I was recently having a conversation with my colleague Ben Morris, who is our Vice President of Technology Strategies, in which we discussed parallels between the booming customer experience sector and venture capital.
We noted that venture capitalists (VCs) are by nature very inquisitive and fond of numbers. Their decisions are often made based on metrics that dictate whether a start-up company should be funded or passed on. Within the past 10 years, customer experience has also been largely guided by metrics. Companies learn what works and what doesn’t using indicators such as churn rates, social media metrics, and other magic numbers.
While I agree with these assumptions and parallels between venture capitalism and customer experience – particularly in the capture, analyze and reward stages – I also believe there’s a huge amount of subjectivity involved in decision making around these topics. This subjectivity is what separates venture capitalists and entrepreneurs from banks and insurance companies.
The importance of capturing a lead is just as important in the world of a VC as it is in managing great customer experience. Investors look near and far for deals and opportunities. Once we set our sight on one, we want to let them know why we are their best choice and try to capture all the information we can on them through a formal due diligence process.
We don’t have to look far for examples of this in customer service as we see it in our portfolio companies. Tutela Technologies collects over a billion data points across every mobile network on the planet every day. They use this data to identify gaps in mobile network quality to capture information for their clients that include some of the largest Service Providers on the planet. Benbria and Pisano both allow for the collection of customer data and insights at different points along the customer journey. Echosec captures the geo-location and customer social media updates surrounding a business or event. In our business of investing we need to capture as much information as we can to improve the chances of high returns and to improve customer service.
In venture capitalism, part of the due diligence process requires sitting down with our partners to analyze information provided by the companies we are considering. We hire expert analysts and carefully consider the probability of a company reaching milestones and see what we can do to help the entrepreneurs make that happen. We look at things like whether or not the startup is acquiring customers, meeting their sales expectations, or releasing their software on time.
In the same manner, customer experience managers will work with their team to analyze the information provided by the various tools they use to collect data. Solink’s analytics solution synchronizes point of sale transaction data with in-store video footage to give a retailer clearer insight into same store sales comparisons, who and why people make purchase decisions and most importantly if there are any suspicious transactions or theft. Twentify analyzes information collected through mystery shopping and store audits to produce powerful customer insights. Pretio uses its data to engage the right people at the right time for their purchases.
The rewards that venture capitalists provide to promising entrepreneurs with growing businesses is obvious: a monetary investment coupled with a network that can have a huge impact on success and grow their business further. We search for multiple ways to support and accelerate the growth of the companies we invest in.
Customer service teams reward their loyal customers to encourage them to stay on and recommend their services. SaaSquatch’s software structures these rewards in the form of referral programs. Enjovia uses their gift card platform to offer rewards and a seamless customer experience.
Data and Metrics- what are we missing?
Metrics are incredibly important and can guide us through the decisions we make as venture capitalists and customer service managers. At the same time, a VC will never admit that they are totally metric driven or say that an analyst could do their job. This is because the decision to invest into a company (or not) is ultimately a subjective decision about the feeling about the team and market.
Customer experience is similar in that you can tick all of the right boxes and follow a script, but you can still perform poorly if you aren’t making the right judgement calls.
Numbers are informative, but they don’t make decisions.
Subjectivity in Venture Capital Decisions
When it comes to choosing a team to invest in I closely watch the team’s commitment to their project in the face of failure. What they learn through failure, and what new opportunities they see in failure shows a lot about the team. They can learn something even more valuable than what their key performance indicators dictate. The decision to invest into a team after they failed at their first attempt is a very subjective decision. Knowing where to draw the line takes a lot of experience and ability to see a story behind the numbers that the numbers won’t show.
Subjectivity in Customer Experience Management
You can be very formulaic about how you interact with customers, and employ a customer experience tool to be collect objective and data driven numbers that can have great impact over the decisions you make.
And yet it’s important to remember that these numbers and don’t and cannot account for trends and shifts in competition. A set of criteria based on data that looks strong today (fashion choices, competitors prices, blog formatting, etc) can be very weak in 5 years from now. The decision to keep up with and be conscious of trends and competitors is a subjective and human decision.
The Role of Experimentation
Experimentation is extremely important for both venture capitalists and customer service teams. Albert Einstein is widely credited for saying “[t]he definition of insanity is doing the same thing over and over again, but expecting different results.” We need to experiment and take chances to find the deal of the century or get ahead of our competitors.
If the data you use to help make decisions is publically available then your competitor may have the same ideas as you. It takes gut calls and subjective decisions to change a process that can seem safe and sound, but the results can be well worth it. After that decision is made and implemented use numbers to evaluate and reevaluate your decision, but keep experimenting.
VCs and customer experience managers would do well to appreciate and respect data-driven data. Metrics can confirm or disprove our assumptions, and sway us in the right direction when making decisions.
Ultimately, however, the difference between success and failure lies in that subjective grey area where you can choose to step up and do something different.