February, 2010

  • February 25, 2010
  • I was in a conversation with the CEO of a CRM company the other day discussing the latest moves in the industry over ideas like SaaS, single tenant and multitenant deployments.  It has occurred to me and I said this to the CEO, that we spend far too much time and brain matter on the delivery model and too little on how we provide value to the customer.

    It’s a problem that you see a lot if you know what to look for.  It happens whenever one vendor or even an individual comes up with an idea that seems to attract customer attention.  Once that happens, the competition is all over the idea like flies on a fresh meadow muffin and the whole competition moves to one dimension.  I’ve seen it on numerous occasions in my ten years covering CRM and the single tenant vs. multitenant debate is just one example.  Other examples include the customer experience and social CRM.

    Now, to be sure, all of these ideas are important but they also hit wide of the mark.  The mark ought to be how I as a vendor deliver value to you the customer and whether that value is sufficient to warrant a purchase.  Ideas like low cost and fast implementation or improving the customer experience are, by their nature, designed to appeal to the buying influences in the complex sale of CRM.  They appeal to the CFO or the CEO.  Customer experience may appeal to the VP of sales or the VP of service and so on.  But you can’t take any of that to the bank.

    There is an implicit assumption in all of this, that a CRM product is in all other respects the same as all others in the market and that this single idea is the one worth contending over.  That’s a road to disaster if you ask me because only one company can be the best at the attribute in question and then everyone else is scrambling for second place.  That’s a path — no, make that a short cut — to commoditization.

    It’s a harder sell to talk about the customer’s needs and what makes them unique and deserving of unique treatment — often the customer doesn’t know and the sales representative might not have the training or knowledge to help figure it all out and sell to those needs.  Too often in early markets customers buy market leading products regardless of their merits and vendors accommodate this need by bragging about market share.

    If we could focus more on how we deliver specific value, the sales and marketing conversation would be richer and you might actually see one vendor competing for business based on a specific need as well as other vendors competing on delivery model or price etc.  But that’s a scary place to be if you are a sales person.  Your customer wouldn’t necessarily be comparing you with the other guys in an apples to apples way so how would you know if you were winning?

    Selling has always been a numbers game meaning that sales people needed to see as many people as possible, have as many contacts and opportunities as possible in the hope of closing some of them.  That was the original assumption of CRM.  But if you are at all cognizant of the marketplace these days, tightness in the credit markets has caused a significant amount of demand destruction and that has changed the terms of selling.

    We don’t have full pipelines because of demand destruction or, if we do, there are many more suspects who can’t buy for one reason or another tied to budget.  In this world selling the advantages of your delivery model or your low cost may not be as valuable as telling your customer specifically how your product can help make money or save it.

    We’re in a cross sell/up sell market today in which we’re trying to sell something else to a customer that has bought from us before.  In that climate it should be easy to talk about using products that enhance a specific business process or function.

    Published: 13 years ago

    In our industry we live on innovation and innovation takes capital — something that has been in short supply over the last couple of years.  Venture funding took a massive hit in 2009 but there are signs that the trend might be bottoming out.  If it is, we might all learn to exhale again.

    According to an article at BloggingStocks.com, a recent report “…from PricewaterhouseCoopers and the National Venture Capital Association (using data from Thomson Reuters) pegs total investment in start-ups for the fourth quarter of 2009 at $5.02 billion, a decline of 2% from the third quarter.  Year-over-year, it represents a plunge of 14%.

    Most revealing was this: “For the entirety of 2009, VC investments fell 37% to $17.7 million, its lowest level since 1997.  Essentially, VC activity receded to pre-dot-com boom levels.  At the peak of the dot-com economy, VC funding was more than five times greater, reaching $100 million in 2000.”

    Yikes! 1997!  How many of us were doing what we do now then?  Those thirteen years are an eternity in this business.

    But, as they say in the infomercials, there’s more.  According to an article in siliconvalley.com, “The $17.7 billion in new investments in startups contrasts with $15.2 billion in new commitments to venture funds during 2009.  The amount of commitment was nearly $21 billion below the $36.1 billion raised in 2007, before the start of the financial crisis, and $13.3 billion less than the $28.6 billion raised in 2008, when pension funds and university endowments curtailed their venture investments.

    Did I read that right?  The VCs took in less than they invested?!

    It would take a lot for me to lament the plight of venture capitalists and we are not there yet, but this data does give me some major concern for those people trying to start companies to invent the future.  Clearly we are in a VC slump and it is just as clear to me, that there is a certain seasonality to this kind of investing.

    Big investment is driven by major changes or transformations in the economy.  You and I might not see or understand these transformations but it is the job of venture capitalists and others to look for telltale signs and act accordingly.  For instance, when the CPU chip was invented or on-demand computing came about, the inventions spawned multiple category invention to take advantage of the original innovations.

    The CPU chip cratered the cost of computing making all manner of devices possible that were once limited by cost.  The chip also made it possible for subsequent generations of dreamers to think up more ways to use computing power.  The net result was a virtuous circle of innovation, investment and new products.

    Today’s relative plunge in investment is more than an indication of tight credit or a recession.  I think there’s more going on.  By definition the money you give to the VCs is money you have a reasonable expectation of losing.  If one in ten VC investments pans out to the point of a liquidity event — such as an IPO or acquisition — French champagne flows.  But more typically everyone is drinking diet drinks with pizza in an all-nighter to get a product to work.

    So my point is that if money is not flowing into VC funds, it is not the result of a credit crisis because venture investment is discretionary.  It is more likely a crisis of confidence and a crisis of new ideas and that won’t be repaired by pouring money on Silicon Valley.

    To be sure, there are ideas out there and a sure sign of a recovery happens when investors start coming back.  For me, I like to watch what’s happening to later stage companies, the ones that need a B or C round of funding.  At least in SaaS computing that seems to be where money is going.  I don’t have more than anecdotal evidence — i.e. what people tell me, not official statistics — to back this up.

    Nonetheless, it would make sense.  B and C round companies are much more mature and closer to the liquidity event horizon, hence the possibility of a payout is closer.  But there are only so many companies and there is still a good deal of cash to be invested so, sooner or later, investors will again have to look at A round opportunities.

    While many fields might get a share of the VC pie — green tech, bio tech and others —  I think there are still great opportunities in CRM.  I believe we are at a point when much of what we do will need to be rethought.  A new level of sophistication in our business processes supported by a consolidation in software functions beckons.  I just wish it would hurry up.

    Published: 13 years ago

    Nothing reminds me of the dotcom bubble more than the social media bubble.  The dotcoms and their founders were famous for attracting venture capital too often with business plans that were written on cocktail napkins or worse.  Social media has gone that idea one better with some of the leading companies letting themselves be swallowed up for obscene amounts of cash.  I keep waiting to see practical applications of social media, especially in CRM where I spend many of my waking hours, but I am so far mostly disappointed.

    Cool seems to be the highest value of the social culture.  We have cool ways to show home videos to near strangers and to communicate our most mundane life experiences to anyone on the planet.  But turning that connectivity into cash has been, so far, beyond us.

    Don’t get me wrong; there are some notable exceptions.  For instance, what Salesforce.com has done with Twitter and Facebook has been inspired.  Salesforce has harnessed these tools to help companies harvest intellectual property from mundane operations and that’s significant.

    On Wednesday Salesforce CEO, Marc Benioff, announced the beta release of Chatter, the company’s Facebook knock-off for intra-company social networking.  Chatter has more than a passing resemblance to Facebook and since you cannot copyright functionality I am not saying this is a bad thing.  But I have to ask the question: Why did Salesforce re-invent Facebook rather than the two companies working together to bring a commercially viable product to CRM?  The same could be said of Twitter.  It seems the social media companies have lived in a bubble of cool instead of commercialism.

    I don’t think of the question as idle curiosity.  In fact, I have been stunned over the last few years that many social media companies have taken on the persona of coquettes at a ball waiting for prince charming to ask them to dance.  They have not made nearly enough effort to integrate their wares into the mainstream and if the Chatter example is prelude, these companies may be about to be rolled up by more competitive players in the commercial sphere.

    Maybe I shouldn’t be too hard on the social media companies.  They are part of the Web 2.0 movement that, when it was new, aimed squarely at flattening the hierarchies of business to produce something more like what Chatter aims for — a relational organizational topography.  But Web 2.0 was mostly a flop; it threatened the status quo and it was successfully shunned.

    Personal use is the second coming of social media and this grass roots movement has educated a generation or two of users and made assimilation into the enterprise non-threatening and therefore possible.

    If anything, Salesforce’s announcement should be a wakeup call to the Web 2.0 crowd that it’s now safe to knock on the front door of the enterprise.  Likewise, enterprises need to understand that social media can be additive.

    Many of us think social media will be integral to the future success of business in general and CRM especially.  For social media to prosper, the industry needs to take on the hard task of missionary selling to the establishment.  It needs to build the links between its products and the legacy world before that world reinvents the wheel and deprives it of a chance at real profits.

    The inroads already made in the personal social networking space will make that easier.  But most importantly, the social media crowd needs to lose its cool posturing and roll up its sleeves with partners who are intent on making money.

    Published: 13 years ago

    I almost never attend a webinar unless I am speaking.  When I need to know something I usually get a one on one with a CEO or other leader of a company.  They’re very gracious with their time and the tutelage helps me as an analyst though often I don’t run out and write something about my experience.

    Part of the reason for my reticence is that most briefings are on background — the leaders are often trying out a new idea and looking for feedback.  Frequently those ideas undergo significant modification before they finally emerge.  Other times, the briefing in embargoed pending an official announcement.  And often a briefing is about an incremental release — suffice it to say there are lots of reasons not to write about something.  At least right away.  Sometimes, months later, an idea strikes and I write something.  It’s not the best system in the world but I doubt I am the only scribe that uses it.


    Last week I broke with precedent and attended a webinar on Microsoft’s unified communications server also known (I think) as Office Communication Server.  It immediately reminded me of why I don’t do this more often but after I got over the pitch aspect and the interminable demo, I got the big picture and was happy I made the effort.  Now, breaking with another looser precedent I am writing about it because I think it’s important.

    Lots of companies, mainly in the telco space, are deploying unified communication servers; they include, but the list is hardly limited to, Cisco, Avaya, NEC and Microsoft, just to pick a few.    This is a new field and standards are still loose and one vendor’s gear might not work with another’s.  But Gartner has a Magic Quadrant for them so it’s a real market.

    If UCS is new to you and you are not a dyslexic fan of USC football, it’s all about bringing together your calendaring, email, mobile, voice mail, VoIP, video and other telecommunications under one roof to better coordinate workflow, customer access and intra-company communications.  I think it’s important, especially from a sustainability perspective.

    I’ve been researching sustainability ideas all my life but my interest intensified in the last couple of years and now I am writing about it.  I think UCS coupled with other new product ideas like content libraries, SharePoint and Salesforce’s Chatter, offers the potential to squeeze a lot of friction out of business.

    By friction I mean all those things that suck up energy — both the personal and the carbon based kind — without delivering business benefit to either customers or vendors.  Unified communication brings together the exploded cornucopia of communications technologies that have been invented over the last few decades into a manageable framework giving users the ability to tame what has become a communications beast.

    Unified communication integrated with CRM offers the possibility of making us all more proactive and responsive to customers but in ways that simplify rather than complicate our lives.  It seems like whenever we get a new technology one of the first uses we dream up for it is to somehow accelerate a business process, like selling.  Ironically, that’s true occasionally but quickly everyone gets the same idea and what was once an accelerator turns the whole thing to gridlock.

    A classic example might be email.  As a tool for sales and marketing it proved very useful and many companies like Responsys, ExactTarget or ConstantContact (just to pick a few) have elevated it to a science.  But then came various flavors of social networking with the same idea and in a short time we had way too many technologies trying to use the same basic technique resulting in jammed (and spammed) inboxes.

    Unified communications reverses this trend partly.  It does little to arbitrate between your media of choice but because it can track the whereabouts and activities of the recipient, it can result in one message rather than several from an impatient colleague, vendor or customer.  It may not accelerate many processes but then again it might surprise you.  What unified communications will certainly do is help us organize how we communicate and liberate time that is wasted because we simply don’t know.

    More importantly, when you add video, VoIP and other advanced technologies, you may come to realize that what used to take a face to face meeting now only requires a quick chat.  My research shows that as the recovery gains momentum, the cost of transportation will increase just as it did in 2008 when liquid fuel prices spiked.  Having an alternative like unified communications might be the difference between doing business and not.

    Unified communications wasn’t on my radar until the webinar and I am glad that I attended that one.

    Published: 13 years ago

    Two issues in the news lately have shown me that CRM is more than technology and that companies are trying to walk the walk.  The Toyota recall and the way at least some airlines have handled the snow nightmare in the mid-Atlantic states say a lot about how CRM ideas have penetrated business.

    Now, with Toyota, I think you need to try to tease apart some cultural issues and I am not sure how you do it.  But there is a distinct difference between the way Toyota’s CEO met with the press (and bowed to the assembled audience before he took questions) to discuss the first recall regarding gas pedals potentially sticking.  I can’t imagine, nor have I ever seen, an American car company chief facing the music like that.

    And Toyota’s recent ads are poignant.  The company that has lived for decades by selling its quality story was prepared to follow that message down an unfamiliar and distasteful path.  The ad I am thinking about says, and I am paraphrasing here, we didn’t live up to our own standards and we are working to regain your trust.  If such recalls don’t become a regular part of life, the company will salvage much good will from that one.  Maybe that’s why they decided to glom together the gas pedal recall and the Prius braking recall.  One big snafu is better than two smaller ones bleeding out over time.

    Some people blame Toyota for dragging its feet on the recalls but I know that collecting data from a few hundred customer complaints takes time and it takes more time to determine if there was something systemic.  I am not absolving the company for this but I do understand that dealing with millions of units over time is not as simple as refunding a retail purchase.  So Toyota gets high marks from me (I do not own any of the company’s products or stock) for their handling of this crisis and dealing with customers in a forthright way.

    The next CRM manifestation comes from the airlines flying into Washington, DC this week.  I can’t speak knowledgeably about all of them but I had a ticket on a JetBlue flight from Boston to DC on Monday of this snowy week.  As a New Englander, my opinion of the Mid-Atlantic’s snow removal capability is somewhat jaded.  Former DC mayor Marion Berry once said of the snow, “God put it here, let God take it away” and that has colored my perception ever since.  More than two feet of snow dropped on the metro area over the weekend and I had zero expectation that the city would be functioning for days after that.  So I was fine with cancelling my flight and eating the cost of the airfare if it came to that.

    I called the vendor who sold me the ticket to cancel but they told me they couldn’t and turfed me to the airline, not a good sign I thought at the time.  I went to the airline’s website and thought I was home free but at the last mouse click the site refused my refund (less fifty bucks just for grins) and I had to call the help desk.  My hackles were raised at that point and visions of losing the fifty plus having the airline hang onto the balance, as a credit, did not sit well with me.  Neither did the fact that the phone queue was estimated at over sixty minutes.  I put the phone on speaker mode and did some work.

    About an hour went by and then something magical happened.  An agent got on the line, said she was sorry about the wait and began helping me.  The airline, it turns out cancelled my flight, which wasn’t even supposed to leave until 4:00 PM.  I was calling at about 10:00 AM so you can see how bad the situation was.  The agent credited me the full amount of my ticket and that was that.

    Now, having a friendly agent is good and having an hour-long queue is not though in an emergency it is understandable.  But what makes this story interesting to me from the perspective of CRM is that the company made firm decisions to cancel the flight and refund the costs.  They didn’t keep the possibility of a flight alive (on time is one of the world’s great lies), which would have drawn some intrepid souls to the airport and into a nightmare.  It was a small thing but it showed an awareness of the customer and an interest in doing the right thing.  No doubt it was motivated at least in part by the same forces that drove Toyota to say sorry.

    At another time and in other circumstances I could easily see each of these companies playing hardball.  But from these experiences I can also see that everything we’ve been saying about customers over the last decade has penetrated some corporate cultures beyond the software licenses.  It’s like Robin Williams’ famous gig about golf in which he says the flag in the cup on the green is just there to give you hope.  Well, there’s hope in CRM too.

    Published: 13 years ago