A recurring revenue business model is an intrinsic component of every SaaS enterprise. Recurring revenue, as the name implies, requires that customers continuously derive sufficient value from your offering so that they are motivated to keep paying for it. Foundational to deriving continuous value is the requirement that customers are successful in using your technology offering. Companies that adopt a mindset that is centered on Customer Success—through retention, adoption, and usage—can achieve sustainable competitive advantage.
Waterstone’s Customer Success Maturity Model measures four key competencies—customer lifecycle, operating model, economic model, and enablement & scale—along three maturity levels: adopting, performing, and optimizing.
Waterstone developed its Customer Success Maturity Model to aid companies in charting a course for and measuring progress towards becoming a Customer Success-centric enterprise. The model measures four key competencies—customer lifecycle, operating model, economic model, and enablement & scale—along three maturity levels: adopting, performing, and optimizing.Customer Success requires companies to rethink how they engage with customers. It requires a corresponding redesign of operational processes, financial metrics, and even organizational structure. Customer Success must move beyond being positioned as a function within the organization to become an organizational mantra if recurring-revenue-based businesses are to achieve sustainable growth.
Each of the competencies has performance dimensions that allow an organization to assess its level of capability / maturity in the competence. The detailed model and performance definitions are provided as an appendix. Companies seeking to fortify their recurring revenue business model should evaluate their performance along each of the competencies, and use their assessment as a means of shaping and prioritizing improvement initiatives. A summary of the framework is depicted in figure 1 on the following page. It depicts the evolution of a company from engaging with its customers in a reactive “firefighting” mindset to a model that is proactive, strategic, and ultimately transformative.
Competency #1: Customer Lifecycle
The customer lifecycle competency is the cornerstone of a Customer Success system. It is centered on the customer journey and the associated operational processes and organizational culture that must align to deliver a remarkable customer experience. Following are the performance dimensions that define the customer lifecycle:
- Codified customer journey
- Customer-centric culture
- Proactive vs. reactive customer engagement
Assessment of the organization’s lifecycle competency begins with looking at the degree to which an enterprise has codified the journey for its key segments. High-performing organizations will actively communicate the intended journey for their customers and collaborate both internally and externally to continually evolve it. Alignment of operational processes is the next dimension to evaluate. Here, we look for an enterprise to align all of its functional and cross-functional processes with the customer experience. Optimized organizations will have no difficulty expressing how the key “moments of truth” (distinct milestones along the customer journey where there is an opportunity to make an impression) along each step of the customer journey are reflected in how they execute a business process.
This intertwining of operational process design and customer experience extends to dominate the very DNA of optimized enterprises. This customer-centric culture pervades the behavior of high-performing organizations, allowing them to anticipate customer needs and expectations and proactively make operating model changes to deliver the customer experience in a highly effective and efficient manner.
Competency #2: Operating Model
The operating model competency is all about day-to-day delivery of a remarkable customer experience. As with all robust operating models, a Customer Success-centric design is composed of key performance dimensions that look for alignment with business measures and a data-driven mindset:
- Data-driven customer insights
- Structure and efficacy of the Customer Success role
- Customer experience aligned with financial and operational metrics
Firms that have achieved the optimized maturity level for this competency are relentless in their pursuit and application of data. In the context of Customer Success, this translates to deep, analytically-based understanding of customers’ emotions and behavior patterns around acquiring and using their services. They utilize their insights to support a Customer Success team that is tightly integrated across the organization. Acting well beyond firefighting of “code red” accounts, the Customer Success group operates as a high-performing group of individuals—and positions on the team are highly sought-after. Contributions made by the Customer Success team are well understood, as there is direct linkage of customer experience and customer health metrics to the financial and operating goals for the enterprise. Moreover, every employee has some form of Customer Success measure tied to their variable compensation.
Competency #3: Economic Model
Developing and maintaining Customer Success as an explicit competency requires investment. Executives should apply financial rigor and discipline in deploying their Customer Success system, and an economic model must be in place to support this. The key performance dimensions for the economic model competency include:
- Quantitative measurement and tracking of Customer Success economic value
- Executive team / board willingness to invest in Customer Success
- Customers are willing to pay for their success
Top-performing organizations have instant access to accurate, timely reporting on the economic value being delivered from their Customer Success investment. Executives in these organizations can cite direct benefits to profitable growth that have come as a result of extending and deepening relationships with desired customers within target segments. These organizations have evolved to the point where their customers are also enrolled in the value proposition of Customer Success; and many of these customers are willingly paying to participate in several programs.
Competency #4: Enablement & Scale
Many firms fall short of achieving an institutionalized and wide-spread Customer Success system. Enablement & scale are essential to ensuring that the growth and accomplishments realized through pilots or focused implementations can be deployed across the enterprise. Robust process definition and skilled implementation—facilitated by tools—are key enablers. The performance dimensions for this competency include:
- Process enablement: existence of a CS Ops function that uses defined playbooks and collateral to manage the customer experience
- Leveraging of tools to engage across all customer tiers / segments
- Customer Success roles are cultivated, respected, and sought-after within the company
A key consideration for this competency is that the processes and tools have characteristics of consistency and cohesiveness. While it is to be expected that Customer Success systems will typically be built out over time, a key to achieving the optimizing level is to begin with a vision and architecture for the system that will provide the requisite enablement and scale to meet the requirements of both internal constituents and customers.
Becoming a Customer Success-Centric Enterprise
Companies can use this maturity model to assess their progress towards becoming a Customer Success-centric enterprise. This assessment should inform Customer Success initiatives and can form the basis for an improvement roadmap. A corresponding set of financial and operational metrics should also be defined and established as a scorecard to measure progress. Enterprises that embrace a systematic approach to improving these capabilities can realize sustained competitive advantage through subscription revenue growth.
For the printer friendly PDF, please click here.