Pegasystems held Pegaworld in Pegorlando this week and a good show it was. I have always wondered about the difference between CRM (social and otherwise) and BPM or business process management so I was happy to attend.
Both CRM and BPM deal with the interaction between the vendor and customer and each is involved in doing the right things that make customers come back. Both use some of the same tools like the Net Promoter Score (NPS) and focus on metrics like customer retention, churn, and maximizing revenue.
But I have devised a simple test of whether you have/need BPM (and I feel a bit like Jeff Foxworthy when I say it): If you’ve ever said our system won’t let us do that, you just might need BPM. I have to add that, this is not a definitive test, it has to be combined with a business that is at least somewhat regulated either by government or by the discipline of practice and markets such as banking, telco, healthcare, big technology, insurance and similar industries.
In those industries, companies are large, in part, because they are old and many smaller competitors have been absorbed or driven out. These big companies work on large volumes and razor thin margins. They make billions but service many millions and many are global with the result that personal attention is somewhat hard to come by at times. In those corporations, if you can’t automate a process, you can’t do it or if you haven’t automated it yet the process might take weeks.
That’s the situation many of Pega’s customers find themselves in and it doesn’t help that many of the companies in finance, insurance, banking and related industries, are just emerging from a nuclear winter caused by the economic meltdown in 2008.
But wait, there’s more. Customers have evolved too. We know all this — globalization, emerging markets, the Internet, personal computing, social media, mobile computing have trained a couple generations of customers to demand more. Customers, vendors, and employees all want systems that work like the apps on their handheld devices.
We’ve heard all this before but Pegaworld seemed to be a coming out party for BPM meets predictive analytics meets the consumerization of IT meets the big corporations emerging from that nuclear winter. To be sure some of the messaging felt like 2007 but it was completely relevant. We saw use stories from some very large companies like AIG, Lloyds Banking Group, Cisco and many others.
The sheer scope of what they are now doing is breathtaking. For instance, Lloyds embarked on an ambitious program to make more than 400 improvements in its customer-facing processes a year and a half ago. The program had a three-year time frame and they’ve completed 200 initiatives so far. For example, the bank found that it could take weeks for a customer and the bank to close an account because the process crossed many back office boundaries and involved some very manual practices. Lloyds automated using Pega and brought the process down to a few minutes. So what? Well, the largest bank in England closes four million accounts per year and that’s a number too big to let take weeks. By the way, I was reliably informed that this is not people going away from the bank just the normal process of consolidating personal finances and closing dormant accounts that people need to do from time to time.
Lloyds is just one example. AIG was a case study of a very large insurance company doing business in 90 countries with each country running as a semi-autonomous group down to having its own data center. It was necessary to work this way, in a federated model, because this old company got started a long time before computing and the Internet would make it possible to consolidate. Moreover, local rules, laws and customs make it necessary to organize at the local level. But local custom and law don’t automatically equate to local IT any more. According to AIG, with Pega they’ve been able to reduce their data centers to about eight.
It’s all about the agile, adaptive enterprise and while it’s not completely different from what other CRM vendors are saying, the scale it has to happen at for very large companies represents a Herculean task and a great opportunity not just for Pega but for any vendor and its customers who can see that the world is changing rapidly and fundamentally.
Listening to this made me think that the financial industry meltdown was at least in part a symptom of many old systems unable to keep up with volumes like the volume of distressed mortgages. I wonder if the crash would have been less ruinous if, as one speaker from Bank of America said, the mortgage departments weren’t running on many old mainframes and AS400’s. Seems like many big corporations are getting an overdue refresh and it looks like Pega with its BPM and predictive analytics focus might be in the catbird seat.
Sustainability and CRM
There was an interesting article in the New York Times last week, “When Flying 720 Miles Takes 12 Hours” about airlines but the subtext was all about CRM, or at least where CRM has to go. If you know me at all, you know I closely attend to macroeconomics and energy issues and they are all over this article.
The story documented how small regional airlines are having trouble in an economy where fuel prices are rising and there are fewer passengers willing to pay higher prices. The typical response you’d expect in such a situation is some combination of reducing the supply of seats and raising prices to enable the carriers to at least break even.
The article shows both but this is not a simple exercise from ECON 101. Higher prices and fewer flights signal stress on the economy because less business is getting done and that’s a downer economically speaking.
A few years ago a Forbes editor, Chris Steiner wrote, “Twenty Dollars a Gallon: How the Inevitable Rise in the Price of Gasoline Will Change Our Lives for the Better” that postulated what might happen to the economy as fuel prices rise. We’re right on time with his predictions, but I think there will be much change and dislocation before we see the promised land.
With fuel heading for five bucks a gallon, we are seeing mergers and acquisitions of sick air carriers along with fewer feeder routes according to the Times article and Steiner. As prices continue to escalate we’ll see fewer short hops and fewer long distance routes as airlines try to hang on.
But also, Steiner thinks places that exist on the end of an umbilical cord filled with jet fuel — Las Vegas, vacation destinations (think ski areas and islands in the sun) — will see a decline in the traffic that brings tourists and their cash. The immediate fallback position is cars, but gassing up a car that gets 12 or even 20 miles per gallon has already gotten old.
The secondary default position will be to get serious about alternatives and since trains and new cars or especially more hybrids are an expensive proposition the next steep won’t be travel alternatives but conservation in the form of travel reduction.
Just a few weeks ago people were talking about the resurgence in U.S. oil production. We went from producing 4.95 million barrels of crude per day to pumping 5.75 mbpd and French champagne started flowing. But the sad reality is that we need 19.2 mbpd every day and while 5.75 mbpd is nice, even getting up to the 9 or 10 mbpd optimists predict would be nice but still leave us quite a bit short. And those are today’s numbers, they make no accommodation for growth.
Even worse, in 2007 just before the financial meltdown, U.S. crude demand was 20,680,000 mbpd meaning that the recession has done as much to reduce demand as drill baby drill has done for supply. I dare say reduced demand will be easier to come by than increasing domestic supply.
When we think we have spare capacity we lose track of the longer-term need for alternatives and we stick with what we know. That’s one reason we don’t have a more aggressive energy and transportation policy. But when we’re feeling sanguine about energy we’re also riding an economic roller coaster up and then down because higher prices inevitably choke off growth. So we find ourselves in a position where the economy gets a little better then a bit worse with the peaks never reaching the previous troughs and the moving average is ever downward.
Alternatives do not simply mean smaller cars or windmills. If you can find a way to do business with fewer energy inputs, you could call it conservation but in reality you are developing an alternative path to profits and that’s where CRM can add so much.
First off, the huge move towards social technologies is one example of using alternatives. Social (along with analytics) enables us to communicate with and understand customers without jumping on a plane or into a car all the time for a face-to-face meeting. But there’s more. We are rapidly approaching a time when the videoconference has to replace at least some face-to-face meetings. Video conferencing can be easily built into CRM applications and as a stand-alone it is a great way to communicate with people.
Some companies are using video conferencing to knit together enterprises strung together across time zones and supply chains. Others are embedding video chat into customer service — another good practice because it produces a more intimate interaction and improves the customer experience.
Companies are looking over unified communications solutions right now but few seem to have the interest in pulling the trigger. That’s to be expected. Big companies like ATT, ShorTel, Siemens, Cisco and Microsoft are offering solutions though I don’t know any CRM vendor with an eye on the subject just yet. It’s too bad because I think unified communication is where social was about 5 years ago — on the periphery but moving inexorably into the CRM suite.
Given unified communications’ upside and relatively modest down side it’s a wonder to me why more companies — vendor and customer alike — are not swarming this solution class already. Business is a game of thrust and counter thrust and everyone must be ready for change or risk being road kill. This is our next challenge and CRM is right in the middle.
Marc Benioff’s Facebook page says that Salesforce.com is a rising leader in the effort to get carbon out of business. I didn’t know there was such a survey or report but I am glad there is.
Getting carbon out of your business processes is hugely important. While most people will view this as an anti-pollution idea and good corporate citizenship — and it is — it has an even more serious driver and consequence. As important as carbon abatement and climate change limitation is, it is secondary to the idea that the planet is running out of fossil fuels like petroleum and coal. Why secondary? Because without the affordable fuel to grow food and bring it to market (just to name one idea) you’ll die in a food riot long before the planet heats up enough to threaten your grandkids existence.
You might like to think that the earth has a limitless supply of fossil fuels but for that to be true the earth itself would need to be limitless. Of course nothing is limitless though some things are so big that they appear to be. In fact, the earth was endowed by about 2.5 trillion barrels of crude oil which we began tapping in earnest in the 1850’s at Titusvill, PA to be precise. Since then we’ve discovered all kinds of uses for petroleum as fuel and as raw material for numerous materials from rubber and plastic to paint and pharmaceuticals.
But we’re running out of the stuff. Estimates from petroleum geologists and others in the industry are that the planet now contains about 910 billion barrels of crude and it’s in harder to reach places of extreme weather or ocean depths. Oil and therefor transportation will never be as cheap again as they are today. Check that, transportation that is not tied to fossil fuel has a chance of being this cheap again but that will require a massive investment in infrastructure and I doubt anyone has the stomach for that — yet.
So that leaves it to the business community to fend for itself. Taking carbon out of your business processes is not simply good environmentalism but smart business. If you can find ways to visit customers over an IP connection or replace the visit with a video you are taking carbon out of that process. That’s where this report fits in and why it’s so important. The tech sector is about to be called on to pull our collective chestnuts out of a big fire and those who lead this process stand to make a lot of money. Google, Cisco and Salesforce are all at the top of this stack and your company ought to be trying too.