The one thing millionaire Nick Mehta got wrong

Right-Right signs

I read Nick Mehta’s article “The One Thing Billionaire Frank Slootman Got Wrong” commenting on @Frank Slootman’s book “Amp It Up”, specifically Frank’s thoughts about customer success departments.  It is a topic I addressed in my presentation at the Customer Conference in London in June this year.  Titled “Notes from a CS heretic” the presentation referenced Slootman’s approach in  questioning much of what we do in the name of customer success.  Here’s my take on the debate between Batman and the Joker.

In his book, which I highly recommend, Slootman says; “If you have a customer success department (my emphasis), that gives everyone else an incentive to stop worrying about how well our customers are thriving with our products and services.”  Slootman is not the first CEO to raise the issue of how organisations address the challenge of delivering value to customers.  In his book Subscribed, Zuora CEO Tien Tzuo describes the typical response to challenges saying “When in doubt, build another vertical silo.”  

Many in the customer success community have wrongly interpreted Slootman’s aversion to a customer success department as a failure to recognise and deliver on the importance of delivering value to customers.  I see no evidence of that.  Slootman eschews a customer success department, Tzuo doesn’t.  Both are successful companies.  Slootman’s comment that CS is everyone’s business does not mean that the work of marketing, selling and delivering measurable customer value is not designed into the organisation.  It simply means that Snowflake chooses a different approach to implement it: one that works exceptionally well.

Before writing-off Frank Slootman’s approach, its worth exploring some of Nick Mehta’s critical comments.

Nick claims Frank’s view “reflects a dated perspective around the future of software.”  I would argue that some of the practices Snowflake employs represent the leading edge of SaaS.  It has a strong product-led capability, free trial and employs consumption-based pricing.  Snowflake recognise the latter as a key plank of their customer-led approach, beginning with sales.  In the words of Snowflake’s CRO Chris Degnan, “With the usage-based model, the account team stays engaged post-sale to make sure you are consuming and getting value(my emphasis) out of that consumption. Your account team should be excited about helping you solve real-world problems and discovering new use cases. It’s all about making you successful by building the right team around you from the get-go.” A sales leader focused on helping customers solve problems is something many leading a CS department in other SaaS companies would love to have. 

In his article, Nick says “Clients expect the vendor to drive the outcome.” Driving outcomes is clearly a must do, not just because customers demand it but also for self-interest.  Recurring revenue demands recurring value.  He adds “Customer success teams are at the tip of the spear of driving value.” But that is because that is how those organisations are designed.  In others, professional services, implementation teams and product lead and/or contribute to that task, sometimes working with partners.  There is no evidence that, implemented well, other models of value enablement can and do deliver the repeatable measurable value that underpins retention and growth.  In fact Snowflake proves that to be true.  Also, there are many cases where companies with large CS departments fail to deliver high NRR and customer satisfaction because they fail to deliver measurable customer value. I have encountered few CS departments that actually measure customer value delivered. It is not the presence of a Customer Success department that guarantees success but the presence of the intent, processes and resources to make customers successful.

Nick also says “Thousands of companies can’t be wrong”, citing the number of companies with CS departments.  But what if they could achieve Snowflake’s level of success, or better, with a different approach? As I am fond of saying, common practice is rarely best practice.  Indeed a criticism often levelled at the CS community is that it is an echo chamber; quick to reinforce current practice and insufficiently self-critical in the pursuit of excellence.  I am not saying the existence of a customer success department is wrong.  I am saying that there are other valid and proven ways of achieving repeatable customer value.  To dismiss these out of hand is what is wrong.  

Is everyone in sales too?” asks Nick and if that’s true “do we need sales people?”  That takes a very narrow view of sales people.  If sales is about delivering revenue then CSM’s owning renewals and upsells (a practice Nick supports in his article), are sales people. So are value engineers or CSMs involved in pre-sales and product managers driving product-led acquisition.  Like value-enablement (customer success), real selling is a team sport.  Let’s also not forget that the best sales people are those that identify if and how their products and services deliver measurable customer value.  They enable buying, which is different in both intent and process from old-school hard selling.  As my friend Bill Cushard taught me, “Helping sells, but selling doesn’t help!”  Another CEO recognises this customer success approach to selling.  Chris Savage, CEO of Wistia said “In essence, our sales approach isn’t that different from our customer success approach.  In both cases, we’re just helping people get the most of out of our products.  It’s just that one group helps existing customers and one group helps prospects.” So yes Nick, everyone is in selling.

Despite not having a CS department, Snowflake employs Customer Success Managers, as a quick LinkedIn search will confirm.  Dig deeper into job profiles I have) and you will find the work of delivering customer value in many roles; e.g. Account Manager, Support Manager.  I think Snowflake believes deeply in delivering measurable customer value but prefers a different way of organising for it.  Snowflake’s results suggest there is merit in Frank’s approach.  Earlier this year, Snowflake reported the following results:

  • NRR               170%
  • NPS.               71
  • Revenue         $1.2 billions 
  • YoY Growth   102%

This cannot be written off as only the result of good product-market fit or a unique business.  Consumption based pricing drives strong NRR but growth is only possible if customers are retained and that is significantly dependent on customers achieving measurable value. 

The belief that there is only one way to organise for customer success and that is around a customer success department, is a mistake and displays a lack of imagination.  In no small part it is driven by a lack of understanding of the work of organisation design; work that is a primary responsibility of a CEO.

For me, organisation design is about how a company implements its vision, values and strategy and from a commercial perspective, centres on four inter-related frameworks:

  1. The company’s value proposition; 
  2. The customers it sells to and serves (and by definition, those it doesn’t);
  3. The go-to-market approaches the company employs;
  4. The metrics it uses to track performance.

Architects teach us that ‘form follows function’: a building’s structure is only considered once its purpose, users and work are understood.  Great organisation design occurs when these four frameworks are highly coherent: they work together by design.  Success is also highly dependant on collaboration and alignment; factors that never appear on organisation charts.  Yet all too often, organisation design begins and ends with structure and ownership; factors that tend to drive silos and narrow focus.  Creating a customer success department in and of itself doesn’t solve the problem of marketing, selling and delivering measurable customer value.  Equally, other approaches are worthy of consideration and not summarily dismissed.

The first of the ten laws in the excellent book Customer Success, which Nick co-authored, is “It’s a top-down, company-wide commitment”.  I agree whole-heartedly.  In my book Customer-Led Growth: A CEO’s guide to building a B2B SaaS company, I argue that measurable customer value is the red thread that connects the whole organisation with the customer.  I do not however believe you have to have a CS department to achieve that but nor do I dismiss that approach.  Both approaches can and do work.  What makes the difference is not organisation structure; the existence or absence of a customer success department but the quality of organisation design.  

Nick does himself a great disservice by likening Frank Slootman to Michael Jordan and himself as a ‘middle school kid on the playground”.  I have founded, built and sold a SaaS company and know how hard it is.  My success is small compared to what Nick has built at Gainsight.  He’s no kid!  I have huge admiration for what he has done but just as he disagrees on one point with Frank, I disagree with him on this point.  Nick described Slootman as his nemesis: The Joker to his Batman. Well if that’s the case, I have to confess to leaning to the dark side. But let’s be clear, the real enemy is not the presence or absence of a customer success department but the paucity of meaningful customer focused organisation design.  

Mind you, if my revenue depended on the existence of customer success departments I too would probably rail against anything that questioned that need.  But even here, Nick is missing a trick.  Recognising that measurable customer value is the red thread across the go-to-market cycle and not just the domain of a CS department expands the opportunity for software focused on delivering measurable customer value.  Perhaps Frank has expanded Nick’s market opportunity.