Chapter 14
Law 10: It's a Top-Down, Company-Wide Commitment
Author: Nick Mehta, Chief Executive Officer, Gainsight
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Executive Summary
Customer success is not just a department or an organization. It's a philosophy that must pervade your entire company. For most of business history, only two things have really mattered: (1) building the product and (2) selling the product. We believe that the time has come for a third core process to emerge—customer success.
Customer success is not just the buzz phrase du jour. It's here and it's here to stay. Done well, customer success drives real value to the bottom line of your business. If you are not on board yet, you will be soon because you can't survive without it. Luckily, getting started is not that difficult. But customer success starts at the top, and it must be a company-wide commitment.
Customer success. It sounds like a truism that says nothing new or interesting. After years of hearing CEOs say customers are king and watching them do the opposite, it's easy to be cynical about the new customer success movement.
In this law, I hope to convince you about the following four points:
- What customer success is (for real)
- Why customer success is inevitable
- How customer success drives value
- Where to start
What Customer Success Is (for Real)
As many B2B companies create teams with labels such as customer success management or chief customer officer, you might think customer success is a department.
But just as sales is both a team and a cross-functional activity, customer success is a company-wide matter. Literally, customer success involves shifting the orientation of your company from your product or your sales to your customers' success.
For most of business history, companies have focused on two core processes: (1) building product and (2) selling product. In the customer success movement, we argue for a third core process: driving customer success. Put simply, if you bet on delivering success for your customers, then success for your business (in terms of sales and profits) will follow. This is a big bet, and it takes support across customer success, finance, marketing, sales, and product teams, hence, the company-wide commitment. And if you're a CEO or a senior executive, you set the tone for this commitment.
In the customer success movement, all business questions are reframed around the customer's success:
- Product: Which feature will truly help our clients achieve their goals using our solution (versus being demoware)?
- Sales: Which clients are likely to be good fits for our solution (versus ones that will leave us quickly)?
- Marketing: What messages authentically align with the success and value we deliver (versus being buzzwords)?
- Finance: Which metrics reflect real success and value for our clients (versus just new sales)?
Why Customer Success Is Inevitable
The good news is that you don't need to think too hard about the if here. Customer success is a natural outcome of massive changes in the economy:
- Globalization and technology have dropped the barrier to entry for businesses.
- Lowered barrier to entry allows new entrants to disrupt almost every established category.
- New entrants have created lower-friction business models.
- Lower-friction business models make it easy for customers to try and buy—with shorter-term pricing (monthly or yearly); granular consumption (per minute, per CPU cycle, per user, per click); and easier deployment (cloud and mobile).
- At the same time, this lower friction makes it easier for customers who try and buy to say bye and leave.
- At the end of the day, customers have the power and customers have choice.
- Customers with choice will choose to stay with vendors that deliver the outcomes and success they desire.
- Indeed, customers will start expecting vendors to focus on success as more of them do so and as the applications for consumers (e.g., Uber) do such a great job at this.
It's not a matter of whether it will happen. The question is will your business react quickly enough to survive when it does happen?
How Customer Success Drives Value
On the positive side, companies that embrace this opportunity early will achieve massive results by focusing on customer success:
- Growth: Facing less headwind in the form of churn and more tailwind in the form of upsell, businesses that focus on customer success simply grow faster. And successful customers become advocates and references to drive more new clients. In the long run, the leaky bucket effect of churn cannot be counteracted by new business alone.
- Valuation: According to an Altimeter Capital report Valuation of Subscription Businesses (October 2014), public subscription business multiples are directly correlated to customer success and retention: “Dollar renewal rate (DRR) is the most important metric for valuing subscription businesses.” In short, Wall Street notices customer success.
- Differentiation: Finally, because not every company in every category is focused on customer success, customer success management can become a meaningful differentiator. Customers know that products and services become commoditized over time. The business process and team a company uses to drive success for its clients is really what matters in the long run. The sales messaging of best-in-class companies talks about the customer success process in a meaningful way.
Where to Start
If you're convinced, you're probably thinking, “How the heck do I implement a ‘top-down, company-wide commitment’? Where do I start?” Here are a few ideas:
- Define success: One of the biggest steps you can take to create a customer success–centric culture is to crystallize what success means for your customers. Many companies sell horizontal products that can be used in a variety of use cases. If you're a CEO or a senior executive, you should kick off a cross-functional process to canonize the common use cases for your offering and define what success would mean to the customer in each of those use cases. Here's a simple way to think about this: If you asked customers, “What does wild success with our company mean to you?” what would they say? Without defining the goal, it's hard to get the company rallied around it.
- Align around success: Next, review your organization and make sure that each functional area knows what it must do to support customer success. Your customer success team can be the quarterback of the initiative, but it needs buy-in from each department. This could mean:
- Reviewing customer success feedback each month with the product team
- Defining and refining sales qualification criteria
- Reviewing messaging regularly with the marketing and customer success teams
- Listen to the customer success team: If you're a senior executive or a CEO, you are likely flooded with signals about your business—from customers, partners, investors, and employees. You need to make sure a key part of that signal comes from the customer success team or are informed by the results of your customer success practices if you don't yet have a team, since they are the eyes and ears of your customer base. Establish a regular review of customer success issues. Include a customer success executive in every executive meeting, every board meeting, and every key strategic decision. And take his or her opinions as seriously as you take those of your sales leader.
- Prioritize customer success: This is where the rubber meets the road. Every business has limited resources and must make trade-offs. Is the feature to delight clients always getting deprioritized for the feature to drive demos? Is the project to implement self-service getting pushed behind the channel partner rollout? Is the training for CSMs being postponed for the sales training? If you want to drive customer success, prioritize it.
- Empower the customer success team: In the same vein, if you've created a team to drive success with your customers, take measures to support it. Some things to consider:
- Make sure the title for the customer success executive is on par with the sales leader.
- Keep your CSM in the loop when a customer escalates to the management team.
- Let the CSM be the hero with customers if possible (e.g., ideally the CSM will tell the customer that you agreed to their contract change or road map request).
- Make it clear to the rest of the organization that the CSM represents the client's views.
- Measure customer success: Customer success will never be taken seriously if there aren't agreed-upon metrics to apply. Define metrics for your bottom-line results, including gross churn, net retention, and other measures. Make sure everyone is clear on what the metrics mean. And create some early-warning metrics such as health score, adoption score, and NPS to track where customer success is going.
- Report on customer success: Next, make these metrics very visible. Show them in your all-hands meetings. Display them on your walls and monitors. Spend as much time on customer success in your board meetings as you do on sales. Create a killer customer success section of your board packet to show your board that you take it seriously.
- Incent toward customer success: Companies set compensation plans to drive behavior. So if you want to drive customer success, pay people for it. Consider adding customer success metrics (e.g., net retention, NPS, or health score) to your company bonus plan.
- Challenge the company: Just as you push the company to grow sales and hit quarterly targets, expend as much effort pushing the company to hit customer success targets, such as retention, go-lives, satisfaction metrics, or adoption goals.
- Celebrate success: Customer success isn't easy. It's not always in your control, and customers can be challenging. Most companies have great traditions for cheering sales on—gongs, champagne, trips, fun bets. Do the same for customer success. Get yourself a CSM gong and send the signal that customer success is a top-down, company-wide commitment.
Additional Commentary
It's hard to overstate the value of this law for companies that are serious about customer success. In some ways, it's not just another law on a list of 10 but perhaps the stone tablets the laws are written on. This is literally the foundation for all the other laws. More than any other organization in an enterprise, customer success needs the commitment of every other organization. I said commitment, not help. Help will be necessary at times, too, but that word implies that it's an anomaly and can be considered only when a specific scenario arises. That's just not true. A real commitment to customer success begins before the first marketing foray is aimed at the first prospect, before the first line of code is written in the product, and before the first sales call happens. That's the nature of the Ten Laws in aggregate, articulating what great recurring revenue businesses need to think about and do well across the company in order to actually be great. This isn't an afterthought or an organization that picks up the pieces when things go wrong. It's a philosophy that starts at the top and permeates the entire company and then, and only then, can it become an organization that participates alongside all other organizations to ensure that the company's focus is on driving business success for the customer first and foremost.
None of this can happen unless your CEO is fully committed, and a CEO cannot be fully committed to anything unless his board is equally bought in. One of the pleasant realities of the customer success movement is that investors are more and more interested in the associated outcomes—high retention, increased upsell, improved customer satisfaction—and are pushing earlier investment in customer success as an integral part of building a viable company. This great news comes with a cost of course: The need to be smart about those investments, both in technology and in people. One more reason this has to start at the top.
The list of ways that your CEO drives customer success is really long, but the last one I'll mention here is about culture. Because great companies will have customer success in their DNA, it needs to become part of your culture. And, as you all know, culture may be managed and nurtured by your human resources team, but it's established, reinforced, and modeled primarily by the boss. Making customer success a part of your culture is often harder for more mature companies because it may be a dramatic shift from the way the company was built. Changes such as that need to come down from the top and be part of the company's rewards and incentives programs. One of the best examples I've seen came from a very successful, now public, SaaS company in which the executive bonus plan made it clear what the CEO's priorities were. Quarterly executive bonuses were paid based on only two criteria: (1) new business bookings and (2) renewal rate. To fund the plan above $0 required a minimum threshold to be reached on both metrics. The message this sent is clear: retention rates are just as important to our business as new customer acquisition.
As we explored in Chapter 2, the impact of customer success needs to be felt in sales and marketing, product management and development, and services. Each of these, along with the customer success organization itself, is an equal-strength link in the chain. The tension created by the constant focus on existing customers that is brought by your customer success leadership and your CEO will drive the company forward in a positive way. Oversight, direction, and commitment from the top are invaluable in creating the right balance. Think through these five questions as a CEO (if you are one) or about your CEO (if you're not). Ask whether your CEO is truly focused on customer success:
- Is he willing to say “no” to an above-ASP deal in your pipeline because the chances of making the customer truly successful are too small?
- Is he willing to delay a vital product release in order to address current customer challenges?
- Is the head of customer success in his circle of trust?
- Does your road map include things that won't help you sell more but only address existing customer needs?
- Does he get personally involved in critical customer situations as often as he does in key sales deals?
I've obviously painted each of these as black and white although business decisions often happen in shades of gray. But forcing a yes or no, even theoretically, can often bring truth to light. If your answer to each as a CEO is not a quick yes, then you need to consider whether you are truly focused on customer success. If you are a non-CEO executive and aren't sure whether the answer to each question is yes for your CEO, then you should consider carefully what that means to you and to your company. I'm not saying that you are doomed to failure because you're not sure how he would answer one question, but it's worthwhile to think about what that means and how it might affect you.
High Touch, Low Touch, and Tech Touch
This law does not vary in any way based on the model or models through which you deal with your customers. Success in every case is highly dependent on the commitment of your board and CEO and the alignment of customer success with the other organizations in your company. There may be, however, some variation in the trade-offs that need to be considered within each model:
- High Touch: hiring another CSM to manage some of your most critical customers versus hiring another quota-carrying sales rep.
- Low Touch: driving incremental bookings by decreasing CSM's book of business versus increasing sales quotas.
- Tech Touch: building a customer portal vs upgrading your marketing automation solution.
Each of those trade-offs is about an increased investment in customer success versus investing in another organization. I'm not saying that the right answer is always about customer success. My goal is simply to point out that tough investment decisions will need to be made regardless of the touch model(s) you are employing and that your CEO is likely to be involved in many of them. A focus and long-term commitment to customer success will show itself over the course of the hundreds of decisions a company has to make every month.
An instructive story on this theme was shared with me recently by Jim Steele. Jim spent 13 years at Salesforce on the executive staff as the chief customer officer and president of worldwide sales. The night before the first Dreamforce customer conference in 2003, the executive team gathered with Marc Benioff to review the agenda and run through all the presentations. As with most conferences held by software vendors, the agenda was filled with product presentations designed to highlight the features and value of the Salesforce platform. About halfway through the review, Benioff made an executive decision that set the tone for the entire company for years to come. He decided to throw out all of the product presentations in favor of creating an open microphone opportunity for customers to share direct feedback. Instead of telling their customers how great they were, Benioff opted for having the customers speak their mind while Salesforce listened. Not only that, but when each customer took his or her turn at the microphone, he specifically requested feedback on what was wrong with the Salesforce product, with their processes, or with their people. No customer got away with simply singing their praises.
I was not there, but I'm guessing this was not an easy decision and was based on Benioff's principle of putting the customer first. In retrospect, it may seem like a no-brainer, but, at the time, with all sorts of time and effort having been poured into the product presentations, I'm sure it didn't go over quite so well nor did it come without risk. But the impact on the customers was no doubt profound and, on Salesforce itself, perhaps even more profound. Putting customers first sounds good but isn't always an easy decision. That's why it needs to become part of the culture and the corporate DNA so that each situation is not so much a decision as just the way we do things.