One of the hallmarks of software start-ups in the last decade has been to accelerate growth through easy access to inexpensive capital.
Fuelling growth this way has made it easier for start-ups to mask inefficiencies, delay profitability and to address business problems by simply adding more headcount.
This era is rapidly coming to an end, with growing inflation, higher interest rates and a protracted period of macroeconomic uncertainty constraining access to capital and bringing with it a renewed focus on efficiency, cost cutting and the return on investment of every function in a start-up.
This increased scrutiny presents a particular challenge for Customer Success, as despite emerging some twenty or so years ago, there still remains a great deal of confusion amongst start-up founders, investors and tech executives about just what Customer Success is and why it is important.
Seat at the table
This ongoing confusion is a common cause of frustration for Customer Success teams, with many feeling it results in a lack of visibility, influence and participation in executive and board level planning and decision making.
The by-product of not having “a seat at the table” invariably leads to an increasing struggle to justify budgets for headcount and technology, and sometimes even the Customer Success function’s very existence.
So why then, after more than two decades in which a large vibrant community of Customer Success practitioners and content has emerged does this confusion still persist?
Ask almost anyone in the software industry to define the purpose of a Sales team and the chances of an accurate answer are high. In contrast, asking the same question about Customer Success will likely yield a wide variety of descriptions or may even be met by silence.
This lack of understanding is often (unintentionally) compounded by Customer Success practitioners themselves, attempting to define their purpose by either describing activities (quarterly business reviews, health checks etc.) or more commonly, defining their purpose in generic or nebulous terms such as –
- Trusted advisor
- Driving desired outcomes
- Delivering value
This lack of a clear, concise, and meaningful definition creates serious credibility issues with start-up founders and executives, who, unable to articulate the purpose of Customer Success, struggle to prioritise or justify investment in it (especially as Customer Success is almost always accounted for as “Cost of Goods Sold”).
A pervasive cultural belief amongst many in the Customer Success profession is that having a revenue target is incompatible with developing and maintaining customer trust.
For this reason, many Success practitioners and leaders publicly eschew any notion that they should be connected with or directly responsible for revenue, opting instead to position themselves as being solely responsible for customer relationships and wellbeing.
This positioning creates further credibility problems with founders and executives, who, already struggling with the lack of a clear definition, become increasingly unclear about what (if anything) their investment in Customer Success will return back to the business.
Another less visible but significant by-product of this positioning is the unconscious signal it can send to other functions in the start-up — specifically, that any negative impact their work may have on customers is not their responsibility to own or resolve because it falls within the (ill defined) purview of the Customer Success team.
The last twenty or so years has given rise to a large, visible, and highly engaged global community of Customer Success practitioners. This in turn has spawned a proliferation of on-line groups, conferences, local meet-ups and thought leadership pieces.
This community is one of the key strengths of the Customer Success profession, regularly providing practitioners with a wealth of knowledge and support. It is however, also one of its biggest weaknesses, as those very same high levels of engagement that add so much value, also create a strong tendency to affirm pervasive beliefs rather than inform (or even challenge) them.
For example -
- “No one understands what we do”
- “We’re not in sales”
- “If we have a revenue target, customers won’t trust us”
- “The problem is Sales” / “Sales is bad” (or some variant)
…. are all common discussions and themes that are regularly discussed and re-affirmed throughout the Customer Success community.
Ironically, as this community grows larger and more engaged, the resulting echo-chamber effect this continual affirmation creates only serves to reinforce many of these pervasive beliefs, making it increasingly difficult to challenge or find solutions for them.
The public nature of many of these discussions (especially those shunning revenue and sales), also adds further fuel to the lack of credibility many founders and executives have about Customer Success.
Some solutions for Customer Success
A standard definition
The challenge with trying to define Customer Success is its highly contextual nature, as what it takes to make a customer successful in one start-up is often completely different to what it takes in another.
At its heart though, every well-functioning Customer Success team acts as an acceleration function, bringing their particular set of (contextual) skills, expertise and experience to bear in order to speed up the time it takes for customers to see tangible business value.
The rationale being that the faster a customer sees demonstrable business value from their software purchase, the greater the length of time the start-up has to work with them on identifying and closing new revenue opportunities.
On this basis, the following goes some way to a much-needed standard definition, one where Customer Success…
“…creates the conditions for new revenue and business value faster, by bringing <insert contextual skills / expertise> to existing customers”
…with change management, DevOps, cyber security, financial regulation or recruitment being a few examples of contextual skills and expertise that could be inserted into the definition.
Aside from being easily understandable, adopting a definition like this is highly advantageous to Customer Success teams as it helps to create and strengthen credibility with founders and executives by addressing areas that are particularly important to them, specifically -
- Customer value
Becoming revenue leaders
The increasingly challenging macroeconomic and start-up funding environment presents Customer Success professionals and leaders with the perfect opportunity to pivot their positioning to become revenue leaders.
This does not mean that existing Customer Success teams need to (or should) become commercial owners and sales experts, but rather it represents an opportunity to shift any negative cultural attitudes and perceptions towards sales and money.
Sales Engineering teams provide a near perfect template for Customer Success practitioners looking to become revenue leaders, as just like Customer Success teams, they too are tasked with bringing their product, technical, use case and contextual skills to bear with (prospective) customers in order to quickly demonstrate the (potential) value of the software.
Whilst they are accountable and targeted on new revenue, Sales Engineering teams are not responsible for the mechanics of selling, with opportunity identification, qualification, pricing and deal negotiation being firmly understood to be the responsibility of their commercial counterparts, the Account Executives.
For this reason, simply modifying Sales Engineering’s purpose by replacing “prospective customers” with “existing customers” and “potential value” with “actual value” is not quite enough for Success professionals to be perceived as revenue leaders. To be truly seen as such, and to gain the internal credibility that comes with it, they too would need to embrace being accountable for and targeted on revenue (with Gross and Net Revenue Retention being the ideal targets to own).
To further transition from cost centre to revenue generator, Customer Success teams would also need to mirror Sales Engineering teams by becoming experienced, comfortable and adept at working in tandem with commercial counterparts responsible for up-selling and cross-selling (such as Account Managers).
Most importantly, they would need to abandon any commercial aversion or negative cultural attitudes towards sales and money and inculcate a culture where it is okay to think commercially but to never act commercially with customers.
Community that informs
Whilst adopting a standard definition and pivoting to become revenue leaders would go a long way in driving credibility with start-up founders and executives, a “seat at the table” is by no means automatically guaranteed.
This is because the legacy of community discourse in Customer Success has unintentionally reinforced the perception that it is an ill-defined cost to the business.
Changing this perception would therefore require a concerted effort to evolve the nature of community engagement, discussion and content so that it becomes increasingly comfortable to publicly -
- Talk positively about and embrace sales, revenue and targets
- Acknowledge that Customer Success is about generating revenue as part of a continuous sales motion and not just about managing relationships
- Accept that being trusted and owning a revenue target are not mutually exclusive
Most importantly, it would take making sure that the plethora of Customer Success books, articles, events and thought leadership pieces no longer affirm the status quo, but rather inform new approaches, cultural norms and ways of thinking by constructively challenging current orthodoxy.
Changing long held perceptions this way is not only hugely advantageous for driving credibility and getting a seat at the table, in the current macroeconomic environment it is existential for Customer Success.
Reboot and reset
As the era of low interest rates, low inflation and easy access to cheap funding rapidly recedes, the level of scrutiny for non-revenue generating functions in a start-up will continue to increase, especially for those functions whose purpose is not clearly understood or that do not own any materially important targets.
This challenging macroeconomic environment represents an opportunity for the Customer Success profession to reboot and reset itself and emerge from the shadow of its historical origins as a “catch all” defensive revenue protection function into a modern purpose driven revenue generation function.
This reset however will take more than addressing the problems and solutions summarised below.
To be truly successful, any reset would need to address the baggage of ingrained perceptions and lack of credibility that have surrounded Customer Success for the last twenty or so years.
For these reasons, founders and Success leaders may wish to consider retiring “Customer Success” nomenclature in favour of something that more accurately reflects a modern revenue generating function.
For example, a function called the Growth Team, accountable for Gross and Net Revenue Retention and comprising all the roles responsible to deliver against these targets, is much more likely to engender the credibility with founders and executives necessary to get a seat at the table.
In place of the traditional Sales and Post Sales structure, there would now be two functions in the start-up focused on revenue — Sales and Growth, with every role in each function having a mirror.
In this new Growth function, the ambiguous job title of “Customer Success Manager” would also be updated to better reflect the valuable contextual skills and experience it brings to bear.
With a typical Enterprise business employing hundreds of SaaS products, each with their own Customer Success Manager vying for their precious time, customers are far more likely to engage willingly with a DevOps or Cyber Security specialist as their titles immediately and unambiguously reflect the value and expertise they have to offer.
A title change also helps internally with driving other functions in the start-up to take greater ownership and accountability for any customer issues their work may have caused, as there is no longer an ill-defined “catch all” Customer Success role they can look to offload such issues to.
The uncertain economic outlook and major macroeconomic changes it has precipitated, coupled with the historic perception that has built up around Customer Success during the last two decades has created an existential risk for the profession in its current incarnation.
By taking conscious steps to evolve by re-defining, re-branding and transforming its culture now, the Customer Success profession can not only weather the new economic reality that the software industry finds itself in, but can ensure that it thrives for many more decades to come.