Digital Transformation, it’s all the rage, and doing a simple Google search yields a plethora of hits, from training to consultants, to the big market research companies, all weighing in. This wave of disruption continues to grow, and brings with it myriad opportunities to completely change the business.
In a nutshell, in the late ‘oughts, with the introduction of the Apple iPhone, the convergence of ubiquitous network connectivity, and the rise of the “cloud,” the stage was set for yet another transformation of business. Suddenly, the paradigm of where you work, and what tasks you perform were being disrupted. From the simple: an app on your smartphone to approve purchase requisitions, to the complex: integration of the CRM, the Marketing systems, and the ERP system to provide deep insight into the function and flow of business, and much more were realized every day.
A big contributing factor, extending the trends of outsourcing core functions, was the rise of cloud based solutions that provided growing capabilities. No longer must the adoption of a technology be an enormous undertaking, requiring a significant investment (technology funding, finding space in the data center, buying racks of gear, upgrading network bandwidth, huge software licenses, big dollar consultants for implementation).
With many of the new offerings like Zenefits for HR and Benefits, Salesforce for CRM, Marketo for Marketing automation, and on and on. Even Oracle and SAP are getting into the game with cloud offerings for ERP and production planning solutions, reducing the complexity of once enormously costly in both dollars and manpower systems.
Business model shift
Yet, if you are one of the companies who are innovating in this space, you are no longer selling an enterprise software package, intended to be installed en toto at the customer site, but instead selling seats, or a subscription to a solution built in your cloud, there is a tectonic shift. Instead of an up front cost for the main deployment, and an annual maintenance fee to give customers access to support and upgrades, you have shifted the revenue model to a subscription based service.
This shift in the revenue model brings with it many benefits, potentially a more lucrative business, that instead of being measured by large boluses of revenue with a trickle of ongoing maintenance, the cost for a customer to spin up is relatively low, but the annual recurring revenue can be much more profitable, amortized over the lifetime of the customer.
But with this ease of spinning up for a new customer comes a pretty significant risk. The barrier to switching has been reduced significantly. Instead of a large investment in software (think what an install of a 10K user instantiation of Exchange as an example), and the hardware to support it, that cost is borne by the provider. Thus, if a superior solution is brought to market, there is a very low threshold to switching. Great for vendors, as new players can more easily disrupt the market, capturing customers from their competitors easily. But it does increase the likelihood of churn.
How to combat this lowered threshold for switching?
Enter the principal point of this essay, the rise of a role called “Customer Success Manager”. You can no longer leave the customer to their own devices. They will be relentlessly targeted by potential disruptors, to try to have them switch to a different solution. And since there wasn’t a huge investment in hardware and software licenses, there will be little to prevent them from bolting.
The customer success role is a vendor position, a person or team who picks up at the end of the sales cycle, with the closed order. They will first determine the actual business outcome that the customer expected to purchase. Was it generating more leads? Was it to automate the lead nurturing process? Was it to increase their collaboration and integrate sharing and email communications to streamline? Was it deep data analytics to help drive operational efficiencies? Regardless of what sales sold, the Customer Success role is to ensure that the customer realizes the value that they expected.
There are other things that this role provides, including:
- Tracking KPI’s – monitoring performance, utilization, and adoption, ensuring that the product is delivering *value* to the customer. They will report to the customer’s leadership team, and provide concrete evidence of the efficacy of the solution.
- Managing Adoption – keeping an eye on the actual use, looking for softness in the adoption of the product or service. If usage flags, it might be an indicator that the product isn’t meeting the needs, or that a competitor is trying to gain a toehold. An effective CSM will look for ways to increase usage, and to drive additional seat/capacity sales.
- Reduce Churn – the death of service based products is losing customers. The acquisition costs can be relatively high, so preventing customers from leaving after a subscription ends is of paramount importance. Roadmap alignment, task analysis, and writing the product/service into the plan of record, embedding the capability are key ways that a CSM can greatly improve the likelihood of renewal, and expanding of scope. Happy customers, easy to use products, delivering tangible benefits will drive higher lifetime customer values.
Product Management Connection
All this is well and good, but why should a product manager care?
First, if you get burned out, if you find that you really enjoy the tactical aspects of product management, you would make a stellar CSM. All your skills will transfer easily, and instead of being thrashed for spending too much time on the tactical firefighting, you will be a hero of the organization, a key contributor to ARR and LCV.
Second, if you are in product management, and your organization has a formal or informal Customer Success (or customer enablement/adoption role), they are valuable sources of intelligence. Make friends with them, and listen to their issues, you will get a goldmine data to help you prioritize your development efforts.
The disruption of the business environment via digital transformation is huge. As more core functions (but not the key functions) are filled by the rise of enterprise grade services, it is imperative for the vendors of these services to manage the satisfaction and success of their customers.
The role of Customer Success Manager is a crucial component, providing ongoing engagement, and monitoring of the utilization, the value provided, and early warning of troubles allowing product and engineering teams to keep ahead of the game.
Learn more at TSIA, a group that has a deep dive in Customer Success