November 20, 2009
One thing that impressed me about Dreamforce was Salesforce’s ability to be creative, to invent something completely unexpected to announce in Chatter. Whether Chatter will be any good when it is released next year is debatable but Salesforce did what it was supposed to do in bringing out a big new idea for its assembled customers.
Most importantly, the Chatter announcement made a mockery of the attempts by SugarCRM and Microsoft to anticipate and respond. I think those efforts fizzled because they were largely expecting a more conventional set of announcements than they got.
It was like baseball. If you’re a pitcher and you have a batter with a 3-2 count sitting on a fastball you might throw one but it might be better not to, instead opting for a breaking ball. If you have to throw the heater you want to make sure it’s just out of the zone to make the batter question whether to swing or take what ought to be ball four. Lots of good hitters end up striking out in that situation because they’re momentarily frozen.
Some of that happened at Dreamforce and parenthetically, I have to commend Oracle for wisely deciding not to anticipate Salesforce’s announcements with a truth squad though they certainly could have.
So now Salesforce has this new, new thing to explain and about six months to do it. I have to say that the idea both new and not new and getting your head around it might be challenging, I know it was for me. Let me try again to describe it now that I have slept on it a bit more.
Think about social media, specifically Twitter and Facebook for they are the closest analogies. Social networks operate on three key elements, according to Salesforce and I have no strong objections to this model. The elements of success in social media are people, content and applications. Social media are only valuable if lots of people use them (the network effect) and they use these media to get content or to use applications.
That’s fairly abstract but think about Facebook whose content is supplied by users who provide all the details of their lives including photos. Facebook is the largest photo sharing site on the internet, I am told. So notes about your life and photos, that’s pretty much the content side. The other bit is applications. We use applications on Facebook to enrich our experience and to get more information and content from others.
The people at Salesforce remind me that the content and applications are only valuable if they are in circulation, if they are used by members. Like a relay race, it doesn’t matter which person is running, what does matter is how fast the baton moves around the track. In the same way, if information is static because it is stored on a network drive somewhere and few people know about it, then it has much less utility than if it was being used by many people. The more people that use applications and data within you company to do business the more value they have.
Now, where is all this information and where are the applications. Of course they are in your in-house repositories, in the data center. But there is also information stored in people’s heads that has potential value such as the deep backgrounds of employees, their skills and things they know that may not directly impact their jobs.
But what if that information too could be surfaced and stored for easy applicability? In Chatter all of that information is easily rendered as well as information about information and all of it can be subscribed to. In an earlier post I offered the idea of subscribing to the data of a sales forecast so that when it changes the subscriber is notified. It’s not much different from becoming friended on Facebook – you get updates when something changes on a friend’s page and it is your decision whether or not to use it — that’s what makes social media work.
Social media is like a big exception machine notifying you about the deltas in life. It’s management by exception and it gives you the ability to keep up with a lot without devoting much attention to the minutia. If you think something is important you post it and your friends or followers have the discretion to decide if it’s worth absorbing.
This model could do a lot for business if implemented properly but there are many if’s associated with that statement. The if’s will begin to be filled in by the first strategic use cases and with them we should begin to get an idea of best practices and all the rest. That will be extremely important.
Not long ago I read Niall Ferguson’s “The Ascent of Money” in which there was an intriguing quote from George Soros, the billionaire financier and philanthropist. Soros said, “Every bubble consists of a trend and a misconception that interact in a reflexive manner.” But what are product innovations if not bubbles that attract attention and money for a time before the bubble bursts and we move on to new bubbles, new paradigms? The experience economy was such a bubble and customer experience is its misconception. Social media in business is a bubble too. What will its misconception be?
It has been a while since our industry saw anything like Salesforce.com’s just announced Chatter. Technically, we’ve not seen anything like it period. True there are aspects of Chatter that are already reflected in other products on the market but I am speaking about the novelty of the proposed application that was announced yesterday at Dreamforce.
Chatter is a pure innovation; you can tell that it is because most of the people I hang with – myself included — are trying to figure out if it is fish or fowl. I am writing this in advance of a keynote this morning that will, no doubt, add some heat to the discussion but I wonder how much light.
I am not ready to pronounce anything about Chatter and since the product won’t be out for at least three, and possibly closer to six, months I am reserving judgment for now. Nonetheless, some initial impressions are in order, otherwise why am I here?
Chatter is part of what Salesforce has dubbed its fourth cloud and although they describe it as a collaboration tool, it is really all about intelligence, hence the name. I doubt that Chatter will ever be able to capture bin Laden but, aimed at the internal mechanism of a company’s business processes, it ought to provide some lubrication to those processes.
I think lubrication is a good – though scarsely the only — way to look at Chatter too. Chatter offers the promise of providing greater transparency to a company’s inner workings, which should result in better decisions and fewer surprises. For instance, Chatter makes each data item an active, or perhaps it is better stated as non-passive, element in a company’s decision-making. In the forecasting realm, a deal’s size, completion date and other attributes will now be active in that, if and as they change, they could make their new statuses known to others.
So, a sales manager might subscribe to a sales person’s whole forecast or just the big deal that is supposed to close this quarter. A change with an immediate alert will give the representative, the manager and others in the organization more time to react to the news and possibly affect the outcome. Currently, an organization that reports its forecast once a month might lose four weeks on the follow up but Chatter would make the response more or less instantaneous.
Chatter is not the only product capable of this feat. In this scenario I can see other products doing similar things, for example Right90, which specializes in forecasting. Other scenarios will bring other products to mind and that is one spot where the debate rises over how revolutionary Chatter really is. Some? A lot? Not at all?
Then there’s the question about whether or not this is a good thing. The answer? Sure. Maybe. I dunno. When you peel the onion on this you discover how nuanced Chatter is. There are dials and settings to deal with that prevent a subscriber to data’s changes from being overwhelmed by background noise – don’t show me all deals, just the ones that will pay off my mortgage, for example.
Chatter and noise are two well-chosen terms from true intelligence gathering and they certainly deserve to be part of the conversation. It is interesting to me that Chatter’s focus is internal decision-making and not the vast ocean of data that exists outside a company’s walls. The decision about focus makes the task at hand far more manageable and signals the importance of reducing the siloed nature of information that is still alive and well decades after that term was first coined.
By its nature, information will always be siloed – there is too much to know and too many people who may need to know it for information to be perfectly democratized. But Chatter does something close to solving the problem by making data active rather than passive and automatically subscribable rather than purely reportable. It is that subscribability (to coin a phrase) embedded in a company’s information processing milieu that is so intriguing and potentially powerful and it is the lubrication that I alluded to at the beginning.
It is also one aspect of what makes this announcement something that we haven’t seen in a while. It is close to a pure innovation, the kind of thing that makes people like me scratch our heads or like the three blind men and the elephant, want to run our hands all over it and make tentative first declarations about what it is. If this kind of innovation is back, does this mean the recession is really over? I hope so.
I was at a user meeting with NetSuite in Boston earlier this week. The company has bought two companies since going public — OpenAir and QuickArrow — both of which support the professional services market. Companies sell things as well as services and CRM has been applied most successfully to the former. Companies that sell services have been left to their own devices to figure out how to automate and manage sales and delivery and their situation resembles that of the thing-sellers pre-SFA.
NetSuite’s idea is an integrated solution combining ERP and services oriented planning and sales modules going by the name of SRP — services resource planning — and the idea has legs.
As you can imagine there are some significant differences between selling things and selling projects. Most importantly, services companies have bigger issues with fixed overhead because you have to have smart people on staff if you expect to sell their time. Economists might say that supply is inelastic or certainly less elastic for the services guys than for the companies that can throttle up or down the manufacturing process.
All this got me thinking not about the two different types of selling but about the two different styles of building a company exhibited by Salesforce.com and NetSuite. Both companies have purchased other companies when it made sense as a way to build out their offerings. But each company also has a multi-tenant architecture and a cloud platform, which makes it easy for third parties to build or modify applications. Nonetheless, if I had to describe each company’s strategy I would say that NetSuite is more likely to buy than make compared to Salesforce — if you include the partners.
Salesforce appears to have decided on an approach that encourages a partner community to build native applications while NetSuite seems to encourage partners to deploy and modify its core solutions though not necessarily build wholly new ones.
Now, this is a rough approximation and it looks more black and white than it is — there is a lot of grey area in all this. But it drives an interesting question that I believe can’t be answered, at least not now. Which approach is better? Should the primary vendor be the only one involved in new product development or should the platform vendor simply let a thousand flowers bloom? Certainly the existence of the platform makes the second option possible.
Part of the answer can be found in how each vendor views itself. Salesforce is obviously looking for a big new market to penetrate that’s bigger than CRM and it has selected application development tools for the enterprise and smaller organizations. NetSuite might have a serviceable platform but for the time being it appears to be more interested in the market for integrated front and back office applications, which is more crowded.
I don’t have any good answers here or prognostications, just these observations. Salesforce has always been in the business of inventing the future and while they’ve been successful they have had their stumbles along the way too. Other companies have been content to stick to their knitting, but the future rarely keeps to a script. There are many markets just opening up, at least in part because there is reliable and low cost software available to support them and that says good things for both companies’ chances.
The big question to ponder is whether there is enough demand for in-house development to support Salesforce’s vision. It groups are notoriously backlogged and it is unclear to me if the backlog is a result of too much demand or inefficient tools. For decades we have argued that it is the tools and we’ve seen generation after generation of tools that promised to fix the problem.
Tools are important but if you read “The Black Swan,” which I recommend, you might get the notion that backlogs are inherent in what we do, in part because we do such a poor job of understanding and planning for future requirements. If so, one of the next logical acquisitions for either Salesforce or NetSuite should be a company that focuses on improving forecasting and planning methods. Does such an animal even exist?
I have been studying sales forecasting and forecasting tools a lot recently and I have come to the conclusion that we need better tools as well as better ways of using them.
There is a lot that can be said about forecasting, its current state and how to improve it and I don’t want to leave anything out but I will try to be brief. First off, how we forecast says a lot about our views on economics. Given that most of us are not economists, our views of economy are most likely derived from what we see and hear on a daily basis, much like our view of the weather.
For over thirty years our view of economics has been increasingly colored by the ascendant views of the New- or Neo-Classical school of economics. To over simplify, it is a view that goes back to Adam Smith, of supply and demand and a belief that economics is a hard science governed by equations as rigorous as Newtonian physics — wishful thinking I’m afraid.
The most germane idea for our purposes is Say’s Law. Say was a French economist, very much in the Classical school who said that “production creates its own demand” and from that we derive the famous supply side economics of the last thirty years. Supply side economics corresponded nicely with another phenomenon in our world, the introduction of the CPU chip in 1968 and the cascade of new products that ensued over the coming forty years, roughly the high-tech era.
Increasing CPU power followed Gordon Moore’s famous dictum, now Moore’s Law, of increasing CPU power and decreasing cost, and it created a special circumstance that governed supply and demand for technology goods. Moore’s Law made Say’s Law work like a charm. A corollary to Say is that all markets clear, i.e. all supply is eventually absorbed at some price — but maybe not a premium price.
Moore’s Law ensured that a fresh supply of technology goods that superseded the earlier generation would arrive and drive demand thus ensuring Say’s Law would operate as advertised. But if Say’s Law requires something like Moore’s Law to operate smoothly, then it must be said that Say’s Law is a special case, not an iron clad law of economics.
What’s that got to do with sales forecasting? Quite a bit. In the special case of selling into a market with undiminished demand, sales forecasting need not be a lot more complicated than determining where we are in the sales cycle. If we’re ninety percent through the cycle we ask for the order and there is a reasonable chance that we will get the business — no guarantee, but a reasonable chance.
It hardly matters that our ninety percent is not really a probability derived statistically but really just a milestone in a process. In an expanding market there are enough deals percolating that reasonably diligent effort will result in on-quota performance. But on-quota performance is not what it once was and forecasting is in disrepute in many places.
According to Jim Dickey and Barry Trailer at CSO Insights, only about fifty-eight percent of sales people manage to make or exceed quota. Also, according to my research less than ten percent of sales forecasts have an accuracy of ninety percent; the rest aren’t worth the time and effort it takes to compile them.
What’s happening to sales forecasting is not surprising. With Moore’s Law slowing down and with so many formerly new market niches filled with products, we are transitioning from an era of expanding markets to one of zero-sum conditions. In a zero-sum situation, if you are going to win business you need to do it by displacing another product. If you are a customer in a displacement game it is always easy to do nothing and wait for a better offer and continue using an existing product that might not have all the bells and whistles you want but fills the need nevertheless.
A zero-sum economic environment has a lot of uncertainty in it. You might use the words uncertainty and risk interchangeably but they are not the same. Risk is something that is unknown but knowable. If a deal forecast is at risk a sales representative — frequently at the urging of the sales manager — can ask more questions, get more data, and piece together an answer. There are many issues in sales that are simply unknowable or mostly unknowable, for example, the details of the bid your competition makes.
When uncertainty — not just risk — enters the picture, our forecasting paradigm that relies on milestones in the sales process becomes useless. We need better tools if we are to forecast in the face of uncertainty and those tools exist but few of us have taken them up yet. For example, prudent managers might start with the territory planning process. How much white space is in the territory? What percentage of that white space is likely to churn this year? What is the overall economic forecast? Given our market share what is the probable share of that white space that we can capture? Is that enough to sustain quota for one or more people? How should we incentivize them?
Sales forecasting will always be an inexact science but we can do better than we are currently. We could persist in basing our forecasting ideas on Say’s Law but inevitably it is a race to the bottom, to pure competition on price. The airlines do that but none of them makes any money.
