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  • August 20, 2008
  • Well that was interesting.  Salesforce bought InStranet for $31.5 million and it’s hard to get any information about the deal beyond the bare facts.  I checked the Salesforce Web site when I got the news (from a competitor, of course) but I didn’t see anything there.

    Maybe Salesforce is a little chagrinned at the fact that InStranet is (gulp!) a conventional software company.  (InStranet enables customers to build knowledge bases for service and support applications.)  I dunno.  The news stories say that there will be an On-Demand version in 2009 and one story pointed out the there has been an AppExchange version since 2006.

    There is no doubt that what InStranet does, content repository/knowledge base for service and support and FAQ is a necessary thing and it was one of those areas that Salesforce needed to beef up.  But my questions are not so much why did they buy a conventional software company as why didn’t they build this functionality with their very own tools?

    Other vendors like RightNow have pretty good capabilities in the knowledge base area so perhaps there was some KB envy going on or maybe no one wanted to wait until 2009 to debut a new and improved KB capability.  Or possibly Salesforce wanted to buy the expertise into the company.  My theory is that InStranet’s main base of business is in France and Salesforce was buying market share.

    Published: 15 years ago

    Apple has been held up as the poster child of ease of use and high value customer experience but how did that all happen?  Various commentators have their ideas and so do I, based on my recent Macintosh purchase.

    I have always had trouble setting up a network involving wired and wireless computers and when I was at the Apple Store recently, I asked an innocent question of the saleswoman, “Can you send someone to my house to set up the network?”  

    I expected her to give me some kind of description of Apple’s services or perhaps introduce me to a partner. Instead, she gave me a blank look, as in, “Why would we ever need to do that?”  It was sort of like the waiter in the high end restaurant not blinking when you ask for the steak sauce, her answer was a crisp: “No. You just plug it in, and it works.”

    “What do you mean you plug it in and it works?!“ I wanted to scream.  “Have you ever installed a network that just worked?!  I have a Windows network at home right now that took days to install, a sleepless night and a six pack once it was all over.  Nothing just works!  This is technology!  It works only eventually!” 

    She was right, though. 

    All this talk about the customer experience, as important as it is, masks something deeper in the marketplace today.  When you get to a point where customer experience is important, you are generally late in a market’s evolution. There are usually multiple competent vendors selling similar products, and customer experience is something vendors address when they can’t really cut prices anymore and a product has enough features and functions to bewilder any geek.

    At that point, vendors look for secondary or even tertiary characteristics to give them an edge.  Other approaches worth considering in an aging market include product line extension, value engineering (building more into the product), cost reduction and improving your business processes (a.k.a. making your company easier to do business with).

    Apple chose to make itself easy both to use—as in setting up the network, using an iPod and the like—and to do business with (the Apple store).  But Apple executives made that decision a long time ago when they realized Apple would not be the No.1 PC maker and needed to make a niche for itself.  

    Apple became the über computer company, the manufacturer that made machines that did graphics and sound and movies before anyone else thought those things were important. It was the company that did spreadsheets to show that it made “real” computers.  They did all that and made themselves everything the competition was not: easy to do business with and providing a great customer experience.

    My point is that in a parallel universe, executives could have decided Apple was going to be another PC company but with greater attention to customer experience.  Had they gone that way, Apple would, indeed, have been just another PC company—working on razor-thin margins. Quite possibly, Apple would have gone out of business, as it is it came close to doing it once.

    I suspect the reason Apple was able to make that pivot is that the founder was still involved at the time and still is.  Founders are product oriented and I suspect that the reason Apple has done so well is that Steve Jobs is still at the helm and still cares fanatically about the product details.  In other companies, the usual course of events is that a financial whiz kid takes over from the founder and when that happens the name of the game is pleasing Wall Street first and the customer later.  At Apple the product oriented founder learned enough board room politics and developed the business savvy to hang in there.

    With Jobs dictating the vision, Apple built ease of use into its DNA, and that enabled the company to invent and re-invent products that no body else thought about.  In addition to customer experience they concentrated on product line extension (they were the first notebook computer company, first hand-held, too). 

    Sony had the personal music niche sewn up for a long time with the Walkman, but Apple saw the limitations inherent in only having one CD in the machine and the need to carry extras if you wanted variety. As a computer company, Apple was able to apply tiny high-density disk technology to the problem, and the iPod was born.  In contrast, attention to customer experience led Sony to make modifications to the Walkman but, like asking a fish to invent fire, all the modifications in the world did not enable it to turn the Walkman into an iPod. To create an iPod, someone had to re-imagine the paradigm.

    So my takeaway from all this is that although attention to the customer experience is important, even necessary, today, it is hardly sufficient for a company to prosper.  Customer experience is a way to compete, but product innovation is still huge.  That’s why the CRM 2.0 paradigm stresses getting closer to customers and using information you acquire both for messaging to improve the sales of today’s products and for defining and designing tomorrow’s products. 

    Today’s markets require some out-of-the-box thinking, and smart vendors will make sure that they don’t paint themselves into a customer experience corner.

    Published: 15 years ago