Customer Success : An Antifragile Approach
People who have heard of Nassim Nicholas Taleb usually know of him as the guy who popularised the use of the term “Black Swan” to describe hard to predict, extremely high impact events that lie outside the realm of normal expectation. Initially his focus was the financial markets but in his book The Black Swan: The Impact of the Highly Improbable he generalises the concept to show the broader impact of the black swan theory.
Black Swans In Customer Success
As an illustration of how this might play out in a SaaS company consider a company that provides a platform for an employee benefits solution. This company derives 80% of its revenue from 3 very large customers and the remaining 20% from a basket of 60 much smaller customers. The 3 very large customers are all on long-term contracts, deriving significant demonstrable value from the solution and in each case have a very strong and productive relationship with the customer success team. They are given a great deal of attention and are considered more or less a guaranteed source of long term revenue. A black swan event in this case would be all 3 of these customers, within a period of weeks, declaring bankruptcy and moving into administration. As part of the plan to rescue the companies the administrators each decide to drastically cut back on employee benefits and therefore no longer need the company’s solution. Under the terms of the administration order they are able to sever links immediately. For the SaaS company this is an existential crisis, something that was seen as highly unlikely (even impossible) and that could not be prevented: a black swan.
Surprisingly this idea of a black swan event, so intuitive yet often so overlooked, is not Taleb’s greatest contribution to our thinking. For that we need to look elsewhere and examine his concept of antifragility.
The usual reaction to, and continuing mis-perception of, the concept of something being antifragile is to think of something as being robust or resilient. However, as Taleb’s stresses, if the opposite of fragile was robust he would not have needed to invent the term antifragile. It was needed because for Taleb the true opposite of fragile, and the concept he is illustrating, is not that something is robust.
For Taleb something is fragile when it weakens in the face of stress, or disorder, or volatility. A china cup that breaks when it hits the floor is fragile: the volatility is the unexpected contact with the floor. Something is robust when it is unharmed by volatility, a plastic cup that when dropped bounces on the floor is robust to that particular stress in a way that the china cup is not. Something is antifragile when it is improved by stress, or disorder, or volatility. As a result there’s no such thing as an antifragile cup. You are all though familiar with an outstanding example of antifragility: the human body.
Take two examples:
- Vaccination which introduces a stressor to the body in the form of an agent that stimulates the body’s immune system to recognise the agent as a threat, destroy it, and to further recognise and destroy any of the microorganisms associated with that agent that it may encounter in the future. As a result the body is improved by the vaccination being newly able to fight off diseases that in some cases may be fatal;
- Exercise, a form of volatility, which puts the body into a stressed state (raised heart rate, increased lactic acid, tearing of muscle fibres) for a short period of time on a regular basis improves bodily health in numerous ways.
The concept of antifragility can be, and has been, applied to numerous fields. Can it be applied to customer success? This would surely be a desirable circumstance, if we could identify the characteristics of an organisation focused on customer success that got stronger, not weaker in the face of stress, disorder or volatility, especially when that disorder arises in their customer base.
Antifragility In Customer Success
The first place to look then is the customer base. The best though that we can do is to make our customer base as robust as possible. An antifragile customer base, one that improves through disorder or volatility is hard to imagine. First of all we can’t hope to prevent or navigate around every circumstance that might cause customers to churn nor does it seem possible to find ways for that churn to organically strengthen our remaining customer base. A robust customer base is easier to describe. It would have some or all of the following characteristics:
- Unlike our black swan example above there would not be an existential dependence on a small number of extremely high value (relatively) customers;
- The reasons for churn would be thoroughly understood by the customer success team and clear strategies to mitigate or deal with each of the scenarios causing churn would be developed;
- Conversations between the customer success team and their customers would be business outcome focussed ensuring the mechanisms by which value is delivered and measured are clearly understood and designed into to every step of the customer journey;
- Data would be used relentlessly to understand customer health and customer value helping to ensure that resources are correctly prioritised;
- Identifying the customers who may have an asymmetric payoff: that is to say the group of customers where large expansion opportunities can be nurtured, at extra but not huge cost to the organisation, such that one or two converting would have a material impact.
So if the customer base cannot have characteristics of antifragility is it possible to embed this elsewhere in the organisation? I think the answer is yes, in fact we’ve seen hints of it already in this article.
The answer of course is in how your company reacts to disorder which is almost entirely down to two things, the quality & mindset of your employees and how well enabled they are by the environment and leadership principles of the organisation. A perfect example of this was seen in the recent Liverpool vs. Barcelona Champions League semi-final (if you’re not a footie fan bear with me).
Barcelona are known for their composed possession based football and in Lionel Messi have in their ranks perhaps the finest player of all time. Liverpool, missing two key players including their talisman Mohamed Salah, went into the match underdogs, pitted against one of the finest footballing sides on the planet and facing a 3 goal deficit.
Any early goal for Liverpool got things off to a good start. This was followed early in the second half by two quick goals to put the teams on equal terms. Liverpool to some extent ripped up the rule book and played a very high tempo game that often overwhelmed Barcelona who refused to change tactics to adapt. As the match came to a close Liverpool seemed strengthened by the stress of the situation and the volatile nature of the way the match was played while the Barcelona players appeared to lose motivation or freeze towards the end of the game. As an exercise in building antifragility Klopp, the Liverpool manager, had succeeded superbly in building a team with extremely high levels of motivation, an unshakeable belief in themselves, their mission, their manager and their teammates: they were in essence unstoppable and scored the winning goal in the 79th minute. Barcelona on the other hand exhibited a fragility seen at least once before under such extreme pressure and almost appeared to concede defeat.
The Importance Of Culture & A Shared Sense Of Purpose
It is this same sense of purpose, shared mission and leadership that companies can draw on to create the conditions for antifragility in customer success. Contrast these two reactions to the unexpected announcement of the churn of a large customer in an otherwise well structured and well run customer success team.
Before the reasons for the churn are properly understood the fragile customer success team is thrown into a mild panic and begins to look for reasons/excuses to explain the churn. An internal inquest is held and likely candidates for the churn are surfaced: we weren’t properly connected to the key stakeholder, they were mis-sold, the product wasn’t right for them from the start and so on. As part of this the customer may be consulted, but maybe not. Changes are then discussed and new plans made to avoid a repeat and the morale of the team takes a dip. This is the kind of reaction you expect in companies where people’s first concern is for themselves, common in companies where the CEO makes statements like “our people are our greatest asset” and then goes on to treat those same people as disposable assets whose only purpose is to help them achieve their own goals. The kinds of CEO who create what is commonly known today as a ‘toxic’ work culture.
By contrast the antifragile team does not start to panic. Supported by a leader whose actions do mirror their words when it comes to culture and the support, growth and development of their employees the shared first concern is for the customer. Knowing they have a well structured process and team, and crucially the support of their leadership, the team’s first reaction is not to think ‘what did we do wrong’ but instead to ask “what are the reasons why this customer churned.” A conversation with the customer will be the first port of call where it maybe discovered, for example, that the churn is due to the customer themselves losing a very important customer and therefore having no option but to cut costs. Alternatively it may highlight that mistakes have been made, perhaps assuming the customer was in good health the customer success team have focussed their energies on the problem customers in their portfolio and happily accepted a couple of customer cancellations of recent meetings: an indicator that might be incorporated into the future customer health score. So far though this response is simply robust. The real magic is in the antifragile response. Disappointed but not downcast the CSM team get together and review their end to end processes looking for similar ‘gaps’ in their approach. Asking the question “how to we avoid similar ‘unexpected’ situations” they set to work to build additional checks and balances into their approach strengthening the overall function. Further, determined to make up the lost revenues they conduct a fresh analysis of all accounts to identify expansion accounts and collaborate with sales to make a plan to develop those into expansion revenues in excess of those just lost – an approach that then becomes part of business as usual. The entire function and its go-to market strategy strengthens as a result of the stress applied.
Needless to say in this second scenario there are other benefits. The employees are likely to be happier in their work, improving retention rates and over time gaining the employer a reputation as a great place to work: the talent magnet effect.
What’s the key difference between these two approaches? Empowered and supported employees energised by a clear, consistent, fair and visionary leader who truly understands and acts on the maxim that ‘our people are our greatest asset.’ If you want to build an antifragile approach to customer success this is where to begin. And where does this start? With the CEO.