- Summary:
- When it comes to customer success, the KPIs we have aren't enough - and the buzzword boomerang effect is kicking in. My challenge to vendors everywhere: please put the brakes on customer success hype, until you can speak to these six proof points.
Somebody please stop the "customer success" hype train - I want to deboard! Let me ask you something:
- Did you know that every enterprise software vendor has a robust customer success program now?
- Did you know that every customer is successful?
Well, according to every single enterprise software vendor in the known universe, the answer is an emphatic yes. So, I'm off the customer success hype train. How can enterprise buyers possibly discern what's real and what's not, amidst all this overconfident noise?
Via my guest appearance on Constellation Research's DisruptTV, I dismantled customer success - and got live input from DisruptTV co-host Ray Wang, and guest co-host Dion Hinchcliffe.
Customer success is a mirror - beware the buzzword boomerang effect
Now, before we go further, I have to explain this intellectual maneuvering. Fundamentally, I do believe "customer success" is a force for positive change in enterprise software. "Lifetime customer value" is a far better aspiration than the handshakes-and-smiles of the legacy software industry, where you flipped the go-live switch, gave everyone a high five, and moved right on to the next project, wishing the IT team good luck with their new integrations on the way out the door.
The customer success movement stems from the SaaS software industry, which was compelled to develop metrics to align with renewal-based licensing models. We've all run into metrics like "customer lifetime value," "churn rate," "repeat purchase rate," "annual retention rate," and, most importantly, user adoption and satisfaction. Some are these metrics can get pretty granular; I suspect even better metrics are on the way.
But when it comes to customer success, the KPIs we have aren't enough - and the buzzword boomerang effect is kicking in. I first encountered the "buzzword boomerang effect" on a previous episode of DisruptTV, where I put SaaS industry heavyweights on notice, via the undesirable tag of "Legacy Saas."
The legacy SaaS critique: vendors went all-in on the SaaS subscription model without necessarily embracing the end state. SaaS opened up a pandora's box on the true implications of cloud business for customers. Burning questions remain:
- Where is your consumption-based software pricing model?
- Why are your contracts and licensing models still a headache?
- Why does your technical support still stink?
Until you can address those questions, that's not a cloud business you're running; that's legacy SaaS.
That, my friends, is the "buzzword boomerang" effect. Be careful what you PowerPoint. The buzzwords you (ab)use today might require you to look in the mirror, and transform your business tomorrow. So it is with "customer success." As I said on DisruptTV, if you would kindly stop advertising your customer success program to me - until you have addressed the following six points.
One word about this countdown: it's organized by degree of difficulty. So, these get progressively harder - and harder to find - as we count them down.
Six customer success proof points - how does your team score?
6. Your supposedly great NPS score isn't enough. Why? The NPS score is a lagging indicator. It's too static. By the time your score comes in, it's way too late to intervene on a troubled project. Instead, show me your real-time customer health and intervention model, and how you flag troubled projects for early support/advice/interventions (and yes, maybe AI can help here).
Don't talk to me about value engineering: talk to me about "real-time value assessment." And by the way, can your customers see their own health score in a real-time dashboard? If not, we have work to do. Some vendors are making progress here. How? by monitoring adoption and provisioning rates, and raising flags when they see anomalies. That can lead to customer dialogue, and thus success, but it's early days. Analyst Josh Greenbaum has built a solution around project health checks called ProQ - here's one podcast with our dialogue on project health.
5. Where is your embedded benchmarking by industry and job role? Can users easily see how they perform against their peers and where they lag in real-time? I've only seen one software vendor that really has this nailed down, and that's Coupa (If SaaS companies are serious about customer success, they better learn from Coupa's community intelligence approach).
How did I run into this story? By hearing customers sing its praises at Coupa user events - without prompting (now that's a superior form of customer success marketing). By the way, getting back to Legacy SaaS, isn't that supposed to be the real promise of SaaS - aggregating data not just for your benefit, but for your customers'? Oh, and by the way, customer data privacy is a very poor excuse for not doing this - one that I've heard several times from vendors when pushing this concept. Don't take my word for it; here's now Hinchliffe responded: "All that can be easily anonymized; it's not a problem."
We can already see why big talk about customer success has a boomerang effect. How many vendors have successfully embedded benchmarks into their software, so you can take actions when you're lagging? Not very many.
4. Where is your customer bill of rights? To some, this may sound like a corny concept, or a fantastical, self-serving marketing exercise. But, if you do it right, the specificity of these commitments can give your teams something to rally around - and be accountable for. The first customer bill of rights that really caught my attention was Acumatica. Later, Infor did a multi-tenant customer bill of rights. There may be more. Take these three from Acumatica's:
- Consumption-based licensing that does not inhibit business growth
- Sustainable pricing with annual increases of no more than 3%
- Ownership of and access to THEIR data, anytime
Those types of pledges have a way of holding your own feet to the fire as well. You're inviting customers to challenge and track you.
3. Have your SI partners embraced your KPIs, or are you working at cross-purposes? How can you talk about customer success when your SI partners have different metrics and KPIs than you do? Where is the accountability when all stakeholders haven't agreed upon the same KPI targets?
Customers sign mostly different contracts with their services partners, and their software vendors. Sometimes there's three contracts involved. So how do we agree on collective KPI measurements to see that we are indeed heading on in that right direction?
Hinchcliffe brought up a valid roadblock to this one:
The problem is that the fundamental business models are at odds. So an SI or a consulting partner who's implementing will not want to use time-to-value KPIs, because they want that project to run for nine months to a year, whereas the vendor wants that thing rolled out right away so they can start getting revenue.
I responded:
One of my big contentions about this industry is that with the disruption in software, the services disruption has not kept up, but it's going to have to. The light is going to get shined on the services industries. To your point around the cross-purposes, if services industry and SI partners don't change around these models, they're going to have that change forced upon them. So maybe they want to get ahead of the game, instead of being dragged in from behind.
Hinchcliffe added:
But they're two points, right? One is the fact that if you're an SI, you're not delivering value, and you're not a value-added partner, at this point, you're gonna get eliminated; everything's going direct to consumer. So that alignment is important. And even if there isn't alignment, if they're not solving a need, that the other company doesn't see as alignment, you will also be taken out. Those are the two factors we definitely will see in that market.
2. Where is your publicly-shared benefits maturity model? A while back, I challenged enterprise software vendors to provide a go-live maturity model. Most of the advanced benefits of SaaS software are not achieved at go-live; they require a concerted effort by customers, vendors and partners to achieve. I sometimes call this a "fierce act of will" - it does not just happen.
The reality is that cloud software growth has been spurred by a remote work model. Yes, we're remote and we're productive, and cloud software is easier to use - but are we really set up to compete in the so-called Vaccine Economy, with its rollercoaster of demand, supply chain volatility, and so on?
I did my own maturity model for cloud ERP. To date, only one vendor (Acumatica) provided me with their maturity model. What are these so-called "advanced benefits"? They include: figuring out how to act on real-time data to create new business models, labor reallocation into high-impact tasks, business users automating their own workflows without any adult supervision, and tangible ROI, not just TCO and operational efficiency.
Note: while they haven't published it directly with diginomica, Sage Intacct's Software and SaaS vertical has a very effective phased approach for measuring customer results. Sage Intacct's David Appel writes about this with exceptional authority - see his diginomica piece, Building your ideal finance tech stack - the do's and don'ts for SaaS firms.
1. Where is your licensing, consumption, and auditing risk dashboard? And do your customers see it in real-time? Nothing chills so-called customer success like an audit, or some kind of data toll tax. As I told a vendor this week, "With today's tools and data, a licensing audit should NEVER be a surprise." Perhaps it's a (good) sign of the times, but they agreed. This vendor is working on a dashboard for this; I applaud the effort, but let's see. Customers should be able to see licensing and consumption levels at a glance, and even make adjustments without convoluted reconfiguring of user seats and data consumption calculations.
Yes, I realize these are not exactly easy benchmarks to achieve. But this is the good work, the work that makes companies better - in a lasting and new way. We could probably add more to this list, including diversity goals-versus-realities, and cybersecurity tracking. And, as far as maturity models go, my colleague Phil Wainewright has a keeper for digital teamwork.
For now, if you have good answers to these six things, then yeah, please do brag about your customer success program - I'd love to take a closer look. Until then, let's get to work. And yes, that includes diginomica; we have work to do here too. Collectively, we owe enterprise customers less marketing carnivals about customer success - and more hard-won improvement.
Disclosure - Acumatica, Infor, Sage Intacct and Coupa are diginomica premier partners, as is Freshworks. I originally stirred up the concept of "Legacy SaaS" at a Freshworks analyst day.
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