323 The Business Model Innovation of Customer Success Helping Sells Radio

This article originally appeared on the Customer Success Leadership Network blog.
We are thinking about customer success all wrong. We think it’s a function. A department. A post-sales team. The enlightened among us think customer success is a philosophy or even an organizational design principle. That’s better, but still not quite right. I mean, what am I supposed to do with “customer success is a philosophy?” I have no idea. After spending two and a half years running a SaaS business as a general manager with P&L ownership, I have come to this realization in my thinking: customer success is a business model innovation.
To understand what I mean by business model innovation, we must first define business model. According to Alex Osterwalder, “a business model describes the rationale of how an organization creates, delivers, and captures value.”
Notice the three parts of this definition: create, deliver, and capture value. All three are required in order for a business model to work. A mistake I see customer success teams make is focusing solely on “delivers,” ignoring “creates,” and “captures.” When a customer success team over-indexes on delivering value, the primary purpose becomes retaining customers, which seems like a noble pursuit until you examine the behaviors of a retention mindset.
The downside of a retention mindset
Retaining customers is defensive. The mindset is, “If we are going to retain this customer, we have to get them to log in more or get them to use the software more or build a better relationship with the champion or get them to understand the value they are currently realizing. We must compel or persuade customers to act in ways we want them to act.” When a customer renews, we are relieved that we got the renewal at the same price as the last contract. We celebrate it. 
I know what you are thinking, “Bill, that is a good thing. We saved/retained/turned around that customer by delivering value. What’s the problem?”
I see two [business model] problems.
* You didn’t create new value.
* You didn’t capture a portion of that new value.
Here’s another way to look at it. A CEO came to me for advice on how to get her team to focus on net revenue retention (NRR) and said to me, “You know, I see my teams celebrate all these renewals, but I don’t see the value of the contracts going up. All of our costs are going up, including the raises everyone wants, but the prices we charge customers are not. This is not gonna work.” 
This is what happens when a software subscription business focuses primarily on delivering value and retaining customers. There is no “what’s next.” No forward-thinking about how to continuously help customers grow.
The upside of business model thinking
Software companies that understand their business model get all of their teams rowing in the same direction by getting everyone involved in all three parts of the business model:
* Create value
* Deliver value
* Capture value
The “what’s next” mindset is built into the system (your business model). There is no need to upsell or for account managers to sweep in to “close the deal” or argue about who should own the renewal or waste energy on debates about whether people can sell AND be a trusted advisor. You will understand how this is possible as you read further.
A well-designed business model answers the question, “What’s next?” It creates a flywheel effect of the following: 
Step 1: Create “something” that solves a problem
Step 2: Deliver that “something” to a customer
Step 3: Capture 10% to 15% of the value of that “something” with reasonable pricing
Step 4: Repeat this process with existing customers. FOREVER.
Steps one through three are simple in the sense that most software companies already do this. The founder noticed a problem in the world, built a product to solve it, and found customers willing to pay for that solution. Step four is where the magic hap