Show season changes the CRM market, it always does. One day you’re in the vanilla application software space and a week later you understand the need to incorporate social media, or analytics or machine learning or you see a need for enhanced integration and development through platform services. It goes on.
Today, in the wake of Oracle, Salesforce, Microsoft, and many other companies’ trade shows, we’re again taking a look at the available suites. But this time, we need to think less about what’s been added and how well integrated the components are.
With Oracle now a year into rolling out its cloud strategy, we can’t say we’re in cloud computing’s early days any more. We’re in a race to computing as a ubiquitous utility like electricity, water and natural gas.
Oracle was the last cloud holdout, the last company that led with its legacy on-premise products. Today they’ve reinvented themselves to offer infrastructure, platform and applications or any combination as services. They might talk a good game about supporting legacy customers forever, and that will be necessary, but they’d like nothing better than to convert the legacy base to cloud infrastructure. And make no mistake about it new cloud based apps is the eventual goal. Much the same is true of Microsoft whose end user products like Office are now being delivered by subscription even if some of the software still resides on the desktop.
Salesforce was, of course, born in the cloud and it hasn’t suffered through a transition though for almost 20 years it has been undeniably causing one. The disruption impacted everyone else but the next disruption, or whatever we’ll call it, is affecting even Salesforce. With typical poise Salesforce is taking it all in stride and is even taking a leadership position.
The disruption turns form purely delivering technology to focusing on how it is used. The focus is very important to Salesforce and all the others because it will have a direct impact on how much of its services (we used to call it software but this is now) get bought and deployed.
So we see increasing emphasis on learning how to develop apps and administer them even to the point of opening up the training platform, Trailhead, to enable partners to develop training programs for their custom apps.
In the background there’s also an effort to standardize on processes that deserves attention. Back in the day, a process was carved in stone. Your organization used a 7 step sales process or maybe a 5 step one. Introducing a 7-step process into a 5-step organization was enough to set off a riot. It was something you did only very carefully if at all. In that era there were sales methodology companies (still are) and there were software companies and each would tell you their products were agnostic. They were too, with a little coding.
But today it’s different. The introduction of AI and machine learning has made both methods and applications secondary. Yes they’re still important but, no, they don’t rule the roost. Everywhere sales people seem to be sidestepping the argument about which method is better in favor of adopting an attitude of doing what the AI system suggests is the next thing needed to advance a deal. As it should be.
Platform based CRM with robust partner communities and their apps have brought us to the point of fully integrated and automated business processes. Customization has never been easier thanks to the platform too. The next step in our journey will be inventing new business processes that derive from our need for, and attempt to be, more agile, to flexibly approach new opportunities.
That’s what has been most interesting to me about show season. Each vendor has, in it’s own way, made a tacit nod to the primacy of data and analytics for automating processes. In that event, they’ve also begun closing the door on business processes that momentarily pop out of the automation sluice and into a spreadsheet or other manual thinking.
The change isn’t only recognizable in sales though selling is a big beneficiary with solutions that include SFA, CPQ, admin functions, AI, ML, compensation management and gobs of graphically rich reporting. Marketing is a rich area with its newfound abilities to identify, target, hand off, score, and journey map. And service has its own rich tool set most significantly analytics married to multi-channel abilities to take customers from beginning to end of a support journey without necessarily bringing in a human.
In all of this businesses are freeing up employee time for higher-level tasks that add value to customer experiences well beyond getting a deal or a right answer. This is where the customer facing jobs of the future will come from. They will demand more and different people skills as well as technical mastery.
That’s why this show season has been a turning point. I think it will be looked back on as the time we began a more disciplined approach to customers and employees as people who interact with technology, not just as various flavors of technologists.
It’s mud season here in New England that time of year when everything merges into an amorphous mess. The grey sky merges with a grey landscape made into slop by continual rains and dirty grey melting snow. It’s hard to tell where one thing ends and another begins but eventually the sun comes out and dries everything, the sky becomes distinct from the horizon, plants bloom from the firming ground and order is restored. What better time for Amazon and Salesforce to announce another partnership?
I have to say I read the press release and articles from Tech Crunch and ZDnet several times in order to separate things because I was confused. The announcement from Salesforce and Amazon today said that Amazon Connect and Salesforce Einstein would work together to provide an intelligent service offering to Amazon’s service customers. Ok, I get it, but why?
Amazon has been climbing the value chain in cloud computing for some time. Initially its AWS service provided infrastructure as a service that enabled legions of businesses to ditch the computer room and run their operations in the cloud. Additionally, the company ate its own dog food by building a customer service cloud offering that not only supports its internal needs but increasingly supports third party customers, the most recognizable among them include, GE Appliances, communications company Bandwidth, and AnswerConnect.
Amazon has other CRM components as well and relationships with Zoho, Zendesk, Freshdesk, and others. Today’s announcement pairs Salesforce’s Einstein AI tool with AWS Connect to produce a savvier version of Connect. There are and will be more integrations of multiple solutions across product lines, for example both Salesforce and Amazon have IoT offerings and we can expect more news on them in the near future, I think. But there’s a part that I still don’t get, a part that makes me think of mud season.
Historically, Amazon has pushed into new industries and markets with economies of scale, its ability to deliver something at lower cost than others in the space and consolidate market power. AWS was and is a great case in point. Unfortunately, the strategy is also one of accelerating commoditization in which only a few survive and the trend is to make a living on razor thin margins and, once the market is consolidated, reduce innovation. I understand commoditization, it’s a facet of capitalism but innovation has to have a place too.
That’s why I see mud everywhere. Can a company that started as a retailer spin off so many tangential businesses and continue to dominate all of them? Can CRM dissolve into a Salesforce-Oracle-Microsoft-SAP-Zoho and now Amazon soup of similar offerings and still offer differentiation?
My cautious answer is yes and not because of anything that Amazon is doing but because Salesforce is in the mix. Salesforce has a smart and notoriously short attention span with which it innovates a new idea and just as the rest of the market picks up on it, moves on to another object that it shines up and spotlights. Salesforce did this with social, mobile, IoT, analytics, and now its artificial intelligence offering, Einstein. With this strategy Einstein could end up powering a lot of customer facing solutions in service, sales and marketing.
This approach seems to be what Salesforce needs right now. As it is approaching $10 billion in revenues, it is, I think, also reaching a ceiling on what it can sell by itself and truth be told, it has been in this spot for some time. Selling through partners does two important things. It greatly enlarges the number and quality of its revenue streams but it also leaves Salesforce more or less free to do what it does best.
Salesforce has rapidly become the innovation engine of the industry. Its ideas drive markets and its technology is in many cases first among equals (check out the Magic Quadrants, I am not making this up). As long as it can maintain this position as the high value innovator through core technologies like its Salesforce1 Platform, Salesforce can be the exact opposite of Amazon. Where Amazon goes for the low cost commodity position, Salesforce captures the high-margin ground of innovation.
Is that a sustainable business model? Ask Thomas Edison.
Over the summer multiple events have pushed me to the conclusion that CRM and government are natural complements and that it’s just a matter of time before they meet. It would represent a huge opportunity for the industry and my full thoughts are available in this white paper.
The common denominator is people. Whether we’re dealing with government or with business people want and expect individualized attention to their needs and importantly, they socialize their ideas about products, services, and government in much the same way.
Business quickly adopted CRM technologies over the last two decades while government has been steadfast in its outdated approaches. The differences in adoption rates between business and government can be traced to some of the disquiet we see in the political arena for example, the populism manifest in the Brexit vote and in the American presidential cycle.
Where the approaches are similar
The government approach was also the business approach until social media and CRM emerged as potent business forces in the last decade. Communication was through broadcast media usually in print media, and it was also one way. Capturing the voice of the customer/constituent was not often attempted partly because it was slow and expensive. If you wanted more you had to deal with a representative that didn’t have your best interests in mind. A visit to your local Registry of Motor Vehicles in the U.S. is usually all the proof one needs.
But when social media came along, we all discovered how quickly an individual could influence a large audience. Some businesses got burned by the criticism and adopted CRM and its associated tools as fast as they could but government didn’t. Perhaps the relative scarcity of elections gave politicos the mistaken belief that there would always be time to fix something that broke. The recent Brexit vote in the UK should disabuse all of us of that belief.
How they differ
Business no longer waits for things to break and a quality regime based on the work of W. Edwards Demming has been a strong influence. Today we build quality into the manufacturing process eliminating defects before they occur or engineering them away. We build intuitiveness and ease of use into everything because we know that if we don’t a competitor will. This is where business and government diverge. There is often no alternative to your local, state, or national government though recent events show that the public is growing increasingly comfortable with “none of the above” as an option and that’s turning normal government functions into mush.
Now, here’s the rub: CRM can’t help all of this, at least not immediately. If we’ve learned anything in the CRM age it is that we need to always be testing our assumptions, gathering data, and analyzing it to figure out next best actions and to discover new opportunities to serve. CRM does all of this very well, but its effect is not immediate. The trust involved in successful CRM takes much iteration to bear fruit.
This is exactly why its time to apply what we know about CRM and customers to government and constituents. The one-way communication model between government and the people that was successful throughout the 20th century has fractured. People have been trained to expect nearly immediate response delivered to their personal devices on almost any subject. Print and broadcast media can’t do this partly because their business models place gates between people and information.
Additionally, the journalism business model, which relies on advertising, has taken a hit from the rise of the Internet and the media now chases the controversy around a story rather than the story itself in order to attract the eyeballs that advertisers crave. Chasing controversy is less costly for the news gatherer but it often leaves consumers poorly informed or, even worse, informed about only one side of an issue. CRM would help to partially disintermediate news media from government further democratizing democracy in the process.
How to pay for CRM in government is a tricky question. Many parties inside of government appreciate the status quo with its rules and procedures that make getting even simple things done quickly difficult. They’d have to be convinced of CRM’s appropriateness, seeing it as a benefit rather than a threat.
If the model for CRM adoption in business is any guide, at some point the benefits will outweigh the detriments. Establishing the balance between enough and too little CRM is likely to be done through trial and error. At some point breakthrough success will happen in one, or more likely, several locations thus creating the momentum for rapid adoption. Until then we continue living in a world driven by technology and social media but mediated by twentieth century communications. It is an unstable situation and it cannot last.
Tien Tzuo, CEO of Zuora, wrote a post for re/code that was so good it deserves broader circulation. While the focus is on customer relationships in subscription businesses, it’s also about loyalty and having just written a book about customer loyalty (available next month), it resonated with me.
My research is full of old style approaches to customer loyalty that, shall we say, aren’t really about loyalty so much as they are about customer coercion. You can coerce a customer into being loyal, what I refer to as performing loyal behaviors, but they don’t exhibit true loyalty. Customer loyalty should be about inspiring customers to defend your brands, to preferentially seek out your products, and to buy them even when they aren’t discounted, have a coupon attached, or involve the award of so-called loyalty points. My research found that customers who behave loyally because of such inducements are easily attracted by the next enticing offer so their loyalty is often more closely associated with the discount or reward than with the brand.
A great example that Tzuo explores, and that I had overlooked, is called the “negative option” an arrangement that keeps you exhibiting loyal behavior as long as you fail to cancel a service or promotion. The negative option is something of a relic but you can still see it operating in the market today. Tzuo uses Columbia House, the now bankrupt vendor of music and AOL as examples and they’re really good ones.
If you are too young to remember Columbia House, then good for you. The basic offer was some large number records, tapes or CD’s for a penny as long as you agreed to be a member and receive a monthly shipment until you’d bought an equal number of recordings at full price. After that point you could cancel the service but human inertia often prevented or delayed that event. As a result people appeared to be loyal but weren’t. They were trapped.
Even today according to Tzuo, AOL has 2.1 million subscribers to its $20 per month dial-up service. As he says, “These AOL customers surely aren’t shelling out for the ‘convenience’ of their painfully slow dial-up service.” He’s right, too, having a dial-up account today is likely more habit for most people, though it’s also possible a few still don’t have cable where they live.
The negative option lives on in the subscription industry in the form of automatic renewals from month to month as long as a credit card stays active. In these circumstances, customers who appear loyal to the negative option might not be using or otherwise engaging with the vendor despite what appears to be loyal behavior. Businesses in this situation have a ticking bomb on their balance sheets for while the revenue is good, it can disappear at any time and at some point, the negative option practice will generate a good deal of bad will toward the brand.
Companies like Totango, Gainsight, and even Zuora use their analytics and large customer datasets to understand customer behavior and to spot true loyalty as well as the warning signs of its opposite. Vendors are becoming more aware of the problem of the negative option and more generally, customer behaviors that appear loyal but which might represent inertia or laziness so that they can head off unpleasant surprises like a spontaneous social media campaign that damages a brand.
The rise of the subscription economy and its culture has placed a bright spotlight on issues of customer retention, engagement, and loyalty. The days when you could sell a product set for a lot of money and move on to the next prospect are ending and being replaced by various forms of subscription and the requirement for greater customer intimacy. But the negative option is from another time and ought to seem out of place today as we focus on retention, subscriptions, and customer intimacy regardless of the markets we serve.
What was most interesting to me from researching my book was that customers aren’t necessarily interested in amazing experiences that cause delight. Delight is another fad that’s come and gone or should at least be on the way out. Very often customers want and expect simple basic competency and effectiveness so that they can get on with everything else they have to do. This in itself is great insight because it shows that inspiring customer loyalty is within anyone’s grasp if we simply avoid creating a circus and focus on what matters most to customers.