As businesses embrace the everything-as-a-service transformation, some find it more difficult than others to make the shift to SaaS. The larger and more established your company is, the harder it is to navigate this monumental change. Think about everything that goes into the operation of a multi-billion-dollar enterprise. Now, mix in a move away from on-prem (something it has been selling since its inception!) and toward software and cloud-based offerings (unfamiliar territory). It can be a recipe for long-term success or a rough road ahead – frequently, it’s both. Over the years, the market has come to embrace the subscription-based pricing model, but that doesn’t mean you can flip a switch and start reaping the benefits of recurring revenue. There’s a term for when a business takes the leap from traditional to SaaS: swallowing the fish.
Swallowing the fish is a metaphor for the impact the journey from on-prem to SaaS has on a business’s revenue and costs in the short term. Because you’re only collecting a fraction of the revenue you once made on an initial sale, your incoming revenue numbers plummet. At the same time, the costs of investing in new capabilities (a brand-new Customer Success organization, for example) snowball. For a time, costs rise high above revenue, making it look like things aren’t going too well (in the graph, this part is the belly of the fish). If you can make it through to the other side, the gains in terms of capital market valuation can be enormous.
But first, you have to get there. Any Customer Success leader guiding their company through this phase will tell you it’s tough. Maybe a little more than tough. At ESG, we’re helping many of our clients undergo this tricky transformation. While there is no magic school bus you can take to get you through the belly of the beast faster, you can do a few things to make the growing pains of this period of transformation easier to bear.
5 tips for CS leaders managing the transition from traditional to SaaS
1. Understand the politics and get the word out
I’ll put this one at the top because it is so critical, and it’s a doozy. CS leaders often struggle to negotiate the politics of developing a new organization within a legacy enterprise. Changing entire business models tends to create a lot of chaos, and people are naturally resistant to change. You have to truly understand, on a gut level, why you’re doing what you’re doing, and you’ve got to be able to sell it to the rest of the enterprise. In short, you need to become a Customer Success evangelizer.
It helps if you’re plugged into the politics of the situation, so you are in a position to educate both your leadership and your colleagues about how Customer Success will help the company make it through this big transformation. At ESG, we call this the Customer Success roadshow. It’s about getting everyone’s buy-in early to set your organization (and, by extension, the business) up for long-term success.
2. Leverage change management, both internally and externally
Change management may seem like a ginormous discipline that takes years to gain full expertise in – and, err, it kinda is – but it’s also your friend! You don’t need to be an expert to apply change management principles in Customer Success. Learn some best practices and be proactive in utilizing change management processes in your CS initiatives, and it will make a big difference. These practices will help everyone navigate the road ahead and help you get the changes you’re driving to actually stick – a real challenge in well-established enterprise companies.
3. Recognize the differences in what you’re selling
Selling software is very different from selling hardware. You’re no longer selling features and functionality. Now, you’re selling impact. You’re selling outcomes. As a CS leader, you probably already know this, but many of your colleagues, especially in Sales, will have trouble making this adjustment. You’re basically learning how to walk the walk and talk the talk of a software company. That’s hard! The quicker you get everyone to see how these customer dynamics need to shift, the better off you’ll be.
4. Align with Sales to figure out the right compensation plan
Which brings me to my next big tip. Out of everyone in your company adjusting to this conversion, Sales will probably feel it the most. It’s likely full of employees who’ve been selling the same way, very successfully, for years. If you don’t work with their leadership to figure out the best way to set up a compensation plan that benefits both of your organizations, you could end up with a program that encourages Sales to undermine the hard work of your CSMs. It might be awkward, but it’s best to jump into these conversations as soon as you can.
While we’re at it, align with everybody, get their input (see CS roadshow in number one above), and foster cross-functional cooperation right out the gate!
5. Ditch antiquated systems ASAP
Lastly, you’ve got to clean up your data and ditch antiquated systems as soon as possible. No, this is not as easy as it sounds, we know. Sometimes it’s a struggle to get the budget for a Customer Success Platform or even a simple tech upgrade, but once you do, it will pay off. CS is often in a unique position, especially in the beginning, to look at all the disparate systems every department uses and build a better solution that benefits everyone. You might feel like you’re stepping on toes, but it needs to be done. Don’t get stuck using spreadsheets to collect and organize data from all the different customer-facing departments – now that’s a real pain.