are you using these data for the shopkeeper?
Pieter van der Does: The shopkeeper owns the data, so we’re not sharing them with other shopkeepers. The only real exception to this is when we’re dealing with fraud. Otherwise, the data is for the shopkeeper. What this allows us to do, is: At the moment you have paid at the terminal, we’re able to see what you’ve bought online as well as your history in the shop, all in one go. Then you can decide: This is a good customer, I might want to give him a gift voucher. This is unique. This is what the shopkeeper, the retailer, has been looking for all along: ‘I don’t know who the client in my shop is.’ Online you may have a user account to go by, but in a store you don’t have a clue. The very moment someone inserts the card, you’re getting the entire history. This gives you an entirely new shopping experience.
Alexandra Jankovich: Adyen has a very strong corporate culture. I think you have conceived the so-called ‘Adyen formula’. How do you get people to do that when you’re scaling?
Pieter van der Does: The main reason we ask people to leave Adyen is the cultural fit. It’s not that they are stupid, or that they are swindling, but they simply don’t thrive in our culture. The formula is in everything, and we discuss this all the time. At every sales event we have a ceremony to reward employees. Not because of the highest sales deal. But because in the sales process they have done something that was ‘the Adyen formula at work’.
Alexandra Jankovich: That is the best way to do things. One of the things in the formula is: you want to bring together a diversity of people because this will improve ideas. In what sense is this a diversity of people? Are they various functional specialists, or how do you see that?
Pieter van der Does: We’re trying to build an organisation with a minimum of hierarchy. People can make their own decisions. But we’re saying: It’s okay, as long as you do it according to the formula. This means: If you’re in support, does your work have great influence, will this generate lots of new work? Or ask someone from sales or account management: Will this be a needle mover? And do ask someone abroad, in a different branch. Try and get different kinds of input. If you then realize it’s really a good idea, you can continue with it. Try not to get only the input from someone who thinks exactly like you. In that case, we’re not using one another as a whetstone.
Alexandra Jankovich: I think it’s very inspiring for everyone to have those different perspectives, isn’t it? In your strong corporate culture, I believe you have an incredibly strong client focus. It’s amazing how you managed to get major clients at the very beginning. How do you manage to keep these clients?
Pieter van der Does: When someone becomes our client, they have to see that they have a ‘subscription to innovation’, as we like to call it. What you bought six years ago, and what you’re getting today need to be two completely different things.
Alexandra Jankovich: Speaking of continuous innovation, one of the items of the Adyen formula is: ‘launch fast and iterate’. As SparkOptimus, we tell our clients the same. We see that large companies want a perfect plan. ‘It will take us two or three years to market the perfect product.’ What’s your vision on those matters?
Pieter van der Does: This ‘launch fast and iterate’ motto is indicative of how you see yourself as an organisation. I see it as a protection of the engineers. As an engineer in a large organisation you have a better life before the product goes live, than you do later on. Before it went live, you had regular hours and you were just coding but the moment it goes live, there’s only trouble. When you’re building your business like that, you’re building in obstacles and the rational response will be: It’s not completely finished, let’s postpone it.
Alexandra Jankovich: How did you solve this?
Pieter van der Does: In part, it was a choice. The company was started by engineers. I was the only non-engineer of the original 7 people. We always invited different people to join us in our office. We always had three extra engineers to make sure there was a balance and it wasn’t the CFO, the CCO, and myself as CEO deciding everything. We needed to have an input like: ‘You could do it like this, but if you do it like that, it’s much more efficient.’ You want this at the very start of the discussion. Our commercial people and our engineers have always been working closely together. Engineers are required to visit a client at least once a year. This always seems to be following the same pattern: ‘I don’t feel like it, I have to travel to get there, imagine what I could have done for Adyen in those three days.’ But when they return, they always say the same thing: ‘This was so useful, I’m full of ideas now. I should have done this earlier.’ So it’s really a matter of getting people out of their comfort zone and showing them how their product is used. Are you still satisfied with it? Or are you inspired to make improvements? It seems to be inspiring. We’re using each other as a whetstone, the engineers and the commercial people too.
Alexandra Jankovich: Take the travel industry, there you could see that the emergence of new players like Tripadvisor and Booking.com pushed the original travel companies like TUI and Neckermann to the back of the chain. They became a commodity and lost the direct client contact with disastrous consequences. How do you see this in your value chain, looking at banks?
Pieter van der Does: What I’m saying now, only applies to payments. Within a bank ‘payments’ is always a dull department. ‘Card issuing’ was bringing in money, so that was a somewhat glamorous department. This made money, it could put new schemes in the market. But ‘card acquiring’, the overarching department of which ‘accepting payments’ is a part, had a really dull image. This was a problem, as it meant: no innovation, no investment. This was also the definition of ‘opportunity’. When you open a shop, who’s going to control your terminal in the physical world? We do both physical shops and online. ‘Who’s going to do payments for my webshop?’ This is the start of gaining insight into transactions and building a relationship. Maybe even more so than for the bank account the money is eventually paid into. By now Adyen is itself a bank, and we can offer people a bank account. It’s only later that the bank starts realizing: ‘Hold on, we’ve lost an important contact moment with our client.’ You thought you needed a bank to accept a payment. And now it turns out that this payment is going to Adyen. And you’re losing your insight into how this shopkeeper is really doing because there’s a different party doing the processing. That’s when banks started realizing: payments may be dull, but they’re important to build a relationship with a client, so you can sell them other products. If you’ve lost your entry point, you’ve done it wrong.
Alexandra Jankovich: Do you agree that what happened in payments is similar to what happened in the travel industry? They let themselves be pushed to the back of the chain, losing client contacts with all its consequences. They then become a commodity, a controlled infrastructure.
Pieter van der Does: Even more so, they’re often pushed out of the market altogether.
Alexandra Jankovich: What would you do if you were the CEO of a large bank?
Pieter van der Does: I would make the core products really good. An online bank shouldn’t do things better than the banks are doing. When my children go on holiday, I give them a card which I can control by means of an app. Should they get into trouble, with huge hospital bills or whatever I can transfer money to the card in real-time. I can change the PIN code online. I’m not doing this through a Dutch bank. They’re not able to do this. Banks often see innovation as a fun thing: ‘We’re taking crypto-currency and we’re stashing it in a separate building with a hassock and a billiard table, and it’ll be great fun so we can continue what we’re doing.’ You should take your core products, things you want to be good at, and really invest in them so you can deliver on them and compete with everyone in the business. It’s really a shame that when I want to have a simple product like a card for my children that will give me an alert. I’m giving them the card for real emergencies and then I see: Dunkin’ Donuts, 17 euros. Then I give them a call: This card is for emergencies, not because you’re hungry. That’s nice. And if you can’t provide a basic service like that you run the risk that we’re the company to be doing the payments for all kinds of shops. Others will do this for consumer accounts, and you’ll see a repetition of this pattern. So I’d make this into a spearhead and make sure that it’s absolutely top-notch. And don’t take your innovation out of the equation of thinking 20 years ahead: How will we be travelling, what will we need then? No, make sure everything is top-notch, right here and now.
Alexandra Jankovich: Indeed. Don’t take four trips to Silicon Valley and lots of brainstorms in hip surroundings and such. ‘Who are my important clients, what are my important products?’ ‘And how do I make sure that I’m better at them than anyone else?’ To today’s standards.
Pieter van der Does: Exactly. Maybe that’s less inspiring and it doesn’t give you a great story to tell but it’s how we are building our company and how our competitors are doing it. This is how other companies are doing it, too. This goes back to ‘launch fast and iterate’. Ask what the client needs. What’s the next country the client wants to expand to? Make sure he’s completely happy. And then get your engineers to build this.
Alexandra Jankovich: You said something that I found funny. It’s going crescendo, but it could have been otherwise. You said: ‘We no longer live in the days of the unicorns, but in the days of the cockroaches.’ Maybe you can explain what you mean by that?
Pieter van der Does: Adyen started during the crisis. By the way, we’ve built everything ourselves, because we don’t outsource anything and because we pay for only a few licenses and make use of open-source the company you’re building, is very efficient. What’s so new about Adyen is that it combines absolute top quality with a lean and mean company. Those are the cockroaches. They can fit into any possible scenario.
Alexandra Jankovich: Absolutely. What did you like best about the past 14 years?
Pieter van der Does: Something I very much enjoy myself is to see how whizz-kids flourish in Adyen. That’s essentially our model. Many companies are trying to get a 6 to become a 7. We’re trying to build a company for the 8s and 9s on a scale from 1 to 10. Or even 10s. This makes it a difficult group of people, because they’re highly employable. So you can get them to commit to you by offering them a kind of traction and not by promising them great coffee or a ping-pong table. These people can sometimes be somewhat eccentric. Because they are so smart, they can also be very outspoken at times. Sometimes you see people flourishing because this place offers them so much traction. Sometimes I walk past a room and I see someone in discussion with others and then I think: You were not the most popular person in high school, but here you’re valued. How cool is that? We’re a company with little hierarchy, where everyone is responsible for their own career where we discuss things and you may decide. For instance, we don’t have a travel policy. You’re expected to act normal. Our only policy is: No blush. Imagine you come back from a travel trip and you have to get on stage at the monthly all hands. And then we’ll sort out your receipts. If you can do that without having to blush, you’re all right. And when a receipt shows that you bought a 300 euro bottle of wine: Who was the client, what was the celebration? When you have a plausible story, for example, you can’t have dinner with that important client and order a 10 euro bottle of wine to go with it, then you’re all right.
Alexandra Jankovich: Definitely, I can imagine! Let’s talk about the future. I’ve read somewhere that you’ve set yourself a goal of one trillion transactions. Is that right?
Pieter van der Does: The reason for this is: If we’re really that good, but we’re not the number one player it means we haven’t played our cards right. It’s useful for our engineers to know: Do I have to do this times 6, times 10, times 20? Or is it all right if it’s times 2? It gives you the room to think about what we’re expecting for the near future. Otherwise, they might build things that can scale insufficiently in which case you have to adapt them sooner. The most important thing for us is the hunger. It has to be attractive for the very best people we employ in order to continue working according to our formula fit. That’s the most important thing. If you say: ‘You could have done better with that hand of cards’, I can tell where it went wrong.
Alexandra Jankovich: Do you spend a lot of your time on this?
Pieter van der Does: Yes, a great deal. But at the moment I’m spending most of my time deciding what training we should do, I do team lead chats. When we hire people, the final interview is always with one of the six board members. You can’t work for Adyen without having spoken to at least one board member. This is to guarantee quality. You can see that we talk the talk, but we also put our money where our mouth is.
Alexandra Jankovich: You’ve read our book. That’s very decent of you.
Pieter van der Does: Yes. You told me to. I’m very compliant. A lot of things in it are very relatable. Some things are cliché: Our motto of ‘launch fast and iterate’ is actually the minimum viable product. It’s become a kind of cliché but lots of companies don’t do it, they prefer to develop a lot, to do big bang launches. The engineers behind it may have even changed jobs by then. It’s not exactly what you had expected. It’s a difficult scenario. If you want to keep things simple, you need people that are willing to go all the way. Otherwise, you’re going to end up with highly complex solutions. We’re constantly trying to keep things simple.
Alexandra Jankovich: And very client-oriented.
Pieter van der Does: If others see us as highly innovative, we sometimes wonder if that’s true. We’re developing things fast to keep up with the client’s next step. We’re great at following those steps and remaining at the forefront. Then you’re seen as highly innovative. We’re working incredibly fast, just because of the way we’re organized doing what’s needed, always in the forefront. If you manage to keep doing this for 14 years, this makes you an extraordinary company. We’ve never launched anything where people said: I don’t know how his works. What is this? It’s always: This is great, this is the next step, it out-performs.
Alexandra Jankovich: People have to get used to tell such stories, even if they’re less sexy. But this what you want as a client.
Pieter van der Does: That’s the core of our idea: A tad less sexy, but very successful, nonetheless.
Alexandra Jankovich: Absolutely. You’ve proved this in practice. And I think you’ll manage to keep it up. So, thanks a lot, Pieter.
Pieter van der Does: Thanks for taking the time, Alexandra. I enjoyed it.