The Anatomy of Creating a Category with Former Gainsight COO Allison Pickens
Sean Lane: Hey everyone. Welcome to Operations, the show where we look under the hood of companies in hypergrowth. My name is Sean Lane. When I first joined Drift in 2018, I arrived right on the heels of an exciting moment in the company's history. We had just created our very own category, conversational marketing. Now this was a completely foreign term just five years ago, and if you fast forward to today, the conversational marketing category now has 106 companies in it, according to G2. Now we at Drift had a lot to do with that, but there were also some undeniable market forces that helped us to propel the category forward. There was the power shift from seller to buyer, the rise of messaging, the expectations of B2B buyers for speed and choice and customization. The anatomy of creating a category is fascinating to me. So I wanted to talk to someone who is an expert in it. That expert and our guest to is Allison Pickens, former COO at Gainsight, and now an investor and advisor through her own work as the founder and general partner of the New Normal Fund. I've been excited to talk to Allison for a while and you'll find out why in this episode. Over the course of our conversation, we talk about how Allison and the team at Gainsight created the customer success category, why she believes it's all about elevating a community of like- minded people. And we end up discovering that the next wave might be just tailor made for operators like us. To start though, I feel like a lot of companies out there are saying that they are creating categories these days, but are they? I wanted Allison to give us a foundation for how she defines category creation.
Allison Pickens: I do think category creation always sounds great. I think folks get excited to create a new category and often investors like investing in a new one. It sounds disruptive and innovative, but not necessarily always a good thing. I generally think of category creation as really a positioning exercise. There's an ecosystem out there and there's a certain set of words that people use to describe the pain points they're experiencing and their anticipated solutions. And our job as entrepreneurs is to figure out how to locate ourselves within that ecosystem so that it makes sense to particularly our target buyer. So, in particular, and I've written about this, I think it's very important to do more listening than speaking when, especially when you're in the early stages of creating a category. I think often entrepreneurs have a really interesting, often provocative perspective on the world. And the key is not imposing that viewpoint on other people or necessarily in the early days, convincing them that your way is a better way than what they're doing, but rather finding like- minded people out there in the world who share elements of your vision and then elevating those people as the early beginnings of a movement, early beginnings of a wave that you can then shepherd and that can propel you to become the leader of a new category.
Sean Lane: I want to follow up on that listening piece that you're talking about, because in some of the stuff you've written, you talk about how you'd be speaking on a panel and you'd say" We invented this category at Gainsight", and then you actually had someone come up and say to you after that you didn't actually create it, you were elevating thoughts that were shared by your community. So can you tell me what you learned about that and how you all were able to listen in the right way at Gainsight?
Allison Pickens: Totally. Yeah. I think I shared that anecdote in one of my blog posts because in a moment of vulnerability and just to share a mistake that I had made, because I see a lot of founders actually doing similar things and I'd like to help them avoid that mistake. I think that is particularly when we're pitching to investors. I think there's an incentive to say," We're doing something new. We have this distinct point of view and we are the leaders. We are generating this. Therefore, you would be well advised to invest in our company." But when you're talking to customers and to your audience, that doesn't come across the right way, particularly. I think, first of all, it was really true, right, that at Gainsight that we" created a category". I mean, categories don't exist without the people who are driving the movement and purchasing your software. So really it's your customers and the other visionaries out there that, together with you as a community, are creating the category. I think there's a factual element to that. And secondly, I think it's, in terms of where the focus needs to be, the focus needs to be on elevating other people. And perhaps sometimes even listening to them maybe even better than they listen to themselves so that you can play back to them," Here's what I'm hearing from you in terms of what your pain points are and what you think the right solution is, and as a mirror to you, I'm happy to be a servant in a way to help you achieve your goals."
Sean Lane: It sounds so obvious and simple when Allison explains it, but I don't think everyone would default to this community driven approach to category creation. Allison is teaching us that it's not about imposing our prepackaged hypothesis. It's about listening to our customers better than they listen to themselves and elevating the solutions to their problems. Now that we've established this foundation for what category creation actually means, I wanted to learn more about Allison's direct experience with this at Gainsight. She talks a lot about listening. So I wanted to understand how she knew whether what she was listening to was useful or not.
Allison Pickens: I think that the biggest listening failure, I think that I notice entrepreneurs happening is when we believe the world will evolve in a certain direction, but there's no one at the company who has the incentive to help the world evolve in that direction. And so, you're saying," Well, companies should do X, Y, Z." Well, the reality is that no one owns that. No one owns the solution. No one owns that problem at a company. Therefore, finding someone who will purchase money... who will spend money to buy a solution will be very difficult. Now it could be a matter of timing where actually as you keep talking with people, eventually, certain ideas will catch on. You'll find people actually who have the problem that you're looking to solve. But, one example of this actually is the advocacy, customer advocacy category, where customers service references for prospective customers and it could be in the form of case studies, actual word- of- mouth conversations, speaking at events, sales dinners. There have been a number of attempts to create a really big player in the advocacy space, but we haven't seen any, right. I'd be hard pressed to think of a really large customer advocacy software company. And even though I think that customer advocacy is so important and arguably the most important thing that drives the future growth and ultimate valuation of a company. But the reality is that today there is no one on the executive team that really owns a number associated with advocacy and therefore has the incentive to track it and really systematize it. Of course, there are people in marketing or customer success that are responsible for the tactics of procuring testimonials and case studies and making sure that customers are speaking at events and positioned next to the right person at a sales dinner and things like that. But just in terms of someone who owns a number and is held accountable for that, that doesn't exist. And I think that's a reason why a number of customer advocacy companies have cropped up, but not solved that. Now, I think in the future, there is going to be a big customer advocacy company. It's a matter of time and it's a matter of companies catching onto the idea that someone really needs to own this, but until then it's not a category to be created.
Sean Lane: Yeah. It is interesting the way you frame that as a person needing to be in charge of it, because like you said, it's not actually... it wouldn't be hard to put a hard metric around the results of advocacy, the impact of it on pipeline, on bookings, right. But with the absence of a human there to do that, I would have to imagine that you all probably fought a similar type of battle, as you were thinking about the perception of the value of CSMs, right, or the perception of how they tied back to the number. How did you all go about transforming that into something that became a required investment inside of these companies?
Allison Pickens: Mm- hmm(affirmative). Mm- hmm( affirmative). Originally, when we started out, when I joined Gainsight, there were maybe a couple hundred people in the Bay Area who had the title customer success. Typically, they were individual contributors. Sometimes you'd see a director of customer success, occasionally a VP of customer success. And very rarely would you see a chief customer officer. Nowadays, chief customer officer is an extremely common title. Many companies believe that that role, CCO should exist side- by- side with chief marketing officer, with chief sales or revenue officer. It's considered to be an important role. And of course there are different org structures that people have embraced. But bottom line is, in a classic SAS company, it's the norm for there to be a customer success executive. Now that wasn't, as I mentioned, necessarily true when we started out. And so we did a fair bit of enabling discussions around the need for retention, growth dollar retention, and the net retention, to be primary metrics that companies track to understand whether their business was successful. It should be up there side- by- side with ARR growth, cash burn, and other things that people talk at about in the board meeting. And I think as the subscription model became more popular and a number of these SAS companies started going public and then public market investors started trying to figure out ways to value them. It became actually common knowledge that retention rate was something that was critical to track. And, as that trickled down to private market investors, BCs and became a topic of conversation in board meetings and CEOs realized that actually they needed to care about retention and there needed to be an executive on the team that cared about that. Now, notably, I think at first CEOs would think," Oh, well, my sales leader runs all revenue. And so they'll own the net retention number." And that can sometimes make sense, but at least when we were starting out, figuring out what to do about that net retention number was not a core discipline that a sales leader was exposed to. Whereas, the customer success folks were specifically dedicated to making sure that that number made sense. And so it became more popular to have a new executive leading that team who could report on the retention number and side- by- side with the sales leader reporting on revenue achieved and the marketing leader reporting on MQLs or dollars of pipeline. So in terms of Gainsight's role in that, I think as in most situations, what you want to see is that there's a secular trend in the market that's popularizing the identification of a pain point and propose solutions that you are in line with. Right? And we had that just with the shift to subscription and with investors caring about certain metrics to understand the health of those subscription models. And what we did was bring people together to accelerate the conversation. We'd have events, dinners, online discussions, our annual conference. We'd bring together as many people as possible to increase the circulation of those ideas. And as those ideas were circulated, it became clear that these companies also needed software in order to systematize the achievement of net dollar retention.
Sean Lane: Okay. So if you're creating a category or you're trying to assess the validity of the category that you're already in, the simple question to ask yourself is, do your customers have someone who owns your category? Allison is explaining that in order to successfully create a category, we have to incentivize people to evolve in the direction that we want. At Gainsight it was about stressing the importance of net dollar retention and the popularization of customer success teams to better help make net dollar retention better. At Drift, with conversational marketing, it was a new idea, but it was still very much owned by existing roles in sales or marketing. If you were responsible for the pipeline number, you were going to own Drift as well. If you can't point to a person whose job performance can be measured by the contribution that your software makes, you might not have nailed your category just yet. I also want to revisit what Allison said about the role that Gainsight played in evangelizing their own message. She talks about customer events and their annual conference. These were things that we did in the early days of Drift as well. And you can find examples from even Salesforce and Marc Benioff's book Behind the Cloud. With all of these role models doing this type of evangelization I wanted to understand if this was a prerequisite for category creation.
Allison Pickens: Yes. I do think that evangelism is an important part of the role of a startup. And I think that because... not because I think it's important for startups to try to create a wave, but rather because I think it's important to position yourself as the leader of that wave. So, I mentioned in a blog post that I've written on this topic that a lot of people, I think in the past have believed in this" great man" theory of history. You could obviously replace man with person, great person theory of history that certain individuals come along and they're incredibly special people. And they become these important leaders in society that everyone follows. I take a much more, you could call it society driven way of thinking about the way that the world evolves, which is that there are certain gravitational forces that move the world in particular directions. And the entrepreneurs who are successful are the ones that identify those forces and position themselves in line with it as much as possible. And so the evangelism actually is intended a lot less to catalyze the force, which is already there, right, and will proceed at a fairly fixed pace. But that you could speed up maybe a little bit, but more importantly, position yourself to in alignment with that wave. So, for example, there's a wave that's starting to gain momentum now for the product led sales software category and I've invested in a particular company in this space and we shall see, right, who is best positioning themselves to ride that wave. And it might be that the winner of this is... has I don't know, it could be that someone tackling this problem has an incredible resume, an incredible talent on the team and like a lot... meets a lot of these check boxes for what counts as a great startup. But I think the team that will capture this wave the best will be the best communicators of... Best listeners, first of all, in terms of what they are hearing from what people need in this software. They then communicate back to these potential customers," We hear you. And here is why. Here's what we're hearing from you." And that will create a virtuous cycle where those customers then feel like they're being listened to and will want to engage more with this team. And then that team will leverage what they've learned from the community to build the best product. And so, it'll be interesting to see which is the company that emerges that is able to best evangelize in the way I described and therefore become the dominant leader. I'll give you another example, actually, of an interesting wave that's happening, which is what one of the companies that I work with likes to call the rise of the analytically technical population. I think this is very relevant to operations, right? It's a group of folks who in another era, or maybe currently, would've been Excel gurus. They were amazing creating macros in Excel, or maybe they were really good at Microsoft Access, or in general understand analytical principles, but may not be experts in data science or definitely machine learning. I think this group of analytically technical folks often lives in various ops teams. It could be customer success ops or sales ops, or marketing ops, or more broadly, revenue ops, which is becoming more popular.
Sean Lane: Another category.
Allison Pickens: A catch all function. Yeah. And all potentially category of software serving them. But, yeah, generally there's this group of ops folks who are very data literate and can start to take advantage of a lot of the data that's becoming available through the data warehouse. And then becoming even more accessible through the transformation that DBT does, and through other tools like High Touch, which brings data from the data warehouse into the operational business tools that different people at the company use. And so I think the popularization of the data warehouse is what catalyzed this wave and now you have the wave being a rising group of people who have this analytical tool set and can derive new insights that they previously weren't able to derive. And I think as a result, you have the rise of companies like, Hex, for example, which is a collaborative data notebook and is... and a lot of people aspire to serve a broader population of analytically technical folks, not just true" data scientists" who may be PhDs and statistics. And then you have other companies that are cropping up that are trying to enable predictive analytics to forecast churn and expansion, and your sales forecast, your MQL forecast, and other business metrics. And again, it can be ops that are using these. I remember having a conversation with some folks at Gainsight maybe six years ago or something where we were sitting around, it was classic water cooler. We were standing around the kitchen and talking about this idea that as the engineering stack becomes more, I guess you could call it composable where there are a lot of different components that you can assemble together to create an app. I mean, certainly like the no code movement is a big part of this, and then on the other end, a lot of customer communications are being automated. So in terms of where you could imagine a lot of headcount going in the future, it could be going into the operations function, which really is the tie, it's the link between the digitized customer communications and the stack of tooling that's used to actually build the product. So, if I had to bet on, call it 30 years from now, what kinds of functions live in companies, frankly, I think it's much more heavily weighted toward ops folks than it is today.
Sean Lane: If you're listening to this podcast, chances are you fall squarely into the analytically technical population that Allison is describing. Go back in time, just a few years, podcasts like this didn't exist. Most of the tools that Allison just described didn't exist. The amount of marketing content that is now targeted specifically at us, the analytically technical persona, has skyrocketed. A whole area of expertise like customer success operations wouldn't have been possible without the initial wave of customer success that came before it. So to use Allison's language here, the companies that don't just ride the wave, but position themselves as leaders of the wave will be the ones that gain the trust and ultimately the business of operators. And so if this is the future, what should we, as participants in that wave, do from here? There are so many tools, so many solutions out there these days. What are the things that we should be paying attention to? How can we make sure that we're part of the community that is being elevated by the wave without being crushed by it?
Allison Pickens: I love that question. It's very interesting. And actually, just to throw the question back out to you, is the reason you're asking because ops people are expected to take responsibility for instrumenting so many different kinds of software that it becomes necessary to prioritize your time across them?
Sean Lane: Yeah. And I think just as the customer journey gets more specialized and gets more broken down, there could be five different tools just for prospecting, three different tools just for opportunity management and forecasting, another set for building your quotes and getting your renewals in. All of those, and that's just on the sales side, we haven't even got to customer success or marketing, right. There's just an explosion there, I think, of the different vendors and logos that could be in an ops person like me's purview.
Allison Pickens: Yes. That's fascinating. Yeah. I guess consistent with the idea that a lot more is going to be on the shoulders of ops folks to instrument in order to make these complex digital communication channels with customers work and to instrument the no code, eventual no code stack. So I see what you're saying. In terms of how to prioritize, it's a little hard to share because I do think that all of these categories really do matter. I would say that becoming more proficient with data and especially learning how to access the data warehouse and the ecosystem of tools that are cropping up to enable that, that's probably the most important place, I think, to spend one's time, because I do think that data will drive the next generation of tooling that becomes available. And so if you can just get closer to the data warehouse and become more familiar with how predictive models work, I think you're positioning yourself really well in your career.
Sean Lane: Before we go, at the end of each episode, we're going to ask each guest the same lightning round of questions. Ready? Here we go. Best book you've read in the last six months?
Allison Pickens: Mm. This will be relevant for folks who are binging on TV and movies. If anyone's seen the movie Dune come out recently, I've been reading the book actually that was written many decades ago, and I won't bash the movie, but I'd say the book is much better. The movie's good, but the book is amazing. I think it's... I have rarely read books that are written with so much linguistic nuance and suspense baked into it.
Sean Lane: All right. I think I made a mistake. I tried to do the audio version and just the names of the characters alone, I was toast. So I think I need to actually read it. All right. Next one. Favorite part about working in ops?
Allison Pickens: I love the systems thinking. In general, I love thinking about many different data points, qualitative, quantitative, conversations I'm having with folks and bringing them together into a framework. Translating ambiguity into structure to me is the funnest part of ops.
Sean Lane: Flip side, least favorite part about working in ops?
Allison Pickens: I think a lot of ops folks are unfortunately taken for granted by their business leaders. They're often the recipient of many, many questions, and they... I think they need to be supported more because as I've mentioned, I think their role, really, really is the future. It can be tough, I think, for a lot of op folks being the... carrying the burden of all those responsibilities and also often being cross- functional coordinators. I think that can be a tough position for a lot of folks to be in.
Sean Lane: Got it. Someone who impacted you getting to where you are today?
Allison Pickens: Oh gosh. I mean, I'm grateful to so many people. The first female boss that I had in private equity was instrumental for me. The executive coach that I worked with in business school and actually then later, and a coach that I worked with while I was at Gainsight. Nick Mehta at Gainsight, our CEO, amazing partner to me. Some of the folks who were early in investing in my fund, my venture fund, which I now run. And a number of the founders that I work with are hugely inspirational to me. So I'd say no one person, but a lot of people that I'm incredibly appreciative of.
Sean Lane: I love it. All right. Last one. I know you have a lot of different jobs today, but one piece of advice for people who want to have your job someday?
Allison Pickens: I'd say become as good of a communicator as you can be. I think in this era, accurate, concise, thoughtful communication that you don't regret later, it's more important than ever. And I think is the best way to show people that you care about them, that you've good intentions and that you can help them in some way.
Sean Lane: Thank you so much to Allison for joining us on this week's episode of Operations. If you want to hear more from Allison, and if you made it this far in the episode, you definitely do, subscribe to her newsletter. It's allisonpickens. substack. com or you can read her book, The Customer Success Economy. I am in the middle of it right now. If you like what you heard on this episode of Operations, make sure you're subscribed so you get a new episode in your feed every other Friday. Also, if you took something away from today, leave us a review, six star reviews only on Apple Podcasts or wherever you get your podcasts. Thanks so much for listening. We'll see you next time.
What does it mean to create category? A lot of companies say they are creating their own category, so we wanted to talk to someone who is an expert in it.
That expert is Allison Pickens, former COO at Gainsight and now an investor and advisor through her work as the Founder and General Partner of The New Normal Fund.
In our conversation, we talk about how Allison and the team at Gainsight created the Customer Success Category, why she believes it’s all about elevating a community of like-minded people, and we end up discovering that the next wave might just be tailor-made for Operators like us.
Like this episode? Be sure to leave a ⭐️⭐️⭐️⭐️⭐️⭐️ review and share the pod with your friends! You can connect with Sean and Allison on Twitter @Seany_Biz @PickensAllison and @DriftPodcasts.