An Investor's Perspective on The Real Value of Customer Success
The following is the second (of three) parts of an interview with Bill Godfrey in which he reflects on the history, current state and future of customer success. It focuses on Bill's assessment of the current state of customer success. The third part will offer his counsel for current SaaS companies trying to reap the true value of an expert services team. The first part of the interview is a reflection on his personal experiences as an executive building an expert services division.
If you are in the tech space in the Midwest, you not only know of Bill Godfrey, but you may have been lucky to reap the benefits of his counsel. He is not merely a substantial investor in SaaS companies in Indiana, but he is also a valued advisor about how to make key early-stage decisions that will impact the success and future valuation of a company. He knows what he knows based, in large part, on his own experience as a software executive at Software Artistry, and then again as Founder and CEO of Aprimo. Software Artistry was acquired for $200 million and Aprimo was acquired for $525 million, giving Bill the personal expertise in building companies with strong valuations.
Regarding the strategy and financial model for customer success, Bill has some keen philosophies and insights about why and how to do it right. (Spoiler: Getting the model right can result in those subscription services being valued at the same multiple as the subscription software.)
What are your thoughts on how to hire for customer success?
The profile of a CSM is definitely not that of a sales person. CSMs should have deep product and subject matter expertise. Furthermore, they must know how to apply the product to a business process within the customer’s industry. This may vary between vertical. So, over time you may want to stratify your CS team.
It's important to get this right. If you line up the appropriate customer use case with the appropriate Customer Success resource, you deliver a home run. Rarely have I found it successful when you hire a CSM from outside your company (unless they come from your customer base and have been using your product for a time and gained proficiency). The best CSMs are those who have worked in professional services, solution engineering, pre-sales, or product marketing. They have a passion for the product! They’ve had the opportunity to master the product. They may be looking for an opportunity to interface more with customers. They like making customers wildly successful – delivering the magic, if you will. If set up this way, they become the real Special Ops team for your organization: highly trained expert professionals. By staffing your Customer Success team with this profile -- it takes off.
What are your observations about the current state of customer success?
Customer Success has a lot of different manifestations. Some companies call their Account Management function Customer Success. A lot of support functions (help desks) are referred to as Customer Success. Most organizations will implement customer success, but not charge for it.
At the enterprise level, I estimate that less than 10% of enterprise companies are doing this right. Whenever I sit with an executive or investor or board member, they nod their heads. They get the model I’m advocating. Sometimes they’ve thought about these issues, but rarely have they implemented them. Most software companies already have a business model which includes a cost structure built around account management and a help desk. Very few have a special ops services team made available to every customer on original sale and priced as an associated subscription service. This is a business model which requires change to implement. You also have to change the mindset of your sales and marketing team. There can be friction with your professional services team because they think you’re going to take away revenue from them.
There are surely some challenges with implementing this delivery model. And, it’s important to recognize that not every customer has equal needs. Some have capable internal resources and need basic service offerings. Some are inadequate and need more units of services. It’s vital to have an elastic resourcing and capacity model that allows you to provide more time to the customers that need more help. If you set up the pricing model and use a platform like Bolstra, you will have an elastic ability to manage the assignments of expertise to customers. This capacity plan will have less friction by enabling you to match customer needs to appropriate resources.
Lisa Leahy is vice president of sales at Bolstra LLC.