Ten billion
Salesforce CEO, Marc Benioff
Salesforce recently announced the partial attainment of one of its long-range goals. In its second quarter earnings announcement the company said it had eclipsed its goal of a $10 billion run rate. This will be followed by similar announcements over the next year (first $10 billion year, etc.) and why not? They should celebrate.
Second quarter revenue hit $2.56 billion a 26 percent increase year over year, but for all the fanfare, anyone watching the evolution of the company and the market should not be surprised. Take nothing away from the skillful engineering and deft management over a prolonged period, but this day should surprise no one in that it was inevitable that some company would reach this milestone.
It’s also not surprising that a long list of established software companies such as Microsoft, Oracle, IBM, or others didn’t get there first. To understand the moment, we need to understand some of the economics behind it all.
First and foremost, Salesforce embraced a disruptive innovation like no other company. Established businesses like Oracle and Microsoft initially gave SaaS no attention and if they did, they denigrated it. The denigration was a great sign that the big guys were concerned but as always it seems concern didn’t turn into action until very late in the game. Siebel was upended by it. Oracle and Microsoft are right now still trying to establish their credentials. Established markets and business models prevented others from taking advantage of what SaaS could offer.
At the same time direct competitors of Salesforce did something just as foolhardy, they underestimated what they had. As an analyst covering the emergence of SaaS I could see that most other vendors saw SaaS, or hosted computing as it was briefly called then, as merely another delivery mode for software. As far as they were concerned they’d sell you the same product with various delivery options, such as a VPN, and call it a day.
What nobody saw, perhaps not even Salesforce, is that SaaS was and is a dramatic commoditization of IT. The SaaS era is the second half of what I refer to as The Age of Information and Telecommunications in a forthcoming book. In every age the first half is expansionary and inflationary and the period from 1971 to 1999 did that for IT. Those were years of costly systems, over runs, and big commission checks. But sooner or later markets revolt against runaway costs especially because a new technology has become so integral to life as we know it.
That’s when an industry turns its attention to efficiencies and economies and that’s precisely what Salesforce offered out of the shoot. Where other CRM products were complex and hard to customize, Salesforce positioned itself as easy (it had to be—the original product only had 4 tabs). Where others had expensive licenses, Salesforce charged by the seat-month. And where others needed expensive hardware and training, Salesforce bundled the hardware and promised an intuitive interface (again thanks to having just 4 tabs).
It all worked. Many people, including me, have explained Salesforce’s success along the lines of “The Innovator’s Dilemma,” and there was certainly a grass roots, bottom up factor operating as there is with most disruptive innovations. But the fact that Salesforce has been able to grow to dominate the industry that it was a late entry to suggests more was at work.
Perhaps the biggest question now is where we go from here. Most of the time, a company in this situation consolidates its position and rides off into the sunset. For Salesforce that would mean becoming the biggest name in CRM which they’ve done, at least by measures like Magic Quadrants. But so far they’ve resisted the temptation to go on autopilot. Every two years or so, they introduce new wrinkles that roil the markets and make everyone scramble to be the fastest follower.
Concentrating on their platform, machine learning and analytics, mobility, social networking, its partner ecosystem, and other topics has given the solution set a breadth and reach that is more appropriate for a general purpose software development house. That’s clearly where the company is taking this. There might still be 50 percent white space in the CRM market but it’s very niche oriented. So it makes sense to take a broader look at the market to ask where a 10 billion dollar company can have an effect that will move its revenue needle enough for Wall Street to notice.
Small companies especially have a distance to travel in adopting CRM-like solutions and much of their future adoption will depend on ease of use driven by the analytics and machine learning that Salesforce and others are building. Another growth possibility is IoT but I see yellow flags in the distance. IoT is in many ways another approach to commoditizing IT, but for non-human customers, and it is a market that will consolidate quickly around a few standards. More worrying, I think IoT will reach commodity status very quickly with few vendors able to make a living there.
For now it’s all in the future. Salesforce has done an amazing job of navigating this far for so long with such good results. It’s one of the biggest software companies in the world right now, the fastest to grow to $10 billion. Good job! Now back to work.
Five reasons you need CPQ
You know you need this.
Many businesses still don’t use CPQ, or configure price and quotation, tools in their routine sales processes. Maybe they don’t need it but if these businesses still cling to spreadsheet-based approaches to track things like price lists and product catalogs chances are good that they’re dealing with more overhead than they need to. Worse, they’re wasting time and therefore money. The choice between quote accuracy and timeliness is a false dichotomy. Today you need to have both or risk always being the best second choice.
Businesses without CPQ have to check and re-check quotes before they go out the door adding delay and the potential for error. All businesses need to update and edit their catalogues and price lists periodically, but without a CPQ system, they also need to ensure that the right, or current, documents are being used, a never-ending task. As a result, these businesses have to focus on mechanical quote generation rather than the overall quote to cash process (QTC), which is more interesting and way more profitable. Here are some of the top reasons that CPQ automation is no longer optional for your business.
- Think faster and clearer. CPQ lets you think faster and to be one of the first vendors in the sales cycle to put a proposal before a customer. CPQ lets you propose quickly and with confidence knowing that your proposal will be complete and compliant with your catalog, price list and other business rules. It also gives you the ability to reconfigure quickly which is often needed.
- Lower risk. Standardized quotations take the risk out of giving the house away with an errant quote, making it possible for reps to do their own quoting thus reducing cycle time. Rather than having sales managers review all quotes, a time-consuming process, CPQ enables vanilla quotes to speed along while alerting managers to those that need review.
- Accelerate revenue. Faster and accurate quotes help ensure that your offer will be on top of the stack when decision time comes thus speeding decisions.
- Better billing. CPQ enhances billing when the two systems are well integrated, by providing an exact itemized list of purchased goods and services for your billing system. Exact copies of quotes can automatically go to the billing department so that when they are accepted and a deal closes, there’s no wasted time producing an accurate bill—and far fewer disputes too. For deals that deliver in multiple parts, CPQ provides clear itemization of what’s promised and what’s already delivered.
- Visibility through analytics. A database of quotes is fertile ground for assessing concretely what works well and what doesn’t in your sales process and helps in the never-ending quest to improve it. But that’s another big data problem unless you have a system that can provide the analytics. Bonus points for a CPQ solution that is integrated with your overall CRM, for a deeper view of the sales process, not just the close. Analytics can also flag for review those quotes that stray from accepted rules.
- Cloud-based, mobile first. If you’re lucky enough to be using a modern CPQ tool, your quotes can be available on multiple screens—from the CFO’s desktop to the sales manager’s phone, thanks to modern cloud infrastructure. This ubiquity enables better team selling and faster closes no matter where your team is operating.
Modern CPQ evolved from applications that replaced spreadsheets. But those systems were often expensive and time consuming to operate so they were primarily used by big companies with complex rules and large catalogues. Times have changed and business has accelerated so modern CPQ with its small footprint on multiple devices, cloud capabilities, and built-in AI can now address a larger audience of businesses in a competitive landscape.
Experienced sales people know there is no silver bullet for advancing every sales process, but they also know of the need to stay competitive. That’s why CPQ that can run on your mobile phone and that integrates with other key systems like CRM, SFA, and billing is no longer a wish list item for most businesses. Professional services companies have their own analogous issues that are solved with services systems that do similar things to CPQ, that’s a topic for another time.
The Age of Sustainability
My new book, The Age of Sustainability, is now available as either a paperback or as an eBook at Amazon. The book covers disruptive innovation and long economic waves, called K-waves, and makes the somewhat surprising point that the Space Age led to the technological world we live in today and all that’s good and not so good. But it also suggests that, just as the Space Age was built on top of all of our prior learnings about manufacturing, technology, and science, the age we are embarking on, the age of sustainability, is right now being built on the shoulders of the Space Age. This is a hopeful book about possible solutions to the climate crisis and how to evaluate them. It’s also optimistic about how to fix the situation and the economic stimulation it can provide.
The book is available today and the website that supports it and delves deeper into some of the ideas that the book presents will be live this week. I hope you’ll check it out when I post the link. Thanks for reading this.
PS. I’m still in the CRM business, bigly…
Getting loyalty right
We iterate toward solutions. A new technology surfaces and often we need time to appreciate its uses and to discover why we need it. Other times, we discover a problem first and spend many days sorting out off the shelf solutions that might work only to discover nothing does and we need a crafted solution. It’s been like this is the customer loyalty space, a problem seeking a solution.
For a long time, customer loyalty has been an elusive goal with numerous intermediate points that never quite jelled. Even before there was technology there were loyalty programs. The simplest programs gave script to purchasers (today they’re points) so that over time loyalty could be rewarded with something of value. A classic example is the frequent flyer program in which airlines try to build repeat business through awards for future free travel. Many other loyalty programs base themselves on the same transactional format.
But that has been the state of the art; transactional give-and-get points systems that generate the appearance of customer loyalty but it was only an appearance. Research shows that when you take away the points and the loyalty disappears. So, we’ve spent a lot of time and resources automating the points based loyalty program paradigm until it became a business in its own right. New systems make it possible to manipulate points and customers in various ways and to extract information from the mounds of customer data churned up in typical activity.
However, all of this automation has been at variance with customer loyalty research. If your dream is getting customers to come to you because they like or trust your brand you know the importance of building an emotional connection with them, of engaging them in ways that make them loyal to the brand regardless of incentives. This kind of loyalty inspires customers to do and say nice things about the brand when they don’t have to.
For instance, a customer might demonstrate loyalty when helping another customer in a community or by providing feedback about products, policies, promotions, and services. Conventional loyalty programs fall down here because they often don’t track these truly loyal behaviors and so they don’t reward them. That’s too bad.
On the other hand, many customers seek nothing more than transactional loyalty programs and who could blame them? Transactional loyalty has enabled airlines to cut service to the bone without worry over losing customers to competitors with better policies. They all have the same sad service, more or less, and customers have to be contented with their miles.
But now with the advent of chat bots, machine learning, notifications, and messaging we may have another chance to get loyalty right. Even in situations where customers are fine with transactional encounters, bots and algorithms can improve the experience and perhaps even engage customers so that they can be involved in meaningful transactions served for all sides. Capturing customer data during a transaction and using it in conjunction with other data, either historic or from a representative group and then analyzing it has given vendors many more levers for dealing appropriately with customers in an effort to promote their loyalty.
Perhaps the greatest contribution today comes from notifications. Its one thing to be able to analyze customer behavior and suggest actions but having the ability to notify a customer in real time and in a contextually relevant way is gold. A vendor that can be contextually relevant is a step ahead of the one that asks a perfunctory question—do you want fries?
Moreover, a notification that’s contextually relevant is not seen as a nuisance but as adding value. These and many other subtle changes are placing us on the cusp of a new vendor-customer relationship and making it possible to imagine much better engagement in the not too distant future. It’s a good time for CRM and its users.
The vision thing
Back in March Salesforce introduced its Einstein Vision capability, an idea with a lot of promise but not a great deal of precedent—who had applications that could see and how would this be used? For decades we’ve been content with scanning documents and analyzing them with optical character recognition (OCR) tools, or we’ve used bar codes and QR codes but it all came down to recognizing simple symbols.
Suddenly there was something much closer to human reading that needed explaining. The March announcement introduced Visual Search, which gives customers the ability to photograph things and use them in searches for products and services or used by vendors it can be used to identify things in processes that didn’t have analogs before.
For instance, with Einstein Vision marketers can quickly analyze photos for presence of brand images and understand how brands are perceived and used. With a picture you don’t have to rely on your gut or your experience, however faulty that might be.
Vision services can also be used in product identification to give service reps a way to evaluate possible service issues before dispatch so that the right resources can be sent.
All of this leverages existing customer technologies, mostly in handheld devices. This is important because it reduces the time it takes to diffuse the solution throughout the marketplace. If, for instance, these vision solutions required special cameras or a wired connection it would take far longer to diffuse the solution through a customer base. Or maybe the solution, however useful it is, might never make it to market.
The March announcement whetted appetites with its ability to recognize photos and logos and the company anticipated it would be able to provide applications to support visual search, brand detection and product ID in short order which it did last month for its Social Studio.
Recognizing that social has itself become a visually oriented medium, it was logical for Salesforce to add vision recognition to the mix and that’s what it delivered by adding Einstein Vision to Social Studio.
So what does this buy you? Well in marketing and service it can mean a lot. Right now the solution is just available for Twitter but with it marketers and service people can search their streams for images that tell them something about their brand, products, or customers’ experiences.
For instance, finding your brand or logo in a stream might give you reason to try to understand the context. What do the words that go with the pictures say? The sentiment (which could also be analyzed by Salesforce) might convey happiness or the opposite in each case prompting different actions from a vendor.
Seeing a brand or product with a negative sentiment might kick off a service outreach. At the same time, unambiguous displays of logos or branding, say at an event, can tell a vendor how well sponsorship ads are performing. Other insights are possible too for instance sorting through a social stream can provide basic research into potential trends. If a noticeable percentage of your customers can be seen doing, eating, or having something, it might indicate the early stages of a trend. Of course, none of this raw data is enough to make investments in but it serves as level one research that you can test. This beats relying on your gut or thinking you know the customer. Everybody knows the customer but well enough to make an investment?
So the first version of AI powered vision recognition from Salesforce is out there and I expect it will be one of the many new ideas that get coverage at Dreamforce and I wouldn’t put it past Salesforce to announce more uses for it or at least for them to announce a roadmap.
A few years ago, two MIT professors named McAfee and Brynjolfsson alerted us to the reality that the tech revolution was about to go into overdrive. The reason is simple, we build on top of prior successes and at this point there’s a lot to build on. These professors also said that because of this organic growth we can’t really forecast the uses and applications of these developments but we know uses can and will be invented. To simplify with a concrete example, there were no computer programmers until there were computers. That makes sense to us today but if you lived in the late 1940s those words might have looked like modern English but they would have made no sense.
We’re at it again disruption is all around us but history teaches us that we shouldn’t fear the future because organic growth has a way of working itself out.
