The Content Bubble and the Greater Fool
Not long ago a vendor asked a friend of mine to speak at a conference. Analysts speak at conferences all the time so the request was not unusual except in the conditions attached. There would be no compensation for the effort and the analyst would need to provide transportation and housing out of pocket. So the invitation was a money-losing proposition from the get go. I don’t know if the offer was accepted. There are times when an analyst might speak for no fee such as when plugging a book. But this was different, the vendor had the budget to pay for the service but just chose not to.
This happened around the time that Taylor Swift had her now famous disagreement with Apple over its attempt to recruit new listeners to its streaming music service. You can read the New York Times article about it here. Apple planned to offer 3 free months of service to new subscribers and intended not to pay the artists for the use of their music.
I wasn’t a Taylor Swift fan before because I am not very musical—I need a permit to carry an iPod. But I’ve become one because of Swift’s classy approach and principled stand. In her open post to both fans and Apple on Sunday, Swift explained that she was pulling her latest album, 1989, from Apple so that it couldn’t give away her work for free. There was no ranting, no cussing or questioning anyone’s parentage or species—just cold hard facts. I thought that was just right.
Artists earn a living, or at least try to, by making art for sale in the marketplace. They are quite comfortable with letting the market decide whether and how much to pay and sometimes that’s nothing. You can say much the same for any content provider. But such decisions are personal and not corporatized–appropriating a product and making money on it without paying the primary producers has become a form or legalized (so far) theft. I see Swift’s principled stand and my friend’s speaking invitation in a similar light.
The logic—if you can call it that—behind appropriating content without paying for it appears to be a variant of, Hey, we’ll make you famous and you can charge big next time. But next time never comes. It’s really the logic of an economic bubble and it sometimes goes by other names like the greater fool theory. Ten years ago speculators paid silly prices for real estate because it was assumed that there was a bigger fool out there ready to pay even more when you flipped the property. Every bubble has the greater fool at its core and, as we saw with real estate, it works really well until it doesn’t work at all.
I think a version of the greater fool theory is invading the analyst space. Well-paid PR firms chase analysts to take briefings from companies that pay for the PR consulting but not for the advice they get in the briefing. They very often don’t engage further than the briefing.
They seem to think we’ll look so prescient if we just write about this up-and-coming company that others will want to pay for our sage advice later. As we’ve seen others try to recruit speakers at their conferences stating up front that they won’t pay anything and that your travel expenses are yours. But consider all the exposure! The obvious problem with the greater fool theory is that it eventually ends—the music stops and the greatest fool is always left holding the bag.
I hope my friend turned down the speaking gig, I haven’t asked. Speaking for no fee is one thing, we all do it especially if there’s something real but intangible involved. For instance, I speak at CRM Evolution every year for no fee and I write a column for the magazine too. But my expenses are paid for and the magazine really has set itself up as one of the arbiters or real information about CRM. In this case our interests align because we’re both in the same business trying to disseminate information about CRM. The vendors I’ve described are, to put it nicely, looking for an endorsement.
The music business is such an economic wasteland today that songs are not being written and people are looking elsewhere to make a living. But the opportunity to write those songs will not come again. To my mind this is a dangerous time in the content business because fewer and fewer people are making a living and that’s true anywhere a form of content gets made and distributed whether in publishing, blogging, or music and it’s always been true in acting and visual art. There’s an old saying: if you can’t make money at your business then you don’t have a business, you have a hobby. What happens when we have an economy of hobbyists?
The Mouseless Era
Like driving on the interstate, you can cross boundaries without noticing but after a while you just know you aren’t in Kansas any more. I had one of those moments the other day talking about mobile technology. It occurred to me that calling what we do on devices “mobile computing” was just wrong, at least linguistically, but also I think conceptually and that’s important.
Mobile has always meant a few things but mostly it implied some user at the periphery of a wireless network tied into a central server/database/hub. It was more of a master-slave relationship where the mobile user could use some but not all of the functionality available because it wouldn’t all fit on the small screen or small device. The implication was that the mobile app was a subset of the app that ran on desktops and laptops.
Gradually, mobile came to mean whatever you did on a mobile device with the understanding that devices were wireless and the apps you were using resided in a browser. It was cool stuff but over a short time, browsers have been pushed aside in favor of apps specific to a task. At some point, and I think it was when we went from web browser to app, we left Kansas and invented yet another kind of computing, which I am calling mouseless until something really sexy comes along.
A good example of mouseless computing can be found in the Salesforce Service for Apps announced this week. Powered by the Service Cloud, Service for Apps enables companies to embed customer service into apps running on mobile devices. The new designation does not come from where the apps run but what they facilitate and, to be clear, this mouseless computing is really about the ability to escape the confines of an office and a desk even if you never leave the building—perhaps especially if you never leave the building. An executive or manager with a device has the ability to run the business from the device, full stop.
There are five customer service channels or bits of functionality in the Salesforce Mobile SDK for Service for Apps that bridge computing, telephony, media, and social media and bring us to mouseless computing including: Chat; Tap to call; Knowledgebase; Case management; and a concierge service that the company continues to insist on linking with some form of disaster by associating the term SOS with it (Salesforce SOS for Apps).
A business can either build business-specific apps and embed Service for Apps into its larger CRM instances on mobile devices or it can add the Service for Apps SDK to existing business-specific mobile apps. How will this be used? Here’s what I think.
We call them apps but they are also the business ends—or customer ends—of specific processes designed to make life easier for customers. These embedded apps enable a vendor to let the customer decide when it might be necessary to step out of a more common service or support process and ask for specific assistance from a live agent or get content such as video.
Anyone worried that this technology will create a moral hazard by enabling customers to over-use live help should relax, no one (okay, no sane people) elects to get help for fun. Letting the customer decide when to jump out of an automated process is highly enabling, it tells customers that the vendor trusts them enough to let them make the decision.
It also lets the vendor off the hook for trying to come up with, and program for, every conceivable service situation. Instead, it lets the vendor say, here are our service processes, which cover most of the contingencies for this company and its products. If you need something else, please use one of these modalities to get action. This offers the real possibility that no one (okay, no sane person) will ever sully your reputation in social media or a sentiment site again simply because they were unceremoniously kicked out of a service process because no one on your side ever considered that a customer could do something unheard of in your service app.
I can see this technology used every day though not for rote processes. Its utility might be best underscored in a highly technical situation where the customer might be up to elbows in complexity and needs to access deep expertise in a context sensitive moment. I can see customers using the video chat functionality to show a service person some kind of abnormality or failure, for instance. The concierge service (SOS) may be the best example because the idea implies a high-end service for a limited number of situations.
At any rate, this constellation of functions and how they are delivered has caused me to think that we’re in new waters, thinking differently again about the vendor-customer relationship and how to solve for the customer. Did you know I wrote a book about that? It’s now available in digital form at Amazon. I have to admit though, I never considered the mouseless angle but there it is.
Oracle Cloud Announcements
Larry Ellison
This is hard—moving a huge number of customers from on-premise systems to cloud systems while continuing to run the business. Hard but there are few alternatives. The last time anyone seriously tried to rip and replace was the Y2K conversion of back office systems to accommodate the new century’s date format. The effort nearly clobbered many companies.
This time vendors like Oracle have no interest in repeating the mistake so as they migrate their installed bases to the cloud, they are being careful to provide interim steps that lessen the load and the complexity though probably not the costs. In announcements made by founder, Chairman, and CTO, Larry Ellison, Oracle outlined a series of cloud services designed to help all manner of customers—from partners to enterprises—to migrate to cloud systems. But note here that migration does not automatically mean going to a multi-tenant architecture like Salesforce and many other vendors. For Oracle, moving to the cloud means only a literal translation from premise to cloud. Call it step one.
For many customers that’s enough because it will be a heavy lift moving from applications they may have been using for 15 or more years. The alternative would be to build new cloud apps on Oracle’s platform but that would take many years and dollars for some. The solution of moving the existing applications to the cloud and then contemplating a rewrite seems inelegant but in fact it makes a lot of sense. Many customers will realize significant savings by sending parts of their datacenters to the cloud—monies they can apply to new business process support.
Here are the services announced and my take on them.
Oracle Database Cloud—Exadata Service. This is very interesting because the Exadata hardware supporting this service is worth the price of admission. Exadata provides orders of magnitude speedups for most database functions because it operates in memory virtually all the time. So big reports, analytics and other database operations run much closer to memory speeds than disk speeds—in other words about a million times faster. That’s nice especially if you need to find more cycles to dedicate to data encryption for security.
Oracle Archive Storage Cloud Service. Archives are necessary and far from glamorous but somebody’s got to do it and I can see many enterprises happily paying whatever Oracle charges.
Oracle Big Data Cloud Service and Big Data SQL Cloud Service. If you need Hadoop and NoSQL databases in your enterprise, this is for you. Though this is another less-than-sexy service, its need is readily apparent for large enterprises and small. It’s also probably more than many will need but that’s likely to be viewed as a good thing.
Oracle Integration Cloud Service. Everyone needs integration services but it’s surprising to see this elevated to the scale of a cloud. Many other vendors get by with their platforms and APIs and that’s telling. If you’ve been an Oracle customer since green screens on a VAX days then this is something you might need to make sense of your less than third normal form relational DB.
Oracle Mobile Cloud Service. This is a developer tool useful in developing and deploying mobile apps. It sounds great but it begs the question, why can’t we just define apps once and generate running code for multiple target platforms? The answer is that some apps don’t have definitions that plug into code generators, they’re real code. So this is another tool for helping move and preserve what’s out there.
Oracle Process Cloud Service. I was very happy to see this because I think process orientation is where we’re all headed. The applications that are moving to the cloud in this migration and many others are built around capturing and manipulating data. But the future is about what you do with the information you glean from data that produces useful information about customers. This information will, among other things, enable businesses to better serve customers by being more intimately involved in their moments of truth resulting in bonding, the holy grail of modern business. This service is the tip of an important iceberg and it provides justification for all of the other services.
All together the Oracle Cloud Platform and Infrastructure services present a vivid picture of the state of modern business and computing. There’s a huge legacy base that has to keep working even as it is being moved. You could sniff that Oracle is enabling the legacy systems to continue operating rather than replacing them en mass but that’s an impractical idea.
The announcements Ellison made show a customer centric company focused on helping customers make generational transitions safely and economically. That might not be your first conception of Oracle. Yes, they will make money on this—I am a big fan of the motivation possible when money is involved. For many companies concerned about betting their business on new technology (been there, done that, got the scars and the Tee-shirt) this should be seen as a gradualist approach to the last generational transition of their working lives.
Taking credit for the sunrise
If you read a lot like me, you might notice almost daily there’s a new study that contradicts some earlier research. Something causes cancer then it’s good for you. You know the drill. What’s going on here? Do we simply not know what our research is saying? Can nobody correctly interpret the data? None of this would mean much to CRM except that with the advance of big data and analytics, the front office, i.e. the relationship between vendors and customers, is coming to resemble many other endeavors that rely on data analysis. Here is my take on all of this.
Correlation
Very often the research we get in the popular press and in business interactions represents the findings of correlation studies. Simply put correlation tells how strongly two events are to one another and it takes some sophistication to understand.
We can think of correlation as probability but we need to understand what it means. A coin toss has a 50/50 chance of coming up heads or tails (.5 probability). So 50% is exactly neutral. If something had a 30 or 40 percent chance of happening, it would be negatively correlated. In other words, the probability of something not happening would be greater. However, a 30 or 40 percent chance of something happening is not zero which is why we still get rain on days when there’s less than a 50 percent chance of it.
So, a probability of greater than 50 percent is what we’re usually looking for and the higher the number the better the correlation. A 90 percent probability is interesting but 60 or 70 percent—not so much for reasons that are obvious by now. Still a 90 percent correlation is not a sure thing and using the weather analogy, we sometimes see sunny days when rain has a 90 percent chance of occurring.
In business, we’re beginning to use correlation a lot but that disappoints many because correlation alone won’t tell us another important part of the story, causation.
Causation
Causation is the reason behind the correlation. It’s the data that, added to the correlation data, will provide the necessary information on which to make a decision. So, for example, a sales person evaluating prospects might look for high correlation between a prospect’s need profile and the vendor’s solution. That’s a good start but it’s missing something very important. It says nothing about the prospect’s motivation which might only be found through more traditional means like making a sales call.
What? Correlation isn’t enough? Consider this—at the correlation level a prospect in need of a solution looks just the same as one that just bought something from your competitor. Causation in this case is another word for a buy signal and if you look at buy signals and not just correlation a customer that just bought will look very different in this one dimension than one still looking.
In sales and marketing analytics we’re mostly focused on correlation and that means we’re far from foolproof in our predictions. I am not trying to get on anyone’s case but the fact that we’re so vested in correlation simply tells us where we are in the lifecycle of analytics as applied to CRM—there’s more work to do.
Another way to look at the situation is through the lens of qualitative vs. quantitative data. So far I’ve been focused on quantitative analysis like getting those 90 percent signals. Very often when we’re dealing with quantitative findings we’re looking at correlation data. Finding causation requires more sophistication but it is often qualitative findings that tip the balance. Interestingly, you can develop quantitative findings over qualitative findings but it takes a little more work. You need to ask questions differently and you might need to score the answers to get a quantifiable result.
Finding causation starts with asking open-ended questions. In my book, Solve for the Customer, I use the example of creating a new candy bar. The quantitative approach might ask about preferences like do you like coconut, prefer milk chocolate or dark, peanuts, almonds, pistachios, nougat—the possibilities are almost limitless. At the end of your research you might have a very detailed understanding of how much your target audience likes various components of a candy bar but you wouldn’t be any closer to making something that would sell.
The qualitative approach is less sexy in many minds because it implies that you won’t get enough information to work with, but consider this. In designing a candy bar, it would benefit you a lot if you also asked open-ended questions about what people like most about them or their favorite memories involving candy bars, or how they fit into a person’s day. Those questions are almost limitless too and the answers would surprise you and possibly tell you a lot about unmet needs in a crowded market.
If you don’t believe that’s useful, consider the story of Howard Moskowitz. Back in the day there were two competing makers of jarred spaghetti sauce Ragu and Prego. Prego was the perennial number 2 in the market and wanted to take the lead and they hired market researcher Moskowitz to figure out how. At the time there were also only two kinds of sauce on the market, plain and spicy. That’s it, just two. Moskowitz hired chefs to make what was ultimately 45 kinds of sauce, many with chunks of things in them like tomato, meat, and other veggies.
Moskowitz discovered that about one third of the American public wanted chunky sauce but incredibly, there was none on the market. Previous research was concentrated on getting quantitative answers to questions about existing choices, which can be boiled down to how do you like our sauce? There were no open-ended questions about what caused people to like spaghetti or Italian food. The Moskowitz taste tests provided the open-ended questioning leading to discovery of a new market that’s been worth billions ever since.
My point in all this is that you need both quantitative and qualitative information to arrive at correlation and causation if you hope to understand customers. If you’ve embarked on an analytics journey that’s great but keep looking and formulating your strategy. Buying a single product is definitely not the end of the journey but a beginning. If you’re a vendor, don’t make the mistake of thinking that your single product is the final answer to market need. It’s a stepping stone and you need to position yourself accordingly.
Salesforce 500
On the strength of its latest earnings, which placed Salesforce’s revenue run rate at $6 billion annually, Fortune magazine came calling with another accolade for the cloud software maker—membership in the prestigious Fortune 500. That’s the list of the 500 largest companies in America. There are other lists that take a more global perspective but this is a good place to start.
The announcement has been long anticipated—I had been writing about its seeming inevitability for a couple of years. But when it happened, there was not much fanfare beyond a blog post on the company’s site dated June 5, and you’d be forgiven if you missed it. I did. Perhaps I’d become immune to the awards piling up that include,
- “Most Admired Software Company” Fortune Magazine, three years in a row
- “Best Companies to Work For” Fortune Magazine, seven consecutive years
- “World’s Most Innovative Company” Forbes, four consecutive years
And, for the third consecutive year, Salesforce was named the #1 CRM software provider in Gartner Inc.’s latest worldwide CRM market share report, entitled “Market Share Analysis: Customer Relationship Management Software, Worldwide, 2014.”
But there it is, the Fortune-five and at $6 billion, the company is more than half way to its goal of becoming the first $10 billion cloud company.
From this vantage point, the company does not appear to be easing up. The current Marketing Cloud show in New York is bursting with product announcements and tutorials on best use.
Salesforce has a bright future but also a few challenges. It has raised the level of competition by bringing a sometimes skeptical and reluctant marketplace into cloud computing and it has applied social media, mobility, and analytics technologies to great effect. Its next challenge appears to be getting customers to see the value of using all of its products and services—including its platform—in concert rather than settling on one or two solutions to specific old school problems.
The company’s formula for success in getting to this point has involved a great deal of persuasion through marketing, events, and leveraging all media and channels at its disposal to get past old school gatekeepers, along with a touch of humor. Continuing on this path should get the company to its goal but it will also continue to significantly reshape the marketplace including other vendors and the customers who use their products.
