Platform is changing everything
If you think that cloud platforms are simply a nice alternative to software licenses, you should think again. It’s human nature to apply new technologies to old problems and that’s what such an approach really does. But sooner or later, and that means now in this case, the market figures out the true impact of new technology and things change in significant ways. Platform is like this. For almost 15 years we’ve seen SaaS and its variants taking up space in the market and picking off niches that were less desirable to the big license software vendors. That idea crossed the chasm just before the Great Recession, which muffled the impact for a few years but today, subscriptions are back with a vengeance. All of the shows I’ve been to lately are put on by cloud vendors and all either have platforms or want to convince you that they are well behaved citizens in almost any major platform ecosystem. So cloud computing + subscriptions = massive change, but…
Subscriptions are the tip of the iceberg
Subscriptions are the first of a long line of new business models that will disrupt business as we know it. The world doesn’t need to move completely to a subscription economy or even a majority subscription economy before subscriptions and other models will have a significant impact on the vendor customer relationship — hint, it’s already happening. I got this from my own observations but they were crystallized by Jeremy Rifkin through his book, The Zero Marginal Cost Society which I read on airplanes, mostly. Rifkin’s thesis is simple. If you can subscribe, rent, borrow or, even better share, something (possibly even make it with your handy dandy 3D printer), the marginal cost to the consumer becomes something close to zero. Ditto for home generated electricity from roof to solar panels and greatly reduced logistics needed. The implications are significant because an economy with even 20 percent of its commerce done through subscriptions, exchanges, and sharing makes it very difficult for a conventional company to show growth and profits. So what happens to Capitalism? Thomas Piketty is fascinated by…
Capital in the Twenty-first Century
Piketty’s book, which I also read on airplanes and, which at 577 pages gives you some idea of the amount of travel I have been doing, sees the twentieth century with its wars and economic disruptions as an outlier to history. Piketty thinks the average growth rate of the global economy will settle back into a long term range of 1 to 1.5 percent (from a Chinese high of up to ten percent per annum) in this century but that capital growth will maintain an average between 4 and 5 percent resulting in continued and exacerbated inequality. According to Piketty, the top percentiles in Europe own the equivalent of 6 to 7 times GDP as wealth while in the US the number is more like 5 to 6 times. Piketty’s point is that this kind of wealth accumulation could go on for a long time.
But Rifkin already sees a zero marginal cost society reaction to Piketty in which capital might become irrelevant. The two books should be read together as they form a big picture story. But all of this means that…
We will need to deal with the IoT soon
The Internet of Things (IoT) is growing out of the above-mentioned trends. Subscriptions and platforms including an Energy Internet and a Logistics Internet that together with the Communications Internet are pushing hard on the zero marginal cost accelerator, drive this. It makes sense to me that in a free market where the individual is free to pursue enlightened self-interest, that zero marginal cost models will become a norm. IoT will be the near zero cost approach to understanding customers in an attempt to eek out profit when capital becomes mostly irrelevant. If that all happens, it will be the first time the 99 percent had a revolution that didn’t involve blood shed a la French Revolution or the American one for that matter. All of this suggests that sales is no longer the effective end of the CRM stick and that…
Marketing is leading CRM
Zero marginal costs imply no margin to be dedicated to sales activities or people so it is very interesting to see the leaps that marketing automation is making. From Eloqua to Marketo to the Marketing Cloud and more, marketing, with its superior analytics (compared to sales) is sitting in the catbird seat. Sales and SFA aren’t about to go away but all of the above puts more pressure on sales people to come in from the cold and accept modern techniques without the complaints about SFA or CRM that it’s hard to use or that it detracts from selling time. Those arguments simply don’t hold water any more. I pity vendors using them to sell their favorite sales automation strategies. Interestingly, this affects how we engage because I think…
Customer engagement is wide of the mark
As customers we may not want an interrupt driven, broadcast advertising model for relating to vendors but neither do we want a neurotic relationship with any vendor that is always asking “How do you like me now?” Who are these guys, Ed Koch? In a country that highly prizes independence and a go-it-alone mentality (not saying it’s healthy, BTW) the neurotics won’t prevail. What we’ve been iterating towards all these years, and I suspect what vendors develop a rash to whenever they think about it, is an interrupt model driven by the customer. I really think that’s it. The vendors best positioned in this economy that seems to be determined to re-invent itself yet again, are the ones that can best prepare to be interrupted and not be surprised when it comes. All this suggests greater reliance on platform supported IoT and sensing customer relationships, so here’s a simple question…
Can we please be done trying to accelerate the sales process?
Enough. Done. Finito. Havlicek stole the ball. It’s all over. Railroads accelerated the sales process. So did telegraphs, telephones, automobiles, and maybe fax machines. Everything else is anti-climax. Why? If you follow the train (no pun) of the last few sentences, over the last couple of centuries we’ve been reducing the lag time between sales touches, which has arguably reduced the sales process time. Trouble is we’re now down to nearly instant communication so where do we go from here? If you’re a high-speed trader like in Michael Lewis’ new book Flash Boys you need to work in nanoseconds to affect outcomes. My bet? Not gonna happen in everyday selling in a zero marginal cost world. The key point is that people playing the customer role still make decisions the way they did before railroads. They think about the decision, weigh the pros and cons, sleep on it, or ask a trusted friend. All of this takes time. If your business really, really needs to accelerate selling then refer to the point about marketing above. The way to make it appear that selling is accelerating is to stuff more quality leads and deals into the pipeline and to use good metrics to verify that you aren’t back-sliding.
The end game (for now)
All this adds up to increased emphasis on the customer buying process but we also now have to add in the sharing, networking, community oriented processes too. I still see plenty of daylight for CRM to prosper but the relative mix is definitely skewing towards service and marketing as customers continue to pursue their idiosyncratic needs based on logic they alone fully comprehend. Meanwhile he who has the best platform, one that supports incredibly agile business processes and their constant reformation might not win but certainly will survive. That’s my view from seat 16B.
Am I kidding me? Forecasting the year ahead? Sheesh!
One of the reasons the task I set for myself is so daunting this year is that I believe we are in a massive transition state that affects the whole economy, CRM included. I think Tom Friedman got it right in version 2.0 of his “Hot, Flat, and Crowded” to wit: the root causes of the economic meltdown and the climate crisis stem from the same idea, unsustainability.
As I recently said, selling mortgages or other loans to people with none of the usual commonsense qualifications (jobs, credit history, etc.) was unsustainable and so is belching carbon into the air or for that matter drilling holes in the ground and expecting them to yield petroleum. It’s all unsustainable as in, it might work now but at some point it won’t.
Welcome to Some Point, a fast growing village east of Copenhagen.
Ironically, this should make the innovators and risk takers among us salivate at the multiple opportunities. Whatever comes from the climate talks should be good for us. Stage one will be to use less carbon and stage two will be let’s use something else or economic growth will cease. As far as I am concerned we can’t get to Stage two quick enough.
Both stages will alert us to the need for new business processes to accommodate new realities and from those new processes we will see increased demand for software. How else will we support them?
The same can be said of our long climb out of the economic crater we made selling funny paper. Software is not a silver bullet but it will have to be a big part of implementing and enforcing the new, more sustainable business rules that evolve.
Some of the candidate areas that I believe will benefit from this realignment include the following — keep in mind that this is a multi-year effort we’re talking about.
SAP spoke a lot about in-memory databases and in-memory analytics at a recent industry influencers conference in Boston. I think we will become even more dependent on analytics in the years ahead and the in-memory idea accelerates results and increases utility. A self-re-enforcing cycle may be forming here.
We have to re-think selling in this market. I believe we’ve moved into a zero-sum era in selling — people have less to spend and many choices meaning more evaluation and extended deals that start well before a sales person makes a call. Selling needs more and different tools — closely integrated with marketing — to manage the customer buying process. Those tools are in many cases out there but they still operate as point solutions. Vendors need to come together to deliver solutions to new problems.
While we’re at it, when the economy recovers, look for gas and jet fuel prices to spike above the last peaks. In that environment business travel will be reduced and we will need better and different software to support modified sales processes.
Thank goodness we have a wide array of social solutions increasingly integrated with CRM. We haven’t optimized social media in CRM yet because we’re too focused on using it as a megaphone when we need to learn to use it as a stethoscope. We will and the companies who first figure out how to do it will benefit greatly.
Service and support
Of all the areas of CRM that might benefit from the coming upheaval, I think service and support are the furthest along the path to a new paradigm. Companies like Salesforce and RightNow are leveraging social technologies and are in the process of subtly redesigning business processes. If you want to understand what CRM will look like in a few years look first at what’s going on in service and support.
We need to get our act together on this idea. Currently, anyone with SaaS, PaaS or infrastructure as a service is touting a platform or cloud computing. They are homogenizing ideas to make a buck, nothing wrong with making a buck but playing loose with definitions can impede the progress of the sector’s evolution by confusing the market. Let’s just agree that a platform has to be more than the sum of its parts. It does minimal good to offer a platform that simply moves your computer room to another state. Platform needs to mean something that makes managing the gear easier, certainly, but it also has to take new responsibility for fast deployment, customization and development of those new applications that new business processes will need.
The year ahead
I see great challenges and great opportunities in the year ahead and the opportunities extend into the indefinite future. More than at any time since the dot.com bubble our success will depend on innovation and creativity — the sustainable kind.