Observations from Show Season
Not that the shows ever end, but as I regain my spot on the ground, I have a few observations from the many shows that I have been to or read about over the last eight weeks.
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.
You Can Improve Your Sales Forecast
I don’t know anyone who was ever great at sales forecasting. This is not to say that it can’t be done but it’s a hard problem, like forecasting the weather. Today they can tell us within a few degrees the weather for many days in advance because we’ve invested in many data gathering and analysis tools like satellites, computer modeling, and analytics.
It’s not that weather forecasting has been perfected though. Instead, forecasters have been able to bring the forecast down to a range of probabilities through the use of all that data and models for how the oceans and atmosphere, the jet stream and other major parts of the earth work. So we typically see something like a 30 percent chance of rain and a temperature range of about 4 degrees and those ranges are enough to enable us to make plans like going to a picnic or not, or remembering to carry a hat or umbrella.
Sales forecasting has none of this going for it at the moment in part because while a sales forecast is a much smaller problem than the weather five days hence, we still do it much as we did a hundred years ago. Too often that means a senior person reviews all the deals, applies his or her experience and follows a gut instinct. By the way, that person is known affectionately as a HIPPO because the decision was the result of the Highest Paid Person’s Opinion. How’s that for science?
But what would the forecasting process look like if we had as much science employed as a local TV weather person? Like the weather person, the sales manager would have a model based on many iterations of patterns that account for all kinds of variables including deal stages and their inputs, sales rep and that person’s track record, the product and its adoption patterns and much more.
If the interest is in total revenue intelligence, the model would also include inputs from the current customer base including propensity to churn, cross-sell and upsell opportunities, and customer lifetime value. To manage all this there would also be powerful analytics to process all the data and the result would not be a single answer such as a dollar number or the determination of whether or not you’ll make your target.
The output would be a set of ranges. Just like the weather forecast you don’t know until the forecast is in the past, so there’s no such thing as 100%. But also, like a weather forecast you don’t need absolute certainty, you simply need to know the probability of rain on Saturday so you can figure out if you want to golf.
Right now human behavior plays a big role in sales forecasting. We have a number to shoot for and often we try to figure out ways to make it regardless of soundness of our reasoning. So we assume deals are going to close even if it means we have to ignore telltale signs of trouble until it’s too late. But imagine using modeling and analytics to evaluate your company’s position in each deal. The model can tell you the warning signs because with analytics it can tell you how closely any deal fits with the model’s known history of success. As with weather forecasting there’s no value judgment just a probability of rain. Managers still need to apply their reasoning. But armed with this kind of knowledge sales people up and down the organization can evaluate scenarios constructed to make their deals match up with the ideal.
Here’s a trivial example. A company I know has a sales process, which is a model itself, which at a certain point has the rep meeting with a key decision maker. If the key decision-maker is not onboard they know the chances of getting the deal done are greatly reduced, so the meeting is an important gating factor. Yet, time after time, reps skip this step. Perhaps the coach in the deal reassures the rep that the decision-maker has already approved, or maybe the decision-maker doesn’t have time to see the rep, or any of a hundred other reasons.
But it might be hard for management to discover this, if for instance, the rep simply indicates on the forecast that the deal is at forecasting stage. A manager with 5 reps each working 50 deals in various stages might not have the time to go through every piece of deal data so the mistake would get through but it wouldn’t improve the forecast one bit.
Now, take a more scientific approach. The sales process stage is one of the variables in the model that the company uses to evaluate deals. More importantly, the business applies analytics to the deal data rather than expecting managers to review all of it. Analytics would have no trouble spotting the incomplete deal stage and would down grade the forecast appropriately. A report would then show the variance between the forecast and the model.
If you apply this logic to every deal in the forecast then you have that range of probabilities that weather people rely on to tell you about Saturday’s conditions. More importantly, and unlike a weather report, the forecast is also prescriptive because it shows you how you can improve it. Get that meeting with the decision-maker if you want to close the deal!
Mark Twain once said, “Everyone complains about the weather but no one does anything about it.” If you’re tired of complaints about sales forecast accuracy, consider building an accurate model and applying analytics. It works for the weather.
Salesforce Wear and Making Sense of the IoT
First of all, is it too much to ask if we could go back to three letter acronyms or whatever these things are called, that are all CAPS rather than things like IoT? You know what I mean and it’s a slippery slope. First we had SaaS and who knows how many other things of the general form XxX and my pinky is having whiplash. Sheesh!
Ok, seriously let’s talk about the IoT or the Internet of Things. The reality is that we are wiring up just about anything that moves with one kind of sensor or another and sticking it on the Internet so that it can surreptitiously upload data to a mother ship whose job it is to crunch all that data. Good, I get it.
Sometime around 2008 when you were paying attention to the financial Armageddon the number of devices on the Internet quietly surpassed the number of humanoids on the planet and the number simply keeps growing. But here’s the thing that might lead to greater understanding. What’s happening is not some gratuitous exercise in demonstrating personal smarts — look at me now my freezer is on line! No, no, no.
What we are really seeing is the early stage rollout of two (count ‘em) new things we’ll call Internets because that’s what we do when some linguistic trick works — quick what does the suffix –gate mean? I rest my case. If you think of the original Internet as the Communications Internet, then the new Internets will actually be synergistic networks of logistics and energy, or so says Jeremy Rifkin in his new book, The Zero Marginal Cost Society — The Internet of Things, The Collaborative Commons, and the Eclipse of Capitalism.
Now, everybody since Karl Marx has been predicting the decline of capitalism but here it still is. Since I am not an economist I will let you read the book and make your own determination about a 250 year-old economic theory based in pin factories and rents. Like I said, when something works we tend to stay with it.
But where Rifkin talks about the IoT, I think there’s a lot to pay attention to and it will help in making sense of the seemingly bizarre array of new devices that all have the common feature of sending data across the Internet but for vastly different purposes.
A device like Google Glass can be seen as a content consumption device (with some capture too) and so it fits nicely into the Communications Internet. But what about the home thermostat that you can access from your phone to crank the AC before you get home? That device might use the communications grid but it is more properly a part of the Energy Internet and this analogy can be carried through to devices that control how and when your solar panels will sell power into the grid for example.
Finally, the Logistics Internet would include the famous sensors on jet engines that report on operating metrics or packages that let you know where they are and when they’ll be where they are going. The combination of these three capabilities is forging a new economy according to Rifkin, one that can significantly reduce the costs of production to ridiculously low levels, hence the title.
As you can see from the examples I provided, we are already well on our way to evolving the Energy and Logistics Internets. The original Communications Internet took about 20 years to reach full bloom but you know how these things go. With the head start the other two ‘Nets have, it won’t take another 20 years to fully deploy them.
That’s why Salesforce’s announcement of Salesforce Wear is so important. ‘Wear is an app development environment for all of the different devices of the Internet trio we seem to be evolving. As usual, Salesforce is deploying technology early burnishing its Blue Ocean credentials but in the process, there’s a lot that’s being left unsaid, like why do we need apps for all these devices? The simple answer is that the apps will populate not just the IoT but the Logistics, Energy, and Communication Internets.
Wear is a good term to get started with since wearable computing is the tip of the spear of the IoT; it’s the most obvious part because, let’s face it, none of us has a jet engine hanging around the house that needs sensing. At the same time though, we need a bigger discussion about the evolving Internets otherwise, business may not grasp the importance of either ‘Wear or the IoT, not to mention the trio of Internets.
In my mind, the social revolution is just about over. The social infrastructure is built out (though the business model needs work as advertising revenues continue to drop) and further refinements will need to wait for the other two Internets to catch up. Some people are offering the customer experience or customer engagement as the logical successors. But each of these ideas lacks the fundamental understanding of the importance of devices. Increasingly the consumer will be the devices I own and my experience will be predicated on how well you engage my devices. In real time. Across all three Internets.
Salesforce Wear, What Does That Mean?
Wearable computing hove into view in a big way yesterday when Salesforce.com announced Salesforce Wear, a capability that enables developers to build new apps for teeny tiny screens and devices that you, well, wear. Wearables is a market poised for takeoff. Last year, for instance, Apple cornered the world markets capturing all the copyrights to “iWatch,” which I think was not a coincident. And let’s not forget the things that are not worn but which simply exist through sensors on the Internet of Things (IoT).
But what does wearables as a class of devices mean? It’s time we began asking hard questions because if Say’s Law (supply creates demand) ever had any applicability it will show itself in this still emerging market and we really want to get demand right. There either are, or there will shortly be, wearables for your wrist, your neck, and pocket. Each does something different and each will need software so the question about the killer app, not seen for real since early laptop days, seems to be relevant again.
More importantly, though, you can’t answer that question until you also ask and answer questions about what we’ll be doing with wearables. The long evolution of technology beginning with the mainframe is a story of ever more personal and relevant information. Mainframes automated back office functions, PC’s, laptops, and networks automated rank and file workers and ignited a productivity explosion. Handhelds made us social and computing personal in ways that had never been done.
Wearables is a different kettle of fish. You’ll notice right off that at least this generation of wearables is not intended to do every compute function. Wearables seem to be context specific so a device might monitor your vital signs, but not your golf swing and vice versa. Or something like Google Glass will deliver needed content to your cornea but it won’t help you get into a secure zone.
So very quickly you can see that wearable computing as a class has a great deal more complexity to it than any of the preceding generations of computing. That makes developing for individual platforms challenging and building development tools that can address all of the form factors and their uses, even more so.
Heck, just imagining the potential uses for wearables is a challenge so I was glad to see that Salesforce didn’t just say, come and get it with some half baked developer tool designed to enable you to recreate your GL on your wrist because that would be a complete non-starter.
Instead, Salesforce did some smart things. First, they made available some reference applications based on their developer pack. The apps showcase a number of innovative business use cases that won’t exactly be second nature to you unless you are an oil rig worker needing to fix some complex bit of technology (yes, there’s a reference app for that). Second, they made these reference apps available as code for anyone to see, evaluate and modify in an open source way. This will help speed the adoption of Salesforce Wear and identify missing components and new opportunities.
Finally, Salesforce is not limiting their deployment to a small number of devices, they’re casting a broad net in an attempt to support the fledgling market. Imagine if Microsoft had done the same thing with Office when the iPad was first announced.
There are other things in the announcement that I think are not only cool but needed to make the product take off — like security in the form of 2-way identity flow to keep you from having to constantly re-log-in — what a hassle that would be on a small device. Also it goes without saying that these things all need to connect with one or more mother ships across the wireless web before the internet providers try to chop up this last bit of the public commons.
So that’s that. Now, what does this mean? Are wearables just another kind of hardware that we can use for checking email? I definitely hope not. Wearables represent a new approach to being in the world and as such their applications and the business processes that they support have not been fully figured out yet — and we’ll be saying that five years hence too.
Wearable computing is a new, new thing, a paradigm being born and because it is, its success will be as dependent on a killer app or three, as the laptop depended on Harvard Graphics and later on PowerPoint. Understanding this drives the next question. What kind of world will we inhabit that drives the development of these apps?
Without getting all Kurzweillian on you the permutations can be very interesting. Wearables can deliver content, take your vital signs, prove your identity, and follow your motion just for starters. The implications for me are that wearables will support more independent yet thoroughly connected life styles. If handhelds enable us to be connected from anywhere to anywhere at any time, then I think wearables will enable us to optimize that existence with presence.
So, application development for wearables is a big deal if you ever expect to do more with that fancy watch than tell time and check basic Office functions. But it also marks another turning point in which technology will become a part of your extended life.
Sometime in the not too distant future we will all wonder aloud not only at how we ever got along without wearables, we will also wonder why it took so long for us to fully realize the vision of the 1960’s era Star Trek show.
Zuora Swings for the Fences
Tien Tzuo, CEO of Zuora, gave the speech of his life today, one that Satya Nadella, CEO of Microsoft should study for its content if not its style.
Tzuo’s company Zuora, started the subscription billing market back when billing was a big and the only deal that SaaS and other subscription companies had to think about. But over the last few years Zuora has built out a product line that supports a vision of a changed marketplace dedicated to the values of what futurist Jeremy Rifkin calls the “collaborative commons.” In the commons it is more blessed to borrow, share, rent, and, yes, subscribe, than it is to buy, own, and hold.
Tzuo has been the leading proponent of an economy based on subscriptions and today’s speech will be seen as a turning point that took the subscription economy to the mainstream. If anything it was a victory speech, a time when Tzuo and his band of brothers and sisters could say, “See it worked.” But it was also a time that rededicated Zuora and its people to a greater vision of a subscription culture. Tzuo acknowledged as much even if he hasn’t used the words yet when he announced three new directions and offerings that will enable subscriptions’ glide into the mainstream.
The three major initiatives which will be detailed in tomorrow’s keynote include a Subscription Academy to teach the basics of subscription business to anyone who wants to engage including huge enterprises and startups as well as their people; subscription business blueprints which will help conventional businesses the clear the sizeable hump that all existing companies face in getting their conventional models into subscriptions; and finally, a community of subscription ninjas who will help to do what communities do best — share ideas, how to information, and paths to success.
Tzuo also introduced a new term for our business, RBM or Relationship Business Management that unites back office subscriptions with front office customer centricity, which has been a long time in coming. We saw a glimpse of this in Zach Nelson’s keynote at SuiteWorld a few weeks ago. NetSuite, Nelson’s cloud ERP company, is now making moves to inject back office data into the customer centricity, customer engagement mix but for my money, NetSuite is still a bit more tethered to conventional ERP, and Zuora is all about new era accounting and finance. Both get to roughly the same place given enough time but in my view Zuora might have an edge that synchronizes with ERP, even NetSuite but is not ERP.
Regardless, juxtapose this with Microsoft and an article from yesterday’s online Wall Street Journal in which Christopher Mims offers five advice points to the Microsoft CEO under a headline of “Advice to Microsoft’s Satya Nadella: Be More Brave.” I can hear Sara Bareilles warming up right now.
Microsoft is a company squarely in the zone Tzuo spoke of in his keynote, old by contemporary standards and more important, old by business model. Dealing with products sun setting and customers migrating away to other vendors; a company with a diverse product line that has lost its theme.
For me the most dramatic part of Tzuo’s keynote came when he invited David Wadhwani, SVP and GM of Adobe on stage to talk about his company’s gut wrenching switch moving its wildly popular Adobe Creative Suite to a subscription model from a conventional software licensing model. Talk about being brave, Adobe isn’t even a Zuora customer that I know of, Tzuo was swinging for the fences looking for the best ideas he could find and it was a good move.
The drama came when it was disclosed that Wall Street had an instant allergic reaction to that particular bit of Adobe news and investors began voting with their feet. Actually the drama came just after that, when the markets had closed and NASDAQ called the CEO to ask if it should suspend trading in the stock next day. That was enough to make anyone do a rethink but the answer was not simply damn the torpedoes, that would have been too easy. The answer was transparency and communication with employees, customers, and the financial press to deliver a message and a vision of a greater Adobe, one that was focused on customers and a better value chain with solid roots in the subscription culture.
It was one of the best stories I’d heard at a keynote and I’ve been covering these things for a while. Heck, my career as an analyst goes back to the foundations of the subscription economy, come to think of it. At any rate, that’s the message Nadella and most conventional business leaders need to hear, internalize, and evangelize. It’s the message of a new economy, new ways to market, sell, and service but also, new and more collaborative approaches to dealing with customers. Every recovery is led by a new, new thing and I think the subscription culture provides that.
