App dev today
Last year I researched the impact of cloud computing proliferation on business. I know it sounds like a dry topic but if you are a CIO or an application development manager, the results can have serious meaning. In our study (Esteban Kolsky was my partner) we discovered that cloud computing has deeply penetrated the enterprise and SMB ranks and 46.3% of respondents said they had 4 or more cloud applications in use. Some have dozens.
So that’s great for the cloud because it validates what Kolsky and I (and many others) have been saying for more than a decade. The cloud is just flat out a better way to deliver application functionality at a reasonable price to a growing universe of companies.
Of course, there was an underside side to the results as well. With so many cloud apps in use, many IT departments found that one of their major responsibilities had become developing and maintaining integrations between many separate clouds. Of course the integration technology available today is quite good making cloud integration straightforward but it’s not free of effort. When something changes in one cloud app IT staff are often compelled to understand how the change ripples through the rest of the company’s cloud infrastructure.
Apps built on the same platform have an advantage because a common platform provides standards that make communicating between them easier; nonetheless, developers still need to patrol the interfaces. Additionally, while the population of cloud apps on many platforms is large and growing (they’re referred to as ecosystems), it is still finite and their granularity or fitness for a particular business purpose is variable. But also, at the very smallest level, an off the shelf app will still need some editing, tweaking, or customization, if you can find an app that’s close to your need, that is. When all else fails, lines of business have resorted to spreadsheet apps, which often bring more trouble than they are worth.
One of the inescapable conclusions I draw from all this is that we need better ways to ride herd on all our cloud apps with far less effort. But by extension businesses also need more than individual cloud apps, more than integration services, and even more than high-level standards or advanced development tools. If you’re a business today and you are trying to keep up with user requests for new or revised cloud apps, you really need a standardized app platform with tools that you can standardize on and that works well with the rest of cloud-land.
Ideally, there should also be a universe or library of app specifications that you can download and trade so that every development project, no matter how small, doesn’t have to start from scratch. Notice the use of specifications because code should be generated, not written. We’ve seen this before with code libraries but I’m thinking that code won’t work if you’re trying to address the needs of line of business users, many of whom don’t write code. Those users need a simple facility that lets them describe in a non-procedural way the apps that support real world business processes. Having an accessible library of apps also means that there are potentially no app requirements that are too small for IT meaning that we can seriously consider eliminating spreadsheet apps.
Now, you might think that this has always been the case and that we’ve always been striving to have enough useful software to run our businesses, so what’s the big deal? There are two simple points. First, not having enough of the right software that’s easy to use and maintain has been a drag on business historically but all businesses grew together more or less so the drag was a relative burden and not absolute.
When there was no CRM we got along with a variety of paper files, faulty memory, and spreadsheets. But once CRM became available it was such a step forward that virtually every business simply had to have it. The second point is this: the so-called digital disruption has entered a new phase in which businesses will need all kinds of software functionality to advance. But there isn’t enough software on the shelf to satisfy the demand and old-fashion approaches to developing and maintaining it are already insufficient and that situation is only going to get worse.
To net this out, what Esteban and I saw in cloud computing last year is really just the beginning of a strain that will rupture the current software paradigm. What comes next has to be better, faster, and cheaper and no, you can’t pick just two out of three.
Zuora moves to the center
Zuora, the company that made its bones in subscription billing and payments held its annual user meeting in San Francisco last week and staked out some new turf. It had always been back office focused but its latest messaging includes elements of the front office. Perhaps it’s no surprise given co-founder and CEO Tien Tzuo’s history of having been an early luminary at Salesforce rising to the CMO position before he left.
The new turf straddles the two worlds we’re most accustomed to dealing with, the front and back offices. This area, let’s call it the middle office, takes data from either side, changes it, and passes it onto processes that go in both directions. Among the applications that act this way are compensation management, subscription billing, customer success management, and possibly HR. But each application area does different things for different reasons.
Compensation management
Xactly may be the best example of a pure play comp system though certainly Callidus Cloud should be included. Sales incentive compensation used to be a pure back office thing because it tallied up sales and applied some algorithms then cut checks. But today, comp management is also about motivating people within an active quarter by identifying best opportunities and ensuring appropriate resources are applied. For this, the marketing and sales automation data is useful and derived information is fed back into SFA. That’s a long way from pure compensation.
Subscriptions
Of course you need to make the subscription bills accurate and get them out efficiently, but these systems throw off huge amounts of customer data concerning uptake and use which are valuable in helping to sniff out early warning signs of disaffection, churn, and attrition—all things to avoid if you are a subscription company. It is in this area that Zuora is making a bigger footprint thanks to its acquisition of analytics company FrontLeaf last year. The subscription data run through analytics can easily kick off processes that use billing, sales, and service, another front to back situation.
Customer success
Full blown customer success takes a page from subscriptions by capturing subscriber data and marrying it to other client data to produce compound metrics that can give managers a better understanding of how well a business is doing with the customer base. This area might see renewed competition with subscription billing vendors in the months ahead.
HR
Long associated with payroll and mainframe back office systems, the HR or HCM systems today are lending their data and insights to front office processes like field service and professional services automation influencing deal structure, reporting, and more.
We could also easily add CPQ to the list too because back office catalogs, price lists, and pricing algorithms come to the service of SFA via CPQ to close better deals.
So all of these application areas are staking out positions that are neither fully back office and certainly not fully front office either. They are opening up new territory and that is potentially very exciting because the other territories are rather full of settlers and we need somewhere else to occupy.
I don’t know what to call it but that will come and I hope we avoid something as cliché as the middle office. This new area strikes me as another dimension. We’ve talked about systems of record for a long time and those systems belong to old school front and back office systems. But the new territory embodies more of what you’d expect from a system of engagement, a system that leverages all of the data businesses collect and actually turns it into unique and valuable IP.
That’s what struck me about Subscribed last week. In so many words Zuora said we’ve done a pretty good job since 2007 of building a solution to the subscription billing problem. But now there are other challenges.
Sales compensation added several important business processes once businesses were able to take their eyes off of the quarterly challenge of writing commission checks quickly and accurately. Incentive comp became all about doing the right business and boosting profits through being more intelligent actors in the market.
I think something similar will happen with subscriptions. Now that the billing and payments issues are resolving Zuora is training its guns on pricing and packaging. Think about it, when your products are more or less electrons, innovation can easily happen around how you package and price and it can happen at much faster rates than we see in traditional product development—if you have agile systems.
This is why the emerging middle ground is so important and why it’s one more thing to keep an eye on even if you’re not an analyst.
Can you accelerate a sale?
I haven’t sold for a living in almost 20 years but then again as an independent analyst I am always selling my ideas. I’ve also studied selling for a long time both as a rep and now as someone who tries to understand how we apply technology to a very human-to-human process; I think my opinions are well informed.
Something crystallized for me in a recent briefing meeting I was discussing sales acceleration with a CEO. I’ve long thought that sales acceleration is not only an archaic term but also a dangerous delusion that could prevent greater sales success. It’s an idea you might be familiar with if you read this space occasionally.
It’s my position that sales acceleration has seen its peak and has been declining as a driving force in sales management for many years. Certainly there are many, many people and organizations practicing a form of acceleration and there are more than a few software vendors poised to assist that effort. But as a practical matter the attempt to accelerate to me is like pushing on a string. That’s because there doesn’t seem to be much left to accelerate.
By necessity most acceleration happens on the vendor side. So we have all sorts of ways to reduce latency in vendor processes and actions. We speed up configuration, pricing, and quoting so that we can put offers in front of customers before anyone else can. Or we use the latest social media tools to be in the moment with customers whenever they have questions or even stray thoughts. But there hasn’t been much change over many years in what customers do. They take in vendor information and process it as they must and reach decisions, even deciding not to decide.
Customers’ deliberations are not guided by much more than spreadsheet analysis and decisions arise from thinking about the collected information from various sources. So I don’t think there’s much further to go in actually accelerating because I don’t know how you speed up the way other people think.
Acceleration is a relic of a much different time. In 1911, Frederick Taylor published his famous time and motion studies and inaugurated the age of acceleration. But Taylor’s goal was to eliminate wasted time and motion in manufacturing processes, to get humans to function as much as possible like the robots that have continuously replaced them over the intervening century.
Taylor’s efforts gave form to the industrial age and time and motion became cornerstones of business processes everywhere whether or not they were appropriate. Perhaps selling is one of those areas. Efficient selling has been a goal for a very long time and at first there were many efficiency gains to be had. Giving telephones, cars, computers, among other things, to sales people gave them the ability to reduce the inherent latency of selling. Today we’re at an intersection point of two important trends going in opposite directions. The drive to make selling more efficient is heading south while the need for reps to intuit, empathize, and adjust to customers has never been greater.
If you look at the sales tools that have been released in the last decade, most of them (certainly not all) aim not at efficiency in the Taylor sense, but at capturing various forms of data that enable better understanding of customer situations so that reps can focus their time and attention on the deals most likely to close. In effect, this has provided the ability to accelerate revenue if not individual situations because the automation we have makes it possible to keep tabs on many more situations. The net effect is more predictable revenue even if it doesn’t do much to accelerate a specific deal.
This is all very good but it brings into high relief the place of efficiency and acceleration in modern selling. Why are we still banging on the efficiency and acceleration drum? My thought is that acceleration has become a meme; something each of us inherits as sales people. It’s a bit of social genetics that we don’t think much about because, hey, it’s groupthink.
But I’d suggest that two things are happening. First the concept of acceleration is morphing to be more about revenue acceleration than about deals, which therefore accommodates the new reality. Second, at some point we’ll realize the gap between what we say and what we mean and we will adjust selling to better reflect the realities. If that happens across a broad swath of the profession it could usher in a new golden age.
Fake loyalty
Tien Tzuo, CEO of Zuora, wrote a post for re/code that was so good it deserves broader circulation. While the focus is on customer relationships in subscription businesses, it’s also about loyalty and having just written a book about customer loyalty (available next month), it resonated with me.
My research is full of old style approaches to customer loyalty that, shall we say, aren’t really about loyalty so much as they are about customer coercion. You can coerce a customer into being loyal, what I refer to as performing loyal behaviors, but they don’t exhibit true loyalty. Customer loyalty should be about inspiring customers to defend your brands, to preferentially seek out your products, and to buy them even when they aren’t discounted, have a coupon attached, or involve the award of so-called loyalty points. My research found that customers who behave loyally because of such inducements are easily attracted by the next enticing offer so their loyalty is often more closely associated with the discount or reward than with the brand.
A great example that Tzuo explores, and that I had overlooked, is called the “negative option” an arrangement that keeps you exhibiting loyal behavior as long as you fail to cancel a service or promotion. The negative option is something of a relic but you can still see it operating in the market today. Tzuo uses Columbia House, the now bankrupt vendor of music and AOL as examples and they’re really good ones.
If you are too young to remember Columbia House, then good for you. The basic offer was some large number records, tapes or CD’s for a penny as long as you agreed to be a member and receive a monthly shipment until you’d bought an equal number of recordings at full price. After that point you could cancel the service but human inertia often prevented or delayed that event. As a result people appeared to be loyal but weren’t. They were trapped.
Even today according to Tzuo, AOL has 2.1 million subscribers to its $20 per month dial-up service. As he says, “These AOL customers surely aren’t shelling out for the ‘convenience’ of their painfully slow dial-up service.” He’s right, too, having a dial-up account today is likely more habit for most people, though it’s also possible a few still don’t have cable where they live.
The negative option lives on in the subscription industry in the form of automatic renewals from month to month as long as a credit card stays active. In these circumstances, customers who appear loyal to the negative option might not be using or otherwise engaging with the vendor despite what appears to be loyal behavior. Businesses in this situation have a ticking bomb on their balance sheets for while the revenue is good, it can disappear at any time and at some point, the negative option practice will generate a good deal of bad will toward the brand.
Companies like Totango, Gainsight, and even Zuora use their analytics and large customer datasets to understand customer behavior and to spot true loyalty as well as the warning signs of its opposite. Vendors are becoming more aware of the problem of the negative option and more generally, customer behaviors that appear loyal but which might represent inertia or laziness so that they can head off unpleasant surprises like a spontaneous social media campaign that damages a brand.
The rise of the subscription economy and its culture has placed a bright spotlight on issues of customer retention, engagement, and loyalty. The days when you could sell a product set for a lot of money and move on to the next prospect are ending and being replaced by various forms of subscription and the requirement for greater customer intimacy. But the negative option is from another time and ought to seem out of place today as we focus on retention, subscriptions, and customer intimacy regardless of the markets we serve.
What was most interesting to me from researching my book was that customers aren’t necessarily interested in amazing experiences that cause delight. Delight is another fad that’s come and gone or should at least be on the way out. Very often customers want and expect simple basic competency and effectiveness so that they can get on with everything else they have to do. This in itself is great insight because it shows that inspiring customer loyalty is within anyone’s grasp if we simply avoid creating a circus and focus on what matters most to customers.
Please hold the music
Remember when your mother used to yell up the stairs to get you to turn your music down? Sometimes, in the age before sensitivity awareness, dad would do the yelling and he’d substitute noise for music. Ah, the good old days. Too bad they aren’t here right now yelling at vendors.
ConsumerAffairs.com is the brainchild of James R. Hood a former Washington, D.C. journalist and public affairs guy. It’s website says the org is located in Lake Tahoe, so I’m just guessing that it’s the retirement project for Mr. Hood. At one point before writing that last sentence I thought perhaps retirement project is a bit harsh but then I remembered what I was actually writing about and decided that retirement project might or might not be correct but that the research just published might suggest a person or organization with, shall we say, time on his hands. Incidentally, much the same can be said of me since I took the bait and wrote this. Whatever.
ConsumerAffairs.com did a little project to compare and contrast hold music at some major corporations. That’s right, they called up, got put on hold, which is not hard, and recorded the music and then wrote about it. I write about it because I see it as my duty as a CRM analyst, which is my job and not some dreamed up project, so there.
That said the analysis is surprisingly insightful but perhaps not all that surprising when you think about it. Hold music is part of product dress, which is a legal term for the accouterments of a brand that are not exactly the brand and that may not be independently branded, trademarked, or copyrighted. The example I have heard is the Coke bottle. I do not believe it is copyrighted or trademarked but it is part of product dress and nobody even thinks of copying it.
In the long running legal battle involving smartphones and billions of dollars pitting Apple against Samsung, part of Apple’s complaint had been that its competitor used some of the iPhone’s product dress in designing its smartphones. That’s product dress and in my mind, hold music is part of a brand, so choose it carefully.
Coke vs. Pepsi
At any rate, let’s look at a few examples, first up is Coke vs. Pepsi. Coke presents itself as the market leader and above the fray by providing classical music. I don’t know what pieces the company plays, it might have been Vivaldi or Hayden or Handel, but the music was mostly strings and soothing. By the way, this is a good time to say what terrible sound quality all of the vendors that I sampled provided. All of the music sounded like it was being played through a washing machine.
On to Pepsi. This company has positioned itself as the choice of youth since John Sculley was driving marketing but what youth? Pepsi seems to be targeting people who remember the 1960s and ‘70s with a jingle sounding like something Nancy Wilson would do followed by a bad imitation of The Rolling Stones. Talk about covering your bases.
Home Depot vs. Lowes
This was interesting. Home Depot uses your attention while on hold to advertise. The clip I heard talked about their gift card, you know, so you can get exactly what you want. That’s what I want for my next birthday. Lowes defaulted to serenity and classical music uninterrupted by a voice. Perhaps the different positioning of the stores reflects blue-collar construction vs. home decorating even though both carry lots and lots of the same merchandise. Personally, I am bombarded with advertising all day and a chance to avoid it makes the choice obvious, at least for me.
American Airlines vs. United
Talk about Coke vs. Pepsi, the two legacy carriers’ music sound the same to me. American plays Adele’s hit “Love song” but the sound quality is so bad that whoever is singing sounds like she’s being drowned in that washing machine. United plays something that sounds like a supermarket circa 1970 and both airlines interrupt their music with announcements.
CVS Health vs. Sears Holdings
You might be wondering about the validity of this one but ConsumerAffairs.com lumps them together as big retailers. CVS fills more prescriptions in the U.S. than anybody and Sears is the icon of retail going back well over a century to a time when it sold through a catalog and rural free delivery, the equivalent of the Internet today if you think about it. CVS sounds like electric piano interspersed by soprano sax in some light jazzy riffs reminiscent of Kenny G. Sears sounds like an imitation of Herbie Hancock doing “Watermelon Man” or “Cantaloupe Island.”
In all cases the hold music sounds like it’s aimed at a middle-aged person like me. That’s no surprise when you think about it. Who else sits on hold calling into a contact center? Gen X-ers and Millennials might also pull out their phones but it’s to surf over to the vendor and make an automated inquiry.
So what’s this all mean? I think it’s proof of the importance of a multi- or omni-channel strategy in CRM. These vendors have a pretty good idea of who their customers are and the channels they use and that’s Job #1 when you’re trying to figure out what CRM to buy. So this was quite useful research even if initially it seemed fluffy.
