In this episode of The Support Automation Show, a podcast by Capacity, Justin Schmidt is joined by Paul Henderson, Director and Outcome Workshop Leader at Outcome Leaders. They discuss the three levels of automation and how to set up an automation strategy.
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Justin Schmidt: Welcome to The Support Automation Show, a podcast by Capacity. Join us for conversations with leaders in customer or employee support who are using technology to answer questions, automate processes, and build innovative solutions to any business challenge. I’m your host, Justin Schmidt.
Paul Henderson, welcome to The Support Automation Show. Where does this podcast find you?
Paul Henderson: I’m in Sydney, in Australia and we’re enjoying a bit of summer this time of year, a little different from where you are right now, Justin.
Justin: Yes, quite literally the opposite of summer. Thank you so much for taking some time this morning to chat with us. You are a director at Outcome Leaders. Why don’t you tell us about yourself, Outcome Leaders, and the journey to this point?
Paul: First of all, great to be with you, Justin. My background is technology, not surprisingly. My last role before founding Outcome Leaders was running the Asia Pacific region for an enterprise software company. I had about 200 people across 9 countries supporting 800 or so enterprise customers. In the last 5 years that I was in that role, a couple of interesting things happened. First, the company globally moved from being an on-premise vendor to a cloud vendor with the fun that goes [chuckles] with making that transition.
The second was I decided that in our region, Asia Pacific, we were not doing enough to create great business outcomes for our customers. I felt like that would be a great strategy to differentiate against some of the big players that we competed against. I hired a number of very smart people and between us we designed and successfully ran an outcome program for over five years. At the end of that five years, a few things occurred to me.
The first was I was a bit hooked on this outcome thing. It was far more interesting working on that program than it was in running the day-to-day business of selling and implementing software. The second was I felt like other companies were starting to adopt outcomes, and with the experience I had, I should be able to help. Third, I actually found something I really cared about. I really do not think it’s okay for companies to sell their products and services and for customers not to get great business and outcomes.
I decided I wanted to tackle it. I had been writing my first book as a little bit of a hobby. I resigned, set up Outcome Leaders, published the first book, got to work researching and writing the second book called The Outcome Generation, which was published about three years ago. In the time since then, I’ve spent a lot of time talking to people about outcomes and outcome programs across the world.
One of the things that has become very clear is, while there are lots of companies that have an outcome program, everybody reinvented the wheel. I think that business and outcome focus is the right way for companies to engage with their customers. My concern is if everybody has to reinvent the wheel, then it’s not going to scale. It’ll be too hard.
The last year, I have spent writing my third book called Income From Outcomes, which is going to be released next month, February. What that contains is a very simple framework. That any company wanting to adopt or improve an outcome program could use it as a framework for designing the way that they want to engage with their customers. That’s how I came to be where I am today. Today Outcome Leaders, we help companies, mostly in the technology sector, drive or tap into unrealized income through a customer outcome program. That’s how we come to be talking, Justin.
Justin: Excellent. What would explain it like I’m five definitions of an outcome program?
Paul: Some backgrounds, some grounding, if you like, in some of the concepts that underpin this. The first idea is that whenever there is a commercial transaction of any sort, there is an outcome that’s in play. Even something very simple. You buy a hamburger, the outcome you want is to be full. You buy a movie ticket, the outcome you want is to be entertained. You buy a sports car, probably you want to be noticed. That’s the outcome you’re looking for. Big or small, B2B, B2C, doesn’t matter. There is an outcome that’s in play if money changes hands.
Second idea, in technology, there are two types of outcomes that we engage in. The first is the product outcome. This is the direct benefit of using the product or service that your customers have bought from you. The second we’ve called the success outcome. This is the bigger outcome that the customer is actually trying to achieve and your products are a means to an end. They are a subset of what’s required.
A non-tech example of the difference between a product outcome and a success outcome, Imagine you went to a hardware store and bought a drill bit. You go home, you use the drill bit and you drill a hole in the wall. That’s a product outcome. You pay for the drill bit. It works as it should. You have a hole of a specific diameter now in your wall at home, but who wants a hole in the wall? What we want is that picture we’ve just had framed hanging on the wall.
When we can step back and admire our handiwork, then we’ve achieved a successful outcome. We did not buy the drill bit just to make a hole. It was a means to an end of getting that picture and being able to experience that feeling of success if I got that picture up on the wall. Why is that distinction important? If you step back and the picture looks terrible, you’ve hung it in the wrong place. The next time there’s work to be done around the home. You may not go back to the hardware store.
You might hire a handy person to come and do the work for you, and the hardware store is going to lose future revenue. Even though the product they sold worked perfectly, because the customer messed it up, the hardware store loses future revenue. That happens in technology all the time. We know our product works. We’ve got so many customers who are using it. We know it works, but some customers get it wrong and that costs us future revenue for those customers. The key message, and this was the key message out of the last book, is that the amount of customers spending next time is driven by the success they have this time and success is the success outcome. Not just whether your product works.
Justin: Got it.
Paul: Now under these concepts, that’s the thinking that underpins this idea of an outcome program. Basically, what is an outcome program? It’s developing an understanding of what the success outcome looks like for your customers, and then you take responsibility for doing as much as you possibly can to make sure they get the picture on the wall looking great, and whatever your version as a vendor of that picture on the wall is, it’s in your financial interest to make sure that customer gets that right.
Justin: Exactly. It’s an interesting model because when you go into the customer relationship with an outcome model in mind, everything you do you’re not driving adoption or you’re not driving features you suggest for the sake of feature usage, right. You’re not bombarding customers with training materials just for the sake of doing it. Everything is very focused on a goal on the other end, which is the revenue-driving success of the customers using your product or service. If you can manage success for the customer to be driving revenue using your product, obviously, you’re going to be in a much better position for success in the future. I love it.
Paul: That now, Justin, that’s a great summary.
Justin: Thank you. Here at Capacity, we’re a software company that sells tools and platforms to automate a lot of functions that you find in typical customer-facing organizations from help desk ticketing, live chat, AI chat, all that kind of thing. We try to build the platform to provide what we call support automation. I’m going to start my meat of the interview here with the question I ask everybody off the top, and that is when you hear support automation, what does that mean to you?
Paul: It’s interesting that as part of the research for the book, I’ve spent quite a bit of time talking to people about automation. Let me answer the question in two parts. First, what I think a lot of other people think about it as. A lot of people think it is about taking your internal processes and automating them. In my view, and the conclusion I’ve reached from talking to– I interviewed almost 150 executives for the last book. Mostly one-on-one interviews. What came out of that for me is you need to think about it a little differently.
It’s better if you start, what does the customer need? What could we automate to make life easier for our customers? Which, as a byproduct, will reduce the amount of manual work we do ourselves. The paradigm is what does the customer need? How do we create a self-help environment where the customer can self-serve? Because we know that customers, if they have a self-help option more often than not we’ll adopt it. Don’t start with let’s automate something we’re already doing, let’s make it easier for customers to help themselves to get the answers, to get the problems resolved, to get the things that they would otherwise require a voice to voice, face to face engagement to achieve.
Justin: The self-help, it sounds funny when I say it that way, self-help you think like, a diet book or meditation or something like that, but self-help from a customer perspective, level zero support sometimes you hear it referred to as like shifting left, going from the Asian to chatbot or a good knowledge base or whatever it is. That is absolutely one of the core concepts of automation in a support sense. I can tell you just from my personal experience, you’re exactly right. I would much rather be able to get whatever the issue is solved on my own versus reaching out and having to talk to an agent.
I’ll give you a perfect example of it even just today. This is, actually, a really interesting example because I bought something for my home studio here that I needed to return, and the retailer that I bought it from doesn’t do self-generated RMAs. Like you have to talk to somebody to then get your RMA, which the people there are always delightful and they’re fantastic at helping you get the right gear or equipment or whatever it is you need. There was an inconvenience, I just wanted to have the Amazon-like experience where I click return and a label spits out of my printer and I can just be done with it, but there’s probably a lot of reason they chose not to go that route.
It goes back to what you’re saying, their end goal is to provide this level of service that for musicians is much higher than that of any other retailer you’re going to use. This is sweetwater.com is who I’m talking about. Shout out to Sweetwater, but I think what you’re getting at is really interesting and that is on the surface level automation today is really easily achievable when you think about simple self-help stuff, knowledge base, chatbots, all that kind of thing.
In terms of where this goes and going another level deeper, when we were going back and forth about booking this interview, one of the things you said is that the purpose of automation is twofold. First is to provide customers the ability to self-help, which we just talked about. Then in the second is to lift customer engagement out of react, which is level one, and protect level two modes up to the third level of expand. Expansion revenue is the lifeblood of any vendor who’s passed the early growth phase and automation freeze resources to folks on the third level. I would love for you to double click on these three levels and how you see automation weaving through those three levels.
Paul: Let’s start at the base level which is react. As a technology industry, we have adopted some different practices. It’s been happening for 20 years, but really the last five it’s probably been stronger and that is the evolution of customer success departments. Departments who were there to help do some of this stuff. It was often a problem for customers. They would have an account manager and they knew the support line, the help desk number, but often the account managers, not always brilliant at being responsive to customer issues.
They’re often spending their time out there trying to close the next deal. Customer success was born primarily to reduce churn, and we’ll talk about that in the next level. We have this base level where customers want to get answers. They’ve got a question or they’ve got an issue or a problem and they need to get a result. The react mode is how companies deal with that and that is the obvious place to start an automation strategy. Set up a knowledge base where people can access themselves.
In the last company I worked for, and this is some years ago now, they had their help desk tickets at 87% self-resolve and it was on the increase. I think that’s the trend across the industry that people, Justin, you mentioned, you reinforced, that people want to be able to sort it out themselves if they can do it effectively and easily.
First thing is, let’s give them access to information, let’s give them access and we’re seeing bots, particularly AI-driven bots playing a much more important role in that. There’s some evidence coming out that people are willing to be more open with bots than they are with real people. They’ll ask dumber questions or put themselves out there, which probably helps them get better answers, better results. That kind of level very strongly lends itself.
Again, don’t start with how do we automate the things that we are doing at the moment in the react level? What does the customer want? What questions are they asking? What information or what help? Even get ahead of the curve, don’t just wait for what are the things that they are already asking us. What are the things that we could proactively solve for them or help them solve, and that react level, that level for people that engage with customers is the least interesting level. The more of that we can automate, the more interesting we’re going to make people’s jobs who are in this customer-facing space.
Second level is protected. This is what resulted in customers’ success being born. There’s a famous story that dates back to the Salesforce days from in the late ’90s where Marc Benioff and his executive team were together and they were all celebrating the fantastic success they had. They were having amazing growth. One of the executives stood up when it was his turn to present and said we’re going out of business. Of course, the room went quiet.
Paul: Yes,”Hang on we’re celebrating this fantastic success. you’re telling us we’re going out of business.” He said, “We have a churn of 8% per month, that means we lose every customer we sell every year. That’s almost the entire base every year we lose. We will not be able to sustain the level of new business growth that we’re currently achieving and stay in business.” He was dubbed Dr. Doom for that presentation, but it resulted in a commitment by Salesforce, by Marc Benioff, to the approach of custom success and their focus very clearly was prevention.
That has been the way that almost every customer success department has started life. It’s about getting the churn under control in a subscription business. How has that evolved? It’s been very much about monitoring usage, first of all, and that’s something that very strongly lends itself to automation. You really should be building into your product the ability to monitor whether or not people are using the product, whether the seats or subscriptions that have been sold are all being consumed.
At the second level, you can identify features in your software, which are strong indicators of a likelihood to renew if they’re used. If companies use these extra features, they’re very likely to renew. There’s a high correlation. You also then want to go to that next level of adoption tracking and track the adoption of those key features. Then automation plays a part there as well. If you can see users, if you can set up your product so that the product identifies that there are users not using this feature and you can throw something out for them.
Hey, did you realize you could do this click here and I’ll show you how to do that is a wonderful way of automating some of that adoption process that was previously done in the early days just manually. That’s a great place to put some automation effort into automating that. Again, it’s a relatively mundane activity, just trying to track for every company what the usage is compared to subscriptions. Again, if we can automate that, we’re going to take some of that less interesting work away from customer-facing people and free them up to be able to do some of the more interesting stuff.
Justin: Then that gets into the third level of expansion, which is driving expansion revenue.
Paul: Right. Particularly in the world of customer success, but right across once a company has emerged out of early growth. In startup and early growth, new business revenue typically exceeds the revenue from existing customers, but at the end of that process, the switch happens when companies’ subscription revenue from existing customers exceeds new business or new logo. Now, you are in a different game. Now, expansion revenue is the key to the ongoing growth of the business. We need to adopt an approach that will drive that expansion revenue. The proposition is, what better thing to focus on than the business outcome the customer bought your software to help them achieve?
If you ensure that they achieve that business outcome, then number one, they’re much more likely to renew, but we then adopt a repeating cycle of engagement with the customer so that every year, we look for the next opportunity to drive improvement in that business outcome, and that drives another project, which will lead to more revenue for you as a vendor. Then a year later, we go back and do it again. We look for the next opportunity to drive the business outcome.
You have a very business-focused framework for driving a repeating cycle of engagement, which has one focus, continuously improving the core business outcome that you help your customers achieve. That becomes the foundation for an expansion program, that really simple idea, being clear about the core outcome you help your customers achieve. What does the picture on the wall look like? Once you’re clear about that, drive a repeating cycle of engagement. Every year, look for ways to do better for the customer. A by-product of which is you’re going to grow your revenue in that customer.
Justin: That’s brilliant stuff because, ultimately, true north, the north star that we all as business leaders go for or are marching towards is to achieve growth through new customers and then growth of existing customers. What’s interesting, and that you mentioned this, I think it was around phase two when you mentioned the gamification and some of the automation that happens inside technology platforms to then get people to do the next thing to build the hook.
I always go back to this example and that is one of the things Mailchimp did extremely well early on was they figured out if they could get a new Mailchimp user to send their first email to however many contacts they just uploaded, the faster they can get someone to send that first email, the greater the likelihood that that account is going to grow with Mailchimp. From the moment you create the account it’s like, “Let’s get your list uploaded. Let’s get your creatives made. Let’s get you to schedule and hit send.
Where you start with good product design and just good UX and user onboarding, eventually it gets to the point where you’ve got rules and triggers if this event happens, send in this email, if they achieve X, Y, Z, send a note to the customer success rep to then reach out to them and say, “Hey, I’ve noticed you did whatever it is. On our next QPR, let’s talk about this and see how we can drive it forward.”
I love this idea of reacting to protect and expand because it very succinctly describes the process and that true north that we’re all going through. In terms of where you see customer success and leading management towards outcomes, what are some pitfalls that you see that people need to keep their eyes open when it comes to things like AI, machine learning, et cetera?
Paul: Pitfalls, for me, the central theme, everything that we do needs to link back to that core customer outcome that we should focus our business on. If our AI tools, if our automation tools are not directed by that, if they don’t have that as their singular purpose, that becomes the guiding light, the framework within which you make decisions about how you deploy bots, how you deploy AI, how you deploy the automation approaches that you take.
That should be– You used the term north star, Justin, which is a term that I use as well, that needs to be the driver. If you go down paths using those tools that take you away from that central focus, that you just need to become crazy about that focus, then you’re going to drift off in the wrong direction, I would think would probably be the central idea that I would offer on that.
Justin: In your answer, I thought of something else too, that I don’t think I’ve ever thought about before, but it’s absolutely true. In a world where you’re using data to feed into some sort of machine learning model, whether it’s as complex as Tesla figuring out however many zillions of data points for a car to drive itself versus just training an AI that– In my company, when people say CSM, that means customer success manager, not customer support manager, bad example, but I’m trying to set the two extremes here.
You end up with, in either scenario, some degree of a bit of a black box in terms of how the model is going to churn through all that data to get to a particular result. If you’re not properly managing those outcomes, you could inadvertently create countervailing forces to what you’re trying to do by having data that is not copacetic with the outcomes you’re trying to manage. Go into the model that you’re hoping helps you manage towards your outcomes.
There’s a data problem and an input problem that an outcome leader needs to be aware of that exists in AI and ML applications that [unintelligible 00:26:27] more traditional business processes. It’s a fascinating thought that as humans, we are getting machines and software to do more and more for us and we have to play the role of conductor more often than we used to.
The difference between working every part of the assembly line, and then, eventually, standing at the end of the line and watching all the workers work the line and understand where things fall apart, that’s a much more ground-level thing for a human to observe versus, “Hey, here’s 25 million data points.” [chuckles] Never in a million years are you going to be able to read through yourself.
The AI models we have are going to process these in 45 seconds and come to a decision, and that just requires an entirely different worldview of someone who’s got to be in charge of managing those processes.
Paul: It makes a lot of sense.
Justin: It’s been a fascinating conversation, Paul. I really appreciate you taking time out of your morning and coming and joining us. Let’s wrap up here with my last two questions I always ask people. The first is, and you probably see this a lot in your work, but if you’re going into an organization that has the scale where bringing automation into their customer success process and operations makes meaningful difference and drives value, what’s the piece of advice you would give them on the start of that journey?
Paul: I do give this advice. The advice is crystal clear about the core outcome that you or your customers achieve. If you can get clarity, and the proposition by the way in the new book is for a line of business, there’s only one core outcome that you need to identify and focus on. There are some subsidiary outcomes called contributing outcomes, but for a line of business, one outcome.
If you can identify that one outcome and you can nail it in 10 syllables or less, like a catch cry or phrase that catches the essence of it, then that will drive everything else that you do with your customer engagement. That becomes your north star, and the rest of it will fall into place. The advice is to put some energy into understanding that one core outcome that your line of business helps customers achieve.
Justin: Excellent. Then, and my final question, in your line of work, what’s the thing that you’re most excited about in the future?
Paul: For me, it is the emergence of outcomes as a central focus for customer engagement that I’m seeing more and more companies. There are some major players that have outcome programs. Salesforce has one. Microsoft has one. SAP has different versions of them. Adobe is doing it. ServiceNow is doing it. The list goes on. Lots and lots of smaller companies as well.
I’m really heartened by that because I think that is the right thing for companies to do because it’s the right thing to do for the customer, but also out of self-interest. I think it is the very best way to create more revenue, profit, and company valuation. For me, the most exciting thing is to see this trend unfold of companies adopting this core focus on outcomes as the way that they drive customer engagement.
Justin: Love it. Let’s end our conversation with our quickfire round. One of these days, I’m going to brand this thing, the famous five, the fabulous five.
Justin: I don’t know what I’m going to call it so part of the brand is becoming awkward, saying that I want to brand it and I think I’m going to just roll with that. What’s the book you most often recommend to people?
Paul: One that influenced me fairly early in my career was Stephen R. Covey’s The 7 Habits of Highly Effective People.
Justin: Oh, all-time classic.
Paul: I use those principles. Begin with the end in mind was one of his, that is exactly what an outcome program is all about. The essence is what it is. Be clear about the to-be state you’re going to help customers achieve and then get there, show them how to get there. That for me was, you sometimes read a book and you just go, “Oh, I get it.” From a business point of view, that was the best.
Justin: That is The 7 Habits of Highly Effective People is to business books as The Beatles are to rock and roll.
Paul: [laughs]
Justin: That’s just like Principles by Ray Dalio are just, read those two, everything else is a derivative of those. You run a pretty successful business. You’re a very busy man. You’ve got to have some good tips on how you manage your productivity hacks if you want to get clickbaity with it. What’s a really good productivity tip that you have taken into your routine and has stuck with you?
Paul: An interesting note that writing was something that reinforced this very strongly, it’s about having discipline in the way that you manage your time. Again, this is Stephen R. Covey, working on things that are important but not urgent. As a manager, one of the things I told my people, I will measure you as a manager on how well you make time to do things that are important, but not urgent. It’s about having the discipline that whatever technique you use, whether it’s putting some time slots in your diary, whether it’s not turning everything off on Tuesday mornings for two hours.
In all of the things you do, there are going to be some things you need to make time for. The more effective you are at working on things that are important but not urgent, the more effective you will be as a leader. It’s about just creating that discipline to make the time to do those things.
Justin: I have a notion dashboard, for lack of a better word, that I use to organize my time and I put all my tasks through an Eisenhower matrix, and the stuff that ends up being not important and not urgent, it gets chucked. I literally deleted the thing, you know what I mean? I agree, there’s a real value in understanding the sanctity of your time and understanding the power of your ability to get things done. If you can imbue that into the people that work for you and you practice that yourself, you end up with a pretty kick-ass team. If you could recommend one website, blog, Slack community, LinkedIn group, et cetera for people to share ideas about managing towards outcomes for customer success and some of this other stuff, what would it be?
Paul: There’s one that I think is worth people, anyone in customer success needs to be listening to this one. Even people outside of customer success, I think, will get value if you’re interested in customer engagement. It’s a thing called Gain Grow Retain. They’re just short, sharp stuff, there’s three of them. They do a terrific job of just tackling issues, practical stuff that people are going to be able to use to make the way that they engage with customers work better. That is a good one.
Justin: Yes, it is. One of the first episodes of this podcast was an interview with Jeff, one of the cofounders of Gain Grow Retain. If there’s one business leader, you could take out for coffee or cocktail depending on the time of day or in our situation, maybe one of us is in the morning. One of us is in cocktail hour, but there’s one business owner you could take out for a cup of coffee and pick their brain, who would it be?
Paul: I’m going to ask you a question. If you were to identify the most customer-centric leader that you can think of, what’s the first name that comes to mind?
Justin: The most customer-centric leader that I can think of, honestly, is Jeff Bezos.
Paul: You nailed it. That’s the person I would have coffee or a cocktail with. I’d be fascinated because customer-centricity is my thing as well. It’s all about customer outcomes. My reaction is the same as yours, I think he is the most customer-centric leader that I’ve ever seen.
Justin: Yes, it’s without a doubt. Not only that, he’s been able to, through that focus, that maniacal focus on customer, he’s been able to parlay all of the success and growth of Amazon into other business units where he can have the same maniacal focus on customer. It’s not just about making sure the brown boxes with smiley faces that are delivered all over the world get there on time, but it’s AWS. At some point, we’re going to have a serious conversation about how good customer success is at Blue Origin. You know what I mean? It’s going to be like, that’s when you know humanity’s entering the new age when we’re leaving Yelp reviews on the rocket ships that take us into space.
Justin: Paul, this has been a fantastic conversation. I really can’t thank you enough for your time. For those of us listening, where can we go to find out more about Paul Henderson and Outcome Leaders?
Paul: Our website is outcomeleaders.com, pretty simple. You will find me on LinkedIn, please reach out, love to connect at paulhenderson5 or search for the outcomes guy. If you can’t remember the name, then the outcomes guy is the moniker I adopted a few years ago and it seems to be stuck. You will find me if you search there as well.
Justin: Love it. Paul, thank you for coming on The Support Automation Show.
Paul: This has been a great pleasure. Thanks for the invitation.Justin: The Support Automation Show is brought to you by Capacity. Visit capacity.com to find everything you need for automating support and business processes in one powerful platform. You can find the show by searching for support automation in your favorite podcast app. Please subscribe so you don’t miss any future episodes. On behalf of the team here at Capacity. Thanks for listening.