The Four Gears of B2B SaaS – Part 2

February 18, 2014 Paul Philp

In Part 1 we expanded Geoffrey Moore’s Four Gears model to this emerging B2B model (SaaS 2.0) In this post we will examine how to operationalize the four gears. Over the past few years the B2B business model has evolved from a ‘Land and Maintain’ model to a ‘Land and Expand’ model.

Four Gears Model for B2B SaaS

B2B SaaS

Of the Four Gears in the new B2B model (Land, Convert, Expand, and Enlist) all but the Land gear are relatively recent additions to the model.  What these 3 gears have in common is a focus on proactively managing customer outcomes.  In the ‘Land and Maintain’ model, vendors could measure existing customer relationships with customer satisfaction and net promoter scores (NPS).  If customers were generally happy with the product and service, that was good enough.  Today, vendors need to ensure customers are getting the value, in terms of business outcomes, that  they purchased.  For example, a customer of a marketing automation platform wants to generate unique visitors, SEO rank and qualified leads.  If they don’t get them from one vendor, they will simply move to another vendor.

This new requirement to focus on customer outcomes is forcing B2B SaaS vendors to adopt new strategies, tactics and operations.  Here are some examples of the business activities associated with each of the new gears.

 

Convert Expand Enlist
Growth Management Retention Management / Customer Success Reference Account Management

Trial Conversion

Adoption and Consumption Services

Community Management

Pilot Management

Strategic Insights /Advice

Customer Advocacy

Onboarding

Renewals

 

 

These new business activities and process all share a proactive focus on the customer.  Whether it is running DRIP campaigns to freemium users, managing pilot projects and trial accounts, advising customers on increasing their business effectiveness or enlisting champions in customer communities, long-term success involves investing in a new range of ‘Customer Operations’.

Four Gears Model for B2B SaaS

B2B SaaS

In the traditional B2B ‘Land and Maintain’ model, the primary revenue generating operations are the sales operations of the ‘Land Gear’.  While there might be a services component to revenue, it will be almost entirely add-on services which are needed for the ‘Land’ gear to work effectively.  Successful traditional B2B companies invested heavily, and mastered, the processes of Sales Ops.

The activities associated with the 3 new gears of the B2B SaaS model all require SaaS companies to invest in developing and mastering the evolving processes of Customer Ops.  Customer Operations are focussed on proactive management of customer relationships, and optimizing the Lifetime Value of the customer base.  Customer Ops takes over where Sales Ops ends.

Customer Ops activities and process are very different from Sales Ops activities.  The table below gives a sense of these differences along just a few dimensions.  This quick sample alone makes it clear that CustomerOps and SalesOps are unique business capabilities that require their own processes, metrics and management styles:

 

 

Sales Ops

Customer Ops

Customer Intimacy

Low

High

Business Cycle

Fiscal Time

Customer Time

Focus

Inside-Out

Outside-In

Internal Outcome

Initial Commitment
or Contract

Retention, Growth
and Lifetime Value

Number of
Relationships

Moderate

High

Data Intensity

Low

High

Product Integration

None

Tight

 

In the new B2B model, vendor interests are much more aligned with customer interests than the traditional model.  Over time, vendors achieve profitable growth by ensuring that customers generate the outcomes that interest them.  This fundamental shift in the B2B model, from ‘Land and Maintain’ to ‘Land and Expand’, requires B2B SaaS vendors to operate 4 core gears at the same speed – Land, Convert, Expand, and Enlist.  The last 3 of these gears are new editions to the Saas operating model and they require investment and mastery of the new field of customer operations.

In turn, customer operations will require new tools, metrics, process, data, practices, professional associates and training, conferences, and everything else involved with the emergence of a new profession.  The last new B2B profession to emerge was digital marketing.  The next 5 – 7 years will see a huge investment in the infrastructure of customer operations to help B2B vendors drive all 4 gears effectively.

 

It promises to be an exciting time.  Does this match your experience?  What are you seeing?

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The Four Gears of B2B SaaS – Part 1
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