The Blog

  • February 23, 2016
  • CRM and GDP

    111230100454-sloane-edison-horizontal-galleryI was gob smacked when I read this: “Electric light, the first reliable internal combustion engine, and wireless transmission [radio, my insert] were all invented within the same three-month period at the end of 1879” in Robert Gordon’s, “The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War.” It’s a book full of surprises emanating from an analysis of major inflection points identified by dates like 1870, 1920 and 1940. Gordon’s point is that major innovations spark major trends in how we make a living and that they happen with regularity. It’s the same idea embodied in long economic waves named after the Russian economist, Nicolai Kondratiev or Kondratieff.

    It takes a while for inventions like these to percolate through a culture. As a matter of fact, each of these inventions represent networking innovations which, while they were brilliant, required great private efforts and investments to become mainstream. Electricity was only as good as the delivery system to the home or factory and then great investment in lighting and even more in electric motor driven machines was needed to derive value and that took decades.

    The same is true for the other inventions. Engines need cars, which needed assembly lines and reliable roads, filling stations, and mechanics, and eventually the electric starter and automatic transmission, which made it possible for more women to drive. Finally, radio needed millions of receivers and content, content, content.

    They all required prolonged rollouts driven by private sector purchases yet each also delivered increasing value as network effects took hold. With these innovations fully networked (or should we say socialized?) their impact on economic activity was profound, but until all was in place, these innovations looked alternately like interesting science projects or loss leaders. With full rollout, though, they became engines of productivity and drivers of accumulating GDP. Computers and information technology look very similar.

    We saw the first inflection point in the IT/PC revolution back in 1996 or so. Prior to that computers and networks were a cost that seemed like a good idea but whose ROI remained in doubt. But the mid-1990’s proved to be an inflection point when all the investment in the PC rollout became the motive force for a sustained economic recovery that rivaled the 1960’s in duration.

    In 1996, many smart people were baffled by the continuing rise in productivity and GDP in the absence of an uptick in inflation. But that’s exactly what to expect when a new paradigm makes it all the way to the mainstream.

    I see CRM in much the same light as those Victorian era inventions and the original information revolution of the 1980’s and 90’s. What will it take to see another economic expansion like the 1990’s in the near future? The end customer has already invested heavily in Wi-Fi and handheld devices and many are now buying into wearables, all necessary prerequisites, while industry is still investing and re-investing in customer facing apps and devices like bots and drones.

    It is amazing that we’ve derived as much value as we have from CRM in the last 20 years. CRM was mostly a system of record when it emerged and its records were incomplete at best. Yet almost from the beginning CRM was able to reduce the time and effort required to deal with front office issues and thus boost productivity. Now, though, I think we’re moving into a new CRM era in which productivity further accelerates but this time it’s increasingly the productivity of the customer that draws attention.

    Earlier IT inventions and deployments have been fully accounted for and depreciated. Buying a few hundred PC’s doesn’t drive a company’s productivity any more; the business simply devours them. The newer inventions taking shape, and most importantly, the network effects that will ensure their success include truly exotic ideas like robotics, drones, the IoT, and analytics driven business processes. All of them intersect with CRM in some ways and all have a great deal to do with making customers’ lives better and ultimately driving GDP.

    When we think of GDP growth we often look at the productivity of the worker. But as Gordon points out in “The Rise and Fall of American Growth” inventions that make the standard of living more affordable and also higher have a multiplicative effect because rising living standards get plowed back into an economy in the form of higher demand for even more sophisticated goods and services. As this election season amply points out, after decades of stagnation, the public is hungry for rising living standards.

    I think GDP growth through CRM requires that we take CRM’s role up a level of abstraction or maybe it’s time to make a new level. We need to add a technology to the list equal to electricity and the internal combustion engine and CRM is only its application like a light bulb is to an electric dynamo. The technology is the software platform. It is both the automation of software development and the integrating factor for so many disparate branches of the software tree from social to analytics, to code generation to process automation and more. All of these services, when merged through the software platform, are capable of order of magnitude improvements in business and in living standards that are required for raising GDP.

    But it’s still early. At the moment we are mostly looking at the pieces and parts of the solution. It’s as if we understand electricity well enough but fail to grasp the importance of electric motors. Or we understand the internal combustion engine but fail to see the need for a good road system. It all goes together. All of our technology—collaboration, social, mobile, analytics, workflow, journey mapping, code generation, the IoT—comes together in the integrated business process just as sure as the automobile revolution reached its zenith with interstate highways and drive-in restaurants. That’s why the platform is so important and it’s why I think the platform will be the key driver in the next boost in GDP and living standards.



    Published: 8 years ago

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