Keeping it simple
Disruptive innovations change our lives for the better. They expose long-standing needs and signal that there’s a solution at hand. Moreover, the solution involved is usually less expensive than the status quo. The lower cost aspect makes adoption inevitable and therefore disruptive.
Document management is like that. Decades ago for many enterprises the cost of capturing documents as electronic images vastly improved on the costs of managing file cabinets. Labor and printing costs still make up a significant cost for some organizations but generally, as document management becomes ubiquitous, a business saves a lot of money.
But disruptions don’t remain disruptive, they commoditize and become mainstream and on the way they become less costly and even more ubiquitous than their inventors had expected. Really successful disruptions follow this path to ubiquity without skipping a beat but other times vendors try too hard to extract value from their old disruptions. This still works when customers are deeply invested or it’s hard to convert to the competition. The term “walled garden” was coined to describe such situations.
In a walled garden you might expect a vendor to tightly monitor license use and to oppose commodity licensing options like site or corporate licenses. Some vendors have gone so far as to audit use within a client enterprise and to charge back for uses assumed but not necessarily verified.
These policies might work when a disruption is fresh and a vendor wants to penetrate an organization. But later both the customer and the vendor have an interest in making the solution ubiquitous because all or nearly all people in an organization can benefit from the solution. Those who can’t benefit won’t use the solution and for them a full license doesn’t make a lot of sense.
Walled gardens can fail, especially when conversion isn’t as hard as the disruptive vendor might think. Further, as time goes on the principal attribute that a vendor displays has much less to do with wiz-bang technology because the competition has caught up. The reason dominant vendors remain so is because they’ve managed to engage with customers and engagement drives loyalty.
In my experience, which includes writing books on the subject, keeping customers for the long term begins with engaging them on all levels with your whole product, a term from a few decades ago that’s still valuable. Whole product includes the core product but also all of the policies, procedures, service interactions and more that tell customers you care about their success.
In “Stop Trying to Delight Your Customers” a 2010 article from the Harvard Business Review the authors say, “…loyalty has a lot more to do with how well companies deliver on their basic, even plain-vanilla promises than on how dazzling the service experience might be.”
The essence of that delivery is simplicity, which includes the user experience as well as the experience with the vendor’s policies and procedures. But in multiple situations we see the opposite of simplicity today, which some customers view as hostility. The best example of this is the software audit.
Whether it’s database companies or document management companies, auditing customer use of a product, along with hefty chargebacks is becoming a bone of contention between customers and vendors. No doubt vendors think audits are necessary but as a customer engagement strategy it lacks a lot.
My two cents
At some point in the commoditization process the driving force of the vendor-customer relationship transitions from the awesomeness of a product to how easy a vendor is to work with and that’s the whole product wrapped up with a bow. The user experience, the buyer’s experience, technical features and pricing all have a role to play in the whole product description. Vendors who forget this may find that after many years customer attrition becomes a problem and at that point it might be too late.
Salesforce Q4 earnings on target, again
They did it again. Salesforce exceeded its year over year quarterly earnings by a tidy amount. The numbers are 24 percent YOY growth on revenues of $2.85 billion. Full year revenue was $10.48 billion. Next year their guidance to financial analysts is revenues of $12.60 to $12.65 billion.
Stop for a minute. Do you know how hard this is to pull off? It’s not just that Salesforce exceeded $10 billion for the year, which was an important goal. It’s that they’ve been a growth company for almost two decades. Every year more corporations buy into Salesforce’s version of cloud computing for CRM, for ancillary applications from the AppExchange, and for building their own apps from scratch for a variety of platforms (all at once) ranging from the handheld device to the (dare we say legacy?) desktop.
Forgive me for going on, there will be no free steak knives at the end of this, but Salesforce has for many years been on of the very best companies on the planet to work for. And, again no parting gifts here either, they have built a business model that has philanthropy, a.k.a. doing good while doing well, built in.
To paraphrase Paul and Robert in “Butch Cassidy” “Who are these guys?!”
Okay, okay, they aren’t perfect. They change their marketing strategy as fast as most people change their socks. They’ve been a hosted CRM company, a SaaS company, a social company, a cloud company, they’ve embraced analytics and IoT as if they were the second coming. They’re also into teaching, training, making it possible for ever more people to use their stuff. They’re hard to keep up with.
But Salesforce, more than any company I know about seems to luxuriate in the idea of destruction as a means of creation. If something doesn’t work out exactly right, they have no problem scrapping it and finding something better. They grow because they embrace the new and the difficult.
But back to the degree of difficulty. It is hard, hard to put up better numbers year after year and do the other things but lately that’s become part of their appeal. Other, larger companies now go to Salesforce to discover their secrets and because their secret sauce is embedded in their software and how they use it, selling Salesforce is no longer about product. Actually, it’s still that but now it’s also about knowledge and culture transfer. That, combined with a subscription model that gets customers to commit to multi-year deals, suggests that this growth curve can extend well into the future. We’re seeing something special happening.
A long good-bye
I’ve been a user of social media for more than 10 years and I was among the first to write about its potential long before there were social media products. The original research on 6 degrees of separation and the Kevin Bacon game that illustrated the power of social networking fascinated me. I started writing about it and even wrote a paper in about 2002-03 that called for social networking and analytics to become part of the CRM suite. I was a fan of James Surowiecki’s classic, “The Wisdom of Crowds” and thought that was a prescription for settling many tricky research questions. But now approaching 20 years later, I’m dismayed by what social media has become and I find myself calling for its abolition.
Okay, social media isn’t going anywhere. The freedom of speech embedded in western democracies will ensure that even to the point that social media is eroding the very freedom of discourse that supports it. But that only places more responsibility on each of us to ensure that this class of products is used appropriately and not as a force for good.
Revelations about Russian social media use to worsen domestic political arguments among Americans and influence political discourse leaves me shaken. But so does the advertising model and profit motive that drives it. They’re really two sides of the same coin. Social media’s primary product is the user and the products do a great job of gathering crowd data and statistically analyzing it to feed recommendations back to advertisers. It is not wrong to say that we are enabling it to assist force-feeding the consumer culture.
Surely there must be a higher calling for the great technology that we’ve midwifed in the last few decades?
A tsunami of negative press is evolving about social media and the ways Russian intelligence services subverted it to sway America during the last election cycle and even today. I am not using any weasel words to suggest that Russian intelligence purportedly or ostensibly hacked the election. The election scandal walks like a duck and it quacks and with two sources of verification I’m calling it. For back-up the Mueller team issued a 37-page indictment against 13 people and 3 organizations alleging it.
Consider a recent New York Times article, “To Stir Discord in 2016, Russians Turned Most Often to Facebook” by Sheera Frenkel and Katie Benner. It says in part,
In 2014, Russians working for a shadowy firm called the Internet Research Agency started gathering American followers in online groups focused on issues like religion and immigration. Around mid-2015, the Russians began buying digital ads to spread their messages. A year later, they tapped their followers to help organize political rallies across the United States.
The social media instruments of choice? Facebook and its photo-sharing cousin, Instagram.
Facebook and Instagram were mentioned 41 times in the 37 page indictment which charged the Russians with “executing a scheme to subvert the 2016 election and support Donald J. Trump’s presidential campaign.”
Now, Facebook and all the other social networks are not charged with any wrong-doing; they are, at least for now, the unwitting dupes of a sophisticated and well-planned effort. Fine, I get it. My dis-ease with Facebook (and Twitter) was summed up well by Jonathan Albright, research director at Columbia University’s Tow Center for Digital Journalism who is quoted in the above article saying,
“Facebook built incredibly effective tools which let Russia profile citizens here in the U.S. and figure out how to manipulate us,” Mr. Albright said. “Facebook, essentially, gave them everything they needed.”
If that’s true, and it seems hard to dispute, can social networking tools be unquestioningly used for good ever again? Are they, like fire arms, inherently dangerous and only capable of one use?
Call me bad names if you wish but as bad as that is, it is the thought that the big social networks like Facebook, Instagram, Twitter and others as well as Google and Amazon all capture a raft of information about us for the purpose of force feeding us things that advertisers desperately want to sell.
How effective are their tools and techniques? A separate article, also from the Times, shows a small sample of the online ads that the Russians used during the election that pick at the scabs of our society.
There’s one designed to fan Southern animosity using a Civil War theme,
There are also ads that tell African Americans not to bother voting or that suggest that the white government is against them. Another showing a picture of Hillary Clinton with an X across it and the caption “Hillary Clinton is the co-author of Obama’s anti-police and anti-Constitutional propaganda.” It goes on and on.
You don’t have to like Clinton or Trump to understand that these things erode our democracy because they make it harder to have dialog between opposing parties and without dialog there is no compromise. But by extension, if social media can be successfully used against us in an election, and Facebook admits that such ads reached 150 million Americans during the 2016 election, this stuff can and is being turned against all of us in every day commerce.
They’re still at it,
Another article in the Times (Feb 19, 2018) “After Florida School Shooting, Russian ‘Bot’ Army Pounced” by Sheera Frenkel and Daisuke Wakabayashi offered this chilling summary,
One hour after news broke about the school shooting in Florida last week, Twitter accounts suspected of having links to Russia released hundreds of posts taking up the gun control debate.
The accounts addressed the news with the speed of a cable news network. Some adopted the hashtag #guncontrolnow. Others used #gunreformnow and #Parklandshooting. Earlier on Wednesday, before the mass shooting at Marjory Stoneman Douglas High School in Parkland, Fla., many of those accounts had been focused on the investigation by the special counsel Robert S. Mueller III into Russian meddling in the 2016 presidential election.
The bots owners don’t care which side of any debate they take and seem to prefer running both sides to ensure divisive reactions. Karen North, a social media professor at the University of Southern California’s Annenberg School for Communication and Journalism summarized the situation,
The bots are “going to find any contentious issue, and instead of making it an opportunity for compromise and negotiation, they turn it into an unsolvable issue bubbling with frustration,” said. “It just heightens that frustration and anger.”
My take
Mostly I am disappointed that social networking isn’t really living up to what we envisioned. It’s a realization of social networking that each of us, according to the theory, is no more than 5 touches from any other person on the planet and for most connections it’s fewer.
The practical application of social networking has to do with Dunbar’s Number. Robin Dunbar was a British anthropologist who observed that humans can maintain stable social relationships with about 150 other humans. The number puts a practical limit on all kinds of things that depend on close relationships. For instance a military company is comprised of not more than 150 individuals for reasons of cohesion. The company is the building block of all military units because every member has every other member’s back and they all know it because they have personal relationships.
In the middle ages, monasticism spread for similar reasons. Civilization was saved in Western Europe because whenever a monastery grew above Dunbar’s number, extra members were sent out to establish another miles away. This happened naturally mind you, not because someone had an algorithm but because organizations just got too big for comfort.
Social networking today has blown up Dunbar’s number. While I wouldn’t suggest that I can have anything like a relationship with the few thousand poor souls who follow me, I can at least keep them interested by occasionally flicking off a crumb of my existence for their consumption. But it’s pointless and all indications are that it’s harmful for multiple reasons to the body politic.
So I’ve quit Facebook. Actually, they don’t let you quit, they deactivate your account so that you can come back. I really hope I don’t back slide though. I never got much from facebook and the harm it does to society weighs heavily on me. I’m just one person with an opinion but it would be wonderful if other people did the same.
Signs that your disruptive innovation is fading
Disruptive innovations drive the economy. First there’s nothing, then something appears in the market and we all realize we’ve been missing the product or service our whole lives. We rush to buy it but soon the market is flooded, copycat products emerge, price erosion commences and the disruption becomes so commonplace that we ignore it. Important disruptions have a chance to become managed utilities, oligarchies with restraints. How can you tell where you are on this wild ride? A few pointers below.
- The market is suddenly full of low cost competitors that only do part of what your product does.
- The plain vanilla version is no longer enough. Customers want variety.
- You can’t keep up with enhancement requests and your service function is overloaded. Customers are getting grouchy.
- The glowing articles about you that once filled the media are being replaced by stories about product deficiencies and unhappy customers.
- Customers are delaying new orders until a product issue is fixed. Maybe they’re auditioning a competitor.
- Various governments want to invent ways to regulate you. None can agree on a common approach and you run the risk of becoming the little Dutch boy with his fingers in the dyke.
- Meanwhile your company is trying to automate the product as much as it can and to reduce the need for service. This makes customers happier and reduces overhead so that you can compete in a low margin world.
There are more issues but you get the idea. The bloom is off the rose as the poets might say. The plain fact is that nothing is “wrong” markets do this. Say’s Law (the Law of Supply and Demand) says, “Supply creates its own demand.” But what they never tell you is that’s only true in new markets. There’s such a thing as oversupply and when that happens prices drop. Your success breeds competition which breeds commoditization, and downward price pressure.
You might not see all of the symptoms in the short list above because products differ. For example, if you’re lucky enough to have invented something that the world, or a good part of it, can’t live without and it’s so successful that it discourages competition, your customers might not boycott or refuse to reorder. Instead they might take their complaints public.
That’s a particularly nasty problem for social media companies and other tech vendors today as customers are rethinking their use. Ten years ago social media was hailed as a great new thing that could link people around the world and offer new possibilities for business and even world peace. Today not so much.
Last week the New York Times ran a story about technologists dismayed by their creations. In “Early Facebook and Google Employees Form Coalition to Fight What They Built” reporter Nellie Bowles writes,
A group of Silicon Valley technologists who were early employees at Facebook and Google, alarmed over the ill effects of social networks and smartphones, are banding together to challenge the companies they helped build.
They’ve organized the Center for Humane Technology http://humanetech.com whose home page says the group aims at “Reversing the digital attention crisis and realigning technology with humanity’s best interests.”
This isn’t the first time people deeply involved in tech have sounded a warning and introduced course corrections. Many like Gabe Zichermann have attributed our uneasy relationship with modern tech to what Zicherman calls the addiction economy, an outgrowth of the attention economy. Gabe Zichermann is the cofounder and CEO of Onward, a mobile app that uses machine learning to help people strike a balance in how often they use technology.
A decade ago, before social media really got going, frustrated customers would find creative ways to pillory vendors. One popular approach was to start a website with the company’s name and “sucks” appended to it. The gods of the internet naturally collated those sites last in searches but if you knew what to look for you could find untold horror stories told from the customer’s point of view.
It got so bad that I invented a metric, the Sucks Score and I wrote about it in a book. It was a simple calculation of the number of hits you got when searching. I haven’t looked for those signs and symptoms in years simply because social media has taken all of the (minimal) work out of the process. Today we can flame anyone on social media and it takes no special skill. Even a septuagenarian businessman can effectively leverage the technology.
But what happens when the go-to technology of social interaction becomes the disfavored and disrespected? That’s when you really know that your 15 minutes are almost up. What to do about it?
First, take a breath, then another. Knowing this kind of thing happens all the time is no help when it’s happening to you. But things could be worse—your brainchild could have been bought and chopped up. Time to take a look at your business model. If it’s the same one you started the business with, think again. A recent article in the MIT Sloan Business Review points out that some of the most successful models involve incorporating partners and their capital into a grander scheme of entrepreneurship. Business models are coming back into vogue and there will be more in a future post.
We’re number 2
We’re number 2 in CRM blogs that is. Every year Chris Bucholtz ranks the best CRM blogs and once again the Beagle blog is in second position right behind the estimable Paul Greenberg. You can find all of the rankings here. Thanks so much for continuing to read this site. Without you who knows where we’d be?
