Disruptive innovations change our lives for the better. They expose long-standing needs and signal that there’s a solution at hand. Moreover, the solution involved is usually less expensive than the status quo. The lower cost aspect makes adoption inevitable and therefore disruptive.
Document management is like that. Decades ago for many enterprises the cost of capturing documents as electronic images vastly improved on the costs of managing file cabinets. Labor and printing costs still make up a significant cost for some organizations but generally, as document management becomes ubiquitous, a business saves a lot of money.
But disruptions don’t remain disruptive, they commoditize and become mainstream and on the way they become less costly and even more ubiquitous than their inventors had expected. Really successful disruptions follow this path to ubiquity without skipping a beat but other times vendors try too hard to extract value from their old disruptions. This still works when customers are deeply invested or it’s hard to convert to the competition. The term “walled garden” was coined to describe such situations.
In a walled garden you might expect a vendor to tightly monitor license use and to oppose commodity licensing options like site or corporate licenses. Some vendors have gone so far as to audit use within a client enterprise and to charge back for uses assumed but not necessarily verified.
These policies might work when a disruption is fresh and a vendor wants to penetrate an organization. But later both the customer and the vendor have an interest in making the solution ubiquitous because all or nearly all people in an organization can benefit from the solution. Those who can’t benefit won’t use the solution and for them a full license doesn’t make a lot of sense.
Walled gardens can fail, especially when conversion isn’t as hard as the disruptive vendor might think. Further, as time goes on the principal attribute that a vendor displays has much less to do with wiz-bang technology because the competition has caught up. The reason dominant vendors remain so is because they’ve managed to engage with customers and engagement drives loyalty.
In my experience, which includes writing books on the subject, keeping customers for the long term begins with engaging them on all levels with your whole product, a term from a few decades ago that’s still valuable. Whole product includes the core product but also all of the policies, procedures, service interactions and more that tell customers you care about their success.
In “Stop Trying to Delight Your Customers” a 2010 article from the Harvard Business Review the authors say, “…loyalty has a lot more to do with how well companies deliver on their basic, even plain-vanilla promises than on how dazzling the service experience might be.”
The essence of that delivery is simplicity, which includes the user experience as well as the experience with the vendor’s policies and procedures. But in multiple situations we see the opposite of simplicity today, which some customers view as hostility. The best example of this is the software audit.
Whether it’s database companies or document management companies, auditing customer use of a product, along with hefty chargebacks is becoming a bone of contention between customers and vendors. No doubt vendors think audits are necessary but as a customer engagement strategy it lacks a lot.
My two cents
At some point in the commoditization process the driving force of the vendor-customer relationship transitions from the awesomeness of a product to how easy a vendor is to work with and that’s the whole product wrapped up with a bow. The user experience, the buyer’s experience, technical features and pricing all have a role to play in the whole product description. Vendors who forget this may find that after many years customer attrition becomes a problem and at that point it might be too late.
The IT industry has been playing whack-a-mole since its inception. We’ve been applying sophisticated technology to our biggest business problems not once but repeatedly as each new generation of technology offers and delivers order of magnitude improvements to our business processes. In some cases we’re on our fourth or fifth iteration of solutions.
For instance, about 25 years ago most business processes were manual. People did things for customers and often this involved paper documents. Document management systems came along at the end of the last century to modernize documents by storing them in digital format for quick retrieval. The improvements saved businesses millions of dollars in overhead and the problem was deemed solved.
However, digitizing a document (a very good idea) is not the same as automating the process that the document participates in. For many businesses modern document storage and retrieval supports manual business processes. These businesses still spend a lot on printing documents and manually or semi-manually routing them around the building or throughout the customer base. Today businesses looking to tackle business process automation are rightly investigating ways to keep documents from being printed even as they circulate.
That’s a different problem from the earlier one defined by storage. It wasn’t even visible when document digitization was thought to be the key need. If you manage business processes that still use lots of paper and printing, welcome to your personal edition of whack-a-mole.
Today’s edition of the problem comes with an especially menacing complication. Many CIO’s would love the chance to streamline their document dependent processes and the ROI for most of them is readily apparent in avoiding the costs of paper, printing, and better customer engagement. But with upwards of 80 percent of their budgets on average dedicated to keeping the lights on, it’s hard to grab even the low hanging fruit if it means a purchase.
You can find the lowest of the low hanging fruit not in some exotic business processes but in the every day customer administration that organizations spend so much time in. From professional services to healthcare to finance, opportunity is easy to spot in any business that produces a custom or semi-custom product or service directly to customers. Advancing regulation also plays a role increasing the amount of paper documents involved even in routine processes. So the problem is not getting better and whack-a-mole is really just a feeble attempt to keep it from getting worse.
The solution to this dilemma may be as simple as changing software vendors. The original digital document vendors may not have an incentive to change their business models or their products to address the new reality. They’ve defined solutions to “document management problems” but in an era that needs business process solutions, their models and technologies may be a bad fit.
If any of this feels familiar there’s a lot you can do. First look for new solutions that avoid putting documents back on paper, for example, to capture a signature. Signature capture is one of the easiest processes to digitize with modern software. Also, consider what’s in your documents. Are people still reading them on multiple occasions to understand what promises and commitments your company made that need to be implemented? Or are there customer commitments buried in physical documents that indicate future purchases? Paying people to read documents is expensive and unnecessary.
Digital documents, unlike those on paper, can feed the data they contain to analytics engines. The resulting insights might drive an ROI many times greater than the cost savings from simply automating the storage and retrieval of documents.
My two cents
As good as document digitization solutions were twenty years ago, the business need has changed and many vintage systems show their age today. Modernizing document based business processes can, in many cases, offer attractive ROIs that even budget-constrained organizations will benefit from. The key to all of this might be in how we frame the business problem. Is it the same document problem your business fixed decades ago or did time and circumstance change the need to something greater? A new generation of solutions based on more modern demands can provide order of magnitude improvements. The first step may be to evaluate the problem with fresh eyes.
This post is part of an occasional series on the AppExchange as Salesforce.com celebrates the seventh anniversary of its launch. The series will focus on some of the most interesting AppExchange applications of the last year.
The arc of nCino’s brief existence provides a good description of the power of application development on the Force.com platform. nCino (“Encino” roughly translates from Spanish as “live oak”), supports commercial loan origination, including CRM functionality to manage the sales process and document management to handle all of the details. The product was originally developed within a conventional bank, Live Oak Bank in Wilmington, NC.
To say that Live Oak Bank is conventional is not to imply that it is ordinary. It is the third largest originator of business loans in the U.S. despite being significantly smaller than its competitors. With the banking industry in a slump Live Oak could not compete as a low cost provider because borrowing activity was slack and interest rates were at low points. So the bank decided to innovate and to compete on business execution.
Anyone who has paid attention to banking issues during the recession has probably realized that banks had not been keeping up with managing documentation for example, in home mortgages. But the same has been true of documentation management in commercial loans and it was the content management part of the process that the bank decided to attend to first.
Live Oak used Force.com to build a commercial loan origination system that could take better care of loan documentation and better attend to the customer relationship issues that attend any loan sale. But the story doesn’t stop there.
When Live Oak showed off its new system at Dreamforce 2011 the bank discovered significant demand from other banks at the show. But not wanting to go into the software business, Live Oak spun off its software to a new company —nCino that is the subject of this piece.
By taking care of all loan origination documents within its Salesforce CRM instance, nCino has developed an origination process that is streamlined and effective. The company’s initial data shows that it can cut twenty five percent of the loan origination cycle time and put money into the hands of the business borrower faster than its competition thus providing a unique form of competitive differentiation.
But operational efficiencies are not the only thing that many bankers are seeking out these days. The financial crisis exposed the document handling capabilities of many banks as unreliable costing many of them lost time, revenues and legal fees. Industry data shows that as much as thirty percent of loan documents are inaccurate. These deficiencies have consequently driven many banks into the market for better document handling software and loan origination systems.
According to Pierre Naudé CEO of the company, Force.com has enabled his team of 27 people to innovate much faster than other technologies. After about a year, the company has nine installed customers with five more in process and several more in the pipeline. The AppExchange continues to be a good source of leads, which might surprise some people because nCino is an enterprise solution. But Beagle research shows that enterprises shop on the AppExchange just as smaller companies do.
Perhaps another surprise for some people familiar with banking is the nature of the solution. nCino is a cloud offering like all Salesforce solutions and the banking industry, according to Naudé has accepted it without fanfare. Naudé says it is because “many banks and credit unions have been using hosted solutions for some time, and there’s no difference between running a hosted solution in some remote data center and running a SaaS solution.” It helps that Salesforce already has all of the certifications that bankers look for including SOC Types 1, 2, and 3 and that it is PCI (private card issuer) compliant. nCino relies on these certifications as cornerstones of its business and they simply come along with the Salesforce service.
nCino was started with a loan from Live Oak Bank and it has since raised an A round of funding worth $7.5 million, which Naudé says was oversubscribed. The company’s roadmap includes delivering a mortgage origination system and retail loan facility later this year but the company does not release information about its roadmap beyond that.
nCino is a great story about what’s possible given the power of the Force.com platform and the AppExchange. More than this it provides a useful model for the future of enterprise software.