Let’s Not Boil This Frog
You know the story about boiling a frog. Throw a frog into a pot of boiling water and it jumps out but put the same frog into a pot of cold water and raise the heat slowly and the frog won’t have the wherewithal to save itself.
Those are the two most common responses to crises — acute and chronic. The frog responds to the acute crisis and lives but fails to mount an adequate response to the chronic crisis and perishes. This phenomenon is not limited to frogs, in fact, we have enshrined the idea in common parlance. Ever hear someone say, “If it ain’t broke, don’t fix it?”
The problem with waiting until something breaks in the modern world is that when failure comes it is often catastrophic. And while we respond to the catastrophe the response is often more expensive and more disruptive than if the response had been made when the problem was simply chronic.
So, perhaps a city or a state foregoes maintenance on a bridge because the money simply is not available and no one can stomach the fight over raising taxes. There’s a modicum of safety or extra tolerance, built into most engineered things like bridges but eventually if left alone the margin is exceeded and you end up with a bridge in a river. We’ve seen it happen before.
But this column isn’t about bridges, it’s about CRM and even here the frog has something to teach us. Two years ago we saw transportation fuel prices rise to levels that choked off economic growth. We had a recession — brought on by other factors as well — but we survived. We’re now seeing energy prices climb again almost to the same levels that we last saw in 2008. There is a direct link between increasing economic activity and energy use. Increased energy use is a barometer of economic health but increasing prices is not, it simply causes inflation and chokes off growth.
Last week we saw gasoline prices rise by twenty cents in most areas and now food prices are taking a hit from the combined high price of transportation and bad weather. The situation looks like a chronic crisis morphing into something acute. There is no silver bullet for this situation but there are many small steps that we can all take to stave off the worst effects of a crisis.
In business we can all look for and find ways that are fairly easy to reduce our business processes’ need for transportation. To name some there are virtual conferences, unified communication servers for virtual communication, video produced to support sales, marketing and service and don’t forget analytics and social media. There are also new work strategies that blend some job functions to better leverage these technologies.
It’s all low hanging fruit and this is the way that free markets work or the way they should work. As many people examine their own situations and then evaluate new strategies and available solutions, a crisis can be averted. But we have to abandon the mid set that lurches us from crisis to crisis and accept the idea that even absent a full-blown catastrophe something is broken. If enough of us take this approach we can generate the stimulus we need to grow the economy and turn adversity to advantage.
Winds of Change and CRM
The upheaval in the Middle East is roiling the energy markets and that will affect CRM. Year over year, the price of a gallon of regular is up over half a buck nationally and the average price for said gallon is $3.18. As gas goes so does jet fuel. The confluence of rising prices, political unrest and a recovering economy all contribute to the price rise.
The important point for business is that it takes energy to do business and as the cost of energy for vital things like transportation rises it has a dampening effect on business and the nascent recovery.
Frequent readers of this space may recall a favorite statistic — that during the year that saw the last energy spike Americans drove a combined 122 billion miles less than the year before. That almost never happens. To see a comparable event you need to go back three or more decades to the oil embargoes.
Three decades is a time span we are hearing a lot about these days as the news outlets report that dictators who are now falling, or in danger of falling, from power have been on the job for similar time spans. Mubarak in Egypt, 29 years, Zine el-Abidine Ben Alin Tunisia 24 years, Khadafy in Libya has been the colonel-issimo for over four decades. New names and time spans are added frequently
Change rarely happens smoothly in our world. Precipitating events are dramatic and they seem to change the world overnight. That’s important because the turmoil in the Middle East has the potential to be one such precipitating event. There are over 300 million people in the Middle East and North Africa and there are another 240 million in sub-Saharan North Africa (both according to Pew Research). By comparison there are a bit over 300 million Americans.
What’s the connection? The middle class lifestyle complete with cars, houses and washing machines — Americans have it and, make no mistake, others want it. Having the lifestyle is not a zero sum game, if you want it you can attain it, just overthrow your local dictator and build an economy that supports middle class jobs.
But there’s a rub. The middle class economy requires energy and the revolution on the southern rim of the Mediterranean has the potential to dump hundreds of millions of middle class aspirants into the world economy at once. Adding that demand to the world’s energy markets will, in a supply and demand scenario, cause another price spike.
Get used to it.
According to the Brookings Institution the planet will add 1.8 billion people to the roles of the middle class by 2020. Brookings says that world middle class population will rise from a base of 30% in 2008 to 52% by then. By comparison, also according to Brookings, total global population will only rise by one billion people in that time.
What’s this have to do with CRM? Plenty.
Since the last oil price spike we’ve seen many new technologies rise that we will need to become familiar with to cope with rising transportation costs. Applications like unified communications servers, more powerful mobile devices and networks, even 3D displays will all play a role in helping us maintain contact while reducing our need to jump on a jet or motor on down the highway. And solutions and tools that have nothing to do with CRM — I am thinking about in-house developed video — will also play an important role in keeping your revenue motor running.
To all of this we must add increasingly necessary and powerful analytics. We need analytics to help us understand customers everywhere but especially in emerging markets and in cultures different from ours.
In a recent interview, Diane Hessan, CEO of Communispace put it to me this way, “…you don’t even understand consumers in Massachusetts and you live here. You certainly don’t understand consumers in Kansas City. So, now, let me ask you about consumers in China. At that point you’re banging your head against the wall, you’re clueless.” She was right, we need to understand — to diagnose before we prescribe.
It would be a mistake to think that social media will do all the heavy lifting here. Good as it is at broadcasting a message it is a dual edged sword. In these emerging markets credibility is all important and you don’t want to learn by throwing things against the wall to see what sticks, so analytics paired with social will be (already is) mandatory.
But closer to Massachusetts and Kansas City, analytics will be important but so will the other technologies mentioned above. There’s no doubt that we need to begin thinking about and implementing solutions that keep us in front of customers and off the road simultaneously.
In another recent interview Anneke Seley, co-author of “Sales 2.0” told me that organizations are just beginning to embrace the idea of hybrid sales models that leverage more inside selling coupled with traditional field selling and even marketing.
If you’d told me a year ago that a revolt in North Africa would get us all thinking about the future of CRM, I might have understood but more likely I would have said those incidents were too disparate. But they aren’t. They are the precipitating events of the next big things in our world.
Getting ready to do a Webinar this afternoon. I will be speaking about one of my favorite topics — revenue. Hope you can join us.
Sage Charts a New Future with Continuity, SaaS, Conected Services
Sage took a major step in clarifying its position in the market when it hosted an analyst day in Boston last week. The company has been around for a long time and has been one of the higher revenue generators for many years thanks to an assortment of products that span the front and back offices of SMB companies. But the company grew through aggressive acquisition and that left it with a hodgepodge of products and a weakly defined strategy.
A few years ago Sage had multiple overlapping accounting and CRM systems with weak integration and the product-line suffered in comparison to newer, cloud computing offerings from upstart competitors. The company still has challenges ahead of it but in the last few years — a period that overlaps nicely with the leadership of North America CEO, Sue Swensen — the company has begun to put its house in order.
Analysts had been treated to glimpses of a product strategy turnaround before, but last week’s meeting in Boston was by far the most cohesive delivery of Sage’s core strategy yet. The company must have thought so too because in attendance were three high ranking executives including Guy Berruyer, Sage Group CEO, Swensen, CEO North America and her designated successor Pascal Houillon who will officially take over stewardship of the North American operation later this year when Swensen retires.
Sage still has a plethora of products and even now speaks of returning to an acquisitions strategy when the time is right. But the company is coming to terms with a need to refresh an aging product line and embracing cloud computing on terms that will cause minimal disturbance for its only channel to the marketplace — resellers.
The last point is not made lightly. Resellers are generally small companies that add value through consulting, customization and building long-term relationships that drip revenue into the bucket rather than pouring it. Sage’s partners are not all technical vendors. Accountants, auditors, bookkeepers and others who advise small businesses recommend many Sage products around the world.
So there is little surprise that Sage’s strategy retains a three-tier character — cloud computing for the smallest, most cost conscious, new arrivals, a hybrid approach for the broad middle and updated traditional products for established businesses that want continuity and few surprises. This is progress and it mirrors what many other vendors with large user populations — Microsoft and Oracle for example — have done. There is no use in thinking about converting every conventional customer to the cloud in a short time and these vendors have done their best to support and, where possible, future-proof their customers.
In line with all this, Sage added better definition to its customer for life strategy. Accounting and CRM are more sticky than either alone according to the company’s experience so, logically, one part of its strategy is to grow accounts. But that requires multiple talents in its partner base or the alternative, cooperation between partners.
Beyond delivery modes, Sage has a three part strategy to address the market. Two parts of the approach should not surprise anyone. Improve existing products in functionality and user experience and grow the Sage footprint within each account. Implicit is this approach is a prime directive to improve the customer experience wherever possible. So far all of this would be standard for almost any business software vendor.
The third leg of the stool demands closer examination. Sage began selling what it calls connected services a while ago and those services are the nucleus of a potential new vendor model that connects partners and customers as well as offering potential new profitability.
Connected services can be anything and generally, these services constitute either things that Sage can do in bulk that its end customers spend disproportionate amounts of time getting right or highly specialized services that require outside expertise. Some of the offerings include employee benefit services, legal assistance and tax compliance as well as more quotidian things like shopping cart, payment and backup services. These go beyond software and make the whole offering stickier. Other vendors should consider this approach.
The thing about connected services is that Sage need not be the only vendor in the mix and an ecosystem is growing up around the model. This ecosystem provides a way for non-technical business services vendors to access a big market and for Sage, or any vendor, to add value. The model can and should provide a tollgate for vendors too presumably because they provide the service of vetting the third party’s work quality.
This ecosystem most closely approximates the AppExchange form Salesforce but unlike the AppExchange, the Sage ecosystem is open to non-technical service providers. A further advantage of this model for Sage is that it opens up a line of communication between it and the end customer that may not always be filtered through the partner. While this can be a delicate matter, as long as the services provided are not competitive there should be no objection.
However, the open line of communication provides Sage with the ability to know and communicate with its customers better than in a model that requires all communication to be filtered through a partner.
In the era ahead, increasing profitability in business software companies will depend on increasing the vendor’s footprint. But there is a practical limit on how much software a customer might buy or lease and this is especially true in the SMB market where the number of users per customer entity is low. Connected business services is more of a green field and offers greater growth prospects.
Finally, connected services is a smart way to educate customers — even reluctant ones — about the realities and benefits of cloud computing so that at some point in the future a move to the cloud might seem less daunting.
In many ways Sage has not changed much. It still has roughly the same constellation of products but it has come to terms with the cloud and put together a future direction for its partners and customers that was hard to see before.
The company will return to its acquisitions model because that is in its DNA. But future acquisitions will probably have a cloud flavor and they will likely further drive Sage in the general direction of the cloud. Very little, if any, of this approach was envisioned in “The Innovator’s Dilemma,” but if Clay Christenson writes a new edition I could see this as a chapter.