CRM and the middle-aged simplifier
Harvard Business Publishing posted a very provocative blog entry by marketing guru John Quelch recently, you can read the whole thing here.
Quelch’s thesis is that the recession now upon us will accelerate consumer downsizing. That should raise alarms for vendors and for CRM vendors in particular as we continue to grapple with questions about what CRM ought to be in the future.
Perhaps it is only coincidental that the 77 million baby boomers are reaching points in their lives when simplification makes a great deal of sense and the recession will only serve as the tipping point. But the fact remains that the generation that reprised Thorsten Veblen’s ideas about conspicuous display of consumption is at a point in life when more “stuff” is not as valuable as more “experiences.”
Thus, Quelch tells us to watch for simplification in all things, for people of a certain age, who no longer need the big house (the kids have flown the coop) or the big SUV (not very green). Even the gourmet kitchen, once an everyday necessity, now stands unused many nights as people with discretionary cash opt for the experience of dining at the new Pakistani place down town.
Vendors from home decorators, appliance makers and even grocers ought to be concerned that as many Americans use the recession as a cause for simplification their businesses will be hurt.
Some vendors will do just fine according to Quelch. The aforementioned Pakistani restaurant might be just fine (provided the whole service experience is top notch) as will be any business that can package itself as a new experience to be tried and maybe latched onto. Perhaps that includes all forms of travel including ecotourism, cruises to Alaskan fjords or renting a place on the beach for a week.
Believe it or not, there’s nothing radical in all this, in other cultures simplification of one’s life and lifestyle has been seen as a net positive for a long time—the Scandinavians and Japanese come to mind here. But when Americans do it, especially a generation of 77 million of us, the numbers are big enough to have multiple ripple effects.
As the middle-aged simplifier (Quelch’s term) replaces the soccer mom Joe Pine and Jim Gilmore, authors of “The Experience Economy” and lately, “Authenticity: What Customers Really Want” stand to look like the geniuses they are, but to more people. CRM take note, the simplifier is here and she wants more experiences and less clutter in her life. What have you got to say about it?
Strategy, forecasting and these times
Last week NetSuite held a user group meeting in Boston for OpenAir, a company that they had bought earlier this year. OpenAir, if you don’t know, provides an application for managing professional services engagements. When integrated with NetSuite’s front and back office applications, the combination provides a lot of functionality for a professional services group. I was invited to attend CEO Zach Nelson’s keynote in the afternoon but I found out later that there was another speech that I would have enjoyed as well.
Former Harvard Business School professor, David Maister, gave a talk that was right down the middle of the plate for the professional services pros that peppered the audience. Maister writes books and does high-powered consulting for a living these days and judging by the steady stream of books and engagements, I’d say he’s pretty good at it.
Maister was there to talk about his latest book, a semi-autobiographical read with an unusual title: “Strategy and the Fat Smoker” which hooks you while the logical side of your brain digests the subtitle, “Doing what’s obvious but not easy”. Boy, I thought to myself, this has CRM written all over it. So, although I missed the talk I bought the book and I think my first impression was right.
Maister’s premise is a simple one and he bluntly states it early on writing, “The necessary outcome of strategic planning is not analytical insight but resolve” (his italics). Everybody who has ever been on a diet, tried to quit smoking, drinking or worse has come up against this truth. We know it’s bad for us but we keep at it until we can’t anymore because changing is too hard and fraught with backsliding.
Sound familiar? It sounds to me like what happens in the upper end of the “S” curve. If you’ve read Clayton Christensen’s books starting with “The Innovator’s Dilemma” you know that smart people who start and run successful companies often tend to stay too long at the same party. Rather than re-innovating, they stay with the same old formula even as the market gives off plenty of signs that the old paradigm is no longer working. While Christensen’s books give us great insight into what happens, Maister may be telling us why.
Perhaps this explains the value of disruptive innovation. Innovation is hard and the people who do it are frequently, but not always, unaware of how hard it is and many have said that if they knew they might not have been so eager to begin. Finally, it also explains why so many companies and the people who run them fail to re-innovate, it’s easier to stay with what you know works, or what once worked.
The more I think about it the more I see it all playing out in CRM and specifically in SFA. I have not written much lately about SFA because it was beginning to look rather mature with innovation happening around the margins with CRM 2.0. Lately, however, I have also conducted some research into selling and the tools that sales people use. I was surprised to learn from my study that more than half of the forecasts submitted by sales people are still delivered in spreadsheets.
You might not think this is a big deal but to me it is. In spite of all the investment in SFA, CRM and computing technology that companies have made over the last few decades, spreadsheets are still dominant. In itself spreadsheet forecasting is not a big deal until you look at some other data from the same survey. That data says that the majority of forecasts are so inaccurate you can’t use them. For almost half (44%) you’d be better off using a dart board. Only seven percent of sales people say that their forecasts are ninety percent accurate and ninety percent is something you can use.
All this was percolating in my mind as I was doing some research on a small company, Right90, which specializes in forecasting, specifically business forecasting. The sales forecast is a subset of the business forecast and if the sales forecast is inaccurate, other departments have a hard time, to say the least, in planning or informing the supply chain.
So, this really focuses questions like: Why do we forecast this way? And can’t we find better ways to do this?
It turns out that we can and we should but like Maister might say, doing what’s obvious might not be so easy. In my research and discussions with Right90’s customers, I found that taking nothing away from their product, the biggest element of success turned out to be the resolve that successful managers bought to using the products. In short, the successful managers said, we’re going in this direction, all of us, even other departments that depend on the forecast like production and the CEO is fully behind it.
Contrary to popular myth, success in these situations is not an immediate triumph. Instead it is the culmination of many baby steps. Like a twelve step program to improve forecast accuracy, people were simply required (and assisted) to do better with this forecast than they did with the last. Managers also helped by providing incentives for accuracy, not simply making the number. Progress was slow at first, then it gained momentum and then there was a triumph.
As we contemplate the impact of the financial meltdown and the prospects of a recession we see the outlines of a classic disruptive moment coming into view. Past disruptive moments ushered in new paradigms and this will be no different. The question for those present now is about whether or not we can and will adjust to changing circumstances. Will we do what’s obvious but not easy?
CRM and Recession
“History does not repeat itself, but it does rhyme.” Mark Twain
There is a considerable amount of speculation about how the molten mass of what was once our financial system will affect our real economy and, closer to home, the CRM industry. Many observers take as their first approximation, the Great Depression that started with the stock market implosion of 1929. I am not that pessimistic.
Some of those prognosticators are betting on a repeat performance of “history” but I don’t share their doom and gloom. When tempted to, I refer back to one of my patron saints, Mr. Twain. Groucho is another patron saint but, although he lived through those times, his contribution was to take our minds off of the carnage by making us laugh.
It can be argued that, in a way, history did repeat itself in so far as the current problems were caused by lax oversight and the corruption it spawned. No matter, that part will always be the same and even the ancient Greeks had that figured out – just read Euripides or Sophocles.
However, it’s what happens on the upswing, once we’ve bottomed out, that matters and that’s what causes History to only rhyme rather than a more sever recapitulation. So what does the upswing look like at this early time? For starters, government is doing a lot more than it did in 1929 – back then they did nothing — we’ve learned that much, at least. The intervention in the global financial markets along with practices that were first innovated in the Depression will prevent the calamity from getting completely out of hand. Nonetheless, that’s just not losing, which is, of course, very different from winning.
I agree with those who believe we’re still in for a bit of a recession and that it could be significant. The last significantly bad recession happened in the 1970’s when inflation ran out of control and oil prices ran quite high for the times.
Getting people buying again will not be as simple as having a sale or implementing technologies that are advertised to “accelerate the sales process” and I expect the next economic expansion will need to be a top down thing because the grass roots are scorched. If that’s the case the buyers of first resort will be large companies sitting on cash as opposed to small companies that are searching for venture capital.
Even such companies will be careful with their spending and they will be highly value conscious. I wouldn’t expect them to invest much in an early stage idea the way that typical early adopters buy things more or less to see if they can get a competitive advantage from a new widget. The translation here is that buyers will be looking for value, for certain ROI and a logical business case.
So where does that leave us? It appears to me that the melt-down of 2008 will be seen as the mother of all disruptions in a lot of areas not limited to the technology market, but that’s a good place to focus. Disruptions are disrupting and that’s as plain and true as it is redundant. It’s also true that disruption makes things new again and what might not have been possible in the old regime suddenly is.
In business and in CRM there are really multiple disruptions taking place right now, which is why the current times are so challenging. Financial risk looks different today than it did a year ago, energy prices are very high despite recent price reductions and the business environment is sluggish and will continue that way for a while.
This environment provides a perfect opportunity for innovative technology to come to the rescue as companies search for ways to do more with less such as maintaining contact with customers without necessarily having to meet face to face. Technologies that help us understand customers and their buying needs and impulses have been developing over the last several years. These new tools are about to be placed in a crucible and some will work while others will fail. From all this we will get new business processes, new products and new companies.
Change is difficult. It’s hard and people avoid it when we can but change eventually happens when the consequences of standing still look worse than the consequences of taking a chance on change. I can see that in CRM for example, we’ve been talking for a long time about the ascendancy of the customer. CRM 2.0 has been all about that trend but now there is a new urgency for vendors to align with customers and their needs rather than dictating to them. Companies that have so far only watched the parade go by will have to learn to march quickly. It’s time for all of us to change, standing still is not an option and we can only imagine the disruptions ahead. It may not be pretty, but that’s the way we do things.
Jevons Paradox
The relationship between economics and technology fascinates me. Economics explains technology markets and technology drives economics. Anyone who has ever performed or just read about quantitative economics research will agree, I am sure. We might think this is a modern phenomenon but you can trace the linkage between economics and technology as far back as the birth of economics at the dawn of the industrial revolution. Jevons Paradox is an example of early economic thinking that comes from another time but resonates with CRM today.
William Stanley Jevons was a Victorian era economist who made a simple but somewhat paradoxical – or at lease counter intuitive – observation that increasing the efficiency with which a resource is used tends to increase, rather than decrease, the rate of consumption of that resource.
Jevons derived the paradox, which would ultimately bear his name, from observations about coal use. He noted that as the steam engine became more efficient more coal was consumed over all in his native England.
Further analysis showed that the ratio of work done – or the benefit of that work measured as factory output – to the cost of the raw material, increased. Generally speaking, as the cost of a good declines, more people will be able to afford it and demand will increase. As demand for goods increases so will the demand for the materials that go into the good.
You might think that’s all well and good for coal and steam engines but it has little applicability to the modern world where so much is run in software on computers but I would beg to differ. If you recall Moore’s Law, that computing capacity would double about every eighteen months you realize that the elements for Jevons Paradox are staring you right in the face.
As the cost of computing has declined over many decades, numerous new computing niches have opened up. Today computing hardware is embedded in our phones, cars, hand held devices and, oh yes, computers that sit on our laps, desktops or in our hands. Frequently multiple CPU chips share the load. In the PC alone we went from a single processor to having multiple specialized processors embedded in subsystems such as graphics cards for example.
That’s not the end of the story either. Good, fast, cheap computing drove the advance of several waves of software paradigms from green screens to client-server to the on-demand.
What’s striking to me is that in each era while older users converted to the new paradigm, even more new users who could not afford computing at the prior price point joined the ranks of the on-line world. On-demand computing has been the most recent example of Jevons Paradox in action. Not only did on-demand computing cause a revolution in computing but it has made users of people who cannot afford computing infrastructure and that, in turn, has made developers of people who have no special training.
We can even see the effects of Jevons Paradox in CRM. Initially CRM was expensive in multiple dimensions – licenses were expensive, implementation and training were expensive and then there was all the hardware and labor to contend with. CRM was also expensive to use, it took a lot of labor to input data, or at least it required a redistribution of labor from old processes to new. However, as efficiencies caused over all prices to come down, greater efficiency in CRM’s use also increases and the amount of labor required to use CRM stabilized.
Today there is so much CRM available at such low prices that it would be a competitive disadvantage if a company refrained from using it. That’s why I find it so interesting that there are still companies out there that still use spreadsheets to track leads or who still market by buying generic lists. Some of them even wonder if they could ever afford the cost of CRM. My question to them is how long can they afford not to invest in it?
The Siebel Restoration?
Not that it’s a done deal like the title might suggest, but Siebel seems to have reconstituting itself into a rival power in the CRM market once again.
After Oracle OpenWorld I made the observation that Siebel appeared to be returning to its old prominence. The introduction of new products based on Web 2.0 ideas, the continued strength in all global markets and the continued investment in its on-demand (and on premises) capacity all augured well for what is now a unit of Oracle.
Before the acquisition, Siebel suffered a brain drain as a lot of good people decided for one reason or another not to stick with the company. A lot of them were just plain burned out and needed some down time. Eventually, some went to other vendors and others started businesses – some people even came back. Most have done well. The people who stayed, augmented by some key additions from elsewhere in the Oracle universe, have resulted in a good blend of talent and a unified vision under the leadership of Anthony Lye. So for the first time in several years, Salesforce.com and others have some bona fide competition.
All that is well and good but the events of the last few weeks have changed the marketplace so much – at least potentially — that you have to question the future of CRM, not because it is going away but because in a credit restricted economy buying and selling will be very different. Even the idea of what a customer is will need reevaluation.
New products
At OpenWorld Siebel introduced new technology that can generally be categorized as CRM 2.0. As a matter of fact, other vendors have also introduced similar social applications so Siebel gets no points for being first in that domain. Siebel’s parent does get some props for bringing the concept together into what will be a social CRM platform. It’s outlines are clearly visible right now with products like Sales Prospector, Sales Campaigns, Sales Library, and Deal Manager. An application dealing with customer loyalty is in the works and enough was in place for Siebel VP Melissa Boxer to confidently demonstrate it at OpenWorld.
Most intriguing to me is that Lye determined from the get-go that the social applications would work well not only with Oracle-Siebel but other CRM applications as well. Given Oracle’s penchant for collecting CRM applications you might call that making lemonade from your lemons but there are numerous other CRM applications that the Oracle-Siebel Social CRM applications will work with too.
What’s interesting to me about all this is the timing of the social CRM phenomenon — and here we need to widen the focus from Oracle-Siebel to the whole community of CRM vendors dedicated to developing CRM 2.0. A couple of years ago when the movement got started no one paid a lot of attention to social applications that tried to recognize the centrality of the customer in CRM.
Actually, you could go back to about 2002 to see the first inklings of community and social media in CRM but at that time the vendors I spoke with weren’t even sure they wanted to be classified as CRM. One, which will remain nameless, even told me that CRM had such a negative connotation that they’d try something else. But I digress.
By putting several social applications together at the service of CRM, Oracle-Siebel has effectively said, the CRM we all know is still relevant as a transaction engine. Dealing with customers in a marketplace that has changed significantly in the last few years (and especially recently) requires new ways of looking at things. How fortunate that the whole CRM 2.0 industry got started back when no one thought it was needed. New ways of looking at things almost always need new tools and that’s where we are right now. Actually it’s hard to say if new tools make new thinking possible or the other way around and it doesn’t matter.
Oracle-Siebel is not the only player to come up with this formulation. From a completely different perspective, Salesforce.com has been plowing the same field for a few years. The big difference as I see it, it is that Salesforce decided to provide the tools and platform to partners and then stepped back to see what evolved. It was a good strategy too and the company now boasts close to one thousand partner developed applications in its ecosystem. Quite a feat though only a fraction deal with CRM 2.0.
Where the two approaches differ is in orientation. Oracle-Siebel is highly focused on selling and applying social applications for a few very specific business processes. Salesforce’s approach is to let a thousand flowers bloom, to see what new business processes are developed and which conventional processes get an upgrade. Each is worthy and it is impossible to say at this point which approach is best, the market will decide.
My instinct says that the Siebel approach is designed to appeal to the entrenched market in enterprise software. Salesforce is trying to appeal to the same market but its roots in smaller markets might suggest success there first. Regardless, the business processes associated with front office computing are changing creating a new opportunity for selection and evolution to do their jobs.
