Customer Success: Phase 6 - Value Realization and Business Reviews

Phase 6: Value Realization – The First and Only Value Phase

• The Paradigm Shift in Value: Phase 6, known as Value Realization, is identified as arguably the most critical stage of the post-sales customer journey because it is the first and only phase where customers actually start receiving value for their investment.
• The Investment Gap: Prior to this phase, the customer has navigated both a pre-sales journey and five preceding post-sales phases (Onboarding, Adoption, etc.) without receiving any tangible value. These previous stages represent pure cost and effort for the customer.
• Value Sources: Value typically addresses specific organizational challenges, such as:
  • Resolving a new problem or complying with new legislation.
  • Reducing operational costs (e.g., energy spending).
  • Increasing the quality of service provided to their own clients.
  • Addressing security vulnerabilities.

The Pre-Sales and Post-Sales Journey: From Cost to Value

• Pre-Sales Cost Stages:
  • Challenge Awareness: The client identifies a gap or problem they need to resolve.
  • Initiative Decision: They decide to launch an initiative to solve the problem.
  • Build vs. Buy Evaluation: They realize they lack the necessary tools (e.g., forklift trucks for a warehouse, vans for delivery, or SaaS-based software tools) and decide to procure them externally.
  • Supplier Shortlisting: Researching suppliers to narrow down candidates to a list of half a dozen, then perhaps three or four.
  • Pilot and Integration: Deeply unpacking the tool, piloting it to ensure it fits the existing ecosystem, and testing integrations.
  • Negotiation and Procurement: Finalizing the financial terms and signing the contract.
• Post-Sales Implementation Costs: Even after the contract is signed, costs continue to accumulate through:
  • Customization or development work.
  • Integration into existing stacks.
  • End-user training and support setup.
  • The creation, documentation, and publication of new processes.
  • Hiring new personnel, even hiring people specifically to hire the new people.
• Phase 6 Transition: Value only begins once the stages of researching, committing, onboarding, adopting, and training are complete, and the customer has mastered the product.

Characteristics of the Value Realization Phase

• Duration Strategy: Unlike previous phases, which should be as short as possible to reach value quickly, Phase 6 should be as long as possible. The longer a customer remains in the value realization phase, the more benefit they derive and the more likely they are to remain loyal.
• Role of the CSM: The Customer Success Manager’s (CSM) "hard work" in onboarding is largely done. The role shifts toward ongoing measurement, reporting, and maintenance.
• Core Objectives:
  • Measuring and reporting ongoing progress.
  • Ensuring promises made during pre-sales are fulfilled.
  • Verifying that milestones are passed and Key Performance Indicators (KPIs) are achieved.
  • Ensuring the ultimate outcome realization is on track.
• Required Qualities: Success in this phase requires research and analysis skills, creative problem-solving, and a "determination to succeed."

Strategic Activities and Outputs in Phase 6

• Engagement Strategy Review: CSMs must constantly review if the customer's strategy is still up to date. Change is the only constant; challenges or initiatives may have shifted since the initial purchase.
• Establishing KPIs and Milestones: Identifying how to measure progress. If the target is unknown, it cannot be hit effectively.
• Reporting Value to Decision Makers: It is not enough for value to exist; the customer’s "powers that be" (decision-makers) must understand that the value is being delivered specifically because of the tool.
• Strategic Upsell and Cross-sell: Identifying new challenges that can be solved with additional products. These should be framed as checkbox items to be discussed in separate meetings, rather than aggressively sold during business reviews.
• Feedback and Advocacy: Obtaining testimonials, case studies, and inviting customers to speak at events. This phase provides opportunities for the customer to act as an advocate for other potential clients.

Measuring Progress and Leading Indicators

• Key Performance Indicators (KPIs): These are critical indicators of progress toward a result. They are not always the final goal but suggest the goal is achievable.
• Leading vs. Lagging Indicators:
  • Lagging Indicators: Measurements of the final outcome that take a long time to manifest (e.g., total energy reduction, total revenue increase, or net promoter score shifts).
  • Leading Indicators: Early measurements that indicate the likelihood of achieving the ultimate goal.
• Industry Examples:
  • Energy Management: Initially, you measure energy usage monitoring (leading) before you can measure actual energy reduction (lagging).
  • Sales Systems: Total revenue is a lagging indicator. In a sales cycle of $2\,\text{years}$ or $6\,\text{months}$, early indicators include increased meeting volume, higher quality discussions, and upskilled staff.

Leading vs. Lagging Indicators: The Microsoft Perspective

• Satya Nadella Context: The CEO of Microsoft emphasizes that "Revenue is a lagging indicator. Usage is a leading indicator."
• Software Performance Curve:
  • Innovators and Beta Testers: Comprise roughly $2.5\%$ of the user base. They often get tools for free to providing feedback.
  • Early/Late Majority: This represents the "hump" of real revenue.
  • Strategic Logic: If usage among early adopters and innovators is high (users are on the tool every day, talking about it on social media), it predicts that the product will be successful when launched to the majority. If usage is low, the vendor can delay the launch to fix the software before it’s too late to recover revenue.

Predictive Analysis and Trend Mapping

• Visual Reporting: Decision-makers find visual charts much easier to understand than raw data tables.
• The Jennifer Hurdler Example:
  • Jennifer is training for the $400\,\text{meter}$ hurdles with a target of $60\,\text{seconds}$.
  • By plotting four data points on a graph, one can draw a trend line.
  • Linear vs. Realistic Progress: A simple linear trend line might predict she hits the target in May. However, humans aren't machines; improvements often slow down as one nears peak performance (logarithmic progress).
  • Setting Milestones: A more realistic prediction might assume only a $50\%$ improvement rate relative to previous gains, pushing the target achievement to July. Providing a realistic July prediction maintains trust, whereas a failed May prediction destroys confidence.

Monitoring Customer Health

• Definition: Customer Health refers to the quality of the relationship between the supplier and the client, which determines the likelihood of renewal.
• Health Scores: A combination of multiple KPIs used to create a single score, often represented via a Red-Amber-Green (RAG) system.
• Purpose of Scores:
  • Individual CSM Level: Helps prioritize which clients to contact (e.g., managing a portfolio of $30$, $33$, or $330$ clients).
  • Corporate Level: Measures the overall impact of the Customer Success team's activities over a quarter.
• The Triangle Metaphor: Like navigating in the wilderness, the more landmarks (indicators) you have, the more accurately you can place yourself on the map. However, there is a balance; too many indicators create high manual overhead for the CSM.
• Recommended Metric Count: For most organizations, between $5$ and $7$ indicators is ideal. High-resource organizations might use $9$ or $10$.

Types of Performance Indicators: Objective, Subjective, Quantitative, and Qualitative

• Objective vs. Subjective:
  • Objective: Hard data that cannot be argued with (e.g., $50\,\text{logins}$ per week).
  • Subjective: Based on opinion (e.g., whether the CSM feels the client "likes" the company or the client's perceived understanding of specific features).
• Quantitative vs. Qualitative:
  • Quantitative: Values and numbers (e.g., a score of $5$ vs. $17$). Easy to compare but lacks context.
  • Qualitative: Rich detail and emotion. Harder to analyze but explains the "why" behind the numbers.

Conducting Strategic Business Reviews (QBRs)

• Principle of "Begin with the End in Mind": Every meeting must have a clear "What’s in it for me" (WIIFM) for every attendee.
• Four-Way Value Model: Outcomes should be defined for:
  1. The client organization.
  2. The individual client stakeholder.
  3. The supplier organization.
  4. The individual CSM.
• Review Content:
  • Progress toward initiative outcomes.
  • Actual performance vs. predicted performance.
  • Changes in requirements or new challenges/barriers.
  • Agreed "get well" plans for off-track goals.
  • Insights that maximize Return on Investment (ROI).
• What to Avoid: Business reviews are NOT for:
  • Technical troubleshooting or solving tickets.
  • Aggressive selling (schedule separate meetings for this).
  • Product training.
  • Negotiating financial deals.

Strategic Hierarchy: Aligning Services with Business Outcomes

• The Value Chain:
  • CSM Services support Core Services (Products).
  • Core Services support the Customer’s Initiative.
  • The Initiative supports the Customer’s Wider Strategy.
  • The Strategy leads to Business Growth/Share Value.
• Audience Alignment: Senior business leaders care about strategy, not core service features. If a QBR focuses solely on technical features with a senior leader, the CSM will "not get anywhere."

Questions & Discussion

• Participant Question (Neil): Asked if the webinar slides would be sent out.
• Response: Slides for free webinars are not distributed; they are reserved for participants of paid training events.