The 7 principles of Customer-Led Growth
There are many ways to build the high-level of customer focus and company-wide capabilities that is required to be successful at customer-led growth. I would be wrong and be doing you a great disservice to say - here’s the playbook, just go and implement it. What I think is helpful is to set out a number of principles and frameworks that, from first-hand experience, have been invaluable in building both my own B2B SaaS company and in helping others on their path.
You can find more on the core GTM frameworks here but in this blog, I will focus on the seven principles I believe underpin any CLG company. Here goes.
It’s a financial strategy. It’s nice to be customer-focused and it’s nice to be nice; but notwithstanding that, CLG is about making money, for both you and your customers. The intense focus on your chosen customers is great for revenue growth and cost efficiency, and, done properly, has a marked impact on the Rule of 40 and therefore the value of your company. Acquisition costs fall as you direct your marketing and sales spend more effectively. Gross and Net Revenue Retention rise, which apart from their profound revenue growth impact, also lower costs: it’s far cheaper to keep and expand $1 of revenue from existing customers than it is to win $1 from a new customer.
Success by design. “All organisations are perfectly designed to get the results they get.” [Arthur Jones] For me, this is the most important principle. Despite the approach many take, organisation design has little to do with lines and boxes - who reports to whom and who owns what. Architects say “Form follows function”; what a building looks like has to be founded on what it does for those that use it. Same with organisations. Customer-led growth design requires the following:
A shared understanding of the purpose and values of your organisation.
Clarity and company-wide agreement of your chosen customers. More on Ideal Customer Profiles here.
A high-level, outside-in view of your customer lifecycle.
Agreement on the small number of measures that apply to everyone
The soft processes used to foster collaboration, innovation and alignment.
Of course, none of this will happen without robust leadership. I came to learn that one of the most important roles as CEO was that of Chief Organisation Designer.
People not customers. Too often we focus on that faceless thing called a customer. In reality, it is people that matter. People have challenges and opportunities. People make decisions to buy, renew, expand and advocate. People use your product. Only by identifying and understanding these key roles can we hope to make them, and by bent of aggregation, their companies successful.
Deep understanding of customers. Given principle 3, you will. not be surprised to know that I think people are the core here. I think detailed Role Profiles are the most important aspect of an Ideal Customer Profile. I am also staggered by how often companies fail to build the depth of understanding needed. Even when it does exist, it is often fragmented and undocumented, which leads to a disjointed organisation and, even more damaging, a fragmented customer experience. I strongly believe that understanding your customers better than the competition is a powerful source of competitive advantage.
Success is selling. Jay Simons, formerly President of Atlassian once said “the best software is bought, not sold”. He doubtless had Atlassian’s product-led approach in mind but I think the phrase holds true irrespective of the business model. The best sales people use the product’s power to deliver measurable improvements in the results that matter to key roles to create a compelling case to buy. The customer’s success is at the forefront of the sales process in any customer-led growth business. They don’t sell in the hard sell way; they nurture buying.
Their choice; not yours. There are two practices used by many customer success teams that, in my opinion, are just wrong: segmentation and customer journeys. Segmentation, often revenue based, is used to determine the level of enablement a customer receives. This almost always takes no account of the needs of the customer. Equally, companies spend inordinate amounts of time designing journeys to take customers on when what people want is to follow their own journey! It’s bit like that old joke: idk you want to get to there, I wouldn’t start from here. Customer-led growth companies recognise customer’s need for control. Rather than segmentation and fixed journeys, they use rich data to understand context and offer advice accordingly. This concept of Next Best Value negates the need for customer journeys. Segmentation is replaced by purposeful design which looks at margin by cohort with the goal of building capabilities that are, at the aggregate level, margin enhancing.
Code scales better than people. Code scales logarithmically; people scale linearly. Unfortunately there are two common, but mistaken practices, stopping companies from fully exploiting the benefits of scale through code. First, many companies jump to creating a CS department to address customer enablement. I am not against CS teams but I am against it as the first and only solution. CS is seeking to address this by introducing ‘digital CS’. I agree with a digital approach but think replacing people with additional systems is not the real answer. B2B SaaS companies are product companies, ergo the product (code) should be the primary vehicle for delivering the measurable results key roles require. Too many SaaS companies suffer from badly designed products. A great product is ridiculously easy to use, looks great and has achievement paths for the key roles built in. Rather than automate CS playbooks, we should be productising the process of delivering measurable results. I first floated this idea in 2016 in a e-book titled “Product-Led Customer Success.”
Those are the seven principles. Each has a dedicated chapter in my book “Customer-Led Growth - A CEO’s guide to building a B2B SaaS company.” Some are more embedded than others but few companies can claim to have adopted them all. I believe these seven principles describe the future of customer centric Saas companies. Time will tell.