How CS Ops Drives Market Valuation Image

How CS Ops Drives Market Valuation

By Gainsight Team

Organizations create Customer Success teams to increase Net Revenue Retention, and we’ve recently published research showing that NRR drives valuation. But, then, organizations find that the baseline impact of simply having a CS team eventually plateaus–your NRR stagnates.

Organizations create dedicated roles to continuously improve CS functions to improve NRR or reduce costs by scaling up your customer base with the same CS headcount. That team of your in-house, expert thought partners is called Customer Success Operations.

Thankfully, the ROI calculation for CS Ops is simple:

If you were to improve your retention by 5%, your expansion by 5%, or your account coverage ratios by 5%, how much would you earn or save? Do that math, and look at the dollar value on the page. Do you think that you could reach 5% while investing less than that amount? (And then, that 5% is just the beginning.)

It helps that Sales and Marketing figured this out long ago. Software, reporting and analysis, enablement, and rock-solid processes and techniques will multiply the impact of a great sales rep or copywriter. The same is true for CSMs.

Can’t I do it with the people I already have?

You’ve invested in a rockstar VP of Customer Success, and they are at the absolute center of the success of CS Ops. Who else can look across all segments and teams to see the greatest pain points and low-hanging fruit? Who else can interpret strategy from Product, Marketing, and elsewhere into the CS team’s role? But there are three reasons that they are lousy at being responsible for CS operational improvements:

  1. Urgent priorities crush the VP of CS. When the big customer is at risk of churn in the last week of the quarter, nothing will stand between your VP and the key stakeholder call. When the Board meeting is next week, they need to have their story straight right now. When the buck stops with them, short-term needs will beat long-term value every time.
  2. Exactly how much are you expecting this superhero to do, personally? They already own a vision, a revenue number, a team to inspire and coach, day-to-day execution, and every last individual customer. Plus, we all know the effort it takes to context-switch between deep project work and a fire drill, then go back to the deep work. Can your VP of CS do some CS Ops? You bet. Will they improve your CS practice at the pace you need to meet your NRR & valuation goals?
  3. Your VP of CS has a different skill set. Have they been hands-on with data and reporting before? Likely. Are they even in the top 50% of data and reporting professionals, though? What about systems administration? Process design? Project management? This should be exciting and inspiring! Your CS team is already furiously speeding down the highway with water for engine oil — imagine what happens when you pour in the good stuff!

You may also look outside the CS team. It’s common to lean on IT, Revenue Ops or Sales Ops, an analytics team, or others. They can be a massive force-multiplier for CS Ops, but they can’t own the responsibility for using systems and processes to improve CS’s NRR or scalability for four reasons:

  1. Who’s going to tell them what to do? For example, let’s say that you decide to improve retention through better onboarding. Who’s going to break down the challenges and opportunities in your current onboarding program? Your VP of CS? See above.
  2. These other teams sometimes have the skills to be true thought partners and business consultants, taking that pressure off of CS leadership. Any great consultant needs to know the right questions to ask, though. These teams don’t know CS’s systems, how the CS team works, or even necessarily what the purpose of a CS team is. They don’t spend every day steeped in the knowledge that’s essential to be a thought partner.
  3. It burns time and bridges to compete with other departments for resources. It’s also common for CS to get prioritized behind teams that have more time-testing and common-knowledge ROI than CS does. Starting a CS Ops team in the CS org puts CS in charge of their own destiny, without having to make the ROI case for every small request.

What will CS Ops do?

Every company creates a different strategy to improve retention, expansion, or efficiency. Plus, your low-hanging fruit may be piled in one of those categories. This is why every CS Ops team looks a bit different. A CS Ops leader will be an extension of your VP of CS’s brain to help you figure out that strategy. That’s what they’re good at.

When you set a direction for CS Ops, they will implement systems, processes, reporting and analysis, enablement, and “1-to-Many” customer outreach to move the needle.

CS Ops for Retention & Expansion: What do I get?

  • Better Value Attainment
    • % of customers who see value prior to renewal
    • Time to value
  • Well-Managed Risks
    • % of customers who become at risk
    • Time that a risk ‘marinates’ before your team identifies it and begins mitigation
    • Time to risk closure
  • Expansion Throughput
    • % of customers who expand
    • Time until first expansion opportunity identified
    • Time to close an expansion
    • Size of expansion
  • High quality, data-driven insights to drive the product roadmap, pricing, and the ideal customer profile

CS Ops for Scale / CSM Efficiency: What do I get?

  • Larger Account Ratios
    • CSM time spent on administrative tasks (such as data entry)
    • CSM time spent communicating the same ol’ messaging
    • CSM time spent developing slide decks, call agendas, emails, etc.
    • CSM time spent prioritizing customers based on renewals or sources of risk
  • Better, Consistent CS Quality
    • % of CSM time spent on proactive customer outreach, versus reactive
    • CS leadership time spent on operational tasks (such as account assignments)
    • CS leadership time spent on reporting
  • Effective CSM Onboarding
    • Time to first account ownership
    • # accounts owned in first 30 days

How do I know if it’s working?

Most of the above metrics, especially NRR, will take time to change. In the meantime, start by ensuring that your CS Ops team’s projects are aligned with your priorities to improve the retention/expansion/efficiency of your CS team. Then, measure their own throughput using one or more of:

  • Objectives & Key Results (OKRs) / Management by Objectives (MBO)
  • Surveys of your CSMs
  • Project management statistics (such as Agile sprint points)

When should we launch CS Ops?

If your CS team has formed, and there’s something you want to improve that will take more than coaching, then you’re ready for CS Ops. A common first step is to make it a CSM’s part-time job, drawing down their account load and giving them a chance to prove themselves. Note, though, that these roles have been shown again and again to be short-lived stopgaps before an organization decides to make it a full-time transition, or to hire for someone who brings more experience or a specific skill set aligned with their key projects.

If you hire CS Ops too late, you’re setting yourself up for a host of regrets:

  • Data that’s structured and scattered in ways that can be near impossible to untangle
  • A hodge-podge of systems poorly suited to CS
  • A team of folks whose habits must be ripped out and replaced instead of well-built from the beginning
  • Aggravated CSMs and CS leaders who feel that you aren’t creating tools to help them do their jobs
  • A fraught relationship with your CFO thanks to inaccurate renewal and expansion forecasts

When you eventually bring on CS Ops, would you rather that they’re spending their time fixing old problems, or putting in best practices from the ground floor and building your vision?

It’s common to find CS Ops needs once you have about 5 CSMs since you start to see inefficiency and negative impact on customers from everyone doing things their own way. 10 CSMs is a common threshold to expand CS Ops beyond that first hire, often to bring on a subject matter expert in something like data analysis or systems administration. This will allow your CS Ops leader to be less of a tactician and more of a thought leader, not just following the lead of the VP of CS, but pointing out areas for improvement. The maturity curve of CS Ops takes years to travel, but you’ll get substantial value at every step along the way.

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