Creating an Efficient Engine of Growth

Doing whatever you can, spending whatever you can spend, to acquire any and all customers — whether they’re a good fit long-term or not — is played out.

“The days of growth at any cost are over.” — Ryan Floyd, Managing Director, Storm Ventures

So when Ryan Floyd, Managing Director at Storm Ventures, welcomed the attendees to the Storm Venture’s Breakfast Series: Customer Success in San Francisco on June 16, 2016, he started with this simple, but powerful message:

Investors are looking for efficient growth.

And there’s no growth more efficient than expansion within existing customer accounts.

But the key to unlocking that efficient growth is Customer Success.

Definition of Customer Success

The definition of Customer Success, so we’re on the same page, is when your customers achieve their Desired Outcome through their interactions with your company.

This simple definition has massive implications when incorporated into the fabric of your company, something Storm Ventures is looking to ensure happens across their investment portfolio.

This is why they brought me in to talk to their portfolio companies at a super-cool space in downtown San Francisco on June 16, 2016 — and it’s also why I’m a Customer Success mentor for Storm Ventures.

Over a light breakfast, the 40+ attendees (including many CEOs and non-Customer Success Executives) broke into groups of 10 and came up with a list of topics they wanted to cover.

We developed a list that included everything from Customer Success org structure to scaling, and from KPIs to how to reduce churn, and everything in between; our agenda was set.

While we covered some of the more tactical aspects of Customer Success, like any major, company-altering initiative like Customer Success, it was critical to look at the foundational-level aspects first, and then determine what tactics you should leverage, including how we got here.

Evolution of Customer Success

Customer Success is not new, the concept is as old as SaaS and the term was coined over a decade ago at Salesforce.

In the first chapter of my book “Customer Success: How Innovative Companies Are Reducing Churn and Growing Recurring Revenue,” my coauthors and I explore in detail the market conditions, industry milestones, and attitude adjustments that led to Customer Success picking up steam.

Customer Success as we know it today is the direct result of the rapid evolution and maturing in the SaaS industry that’s taken place over the last 6 or so years.

As an industry, we went from being focused on customer acquisition at any cost to seeing that losing customers out the back door was hurting growth. Once we figured out that we could control churn, the next logical question was “since the customers are now staying longer, what if we could get them to pay us more, too?”

While brute force expansion tactics have been used at every stage in that evolution, these proved to be temporarily effective at best. The only long-term solution that seemed to work was to ensure the customer was achieving what they needed to achieve (their Required Business Outcome) in the way they needed to achieve that outcome (their Appropriate Experience).

And the idea of ensuring customers are successful — while something everybody seemed to somehow move away from over the years — is also not a totally new concept.

But operationalizing the customer lifecycle around Success Milestones in a way that drives the customer toward success and along a logical ascension path pegged to their success, is a relatively new — and powerful — concept.

And it’s proving to be transformative for both customers and the vendor.

But as a startup CEO, when should you start thinking about Customer Success for your company?

Table Stakes

When should you start thinking about Customer Success for your Startup? The answer is either as you’re starting your company or now; whichever is sooner.

Customer Success is table stakes for any startup today; the days of sloppy growth while you “churn and burn to learn,” and in the process decimating your Total Addressable Market (TAM), only to bolt on “Customer Success” to save the day when the board determines your churn is too high, simply won’t fly anymore.

The days of ‘churn and burn to learn’ are long gone.

What is clearly noticeable is that the best of the best — those expanding account revenue 130% or more — created processes that ensure their customers are continually achieving their ever-evolving Desired Outcome and put their customers on a well-orchestrated ascension path.

As needs grow and change for the customer, the best companies match those evolving needs with additional services, add-ons, capacity, etc. for the customer to consume. When we work to ensure our customers are successful, they will make us successful in return.

In fact, Customer Success-driven Growth pulls many of the levers that directly affect the value of your company!

Customer Success as a Growth Engine

Because of the various bumps in the economic road as of late, Venture Capital firms — and their investors — are looking at their current fund portfolios, as well as potential investments, with an eye toward more efficient growth and achieving profitability.

In a tightening economy, companies are going to be slower to buy new products, possibly extending sales cycles while they try to justify the cost and negotiate down anything they can’t justify (or that seems negotiable).

At the same time, they’ll be actively evaluating the products they subscribe to and may start to jettison those from which they aren’t getting value. And those customers that don’t cancel are going to be less likely to upgrade or otherwise buy more from you if they aren’t actually achieving their Desired Outcome.

That’s all happening while you’re still under pressure to grow, and to Ryan’s point, it’s going to be expansion sales to existing customers that’s even more critical to a company’s growth at times like this. It’ll be the companies that build systems and processes to ensure their customers quickly, consistently, and predictably achieve their Desired Outcome that thrive and grow.

Remember, however, that growth in existing accounts (expansion of capacity/seats, add-ons, upsells, cross-sells) does not happen in a repeatable, scalable, and predictable way without operationalizing the customer journey.

That’s why Customer Success, in its various permutations (from an operating philosophy to an organizational function), is critical to this process. Of course, those things also make sense in a loosening economy, whether your company is funded or bootstrapped, etc.

The Future of Customer Success… Today

I’m often asked what the future of Customer Success looks like. The better question is “what does the future of business look like?” and the answer is that it looks an awful lot like Customer Success.

Oh, and that future is already here.

About Lincoln

Lincoln Murphy is a world-renowned Growth Architect, Consultant, Author, and Keynote Speaker. As founder of Sixteen Ventures — and previously leader of Customer Success Evangelism at Gainsight — he’s used Customer Success to drive growth across the entire customer lifecycle for more than 400 SaaS and enterprise software companies over the last decade.

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