Chapter 15
The Rise of the Chief Customer Officer
When organizations change, and especially when new ones appear, new titles tend to come along for the ride. Shortly after IT took its place of prominence in the enterprise, the title CIO started to become popular as well. Today, it's the norm. Any decent-sized company has a CIO. No one questions whether it's necessary or whether there's enough responsibility to justify the C. It's a given when you consider the technology dependence of virtually every company in the world and especially when you consider the liability involved in the protection of a company's key information. The existence of the cloud has only served to up the ante as it's become part of every company's IT infrastructure and the home of volumes of business-critical data. There's no doubt that CIOs are here to stay.
Time will tell if the same is true for the new title that's becoming part of the customer success landscape—chief customer officer (CCO). For all the reasons we've outlined earlier, customer success is certainly here to stay and most likely the same is true for the CCO title. But what does that title actually mean? What are the typical responsibilities? Why did it take the customer success movement to make it prominent? Let's explore.
Wikipedia defines chief customer officer this way: “A chief customer officer (CCO) is the executive responsible in customer-centric companies for the total relationship with an organization's customers.”
The Before Cloud Chief Customer Officer
That's a pretty good definition, and, as you can see, a position with that responsibility would logically align with virtually any company in the world. Thus, it's not a new position/title, but it was seen pretty sparingly up until recently when the subscription tsunami raised the visibility and importance of customers to a whole new level. In the world BC (before cloud), the CCO role appeared primarily at companies that used it, in part, to make a public statement about how important customers were to them. One executive whose entire responsibility it was to make the customer's journey and experience better—sounds like a really good idea, right? And, if done well and supported 100 percent from the top, it was better than a good idea; it was a great idea.
But the challenges were many to making a measurable impact. The primary obstacle was that the CCO in the pre-subscription days seldom had any direct operational responsibility and, therefore, no bottom-line revenue or profitability metrics for which they were accountable. That's not to say that their efforts were not positive and significant, just really hard to quantify.
Let's play out an oversimplified example. The focus of the CCO in the pre-subscription days was usually defined around the customer experience, often referred to as CX. Most companies truly want to be easy to do business with. They want all customer touch points to be frictionless and leave a positive impression on the customer. One of the touch points for every customer is the vendor's invoicing process. Depending on the complexity of your product, invoices can range from simple to nightmarish. Look at your own cell phone bill for a good example of nightmarish. And then think about how much time and effort AT&T spends explaining invoices to customers. Lots. A CCO with overall customer experience responsibility might very well seize on the invoicing process as a source of irritation for customers and seek to improve it. For larger companies, this will be an enormous undertaking. Making all invoices accurate, simple, and timely is an extremely positive thing for customers. No one could possibly dispute that. But the effort involved will be significant and, certainly painful, and will result in what? A better experience for the customer? Absolutely. More revenue for the company? Maybe but hard to quantify. An increase in profitability? Probably not but, again, very hard to measure. Existing customers spending more money with you? Could be, but how could you ever prove that?
So you see the challenges. I know many who have performed this role back in the good old days and with great satisfaction, knowing that their efforts really did change the customers' experience and improved how their company was viewed and trusted by their customers. But it was constantly frustrating to be working so hard and doing so much good and not being able to specifically tie it to the things the CEO was measured on by the board. The result was that funding that expensive position was a risk and an expense most CEOs were not willing to take. Now you could accuse them of not being customer-centric, but we all work for someone, and, if the board is holding a CEO accountable for revenue, profitability, product quality, and market share, and a CCO can't tie her accomplishments to any of those things, the choice to not add that position to the executive staff is pretty understandable.
To all of our benefit, CX has found its way into thousands of companies and changed the way they interact with their customers. But it's pretty rare for that discipline to have become important enough to generate a CCO title. As we mentioned in Chapter 2, CX and customer success are two parts of the same jigsaw puzzle and are overlapping in at least one significant way—surveys as a provider of insights and customer feedback.
For the most part (but not exclusively), CX measures itself by customer satisfaction surveys. In the previous example regarding invoicing, the project may very well start with a survey that asks customers about their satisfaction with the vendor's invoicing process and perhaps even drill in on the key elements—accuracy, simplicity, and timeliness. That becomes the baseline for the project and then a post-project survey with the same questions is done, and the results are compared to quantify the benefits and justify the effort. It's a perfectly reasonable way to determine the validity of the undertaking. The overlap between CX and customer success occurs because customer success will also use surveys to help understand customer health (Customer Success Law 4). They are not the whole story, but direct feedback from customers is certainly part of the overall picture of customer health and will help customer success teams prioritize customer interactions. Because the goals are really the same for both groups—improved customer health and customer experience leading to increased loyalty—they are likely to start coming together organizationally.
In the days BC, and even to this day in non-subscription companies, the CCO role has been thought of primarily as a marketing job and even as a replacement for the chief marketing officer title. Not coincidentally, CX usually lives in marketing as well. Both of these are signals of another positive trend brought on largely by the power of information and its fingertip availability to anyone and everyone. Generally speaking, many marketing organizations are moving to anchor themselves to the bottom line of the company and engaging customers, not just selling to them, is their means to that end. Today's customers, empowered by their access to information, can't simply be seen as buyers. They want to be listened to, engaged with, and basically treated as partners. This becomes a noble goal for a VP of marketing, a CMO, or a CCO and provides tremendous benefits to the rest of the company thirsty for more insights and understanding about their customers. In the absence of other organizations thinking strategically about customers, marketing rightly picked up the ball and ran with it. Customer support and services, with their thousands of daily interactions with customers, had a similar opportunity, but the tactical focus required for their daily success on fixing customer problems and completing services projects worked against them becoming as strategic or long-term focused as the business required.
And that was the state of the world up until sometime around the turn of the millennium when subscriptions and cloud and SaaS and social media thundered into our consciousness.
The New Chief Customer Officer
I've seen customer success organizations grow up inside almost every organization in the enterprise. It's very common inside sales because the sales VP is often the person, at least early on at a subscription company, who owns the renewal process and the renewal quota. Also very common is that customer success takes shape within the broader services organization because the initial focus and efforts of the customer success team tend to look a lot like some combination of consulting and support and require many of the same skills. For all the reasons described above, marketing is also a relatively common home, although much less so than sales or services. Last, I've seen it arise as part of the product team. The logic here is pretty clear, too. The product must be built to solve customer needs, and nobody will know more about the needs of customers than CSMs. But, as you have likely observed in your career, especially at smaller companies, organizations are often built around individuals, not simply on convention. But over time, consensus tends to form and some sort of best practice usually starts to emerge. For customer success, that trend is toward services.
I say toward services very carefully as opposed to in services. The reason that the movement is toward services is pretty simple. Customer success is rightly seen as a post-sales role, because the preponderance of effort and involvement happens after the prospect has become a customer. However, because we're on the subject, one of the many nuances in a subscription economy is that there's really no such thing as post-sales. Once the initial sale is complete, all effort is then applied to ensure the next sale, whether that's a renewal, a non-opt-out, or an upsell. It's fair to say that, in the subscription or pay-as-you-go economy, every single activity is a pre-sales activity. But, back to the subject at hand, the phrase post-sales is not going away, and it's well understood that it means “after the original sale” and that's where customer success belongs.
The post-sales organization tends to be pretty mature because the primary parts of it have been a necessary staple of the enterprise for a long time:
- Professional services
- Training
- Customer support
- Implementation/onboarding
Even CEOs have a breaking point with regard to how many direct reports they can effectively manage, so the post-sales organization tends to become consolidated over time. That usually means that a senior vice president (SVP) of services is hired or promoted internally to manage all of the above departments. It's more and more common that customer success becomes another department in that larger services organization, and, as we elaborated on in Chapter 2, the entire services organization often then takes on the umbrella term customer success as its moniker.
But what happens when the leader of the entire organization, once called the SVP of services, changes the name of the organization and, therefore, his title, and becomes the SVP of customer success? Nothing wrong with that except the confusion caused by the department within the organization also called Customer Success, which may well also have a VP leading it. This can result in a bit of a who's on first routine in describing the overall organization. That's certainly not the best reason in the world to change someone's title to CCO, but it's definitely a reason. And if you combine that with the ownership of the overall retention number for the company, which will come with the addition of the customer success function, you can start building a pretty compelling case for adding this role to the C-suite.
At this point, we've described the morphing of the post-sales organization from what's seen in Figure 15.1 to what's in Figure 15.2.
Figure 15.1 The Old Post-Sales Organization
Figure 15.2 The New Post-Sales Organization
For those who haven't encountered this type of organization, it's not at all like an SVP of sales overseeing four different sales groups:
- Enterprise
- Midmarket
- SMB
- Channel
No one is saying that's an easy job by any means. But the primary focus and measurement of each of those four groups is identical—selling your product. The SVP of services (or CCO) has five groups in the organization described above by the second chart. But it's not about having more departments or more people. It's all about the breadth of responsibility as defined by the types of activities performed and the associated measurements. As you'll see in a moment, each one of these groups is separate and distinct in what they do, how they do it, and how they are measured. This is another factor in assessing whether the word chief is the first word in the title of this leader.
Professional Services
Primary Measurement—Utilization
Almost every software company, and many other companies, too, will have a professional services or consulting arm. This organization will be made up of people with very deep product and/or domain expertise that is applied, for a fee, on behalf of customers. This could be a consultant who has deep knowledge about how to use the Oracle invoicing product in a productive way. Or it could be the plumber who comes to your door and fixes your leaky sink. Neither one of them is trying to sell you either the software or the sink. They are selling you their expertise. In a nutshell, that's what we often call professional services or consulting.
The primary measurement for success in this business is called utilization. That basically means this: out of all of the hours available to be billed, how many hours were billed? If the plumber works 40 hours a week, he's going to be more profitable (and richer) if he can bill 30 of those hours than if he bills only 20. His primary task, assuming he has more work than he can handle, is to minimize his nonbillable hours and maximize his billable ones. The same is true for every consultant. And for the person who manages the professional services organization (and his bosses), that will be the number she looks at daily and for which she's held accountable.
Training
Primary Measurement—Number of Products Delivered
Everyone knows what training is so we won't reiterate that. Over the years, what's changed is the delivery mechanism. Classroom training is still done in the right situations, but, more and more, virtual training is becoming the norm, and on-demand is now a must-have as well. Not surprisingly, there are lots of technology options to help you execute on whatever channels you choose to use.
The key here again is to point out how different the roles are within this function and how the group as a whole should be measured. Training is run essentially as a product development team. Requirements are gathered, the product is built, and then the product is manufactured, sold, and delivered. The viability of the group rests on two things—quality of the product (does the student learn what they were intended to learn in a positive way?) and the number of products sold. Not all training organizations are designed to make money but as a company matures, training often becomes a source of revenue. Whether it generates dollars or not, “# of products delivered” is probably the right measurement for a training team. Alternatively, you could measure this from the customer's viewpoint and use a metric like “# of customers/users trained”. In either case, it's very different from the way professional services is managed and measured.
Customer Support
Primary Measurement—Efficiency
Customer support is the break/fix organization. It's the team of people who take the calls or e-mails from customers who feel like something in the product is broken and who have come to expect some reasonable level of responsiveness, depending on the severity of the problem. In the software world customer support is the team of people who reactively assist customers with problems. Early on, the communication channel was primarily telephone, thus the euphemism “call center.” But today this is often an organization interacting with customers via e-mail and chat as well as phone. Social media has also become part of the picture with some customer support teams taking cases from customers via Twitter, too.
Customer support is often seen as that necessary evil that exists only because of the impossibility of shipping perfect products. There are call centers around the world to help you put the crib together that you just bought for your newborn baby, to get you set up on an international calling plan for your upcoming trip to Europe, or to help you work around the bug you just discovered in trying to run that report.
In all of these situations, customer support is a cost center, and it will likely always be that way. It will also be, for the most part, a reactive organization. That's not a bad thing or a good thing, just a fact. And the way that you measure a cost center is by efficiency metrics like “number of tickets closed per day per rep” or “total number of calls handled,” metrics that tell you whether you're squeezing the most out of your investment. Typically, standard customer support is not something that is paid for separately by the customer so minimizing the cost per customer of providing that support will be high on the priority list for CFOs and those leading support teams. It's all about efficiency.
Implementation or Onboarding
Primary Measurement—Time-to-Value
As we discussed in depth in Chapter 11, your onboarding or implementation team is one of the key drivers of time-to-value in your company. No value can be derived from your product unless this is first done, and done well. It's not uncommon for the onboarding team to sit in the same group as your professional services team because the skills can be almost interchangeable. But, over time, most companies break these two groups apart for two reasons:
- Measuring and improving timeliness of project completion in onboarding is so critical.
- Packaging onboarding services is much more likely than professional services in which most work will be done on an hourly basis (time and materials).
Because onboarding services are almost always part of the initial sales deal, they are often packaged with fixed prices to make them easier to sell and to not slow down the sales cycle. Time-to-project-completion or time-to-value are the key metrics to drive improvement (and profitability) of your onboarding packages. Breaking this team out as a separate group allows you to start tracking the improvement of those metrics as the key determination of the effectiveness of this team. Ultimately, you could argue it's just another way to say utilization or efficiency but most would agree that timely and high-quality onboarding is so critical to the success and retention of customers that it requires its own group and measurement.
Customer Success
Primary Measurement—Retention
Customer success, as we've examined exhaustively, is a completely different organization from the others outlined previously. In some ways, it's the group that glues the other groups together. Customers have questions that go beyond what customer support can provide. They land in customer success. Customers need some consulting expertise in order to justify renewing their contract but not enough to justify an engagement. They land in customer success. Customers took training and went through onboarding but need just a little nudge here and a tweak there to reinforce those experiences. They land in customer success. And, at the same time, customer success, as the place where the buck stops (retention), pushes back on the other organizations to be better and faster at what they do. It really is a virtuous cycle from which the customer benefits greatly.
The goal and measurement is retention, net retention, renewal rate, or something along those lines. You could lump it all under the word loyalty. Customer success, whether high touch, low touch, or tech touch, is designed to build customer loyalty because loyal customers stay with their existing vendors and buy more stuff from them. It's as simple as that.
So that's five different organizations doing five very different things and being measured in five very different ways. That breadth of responsibility takes enormous intelligence, skill, and experience to manage and lead. I would argue that the skills and responsibilities of this role make it at least equivalent to that of a chief revenue officer who manages both marketing and sales. In fact, those two roles should be peers and have equivalent authority within the company. We've touched on this previously, but it's worth repeating that, in a maturing subscription or pay-as-you-go company, the revenue/bookings coming from existing customers greatly exceeds that coming from new customers. Figure 15.3 shows how those numbers diverge over time at a moderate-to-high-growth SaaS company.
Figure 15.3 Quota Comparison—Sales versus CCO (Moderate to High-Growth Recurring Revenue Business)
This discussion so far explains the rise of the CCO and provides justification for that title if justification is required. But that's not even the end of the story. Much like software began to eat the world, customer success is kind of eating the enterprise. It's not hard to understand why. As your existing customer base becomes more and more valuable, the people responsible for nurturing and growing it become more valuable, too. Customer success has become a vortex sucking parts of other organizations into it as well. It's not a thirst for power; it's an acknowledgment of the shift in power happening in many companies across multiple industries. Another artifact of the subscription economy.
There are three other organizations, or parts of organizations, that are feeling the pull toward customer success and accelerating the rise of the CCO. The results will be different for different companies, but there are only two possibilities for these organizations as part of a customer success-centric enterprise: influence or absorption. Let's look at all three carefully to understand what is happening and why.
Sales
I made the comment earlier that, in a subscription or pay-as-you-go business, there's no such thing as post-sales. Every activity is a pre-sales activity. Simply put, that's because there's always another sale lurking whether it's a physical renewal or an opportunity for the customer to opt-out or an upsell of some kind. The selling process never ends, it just changes uniforms. Given that truth and the reality that most CEOs will want one person to be responsible for net retention (renewals and upsells), there's a logical argument for adding a sales function into the customer success organization for a number of reasons:
- So CSMs can maintain their trusted adviser status uncompromised by negotiating sales deals of any kind.
- So the CEO has one throat to choke when it comes to maintaining and growing the value of the customer base.
- Because the CSM will have her finger on the pulse of any customer coming up for renewal and can help prep the sales rep with the history and background necessary for the renewal conversation.
- Because the CSMs will be the best source of upsell leads for the sales rep and will help prep him for the opportunity.
In short, the person responsible for the net retention number, regardless of title, will have every right to ask for the resources required to deliver that number, including the quota-carrying sales rep(s) who are closing those deals. In addition, the primary synergy for the sales reps that drive renewals and upsells is with the customer success team because of their intimacy with the requisite details to empower that conversation with the customer.
Even if this sales function does not land in the customer success organization (absorption), there will be significant influence on the sales process by the CSMs. In fact, a good sales rep will initiate and build the relationship with the CSMs knowing the value they will provide in the process. In many ways, the installed base sales rep will see the CSMs in the same way a new business sales rep sees and utilizes his sales consultant—as necessary to help close deals.
The movement of this part of sales toward customer success is inevitable because of where the synergy lies. The team driving renewals and upsells from your customer base will be joined at the hip with your customer success team. At best, there's a diminishing argument for having that team live in another organization.
Marketing
This is not a case for the CMO to report into the VP of customer success. There's no galaxy where that would make sense. But there is typically a part of marketing that starts with the word customer, and it's reasonable to consider whether it would make sense for that function to also live with the team that is responsible for the rest of the customer journey. Let's first examine the typical responsibilities of a customer marketing team and how they are potentially involved with, or influenced by, customer success:
- E-mail marketing/nurturing: the content, timing, and even voice of these messages must be heavily influenced by customer success to ensure every touch is as relevant as possible
- Reference management: all the information necessary to match a given prospect with the right customer reference will reside in the customer success management including industry, size, use cases, health score, reference frequency, and last reference completed
- Community: content and direct interaction will often be part of a CSM's responsibility
- Webinars: content and personal involvement will be required from the customer success team with regard to both product and domain expertise
- User groups: who to invite, personal involvement, and encouraging customers to attend will be the customer success team's responsibility
- Customer summit: agenda, content, proposed speakers, and personal involvement will all be provided or influenced by customer success
Just as with installed base sales, there's a case to be made that most of the synergy for the customer marketing team is with customer success, not with other parts of marketing. And just as with installed base sales, a CCO who owns the company retention number will have the right to ask for ownership of the tools and talent needed to deliver that number. No chief revenue officer would take that role if it didn't include the demand generation part of marketing. If you are being held responsible for the new business quota for the company, you will ask for control of the entire revenue pipeline, not just the bottom half of it. The same philosophy can be applied to customer success and the CCO. If you ask your CCO to be responsible for the entire customer journey and the sales results expected to come from the customer base, then owning all of the customer touch points, including the ones listed previously that are typically part of customer marketing, is a legitimate ask. And keep in mind the changing landscape regarding where the dollars flow from in a maturing subscription or pay-as-you-go business. See Figure 15.3 for a reminder of the reality that, over a fairly short period of time, the percentage of bookings that come from existing customers exceeds that of new business and then accelerates rapidly to the point where it could easily be six times to eight times new business. With that level of responsibility comes significant authority and organizational power.
Customer marketing may not move into customer success as rapidly as the renewals and upsell sales function, but it's being drawn in that direction already and influence is increasing daily, which might leave absorption not far behind.
Sales Consulting
This one is the road less traveled of the three and wouldn't have even made this list six weeks ago. But more progressive, and aggressive, CEOs are moving this function, which has always and forever been part of sales, into customer success. The reason is simple and logical. See Chapter 5, Customer Success Law 1, “Sell to the Right Customer.”
There are a number of ways to ensure that a company enforces this law as we've discussed. Incent the sales VP on retention, give the customer success VP veto power over the pipeline, and a few others. We did not mention this one, which is to give ownership of a vital part of the sales organization to the person who has to live with the sales decisions. This is a bold statement and sure to be fought fiercely by most VPs of sales, but it's easy to see the logic in it. It's akin to taking the quality assurance function away from the VP of engineering and putting it under customer support. Assuming the leadership is competent and the necessary lines of communication with engineering don't get broken, it could be a brilliant move. Ownership of the function that blesses new product releases lies with the organization that will suffer the most pain if a bad release goes out. Not stupid. Not stupid at all.
Regardless of the organizational logic, the message this sends from the CEO is pretty hard to miss. “We will prioritize long-term retention and customer success above merely making our quarterly sales targets.” Very powerful.
The resulting organization in this brave new world, assuming all three of the above groups are added in, ends up looking like this (Figure 15.4), and no one would argue that the leader of an organization this broad and with the degree of business impact it would have, would have a Chief in charge of it.
Figure 15.4 The Future Chief Customer Officer Organization?
We originally made the case for the rise of the CCO based just on the traditional post-sales functions in the enterprise. But now we've added the possibility, perhaps even the rationale, that renewal and upsell sales, customer marketing, and even sales consulting would make sense under the same umbrella. Just as SaaS and subscriptions have shifted all the power from the vendor to the customer, the same shifting sands are moving the organizational power in the enterprise from new customer acquisition to customer success. And it's probably never moving back. Technology has enabled it, and prospects and customers are being spoiled by it. And, by the way, isn't this the way the world should work? Shouldn't customers have more control than the vendors? It certainly works that way in retail and in most consumer-oriented businesses.
Like it or not, the customer is king once again or at least climbing the steps to the throne. And that makes the person responsible for the health and happiness of the king, the CCO, vital to the vendor. Not every company has a CCO today, and many won't ever have one, but the momentum of the customer success movement is accelerating the rise of this role.