I had an interesting conversation with Eric Berridge, CEO of Bluewolf, last week about a new report his company sponsored, The State of Salesforce. This is the second year that the company has done this. In conjunction with MIT’s Sloan School the researchers interviewed hundreds of Salesforce’s customers to learn about their attitudes, opinions, and future demand. Parenthetically, I think this is an unusual approach—publishing, not researching—by a partner and it certainly highlights the importance that Salesforce has gained in this ever-expanding ecosystem.
I am not going to go through all of the findings but I encourage you to download the report here for more details.
Nevertheless, I do wish to elaborate on one of the more provocative findings snugly placed in the middle of the document—“Communities are the new CRM.” That’s a big statement and one that needs to have its multiple threads teased apart, and there are many. First off, is this hyperbole or can we take it with a grain of realism? I’d carefully say it’s real but it also bears watching.
According to the survey, 9 percent of the customers interviewed are already invested in Salesforce communities while 21 percent say they are planning to purchase Salesforce Communities licenses in the next year. Given the success of other community companies like GetSatisfaction and Communispace I’d have to say that this is a reasonable amount of proof; however, there is a big difference between saying you are going to do something and actually doing it, so keep watching those numbers. If next year’s report has something close to this year’s 9 percent plus 15 to 20 percent new purchases then I’d say that we’re on a hockey stick.
Next, you have to ask what this new CRM does and if it is a replacement for old CRM or just a new wrapper. Here I am less sanguine though I also recognize that things don’t evolve along nice parallel lines. Community based CRM might be really good for some things like problem triage and resolution, disseminating marketing information and opinion formation, but at some point in most businesses somebody’s got to sell something because customers won’t always simply be buyers. Therefore the functions of marketing and sales as well as support will still be needed though perhaps in different amounts and possibly through different means or channels.
One possibility that seems to be forming from this idea is that traditional selling will become a rare event replaced by rational people making purchase decisions on a continuous basis. This would make the rational market theorists happy and why not. The poster child of that movement, Eugene Fama of the University of Chicago just won the Nobel in Economics for just that kind of theorizing. Unfortunately, for fans of rational markets, Fama shared the prize with two others, one, Robert Schiller of Yale, takes a mostly distaff view of rational markets.
True, the work cited by the Nobel Prize committee focuses on markets for stocks and other financial assets, not sales of goods and services but a reasonable person would argue that rationality is rationality regardless of the market—if it really exists at all.
Personally, I have never known a sales manager who operated rationally. He or she always wanted not only all of the business on the forecast but they also wanted more than their fair share. So it’s hard for me to see how rational markets prevail in the real world and because of this, it is also hard to see life without SFA in the future world of “new” CRM.
At the same time though, community would be a logical next step in the commoditization process of front office functions. This goes all the way back to retail sales clerks actually waiting on you, which many retailers have eliminated in favor of low prices and self-service. Community brings self-service to fruition on the Internet while re-establishing, after a fashion, the face-to-face community of so many local markets that once stretched no further than your hometown and its merchants.
But perhaps I am being too literal on this point and the real information contained in the report is simply that we are in a transition state, which for my money is the only constant in life. We transitioned from spreadsheets to client-server CRM, then went to the cloud, and now, if Blue Wolf is right, it appears we are moving the whole shooting match (or most of it) to the community.
What this tells me for sure is that today, and especially tomorrow, the customer owns the customer experience AKA the vendor-customer relationship and that vendors who fail to grasp the change will someday look like dinosaurs that had just seen a bright spark of light in the sky. The world is rational most of the time, except on those special occasions when it isn’t. Then watch out.
Erik Brynjolfsson and Andrew McAfee of the MIT Center for Digital Business and the Sloan School of Management have written an interesting book for our times — our economic times — with an appealing metaphor that any technologist will appreciate. Race Against The Machine: How the Digital Revolution is Accelerating Innovation, Driving Productivity, and Irreversibly Transforming Employment and the Economy, is short and to the point and it ought to be required reading.
The subject matter is employment growth or its lack in this rather austere recovery and the effect on future employment and growth. More specifically, it is about the changing relationship between humans and their creation, the computer — the almost-thinking-machine — and how it can out-compete its masters not only in routine manufacturing tasks but, increasingly, in jobs that were once thought to be the exclusive province of human thinking.
The metaphor, from futurist Ray Kurzweil, holds the narrative together and is worth pondering before we continue. It is told in the form of a story about the invention of chess. The emperor, the story goes, was so delighted with the game that he gave its inventor a wish. The sly inventor asked for a grain of rice to be placed on one square of the chessboard two on the second and double the prior square’s total on each succeeding square.
It is the story of exponential growth. Accumulating the sums of rice on the first half of the chessboard was manageable but the second half totals were truly significant, from small beginnings arose a mountain of rice that would dwarf Mr. Everest. McAfee and Brynjolfsson apply Kurzweil’s story to another runaway exponential progression, Moore’s Law. You may not need to be reminded that Moore suggested that computing power would double and its cost halve every 12 months or so. With some fine-tuning the period was raised to 18 months and has continued for virtually the lives of all people in the technology industry today.
But that’s not the crucial part of the story or the book. The authors calculate that we have only recently (in the last few years) crossed over from the first 32 squares of the chessboard into the second half where a metaphorical Everest awaits us. The gains in the second half of the chessboard will likely come from advanced software and algorithms and not hardware per se. They point out that while computing power has increased one thousand fold on the first half of the chessboard, the power and quality of our algorithms has increased 43,000 fold.
The chessboard’s second half is already giving us systems that can diagnose better than doctors, out lawyer lawyers and, of course, kick booty in Jeopardy!. So what will happen next? McAfee and Brynjolfsson are quick to point out that the thinking that machines do is not the thinking of humans. It is often the lightening brute force effort of crunching a great deal of data to ferret out an answer. Also, training a machine to pick up a pencil from a random table top, let alone use it, is still elusive.
The major point of The Race Against the Machine, is that there really is no race, or if you think there is be prepared to lose. But this book is fundamentally hopeful because it suggests that machines are tools that ought to off load people from their rote tasks to concentrate on the creative, entrepreneurial and innovative endeavors that only humans can engage in.
What’s powerful about this argument is that it offers a prescription for a solution: Leverage the machine rather than fight it. Crunch big data in every way you can imagine, ask “What if” questions ad nauseam and above all, innovate.
As I look at CRM and the broader technology world, it seems to me that the subdivided chessboard is visible everywhere. What we once called innovation was surely innovative but it was really no more than automation of what existed before. True innovation starts on square 33 when we realize that all the automation is mostly behind us and innovation means making totally new concepts.
McAfee and Brynjolfsson speculate that we reached square 33 in the middle of the last decade. If true, one of the first true innovations we all witnessed was the social media revolution. Combined with the mobile revolution and today’s quest to master Big Data, we have a potent nucleus on which to invent new businesses, models, and processes.
And if we combine what we know about the chessboard and where we are on it with what we know about our industry we can clearly see that some vendors are simply automating on the first half of the board while others are innovating on the second half.
Let’s not fool ourselves though, simply innovating on the second half of the chessboard is no guarantee of success, just as always, bad ideas will still yield bad results. But it is also true that failing to try, to enter the second half is a sure route to oblivion. This is not simply a matter for the tech sector or even the nation. It’s a large scale economic issue that will affect our species.
Historians and others often debate when specific eras start, because they don’t often follow calendars and precise dates. Some people say that the twentieth century started in 1890 with the closing of the American frontier, for instance. With this as a guide and McAfee and Brynjolfsson’s fine and short book as context, I’d say the twenty-first century started in about 2006.
Researchers at MIT have concluded from a research study that the spread of Twitter occurred through traditional social channels. That might not seem earth shaking because, well, how else would a new social technology spread? As the report notes, “MIT researchers who studied the growth of the newly hatched Twitter from 2006 to 2009 say the site’s growth in the United States actually relied primarily on media attention and traditional social networks based on geographic proximity and socioeconomic similarity. In other words, at least during those early years, birds of a feather flocked — and tweeted — together.
But the significance of the study and its results is better summarized by lead researcher Marta González, assistant professor of civil and environmental engineering and engineering systems at MIT, who is co-author of a paper on this subject appearing this month in the journal PLoS ONE. “The big question for people in industry is ‘How do we find the right person or hub to adopt our new app so that it will go viral?’ But we found that the lone tech-savvy person can’t do it; this also requires word of mouth. The social network needs geographical proximity. … In the U.S. anyway, space and similarity matter.”
While the diffusion of innovation has been studied exhaustively for durable goods, little research into how free things like a website go viral. “Nobody has ever really looked at the diffusion among innovators of a no-risk, free or low-cost product that’s only useful if other people join you. It’s a new paradigm in economics: what to do with all these new things that are free and easy to share,” says MIT graduate student Jameson Toole, a co-author of the paper.
So maybe we can finally get a definitive answer to whether the freemium model is a good idea?