“The Death of McKinsey”: What Enterprise Cloud Companies can learn about creating insights from dataShare
By Gordon Ritter
At Emergence we work exclusively with cloud-based companies that primarily serve business customers. Consumer internet companies have always been good at harnessing behavioral data from their customers to serve their customers better (and help themselves in the process). Many enterprise cloud companies have the same opportunity but have not focused on the importance of this data. Maybe it is because there is not the direct correlation between product changes and resulting advertising monetization. Or that the scale of user interactions seems too small to warrant focusing on it. Whatever the reason, the value of using aggregated customer data to help avoid churn, increase upsell and ultimately create a more strategic relationship with your customers is at stake.
Here are the three steps I encourage all our companies to take as they transform from being “tools” companies to thinking of themselves as “insight” companies:
- Embed your employee insights into your offering. Start by getting your key product, marketing and sales teams in a room and ask a simple question: “What’s the most important piece of advice that we tell our customers every day about how to get more value out of our service?” It could be a common wisdom that your customer success people mention every day when they talk with customers. It could be the little secret that diligent customers find buried in your FAQs. In my experience every company has these little gems. The key is to embed the insight directly in your service and to use this “black art” to begin to build your data strategy. At Salesforce.com, they saw early-on that customers who forecast their sales pipeline were much more likely to stay as customers and add seats. Armed with this insight, the product team focused attention on making forecasting easier and encouraged sales reps to predict what a sales opportunity might be worth in the future. This little insight about the value of forecasting, led to a dramatic decrease in churn for Salesforce.com. I bet your company has 5 or 10 of these same insights today but you have not codified them into changes in your offering. Instead you continue to communicate these insights either verbally or in text form.
- Automated benchmark reports bundled with enhanced versions. Next, gather aggregate behavioral data from your customers and create reports that quantify how your customers are doing compared to other customers. This is commonly called “benchmarking”, but for a cloud app the data is much more rich and proprietary because it is more granular. In the old days, software companies might have reported on the number of modules a customer was using compared with their peers. Today, cloud companies can report on detailed data about precise usage patterns and the correlation between those patterns and customer success with the product. At Lithium Technologies, their depth of knowledge on how to build successful customer and marketing communities led to a “Community Health Index” (CHI). A customer’s CHI score is based on a range of detailed usage patterns and is highly predictive about whether a community will succeed or fail. Once you have automated the creation of these reports, bundle them with more expensive versions of your service as a way to begin to monetize this valuable data.
- “The Death of McKinsey”: C-level recognition that only your company has the data-driven insights. The end goal for your data strategy is to continuously derive so many insights from customer usage patterns correlated with success metrics, that you can help predict more about their success than your customers can. This will lead to higher competitive advantage and productivity for your customers, and far higher ASPs and lower churn for your company. The reason I call this final stage “The Death of McKinsey” is because you may already have what a strategic consulting firm uses to come up with their CEO-level advice. Typically, a consulting firm will start their project by interviewing employees and gathering data from a client’s IT systems, and then look for patterns to support some strategic change. In your particular domain, you may already have the employee or end-customer usage patterns and be able to provide the insights that a consulting firm charges hundreds of thousands of dollars for. Getting to this final stage will take some time for a young company, but know that some of the largest public cloud venders are starting to think of themselves as “insight-engines” for their customers. And Fortune 500 CEOs are changing how they look at certain cloud vendors.
Whatever industry domain you are in, you have the opportunity to be the best provider of insights for your customers. Take the first step to break the “tools” mindset in your company.