Finding Common Ground

Recently, I attended a master class for Customer Success (CS) executives, one of the many Customer Success Network events that are held every quarter. The April event, sponsored by ServiceRocket and Strikedeck, focused on how CS is perceived in companies, through the lens of other executives. Key topics included scaling CS, and key tips to enable CS to help other leaders. This post, summarizing the event, is a must-read for CS leaders. The event was informative and shocking, encouraging and surprising, and I personally left wiser and more determined to bring CS to the forefront in every way possible. All fellow CS leaders can benefit from knowing knowing the shocking truth!

The speakers and moderator explored how CS is viewed by senior leadership in successful and hyper-growth companies. As CS is an increasingly common function that gets implemented in different ways, these founders, execs, and moderator (a CS Leader) shared their experiences with CS to help us understand what has been effective, challenging, and where CS needs to grow to fulfill its promise.

This session was moderated by Irene Lefton, a CS Evangelist and VP of CS at Lastline, and included Shawn Farshchi, the CEO of Aryaka Networks, Ananth Avva, the CFO and Biz Ops of Lastline, and John Haniotis, the VP of Product Management at MarquetU. All these experienced founders and execs have experience growing businesses to a $100M ARR, and each had some different perspectives to share. In short, between these folks, there was over 60 years of leadership experience and work with customer-facing functions.

The audience included leaders from CS, Sales, and Marketing, with a VC or two in the room, as is common for each of these events. For this meeting, the conversation centered around three areas:

  1. The Key Role of CS
  2. KPIs, Key Contributions, and the Value CS Provides
  3. Friction Points
  4. Audience Q & A

If you missed the event, check out the full recording below!:

The Key Role of CS

I expected our first topic to be a good chance to align on first principles, and it was.

Our CEO Shawn spelled it out, “Churn is negative revenue; it’s so bad and so expensive to overcome. CS is focused on ensuring we renew.” Sales may want to focus on renewals because it’s perceived as easier, but they need to be focused on new business. There was no debate or disagreement from the crowd.

CFO Ananth agreed with Shawn, but also elaborated, “CS tells us if the business model is working.” And it’s tasked with helping us figure out how we scale. What can we do with the install-base to influence key drivers for success? There’s a time when the CS team doesn’t scale. You can’t simply hire more CSMs.

The critical subtext was beware of the CS leader who doesn’t understand the business, the business model, or business basics like accounting. To be effective, you have to speak the language of the CFO, and if you don’t understand that role, you may struggle to be effective, or get resources. This turned out to be a theme with different views that we revisited a few times.

Product leader John got us back together with something we could all agree on, “CS focuses on driving adoption, capturing feedback, and helping Product improve the product by understanding and identifying pain points for customers”. In doing that, CS grows the number of promoters and referenceable customers. CS provides that critical direct channel to the customers. Yes, we all know this.

The first topic concluded with alignment on the basics, but an important but surprising finding – these leaders had also experienced CS as uninformed, emotional, clueless business partners. They had seen CS leaders who were alarmists, out of touch with the business, and a risk to be managed. The message was clear, they understood how they expect or know CS should function, but there are some leaders that are unseasoned, uneducated CS executives, and when you encounter these folks, it has a negative impact on the overall view of CS in a company. Duly noted.

KPIs, Key Contributions, and the Value CS Provides

We moved on to explore the value CS provides to the company and the KPIs used to measure it’s impact. Clearly, this should be a direct extension of how CS is viewed, and indeed, it turned out to be so, with an important surprise.

John, the product guy, discussed that NPS, adoption, and usage stats were important in measuring CS impact. He also emphasized how CS can provide a view into how customers are using the product and highlight their comments and feedback. This is a high-value area of CS, because it helps the company understand from the customer view exactly what can the Product Team needs to do to improve the product.

Shawn, the CEO, shared this view and reflected on his time at WebEx, when the CS team spent time onsite with customers and discovered the many uses of the Meeting Center, and how that product could effectively be verticalized for the very different companies using it.

Ananth, our CFO/COO representative, and Shawn discussed revenue metrics like retention, growth, CLV, and CAC. Ananth also elaborated on a key point all CS execs should know, “Of course hitting the metrics are important, but also important is knowing HOW you got there.” Understanding this is where the value comes from the CS executive; this is how they directly contribute to helping with scaling and being an effective function. Ananth re-emphasized that at some point, CS can’t hire its way to scalability. It’s necessary to understand the details in order to know when and what to automate.

Friction Points

The final topic the panelists covered was friction. What creates friction between the CS team and other teams? Irene started the discussion with her own experience, “Lack of alignment in metrics and incentives,” to which the panelists completely agreed. Heads in the audienced nodded.

CFO Ananth got everyone’s attention when he shared, “In terms of accounting, CS execs like to think they are part of the Go-To-Market category, but usually they are not.” In his experience, CS teams are generally considered part of COGS. Gross margin is a key metric that that the CFO continually analyzes. In the $25M to $75M ARR range, a company’s profit margin can be in the 80s to high 80s. But then suddenly, as the CS function grows, margin begins to fall. This can lead to friction.

Ananth explained further. As companies move to scale from $50 to $100M, to continue growing at 40% to 50% a year proves challenging, especially when scaling CS. Ananth touched on premium services as an opportunity for CS and quite a few attendees agreed, but we didn’t have time to explore it further. We plan to dig into this in a future event with a financial focus.

Product expert John suggested a key friction point for CS is remaining strategic as the business grows. As pressure continually grows to retain existing business and respond to escalations, the CS team can become reactive. This is something to pay attention to! Building on this, Shawn noted that he’s seen CS managers who become alarmists when problems arise. He didn’t have to say it, but we all heard, “Don’t be that CS leader!”

The path forward is to understand the key metrics that deliver the required outcomes, be sure you’re aligned with the CEO and other leaders, and have a plan for how you’ll work together.

Audience Questions and Answers

As is always the case, with a room full of CS leaders, there is always time for questions, and some good topics and discussion ensued with this panel. We explored topics such as “What is the cost of a dollar worth of revenue for CS versus Sales?”, “What’s most important when hiring a CSM?”, and “Can you leverage a channel to help CS Scale?”

Closing Remarks by Panelists

The event closed out with a piece of advice to the CS Leaders in the room:

  • Shawn: Understand the business, be the evangelist; at the exec level, there will be resistance, but if there is opportunity for growth, you’ll get interest and buy-in.
  • Ananth: Educate us; playbooks are unknown and folks are just learning; get rid of acronyms, build structure, and make it universally understandable.
  • John: Agree, it’s not clear how CS and all the other departments work together; CS has to to educate folks on how it adds value and fuels growth.
Paul Reeves

VP of Customer Success, TokBox