So, you've decided to adopt a SaaS business model, what happens next? For many companies this means adjusting processes, assigning responsibilities, defining new pricing, adjusting contracts and terms of service and more to execute on the new strategy. It's likely that we'll soon be facing the following problems:
Lets agree it's a big change for the organization and with change comes challenges. Let's take a look at some keys to align our efforts so that we know what we do the right thing in the right order
Key 1: Understanding and defining customer success
In the transaction economy you provide something and get paid once. This often leads to behaviours such as sales focusing on new deals, consultants targeting customer acceptance at a certain point in time before continuing to the next customer project, customer support functions aim for meeting defined SLA:s with minimal effort and the functions tend to work isolated. Providing a service is a different game, the basic, somewhat simplified, principle being, as long as the customer is successful they'll renew, and the longer a customer stays a customer the more value is generated.
Understanding customer success becomes crucial to the value generation of the company and being able to define customer success is a pre-requisite for proper execution of all other activities. The process of defining customer success could look something like this:
First version: We deliver a service that provides the customer with a tool to do something
Second version: We deliver a service that helps the customer achieving something
Third version: We deliver a service that helps the customer improve something by X%
Fourth version: Our service on average improves the customer something by X% but top performers see an improvement of Y%
What has happened is that the customer success definition has gone from the company delivering a tool (which really isn't success..) to more or less promising an improvement of something by X-Y% by the use of the service.
Based on the definition of customer success it becomes straightforward to set up measuring systems for customer success. You would naturally measure current state, trend analysis and goal attainment.
In a larger organization these measure also becomes the basis for breaking down department and individual goals.
With customer success defined and goals set process changes can be done on a firmer foundation. What changes will have the highest impact on customer success and our company success. If anticipated effects are not seen, well something was wrong with our assumption, let's review it again.
Some typical process changes are:
Many parts of the organization rely on understanding the current state of the subscription, the usage and customer success KPI:s - we need to establish transparency of data for customer azquisition teams, onboarding teams, customer success teams, financial teams etc.
Processes were designed for the single transaction type of business not the recurring nature of SaaS business - we need a different way to calculate workload, we need to reduce errors that were overlooked before but are now repeated every month.
Customer support was primarily set up to solve errors and problems, can we instead focus the effort on improving customer success? - we need to understand the customer throughout the lifecycle and understand what the best-in-class do that the average-in-class don't do. Can we setup a customer success program to improve customer success based on our best practice and insights?
One aspect of pricing is what value do we provide and how much can we charge for that value. With customer success this aspect becomes easier to assess and price. With new processes in place to support the customer throughout the lifecycle, we can define add-on services to further help our customers.
With a SaaS model the number of interactions and transactions with the customer increases and subscriptions are not fulfilled or done as in the single transaction world. The load on especially back office staff increases by the month, this drives a need for automation and standardization to ensure that business growth is not hindered by back-office constraints. Traditional systems, especially financial systems and ERP systems are often built for the single-transaction world. This makes it difficult to use them for automation or at least not without a lot of customization effort. Using standard systems built for subscriptions provides a foundation for managing a large portfolio without growing the administrative staff.
In the end, all successful transformations are the result of hard work. By using the 5 keys described above you can increase your chances of a rapid and aligned transformation. In any case, make sure you have defined customer success and remember that the first shot is not always the correct one. Many of the most successful companies are the ones that have understood that many quick iterations often is a winning strategy.