Peak Oil

  • August 18, 2009
  • There are numerous signs that the economy is strengthening and that the recession may be ending.  The markets are doing better, failed banks are no longer failing and some have even paid back the funds they borrowed from the federal government when they were under water.  Unemployment is still stubbornly high but it is trending down and as a lagging indicator of recovery this indicator is behaving as one might expect.  If all this is true and not some mirage then the year-end and the year ahead could hold some upside surprises and that will be a welcome change.

    For some time now I have been thinking about the recovery — what it might look like and what new ideas might come through the wringer of recession to help drive it.  In the recession that followed the dot com bust some powerful ideas emerged that subsequently shaped the business world.  They included on-demand computing and Web meetings.

    Prior to the recession on-demand computing was something that a few hardy souls tried because they were fed up with the high cost of software and implementation.  On-demand technology proved to be an important way to tame those costs and in the recovery users at every level discovered its benefits.

    The same is largely true for Web meetings.  In my experience, prior to the recession vendors engaged in elaborate press and analyst tours to conduct face-to-face meetings that involved weeks on the road.  I would routinely take two or three briefings in my office daily but all that has largely been replaced by Web briefings.  Vendors still go on the road but much less frequently and I wear fewer professionally laundered shirts as a result.  That’s the funny thing about innovation, you never know what all of the downstream effects will be — and they can be surprising.

    So, coming out of this recession I have to ask what technologies or business ideas will emerge and I have my eye on two.  The first is Web based conferences.  Like a Web meeting a Web conference can save a ton of money on travel costs as well as wear and tear on the attendees.  The technology may still have some kinks to work out but I suspect that as vendors and other organizations look for ways to improve communications the demand for Web conferences will grow and the solutions will become more robust.

    The second idea that I see percolating is the enhanced use of video in marketing and sales.  Video has the ability to engage customers in ways that product brochures and white papers can’t.  And with tiny URLs or “turls” they can become powerful viral tools.  The technology for creating, editing and distributing video with decent quality is available on the desktop at reasonable cost or even free.

    The key to high volume corporate video will be achieving the right production values.  No company that wants to develop video will be eager to shoulder the high costs of hiring actors, voice talent, camera operators, editors and all the rest.  For video to take off we will need to develop skills at documentary filmmaking.  That’s not as hard as it sounds and Ken Burns, the producer of such classics as The Civil War, Jazz and Baseball, has developed a style that can be easily imitated.  I expect that given the constraints of video development in a marketing department, Burns will become even more of a recognized name.

    But there’s another reason to consider these and probably other innovations coming out of the recession.  These new ideas also have the advantage of helping to save a great deal of energy, especially energy involved in transportation.  Just before the economy went into the tank last year, we got a glimpse of the energy future with gasoline exceeding four dollars per gallon.

    That wasn’t a fluke, it is likely to be a sign of the times for the foreseeable future because global demand for fuel is rising at a two percent annual rate while supply is remaining constant or falling slightly.  So we are faced with an interesting problem.  Fuels are becoming increasingly expensive and the need for Green approaches to modern life are apparent and all around us.  It would make a great deal of sense then for business to engage CRM solutions that reduce the impact of escalating energy costs.  Web conferences do that and video — done well — may be able to help.

    So for all those reasons I can easily see the CRM suite expanding again to include these technologies.  Interestingly, even though Green approaches may be desirable for many ecological reasons, it is still economics acting as the driving force for change.

    Published: 15 years ago

    Rolling sustainability into business development isn’t just a marketing ploy.  In the CRM arena it’s an effective way to communicate with more customers and prospects at a lower cost.

    Last summer, when a gallon of regular peaked above four dollars per gallon, Beagle Research published a white paper on sustainability and CRM.  I am happy to report that there are many signs in CRM and elsewhere of industries taking the first steps toward more sustainable business.

    We began to see changes in the ways we organize our society and work when gas hit four dollars — Americans drove more than a hundred billion miles less in the year ending in November 30, 2008, for example.  But, too often, reducing travel frequently means falling economic activity.  Airlines were nearly crippled when businesses began curtailing travel.  An economic recovery and unrestrained demand will likely mean that the price of oil, and the gasoline and jet fuel from which they are derived, will again rise — beyond four dollars.  With global demand rising and supply peaking it’s hard to see otherwise.

    All this went into our thinking last year and one of our conclusions was that front-office business processes needed to become more energy efficient.  Face-to-face sales calls would be curtailed and replaced by greater reliance on Web-meetings and Web-conferences, and enhanced reliance on in-house produced video.

    Our ability to make documentary-style (Ken Burns) videos using desktop technology has accelerated very quickly in the past year or two.  While there is no set standard for these clips — and there shouldn’t be — there are numerous examples of CRM-oriented videos coming into the market.  We believe that video production needs to reach down to the sales and marketing departments in the same way that desktop publishing has. Why?

    Giving marketing people the ability to produce professional looking video will not replace the need for travel or product slicks, brochures or even white papers.  But video will begin to provide valuable content in a format that is easy to absorb supplementing sales by conventional means.

    There are numerous examples of CRM vendors already turning to video as another way to get a message across.  MicrosoftSAP and Oracle all have produced video content that touts their products.  It’s very effective, especially if it is kept short and moving.  A short video might not replace a brochure or a white paper with all the additional detail that only print can provide.  But video can deliver a message quicker and more clearly when an impression is what’s needed.

    Video can exist independently on the Web and it is a medium better suited to viral transmission than print.  How many times each day or week do we get some clip passed along to us?  The number might vary, but our experience says it’s increasing.  And what are you more likely to do, read a white paper or watch a video?

    The next step is for CRM customers — in all industries — to become fluent in desktop video development, a big step for sure.  We’ve grown accustomed to building and sitting through PowerPoint presentations, most of which are not that good according to Garr Reynolds.  In his book, “Presentationzen,” Reynolds writes about what’s wrong with what used to be called slide shows — too many bullet points, too few pictures to engage the mind, droning voices, and dark rooms.  Worst of all, Reynolds says, is when someone sends the slides or a printout expecting you to derive meaning from all those cryptic bullets.

    Better to build a documentary video out of stock photos and voice animation, and then stick it on your Web site or on a public sharing site like YouTube so that the video can sell for you when customers are receptive.  A simple condensed URL or “turl” makes a video viral in ways that slide shows will never be.

    I work on a Mac and all of the tools I need are on my computer.  I have not checked Windows lately, but perhaps the latest version has similar tools, if not, they are available and inexpensive for Windows users.

    Some might object to widespread video use because letting salespeople develop video can take away too much selling time.  I agree.  Video should be the province of the marketing team and it’s a great way for them to reclaim responsibility for message creation and maintenance.  When salespeople got the ability to make slides, it inevitably led to message degradation — time for marketing to reassert itself.

    Out of the last recession we got on-demand computing and Web meetings, each of which became great successes because they save their users a lot of money without degrading their ability to do business.  From this recession Web conferences and in-house video are showing good signs of life.  In a recovery, the high cost of travel will demand alternative solutions.  Video is the next marketing frontier, a natural content carrier for ideas that have to stand on their own.  Early adopters are already engaged; it’s time to familiarize yourself.

    Published: 15 years ago

    Peak Oil is a term that resonates very little with about 95% of the population.  I discovered this by asking a lot of people and getting blank stares.  A few hardy souls ventured a guess and those guesses were not far from reality.  If you take those words to a search engine you will be surprised by the number of hits you get.  I got nearly 5 million hits the first time I searched on the term. 

    The on-line community is awash in blogs and publications from experts in the oil industry, economists, investment bankers, geologists, scientists and many others.  Nonetheless, the term has not penetrated the mainstream yet beyond a few ads on TV that talk about the expense of imported oil.

    If you are part of the 95%, Peak Oil simply refers to the fact that the flow rate of the world’s oil fields is at or near its maximum.  In other words, there might be plenty of oil “down there” but bringing it to the surface for processing and use is limited by geology and physics (in some cases, politics too).  More importantly, rising demand and decades of poor exploration results indicate that demand will be outstripping supply in the not too distant future.

    The experience of the oil industry is that once a peak occurs, the next move is downward and many of the same experts are predicting a decline of available oil at a rate of as much as 4% per year.  Add to that demand increases of, say, 2% worldwide and you can see that oil availability will be a major challenge in the years ahead.

    The smart money knows this already.  That’s why people like Warren Buffet and Bill Gates are buying lots of shares of unglamorous low-tech railroads.  It’s also why T. Boone Pickens is such an advocate of wind power and compressed natural gas and Shai Agassi, former SAP executive, started a company dedicated to making electric cars a reality.

    To be sure, there is no “energy crisis” per se but there is a tightening in the liquid fuels market – the fact that gas prices came down about half a dollar over the summer provides no real comfort if you consider that prices were half that — well under two dollars — less than eight years ago.  Since our cars, trucks, aircraft, busses and trains run on liquid fuels, it’s worth considering what this all might mean to our economy.  In pure economic terms, I think this would qualify as a disruption in the making.  It’s one of those moments when everything changes and what worked yesterday might not work so well going forward.

    As I look at this disruptive moment, my natural reaction is to ask what effect such a disruption might have on business and what CRM might be able to offer in the way of solutions.  In performing my analysis, it became clear to me that there are numerous front office business processes that are highly dependent on energy especially for travel. 

    Sales calls are a primary example but they are not alone, there are energy considerations in the call center and marketing departments can do a lot to help take some of the energy footprint out of front office business processes.  Driving or flying to see customers are activities that are highly dependent on energy use and in an environment where the price of fuel is high and volatile, the cost of selling will become more unpredictable and so will profits. 

    We have just completed a new white paper, “CRM & Sustainability”, which examines the challenges that this disruptive moment called Peak Oil is about to inflict onthe global economy.  The paper examines ten areas in front office business processes where innovation and entrepreneurship can be applied to develop solutions that both reduce the energy input to front office business processes and improve customer intimacy and operational efficiency.

    I do not expect that our list of ten ideas is complete, there must be many more ideas out there too but it’s a start.  Speaking of starting, some of the ideas in the paper reflect concepts already embodied in off-the-shelf, or off-the-Internet, products and services.  Other ideas will need to be built.  The point of the paper is not to prescribe specific solutions and I shy away from naming specific companies.  Instead, I want to spark conversations about the business opportunities inherent in the disruption that will be caused as Peak Oil accelerates. 

    I also know that software does not get built over night and while the energy situation today might cause many people to feel sanguine, I know the smart money is always thinking about the future.  It’s time for the CRM industry to think more like Bill Gates and Warren Buffet.

    Published: 15 years ago