Success Engineering

Over the past year, I have had the privilege of talking with many individuals changing their careers to involve technology. Many have completed one software "bootcamp" or another and believe that the "brass ring" is becoming a developer. 

To them, this role is the domain of the elite. Safely firewalled from customer needs, developers focus on engineering tasks that drive long-term value. The work-life balance seems attractive too. They imagine the hours would be more regular because you are not responding to incidents or having to be "on-call." In short, they imagine this role as a kind of nirvana for many individuals who previously were working in customer-facing service positions. 

But this is leaving their most significant asset on the table: the ability to interact with customers. This asset is more important than ever in the age of Software as a Service. 

Turn the perspective around from labor to capital. From the point of view of an investor, companies that can form long-term relationships with their customers will be worth far more as a multiple of their current income than those that do not. 

This higher equity value is because a long-term customer is an asset to the company - a promise, or at least probability, of future income from the same source. And since a company's equity value is equal to its assets minus its liabilities, increasing retention means increating equity. 

The asset also has a financially strange quality of growing in value over time if we take care of it. A happy customer with a track record of good results is more likely to stay longer, which means the associated subscription has a lower prospective churn. Nurtured subscriptions appreciate, rather than degrading in the manner of most assets.

In business-to-business markets, the driver of this appreciating value comes from services: customer success. Customer success is not the same as customer support. Support is helping when the product is not meeting the customer's needs or has broken. From a prospective employee's point of view, service means interacting with the customer almost solely on their worst days, taking some of the emotional brunts.

Many companies view support as a necessary cost of doing business, but not something that moves it forward: a cost center rather than a revenue generator. So not only is the work a bit emotionally taxing, but it often does not get the level of respect and consideration within the organization that other roles do. Company mergers will often look to efficiencies in consolidating support organizations as an opportunity.

In contrast, customer success focuses on improving the net dollar retention of the relationship, and that comes from helping the customer get maximum value. The account executive and post-sales marketing roles have been getting more attention in the past couple of years.

The technical need here is significant too, and this is a blue ocean opportunity for our career changer. For businesses, success with a product is a matter of integrating it into their systems and processes. Further, enterprises are living things. They tailor and rebuild those systems as market, and environmental conditions change. 

A good customer success organization co-owns the job of driving value with the customer's team. From a technical point of view, this is a combination of configuring the product, configuring other products the customer has, and providing some custom or bespoke technology in the middle. The amount of value that can come from fifty lines of custom-made Javascript is enormous. This code might be the key to the whole value proposition - and the customer success engineer (CSE) who created it is a medium-term key to that relationship. 

Further, all those technical implementations have only a moderate half-life as the customer changes. As such, the CSE's value comes as much from client trust as from their innate technical skills. The CSE has an ongoing role in maintaining that value or increasing it as opportunities allow. 

The trust drives customer retention and the opportunity for upsell/cross-sell. When the relationship is strong, the client starts to ask the account executive - or sometimes the CSEs themselves - what other products or processes they should choose. If the company has additional relevant offerings, this allows the company to expand the breadth of revenue and retention duration. This combination drives the now-hot "net dollar retention" metric. This metric is hot in that it has a significant positive impact on company valuations. 

From the employee's point of view, this is job security. One's employer wants the CSE to stay because the client's love toward the company is at least partially due to the CSE's work. We can all talk about the importance of products customers love, but that love comes from success - and success comes from a combination of product and service. 

As such, retaining revenue - and the equity value that goes with that relationship - means keeping the CSE. The trust built in weeks and months is an asset - and companies pay for assets! Understanding one's value in this role will give leverage for fair equity and cash compensation.

Contrast this with the product team, which is entirely overhead: a given engineer's relationship with the company's income statement is less clear, lessening their job security. This problem is more acute at "junior" levels since they tend not to be responsible for institutional knowledge and are more replaceable. 

As with any other job, there exist multiple flavors of the CSE role and increasing responsibilities. One can join the management track, of course, and since CSEs are such a new role in most organizations, this is an opportunity that comes from growth at a company. 

Another opportunity is to become a sharper-end success engineer. I have found that a critical role at many business-to-business companies is the integration engineer (IE). The IE has a deeper technical skillset and comes in for the "hard parts" of a customer's transition to adopt, adapt, or expand the use of a company's products. 

Their job hovers between product engineering and customer success. On the one hand, they often create intellectual property that more customers can reuse than the immediate one with a need. Further, they drop in to help with the specific integration or need and then go to the next customer to help there. 

Between engagements, they ensure the work is reusable through documentation and communication. Further, they study other products that are likely to be integration targets in the future to get ahead of the curve. 

IE is a senior individual contributor (IC) job relative to the CSE. They have an outsized impact on each customer they touch. The integrations mean a deeper relationship between the customer and the vendor, creating more value and requiring more work to uproot. E.g., the customer stays longer and has a higher cost to switch. Further, the people in this role are valuable assets to the company. Each IE's contributions increase equity value across a broader set of customer relationships since their engagements are focused and (hopefully) short.  

My general observation is that engineers and would-be engineers give these jobs too little respect. They are challenging, multi-disciplinary, and drive both the bottom line and the company's valuation multiple. Account management types understand their value. In the absence of allocated resources, they bug the product engineering team to solve these problems, creating tensions between strategic product direction and the immediate need to service revenue. 

More experienced investors in the SaaS space see the importance of net dollar retention for driving the company's equity value. They forgive a cut in gross profitability to fund these efforts because the increase in longevity more than pays for the decrease in monthly or annual profit. 

Going where investors see the value but your fellow labor market participants turn up their nose is putting strength against weakness. An engineer with "soft skills" and, more importantly, a willingness to tinker and help get that maximum value will be an asset to both the customer and the employer. That person will have leverage when it comes time to discuss compensation increases, and of course, for working at other institutions.

CSE and ICs are part of a trend that will be critical for the success of SaaS in the coming months and years. Here one can be an important, client-facing asset rather than a "junior" engineer. 

And to my founder and investor friends, I point out the many excellent people entering the market who could drive success for your customers - and you! 

Win-win. 

Photo by krakenimages on Unsplash