Following the launch of the 2.0 magazine, we’re hosting a 4-part roundtable series designed to move the function of Customer Success forward.
Last week’s discussion theme was “How Customer Success Becomes More Strategic at the Executive Level” featuring Nick Mehta (CEO at Gainsight), Christina Kosmowski (former CCO at Slack), Rey Perez (CCO at New Relic), Sue Fellows (CCO at Workfront), and Mackey Craven (Partner at OpenView).
This week’s newsletter showcases some of the best moments from our discussion including how CS can meaningfully influence the ICP that Marketing and Sales prioritize, what board members are looking for from CS leaders, and the gap between now and when CS leaders become executive MVPs.
Chris: Here’s a spicy question to get the group started. Compared to other execs on e-staff (CMO, CRO, CFO, CPO, etc.) the CS leader is perceived as “the nice person” with the least influence on strategic decisions.
Do you agree or disagree with that statement, and why?
Nick Mehta: This is a logical question and I have a unique purview into this problem because I talk to a lot of CEOs about it too, not just CCOs. The answer: absolutely. Sometimes this does happen. That's not what it should be—that's not the future—but you should know that this is the reality for a chunk of people.
On the one hand, there are some CEOs that just don't ‘get’ SaaS and cloud. Obviously we're all trying to change that, but the number of CEOs like that are actually a smaller percentage than you might think, probably around 20-30% of CEOs.
But then there are other circumstances where a CEO is not getting what they want from their CS exec. And that's why I'm excited about this conversation—I believe in the growth mindset and that we can all grow.
In these situations, CEOs aren’t getting the level of strategic thinking from CS leaders that they want. Instead they're getting conversations that are too tactical of an altitude. Later on, we'll probably talk about board meetings. I think the big litmus test is whether someone can deliver a strategic presentation at a board meeting. There's two kinds of board presentations. There’s the presentation where the board says, “Oh, great job. You're doing such a great job. Thank you for all your work.” And then there’s the presentation where they really engage. And actually most executives are in the former—not just Customer Success. Most executives are not considered to be strategic. If you ask most CEOs, my guess is 2 out of their 8-10 execs are considered “strategic.” So how do you break into that? That's hopefully what we'll talk about.
Sue Fellows: To Nick’s point, what I've found is that all CEOs have a background. Maybe they're a Sales person at heart, or a Product person at heart, or a Marketing person at heart. They're not always a Customer person at heart. So if you find that right CEO, who has a customer heart, you're going to be viewed at the same level as other executives. And if not, you need to work hard to turn your CEOs focus towards being customer-led.
On a tactical level, I believe in bringing other executives into customer conversations. So that as a CS leader, you're not just sharing information, but your CEO is actually hearing feedback from customers. When we get a detractor in NPS, every response goes to every executive. Then, one executive is assigned to reach out within four hours. It doesn't matter how big the customer is, or how strategic they are. We have conversations with them and then when we bring data back to analyze and decide strategically how to move the customer forward. We try to balance that with being innovative with our product—balancing how to help the ones we have as well as get the ones that we want.
Chris: How do you quantify the value that CSMs bring to the company, especially in the case where they're not managing the renewal number?
Christina Kosmowski: In this age of expansion, of companies moving to multiple products, and actual buyers asking for more of a try-and-buy experience, CS becomes so much more important. That's where all of your ARR in SaaS comes from. So I think you can directly say ARR is equivalent to Customer Success, which is an incredible north star metric. At Slack, CS was responsible for ARR. The entire company was bonused on it, but we were the ones that held that target. That was incredibly powerful.
But I actually see the problem of “what do we measure ourselves on?” as being less challenging—instead, most teams either have too many metrics, or they’re tied to the wrong metrics. As for the latter, a lot of old school CS leaders come from a Support or Services background and they often tie to those metrics instead of talking about time to value and how it influences this expansion revenue number. That's the shift CCOs need to make—to move from, “This is my Services revenue,” to “This is how Services is affecting time to value, which is increasing our pace of ARR growth.”
Chris: Many people in the audience report up through Sales where the top CS leader doesn't actually own the renewal number (or at least the transaction happens in Sales.) So in the case where CS isn't directly accountable for the actual renewal number (well, I should say they might feel accountable, but Sales ultimately is accountable for getting the deal done), how does one justify the value of Customer Success?
Nick Mehta: Every CEO and CFO ask or think about that question. This isn't judgmental of them. They have to think about everything, right? That's their job. So one way to think about it is what are they asking? They're not asking “What's the ROI of CS?” Instead they’re asking a harder question: “What if none of your people were here? What would happen?” They're trying to understand what would happen in an alternate universe.
It's a hard thing to prove because you don't know what would happen in a counterfactual, but the two things I would really encourage people to do is 1) when you present data, show some comparison points. Most of the time, you can’t have a scientific A/B control group, but you probably have situations where CSMs were more involved than in other cases. Presenting that is actually more compelling than showing NPS or showing renewal rate. You get experiments all the time, just accidentally.
The second thing is to remember that human beings, including CFOs, are motivated by stories. Tell the story. If a new deal comes in, but it’s actually an older customer who wasn’t a fan but the CSM got them engaged and turned it all around, tell that tale. Share the story that the Salesforce order doesn’t.
Chris: How does the Customer Success leader show up at board meetings relative to their peers? Specifically, what are the gaps in how the CS leader presents their function relative to, for example, the head of Sales?
Mackey Craven: In our experience, the variance in how the CS leader presents is much higher than in the other functions because it is a newer function in general.
Often, particularly if it's a Chief Customer Officer, it's the first time this person is in that role. Unlike Sales, Marketing, Finance, and Product, they may not have had others that they've worked for who were in that role, have seen what success looks like, and understand the core metrics. So the largest challenge you see folks having is being very clear with themselves of what success looks like, how to measure it, and how to clearly communicate and talk about that.
I want to emphasize the point that Nick made, which I think is incredibly important—human beings do respond to stories. The combination of clear data and the stories that tie to individual data points to provide context is very powerful in the boardroom. As a board member, we will go out and talk to existing customers from time to time, but it is not part of our day to day. Bringing those conversations into the room, along with the data and the case studies is incredibly helpful to create the kind of discussion that you want to generate to both show the impact your CS function is having, and also to make it a focus area for the company as a whole.
So that’s really the key. 1) Being very clear and having alignment with your CEO on what those objectives are and having clear data that supports it, and 2) being able to bring in certain stories and examples that make it real for those that are sitting on the board.
Chris: Let's envision a future where the top CS leader is the MVP of the executive team. What are the gaps that need to be filled between that future and where the CS leader is today?
Rey Perez: For one, CS must become institutionalized by their customers. At my company, our CS org is building these deep relationships because we're asking customers, “What are your problems and initiatives?” We're aligning ourselves with their initiatives to see where we can bring value. So we sell a platform and assess which of our capabilities apply. If some don’t apply, we don't offer them. We don't sell customers stuff they don't need. We just help them and they'll consume what they need. That focus has really helped us align all the way up to the CEO’s.
We have a big account where their strategy is based on our software. We are institutionalized. It doesn't matter if new people come in, we're part of their ecosystem. So how do you do that? How do you have customers depend on you at a high rate? That’s how you become the MVP on the customer-facing side.
Internally, the CS leader needs to be really good with data and telling stories, but they also need to provide a benefit to the company, like efficiencies and focus, so that others can quantify the value that they’re delivering on a day-to-day basis with customers.
Chris: How can CS meaningfully influence the ICP that Marketing and Sales prioritizes?
Mackey Craven: Ultimately the metric we, as investors or board members, think about the most—more than growth, more than gross profit, more than anything else—is retention. A mistake a lot of businesses make early on is finding customers that they can sell to, but that they can't grow with. They aren't the right ICP. Initially, what's most important is not figuring out which customers are going to have the lowest cost of acquisition or the people most excited about your product. The most important piece is identifying the users that will get the most value from having you as a partner and those that use your product to do a job that they need done.
In my view, there's no better position in the organization than CS to really understand and communicate that back to Sales and Marketing because ultimately CS does own ARR. Even if you're growing 100% a year, if your customers are upselling at all, a majority of your ARR is still coming from customers that have been existing customers in that year. Those are the customers you want, right? So there's a real opportunity for CS to communicate that and in some cases help define what that ICP should be to create some of the most successful and strongest foundations from a customer basis as a business.
This week's top posts
Blog About What You’ve Struggled With
If you’re struggling to break into writing about your experiences, read this post by Julia Evans. Her process at a high-level: 1. Struggle with something, 2. Figure out how to solve it, 3. Write a blog post about what specifically helped you. Writing about our lessons learned will help others leapfrog our experience and, in turn, will push the industry as a whole forward.
How Execs Can Better Present to A Board of Directors
Here’s Nick Mehta (CEO of Gainsight) with a LinkedIn post that complements his responses in the featured piece above. He offers a quick list of tips on how execs can improve their board presentations.
Customer Success vs. Sales - A False Dilemma?
Niel Isdale offers another way to think about the focus of Customer Success and makes the case that CSMs should handle the commercial aspects of deals. “Customer Success and Sales aren’t opposites. They are in a relay race, working towards the same goal, working on different time horizons, together.”
The Path to Purchasing A CS Platform
In this post, Chad Horenfeldt (Head of Customer Success at Kustomer) breaks down his process for researching and justifying a CS tool.
Success Happy Hour is a weekly newsletter for Customer Success leaders. Each week we feature one digestible piece of advice or a framework from a top Success leader, along with the best resources from that week. Subscribe here.