Time warp
I did a webinar recently for a client, Nitro, a document management company that focuses on improving paper-based business processes with digital solutions. You know the drill, turn documents into digital images to route them around organizations and the greater vendor/partner/customer community. It saves time and costs, reduces error, and adds a degree of accuracy and precision to the mix.
You might yawn at this point and say been there, done that and want to move on to the next big thing in IT. But working with this company made me realize how incomplete the transition from documents to digits has been. In some ways the move has been locked in a time warp for a couple of decades.
Numerous companies have only made cosmetic changes to their document management implementations since they were installed. Documents might now be stored on conventional storage arrays rather than optical disks since the cost of storage has plummeted. But otherwise, the processes haven’t changed much.
One surprising result has been how piecemeal document handling is in many organizations. For instance, some employees don’t have the ability to capture e-signatures for important documents from customers. This results in the insane process of printing a document in need of a signature or sending it to someone to print and sign and possibly scan and return. Variations on this include using the US mail for the communication. Another gets the paper document back and has the employee do the scanning—days later.
All this sounds trivial but American business uses 12 trillion sheets of paper each year and printing documents that should remain digitized is one of the culprits. If you want to identify why all this happens in “modern times” go back to the cost of document management software. It hasn’t evolved much. Often a business still purchases licenses by the seat which creates the need to identify the employees who need software and those who don’t.
But the reality today is that the advent of document management was highly successful and changed the landscape. Everyone, not just a select few, needs software to capture signatures and participate in myriad business processes, many of which have sprung up since the first implementations of document management.
If you have ever wondered how software revolutions get started this is a good case study. They begin at the grass roots where theory meets reality and nimble vendors identify previously unidentified needs. Many businesses realize they need additional functionality for all employees but the costs are out of line with the benefits. The need in this small part of IT is for licensing across an organization to saturate users with the tools they need and can’t take for granted.
Interestingly, this is not about a technology fix. Instead, it is a story about entrepreneurship at the customer relationship level and it’s fascinating to see a company like Nitro innovating on pricing and licensing in addition to its technology. At the technology level, they’ve leveraged AI to help businesses figure out where in a business process, adjustments to licensing can improve things. This is enabling them to be a lower cost producer which is always destabilizing for an incumbent.
It’s unlikely this scenario will ever compete with the latest discussion of AI and machine learning. But if you’re an IT leader, your costs of mundane things like paper and ink and a general need to speed up business processes keep you up at night. That’s why even in an old market you can always profit from opportunities to improve.
Not their finest hour
The reputations of Facebook founder and CEO Mark Zuckerberg and COO Sheryl Sandberg are in tatters today after a long expose in the New York Times that examined how the pair dealt with the rolling crisis that engulfed the company during and after the 2016 elections that saw Donald Trump elected under a cloud of suspicion that he had help from Russia.
The story has been picked up on cable news and it paints a picture of a company led by two executives more interested in company growth than anything else. The story includes examples of attempts to pass the blame on to others, withholding useful information from investigators and repeated denials of culpability when the known facts inside the company said otherwise.
Most significantly, it shows a company in constant reactive mode in part because no one seemed to have a moral center, a clear sense of right and wrong, and the fortitude to take the right actions for customers and the country regardless of how those actions might hurt the executives or damage the company’s reputation.
A day earlier, the Times also published a three-part video, “Operation Infektion,” describing a decades-long effort by the Kremlin to spread fake news (active measures) about the West and the US especially in an effort to weaken its adversaries. The overlap between the stories hasn’t received as much attention in the media, which is a shame because social media became the accelerant in an act of political arson.
There’s a lot of information already available on the debacle so let’s skip ahead to Infektion to get a big picture view of how Russia’s use of Facebook damaged society in the West and how its repercussions will play out for a long time.
The most relevant part of the Times video series comes in part 2 dealing with the seven commandments of active measures, a term that encompasses Russia’s approach to spreading fake information to the detriment of the West. The seven commandments are,
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Find the cracks—social, economic, linguistic, religious, or ethnic issues that can be exploited and wedge them open. This can include almost anything from gender issues, to religion, to immigration and abortion. You get the picture. Russia started out picking sides but grew to realize it could manipulate both sides of any issue to manufacture discord. There are examples of confrontations during the 2016 election in which both sides were galled into action by Russian efforts, often on Facebook.
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Create a big bold lie—something that is so outrageous no one would believe it was made up. Example, the AIDS virus was manufactured by the US to hurt minorities and escaped from a lab at Fort Detrick, MD, where it was supposedly made.
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A kernel of truth—provide a speck of facts to make the lie more believable. The US does have labs that work on viruses and ways to combat them in war. Fort Detrick is one place where this research goes on. The kernel of truth in this case is the name of the lab assigned blame for the fictional virus release.
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Conceal your hand, make it seem like the story came from elsewhere. The first mention of the AIDS story came from a small paper in India and it took years for it to percolate through the journalism community in the 1980s. One weak spot exploited by this approach is that fact checking didn’t go all the way to establishing primary sources. News stories up to and including some in America only used other stories as their sources. Thus, the people relying on the transitive property of truth were severely exploited.
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Find a useful idiot, someone who would unwittingly promote the fake news story as real. The emphasis in that phrase is evenly distributed. A useful idiot can be anyone who unwittingly (the idiot) takes the pseudo-information at face value and passes it on (the useful bit), often amplifying it. In the case where a news organization propagates an untrue story, it is serving as a useful idiot, even if it attributes the story to another news outlet in another country.
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Deny everything when the truth squad shows up. We’ve seen way too much of it lately. When the truth squad tried unraveling the AIDS scare it had to go through many layers of news outlets and reporters to find Russians who denied everything. Or consider “no collusion.” Collusion isn’t a crime in the US but conspiracy is. So in this two word phrase you have a useful idiot spreading a big lie with a kernel of truth in an effort to conceal his hand. It’s brilliant.
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Play a long game. Repeat, repeat, repeat. Regardless of costs, keep your eyes on the prize and understand that losses and setbacks are temporary when you play a long game. It’s a very Zen idea. Consider the birther movement. The only way to silence it was to meet its terms by producing President Obama’s birth certificate. The choice was continued low grade carping with erosion of public trust or swallowing a larger amount of humiliation all at once.
In nearly all these commandments you can see how Facebook was taken advantage of during the election cycle thus playing the useful idiot. But also, you see the tactics the company tried to use to deflect attention from itself during investigations—keep in mind the Times’ story headline is “Delay, Deny and Deflect: How Facebook’s Leaders Fought Through Crisis.”
In the process, Facebook has become a useful idiot on steroids, thanks to the Internet and social media’s reach. In the age before the Internet and social media these tactics might have caused some trouble but the disturbance was usually self-contained because it couldn’t spread as well. The truth squad eventually rode in and set things right. Today it’s much harder. For example, in the pre-Internet era, the fake story about the AIDS virus took 6 years to spin up. The story about a child sex ring run by the Clinton campaign and operating out of a pizza restaurant in Washington, DC only took 6 months to bear “fruit” if that’s even the right term for the mass shooting that happened.
What to do?
There is a nascent movement in Congress to develop some form of regulation over Facebook and other social media giants, which is reasonable but not very welcome. It never is. The result of the tech revolution is that we can no longer function very well as a society without information, a trend that is still increasing. This trend makes equal and transparent access to information something that must be spread throughout society.
At the same time, social media and Facebook can no longer be regarded as neutral platforms that foster free speech. They have become publishers bringing eyeballs to advertisers and they have responsibilities that go with this status as well as First Amendment rights. Sen. Mark Warner (D, VA), already has a draft working paper circulating suggesting some components of regulation. Michelle Goldberg Opinion columnist at the Times wrote that,
Among them are amending the Communications Decency Act to open platforms up to defamation and invasion of privacy lawsuits, mandating more transparency in the algorithms that decide what content we see, and giving consumers ownership rights over the data that platforms collect from them.
My two bits
Facebook, Google, Amazon, and many other platforms that use a social media model to capture consumer data and remarket it to advertisers, is now a utility. My definition of a utility is something that started as a disruptive innovation and proved so useful that it has become indispensable to modern life. Modern transportation beginning with the railroads, electricity, telephone, and cable have all trod the same path. At the moment cable, especially as a gateway to the Internet, is the outlier thanks to decisions by the Trump era FCC. By rolling back net neutrality rules set by the Obama administration, the FCC negated the principle of the common carrier that over-arches other utilities. We can and should hope this is a temporary aberration.
But back to data and its collectors and merchants. The consumer and the nation at large have a right to expect that the purveyors of modern life’s essentials will abide by the essence of the Hippocratic Oath and first do no harm. Enacting a common sense set of regulations to make this so should not be a heavy lift.
A century ago President Theodore Roosevelt pushed legislation enacting standards for food and drugs ushering in the Food and Drug Administration (FDA). A generation later, after Wall Street shenanigans brought on the Great Depression, his cousin, Franklin Roosevelt, brought forth the Securities and Exchange Commission (SEC). We’re at a similar crossroads today. The path forward might be shrouded in mist but the way backward is completely unacceptable.
Like so many things riling society today, from global warming to immigration, fixing the problem is not the hard part. Getting the various sides to agree there is a problem that needs addressing and negotiating a solution is. Doing nothing is never a solution because letting a situation fester only makes it worse. The recent revelations of Facebook’s failures has demonstrated that putting its house in order is more than it can do internally. Perhaps a reconfigured political landscape in the US and a new year will bring solutions into focus.
Above the funnel no more
The conventional sales funnel exceeded its usefulness a long time ago, roughly when the Internet gave us the ability to gather our own information about vendors, products, and services. Without the necessity of contacting a sales person, individuals and businesses could eliminate the middle man in the information exchange, waiting to expose their interests much closer to decision time.
The result was sales cycle compression and more emphasis on getting a good deal. It also caused more focus on price, which most sales institutions regard as anathema because a sales effort is all about proving higher value and commanding a better than commodity price.
Naturally, this turn of events has driven software vendors to discover or invent ways to gather intelligence about markets and customers even before they tip their hands. The popular lingo sometimes used to describe this is trying to gather information “above the funnel.” This means, capturing data and turning it into information that marketers can use to drive interest even if they can’t turn a marketing qualified lead, or MQL, over to sales in the moment. In the process, we’ve witnessed the growing importance of the marketing funnel, something that’s analogous to, but at the same time different from, the sales funnel.
There’s an almost Heisenbergian quality to this. You might recall that the quantum physicist Werner Heisenberg’s uncertainty principle said that the mere act of measuring something on the atomic level is enough to alter its behavior. By extension you could worry that tracking customers’ anonymous early clicks could be enough to put them on different journeys but that would be misplaced. People are more complex than atoms, but the uncertainty principle is still a nice metaphor.
This week Full Circle Insights had the last word when it introduced its Digital Source Tracker. The product associates early clicks with a specific conversion path giving marketers insights into how they’re doing. It’s a way of getting early feedback on whether a program is or can be successful and it seems it would be especially useful in helping marketers decide during an A-B test which approach is best. Early information gives them a chance to manage resources as well as potentially generate more and better leads.
Who cares? Or why is this useful?
Glad you asked. Going back to how the Internet changed marketing and sales, there are very few sustainable differentiators in business today. If your business made its bones on a great supply chain, financing, or other advantage of size, the Internet has acted as a great leveler giving any business, regardless of size, access to very similar advantages. In fact, smaller more nimble businesses acting on the best information might have a decided advantage today.
What’s left in that case is a business’ ability to flexibly adjust to opportunities as they crop up, which is often described as business agility. But agility takes two things. First there must be information for without it nothing follows. Second, a business needs a platform that can support reconfiguration of business processes to take advantage of those opportunities.
Now, not every prospect requires a business reconfiguration and for our purposes the platform in question would come from a larger entity. Also, there are plenty of opportunities where simple timing is all that’s needed. But all opportunities run on information, hence the importance of pushing the marketing pipeline as hard as you can.
Over the years that I have followed Full Circle Insights (and they are not a client) I’ve watched as they and some of their competition have extended the marketing funnel so that vendors could capture customer information and regain a bit of the insights they had when they controlled all information.
Full Circle won’t turn back the clock for vendors, and customers are still firmly in charge of purchase process. But by gathering what were once considered whispers of data and analyzing it appropriately, vendors can get a better sense of what’s happening in the market and plan accordingly. That’s a lot better than having to discount at the last minute because of shortened sales cycles.
CRM’s Oligopoly
As markets mature, they trend towards oligopoly or even outright monopoly. There isn’t much difference because an oligopoly has several members instead of just one. Examples include electric power generation, an oligopoly made up of vertically integrated monopolies in most areas, and the airline industry, an oligopoly where there may be many airlines but they have monopolies in regional hubs. As monopolies and oligopolies gain strength, it becomes increasingly difficult for new comers to enter a market.
I think CRM is trending in the direction of oligopoly which might not be bad but it also signals market maturity. I also think the IT industry generally is moving toward becoming a utility—an information utility. Utilities form when a monopoly or oligopoly gains enough market power to dominate a market and set artificially high prices to the detriment of consumers.
The ultimate regulated monopoly was the phone company prior to the court ordered breakup in the mid-1980s. That decision opened the flood gates to innovation in products, services, and business models that had been held back by what was a regulated monopoly. This article asks where CRM is on the continuum ending in monopoly.
Market maturity
Is CRM a good business to be in? It’s a question rarely asked and I don’t actually know if I’ve ever seen an answer or even if I’ve personally considered it.
A good business by my definition has to be one that makes money and does some social good. Cigarettes make money but their social good is highly suspect. Many organizations that do some kind of social good might be characterized as non-profits. Social good, or making a positive contribution to society, makes sense as a differentiator. Making car tires fits that definition in ways that cigarettes can’t.
In addition to making money and providing a social good, as a technical point, I’d say that a CRM business ought to be in business on its own and not as a part of some larger entity. Lots of software companies have a CRM component though their roots are elsewhere.
The reason is simple. A business owned by a larger organization could lose money but that might not matter if, for instance, the overall organization turned a profit. For instance, a few years ago Oracle bought Sun Microsystems for about $4 billion if memory serves. I don’t think Sun was making money at that point and today it doesn’t matter. Sun provides a vital hardware component in Oracle’s drive to produce autonomous enterprise software.
So, a CRM business might be a loss leader—something that a company needs to sell to maintain its chops as an enterprise software vendor. This one-stop shopping strategy might be designed to keep competition at bay. Again, using the Oracle-Sun example, Oracle can provide order of magnitude performance advantages using its hardware and software over competitors like IBM, which could supply hardware to run Oracle apps and databases, or Amazon which competes in database.
Also, for this purpose, when I refer to CRM it’s CRM as an integrated, soup to nuts, 360-degree view of the customer, solution set I’m thinking about. Lots of companies in the CRM space today offer a call center, help desk, analytics,
sales, marketing or other single solutions. But unless they have superior integration capabilities, it’s difficult to make a case for some of them. More likely, the full-suite vendors provide the integration which always begs the question of how much better an independent vendor needs to be to compete.
Lifecycle
I think you can tell a lot about a market’s health and age by the number of free-standing businesses it includes. Early in a market’s life there are numerous similar solutions competing for space. Twenty years ago, there were lots of independent companies, most offered one or two CRM elements, but that situation was unsustainable because customers found integrating disparate solutions way too hard. That resulted in a wave of consolidation; companies bought others by swapping stock and some lost their shirts.
Before CRM you could observe the same dynamic in the database industry which shrank the number of competitors as the winners got bigger and bigger. Before that minicomputers went through the same dynamic until there were none. Interestingly, the minicomputer makers all developed and maintained their own operating systems. Imagine the technical issues surrounding any integration.
Mainframes were no better. There were numerous mainframe vendors including IBM, Control Data, Amdahl, Burroughs, and others and there were more mainframe operating systems than there were mainframe vendors.
Disruptive innovation
So where are we now in CRM? Every category I’ve studied that was based on a disruptive innovation followed a typical path from a proliferation of similar solutions to a big industry controlled by a small number of successful vendors, an oligopoly. It’s much as Geoffrey Moore described it in “Crossing the Chasm.”
CRM has reached an oligopoly stage today. The oligopoly members, in my opinion (we can differ) include Microsoft, Oracle, Salesforce, SAP, Sugar, and Zoho. That’s big for an oligopoly which Moore said might contain three vendors when mature but it’s early yet.
Of these companies, half—Microsoft, Oracle, and SAP—are multi-line software vendors of front and back office apps with solutions that work on-premise and in the cloud. They all have database businesses as well and only Microsoft does not use Oracle database products.
It will take time but it’s obvious that the world is moving to the cloud and the vendors want to wind down their on-premise business models because the cloud is so much more efficient and potentially profitable. Also, it’s hard to run two very different business models profitably. For example, the financial community is impatiently waiting for Oracle to show better earnings numbers as it necessarily straddles two worlds.
The other half of the list, Salesforce, Sugar, and Zoho is exclusively in the cloud and oriented toward the front office. Salesforce has a huge partner program, AppExchange, that expands its reach to most application areas including the back office and it offers good networking and a platform that enables partners to build products to the same standards as the core CRM making inter-application cooperation easy.
Sugar was recently bought by the private equity firm AKKR which will enable it to invest in things the company couldn’t sufficiently do with available resources, especially marketing outreach. That’s vitally important because while the company has been around a long time, it didn’t catch fire earlier for many reasons including its original business model.
A mature market requires a lot of marketing spend and this acquisition gives Sugar that opportunity. At the same time though, the company needs to figure out its long-term niche. Its most likely approach going forward will be an acquisition as a branch of some larger vendor with some form of synergy but there are few software vendors that don’t already have CRM. This leaves us to speculate about tangential markets which again requires Sugar to declare its intentions.
Zoho is interesting because it is cloud native and has thousands of lower cost developers, primarily in India. The company initially focused on the SMB market and didn’t limit itself to the front office. Today it has about 50 apps aimed at all parts of a business and it is moving up market. It is definitely worth keeping an eye on given its resources and direction.
Lastly there’s Salesforce. This company invented the cloud computing industry and it continues reinventing the space and itself. Rather than developing multiple apps, such as the back office, it invited others to build solutions. It developed a platform for partners to use, and the AppExchange to make it easy for customers to find and buy solutions. Salesforce’s continuing success comes from constantly surveying the market looking for new trends. It is currently focused on opportunities that are not directly technology focused including training and philanthropy. That sounds strange but Salesforce is taking a long view.
The oligopoly
The future CRM oligopoly could condense in several ways. Salesforce, Oracle, SAP, and Microsoft could maintain their holds on their customer bases while taking market share from the others and each other. That’s logical and there’s a certain amount of that zero-sum back and forth going on right now but it’s not a likely final outcome.
Sugar and Zoho could establish solid niches. Zoho has a global SMB business with ambitions to grow and Sugar, which has its annual user conference in Las Vegas beginning October 9th, could articulate a strategy of its own to claim some undiscovered market niches. Time will tell.
Alternatively, many of the businesses in the Oracle, Microsoft, SAP orbits have legacy on-premise solutions that are over a decade old. When those customers decide to rethink their software deployments, they will, in all likelihood, not just think about moving to the cloud; they’ll also consider which vendor offers the best solution and value today. Salesforce could be a big beneficiary in this given its cloud residency, platform, AppExchange, and history of working with large and small enterprises.
There’s also dark matter to consider. According to some keynotes at Dreamforce the average enterprise customer has over 1100 cloud apps already running, so some amount of refactoring and simplification might be on the minds of customers as they move their primary computing to the cloud.
My two bits
Beyond basic cloud computing, a good deal of the future competition will focus on things that are somewhat intangible like ease of use. That’s not the old idea of an attractive and logical user interface but a more expanded concept that embraces business flexibility and adaptability that enables a business to chase smaller opportunities because it can reconfigure its business supported by applications, quickly.
By these criteria it’s hard to rule any company in or out of a shrinking oligopoly but you might begin attaching probabilities. In any event the six vendors listed are worth watching. Every move they make from here will be much more important than those that got them here.
Pulling a thread
There’s an emerging theme in sales and marketing that I expect will be important for a while and could influence some of the messaging associated with upcoming events like Salesforce’s Dreamforce and Oracle’s OpenWorld. Each company will have lots to say about security, analytics and machine learning, IoT and blockchain but what’s under the radar is the practical application of much of this to marketing and sales.
So far smaller companies have been leading the charge in using analytics to identify prospects very early in the sales cycle but it’s a crying need. Both B2B and B2C vendors have been back on their heels for many years because of the improved access to information allowed by the Internet. Unfortunately, conventional marketing approaches tread the same rut marketing was in before automation.
For about two decades, vendors have been competing with themselves by posting information that eliminates the need to speak with sales people. They don’t really have a choice since their competition does the same but it’s a commoditizing move. With all that information available online, customers just need pricing to make decisions and vendors find themselves competing on price alone rather than configuration expertise and service which can often help justify slightly higher pricing.
Recent research by CSO Insights, part of the Miller Heiman Group, prove the point. In “The Growing Buyer-Seller Gap: Results of the 2018 Buyer Preferences Study” researchers found that buyers would go almost anywhere else to get information to solve business problems than a vendor’s sales people. Importantly, this is even though almost two thirds (61.8 percent) say that sales people meet their expectations. According to the study, “Less than a quarter (23%) of buyers selected vendor salespeople as a top three resource to solve business problems.”
That’s a very various problem for vendors because if a customer won’t reach out to its sales people they can’t sell the value of their products and absent that they fall into the miasma of price competition.
Lately a small group of mostly startups has entered the market with analytics tools designed to identify prospects very early in their purchase processes. That’s hard to do and sales people have tried and tried over many years to be there at such moments. Unfortunately, the signals can be so early that they can either be missed or they can end up antagonizing potential prospects proving again that being early can be as bad as being wrong. But if vendors could get it right more often than not using impersonal automation to do some of the work, the dynamic could change.
Today a long list of vendors can contribute to the upfront process using modified CPQ and more. They include Atlatl, Configit, Tacton, In Mind Cloud, Model N, Apttus and many others. Also, not to be overlooked, Versium, LiveRamp and LifeData all in one way contributing to getting inside the heads of buyers even before buyers get into the market.
Just recently Salesforce became more active announcing completion of its purchase of Datorama, a cloud-based AI-powered marketing intelligence and analytics platform for enterprises, agencies and publishers. It’s worth pointing out that there’s a big difference between catering to B2B segments and B2C. For instance, Datorama caters to global agencies and brands like PepsiCo, Ticketmaster, Unilever and more. It’s questionable how useful Dataroma is in its current state at helping nail a B2B deal for gears and sprockets.
Last words
The point is it’s a big marketplace and there’s no clear leader from what I can tell. Consequently, this is just the kind of thing that vendors will want to highlight in their big tent shows this fall because these new wrinkles can help drive adoption of other components of these very large solution sets.
