Where Product Development is Going in 2021 with Nick Mehta, CEO of Gainsight

All right, we're back with one of my very favorite cloud CEOs and good friend, Nick Mendes, CEO of Gainsight First Nick, real quick, next week we have a big event coming up. What is it?

It's the very first, very first Pulse for product people. So Pulse is our big conference we do every year for driving better customer success and customer experience. And product people are a huge part of that. So this is the first event targeted at product people that want to drive great experience in their products, better customer retention and better growth in their business. It's October 14th to 16th online, 8am Pacific to noon Pacific. And you can go to Pulseforproduct.com to learn more.

Okay, I'm excited. I think I went to the very first Pulse which was in like hotel in San Francisco. My jaw drop. This was one of the best events I've been to. So dude, you better bring it next week for Pulse product because the regular Pulse has been like a 10 and inspirational to faster. So.

There may be a backstreet voice parody video that's an homage to product managers that may be happening.

So you, what are you doing? There's so many digital events these days, right? What are you doing to take advantage of digital for product people next week?

Yeah, three things. Number one is just try to keep bringing that same like I talked about the video, that same vibe of the fun that you want to do in person and try to bring that online and you'll see a lot of that. Number two is really trying to create more ways for people to connect. I mean, it's amazing. The chat like chat is so basic, but whether it's in zoom or a virtual event, there's so much connection that happens on it. Number three, we're actually trying to practice what we preach. We've embedded our own product analytics technology, Gainsight PX into the event experience and we're basically personalizing the event for each person. So based on what you've done and where you've gone, you get pop up messages to take you to the next place and kind of gamified it a little bit. Should be fine.

That's taking the bar up. It better work because it sounds pretty good.

I think it will.

All right, last one, quickly. What's the top trend in building products for 2021? What's the top of mind? Biggest thing we're thinking about, number one.

Thing is in the last 10 years, customer experience and customer retention was a job of the customer success team. Now product teams are getting super engaged in how do I drive Sticky features and sticky usage. How do I drive user retention, onboarding and use the product as the best customer success manager?

Got it. So product and the nexus of product and customer success, big deal for 2021, right?

Huge.

Yeah. All right, so that's awesome. We'll see you next week. Let's do a quick, deeper dive now. Great. So this is interesting. We did. I did this deep dive with our friend Dharmesh Shah from HubSpot the other day. He was talking about how it took them 5 years to build awareness for their sales CRM. 5 years. We just talked about how sales and customer success are. I mean, product and customer success are adjacent. Terrific. But how do you get. What have you learned building a second product? How do you expose customers? What are the challenges? Why did you decide to do this? Because it can be a distraction, right?

Yeah, there's so many things there. So let me talk about why. And then the how we're still learning. So the why was pretty straightforward, which was what we figured out was customer success is bigger than just the CSM team. And you saw that from running a company and from investing in companies. The CSM team can do so do a bunch of things. They can reach out to customers, they can get feedback, they can onboard them, but eventually the product is a huge part of it. Like, first of all, is the product experience good? Second of all, is it easy to onboard, to try it out? Do you have good data on what people are doing? Our customer success people said, nick, focus on helping product people. They told us before we got into the space, that's the number one thing they needed. And so we saw that there was a sort of complimentary technology area and we needed to get into it. So we bought a company that was very, very early stage, integrated it with our platform that's now called Gainsight px. And I think in some ways that was the easy part. The hard part is what you're alluding to, which is, okay, great, you have this awesome technology. It's all integrated, but you have a totally different community of people. It's a different type of person.

Right.

So CSMs and product people are different. They go to different events, they have different ways they want to engage. Customer success people probably are a little bit more, you want to spend time on, you know, chatting with people. And product people probably in general tend to want to just try things out themselves. Right. And so for us, it's been like figuring out how to have a totally different engagement model with these people, a different way to market to them, a Different way to sell to them. And we're still figuring it out, but it's been a real big learning for us.

But let's just dig on that one point for a second. That's interesting. So of course think of your average customer success team. What's the number one thing they want? Better product. Let's like customers are complaining about a feature that doesn't work like they hoped something wasn't delivered on time. It does. The integration isn't quite what they'd hoped Product like they would like a lot of things but if you make a real CS leader happy, they just want the 10, 20 things fixed. Right. So of course that would be their next like forget I don't even need my own tool. Make the product better.

That's it. That's the.

So that makes sense from. And I call this a whiteboard strategy. It makes total sense on the whiteboard. But why does the market want that? Why does. Builders are at a different time in the funnel? They're actually pre funnel in many cases. Think about product people. They're before marketers, they're way early and we all work together. Why. Why should one vendor connect these disparate parts of Even if CS wants it.

Yeah, it's interesting. I think we have to start with what the customer wants, right? Because that's the North Star. And what's interesting is clients today they're sold one thing, they're implemented with different thing and the product is a third thing. And there. And you can tell right? When you work with a lot of vendors, you're like, okay, so these are totally different organizations, right? And that experience doesn't end up being great. And therefore you have all these issues. Like for example, you know, a salesperson pitched me all these objectives and outcomes of what I'm going to get out of the product. And then I actually get to my first onboarding call and the CS team's asking me, so what are your goals? What are your objectives? Then I log into the product. It's not obvious how I'm going to achieve those objectives. It's like three different things. You need an integrated experience between sales, product and cs. That's the customer view is they want that integrated journey. Now, from a product perspective, what I'm finding is product people don't want to just be feature factories, right? Just ship a feature and just go to the next one. I mean that might be what they've been turned into because of the inertia of the world, but they actually are excited about saying I'm driving Adoption, I'm driving retention, I'm driving lifetime value. They want to be aligned to what kind of board's line. And you've probably heard about this concept of product led growth, this idea that product teams eventually aren't just the top of the funnel, they're the whole funnel. They're actually building, building stuff that you could try out online. That drives marketing leads, that drives engagement, that drives the sale, that drives the onboarding and the retention. Right. And I think the product team is the whole funnel in the future.

Yeah, I get a little skeptical about buzzwords like product led growth. But I love the idea that the product team can use Software to own KPIs and outcomes that extend longitudinally. Right. That you're not throwing features into the funnel, but that they are connected through the lifetime of the customer. All product leaders are. But it gets, it's hard to measure that KPI sometimes in product. Right. That is interesting, right?

It is, yeah. And by the way, I understand the skepticism on some of the terminology because it will evolve. But I think the thing that's definitely true is products job is no longer just shipping features. That's for sure.

The old world, that's the big insight, right. Maybe in some ways it's interesting, maybe it's in its own way. Product is where CS was five years ago for different reasons. For different reasons. Product is the most mature function in software other than coding. But product being more than shipping features for SaaS in particular for B2B, that's like a profound shift, isn't it?

Totally 100%. And I think you see it in your younger companies you invest in. They already have that insight. Product is so central to everything. What's interesting is the older companies are having to rethink what product management is for this new world.

Yeah, I remember not to name names, but when I was a VP in a Fortune 500 tech company, a lot of these product teams were in. Not only were they in different buildings, but you couldn't talk directly to them. You would ship them a spec. Like one team would create a spec, it would ship it to another team and then you would get software outputted to you. And the people that outputted it to you, you would never speak to them again until they were shipped another spec. Right. I mean that is crazy. But that is the way software was built in the old and today maybe. Right.

Well it's interesting because that company you mentioned, it's funny, they're one of our big customers, px and they're embracing this new model. So I totally agree. That's the old world. And it is a big change though.

It's a big change. Right? So a lot of software to sell. So just to kind of, let's let now, let's learn. Okay, so great. So how do you sell two products to the same customer base? And how do you do it? How do you do it from a conversation basis? And do you have two sales teams?

So it's been such an interesting adventure of. So we started with two sales teams and we had like merged it all together and now we're kind of making a little more separate again. I think it's like Goldilocks where you're trying to find the perfect middle because what you're trying to find is you want the leverage and like strength of oh, we have these relationships, we have this brand, we've got these customers. But you also want the agility and the specificity of having a team focused on a Persona. What we learned is that the product Persona wants to buy in a very different way. Right. They don't want like 17 different conversations and demos and meetings. A lot of times they want to be able to try it out like our product, you can try it out online and they want assistance from sales. They don't necessarily want a sales meeting. Right. And so give you an example just from two days ago. So we have a large client, big public company, they're a client of ours on the CS side. So they use our CS technology. They're looking at our PX technology. We did a session where we had all the product leaders for all the different divisions on one virtual meeting. It was great. It was like 30, 40 people on there. And what was interesting was we're giving the pitch of OPX or product or whatever, but they're engaging on the chat and they're literally talking to salespeople. They're like, okay, what's the price per user? How many users are there? What can I get a link to a free trial? They were going all the way down the funnel because anyone wanted any of the PowerPoint, you know, kind of high level stuff. They just wanted to go straight to what the product does, what the API is like, is there a REST API, all that kind of stuff. So we've found that it's a really different engagement model. And so what we created is a specialist team that works with our main team, but is very focused on talking to that specific buyer. And they're kind of an overlay. So both sides get comped, but the specialist team is good with that technical Buyer who wants to just get to the product and skip the slides, basically.

So the specialists are almost like SES 2.0, right? They know the product.

They're much closer to an se. Yeah. Than a sales rep. Yep.

Okay. And it's interesting. So it sounds like you did this just the other day and your customers trust you enough. Every CEO wants to think this, but your customers trust you enough. But then when they're exposed to a new product offering, they're open to it, right? They're like, this is a vendor I trust. What have you learned from that? And also, how do you make sure your brand covers a new product area?

Those are two great questions. So what I've learned is that, you know, it's like any vendor, when you have a. When you do a good job in one area and if there's connectivity to other areas that add sort of differentiated value, it's not just a random product, but it's something that ties together. Your clients will give you a shot for sure. I mean, it's. And that's where good net retention comes from.

And how happy. I know, I know you might know this. How happy do they have to be to really give you that shot? We all say this, right? But gain, you know more. How many customers does Gainsight have today?

About 7, 750 customers, roughly.

Okay, well, they're all. I know they're all happy, but some are even happier than others. Is there a line, have you learned where they'll be even hyper receptive to an offering and maybe there's a line below where they don't want to. Have you measured that or can you sense it? Yeah, totally.

It's interesting. So maybe non intuitive. So for sure, if they're super happy, they're very receptive to stuff and that. Like I was on a call with a customer yesterday and they're like, oh, we love your stuff. And should we look at replacing a certain vendor with px? I was like, yeah, that sounds good. And so that's true. But I think what's a little counterintuitive is when a customer hasn't gotten value or isn't happy sometimes actually this extra thing can actually tip the scales. So in our case, PX gives you really good data about product usage. And the CS team often can't do a lot with game site without having data about product usage. So this actually is a really important piece of glue. And so a lot of our customers where, let's say they struggled with things, they're actually open to it now. Will they pay Full price for it. Will they want you to give them credit for some of the lost time? Those commercial things will always happen, but they will absolutely open new things.

Yeah. That's second product adds value to the first. Clearly. And the customer saw the value in your product, but they haven't unlocked it enough. You may be able to increase your nps, increase everything because they want to give you that extra shot. Right. It's like the renewal you get that shocks you. You got the renewal, but they still believe that's it.

The key thing is we always talk about outcomes and experiences. So I'm talking about client that like still likes you but isn't getting a lot of value. Which, by the way, everyone has those for lots of reasons or changes, whatever. Right.

They needed.

Yeah, yeah.

What's that? They need a term, these type of customers.

Yeah, exactly.

They do. They are positive. But you just haven't quite unlocked the value for them yet. But they still want it, right? They will.

They will. Look at now, let's say the customer really doesn't like you the experience of it, but that's where it's harder to go sell them more stuff because they just want to get out of the relationship. So the key thing, that's why you talk about so much. The key thing is like just keep working on that experience even if things aren't perfect and you can do that. And that's what lets you sell more things and expand your footprint.

Yeah. It is a good. That middle category, it needs a name. Right. This middle category of customers, we underestimate them. We underestimate the second chances we get. We underestimate the shot to renewal. We underestimate getting on a zoom with them today. Right. And listening the power. Like they're not lost, are they? The ones that are stuck, these sort.

Of stuck, by the way, even the ones that are lost, technically that churned. There's still ones that will come back. I mean, the number of boomerangs you're going to get if you're an entrepreneur. And it'll make you feel much more confident when you get those customers back. Because sometimes it just wasn't the right time for them. It wasn't you, it was them. That type of thing.

Yeah. You just have to start thinking in terms of half decades to experience. You have to settle in that. I'll get you in 2025 and then you will get them back. 2021 might be tough.

It's a long journey.

Yeah. All right, the last couple questions on product, but I want your tactical answers not Your CEO pie in the sky answer. Right. You know what the amazing thing about software, it's still hard to build.

Yes.

All the tools, all the APIs we get out there, then we add more complexity on top of them. All these things didn't make our lives easier. What are we seeing in 2021? What have you learned from PX? How can we build software better in the future? Is it even possible? Will it always be hard? And maybe that keeps us in jobs, right? I don't know.

Yeah, I think part of it is this idea that you don't have to design the entire experience in the software with all of these JavaScript embedded things, PX being one of them. There's a lot of different things out there. You can do a lot now outside of the core code and that lets you actually innovate faster. So whether you think about AB testing with like a launchdarkly or a split or somebody like that where you can actually a B test outside the product, or you think about our world of in app engagements and surveys, or there's so many different things out there that let you innovate without having to change your code and that allows you to do things like trying out new stuff, you know, prompting users to different areas, experimenting. And so I think that concept of experimentation without having to rev the code all the time is a big idea.

Got it. And related to that, just the penultimate question, now that you're talking to so many customers on the product side, what are their biggest head like, the real headaches? What are they banging their heads against the table in 2021? What do they want solved next year? Like the real pain?

The real pain is the fact I started my career as a product manager a long time ago. I think it was hard back then, I think it's really hard now because of the volume of feedback that you get from so many channels, right? So you always had the sales people telling you what features you needed, right? But now you've got customer success people telling you and obviously you have support and you have the analytics coming in and you've got stuff from like your online community.

So much data analytics, right? So many data analytics.

And then you've got your CEO coming in with the random idea of what he or she wants, product wise.

Right?

And I think that the challenge right now is product people are just like flooded with feedback. But then on the other side with this sprint model of two week sprints, there's so much work to work with, engineering, there's just so much day to day engineering Work. So you've got this thing we're like rocking a hard place big time for PMs.

That is interesting. So it's an exponential growth in just product feedback and data to manage and prioritize and pressure to ship faster. We're all under that pressure, right? Yeah. And do you find just the penultimate b. Do you find that because of this customers are more demanding in terms of when they want those enterprise style commits to come or are they still willing to wait 2 to 3 quarters for what the CEO agreed to in the contract?

I think the customers. That's well said. I think the customers are willing to wait, but they want certainty that is more than the Agile model delivers. This is a real hard problem. They're used to the old model of hey, it's going to ship in Q3 of 2022 and it's like, I don't know what I'm shipping next week. This is Agile. We're not trying to set the future. And so I think that. But the client view is actually reasonable because they have these training cycles. If you have sell to big customers, they have to train their users, they have to do change management. And so there's this constant battle of Agile not wanting to have date commits and customers wanting date commits and you have this just back and forth all the time. That's a big challenge.

Yeah, maybe at some point with software we have to do SLAs in those contracts. Yeah, I think there's probably soft commits like we will get. We will. And we will literally track everything. Yeah, you will have an SLA and look, we're just going to get. There's a, there's a penalty like an sla. Not that if you SLA really helps you because you just want the site to stay up, but maybe it, maybe it comes. Right?

I think it's a good point, Jason, because I think another thing I've learned about SaaS is when you're a SaaS customer, you are buying the roadmap. Like in an on prem customer you're buying the product and you might use the roadmap but you might just stay on that old version. Right. But in SaaS you're buying the roadmap and so therefore the roadmap is actually very strategic.

It is. All right, last question. I want to tie it back up to Gainsight at a high level and customers overall. And I wrote this question as a challenge. I was thinking about it because this is the nature of software. You and I have known each other since just when you join gainsight so that's a long time ago. 2013, something like that. And CS was new. It's old and new. Right. We've been making customers happy, but as a science, we were both passionate about it. Right. So with all this work and all this software and all these tools and dashboards and analytics, are customers happier? Have we made customers happier? Are our CSAT higher? Are we by being more attentive, has it worked or have we just created more work for ourselves? Do we know?

Yeah, I think that objectively we have as an industry definitely made customers happier and actually made them retain longer and grow. You just look at it, the net retention rates of public companies now versus a few years ago. What's great in that retention rate?

Well, that's a good point. It's 140% now in the enterprise or.

Even as crazy as the bar is raised. So much nps. When I look at entrepreneurs now, they're like expectations on NPS net promoter score are so much higher than they were before because the expectation on product experience is so much higher. I think CUS clients are learning. Okay, this is a different engagement model with this customer success thing. Now I think clients would tell. I've talked to a lot of CIOs who are clients of CSMs. I think they'd say it's not all created equal. Like some vendors are just taking their old stuff and dressing it up as customer success or whatever. And so there's a bit of a kind of like cloud washing, if you remember that, where everyone says they're a cloud company. It's the same thing here where everyone says they're doing customer success, but the best are doing it really well and it's showing.

That is a good one to close. If you look at a lot of startups, they all want 60, 70 MPS, right? Whether they're calculated properly is a different question.

That's right. Right.

And then we look at everyone, we look at everyone from PagerDuty to Datadog on down, they have 130, 140, 150%. Some of it is API based, so it's gonna be automatic. But put it aside, those are jaw dropping numbers, aren't they? Those are jaw dropping numbers.

It's different. Yeah, things have gotten better.

So we all have to sign up for this one. We all have to sign up for customers that are far happier than in our last job. Like that has to be our goal. Our next group, they have to be friggin be happier. And the public markets have showed us it's there. There's no excuses anymore. That's the biggest difference from when we started working together. There's no excuses anymore.

There's no. It's all out in the open, too, with things like G2 and other review websites. Right. It's just all out there.

All right, Nick, this was great. Any last thought? You want to leave us on any of this?

No. I mean, I just say if you're a product person, if you're watching, definitely check out the event. But more broadly, I think there's an opportunity for you to really have an even bigger strategic impact in your company. So I'm excited to have people level up to the next level.

It's exciting.