Often I’m interviewing other company builders that I admire, but it’s always energizing to be interviewed as well. I participated in a fireside chat with Carolyn Fikke at Golden Seeds, an early-stage investment firm focused on women-led businesses. I’m re-publishing our conversation here. We covered a range of business and leadership topics, including:
How does AI affect customer success?
What are the 7 fundamental attributes of companies with high growth efficiency (and talent efficiency)?
What are the 4 dimensions on which we can coach our teams (and grow ourselves)?
This was a fun conversation! You can listen to the audio version or else read the lightly edited transcript below.
Transcript
Loretta McCarthy: Good afternoon everyone. Thank you for coming this afternoon and welcome to today's Trend Talk. We have with us Golden Seeds members, CEOs, and quite a few guests, so we welcome all of you to today's session. We urge you to send your questions and comments through the chat box and with any luck we'll get to all of them.
Our guest is Allison Pickens. She's founder and general partner of The New Normal Fund, which invests in AI and SaaS companies. In fact, just a few minutes ago she told us that so far she has invested in over 25% of the Forbes Rising Stars lists in 2021 and 2022, so we consider that a good sign.
She's also a former COO of Gainsight. Allison was brought to us by Lynn Bain and Lisa Favaro. Thank you for introducing Allison to us. Allison has particular experience with AI and SaaS companies and the large topic of building recurring revenue. Plus she has much to say about go-to-market strategies and more. So we'll hopefully get to all of that. She's been a board member and an advisor to many companies.
Today Allison will be in conversation with Carolyn Fikke, who is known to most of you, but just in case, I will also introduce Carolyn here. She has been an important part of Golden Seeds for over 11 years. She's the leader of the consumer sector group at Golden Seeds and is involved with literally every consumer deal that comes through Golden Seeds. She also created and delivers our Knowledge Institute class on investing in consumer businesses. So if you haven't taken that class yet, watch for it. It's terrific. Carolyn is an experienced board member and board observer. She's mentored many companies in her years at Golden Seeds. She was previously an investment banker for 18 years with both KPMG and Prudential Securities. So today Allison and Carolyn will be in conversation for the first 30 or 40 minutes. Then we'll take your questions, hopefully we'll get to all of them. So Carolyn, over to you. Thank you both for being here.
CF: Thanks Loretta, appreciate it. And Allison, I will echo Loretta, thank you for joining us today. Looking forward to a far-reaching conversation and to our members questions. So we're going to start hard on customer success. It’s the big topic for the day. Beginning with your early days at BCG on to Bain Capital through your pioneering work at Gainsight, how have you seen the concept of customer success evolve, especially in light of the shift from perpetual software licenses to subscription-based and consumption models? And how do you envision the trajectory over the next decade of this important topic? And you might start with just definition of terms. How do you look at customer success?
AP: First of all, thank you all so much for having me. I've been an admirer of Golden Seeds for a long time, so I’m excited to join you all today.
There are four different stages of customer success that I've noticed over the years and one of those is a future stage. Customer success as the term probably dates to the late nineties, when customer success was really about customer support back in the perpetual license world. So in that environment, revenue was made upfront. It was all about the TCV, total contract value, of the deals that you were signing. And the reality of that model is that because you were making money upfront, you really wouldn't have to care too much about customers after the initial sale. Customer support in that case was mainly offered as a service.
So B2B companies would charge for customer support, often as a fraction of TCV, and professional services as well. It was considered to be to the customer's benefit to offer that, but not necessarily to the company's benefit unless they were making healthy margin on that service. And so customer support by nature was reactive to what the customer wanted. It was mainly focused on inbound tickets and checking boxes on issues that came up. The best thing that could probably come out of a customer support ticket is that you could sell more professional services at a high margin because you'd realize the customer had a problem and you'd use that as a way to sell a service.
With the shift to recurring revenue, you were no longer making your revenue upfront. Certainly there was that component, but a lot of the revenue over the lifetime of a customer would come after the initial sale. It would come through the renewal of that contract and through the expansion of that contract. And so it meant that you actually had to care about customers after they signed that initial deal with you. At the beginning of the SaaS model, people saw these recurring revenue contracts as kind of annuity in the sense that it was considered to be the default that the customer would renew. There would just be this automatic recurring stream over time.
But as many SaaS companies soon realized, as their customers churned a renewal was not a guarantee. And actually if anything, there's sort of a law of customer success that the natural tendency of customers is to churn. It's almost like a law of gravity. They will churn unless something is done about it, and there are all sorts of things that you could do about it, which we can talk about.
But a big thing that needed to be done was to have people who would be dedicated to working with customers. They would need to be guiding them through a journey of onboarding onto your product, getting to an initial value milestone, deriving the ROI from your product that they hope that they would achieve when they initially bought your software, guiding them through the renewal and then finding new ways to add value. This would result in a high net dollar retention rate, which was really the recurring revenue metric that SaaS companies would care about.
We’ve seen stage three of customer success emerging. It started five years ago, when the product led growth model really started taking off and there was consumption-based pricing that became a lot more popular as well. So these two things often go hand in hand, but they had slightly different implications on the product-led growth side, what it meant was that customer success management as a function was not the only way to get customers to value, and actually product-led growth companies said your product should really lead not just in terms of acquiring new customers, but in terms of getting customers to value.
Ideally, customers don't have to talk to anybody in order to get value from your product. They should just self-onboard. They should learn about best practices through the product itself, and we can talk about that later in this conversation about what might be some mechanisms for that. And so product teams really are responsible for net dollar retention as much as, if not more than, customer success teams.
And then with consumption-based pricing, which often was tied to the product-led growth model, it meant that even if you have a renewal in your contract, the primary way that you make money from your customers over time is not through the renewal event, it's actually through getting your customers to consume more of your product over time.
So we're making money as customers complete certain actions in the product and the consumption-based metric might be literally transactions that are happening through the software. It might be the number of something that's done like invoices sent or emails sent, depending on what the product is. Therefore, it's really in the interest of the company to make sure that customers are using the product. It meant that securing additional revenue over time wasn't just about working with stakeholders to get the renewal signed. The shift in focus became a lot more about the usage and the value that customers are getting.
Then finally, the beginning of stage four is really right now where AI is taking off. Large language models have gotten so good that these agents can actually speak to customers sometimes even more effectively than humans can. There have been all sorts of studies that have been done that show that depending on the industry, agents can actually can outperform the average human in terms of technical expertise, problem-solving, and even empathy. So we are still learning what stage four looks like exactly, but you can imagine it in the long run being that at least some of your customers can be served by an AI CSM. And in the meantime, a large portion of what customer success managers do can be automated through those CSMs using AI to make themselves more productive. So certainly the role is changing even if it's not going away at this very moment.
CF: Absolutely a fantastic start and we absolutely will be getting back to churn, value from your product, and AI, all of that in the session. What I'd love to shift to though is the drivers of the need for stronger customer relationship. Tell us about what's impacting that. Specifically given the prominence of social media, increasing emphasis on online feedback whether they want it or not, how do you believe these factors are shaping the vendor customer relationship and in what ways has that immediacy of digital feedback and digital communication elevated expectations for customer service?
AP: Digital interaction certainly has been a primary driver of vendors realizing that they need to respond to customers much more immediately and effectively. Social media, as you mentioned, is an important vehicle for customers to talk to companies, sometimes not even directly to them but more just kind of venting to the universe about the issues that they might have and their relationship with their vendors.
Twitter, or X, has proven to be a great venting ground, and I think in a nutshell social media holds vendors more accountable than they used to be. Positive word of mouth through social media can really make your company, but one bad post can take down your company also. So, it's meant that vendors need to really mitigate the risk associated with bad customer experiences.
Also, Slack started out as a tool for people to collaborate internally within their companies. But increasingly, best in class tech companies are using Slack to communicate directly with their customers. They might have a Slack channel for each enterprise customer relationship that they have. It's helpful to do that because they can have a whole group of people at the vendor — it might be the CSM, their boss, a support person, professional service person, anyone who interacts with an account can be there seeing the full visibility of correspondence with the client. And then the client can similarly include all their stakeholders on their end and get near-immediate answers to questions. Slack has enabled an expectation of greater immediacy than there used to be.
And I think at the same time, some of these methods of communicating with customers online have become outdated. For example, I think we've all had painful experiences trying to interact with old school rules-based chatbots as a consumer, if you've interacted with your bank or Dropbox or you name it through chatbot, you've probably been frustrated.
Similarly, these voice bots when you call a customer helpline that take you through this decision tree are very painful to communicate with. This is particularly difficult for a lot of companies now, not B2B ones so much as B2C ones that are short-staffed. They just don't have the people to be the fallback for these channels of communication if the chatbot or the voice bot isn't working. There's often not someone who can talk to you at CVS if you're struggling. So we've had this heightened expectation for immediate responses, but then with the talent shortage we've been letting customers and especially consumers down a lot. That combination has just opened the gateway for AI to make an even bigger impact on customer experiences.
One example of a somewhat new use of a chatbot is in the debt collection space. There's actually a company that I just invested in, Saris AI, an early-stage company. If you looked at them, you probably wouldn't see anything really about it, but they're building agents for debt collection. It's a space where 75% of the role of a debt collection agent can be automated. Often these debt collection agents are corresponding with debtors through text or email, and some of what they're doing is rules-based. A lot of it is navigating the conversation to get a sense of that person's likelihood to pay off their debt and figuring out how to optimize the negotiation to the firm's benefit. These new ways of interacting with customers in an immediate way can benefit the vendor even more now than they have in the past.
CF: We'll get back to that question you mentioned before about value from your products, and we'd love for you to chat a little about how are companies delivering tangible value to their clients. And specifically by way of example, such as use of dashboards, embedded best use cases, what can companies do to really deliver best in class?
AP: I'll share a few examples. Certainly it varies by company, but we broadly categorize companies into ones that are following a product-led approach like I described before, and then those that are more enterprise oriented. On the product-led side, which is a large percentage of especially AI companies that are coming to market now, certainly in-app walkthroughs are a known way to onboard a new user. If you're not familiar with that term, you log into the product for the first time and there's a window that pops up and you click next as you learn where to go. The product walks you through, do this, then do this, then do this, and you're “activated.”
There's actually now a next generation of walkthroughs, and the one I'm excited about and which I invested in is a company called Atlas. It has created a crawler that allows you to understand in real time all the different states of your application. It's kind of like creating a Google map of your product, and the Google map automatically updates as you release new features in your product. Unlike the old school walkthroughs, which were static and you had to manually change them over time, with Atlas now you can release on a very frequent cadence with new features and then customers can quickly get up to speed on them through the dynamic walkthroughs that you can create.
It's also really common nowadays to use templates to greet new users so that they know, here's an example of how another user like you has solved this particular problem. Airtable, which folks might be familiar with, is probably considered best-in-class in offering templates for different use cases. It ensures that there's no blank canvas when someone logs into a product. It helps them get to value pretty quickly.
Product-led companies also use email outreach from virtual CSMs, so if they notice you getting stuck in the product, they might send you an email that says, "Click here if you'd like to set up time with us." Sales assist teams have also become common among product-led growth companies that are trying to upgrade individual paid users to corporate level contracts. The sales assist teams are like user-level CSMs where they'll reach out to individual free or paid users who they notice being power users of the product. They'll notice that if there are five power users at a particular enterprise account that are using the product, that means they're starting to collaborate. It’s an opportunity to leverage that and turn it into a corporate-level contract that a salesperson who's working with them can then close.
On the enterprise side in terms of how to help enterprise customers get value, I've noticed great companies creating maturity curves where they educate the client on how to change the way that they handle some practice through the use of their software. We did this a lot at Gainsight, which was a customer success product, and that’s why I know a lot about this space. We would be helping other SaaS companies trying to build their customer success organizations and we would let them know that they're starting out in stage zero where they are very reactive to their customers. There are these three additional stages that we're going to take you through over the course of our relationship. Stage one is about this, stage two is about this, stage three is about this. We're going to map the best practices in each of those three stages to features in our product that you should be using in order to become mature in that particular stage. And then we'll graduate you to the next stage.
It's a very prescriptive way of helping your customer instead of waiting for your customer to reach out because they’re struggling or not using your product. We were almost acting like a light touch consulting firm and help them get value in a methodical way.
CF: It sounds like in product education—helping the whole customer experience is what this is all about.
AP: Exactly. And even with enterprise customers, certainly much can be done in-product. Software people have a tendency to want to automate everything, so they can sometimes underestimate the value of having humans actually guide customers through change.
One of the companies that I work with that has actually been super successful today, primarily through product-led approach, is now really deep in building out their enterprise business. The founder came to me and said, "I finally understand now why you were telling me to be on a texting basis with the top executives that are top clients. Because even though that felt like a silly manual thing to do, it's a huge lever for us to learn about the effectiveness of our go-to-market approaches, deepen relationships, ensure the renewal and expand the size of these accounts."
The in-product stuff is really important, but still there's some old-fashioned relationship building that tends to make a big difference particularly in changing behaviors. It can be hard for products to change people's behaviors. They're used to working in a certain way. Sometimes we just need a person to guide us through it, or in the future maybe a persuasive AI.
CF: Let’s shift a little now to the product-led growth area. How are businesses managing customer expectations given the rampant use of free trials, freemium models and product-led growth? How have customer success teams adjusted to this new emphasis on customer-driven product roadmaps?
AP: All of these changes have meant that product teams and customer success teams have had to work very closely together to ensure that customers are getting value and that, as you said, their expectations are met. I've noticed a certain set of best practices needed for those two teams to work well together.
One is that they have the same metrics that they're using to analyze customer health. I remember really early at Gainsight, I came to an executive team meeting and I was saying, "Here's the definition of a customer health score that we have been working on on my team." And then the product leader looked at it, and we are clearly not on the same page, and he said, "Well, actually we've been using this other definition," which looked really different. And there was a moment where we thought maybe it could make sense for us to have two different metrics. Certainly I didn’t want to impose too much on him and he didn’t want to impose on me. But that's a misalignment that needs to be fixed. We need to have a North Star metric for what counts as great adoption and what counts as a healthy customer. Otherwise we might not build the right things to serve customer needs.
In the same vein, it's important that both teams be looking at the same customer feedback. Particularly with the advent of better LLMs (large language models) there are a lot of great tools out there for analyzing written customer feedback, quantitative customer feedback, and getting summaries of those things. Both teams should be looking at the same stuff. It's important for product teams to involve customer success early on when they're planning product roadmaps.
It's one thing to come for the product team to say, "Oh, we designed this whole feature and FYI, we're going to be releasing it in two weeks. Customer success team, you better get ready because you're probably going to get a lot of questions about this from your customers." It's another thing to say, "We're envisioning solving this particular problem that our clients have. Customer success team, join our design brainstorm session or our design review session so that you can give input based on what you've noticed those customers experiencing with this particular problem."
I've noticed a lot of benefit to having subject matter experts within customer success teams where a particular CSM can raise their hand to say, "I'm going to be the one to just gather lots of feedback on this particular feature and become kind of a thought leader on how that might evolve over time." And then they can be the one to join the product roadmap meetings for that particular feature.
I've noticed a ton of benefit to having engineers rotate through a customer support position. Some companies, for example, when hiring a new engineer, will have them spend their first two weeks on the job fielding customer support tickets. It starts them off with developing a level of empathy for customers that they can then bring into their engineering role.
And I saw another very successful company recently, where they've got nine people and are at a few million in ARR, annual recurring revenue, which is amazing. They don't have any customer support people. All their engineers just field tickets as they come in and the minute they get a ticket. They solve it, but then they build something to prevent that ticket from recurring.
And the final thing that is useful is recognizing that customer success folks and product managers bring different skill sets and personalities to solving customer problems. Both are important. I’ve found customer success folks to be very good at situational thinking. They understand that a customer has this particular problem, and they’re eager to help them think through how to solve it for their particular needs. Whereas product people are often very good at systems thinking. They notice this problem across a broad set of people and look to define the problem with a level of breadth. Not every problem is unique, not every client is unique. There are patterns and they aim to build the product to account for those patterns.
CF: Are there actually metrics that should be used by companies, no matter who's bringing them forth, that really help gauge customer health? Are there standards, just a list, that every company should be holding onto?
AP: There are certain financial metrics that every company should be tracking. Net dollar retention is the most obvious one. Net dollar retention, for those who don't know, basically means you take customers and the revenue that they're paying you at the start of the year for that same set of customers, and see how much revenue are they paying you at the end of the year. Over the course of that time, some customers might have churned, they might have stopped paying you altogether, and then some might be using your product in a more robust way or they might've bought additional products or licenses from you and that expands the size of their contract. So net dollar retention is an important metric.
Churn, like dollar churn rates, or the inverse of that is gross retention rate. Very important I think for everyone to track and that's important to track separately from net dollar retention because if customers are churning, even if other customers are spending more money with you, on balance it nets out, it still matters that customers are churning.
That's important information. You might learn that customer is not a fit for my business and we shouldn't sell to this market anymore. You might learn important feedback on your product or your method of selling to them. There's just important information inherent in that churn. So you need to track it separately. And also the more customers that churn, the fewer customers you have to upsell, so it reduces your install base that you can then expand and that's a financial problem.
It also costs more money to replace a customer that has left than to renew them typically. So, it's important for your sales and marketing efficiency that you renew customers. But I think there are a lot of other metrics that are unique to a particular business. I do recommend, as I noted earlier, having a North Star adoption metric for your company.
It might be the metric that's used in your consumption-based pricing model if you have one. For example, the number of value-oriented actions that a company is completing, or a user is completing in your product.
PQL is also a common operational metric. It's product qualified lead. I talked earlier about a scenario where you have five power users at a particular account that might qualify that account to be a PQL. It's a lead for a sales-led, corporate level contract that you could be selling. You're trying to convert self-serve organic usage into a sales-led, much larger contract that you build, probably with the executive at that account.
CF: As we think about just holistically business strategies and practices and as you think about the audience on this call right now approaching and chatting with young companies, are there rituals and practices that embody everything you've been talking about that are recommended for these young companies and that we should be looking to see whether they're tackling? Specifically, which practices are most important as younger companies undertake new product introductions, expand their channels of distribution, or even make an acquisition?
AP: There are a few that I've found helpful. The foundational thing is for founders to define very clearly what their values are, explain in detail what they mean and refer to them very frequently. I really believe that it's important to be intentional about this. Also, a lot of founders make mistakes when they define their values. The biggest mistake typically is they are too vague or the values just look like, "Oh yeah, everyone likes that. Be nice to people.” Sure. It's hard to argue with that.
I think the best values are ones that reasonable people could disagree on. As an example, a value might be that we are transparent with each other. The reality is that not everyone likes transparency. There are certain people who may not want to know everything bad that's happening at the company. They might get really demoralized or they may not want direct feedback.
So, you could imagine a different type of value, which might be that we are kind to each other. It might be that kindness is sometimes at odds with transparency. So again, I think it's important to take a stand on what kind of company you are going to be and that can help guide many decisions that you have over time.
OKRs are certainly an important type of practice. OKR stands for objective and key result. Essentially, it's a goal setting process that's become a widely used methodology now. You can have overkill with OKRs when you're a very small company, but what I like about the methodology, and using it in a light way from the beginning of your company, is that it makes everyone realize that what they are doing matters for a bigger goal. Everyone needs to understand the way that they're spending their time is mapped to a broader mission and strategy for your company. It just gets everyone on the same page from the beginning. And that creates a lot of agility, which is so important when you're a small company.
I also like reviewing job descriptions with key leaders every six months. Often we talk about job descriptions when we're recruiting someone, but we don't revisit them later. It's important to revisit them because if you've stayed at a fast-growing startup for six months, that company has inevitably changed dramatically over that period. That means that your role has also changed. Probably the expectations for your role have changed pretty dramatically. So those JDs need to be updated and there needs to be an alignment between CEO and exec or leader about what is their role at the company.
The final thing I'll recommend in terms of rituals is using exec coaches or leadership coaches. I find it just so important that leaders be self-reflective, aware of what they're strong at, aware of where they need to improve. When people have a coach who's in their camp advocating for their professional growth, folks are much more likely to not only succeed themselves but also be more dedicated to the professional development of their team members as well. They’ll make sure that everyone is growing with the company, again as the company changes its expectations for people.
CF: On another topic, you had a wonderful blog post that spoke to seven fundamental attributes of a company.
AP: I wrote a post about something that I termed talent efficiency about a year and a half ago. It was a revelation I’d had when I had looked at two extremely high performing companies that I was involved with. One of them was, at the time, the fastest growing SaaS company ever to $40 million in ARR. I was looking at these two companies and realized that in both cases the founding team worked hard but not super hard. As someone who's worked in private equity investing and has always been a very driven person who believes that hard work is inherently an important attribute in life, this was kind of shocking.
Both founders were dedicated fathers and would leave work at 5pm. I was trying to figure out how this is even possible! It’s a small sample size, but I think this applies more generally—if the fundamentals are right at your company, you may not need to work as hard because things are easy. And the things that make it easy for you are the seven attributes in my experience.
One attribute is a large immediately addressable market, which by the way is different from knowing there are 7,000 accounts that you could sell to. It's that there are people in the market to buy your product right now who are raising their hand and you can just onboard them. You could have a wait list right now of people knocking down your door trying to buy your product. There's a strong inbound component to this. It's not just they're willing to have a conversation with you. They're more than ready. They would've bought it yesterday.
The second thing is strong product-market fit. It's not just that the market is ready to have a solution, it's that your solution for that great market is also great.
Third is strong positioning, where people easily understand how your product fits into their current tech stack. We like to be disruptive as startups, but the reality is you have to work your way into the world and you've got to have a place where you fit. So you build partnerships, product integrations that reinforce your positioning.
Fourth is limited competition. You don't want to waste your time fighting small battles.
Five is a talented team. The talent of the team is a fundamental attribute. These are people who can do the same amount of work in less time and find better solutions.
Six—strong alignment across your team. Alignment is a fundamental attribute. It means that, as we talked about earlier, everyone is aligned. Synergies among team members are high and you're able to focus your effort on very high value things.
And the seventh thing is a strong founder. And strong founders end up checking all the boxes on fundamentals one through six. They find a large immediately addressable market. They build a product that fits really well and they position themselves well. They find a space where there's not a lot of competition. They think through this, then align and recruit the right team members to go after that problem. Those are seven things that I think about a lot when I'm looking at investing in companies as well.
CF: I'm going to take a little bit of a leap now because I don't want to miss this topic. You mentioned ChatGPT before, and I'd love to take it a little step further and ask you to comment on how you feel that tool is going to add value in today's business. Can you provide a specific example as it relates to excellent customer service?
AP: ChatGPT, as I think you all know, is a consumer facing product that was initially launched as a way of educating the world about the power of large language models. GPT more recently, GPT 4 and GPT 4 Turbo that the company OpenAI has released into the market. Companies have been spending the last year, I guess since it was launched, trying to figure out how to incorporate large language models into how they do business. And not just how people can use ChatGPT for fun purposes, like faking the writing of an essay for school.
And I've noticed three categories of ways that large language models can be useful for customer success. One is that they make customer success managers individually a lot more productive through, for example, summarizing meetings and coming up with action items coming out of a meeting. There are tons of meeting summarizers on the market, and actually CSMs spent a lot of their time summarizing a client meeting, then sending takeaways and action items to customers or to other internal team members who are supporting an account.
You can use large language models to brainstorm ways to save an account. I've used, for example, Pi AI (it's pi.ai) before. You could use ChatGPT for this as well. You could write a prompt like, "Here are some attributes of this customer situation. Help me think through how to save this account."
LLMs have been used to synthesize research about a particular company's priorities by scanning public filings and even job descriptions. Because job descriptions often mentioned corporate priorities and tools that are being used. You can learn a lot from public stuff about what a company cares about and therefore how to sell to them or how to influence that account as a customer success manager.
For auto-generating decks and PowerPoints for meetings, there's a company called Matik. They help take your company data and embed it into a PowerPoint that you can then share with the client as part of a quarterly business review. That might be just a quarterly touch-base with the client about the value that they're getting, particularly how their users are using the product.
The second category is automating the role of CSM and support, not just making CSMs more productive. We've talked about support chatbots getting a lot better with AI and helping with how-to questions that users have. You can also automatically email your long tail of users to upsell them, for example, and design the talking points in those emails. There's a company called Wizia which does that, and there are a few others as well.
The third category of ways that LLMs have changed customer success is about improving the product. So you can use chatbots for example, to gather feedback from customers about their experience and what features they'd like to see that can inform the roadmap. I mentioned the company that I invested in called Atlas, which helps create in-app walkthroughs, but also they help create and maintain documentation about your product, which is currently an extremely manual effort. That's mostly shouldered by product managers and engineers who could be spending their time doing really different things.
The final thing is then automatically configuring software based on prompts. So for those who have been exposed to salesforce.com, you might know that there's a huge industry dedicated to configuring Salesforce to customer needs and then maintaining it and adjusting it over time. Companies spend, I think, more on those services overall than they do on software licenses for salesforce.com. Companies like Superframe and Swantide are autoconfiguring salesforce.com and other related applications. That means that those products can be massively improved in terms of the time to value that they offer customers.
CF: I would love to turn our attention to your book The Customer Success Economy. It contains so many different and important insights. What would you highlight to this audience as the most important ones anecdotally or otherwise that entrepreneurs that we speak with should really learn from?
AP: The book is basically a synthesis of my (and our CEO who I co-wrote it with) six years of learning about customer success, from incubating best practices internally to seeing what works out in the community and compiling that together in excruciating detail. I think a lot of people have found the best practices in that book to be useful. But the most important takeaway from it is actually how the power of first principles thinking can help you learn about something from scratch. We knew very little about customer success and we set out to build this company and we learned a lot by just thinking from scratch about the problem of how to drive strong net dollar attention.
And that's important because even today when I talk to founders who are looking to hire a great head of customer success, their default instinct is to go hire someone who's done it before. But given how quickly technology is evolving nowadays and therefore how quickly go-to-market motions and customer facing motions need to evolve nowadays, it's useful to hire generalists in customer success leadership roles. These are people who can think from first principles about how to design a customer success team given how quickly their company is inevitably going to change and how quickly the ecosystem around them is changing. So, I maintain that often generalists are the best customer success leaders, and again, thinking about things from first principles can often get you to the right answer.
CF: Briefly describe what you call the growth mindset, which anybody with any background needs to have, and its four dimensions.
AP: Growth mindset is one of my most important values, personally. Actually, on a personal note, when my husband and I were trying to decide whether we should get married, we decided to spend half a day at a vineyard in Napa where we put together our family values. We wanted to make sure that we knew what those would be. So we came up with a bunch of family values and we engraved them into a wooden board that now sits in our kitchen and that we educate our children about. You can tell we're both MBAs. And one of our values is growth mindset.
In life and also in startups, it's just so important to recognize that you are never perfect. Perfection is also not really possible, but a little bit of humility and a little bit of insecurity actually can help make sure that you're continuing to improve, continuing to evolve.
The four dimensional framework that you mentioned is something that my leadership coach David Lesser (who I've been working with for seven years at this point) put together with one of his mentors. I found it to be one of the most impactful frameworks for thinking about how to grow oneself.
The four dimensions that he identifies as leadership competencies are one, awareness, which is about being self-aware and aware of your environment. Do you process information well?
Second key competency is connection. Are you able to have that EQ to connect deeply with other people?
Three is confidence and actually it's more like inspiration. Do you have the gravitas and do you glow in the way that helps other people be drawn to you and want to follow you?
And then the fourth competency is essentially warrior strength, which is about just hurtling toward your goal.
And I found when I am coaching folks who work with me, speaking to these four dimensions is helpful for me. It helps me understand where they get their energy and where they are strong. It's not necessarily that you have to fix it when one of these competencies is low for them. It might mean more that you make sure that for the next executive that you hire on your team, they can complement that executive in that area.
But it's important in any given team to have great energy across those four different competencies because all of them are important. And if we know where we're getting our energy, it helps us to grow and evolve.
CF: Fantastic. And with that absolutely wonderful way to think to the future, think about ourselves, think about people that are part of a management team, having that kind of growth mindset. I'm going to just say thank you, thank you for all these wonderful insights. What a pleasure and a privilege to have you with us today. We're so glad you're able to join us. I'm sure the audience shares in saying thank you.
L: Thank you Allison and Carolyn, I just want to say first of all, your expertise goes way beyond AI and SaaS, so thank you for all of those insights. We do have time for a couple of questions. John Wilson, you have a question.
JW: Thanks Loretta. And Allison, that was great. I enjoyed your topics and presentation today. It was really well reasoned, well organized, compelling even. So thank you.
The way I think about customer success, we staff people typically in those roles with SaaS. We should have pretty good telemetry about how our products are being used at an actual individual user level. And then we have the ability to suggest maybe through a maturity model the features and capabilities that can help them adopt or be more efficient or more effective. Maybe there's an element of AI in there as well.
I look at customer success and those three things that need to come together. I think my experience is most companies look at telemetry sharing. Too much of that can be creepy to the actual customer or user. Are we thinking about how to make the telemetry and the insights? We didn't really talk about that a lot today, but we have this incredible wealth of information on how our products are being consumed and used. And we can take a client logically through that maturity model or use it for engineering to give us the heat maps on where people are having challenges. Is there a collective thought in the way I described those three things about people or organizations or solutions that are helping do things like that?
AP: Those are three important components of effective customer success strategy. Specifically to your question about telemetry, can that be at odds with our desire to connect with our customer because they find it creepy that they're being tracked? I actually think that was true when we started out at Gainsight, but at this point in the business community, I think everyone actually expects that they are going to be tracked. And if they sense that you are not tracking them deeply, they are annoyed at you — speaking of the desire for immediate response. Many companies believe that if a vendor is not tracking the percentage of their licensed users that are using it, if they're not tracking whether they've completed certain milestones in onboarding, they think that the vendor is just not on their game. So that's been an important evolution now and it increases expectations for the vendor.
You were asking a bit about how these three things relate to each other. I do think that especially usage data can be used to understand where is a customer in the maturity curve. I think that's what you were implying. And for each of those three stages that I mentioned in the Gainsight example, how we tracked our clients through the stages, there were certain behaviors that we would expect to see in the usage data. And so yes, I agree with what you said.
L: Barbara Raho is saying, "I always thought that an important leadership competency was subject matter expertise and knowledge. Do you think that's important?"
AP: That's a great question and could be a counterpoint to my argument for first principles thinking. It depends, and to give some boundaries around that, I do think founders need to be subject matter experts on the markets that they are serving. One of the things that I look for in founders that I invest in is that they're authentic to their market. It’s important for developing a unique insight into how to solve a problem. That unique insight can propel them into building something that doesn't have many competitors and that is contrarian in the best way. That's important. Also in certain cases for customer success managers specifically, it's helpful for them to have subject matter expertise in the field of clients that they are supporting. For example, I was talking to a legal tech company yesterday that is thinking of hiring lawyers as customer success managers because they have so much credibility with the client lawyers that they are speaking with and trying to influence.
So subject matter expertise can be important. I generally find, though, that founders overweight functional expertise when they are hiring. And that often leads to big mistakes like hiring a sales leader from a big company just because they have 20 years of experience doing it and it's a hot company. But it's very different building in a tiny company in a relatively unknown market where the world is shifting beneath your feet because OpenAI just came out with a bunch of announcements that day. So first principles thinking is probably the most important thing to anchor to when you're hiring.
L: That's great. Thank you. And our last comment is that from Elton, “Thank you very much for your advice about marriage.” That's a good comment and I just hope everyone will join us in thanking both Allison and Carolyn for a great conversation. Thank you everyone for coming and happy holidays. Thank you.
CF: Thanks, Allison.
