What Your Board Really Cares About in Customer Success (Hint: It’s Not NPS)

Good afternoon, everyone. Super excited to deliver a workshop. This is my third time speaking at Pulse. First time getting to a workshop, and I'm very, very stoked about getting that opportunity this year.

And I've officially gone to enough pulses that I don't know how many I've gone to. So who else is in that boat? I'm not doing a workshop if no one's participating. Who else is in that boat?

Anybody else? They've lost count. How many pulses? All right, so at least I knew there had to be a couple.

All right, so before we even dive in, just a quick background as to why this topic is important to me, and why I feel I have a right to impart some knowledge on you guys. I've really been around customer success or in customer success since before they called it customer success, right? Since like 2003 doing like desk-to-desk training for for a Thomson Reuters and financial institutions and you know moving on to a startup. I did my time at Salesforce just like probably many of us in this room.

And then I went into advising and teaching and I went to a private equity firm and called Westcap and I did that for four years where I was advising our portfolio companies on customer success and you realize quickly it's not just about advising the portfolio companies and the customer success teams like you think about. It's about advising the founders. It's about advising the CEOs. In some cases it's about even advising the board or the board advising me as to what they want to see because I'd be working with people on the board of directors of these companies.

So this is where it started to get really interesting as to you know, what do we need to present to the board? What does the board want to hear? When does it matter? Why does it matter?

And then the last thing I want to share is at the University of San Francisco that is the only school in the world that has an MBA program around customer success in SAS and some of you may have heard of it. Some of you may have met Vijay Marocha who came up with the course initially. I teach it with Junan Pang who runs CS at Intercom and it is it's an honor to get to do that and it's an honor to get to learn from the students and then sort of bring a lot of that here as well. So that's my background.

Now, I have four kids. How do I have four kids? Because on our third shot we had twins. That can happen.

So be careful. But what I'm missing tonight guys, this is it's our playoff game. It's winner-go-home. We're gonna lose.

We're 1 and 13. Like we have no shot. But we did our only win of the year was a playoff game last week and that was our team after the win and I'm not gonna be there tonight, but it's so it goes. I love customer success and everybody understands, but this is this is where my heart is right now with this with these group of boys, these ten-year-old boys.

And it is how I got the name coach Mike that came in. It just it all happened and that's how nicknames work. All right. Quickly because I love this exercise and I've never gotten to do it in a room this big and I don't know if it's gonna work or not, but we'll just go for it.

And we're gonna have to do it with speed to make sure we fit in. I am going to ask each of you to get pen and paper, computer, whatever you're on and you're gonna make a list of words. And I'm gonna tell you the concept of this in a second. You're gonna make a list of words and now I have to tell you what I tell my students.

I have to tell you what I tell CEOs and please be the first room that listens. A word does not mean a phrase. A word is a single word and when you're talking about the words afterward, synonyms are not same words. Words are words are words.

That's it. Okay. So I would like you you have 30 seconds. Write down a list of every word you can think of when you think of customer success.

Go. Pens down. Okay now at your table, we have all different size groups of tables, but it shouldn't matter. but it shouldn't matter.

In a normal environment where we have a lot more time, we'd be discussing the words in our thought process. But now I just want you at your table to come up with your list of unanimous words. Words that you all had. Not phrases, not synonyms, actual words that you had in common.

Just one person can read their list out loud and you can quickly figure out what your unanimous words are. And you should just be able to read one list off and figure it out from there. Is that anyone need more time? Everyone good?

I'm supposed to have total control when I'm up here and I feel like I've lost it. Yes, that is customer success. And that didn't work either. Okay, let me bring you guys back.

Okay, if your table had a unanimous word, raise your hand. So maybe just one hand per table because this is confusing. Okay, all right. What was your unanimous word?

Retention, yours. People and risks or retention people risk. Relationship, relationship. Strategy, you guys all had those unanimous words.

I've done this enough times to know. Any other tables? Yeah. Relationship and retention.

Relationship and retention. Okay, so great words. And again, in another exercise we could dig into those words and why. But you go into a boardroom and there's, you know, ten people or whatever and you don't know what they know about the post-sale process.

You don't know if they've ever sat in your seat. You don't know what they know. I'm looking out at a room of, I don't know what's a hundred people here, some of the most talented minds and customer success today. And you guys can't agree on a damn word that describes what you do.

Seriously, right? All of you, everybody here didn't say value. Right? Everybody here didn't just say success.

Like, it's insane. You didn't do anything wrong. But like, you know, we've been talking for years that everybody does customer success differently. Yeah, because it's done differently everywhere.

Okay? So my point in this exercise is that like, there's no right way to think about this, so to predict what your board wants is going to be very difficult. See? It worked.

And conversely, if you guys had thought of a unanimous word, I just would have bought beers for everybody afterwards. I don't know what I would have done. Okay. So I want to get through this quick so we can get to work.

Just like three slides. What does your board care about today? This is pattern recognition of what I saw in my years working with boards and working with CEOs. They're super interested in time to value.

Okay? It's a controllable lever. It's when payback period can start. I don't know who said this.

I might have made up this quote, but I don't want to take credit for it. "Churn happens in the first 90 days." Right? That's your implementation period. That's what it happens.

It's a big risk. However, have we ever been able to define value? I mean, it's been an impossible task that we have been kidding ourselves that we've been able to define. So that's really difficult to show at the board level.

Obviously, they care about churn. I can't have this slide up here without churn. And there's nothing really new to talk about there. But you have to have a grasp on churn, segmentation of the churn, analysis of the churn.

The last one I love. Customer advocacy as a growth channel. This one sort of blew my mind. Because health scores are dead.

We don't care about health scores. It's what we had then. But the fact of the matter is you still need health categories. Because you have to have red accounts.

You have to have an at-risk process. And we all have probably a really strong at-risk process. Because we know what we have to manage. We know what our GRR goals are.

And we know sort of what the funnel of risk looks like. And we know how to manage that. But then everything else is just sort of like green or yellow. We know this already.

What I learned in a board meeting is that we had a VP of CS presenting the health scores. And the sort of overall health of their customers. She got, excuse my language, but they called bullshit on her green accounts. Because they're like, this isn't, how many of those accounts are advocates?

How many of those accounts will go sell for you? How many of those accounts will go stand on a stage? Stuff we already know. We know to be a green account you have to be that.

But we're lumping everybody else into green. Customers that are healthy. Customers that say we love you guys. Oh, they're green.

Or your score and your deep data says it. But if they're not advocating for you, they are not green. You should have a green layer that's just as discerning as your red layer. And the board doesn't care about the segmentation of health.

But they do care about customer advocates. And again, this is, what do we need to teach our boards? We need to move, and this is what you're seeing in every single session. Outcomes, outcomes, outcomes, value, all of this.

These things used to be buzzwords. They're real now. So we need to move away from sentiment to outcome. Like NPS, who cares about NPS?

You can care about NPS. You can make it something valuable to you. But sentiment doesn't matter if they're not getting outcomes. So really, like it says here, interpreting that data to a feeling, to really what they achieved.

And also, the second bullet, value now precedes sentiment. Anyone want to take a crack at that before I answer that? I'm a professor. I do this stuff.

I'll cold call. My kids hate it. Yeah. Well, the way I understand it, the value of the customer exceeds from the product itself, right?

And the first time, the value of the customer is way more than how you do it. First thing I'll have customers say, we love you. You're great. Three months later, they charge us money.

Yeah, exactly. So I don't know if you could hear, but the point being here is that value happens really quickly now. And time to first value being that big piece. So value happens before you even have a chance to decide what I recommend this product or whatever NPS question you were thinking about.

And again, I don't need to explain this, but I will. You're using Clod. You get value in like four seconds. Okay.

And that's where our products need to go. And then from cost center to margin lever, I mean, these are different ways that our board needs to understand that we're not, again, back to the old days, we're not a cost center, but we can actually really, really, really impact the margins by digitalizing, by automating, and by really understanding how to deploy our resources because our resource deployment, as we know, is changing now. Okay. So the new metrics.

This is the last slide before we go into the workshop. Listen, are these the new metrics? I don't know, but we have to go in with a new set of metrics because the old metrics don't work anymore. Like time to value, even just the nomenclature of it.

We talked about it. What the heck does that mean? What is value? But we know what outcomes are, and we know how outcomes are identified.

And if we can dictate simply the time to first outcome, that signals the ability to sell more. And I've always said you have to earn the right to sell more. You just don't get to expand. But you can't expand until you sell more.

I worked with a portfolio company when I was at Westcap that wasn't even a genteck. Okay. They had a trading system where the big obstacle was selling into the banks, getting it deployed, getting it implemented, and then they'd have one successful trade, and they're like, we're implemented. And I'm like, you're not.

You're not. All you've done is one successful trade. Now it's starting. So the time to first outcome was that piece of like, okay, now they can start trading on this platform.

NRR decomposed. So many of you probably work for a SaaS company. Many of you probably have an egentic layer over that, maybe a small revenue stream of an egentic product. Well, what does that do to your NRR?

It blends your NRR with two completely different ways of thinking about NRR. Because the typical SaaS way of thinking about it, what's great NRR for SaaS? Somebody. 120, right?

120%, great. What's good NRR for an egentic company? 200? I don't know.

900? We have no idea, but it goes like a J curve now instead of this sort of step up. So you might be sitting at, for an egentic product, you might be sitting at an 80% NRR after a year, but that's the way it works now. It's a longer play to get to longer expansion and longer workflows, which is what process penetration rate is.

Think about life before Uber. You would have thought that the taxi fleets had the market. You didn't understand that there was an entirely untapped market of people who wanted to reserve cars in different ways and how you can impact them and how you can book them, right? So there's new processes.

So, you know, like it says here, a green customer that at only a 15% workflow penetration rate is missed expansion. And think of it in another way. In order for you to expand your customers before AI, your customer had to grow. They needed more seats.

They needed to hire more people. That's not the case anymore. You just have to identify more workflow. So that's the process.

So how much of your process are you, how much of your customers' process are you penetrating? And then another one here, two-sided payback period. Simply put, it's when does your customer get value versus when are you getting paid back? And again, you know, if we talk about a forward deployed model, the cost of deployment is no longer cost to serve your customer.

It's a cost to acquire the customer. So you have all these expensive resources and expensive processes on the front end. So it's a much longer payback period. It's a J-curve of NRR that a board is going to be looking at.

But you also have to show perhaps that because of that time to first outcome, the payback period for the customer is very quick. All right. I did my talking. So now we're going to do our exercise.

And I put this as like the old metric. You are welcome. If you have a different old metric you want to use, go for it. But this one just says, hey, board, our health score has improved across 80% of our book of business this quarter.

Woo-hoo! Okay? That doesn't matter anymore. So what I want you to do is now connect this to a more broader board level concern.

Why were you bringing this to the board in the first place? And how can you articulate it in a different way? So here's your instructions. And so the first piece you'll do just by yourself, right?

What does the board need to know? So just individually, what is the board level question that that previous screen, does this red button go back or does it blow it up? Okay. There's a button on here I was told do not press.

And if I press it, I have to press it again. So this health score has improved across 80% of our book of business this quarter. I would like you to write down, take a few minutes, what is the board level question that you're actually trying to answer with that? And then once you have it, you can just go right into comparing answers within the group.

So we'll start there. Yeah, yeah. So what question is this actually trying to answer? Like what you'd be responding to what when you said this?

Let's bring it back. What was that? At home as well. Okay.

I love the conversation. Okay. So you've talked about your questions. You might have already jumped to the next bullet, but naturally by agree on the one question that collectively you feel like you want to ask at your table or be asked.

Okay. So now what I want you to do is you want to ask your board level question. You want to be asked. Okay.

So now what I want you to do is using the new metrics and I'll put the slide up, map it to a new metric and invent your own metric if you want. These metrics are invented, right? These are metrics that we feel are now the new metric to go to because what's going to happen, what's already happening in boardrooms is that they're reliant on old metrics. So if you're going to be reliant on old metrics, you need to show, well, hold it a second here.

Let's look at this from a different angle now. So map it back to a metric or two. And, you know, and again, if you don't buy into this, if you think it should be a traditional metric, go for it. There's no right or wrong.

Question the process in this room. And then sort of document, you know, what specific data you might need to be able to report in it regularly or how you'd want to communicate it. This is sort of open-ended. Just come to grips with how a new metric would impact this question or change this question.

With just five minutes left in the session, where does the time go? Right? You don't have to write the CFO hook. Think of it in terms of CFO now.

Like, what is the financial outcome tied to this, if that makes sense for this. But I also would love if this is okay for someone to take the microphone and talk us through what happened at the table. That's really what I would love to do in the last few minutes. So take a second to come up with a financial outcome.

And then somebody, I will pick somebody. I will pick somebody. So someone should step up. You having volunteer?

Awesome. All right. Thank you. Shout out to the Dons.

Customer success at USF. You know VJ? Of course I know VJ. Okay.

So we decided that our agreed board question, and this all depends. Like, are you going in with a crew? Are you going in with sales? Are you going in solo as CS?

But what's the value that CS contributed to the bottom line? Was the question that we replaced the... The health score with, yeah. And then the metric we selected, we like the NRR decomposed because it gave us flexibility.

Are we talking, you know, so what's the story we're telling? Are we telling a story of growth? A growth story across different products? Maybe there's a Gentic, maybe there's old school products that you're trying to decompose and understand time to value and everything else.

But then we can talk churn. We can talk about churn in predicted churn or involuntary churn. And so you can really take that decomposed NRR and tell the story that you need to tell depending on whatever the situation is. And are you actually selling the value of CS?

Or are you just trying to tell the board exactly what it is they care about, which is the bottom line? So we just liked it because it gave a lot of flexibility. Would you guys add to that? Okay.

Great. Thank you. Yeah, give her a round of applause. [applause] Anyone else want to add anything in our two minutes left?

Otherwise, it's your point. Okay, whoever's being voluntold. And while the microphone makes its way over there, I'll just flash the last, my last slide because there should be an action when you leave here. And I think for the CSMs in the room, I'll get to you in a second.

I can't even see your face with the light. But for the CSMs in the room, start tying, for instance, deployment timelines. Start tying that to expansion opportunities. That's how they get unlocked.

You cannot go sell if you don't have something to sell. And that's how that'll get unlocked. And for a leader, I mean, you just have to start, I mean, think about how impressive the conversations will be with your own leadership. If you start thinking outside of the box a year before everybody else's.

Okay. The CFO hook that we had was very simple. More revenue, less cost. It's got to be one of those two things.

And if you can categorize it in that bucket, you're going to satisfy the CFO. And we were talking about it within the context of things like engagement scores. So moving away from health scores and looking at the quality and health of how often and the quality of the interactions customers are having with us on a regular basis, the higher quality of the interactions, then we were able to prove out the higher the overall net retention on those accounts. Great.

Yeah. I mean, I love that. Everything comes down to revenue and cost. When I always say, do you know what the CEO's goals are of your customer?

You know, people go, well, they stop and think. I'm like, well, how about make more money and spend less money as two big goals? Right? Like, that's always what you're aiming for.

Okay. So I will leave you with that. I'll leave you with a ton of gratitude for taking part in this session and listening to me. And also acknowledging sort of as a community of customer success that this is not a scary time for us.

It's not. It's an awesome time for us. It's an incredible moment of opportunity for us because everything we've been trying to do for 20 years, we can now do and we can do it better than we did it before. And it doesn't mean that customer success is changing.

There's still a need for the traditional customer success, especially the digitalized motion that we had. But we could do so much more now and there's so much more that we can prove to the board. So again, I'm Mike Edelstein. I'm an independent advisor in the space.

And I really look forward to seeing you guys again and being back at Pulse next year.