Health Scores Aren’t Enough: An Outcomes-to-Value Operating Model for Enterprise CS

[Speaker 1]
So, hi everyone, great to be here. Let's kick it off with this. It's not really Monday morning, it's Monday noon.

I'm the only thing standing between you and drinks and the health scores are out. So, great, 94 engagement, portfolio adoption, NPS. So what?

Who understands these numbers? What do these numbers mean to the company? What do these numbers mean to our customer?

Let's see. Let's switch, we have a poll here and I will ask you what your management is asking about. Okay, cool, cool.

So please, put out your phones, tell me what are the questions that your management is asking about customer success and let's see how that comes up. Great, so it's all about revenue and then the second one was about renewals. So, they really tie us to renewals from what I hear and what revenue we create.

So is it just about that? Let's see, so we discussed about health scores and mainly our health scores fall into these big buckets, three big buckets, right? Either around adoption, how much our customers are using the product features, the product and whatever we give them.

Health scores, self-graded exams. We just make this up for ourselves. I'm over exaggerating just for you to get the feeling of what I'm trying to say.

The health score is something internal that means something just to us, no one else. And then activity, my favorite one. How many meetings did we have?

Who cares? You can make all day and create nothing. So, how can we define that?

I want to hear you as well. What is your biggest measurement gap today? So, I will ask you for another poll here.

We validate outcomes but can't quantify the value. I love that one. And this goes, looks like the winner.

We do all of it but no one believes the numbers. Okay. Okay, I think we have a stable view.

So, let's solve the problem. We measure, we said, we measure outcomes but cannot validate them. That's the biggest category that we saw.

Let's work on that. So, the way we're solving this, by the way, I was introduced, John Meleti's part of MasterCard and we're actually building out the customer success practice throughout MasterCard. So, you can understand that MasterCard is a widely complex organization.

I'll just give you a number in continuum. We have, the number of products that we have is in the 500s. So, managing that is quite complicated by itself.

So, how did we flip the coin? How did we get out of the health score discussion and into value? We all talk about value but how do we actually make it real?

So, we talked about customer value realized. You need to be very, very careful with the categories. You can easily mix them up.

Customer value created is what the customer got, not what we got out of the customer or what we think the customer got. You need to understand what revenue did you generate for the customer, what efficiencies they get and what is it that they will push up into their own management as the outcomes that came out of your product. And then, it's the company value created, the revenue, the ARR, the upsell, the cross-sell.

It's what we report and care about and this is a very distinct pillar. Now, the problem that we most usually face is that when we talk about customer value, in reality, we push our own agenda that we want for the customer. So, what is the customer objective?

To get more products for us. No, we need to understand what the customer is getting out of the product and be specific about it and then talk about what we got out of that. And last, but not least, is the relationship value.

So, this is, and we have it as a very specific pillar because it's the easiest one to miss and forget. So, it's the trust, the advocacy, the human touch, the identity, the presence. You cannot put that in a scorecard but at the end of the day, it's as important as the rest.

So, let's begin. So, when we talk about customer value, in reality, is from the eyes of the customer what they got and this is where you go into your QBRs and you start discussing, hey, dear customer, this quarter, you got 10 millions out of my product. Is it an easy discussion?

It depends. If you level set at the beginning of the relationship and go into the customer and say, hey, dear customer, this is how we will measure the value that was created from our product into your organization. Are we aligned?

If you get to that point early on in the discussion, then the outcome should not come as a surprise. So, if you build the system beforehand, so you go back to the discussion, you have a very specific system and you want them to talk back to the customer. This has another hidden advantage.

A lot of the customers cannot quantify what they're getting out of the product to support themselves and your product into their own organizations. So, being able to help them quantify the value that you create as a vendor gives them the ability to not just support you, but support themselves within their own organization. And let me give you an example.

So, let's say that a customer processes 50 million annually in a payment gateway. Let's say that, I don't want to call names, but let's say this is a big payment gateway. And they process 50 million annually and this is what enables the online business.

So, in reality, the value the customer is getting is, what if the customer did not have that or any other system to do the same work, right? Then they wouldn't have 50 million. So, that way you can discuss with them and say, hey, our system is creating 50 million for you.

Could be our system or a competitor system. And that's another bigger discussion of how do you quantify the value you create versus the potential competitor. And this is where the whole discussion begins.

But at the end of the day, if none of the systems like that existed, the customer would not have 50 million, which is net of fees, but you get the point. Now, let's move to the next one. What we captured as a company.

This is not related to what the customer got or it could be depending if it's a usage model, depending on how the product is set up. But at the end of the day, what we capture is connected more to internal metrics. Retained ARR, expansion, the upsells and the cross-sells.

Of course, you have the cost to serve reductions. How well is your product position and how it moves? And then let's move to the third pillar.

The third pillar does not have a measurement way. The fact that it doesn't have a measurement way, it doesn't make it less important. I would argue that where this is going, this is the most valuable part of the relationship we should have with the customers.

Even in the keynote, we discussed that what remains is the human connection and the human relationship. This is where you capitalize it. You shouldn't forget that.

So trust, advocacy, the experience that it has doing business with you and who you are. Do they call you before they call procurement when you need a renewal? Do they speak about your product in a conference?

Do they speak good things about you when you're not in the room? This is where you capitalize the relationship value and this is how you should make sure that you measure that. It's hard to measure, but you shouldn't forget.

Now, let's do a magic trick. I want all of you to put one product into your mind. Your product, one that you feel very comfortable about.

Anything. Ready? Let's answer five questions.

You please do it in your minds. What outcome does the product create? Be careful, not what it does.

What outcome does it create for the customer? How would the customer know? If you were the customer, how would you know, how would you measure that you got the value from that product?

What does that mean in money? That's one of the big things that came out in your poll. We measure it, but we cannot put a value around it.

How do you know it was delivered? Just because we use it and we have usage signals, it doesn't mean that the product actually created the value. Without it, what would they lose?

Ready? You have all the answers? Let's see.

So, how many did you get? If you cannot talk about the outcome, your CSM does not know what they need to drive towards. The health score is measuring their own thing.

If there is no proof, no one can say whether the value was created. Money, if you cannot put value into money, at the end of the day when your CFO does the math, you will have a big zero there. Validation, there's no way to validate, right?

So your renewal becomes, I hope they get it. I hope they got some value. Who knows?

So this is where retention becomes a coin flip. And if you cannot articulate what the customer will lose if they stop using your product, then you're spending time on something that you shouldn't. How many did you get?

Now, let's move on a bit. We talked about the five questions, but are all playbooks the same? Can you put one formula to calculate all?

No, and that's a big trap. If you try to apply one template in value quantification, then probably 80% of your portfolio will be not there. Why?

Because there are different kind of product types. So I'm just naming here a few. There could be a lot more depending on the business scenario.

So foundational infrastructure, things like Windows, like operating systems, like Azure, AWS, what is the value created there? The reality there is you need to measure risk avoidance. You need to measure downtimes.

You need to measure impact if your service goes down. There's another set of products that I call them revenue enabling. Your Salesforce, where you monitor your opportunities, where you create new revenue, and you can directly attribute revenue to them.

Capability, efficiencies, your teams, Slack, SharePoint, where you make your people's work easier. How do you attribute that? It's the operational improvement.

How do you save time? See, in all the three categories I'm talking about, I've used completely different metrics. One is risk.

The second one is direct revenue. This one is efficiency. And let's talk about strategic transformation.

That's another big one. So let's say you are a big software company and you're doing a strategic transformation at a customer. You might be working for two years and have not brought anything into production.

Have you created value? Possibly. So this category goes by milestones.

So what are the project milestones and what is the probability that these milestones will come to life at the agreed timeframe? This is how you can calculate the value created. Typical, you have an SAP, HANA, transformation, migration.

You have milestones. You can attribute the value created when each of the milestones is reached. Not before that.

That comes in chunks. Lastly, we have the adjacent value, the value-added services, the plugins, the value, the product that does not exist without the base product. Let me give you an example.

Gainsight is the base product. You cannot have AI follow-up on top of that if you don't have Gainsight. So how do you measure the AI follow-up value created?

On this specific example, I would say it goes into the operational improvement and efficiency. So we talked about five different models. I'm sure there are far more than that, but you need to go back and look at it.

So we discussed about product types, what's the measurement approach, what's the validation method, what's the reporting cadence? Why? To be able to answer the five questions that we talked about.

Now, where it becomes real, and this is not a very easy discussion. How do you incentivize your CSMs? How do you set the objectives of your CSMs?

If your objectives are around health scores, they will strive to get the health scores green. So you might have a very big, nice, juicy watermelon with everything green on the outside and everything red on the inside. So you need to drive your people with really what you want them to do.

So in reality, what you want them to do is realize customer value. So the value is getting what they want from your product. Create company value.

In your polls, the revenue stream was far ahead anything else. And then the relation value. By the way, this is how a subset of our CSMs is being incentivized today.

Why I'm saying a subset? Because we are on a journey and we have a subset of CSMs that their incentives are tied to these three buckets. And if the incentives don't change, don't expect to see different behaviors from people.

And your CFO or your finance team will continue asking, so what? Cool. So as I said, we are on this journey.

We're on this path. What is working? What was hard?

What is still ongoing? Where are we going with this? So the three-sided value model has, in reality, forced better conversations.

This is where you need to start doing before you understand how it is done. Set the stage. Talk to your product teams because they need to help you understand how the value is created.

Product typing, that is another important aspect. If you are in the multi-product company, this is really, really important. If you have few products, that's easier.

But in a multi-product environment, it's a big, big trap to try to squeeze everything into one model or squeeze everything into one number. You shouldn't because then you lose the detail of how things work and what are the differences. Relational value, that was a hard one to crack.

Why? Because we had, and we still have, it's a journey, right? So the relational value is, how do you start thinking where your customer will support your product without you being there?

And a lot of people confuse the advocacy that's part of that with what we are doing for our customers. It's the exactly flip opposite. Because there's no dollar value behind that, people often have a hard time getting it.

Now, the big, big, big, big thing, tools make value calculation scalable. So the one problem that you define that we cannot put a value behind that, the way we have solved that is we have a value quantification mechanism, team, that creates those values for us. So we've built out the rules, the types, and we know how to quantify the value that is created for the customer and for MasterCard at the same time.

And this keeps expanding. You understand that we don't have 500 value quantification tools, but we're expanding that, and we're expanding that massively. So the idea is that you have a standard way and ideally a tool that will be able to produce those values based on the inputs that you give.

And then you need to go wide. The wider you go, the better people will get it and understand why it's there. Now, the hard part, right?

The hard part is that you're asking your CSMs to do something different. Up until now, it was always, hey, is the product being used? Is the customer happy?

Yes, I had the QBR meeting, everyone was happy. I had 10 meetings this year with a specific customer, all good. So this is a change in the way our CSMs think.

And change management is not always easy. You need to keep pushing on that. As I said, relational level evidence, the relationship value, the third bucket, is the hardest one, because when you need to focus on dollar value, people tend to go that way.

You need to bring them back to making sure that the relationship value stays there and there is evidence behind it. Do you have case studies, public case studies? Do you have conferences?

Do you have your customers getting awards on your behalf and so on? So that kind of evidence, you need to collect and put them in there. As I said, the multiple measurement approaches and the billions of go-to-market strategies that we have do not make it easy.

But creating the vast categories that at the end of the day, you could put in your products and create this standardization on your product types will help. And as I said, give me a number. No, it's not one number.

It's at least two numbers and evidence. So if you collapse everything into one number, then you're losing the value that you're trying to create. And of course, it's hard to understand the value leaders.

So let's work on that. Your turn. Pick three products.

And you can actually take pictures. You can take that as a homework. Your biggest revenue product, the one that you're not really sure why you're there and what you're doing as customer success and why they brought you in.

And the roughest one, the one that you know that if I go into a renewal discussion, I will have a hard time. I will have friction. Something will not go right.

So pick these three products. Get the product team. And work through the product value model.

Again, you need to build this. It's the same five questions that we saw earlier. These need to be answered together with your product team.

You cannot answer them alone. It's not within the customer success remit to answer those questions. You need the product team to be with you to be able to answer the question.

So, again, be careful. We're not talking about features. We're not talking about return on investment to us.

We're not talking about revenue to us. We're talking about the customer created value. And so on and so forth.

So take these and then pick the product type. As I said, this is a working example. You could have more product types, but be specific about the product type and why you choose the product type.

And work out those three products with your product teams. That's about it. Thank you very much.

I hope it was useful.

[Speaker 2]
Thanks very much, John. Given that's the last session of today, super insightful session. Thank you.

So really appreciate taking the time there. We're gonna take about 15 minutes to answer some of the questions that have come through on the Slido. So first one that we got from anonymous is how do you actually restructure CSM compensation around the three separate value categories instead of one number without it becoming impossibly complicated to calculate or explain?

[Speaker 1]
Well, depends on where you come from and how complicated the company that you operate in but at the same time, it goes back how you set objectives. Is your objective one number? Most probably no.

Probably the objectives you're setting to your people are multiple. So I would say making super clear to them that at the end of the day it will be two numbers, customer value created, and I was going to say master value created because that's the natural thing, but company value created and then the evidence for the relationship in reality will make it simpler for them to understand what their expectations are from them instead of having more vague objectives.

[Speaker 2]
Nice, nice. Thank you. A second question from Jeff.

Hi, Jeff. One of my customers, I think. How and where do you collect slash store the relational value evidence and what do you do with it afterwards if you don't score it?

So that's a very good one.

[Speaker 1]
We have several ways to do that. So we have, and we have the team here with me. So we're storing success stories, reference material, public case studies, wherever a customer presents, whatever that happens, we store it in a specific place.

There's a custom application for that. What do we do afterwards if we don't score it? We keep it in our trunks.

It's useful information. Or if it makes sense, this is where, that's another good one because this is a good funnel for your public case studies. And the latest trend showed that public case studies, what others are doing with your product is a very good way to advertise your product.

So this is also the pipeline that we use to promote what we want to become public case study, given the strategy that we have at each point.

[Speaker 2]
Nice, yeah, I love that. I think the advocacy piece and to say people learning from others is key there. Another question is how are the subsets of CSMs tracking against the three new KPIs compared to the CSMs not on these KPIs?

So the difference between the two.

[Speaker 1]
Yes, the tracking is actually done in Gainsight. We use CTAs for that. And we have customized the CTA type to have specific fields that, and I see the team nodding because it wasn't an easy journey.

We had to go a lot through to get to that point. But yes, we are tracking within Gainsight with CTAs and we also keep different statuses for that. So you go in as a CSM, you say, hey, I created $10 million value for my customer.

Could be just that. I also created MasterCard value. You could put it in.

And then it goes through an approval flow to make sure that everything is set correctly. And this is not by calculating out of their heads. They reference the tool that we have to create those values.

But it's done in Gainsight, actually. The CSMs that are not on the KPIs, they don't need to create those specific CTA types yet.

[Speaker 2]
Nice. I guess a follow-on question for me is the plan to get all of the CSMs on that? Sorry?

Is the plan to get all of the CSMs on those KPIs or is it still?

[Speaker 1]
Well, the teams are big and different. Eventually, yes, we would like the whole company to operate on value-created. Customer value-created, MasterCard value-created.

[Speaker 2]
Nice, nice. Yeah. And the next question is, how do you set KPIs?

Slash, how do you measure in numbers the relation to value, I guess?

[Speaker 1]
So, it's still, it's earlier stage. We had to make sure that the mechanics of customer value and company value were set. Currently, it's more qualitative.

So, as I said, number of success stories, number of public case studies, and these kind of things. We don't have hard KPIs on the relationship value, and I'm not sure we should.

[Speaker 2]
Yeah, I think that comes a line at some point. And then, did MasterCard adopt the framework? I guess you may have answered that a little bit already, but did they adopt the framework?

[Speaker 1]
I didn't build it myself. It's a team effort. A lot of the team is here, and it's an ongoing effort.

It's not done, it's not set. We learn, and we adopt.

[Speaker 2]
And I think a follow-on question from the one before is how do you measure the relational value, the trust element there?

[Speaker 1]
That's the qualitative part, right? How easy the conversations are, because we have three levels of approvals to that, right? So, it's the CSM, the customer success lead, and then it goes into a committee.

So, it's still qualitative, the relationship part, and as I said, I think it should stay as such. When you have a good story, everyone will buy into the good story. So, you know you have a good story when you have the customer coming into your own internal meetings talking about their experience, those kind of things.

[Speaker 2]
I agree. I think, and then one from Alec is, what are some of your favorite questions to ask customers to establish value realization? It's a great question, particularly at the senior stakeholder level discussions.

[Speaker 1]
Well, my favorite questions come before that. So, my favorite questions go to your product groups. If you go out to the customer and ask them, hey, what kind of value are you getting from our product?

Then you're fried. You need to know what kind of relationship they should be getting from your product. And the discussion with the stakeholders is validating the understanding or adjusting that understanding.

So, this is how we propose we measure the value between us. Does it make sense? No?

And this is where you kick off the discussion.

[Speaker 2]
Yeah, I agree with you on that. It's very much understanding like from a high level, what are the gaps and challenges that you're looking to solve as a business.

[Speaker 1]
And adjust. It's not one size fits all, right? I might have a relationship with my customer that is slightly different.

You can adjust that.

[Speaker 2]
Agree, agree. It looks like we've got a couple last questions before maybe head for drinks at Fabric tonight. So, the five products question surface.

We've got three now. Surface, when a product doesn't need a CS motion at all, what actually happens next? Does CS pool support entirely or does ownership shift somewhere else?

[Speaker 1]
That's your decision to make. Where do you prioritize your resources? So, if you're only supporting one product and you cannot answer those questions, I would have a bigger problem than that.

If you have multiple products, but you cannot answer those questions for one of the products, then I would choose where I would put the resources that I had.

[Speaker 2]
And do you have any tips for how to align on the value driven with the client?

[Speaker 1]
You need to know your story. You need to know what you're proposing. They will come in affirming or changing your proposal.

You cannot expect from the customer to go and tell you what value your product creates. By the way, the learning is that this is a great tool for them also to use. I touched point on that, but what's in it for them, for your stakeholder, they can go back to their own CFO and tell, hey, this product created $10 million.

So, I would like to expand it, which is a very, very hard discussion if you don't give them the tools to have.

[Speaker 2]
Agreed, I think when it came to the point with the CFO, as long as you can have a number behind it, it's super important.

[Speaker 1]
How do you set targets for customer value? Is it based on ARR? No, that's a trap.

ARR is the value you're getting. It's not the value the customer is getting. So, if you quantify that, and you understand what kind of value the customer will be getting, target the first year, it will be hard because you're guessing, right?

But the second year, you will have a baseline of how you operate and where to build on. I get it. Customer value, if you have never measured customer value, is hard to get on the first round.

You will be a lot better on the second one.

[Speaker 2]
And then, going back to the value realization discussion, does Mastercard have a business solutions team that can assess the ROI of your product? That's an interesting one.

[Speaker 1]
Yes, yes, yes. And it was built like two years ago, right? Yeah, it was built two years ago just to come into this direction.

So, we have a very specialized team that sits between product teams and ourselves that will systematize the whole thing. There are discussions with global product, there are discussions between us, but we have a very specific team that will actually create the value quantification that will produce the numbers. And these are the numbers we are using.

Again, not for everything. We're expanding, we're announcing more and more. We want, eventually, to cover the majority of the products.

I don't think we'll make all of them, but then, going on the revenue side, we want the majority of the revenue covered by that.

[Speaker 2]
I was gonna say, if you do 500 products, 500 plus products, then...

[Speaker 1]
Well, it's more than that. We stopped counting at 500. And we're coming up with more.

[Speaker 2]
It looks like we're out of questions. We've got five minutes left on the timer, but if everyone could give John a big round of applause. Great last session.

Thank you.