Why the Customer Success Revolution Matters: A Conversation with Andrew Kahl
Over the last decade, the software industry has seen a revolution in customer service, marked by the introduction and maturation of the “customer success” team. Today, the role of chief customer officer (CCO) has become essential to the C-Suite in high-performing organizations. Internal customer success organizations are widely understood to be critical driving forces to world-class net-dollar retention and sky-high company valuations.
But what caused the emergence of customer success teams? Why are they so essential, exactly? And how does this macro trend reflect larger shifts in the software industry?
To answer these questions — and more — I asked Andrew Kahl, former Chief Customer Officer at Sailpoint and current Chief Operating Officer at CM Group, to join me on my podcast, Capital Geek. Andrew, who has a 27-year track record of building and leading global customer-focused software organizations, has spent his entire career thinking deeply about what it means to take care of customers.
During our wide-ranging conversation, I sharpened my own understanding of customer success. Whereas I’d always thought of these teams’ responsibility as being to make sure your company is successful with your customers, in reality they should be laser-focused on ensuring the customers’ success using your products.
It’s a subtle but impactful paradigm shift and just one of Andrew’s key insights. Here are a few more nuggets of wisdom that every software company should take into account:
Customer success teams emerged as enterprise software transitioned to SaaS
Andrew traces the emergence of customer success teams to the 2008 financial crisis and its aftermath. Much like today, companies of all sizes were forced to take a hard look at their business models — which precipitated a new and intense focus on taking care of customers, to be sure they would stick around for the long haul.
Then, as the economy bounced back and the software industry started to see more growth, large enterprise stalwarts were further threatened by the proliferation of new and disruptive technologies. With increased competition from SaaS newcomers came increased pressure to focus maniacally on the overall customer experience. On the other side of the coin, the new kids in town realized that their survival depended on happy customers.
“Companies realized that their success wasn’t just dependent on product quality, but also on the overall experience,” says Andrew. “The question became, ‘how do we make ourselves more valuable so that we can weather a storm?”
Customer success must be a company mindset, not just an internal team
The key paradigm shift that defines the customer success revolution is a movement away from a transactional approach to customer acquisition towards building long-term relationships. As Andrew puts it, it’s one thing to retain a customer and another to understand what inspires them to stay with you so you can grow their lifetime contract value.
“If you take a transactional approach, you’re just another company looking for that next customer,” says Andrew. “ But if you look at it from a growth standpoint, you start thinking ‘Okay, I’ve got this customer, but how do I grow with them and let them grow with us, and then how do we get another new customer and let them grow together?”
For a simple illustration of the core concept, he points to B2C companies such as BMW and Zappos that provide a suite of tangential services beyond their products that inspire intense customer loyalty.
“Take BMW for example,” he says. “I like the car, it suits my family needs well. But I also appreciate that the service area is always clean, the tech knows my name, and they know enough about how I drive the car to recommend features accordingly. It's all the things that go around the car that the company provides that make me a loyal fan. And it’s the same with enterprise software.”
Importantly, the focus on understanding and delighting the customer can’t be the sole responsibility of the customer success team — it needs to be baked into the DNA of the company.
“The customer success team helps take the experience to the next level for the customer, but if there isn’t an overall mindset within the organization of ‘How do we start with the customer in mind and build a quality product with ease of use and ease of engagement?,’ that team probably isn’t going to be successful,” says Andrew.
Don’t wait until there’s a problem to create a customer success team
In the early days, all startup founders are one-person customer success teams. But there comes a point when you need to formalize the function within your business and start building out a dedicated team. As a general rule of thumb, Andrew says that when a small company starts nearing a milestone of 20 enterprise customers, they should be thinking about getting someone focused full-time on customer success and building out programs accordingly.
But while customer dissatisfaction is certainly one reason to start building a team, it’s better not to wait until the wheels start falling off — and instead, create a customer success team as a mechanism to understand where your customers want to go with your products, even if they are quite happy today. This entails close collaboration with the chief product officer to create user groups, solicit feedback, and align with your customers’ needs in order to ensure you’re building those essential long-term relationships.
“The trick is really stepping back to understand what elements or guiding principles you want to have in place that are going to make your customers successful,” says Andrew. “You have to figure out what unique, defensible attributes you can provide — in addition to the product — that are going to align with your customers’ needs. It sounds simple, but it’s really hard.”
Customer success isn’t new, but it’s now non-negotiable
If you look back at the early tech companies that proved to be transformational, it becomes clear that they not only had great products but also focused on customer success. This isn’t an entirely new concept, but it’s now a requirement of all successful companies — not just the few who will, indeed, change the world.
What excites me most about this macrotrend towards customer service is the way it reflects a movement towards better products and experiences for the end user. It’s part and parcel of a focus on value-led growth.
Even as the SaaS revolution has accustomed buyers to making transactional, impersonal purchases with their credit cards, we’re seeing companies find innovative ways to build real relationships with their users. This is a win-win for software buyers and vendors and — Andrew and I both agree — represents a movement towards a healthier ecosystem for everyone.
To hear our full conversation, including the metrics Andrew recommends every customer success team include on their scorecard, go to Apple Podcasts and download “Andew Kahl, Customer Success Geek.”