Leadership and Transformation: John Sabino at the CCO Online

Recently, we had the pleasure of welcoming John Sabino to our CCO Online forum, celebrating his significant contributions as an executive officer. John has a track record of propelling organizations forward during rapid growth and change. At VMware , his leadership in Customer Experience and Success organization with 8,000 employees generated over $1.3 billion in annual revenue. His strategic guidance has been essential for customers to reach their business goals.

During his tenure as the Chief Customer Officer (CCO) at Splunk , John redefined customer engagement and digital interaction. His leadership saw the team burgeon, driving revenues past $900 million and affirming Splunk's stature as a preeminent data-to-everything platform.

As John embarks on his new chapter as CEO of LivePerson , a company specializing in conversational AI and customer engagement, we extend our heartiest congratulations and best wishes. His profound experience and visionary foresight continue to be a beacon of inspiration, consistently revolutionizing executive leadership and the essence of business transformation.

1. Having served as a Captain in the U.S. Army, thank you for your service. Could you share key learnings and experiences from your military career that have shaped your professional life?

I appreciate the mention of my military service, which has profoundly influenced my leadership and customer service approach. Contrary to common perceptions of rigidity, the military today values flexibility and initiative. It trains leaders to thrive in unstructured environments, often with limited resources, which has taught me the importance of focus, adaptability, and transparency.

Understanding the 'why' behind actions is crucial—not just the what or the how. It's not enough to aim to become a SaaS company; the rationale, the customer benefit, and the impact on the team must be clear. I strive to ensure my teams are well-informed and understand our mission's purpose, empowering them to make independent decisions.

As our industry shifts from prioritizing growth to emphasizing profitability, maintaining focus and understanding the reasons behind our strategies are vital. This shift requires transparency and clarity to ensure effective and meaningful contributions from the team.

My military experience has also highlighted the value of diversity and integration, which the military has embraced for decades. This creates an adaptable and mission-driven workforce—a testament to the unique capabilities veterans bring to any team. This ethos from my military background has been a constant thread throughout my professional journey.

2. John, you've achieved significant leadership roles early in your career at NBC Universal and GE, often more quickly than others might in similar positions.?Could you share some stories from these experiences that highlight your approach to leadership and decision-making?

I've always believed that being prepared is better than just being good at something. Luck plays a part, but it's often the result of being ready and looking ahead. In my early roles, I became a senior executive at GE at age 34 because I was in the right place at the right time, deeply involved in advertising when digital media was emerging. In the late '90s, we were transitioning from traditional TV – think of 'must-see TV' like 'Friends' – to digital, nonlinear advertising.

I took the opportunity to lead in digital media when I saw the industry's direction. This decision sparked a pattern in my career: continually assessing our current state and anticipating how technology could transform our business. We quickly transitioned from traditional linear advertising to a digital, subscription-based model, bringing innovative products directly to consumers. At GE and NBC Universal, I developed skills that would later be crucial in addressing significant data challenges and the industrial Internet of Things (IoT), leading up to cloud networking solutions at VMware.

My early career moves were informed by a deep understanding of my industry and a willingness to take calculated risks on emerging technologies, such as digital streaming media and cross-platform digital advertising. Successes like this gave me the confidence to take on further challenges, such as transitioning Splunk to a SaaS model and embracing an ambitious multi-cloud strategy at VMware.

Now, as I move into a CEO role at an AI company, I recognize the revolutionary impact of AI on all aspects of business. For CCOs and customer success leaders, AI represents a transformative toolset reshaping our field. I believe in embracing these moments of change to stay ahead in any industry or market.

3. How have your experiences in high-pressure situations shaped your leadership style?

In high-pressure situations, like dealing with a customer outage or a failed product, the decision-making process differs from everyday choices. It's crucial to be quick yet deliberate with decisions, focusing on what truly matters. As a senior executive, your role is to keep your team focused, clear away obstacles, and empower them to execute their tasks effectively, whether handling a security breach, a significant support issue, or any other critical challenge.

The Chief Customer Officer must act swiftly to align resources and make informed decisions, always ready to pivot if necessary. It's about guiding the team without getting bogged down by bureaucracy to ensure smooth execution for the customer.

This approach is something I emphasize to all my senior vice presidents: operate swiftly, maintain focus on the essential objectives, and eliminate barriers. Flexibility is key. I might attempt several initiatives daily, knowing some will fail. That's a part of life, especially in a CCO role, where perfection isn't the goal but somewhat effective management and adaptability in facing challenges.

4. What are your thoughts on the evolving strategies and impact of a CCO in today's dynamic business environment?

I'm glad we're discussing strategy evolution, especially for CCOs and support leaders. Strategy is actually the third priority for me. First comes a clear vision, an almost unattainable goal that inspires us, like ensuring all customers benefit from our services. Second is our straightforward mission: ensure customers renew, expand, and advocate for us. And then, we come to strategy – the specific actions that support our mission and enable our vision.

For example, let's consider professional services. Many companies treat this as a profit center, a mistake in today's market. These services should focus on enabling customer adoption rather than generating profit. We shifted from this model at VMware, emphasizing packaged services that facilitate customer consumption rather than just revenue generation.

Another critical strategy is developing prescriptive value paths for customers, mapping their journey from beginning to end. This blueprint is essential for customer success teams to provide relevant and timely support.

Segmentation is also critical. Not all customers are equal in their needs or their contribution to revenue. We need tailored engagement strategies for different customer segments, especially in a market moving away from hypergrowth and profitability.

This leads to my point that customer success is a cost. Packaging professional services, education, support, and customer success management are vital and should be reflected in the pricing. In an environment where profitability counts, we must sell the value of these services.

In summary, it's crucial to have strategies that focus on renewals, consumption, and expansion, guiding customers correctly. These strategies may vary, but the core purpose remains: to ensure customers utilize and value our services, driving business growth.

5. How has the customer success discipline evolved over the years, and in your experience, what strategies have you found most effective for justifying the cost and demonstrating the value of customer success within a company? This is an excellent follow-up question that builds on what I said earlier about our discipline's maturation. To be candid, customer success has evolved significantly since the early 2000s. Back when CRM systems first emerged, sales operations were more of an art than a science, but that function has since matured, much like the roles of CRO and CCO have become more critical. This is precisely what is happening to the CS function.?

As a function, customer success incurs costs, but it can also be a significant profit center in ways other organizations can not. A well-functioning customer success team with packaged offerings with PS, Support, and Education can create high-margin recurring revenue streams. I've seen margins as high as 60% and as low as 30% when these capabilities are combined, which is still substantial compared to traditional professional services engagement or support functions when sold independently.

Moreover, an effective customer success organization can accomplish renewals and expansions at a fraction of the cost typically associated with a sales team. For example, our customer success costs at VMware and Splunk were about a fifth of the cost to secure a renewal or manage expansion compared to using sales teams.

A customer success team should ensure that customers fully utilize their purchases and secure renewals. This contributes to a high-value recurring revenue stream that can be quantified on the company's balance sheet. For every dollar invested in customer success, you could see a return of three dollars in annual recurring revenue.

As for resource allocation, it's essential to direct your efforts where they'll have the most impact. While I would invest heavily in our most significant customers, the majority, including the mid-tier, might be better served through digitized services or call centers rather than a costly one-on-one approach.

In summary, customer success should be seen as something other than a free service. It requires investment and strategic thinking to generate value for both the company and the customer. Those who need help understanding this will stay caught up. Customer success is smartly allocating resources and demonstrating the tangible benefits it brings the business.

6. Can you elaborate on the significance of focusing on renewals and consumption instead of other metrics for customer success?

This question ties back to my previous point about our discipline's evolution. Recognizing how the market has shifted requires us to take ownership of our company's renewal and consumption metrics.

I deliberately avoided mentioning 'adoption' initially because it can be an amorphous concept. Adoption is about how customers use your product and whether they achieve their desired outcomes. While it's crucial, your financial structure must align with metrics that reflect your value to your internal company's financial metrics, like renewal rates. When customers genuinely adopt and enjoy their experience, renewals naturally follow. You must have and track both metrics.

Start by focusing on the lower-tier renewals within your company. Develop a system similar to a call center arrangement to proactively manage accounts that may not be adopting or consuming licenses and services as expected. By lifting renewal rates at this level, you build credibility. Eventually, you can take on more significant renewal responsibilities.

Regarding consumption, many companies are shifting towards models where customers pay for what they use. If no one encourages customers to use their technology, it often goes unused or becomes 'shelfware' regardless of how it was bought and sold. At VMware, we successfully reduced unconsumed credits from around $420 million to under $20 million in under 15 months, leveraging all the functions of CS, thus demonstrating our team's dedication and internal value to maximizing revenue for VMware.

To be indispensable to your company, ensure you have a stable pipeline of renewals and oversee the usage and consumption of what is sold. Doing so from a customer-focused perspective means adoption will naturally occur as customers find new use cases and derive more value from the product.

To summarize, you must position yourself in an environment like today's profit-focused environment, where the CFO, CEO, and CRO value your role in cost-effectively driving renewals and consumption. This is your contribution to your company's success. If your company recognizes this value, the CS function may be sustainable in the long term. Thus, these two metrics—renewal and consumption—are the primary indicators I track for the actual internal impact of our organization. While I also monitor a customer's adoption health through risk scores and many other customer-focused metrics, remember that your CFOs are more concerned with their company's own financial metrics. Thus, your role is to help your company achieve its financial goals while being the customer's advocate, ensuring they remain loyal, fully utilize their purchases, and have excellent experiences that lead to value creation within their companies. This is the natural outcome of successful adoption. You have to do both.

8. As the CEO of your next company, what are your expectations of your CCO?

The Chief Customer Officer (CCO) carries two pivotal responsibilities. Firstly, the CCO is charged with fulfilling the promise made during the sale. They must ensure that the customer realizes the value they were sold, which is the cornerstone of the CCO's role.

Secondly, and perhaps more contentiously, the CCO must navigate the complexities and challenges associated with the product—beyond the surface issues. This means being on the ground with the customer, observing how they interact with the product, identifying their struggles, and pinpointing where they might require professional services.

The CCO and their customer success team are central to providing product feedback. This was the case in my experience with both Splunk and VMware, where I managed the product feedback loop, a function that was initially absent at scale within those companies. Typically, the product team might prioritize features based on the loudest sales feedback, but a CCO must ensure that customer feedback directly informs product improvements and feature prioritization.

The CCO, working with the sales and product teams, must determine the order in which product issues are addressed and new features are developed, always backed by a sound economic argument. The sales team may be responsible for the revenue potential of selling the product. Still, the CCO owns the renewal and consumption aspects, ensuring the product continues serving customers effectively.

This product feedback process, or 'new feature and error log,' is vital and should be a fundamental function within the CCO's purview because they know better how a customer uses a product and their experience. It ensures that the product evolves in response to genuine customer needs rather than being swayed by transient sales opportunities or engineering whims.

In conclusion, the CCO's role guarantees that customers receive what they've been promised and that the product continually progresses to meet their evolving needs. It's a role that requires a balanced perspective, with its focus on supporting the customer, and it's a strategy that can be scaled to benefit the entire company.

9. Could you share your insights on the impact of AI on society and business?

The allure of AI for me is its potential to redefine the CCO role, enhancing our ability to serve customers, not by replacing jobs but by improving our skill sets and focusing our efforts. When it comes to society, I'm an optimist. Despite its risks, technology like AI is fundamentally a force for good, capable of solving our most complex challenges. Imagine AI as benevolent, knowledgeable, and slightly humorous —this is the future I want to contribute to. We might see a temporary job downturn as we adjust to AI, much like the transition from analog to digital media, but the long-term benefits will be substantial. My goal is to be at the forefront, shaping an ethical AI that embodies the best of us and promotes a more efficient and equitable world.

Training support staff can be time-consuming, but an AI assistant could accelerate the process, providing quick, intelligent responses. I foresee AI eventually dominating customer success roles, handling routine inquiries while escalating exceptions to human staff. This efficiently leverages your current resources and ensures that even small customers receive attention, which is vital since today's small customer might be tomorrow's major client.

We are thankful to John Sabino for imparting his expertise at our forum. We're excited to see the new developments he will spearhead as CEO. We wish John the best in his upcoming ventures and look forward to his continued influence in our industry. The active participation and thoughtful questions from our attendees greatly enriched the dialogue.