How to Focus on Success Outcomes
Thank you Planhat for inviting me to your podcast, it was a great experience. I love talking with Megan Lozicki, the depth of our conversation was just phenomenal.
Meg: Hi Paul, thank you so much for joining me today on the Customer Success Podcast. How are you?
Paul: I’m well thank you, and it’s a pleasure to be here!
Meg: Before we get into the topic we’re going to talk about today with customer success, can you tell us just a little bit about yourself, what you do, and what your background is?
Paul: Sure! These days, I’m an author, I’m a speaker and a consultant on customer success for technology companies. So I help tech companies implement a customer success program, [and] that’s been used to close million dollar cloud deals. [I] mainly focus on medium to small sized vendors, because the big guys tend to already have people doing this sort of stuff. How I got into this – it’s not what I’ve done forever – before this I was in the tech space, in the ERP software area. My last role was in the Asia-Pacific region for a medium-sized organization. So I had about 200 people working for me across 9 countries and supporting 800 enterprise customers. In the last 5 years that I was there 2 significant things happened, the first is we made the transition from being a traditional vendor to a cloud vendor…and the second is, we implemented what we call our outcomes program, which, today, would be called a customer success program. And we ran that for over 5 years. I’ve written 2 books; the first is on execution capability, the second – the topic of today’s discussion – is around customer success.
Meg: What, specifically, inspired you to start your own consulting firm?
Paul: If we go back a decade or so I was working, still, in that same company and we were looking at the success, or lack of it, the whole industry was producing. And ERP, frankly, isn’t very good at producing success for its customers. In fact, there was a Gartner study done years ago that suggested it might be as low as 32% success rate – it’s amazing that any industry can be successful at 32% success rate.
So we looked at what we were doing and we said how can we do more? How can we make our customers more successful? So we started by looking at the outcomes that we thought the customers were trying to achieve when they bought our ERP software, and we decided that that outcome was, effective operations. So they wanted the business to run well.
We then said, well what else do they need besides our software? And we realized that they needed processes, they needed the right people skills, training and education, and change management skills and so on. And they were largely left to themselves – they had to do those things themselves or they used other consultants or other firms. And we thought, wouldn’t it be better if we could help customers do all of those things? And that’s what we set out to do.
We introduced a whole range of new services, we introduced new methodologies, new ideas, new measurements and KPIs (Key Performance Indicators), all around the idea of helping the customers become what we call the “effective enterprise.” And that became our mantra. So we ran that in the region for over 5 years, got a lot of experience and worked out what was good and what wasn’t good things to do, and then about 2 years ago I realized the things that we had learned could really help other technology vendors. And so I decided to leave the software industry and try and help.
I’ve spent the last year and a half researching the book, interviewing people, reading and listening to everything I can about customer success and based on that and my own experience, produced the book. Which will be available pretty soon.
Meg: So let’s talk a bit about the book, the book is called, The Outcome Generation – How a New Generation of technology Vendors Thrive through True Customer Success, could you tell us a bit about your book and what you mean by Generation 3?
Paul: So the idea of this ‘generation 3’ is the outcome generation. The book talks about a new generation of tech vendors that are emerging and the way that they’re operating.
Just to give some background; whenever an organization spends money on technology, there are 3 things that have occured, someone in the business has said that an element of the results that are being achieved aren’t good enough and we need to act to do something to fix that, they’ve then looked at the problems or roadblocks that are being experienced, and then finally they’ll come up with a set of requirements. And the logic is that if the requirements are met the problems will be solved and the results will therefore follow.
Once they’ve gone through those 3 steps they’re then ready to go and talk to vendors, and vendors have responded in a number of different ways. If we go all the way back to the 1970s when software packages first appeared, those vendors responded by highlighting features of their software and they showed they could meet the list of requirements the customer had given them. We call that generation 1 – or the ‘feature’ generation.
In the late 80s we saw a change; vendors started to go to customers and prospects and [try to] understand the problems that you have. So as well as your requirements we want to understand, first hand, those problems. And based on our experience elsewhere we’re going to be able to come up with a really good solution for you. So we saw the introduction of solution selling which is still a major way the industry sells today. That became the ‘solution’ generation – generation 2.
In more recent times we’ve seen the emergence of generation 3 – what I’m calling the ‘outcome’ generation. They’re going one step back in the logic chain and saying, yes we need to solve problems and we have to meet requirements, but let’s understand the outcomes that you’re trying to achieve…and let’s work on helping you get to those results directly. These outcome generation vendors go straight to what are the outcomes the customer is looking for.
The advanced vendors are focusing, however, on a very specific type of outcome. And I want to spend a couple minutes and just talk about what I’ve learned about that. Whenever somebody buys something there is an outcome they want to achieve….In business, in the technology space, there are 2 types of outcomes, the first is a product outcome – that’s the direct benefit of using your service. The second is a success outcome – that’s the bigger outcome that the customer is actually trying to achieve when they buy your products or services.
So to just illustrate that…if you go to a hardware store and buy a drill bit. The hardware store manager knows you don’t want to own a drill bit, what you want to do is own a hole in the wall. So the product outcome, the direct benefit of using the drill bit, is a hole in the wall. But that’s not success. What we really want is that beautiful family portrait that we’ve just had framed hanging on the wall, and that’s what success looks like. So the product outcome is the hole in the wall, what we care about is the success outcome of the picture hanging on the wall.
The whole proposition in the book and the observation around these ‘outcome generation’ vendors, is that they’ve become very very good at identifying the success outcome that they serve and they’re building their businesses around doing everything the customer needs to achieve that outcome – not just delivering the product outcome. That’s the key idea.
The heart of the book is, be very clear about what the success outcome is that your customers are trying to achieve. This is the thing they care about, this is the thing that gets them promoted, it gets them their bonus, it gets them recognition.
Meg: Do you offer a suggestion for how companies can implement a generation 3 approach?
Paul: We do. We have a 6 step methodology that we use that we take people through to come up with a tailored customer engagement plan, or a customer success plan that works for their business, and then how to implement it. One of the lessons that we learned the hard way is that this should be an evolution and not a revolution. The idea of customer success really should touch and be the heart of the way all customer facing activities operate. In fact, one of the podcasts that you did with Steve Lucas,the CEO of Marketo, talked about exactly that. By the way, I’ve extracted some of that interview [with Steve Lucas] that you did and put it in the book.
Meg: Thank you! We’ll have to tell Steve as well!
Paul: It was a great interview and it was a great message. And I think that he and other CEOs who are promulgating that idea are absolutely right. So because it’s so pervasive, we don’t want to do a big bang, we want to start small with a subset of customers we want to do it with, maybe not even [use] all of our staff or all of the partners. Start small, have some success, get some experience, and then build and grow on that.
Meg: In your book you mention a concept you’ve come up with called DEEP Engagement. Could you explain what you mean by the acronym, and why this is an important way to be looking at success?
Paul: The book has to have some acronyms in it, it’s for the tech industry. DEEP represents the 4 phases of engagement with customers. We use those 4 phases to create a customer lifecycle – what we call a success lifecycle. Every one of those phases is based around enabling the success outcome that, as a business, we serve for our customers.
The first of the phases, the D in DEEP, is for Develop. This is the lead generation stuff, but we do it differently. Lead generation now, [all of the marketing messaging, and sales conversations] all revolves around the success outcomes because that’s the thing that they care about. So if we’re talking to them about product we have some chance of getting their attention, if we talk about product outcomes – the benefits and value – which we hear a lot we’ll get some attention, but if we talk about the success outcome, the thing that they really care about, they’ll engage with us.
So the first thing that we do is we move are marketing, move our sales messaging and so on to discussions around the success outcome and that’s the heart of the develop phase.
The second phase is Evaluate. This is selling, but it’s selling done differently [and] particularly to existing customers. Because we’re talking about the success outcome and not just about what our products do the customers are interested in engaging with us in a joint way. So we now jointly focus on identifying projects that can improve the success outcome. We don’t go in there and try and sell products, we don’t have to do ROI (Return On Investment) on our product. What we do is find projects to drive improvements in the success outcome and we do it together with the customer.
The third phase is Execute, and that’s about making it work. This is the onboarding, the implementation, but we don’t declare success when we get the product working we declare success when we’ve measured results and fed that back to the executives who’ve sponsored the project.
And then finally, the P in DEEP, is for Prosper, and that’s about continuous improvement. Because we can always improve the success outcome, we can always make that better.
With those 4 phases we then establish the steps in the success lifecycle, and there’s typically somewhere between 8 and 12 of them. For each of them we identify a deliverable, or an outcome, and this is a really important step. So instead of just being very focused on here’s a process and you must follow that process – what we want the staff to understand is what the outcome is that their effort is going to create. Similarly, if we’re working jointly with the customer we want them to understand the outcome that needs to be produced from each step, and that drives the business a bit differently. It means that if we run into an unusual customer situation it’s ok to do it a bit differently, we can let the smart people that work for us behave in different ways as long as they’re clear about the outcome they need to achieve from the step.
The next thing we do is then identify KPIs for each of those steps. Now we can track how well that lifecycle is working, and if it’s not working we can see where it’s not working and that allows us to take some action on it.
And then finally we conduct an execution capability review [where] we look at the PSPSP analysis – Processes, Systems, People Skills, Partners – and we look at which of those elements are required for each step, and where are we today and what do we have to do to bridge the gap.
That’s the framework that we use to come up with a tailored customer success program for each vendor.
Meg: What have you found makes the biggest difference for customer success when there is a focus early on, and the D – Development stage, on creating customer goals and making sure the strategy is focused on those?
Paul: I think the biggest thing is the ability to engage. Again, the idea that if you talk about product then you’ll have a little bit of interest, if you talk about a success outcome you’ve got their attention. And our first-hand experience was, particularly with senior executives, if you go and talk about success outcomes they’re interested and they will engage with you. If you talk product their eyes glaze over and they quickly fall asleep.
The first thing is, is that it does change your ability to engage, and the same is true on the marketing side.
The second thing is, is that it does give you the ability to move to that joint engagement. If you go along as a vendor and you talk about your product and your product outcome, the customers go, “You’re just selling to me,” and they’ll keep you at arm’s length. If you show them that you understand the success outcome that they have to achieve, and that you know about all elements of achieving that and you can help them with a lot of it then they want you to work side-by-side with them. That’s the thing that helps drive that joint engagement.
The final thing is, it changes pre-sales. In organizations that use pre-sales people customers won’t pay…but if what you’re doing is providing what we call ‘success consultants’ whose job it is to help with everything in the success outcome then the customers will pay for that. And our experience was that we were charging double than normal standard consulting rates and the good people had more than they could deal with because the customers realized just how much value they could bring and they just loved them. So it really changes the way the funding of sales works, because now instead of having expensive pre-sales people who are just an overhead, they can actually be producing revenue for you.
Meg: I think many would agree on this. But do you find that many companies aren’t actually doing this effectively?
Paul: I think the thing that I’ve found most with this is almost every vendor that I’ve interviewed and that I’ve researched has moved past generation 2. Pretty much everybody is doing some generation 3 stuff, but what I found was that it’s very patchy. If you look at the lifecycle they’re using and you look at all of the people (sales, marketing, etc.) there’s little bits being done in the generation 3 way, little bits that are being done in a generation 2 way, and some that are even generation 1.
One of the objectives of the generation 3 program is to get everybody aligned in the organization around this one single idea of a success outcome. The biggest challenge I see is as vendors have moved past generation 2…they get stuck at the product outcome and they think that my job is to produce a great product, get the product working and the customer will love it…but that’s not the case if the customer isn’t achieving their success outcome. Only those really advanced vendors have gotten past product outcomes and are thinking success outcomes.
Meg: What are some recommendations you can give on how to get your success and sales teams focused on these outcomes and goals instead of having a more short sighted approach?
Paul: Ideally, the impetus for this will come from the top of the organization…If you have listeners that are in organizations where that’s not the case, where this lead isn’t coming from the top, they can still do stuff.
What I’d suggest is to start themselves. The first thing they need to do is figure out the success outcome that their organization serves. So just get a bunch of smart people and go off and get a drink together and work out what the success outcome would be. Go and talk to some key customers and play that to them and ask them if it works…does it resonate for you?
Then try doing some small marketing campaigns, some small existing customer sales campaigns. And you’ll find that by talking about the success outcome and how to improve that you can identify opportunities for upsell and cross-sell. Create some revenue, actually get some wins on the board using it, and then when you’ve done that you can start maybe even going to the [new business] sales team and showing them how to use that message to create new business deals.
Again, once you’ve started experiencing success using the idea then you can go up to top management and you can convince them that this is the right way for the organization to go.
Meg: Do you have any final tips for anyone who might be starting their career in customer success and maybe need some guidance or advice?
Paul: There’s [more of] an appeal I’d like to make. I’ve really really enjoyed engaging with customer success people and it’s for one reason, almost everyone – all of the reading I’ve done, the listening I’ve done, the people I’ve spoken to – there is an underlying passion, an underlying purpose about genuinely making a difference for the customer. And that’s not always there in the space that I’ve come from.
And for many of them it’s difficult. They might be working in an organization where that ethos isn’t in place that the top of the organization, and so they’re battling a bit with that. They want to make a difference, but sometimes it’s hard. There’s old ideas about the way sales and marketing is done, support is done, and they’re trying to battle that a little bit.
I guess my appeal would be this; they are doing something that is genuinely worthwhile. It is making a real difference….and keep fighting the good fight. What they’re doing is worth it, it serves a purpose, keep going.
Meg: Yes, completely agree. And can you tell us where and when everyone can find your book?
Paul: The book will be out in the next couple of weeks. It’ll be on Amazon and iTunes, but you can also go to the website, gen3cs.com. And if you want to get an idea of what sort of ideas will be in the book there are a number of white papers that are on there already that summarize some of the key ideas.
Meg: Thank you so much Paul, and we’re looking forward to being able to read your book!
This article is based on the book; The Outcome Generation: How a New Generation of Technology Vendors Thrives through True Customer Success
Paul Henderson is an author, speaker and consultant on outcome-based customer success for technology vendors. His last role was leading the Asia Pacific region of an enterprise software company. He saw the potential that could come from delivering real and measurable business success for customers. So, he initiated a customer success program based on customer outcomes. He and his colleagues developed, modified and proved the model over more than five years. He thespent one a half years researching and writing, culminating in the release of The Outcome Generation.