The Future of Customer Success: Talking 2020 and Beyond with ESG CEO Michael Harnum

July 15, 2020

Marley Wagner

Category: Customer Success as a Service, Customer Success Maturity, Customer Success Strategy

We all know that 2020 has been quite the year. Certainly, it hasn’t been what many of us were expecting from the beginning of a new decade, but it’s a milestone year nonetheless. So, while none of us have a crystal ball to tell us what will happen next (if only!), I wanted to take some time to look ahead at what the future of Customer Success could have in store. That’s why I sat down with our own CEO, Michael Harnum, to discuss how he sees Customer Success evolving in the years to come and the lessons he thinks businesses should carry forward into the roaring ’20s.

ESG: You spend a lot of time considering Customer Success and what it means for businesses, both those just starting their own programs and those who are already CS experts. How would you define Customer Success as it stands today, and how do you see it advancing in the years to come?

Michael Harnum (MH): “When I think about Customer Success, and I begin to back up from there, it starts with the macroeconomic forces of the subscription economy. People are subscribing to things more often; they are expecting to subscribe to things. They are expecting to have choices in the marketplace. If you and your product and service don’t perform, they can easily bounce out to another subscription. That is fundamentally different from the way businesses have operated in the past.

I like to start with the fact that Customer Success requires the existence of a subscription in the marketplace. That subscription can take a million different flavors – it could be a music subscription to Spotify, it could be a content subscription to the Wall Street Journal, it could be a corporate license subscription to Aruba Central – whatever it is, the existence of a subscription is a prerequisite to the necessity of Customer Success. Then, I begin to place my bets in terms of the future of the Customer Success marketplace. It’s a derivative of what I think about the success of the subscription marketplace.”

ESG: So, if you’re trying to predict the development of Customer Success, it is intimately tied to the future of subscriptions.

MH: “Yes. There are some really easy and obvious predictions like – do we expect more things to be available as a subscription moving forward? Well, I think the answer is pretty evident that the appetite for subscriptions continues to grow. There are large portions of the marketplace that the subscription economy hasn’t even touched yet. I think of the automotive industry or industrial verticals. There’s a ton of opportunity there for increased subscription activity. That’s one way I think about it.

The second way I think about it is in terms of sustainability during rough economic patches or economic growth areas. Zuora did a study on the marketplace during the pandemic. They took a look at subscription companies versus non-subscription companies, and they wanted to see how much they reduced their sales forecast between now and the end of the year in those two categories. It’s just one barometer for the resiliency of your business in difficult times. The lion’s share of the non-subscription companies had dramatically reduced their sales forecast for the rest of the year. It makes sense. They require capital expenditure upfront for their product, but everyone’s budget is shrinking. Whereas, subscription companies that rely on recurring revenue relationships with their customers, very few of them had reduced their sales forecasts for the year. Those that did, reduced it in a very small way. I look at this, and I think there will be more subscriptions in the marketplace. The subscriptions that are there are more resilient in a time of crisis. Even the last stalwarts of non-recurring revenue are thinking about subscriptions.”

ESG: You see more and more companies joining the subscription business model going forward?

MH: “Take Claude, the shoeshine guy, for example. He’s a Denver legend. His marketing strategy is, you walk by and he heckles you about the quality of your shoes. I walk by the other day, and he offered me a monthly subscription, and now he takes Venmo. If Claude, the shoeshine guy has figured out how to offer a subscription and to monetize that through a digital collection agency like Venmo, it’s common, and there’s more of it. There will be more subscriptions, they will be more resilient, and they will be more relevant to the growth of companies.”

ESG: That’s a great example of how we’re seeing so many different industries and businesses moving in this direction. Given this trend, do you expect more and more businesses to take on a Customer Success philosophy?

MH: “I think we’re in phase one of this. Then, if that’s the summary of my case that there will be more subscriptions and they will be more relevant to companies, the question becomes – how are you going to handle it? If it’s not a Customer Success practice that involves all the dynamics and best practices the strategy has to offer, what are you going to do? You’ve got to have your customers segmented appropriately. You’ve got to have a high-touch, a mid-touch, a low-touch breakdown. And you’ve got to have humans along those segments running plays proactively into the marketplace. The companies that are doing that, they’re going to be the winners. To my mind, it’s black and white. It’s hard to be gray here. You’re going to do that well and you’re going to flourish and you’re going to put your competitors out of business. Or, you’re going to do it halfheartedly, and you’re going to lose market share.”

ESG: You’re either doing it right, or you’re doing it wrong.

MH: “You know, when you think about how our service portfolio layers into these challenges – we start with that Customer Success Maturity Assessment because it’s a critical first step. We need to know where you are relative to where you’d like to be and where the industry is. It is a terrific way to do some gap analysis. Many of these leaders I’ve met with have so much to do, their hair is on fire, they have a limited budget, and most of them are just reacting to stuff in the marketplace. Most of them are not doing work that I would call Customer Success.”

ESG: What do you think is the biggest error companies are making in terms of Customer Success?

MH: “I would say it is engaging really quickly with larger customers without having a defined Customer Success plan in place. They go upmarket with their resources, and they don’t have a defined plan or strategy for handling the rest of their customers. My argument would be – go do that. You’ve got a lot of revenue and a lot of relationships, so take your really expensive, really smart people and point them at your top segment of customers. But don’t stop there. Let’s figure out what your next customer segment is. What is the next group in terms of annual revenue? Who do you have assigned to them? What do you know about them? How can you best engage with them? These leaders get thrown into scenarios where they’ve got really big accounts, a small number of them but considerable revenue, and they throw all those resources at that because that’s what the C-Suite is barking about, but they’ve left a huge portion of their customer base exposed.”

ESG: What do you think someone who finds their business in that position should do? If they see this untapped potential in their customer base, what is the next step?

MH: “Then the issue becomes now, how do you scale your organization without just throwing an army of people at it? How do you do it in an efficient way that leverages technology and automation, but also includes human interaction? That’s why we do what we do.”

ESG: It’s sounding a lot like the future of Customer Success is expansive growth.

MH: “I think, in the near term, there’s growth and maturity. In the long term, Customer Success becomes inextricably connected with SaaS. Kind of like, if any of us buy technology – a gadget, a widget, what have you – we expect there to be customer service. I think the future of Customer Success is that it becomes that native, and the conversation becomes – wait, you’re doing SaaS and don’t have Customer Success? That’s irresponsible. Don’t even launch it. The two will be so interwoven that it becomes a market assumption.”

ESG: It seems that many companies have invested these kinds of resources in their sales process, but not their post-sales process.

MH: “That’s the reason we have a digital practice inside of ESG. Those same companies that are overemphasizing sales also have their marketing department aligned with that overemphasis of sales. It’s all about net new logos. Go get me new logos; go get me new leads. Those marketing resources, which are limited already, aren’t spending any time trying to figure out how to reach their install base of customers – what information they need, what calls to action to use, and how to follow up with them regularly. Those things won’t be immature forever, but they’re pretty immature now.

The math is undeniable. The math at ESG even supports this. 80% of your growth comes from your existing customers. You spend all this time and all this focus and all this energy getting new logos, and of course we want that, but you need to have balance. You have to communicate well with your existing customers.”

ESG: Is there anything else you’d like to add for CS leaders today, now halfway into 2020, for how to move forward?

MH: “This time of year, I’d encourage people to pay attention to budgets. People are going through the budget analysis right now, and budgets are tight. Because it’s difficult, not impossible but difficult, to show an immediate return on investment from Customer Success, it tends to get whacked from budgets. The encouragement would be, as we go through budgeting season for 2021, company leaders really need to dig in and understand the value so they allocate the appropriate funding. Customer Success leaders have to step up and be confident. They need to make leadership understand that Customer Success is a necessity. It’s not a ‘nice to have.’ They can do more with less, sure, but this is something that, philosophically as a company, we’ve got to be committed to, or we will fail. Let’s align the budget to keep that reality in mind.”