By Matthew Klassen, Gainsight Head of Creative
In his excellent article, The Manufacturer’s Dilemma, the author Geoffrey Moore gives perhaps the most succinct economic premise of the shift to the SaaS model:
“The ultimate consequence of all this is as simple as it is devastating: product is no longer king. Supply is not the scarce ingredient in the economic equation any longer. Now it is demand. And that means the customer is king.”
In the context of the larger article, he’s making the case for manufacturers to adopt a SaaS playbook: become customer-centric, hire Customer Success Managers (CSMs) to engage customers more deeply, deploy technology to manage the customer relationship beyond the initial sale, etc.
In other words, the Manufacturer’s Dilemma is that vendors are separated from their customers by layers and layers of abstraction, and closing that gap requires a fundamental shift in mentality and business model.
Overcoming A Manufacturer’s Mentality In SaaS
But there’s another aspect of the “Manufacturer’s Mentality” all companies—including pureplay SaaS businesses—need to overcome in order to truly become customer-centric and protect that scarce ingredient: specialization.
As an economic principle, the division of labor has been around since the mid-ninteenth century, and it’s been the go-to model for organizing companies and economies since then for a simple reason: it scales. In manufacturing, no one person has the skills to build, say, an entire car—especially if we’re talking about going from raw material to finished product. And even if you can create one from scratch, it would take way too long to be worth doing compared to the alternative: breaking the job down into smaller and smaller tasks and getting really, really good at each one.
But even in SaaS we’re still beholden to specialization, for two main reasons:
- It still works—mostly. When you start out, you might have your Sales team also onboarding the customer and managing their day-to-day experience and reaching out at scale and handling renewals and so on and so on. But to scale, you need them to focus on selling—which means you need specialists for every task.
- It’s all we know. Our entire hiring and career development apparatus is built around defined roles. People who can “do it all” (highly technical, relationship-minded, relentless deal-closers) are few and far between, and for most of them, if they want to advance their career, they need to specialize anyway.
But what’s an advantage in a world where product is king has an Achilles’ heel where customer is king: a deeply fragmented customer experience.
What Specialization Looks Like To A Customer
Let’s go back to the car analogy.
When we buy one, we’re shielded from the weaknesses of specialization by the nature of the purchase. Not only do we have the whole car, shipped, bought, and paid for (and therefore we’re no longer reliant on the manufacturing apparatus for maintenance, upkeep, servicing, etc.), we also probably bought it through a third party, which may or may not be responsible for or care about continuing the relationship beyond that sale.
That’s fine for car companies (although they may want to watch their backs for Tesla!), but when your company is on the hook to not just ship a great product, but also onboard and train your customers on its use and ensure outcome and value delivery, the gaps between your functions start to show in a very real way.
Does this sound familiar?
- You contact a company you have interest in buying from.
- Their Sales & Marketing team loads you up in the nurture program.
- You engage with their Sales team and eventually buy the product.
- They hand you off to an unrelated team to onboard you, at which point you find out their Sales team has promised you something they can’t do.
- You find a workaround with Professional Services, but…
- You’re handed off to CSM who doesn’t know about the workaround—they want to train you on a feature you didn’t know you had and thus weren’t using.
- An Account Manager re-engages 30 days from renewal to upsell you the feature you really wanted in the first place.
- Meanwhile, you’ve been getting nurture emails from Marketing the whole time.
In this nightmare scenario, each team or individual may have been doing a reasonably good job within their lane according to their own performance indicators, but the overall experience is just terrible from the customer’s point of view—and the end result is customer attrition, or churn.
Cross-Functional Pods For The Win
The trite “business-speak” solution to this problem of fragmentation is usually a farming metaphor or a sports metaphor, both leading to an equally (and frustratingly) non-specific place:
- Break down your “silos” or…
- Improve your “handoffs.”
But what does it actually mean to break down a silo? How do you meaningfully improve a handoff?
Many companies (including Gainsight) have begun to deploy a “pod” model for organizing their customer-facing teams in order to firstly, reduce friction for the customer, and secondly, maintain the benefits of specialization.
When you look at your customer’s lifecycle, you can probably identify several teams that impact them—Sales, Services, and Customer Success. Support could be conceivably engaged at any phase of the lifecycle. But from the customer’s perspective, we don’t want to look at it in terms of functional roles, we want to look at it in terms of milestones—their milestones from their perspective—so:
- Buying the product.
- Implementing the product.
- Getting value from the product.
When we align those milestones to our functions, it looks like Sales, Services, and Customer Success. And in order to break down the “silos” and improve the “handoffs,” we group people from each function into a “pod” corresponding to each customer.
Each pod has an Account Executive, Solutions Consultant, Advisory Services, Technical Implementation, and CSM, who work together from end-to-end to make sure the experience is seamless.
Aligning Around Outcomes As A Metric
Once you’ve got your cross-functional pods, you can’t just leave it at that. If each team is still operating on their own imperatives, metrics, and mandates, they’ll still find themselves out of alignment no matter how many meetings they have.
They need a north star metric they can optimize for at every stage. Enter the Verified Outcome (VO).
We started with the premise underlying customer success—that customer success is what happens when customers achieve their desired outcome with a product or service, and that it’s the defining factor in whether your SaaS company will grow or not.
But how do we know whether a customer has achieved that outcome? As it’s a lagging indicator, we decided to ask them and then work backward. In other words, our CSMs verify in writing what outcomes the client has achieved. Over the past 12+ months of collecting VOs, we’ve found that customers with Verified Outcomes renew at 16% points higher than customers without. Furthermore, customers with Verified Outcomes made up 42% of ARR but only 12% of dollar churn.
So we know VOs are working. And CSMs have a clear mandate to driving them, but what about Sales and Services? Here are two action items to align them to outcomes:
- Have Sales capture baseline ROI metrics and desired outcomes during the sales process.
- Have Services drive toward specific outcomes using pre-built, best practice configurations.
It’s time to evolve beyond the Manufacturer’s Mentality to have a Customer’s Mentality. That doesn’t mean completely abandoning specialization, but it does mean looking at your people, processes, and technology from your customer’s perspective. Align your people into a pod structure that includes Sales, Services, and CSM. Create a process that unites them around a common metric: Verified Outcomes. And enable it all for scale inside a technology like Gainsight—the only purpose-built, cross-functional solution built to drive outcomes throughout the customer lifecycle.