Part 3. History of Customer Success: Boom to Bust (2020 to 2023)
2020 A New Type of Customer Relationship
As the pandemic took hold and put the world into virtual workplaces, digital delivery became mainstream across customer success teams. In this new uncertain environment, there was an acceleration of customer success teams seeking to improve the scalability of virtual customer engagement through digital means.
Most customer success teams already had edge cases for digital customer success, but in 2020 it became pervasive across teams in the region and was enabled by technologies such as Brella, Zoom, in-app messaging technology, and customer success platforms (CSPs). Digital customer success is defined by automated in-product value- and usage-driven funnels with personalised omnichannel messaging to ensure customers continue to use and find value while limiting human interactions. It is a strategy with one foot in digital marketing and another in product-led growth.
Digital success has existed for almost as long as the profession, but for the first time, it became a necessity to join up digital approaches to maximise impact for customers. Driven by primarily the pandemic, the acceleration of ‘scale-to-serve’ operational models to reduce cost, and loss risk and maximise customer growth opportunities were here to stay. The role of Digital Customer Success specialist emerged.
2021 Hire! Hire! Hire!
After the initial fear and shock of the pandemic subsided, the tech sector saw a huge rebound with an explosion of VC funding fuelled by low interest rates, pandemic-driven innovation and growth in the tech sector. In 2021 the investment in tech firms (VC & PE) was more than 2.5 times greater than in 2020, and this investment was realised as headcount growth.
In Europe, we saw a supply-driven market for customer success managers which drove higher salaries, increased job-switching and an influx of new customer success managers from industry. This growth was unlikely to be positively sustained.
We started to see CEOs and CFOs question the value of customer success as costs burgeoned, results were variable and not always directly attributable to the function. Had we grown too fast and diluted skills and capability on the quest to fill roles?
Additional capital and funds flooded the European tech sector, relative to other years, in 2021 and 2022.
Source: TechEU: European startup funding down more than half at $45B in 2023. 28 November 2023
2022 Seeking Profitability
Economic and political instability brought about by the war in Ukraine, the energy crisis, the collapse of Silicon Valley Bank and the impact of government spending pushed up interest rates and led to capital becoming more expensive. The fall-out was smaller raises and more reluctance of funds to invest in the tech sector with the same vengeance as years gone by. As CEOs became less confident in securing their next round, or a potential down-round, they scrutinised spending.
By mid-2022, burn rate became a focus of companies, especially in the light of revenue growth and profitability. Companies looked for a way to reduce costs as the “just grow” mantra became unsustainable. A mix of strategic, investor-driven and contagion-style layoffs impacted all roles in tech companies. We started to see the right-sizing of tech companies.
These layoffs did not initially appear to impact customer success as there was still a need to protect and grow the installed base. As customers rationalised their tech stacks to save costs, post-sale growth saw a decline in NRR, a lag metric. Customer success was soon impacted and customer success managers flooded the market in Europe, particularly at senior leadership levels.
After 10-odd years, employers finally had a demand-driven talent pool again and could regain control of salaries. Internally, CEOs started to question the value versus cost of customer success. Alternatives, such as customer-led product development, extending sales engagement and more traditional account management are challenging the status quo of the profession.
Where “scaling” meant adding more headcount in the past, scaling now means efficiency. Post-sales functions had to do more with less and demonstrate their impact, not just on revenue, but on the bottom line. Were customer success teams still positioned for growth, when they needed to have pivoted earlier for efficiency?
As tech companies managed finances more prudently and rationalised teams, layoffs impacted many people.
Source: layoffs.fyi December 2023
2023 The Rise of the AI Customer Success Leader
At a time when efficiency and cost management are challenging the future of customer success, AI-driven innovation has been a welcome catalyst to enabling a transformation of the profession. Generative AI will fundamentally create a shift in how we deliver to customers and operate internally - both with more impact
For customers, AI has helped better achieve at least four of the principles of great customer experience at scale as defined by David Jaffe and Bill Price in The Best Service Is No Service.
Create engaging self-service - personalise the interactions your customers have with your app and support service
Be proactive - use data and AI to understand your customers and engage with your customers before they come to you
Listen and act - enhance customer listening through multi-source data aggregation and interpretation of trends
Deliver great service experiences - continuously improve from what you learn
Internally, generative AI is helping leaders unify, aggregate, interpret and communicate data to make better decisions and identify the highest impact moments to include human (CSM) interventions. Non-value-add tasks, such as meeting notes and risk planning are being encapsulated by new tools.
Any leader not insisting on behaviour change in their team around the use of AI will find that compared to their competitors, their teams and performance will fall behind.
Our blogs are written by us. We use generative AI to promote ideas and thought-challenge, not to write our content.
