The path to scaling
In an early stage software business, getting to “product market fit” as quickly as possible is one of the key milestones for founders. It is only then that revving up (and professionalising) the commercial engine can really begin.
An inability to build the right commercial engine in a timely manner (reaching “go to market fit”) is a common reason why early stage software businesses fail, but for those that do succeed in achieving product and go to market fit, being able to consistently articulate, position and sell the value of their product sets them on a path to rapidly scale the business.
Scaling however is about much more than adding people, processes, and customers to a business. It is also about increasing the pace and frequency at which you do everything.
The drawback of this increased pace for founders is that it can very easily obfuscate deficiencies in the product or gaps in the organisation structure.
A common organisational gap that can emerge during this scaling stage relates to customers. As the volume and complexity of customers increases, so do their needs — and if these needs have not previously been encountered or anticipated they may have no obvious organisational owner.
Not meeting these needs can lead to slow (or no) product deployment, poor user adoption and low usage proficiency. This results in customers not realising business value from the product, which in turn leads to a lack of customer advocacy and more importantly an increased risk of losing renewal and growth revenue.
The typical solution for founders to address these unmet and unanticipated customer needs is to create a Customer Success function. This instinct is a sensible one, but it is also fraught with complications if it is done purely out of a reaction to unexpected issues or organisational gaps. The chief complication is that the rest of the business begins to view the long-term commercial health of its customers as being the sole responsibility of the Customer Success function.
Or to put it another way, if we were to think about the product, sales and marketing motion in a software business as being a car production line, it has now become the responsibility of the person at the very end of the line to not only ensure that the car meets the customer’s specification and to deliver it to them on time, but to also be responsible for teaching the customer how to drive it whilst resolving any defects that occurred further back in production and assembly. And all this whilst somehow trying to convince the customer to buy additional add on features or even another car next year.
In short, if the Customer Success function has arisen from a reaction to issues, it risks ending up becoming “the everything department” — a place that owns responsibilities that either do not fit (or are not wanted) elsewhere, when it’s real purpose should be to create the conditions for new revenue by proactively delivering faster business value, thus maximising the business’ ability to keep and grow revenue from customers forever.
The irony for founders is if they have hired the right kind of people in Customer Success, they will almost always work incredibly hard to make customers successful through a combination of creative workarounds and laborious often inefficient time consuming manual effort. This further conceals the root causes of any product and organisational issues and compounds over time, risking the founder’s ability to scale the business effectively.
Assessing if you have an “everything department”
Founders that are busy scaling the business and that already have a Customer Success function in place need to assess whether that function is proactively accelerating business value for customers or if it is simply a reactive firefighting “everything department” that is (unintentionally) masking the source of other problems.
A simple way to make this assessment is for founders to ask themselves the following:-
• Is there a crisp definition of how the Customer Success function is accelerating business value for customers faster than if we simply left customers to their own devices?
• Does the Customer Success function have materially important targets that add value to both the customer’s and our own business?
• Does the Customer Success function make decisions based on data?
• Does the Customer Success function have a “hard handover” from Sales?
• Do the Sales and Customer Success functions have any common alignment? e.g. by geography, vertical or compensation incentives?
• Does the Customer Success function have a formal mechanism to share feedback with the Product organisation?
If the answer to any of these questions is “no” then it is quite likely there are core issues in the “production line” that are being worked around and obfuscated by an “everything department”.
Avoiding or fixing an “everything department”
Founders looking to establish a new Customer Success function, or reorient an existing one around its core purpose of creating the conditions for new revenue, should consider putting the following in place:-
• An “elevator pitch” for Customer Success — a short two sentence description of how the function is speeding up the value customers get from the product and how it is adding to the bottom line. This not only helps to act as a selling point and competitive differentiator with prospective customers, it also helps founders reinforce to the wider business that the long-term health of customers is not just the responsibility of the Customer Success function.
• A revenue target — in the early stages of the business where the majority focus is on the product, orienting the Customer Success function around user and feature adoption targets makes a lot of sense. During the scaling stage however, driving usage and timely business value should (hopefully) be better understood and systematised, so giving the function a Net Revenue Retention target is much more appropriate.
• Data & signals — a key to making a Customer Success function proactive is ensuring it has access to relevant real time data. Specifically, sudden changes and trends over time in product usage telemetry are key signals a Customer Success function can use to engage customers and proactively head off issues that might impact existing and future revenue.
• Integration in the Sales motion — there is always a gap at the customer between the buyer of the product and the people tasked with deploying and using it. Closing this gap in the Sales cycle is key to ensuring smooth and timely deployment and fast realisation of business value. Ensuring there is no “hard handover” and that Customer Success is positioned and introduced to the buyer earlier in the sales cycle goes a long way to generating successful renewals and growing new revenue from customers in the future.
• Sales territory alignment — ensuring the Sales and Customer Success functions are aligned on a “common book of business” is also key. If Sales is organised by geographic territory, industry vertical or by employee size, it makes sense for Customer Success to do the same. As does aligning the incentive structures for both functions e.g. making 5% of a Sales reps compensation be based on the customer hitting certain usage characteristics in the first 30 days and making 5% of a Customer Success Managers compensation be based on helping Sales close the deal.
• Product feedback mechanism — effective product teams are always looking for validation of their hypotheses, however customers have a habit of using products in ways that could not have been anticipated. The Customer Success function is almost always closest to the problems that customers are trying to solve with the product and, more importantly, they have visibility of the product gaps customers are encountering. Instigating a formal feedback mechanism between the Product and Customer Success functions is something founders should always consider putting in place. Not only does this improve the customer’s experience, it also ensures the business is maintaining its product market fit in the most efficient way possible.
Scaling a business is challenging, but by putting these six items in place early, founders can ensure they are continually aligning the entire business around a foundation of sustainable long-term revenue growth, even as the pace of everything is rapidly increasing.