Customers + Success: Tutorial: Outcomes-based Customer Success
Join our learning journey as host Kate Fleming explores all aspects of Customer Success with guests from across the industry.
We’re really excited to have Paul Henderson, author of ‘The Outcome Generation: How a New Generation of Technology Vendors Thrives through True Customer Success’ join us for Ep #6 of C+S. We will discover just what ‘Outcome-based Customer Success’ is, and then walk through a practical guide to building your own ‘Outcomes’ Programme for your Customer Success team or even just your own portfolio.
So Paul and people at home, thank you so much for joining us for the sixth episode of Customers Plus Success on Cloudflare TV.
Paul and I were just discussing what is likely to be an intermittent issue through today's show, which is the fact that I keep freezing.
So if that happens, I can guarantee it'll be on a really unflattering view of me.
Paul and I know we're going to discuss and he's just going to keep talking until we work out how to fix it.
But let me introduce Paul. So the series that we've had so far, we've been talking to people that are practitioners in customer success.
We've been talking to people about how they hire for customer success, how they build communities, how they structure their team.
And we've spoken to people from leadership as well as people from strategy, so people outside the industry coming in.
And you're a bit of a hybrid of both, I suppose, because you've been there, done that, and now you're on the strategy side.
And one reason why Paul and I are chatting today is he published a book that's pretty exciting and very relevant to most people or to everyone who's on the show today.
Paul's book, The Outcome Generation, How a New Generation of Technology Vendors Thrives Through True Customer Success, really helps frame a conversation around what outcomes-based customer success is.
And it might seem like a mouthful, but it's okay.
That's why we've got Paul on the show, and he's going to talk us through some things.
But before we get started, Paul, tell us a little bit about your background, because you are this hybrid of you've been practitioner and now you're consultant.
Yeah, okay. So I'm concentrating on the technology industry, so it's not a surprise that my background is technology.
So my last role before founding Outcome Leaders was running the Asia-Pacific region for an ERP software company.
So I had about 200 people across nine countries supporting 800 enterprise customers.
In the last five years that I was there, two interesting things happened.
The first was that we made the decision globally to change from being an on-premise vendor to being a cloud vendor, with all the fun that goes with trying to make that transition.
And the second was I made the decision in our region that we were not doing enough to create genuine business results for our customers.
And so I hired some smart people, and together we sat down and worked out a program, which we then successfully ran for over five years, delivering business outcomes for our customers.
At the end of that time, two things happened for me. The first was I thought, you know, other companies are starting to do this outcomes thing.
Maybe I can help, given the experience that I have.
And the second was, you know, I realized I really cared about this.
I do not think it's okay for technology companies to sell their technology, and for the customers not to get great business results.
So I felt like I wanted to tackle that. So I'd been writing my first book, The Chief Capability Officer, as a hobby basically.
I left the company I was working for, I published the first book, and then got to work researching and writing the second book, The Outcome Generation, which took about a year and a half.
And since then, I'm working to help technology companies make customer outcomes their central focus.
So that's how I come to be talking to you today. So thanks, Kate, for the invitation.
Got it, got it. Thank you. I actually didn't know about your first book, so I'm going to have to take a look at that as well.
Okay. Yeah, all right.
So we're talking about the fact that you really, you almost had like a, I'm going to say it's a moral calling, but you had a sense to really shift the paradigm to be customer-centric and really deliver value to customers rather than, I suppose, interpret what you could deliver.
So can you talk to me, like let's start with that, because customer -centricity is something that comes up.
Everyone talks about it.
It's like, I don't know, everyone says that they do it, but are they really doing it?
Yeah, Kate, I think it's a great point. You know, I hear companies all the time, and then you say, well, what does it mean to be customer-centric?
And you get very vague answers often. So I have a view that it's linked to outcomes.
So the view is, whenever money changes hands, whenever someone buys something or a company buys something, there is an outcome at play.
So you buy a hamburger and you want to be full.
You buy a movie ticket, you want to be entertained.
Buy a sports car, probably you want to be noticed. So it doesn't matter what it is.
If money changes hand, there is an outcome in play. So the question, if you're not clear about the outcome that you help create for your customers, how can you be sure that your offering, that your products or services are actually a good fit?
How do you know you're not a square peg in a round hole? So the proposition is, if you can be crystal clear about a core outcome that you help your customers achieve, and you can align all of your departments around enabling that one thing, that one outcome, that you is the central thing that you do, then you can be truly customer-centric.
I've got to remember to take myself off mute before I ask you a question.
Okay, so customer-centricity, it's not just talking about it, it's actually doing it.
But then, I suppose I am going to digress about that for a little bit, because it sounds very easy, you get everyone on board, find out what value you offer and off you go.
But you're asking companies to almost look introspectively and change a lot about what they're doing, and potentially to really ask some hard questions.
I suppose what's on the other side? Why would I bother doing that? So there's a few things that the driving and outcome approach will do for the organisation.
The first is alignment. So if you talk to a CEO, one of the big problems they have is that every department is doing their own thing, and that results in these silos, and forever since Peter Drucker we've been talking about silos and the negative effect of those things.
And if you have a single thing that you're doing, then everybody is focused on that one thing.
And that helps get alignment.
So let me give you an example. There's a company in the US who do digital asset management software.
So it's things like font management, managing videos, managing pictures, and so on that are used by creative people in producing advertising and content and things like that.
They looked at the way that creatives work, and they said, well, there's this productive time when they're working on stuff that's really good, and this is what they're producing, their work product, but there's this dysfunctional time when they're doing things that are not adding anything.
They're not helping with productivity or the result. And that's caused by what they called creative chaos.
And so they said, what we really do in helping with digital asset management, we actually help the customer control the creative chaos.
And that has become their mantra. So now when they go and talk to customers, when they're doing product development, when they're talking sales, marketing, everybody comes back to that one simple idea.
It's all about controlling the creative chaos.
So the first thing that comes out of it is alignment.
The second thing out of an outcome program is the ability to create advocates.
So if you help a company create a great business result, and you make sure that someone in that company gets credit for that, they become a hero or a heroine.
Heroes and heroines become advocates.
And advocates make sure that your subscription gets renewed, because their success internally is tied to your success.
But they also want to maintain and improve their status as a hero or heroine.
And so they will help you drive a continuous improvement program.
Continuous improvement of that core outcome that you help your customers with will result in new initiatives.
New initiatives mean expansion revenue. So an outcome program is a brilliant way through a hero, heroine program of not only driving retention, but also driving expansion revenue.
And there's a bunch of other things, executive engagement.
Every account manager on the planet has been told by their sales manager, you need to go and engage with the decision makers.
The problem is we don't arm them with anything to go and talk about.
You know, and they turn up there and they've been trained to talk about product.
And executives hate talking about product.
They've got no interest. They delegate that. If you can turn up and talk about how you can help them create a genuine business result, something that they get measured on, you have their interest.
And you've not only established, but you can maintain that executive contact.
So those sort of things. There's an interesting one that came out, which was an internal one.
And it's about having a sense of purpose.
So we, as a software company, we, and this was an unexpected byproduct of the outcome program that we ran across Asia Pacific.
We said, you know, we're going to do this.
And we taught all of our team how to go about working on the business outcome that we were helping with, which was effective operations.
So manufacturing companies buy ERP software to run their operations the most effective way they can.
We used to focus on selling software and getting it live.
And that was a good thing, you know, because the software was good and so on. When we elevated that, the staff had a much greater sense of purpose.
Now their work was directly linked to measurable business results that the customers were getting.
And that lifted them. And it created new career opportunities for people.
We had some new roles that came about because we were helping with this. But it also just, across the whole company, it just gave everybody in the region this new sense of purpose.
And that's fantastic for retention, for discretionary effort.
That really helps organizations run that sense of having a great purpose.
So that was just some of the things that we found that came from the outcome program that we ran.
Okay. So if I, you know, and I think purpose actually, and purpose is something that we haven't discussed a lot in previous episodes, but it's so important.
You know, it's not just where I fit into the bigger picture, but, you know, what value am I delivering?
And being able to tie yourself to actually good customer stories and good customer outcomes versus dollars is pretty powerful.
But I want to go back a bit. So let's say, so customer centricity, everyone talks about it.
Not everyone does it. To do it properly, you need to have everyone on board.
You've just given me six or seven reasons about why it's important.
But let me just go back and throw a spanner in the works here. Let's say I'm me, right?
And I run a team of customer success managers in APAC. And either through, for whatever reason, lack of influence, lack of interest, other projects going on, whatever, I'm not able to get our CCO or our CEO or CRO to get on with this journey and say, yes, we're going to do it from the top down.
Can you do it at a department level?
Can you say, okay, well, we're going to embrace that. Yeah, you can.
So I was talking to a guy in the US just two nights ago who has done exactly that.
And he started, he runs the customer success team. He launched the outcome program in his company.
It works so successfully. And so he told me, they are an application vendor.
They improved retention by 15 points in nine months, solely by switching to an outcome program.
The CEO was then so impressed that now the whole company is adopting an outcome program.
So yeah, CS can kick it off. In my view, the simplest way of doing this is by adopting a continuous improvement program.
So we talked about this idea of expansion revenue. And we talked about the idea, if you create a hero or heroine, they become an advocate.
They will not only ensure retention, they can also help with a continuous improvement program.
What CS can do is take over driving a repeating cycle of engagement with all the customers.
And that's something that traditional account management, account managers do really badly.
So account managers run what I call scramble pipeline building.
So the way that works is they've got a quota. They look at their quota. If they've got enough in their pipeline to make quota, they do zero pipeline building.
They hate it. I think that sounds like me earlier in my career when I was an account manager.
Yeah, me too. I've been there and done that, exactly the same.
But what happens if the pipeline isn't enough to meet quota, the sales manager is saying, you've got to get out there and find some opportunities.
So they scramble out into the customer base and talk to anybody that will listen to them, hoping that they'll be able to find some leads.
If they do find a few leads, and their pipeline look is now big enough, they stop lead generation again.
And by the way, customers hate it because the customers know the only time the account manager wants to talk to them is when they're trying to sell them something.
And it's all about, can you buy something right now?
CS can change that. CS can drive this repeating cycle of engagement.
Let's every single year, we're going to come back and we're going to go through an agreed process of reviewing the business results that we're helping you achieve.
And we're going to agree some initiatives to drive further improvements in those results.
It's not about selling the software.
It's about driving further improvements, further business initiatives.
And that will lead to expansion revenue. But the expansion revenue, the sale of our products and services is a by-product of a business initiative.
The purpose of which is to improve the business results, the business outcome that we serve for the customers.
So the simple thing for CS to do to get this started is get this repeating cycle of engagement working across your customers and make the conversations about the business results of the customer.
Ideally, you can convince your CEO to agree on this core outcome that you serve.
If you can't do that, just talk about the business results and stay focused on business results.
Do not lead with your product. Don't lead with your services. Stay focused on the business results that are important to the customer and drive the cycle of together with the customer coming up with ways of improving them.
So I'm going to show my age a little bit here. But we were taught spin selling.
And I remember being taught spin selling. And for the people that maybe aren't as old as I am or haven't come from a revenue background, spin was really changing the paradigm as a salesperson.
And it was to coming out with the problems and really getting the customers to feel the pain.
It was all about the feel the pain that you're going through and then getting them to come up and then for you to be able to offer them these solutions to these problems.
But this sounds a little bit like that, but not quite.
So talk to me about the difference. Okay. This is about telling the customer rather than asking them.
Is that correct? There is a bit of a problem there.
Yeah, absolutely is. So this has got some elements of challenge of sale which is the most recent version of solution selling.
So let me perhaps give a little context to this.
In the book, I talk about three generations of customer engagement.
The first generation started way back in the 70s when software packages first appeared.
And customers would come up with long lists of features and functions requirements and they would hold a shootout and vendors were required to turn up and they were required to demonstrate feature by feature by feature how their software complied with the long list that a consultant had helped them write.
Honestly, it is mind numbingly boring for everybody involved.
No one really cares about the list of features and functions but that's what everybody had to evaluate.
Oh, it's horrific. Sadly, if you sell to government and some other agencies, you still have to do that.
But the commercial world luckily has moved on.
So that first generation was the features generation and that lasted until about the late 70s or early 80s when we started to see solution selling be adopted.
Solution selling said, instead of just accepting the feature function list, go and understand firsthand the problems that the customer might be experiencing and show how your software solves the problems, provides a solution.
So spin selling one, there was strategic selling, spin selling, target account selling, there's a long list of them.
The latest and greatest of which is a thing called the challenger sale.
If you haven't read the book, The Challenger Sale, actually there's two books in the series.
The second one is The Challenger Customer. It's the better of the two books to read.
They're worth a read. The one change that the idea from the challenger sale brought in was this idea, don't go and ask the customer what problems they've got, go to the customer and tell them about problems they don't know they have.
So give them insight and then talk about how you can solve those problems for them.
So this concept of creating insight was introduced, which I think is really a really valuable concept.
So the authors did brilliantly in bringing that concept to the market.
What we are seeing now is the emergence of the third generation, the outcome generation.
And what the outcome generation is saying is if we just focus on today's problems, business is changing so fast that by the time the customer goes through definition of the problems they're gonna solve, comes up with a solution, evaluates vendors, goes through an implementation, waits for results to start flowing, by the time they've done that, a whole new set of problems have come up.
The business world is moving too fast to be focused on what have you got as a problem today?
The outcome generation says, no, let's look into the future.
Let's create an image of a to be state, the kind of result or outcome that you need to get to.
And let's build a plan to the future of how we can get you to something that is not yet on your scope.
And we build in this idea of providing insight.
So we're gonna give them an idea that maybe they hadn't even thought about before.
So this idea, going back to the example I talked about before, the creative chaos.
So this company is going along and talking to the heads of creative departments or the owners of creative agencies and they're introducing the idea of creative chaos.
And the reactions they're getting are, you know what?
I've never thought about it like that, but you're absolutely right.
This is a serious problem for us. We need to- That's that aha moment, right?
That's a great way of describing it, Kate. Yeah, there's aha moments going on.
So what the difference between solution selling is it's focused on today's problems.
An outcome program says, let's paint a picture of the future and together build a path to that outcome future driven by an insight into how to get there and just maybe some outcomes or to be state that the customer hadn't even thought about.
Okay, so you're then building yourself. I get where we're going now because now we're building yourself into the subscription because you're taking them on a journey and they're gonna thirst for more.
So let me kind of just recap mentally and just for people listening along.
So, you know, customer centricity is important and you've got to do it, not just say it.
It is best if it can be from the executive sweep down and part of your overall strategy.
However, it sounds like you can still move the needle if you're a department head or even a team lead, you can do things within your control.
Then the bent, you know, you've given us a...
Sorry, there's a bit of kitchen noise going on in the background of my house.
You know, the benefits in the... This is the COVID world. That's it. We're all used to seeing everybody where everybody lives now.
Correct, correct. I've seen more of my colleagues pyjamas and children's pets over the last possible.
But, you know, you talked about alignment. So at the higher level, like what's in it for me, right?
You know, why would I go through this effort? Well, forget the alignment piece because let's just say you're only doing it at a department level, but you're creating advocates within your customer base.
So they're going to help you sell and help you stay sticky.
You're actually helping your key advocates to better their own careers and really build their own brand reputations.
It gives you a message to take to executives when you're dealing with them in your customer base and a purpose for your team.
And that it's about the future.
It's not just now. It's about future because we've got this, I don't know if you've heard this term, this VUCA world, right?
There's increased velocity, uncertainty.
See, change might be change, acceleration. I don't know what it is. But like this idea that things are changing so much more rapidly than they used to that you just cannot build a plan that will last you for 12 or 36 months.
We've set the scene and I'm just watching the time now because now I really want to understand how to do it.
We've got seven minutes left and I'm thinking that we're probably going to need to pull you back because you can then take me through.
And I know you talk about things like a plan on a page, but you know, practically, theoretically, people listening to this go, okay, I get it.
It's important. But like, what is it and how do I do it?
We're not going to have time to do that today, but can I ask you to take me through maybe some examples just so that people can get like a concrete example of, like, what are you talking about?
So one is we reduce your creative chaos.
Give me some more examples so people can kind of level set this against their own experience.
Okay, so let's use an example of a marketing automation vendor.
And I want to introduce a concept around this, you know, what an outcome is. Because outcomes is one of those things that everybody talks about, but everybody's got their own idea about what an outcome is.
So let me frame it a little bit and then I'll come and talk a little bit about an example.
So we've talked about the idea that whenever money changes hand, there is an outcome in play.
In the technology industry, there's two different types of outcomes that we deal with.
The first is a product outcome.
So that's the direct benefit of using our technology, our product or service.
The second we call a success outcome. So the success outcome is the bigger outcome that the customer is actually trying to achieve.
Our products are a means to an end.
They're important, but not enough for the big outcome to be achieved.
So let me give you a couple of non-technical examples to illustrate the difference between a product outcome and a success outcome.
So let's say you go to a hardware store and you buy a drill bit.
The hardware store manager is going to know you don't want to own a drill bit.
What you want is a hole in the wall. So you pay for the drill bit.
If it works as it should, you have a hole in the wall. That's a product outcome, the direct benefit of using your product.
But who wants a hole in the wall, right?
What we want is that picture we've just had framed hanging on the wall at home.
And when we can stand back and admire our picture up on the wall, then we've experienced success.
That's a success outcome. Similarly, if we go to a restaurant, the restaurant owner might think their job is to create great food and service.
And they're right. If the food and service is no good, we'll never go back to that restaurant.
But so we pay for the food and service.
The food and service is good. We've had a product outcome. But that's not the only reason we go to a restaurant.
If we're ever allowed to do that in numbers again, we go for a great night out with family and friends.
And the success is a great night out.
So why is that distinction important? Well, let's say we get the picture up on the wall.
We stand back ready to rub our chest with pride and it looks terrible.
It's in the wrong place. You know, we've done a poor job of selecting where to put it.
The next time something needs to be done around the home, instead of going to the hardware store and spending money, we might hire a handyman.
I'm just hiring.
OK, I get where we're going here. Great. You'll be able to do the next bit.
So, but through no fault of the hardware store, they are going to lose future revenue from that customer.
Similarly, let's say we're at the restaurant and the food and service is just fine, but we're with a group of people and a couple of them have an argument and it really spoils the night.
Everybody ends up having a lousy time.
We probably won't ever go back to that restaurant because it's now got bad connotations for us.
And so through no fault of the restaurant owner, because our success outcome wasn't achieved, then we've lost future revenue.
The central idea of the book is that is exactly what happens in the technology space, that we get blamed all the time when stuff goes wrong.
So the central idea, the amount a customer spends next time is driven by the success they have this time.
And success for the customer is achieving the success outcome, not getting our product working.
So it's the picture looking great or the great night at the restaurant.
It's not the drill bit made a hole or the food on the restaurant table is good.
We make the mistake often as technology vendors of thinking our job is to get the food on the table to get our product in and getting it working.
And we ignore that that doesn't necessarily correlate with the customer feeling like they've had success.
And SAS, the move to subscription has now made it imperative that the customer feels like they've had success.
And it's how they feel that will drive their next spending decision.
So we have to be aware of the success outcome that we serve.
And we have to do everything we possibly can to make sure the customer achieves it.
And that's more responsibility than we've taken in the past when we didn't really matter.
All our job was to get the software working because we'd been paid up front.
Now we're paid as we go. So we're at risk. The customer doesn't achieve their success outcome.
So, yeah. So go ahead. I was gonna then say, then give some examples of this, of the main forms of this.
Do you want me to just move straight on to that?
Well, yeah, we've got, we've actually only got a minute to go.
So I just want to wrap up because this is, I think, like now, this is the juicy bit, right?
And we are definitely going to have to come back because now we're talking, it's the emotional.
And I remember with Miller Hyman, they used to talk about a win result.
So it was not just what's good for the company, but what helps people feel good about what's going on.
And actually, a colleague of mine at Zendesk talks about, it's the value, like not your value.
No one cares about your value. It's the customer. What is their value? And so we've got 30 seconds left.
Paul, thank you so much. And I get it now, the difference between the product outcome and the success outcome.
We are going to have to come back.
And I am going to ask you to take us through this idea of a plan on the page.
So people who are listening can work at how to do this. Okay. All right. And hopefully we didn't freeze too much.
So we'll see you later on. All right. Thanks, Kate.
All the best.