February, 2019

  • February 19, 2019
  • NetSuite announced a study at the National Retail Federation show in New York this week that it sponsored into technology adoption in a retail setting. The study suggests that merchants are either not doing what customers would want and that they have a misguided perception of the situation. Confusion abounds.

    Some of the findings indicate that merchants may have gotten things very wrong. From the report, for example,

    • 73 percent of retail executives believe that the overall environment in retail stores has become more inviting in the past 5 years. Only 45 percent of consumers agree, with 19 percent stating it has become less inviting.
    • 80 percent of retail executives believe that consumers would feel more welcome if in-store staff interacted with them more. Less than half (46 percent) of consumers agree, with 28 percent noting they would feel more annoyed.
    • 79 percent of retail executives believe chatbots are meeting consumer needs. Two-thirds of consumers (66 percent) disagree, with respondents noting that chatbots are currently more damaging to the shopping experience than helpful.

    Also there’s this nugget: 95 percent of consumers don’t want to talk to a robot while shopping. And finally, this: “Despite almost half of consumers (42 percent)—and almost two thirds of millennials (63 percent)—noting that they would pay more for improved personalization, only 11 percent of retail executives believe that their staff has the tools and information needed to give consumers a personalized experience.”

    That’s enough. There’s more and you can download the report here.


    Now let’s try to assess this.

    You can draw some quick conclusions that scream validity, namely that for many if not most people, the retail experience is less than positive. Other data says so.

    “More than half (58 percent) of consumers are uncomfortable with the way stores use technology to improve personalization in their shopping experience and almost half (45 percent) reported negative emotions when they receive personalized offers online. The majority of consumers (53 percent) felt negative emotions the last time they visited a store; only 39 percent feel confident in retail stores today.”

    There’s so much “wrong” documented about the retail experience in this survey that it makes you question the results. In other words, how can so much be so wrong with the experience we’ve all relied on for so long? Going to a store and buying things is not a foreign concept, after all.

    I suspect that the answer is rooted in the preference many people have for being left alone in an online shopping experience. What the data tells me is that people, especially younger people, have become inured to and even enamored with the online experience. It’s hard to beat searching online and saying yes, at least until you discover that the item you got in the mail doesn’t fit.

    The data also suggest that the technology takeover of the retail world is still in its infancy. People and organizations are trying things with good intent and stubbing their toes or even walking into walls. All of this suggests opportunity.

    This data clearly shows that personalization is a hard thing to get right. But maybe we’re trying too hard. A few years ago, an article in Harvard Business Review, “Stop Trying to Delight Your Customers,” by Matthew Dixon, Karen Freeman, and Nicolas Toman, said, “…[customer] loyalty has a lot more to do with how well companies deliver on their basic, even plain-vanilla promises than on how dazzling the service experience might be.” Quite right. Attempting to dazzle with service people or bots can backfire.

    The insight from that article was that customers don’t want their time wasted by extraneous things implemented by vendors to create what the vendor thought was an ideal customer experience. This report seems to be coming from that direction and that’s good news of a sort. It means that technology isn’t the enemy, but it has to be tuned to the individual and to the moment and it’s not clear that’s happening yet.

    It’s notable that this survey doesn’t focus on customer data acquisition and machine learning because those two aspects could be responsible for getting the interaction right.

    Published: 5 years ago

    How do you build a software company? It’s a trick question.

    There are certainly things you need to do and not do on the way to building a successful software company but there are no recipes, especially in CRM where demand changes all the time. In my career I’ve seen first-hand some of the ways that company builders succeed or fail, and to paraphrase Tolstoy, happy companies are all alike; every unhappy company is unhappy in its own way.

    We’re used to having an idea, a prototype or minimally viable product (MVP), and shopping it around to investors in the hope of raising a few million bucks to get going. One round follows another with the investments and the number of investors growing until the company either fails because it can’t raise more cash, or it has a successful liquidity event like an acquisition or IPO.

    Some years ago, I witnessed up close another approach, called bootstrapping, in which founders finance the effort and retain ownership. It should be said that bootstrapping was the only method of starting a business until the Renaissance. At that point the cost of starting, say an import-export business, were so high and the risks so great that prudent business people began pooling resources to lower the risk of any specific voyage meeting with robbers, weather or other disasters. The profits were lower but more consistent and the risks were, obviously, less.

    That was the beginning of what would be the “joint stock” company and it was so successful that a peripheral business, shipping insurance, took hold. For the first time, investors could make money not on the profits of the voyage but on its simple successful completion. It’s noteworthy that Lloyd’s of London, the 300+ year old insurance company got started as a simple coffee house/information exchange where nervous investors gathered to trade information about their shipping investments. Watch out Starbucks!

    At any rate venture capital was a significant investment that, like insurance, discovered a new niche within the old idea of shared risk. VC’s invest in ideas that are far, far removed from first voyages in markets that demand immediate results. My point is that bootstrappers might build the company slower than the guys with access to the capital markets but they are part of a long and successful tradition and, for some entrepreneurs, it’s the right move.

    The big question occurs if, and it’s often the case when, growth stalls. A VC funded company might get shopped around and eventually sold to a company with parallel interests. A self-funded outfit might go into a holding pattern in which it operates more or less as a funding mechanism for the founders. These companies are at least minimally profitable, and they can go on for many years. Some call them lifestyle companies because they provide a product or service but are uninterested in generating profits beyond satisfying founders’ income requirements, i.e. their lifestyles.

    Nevertheless, some very successful examples of bootstrapped companies in the modern era include SAS, the analytics vendor, and UPS, the shipping giant, which only went public in 1999 after becoming a business icon for many decades; the company raised over $5 billion its first day. Also, back in the day, Ford Motor Company was like UPS only having its IPO in 1956 once it was well established.

    Enter Zoho

    What many bootstrapped companies have in common is that they decide to avoid the spotlight to concentrate on building great products and serving customers while providing good workplaces for employees. Last week I spent a day and a half at Zoho in Pleasanton, CA and I think they fit the overall description.

    It’s impossible to say how big Zoho will become. Heck, it’s impossible to say how big they are right now. As a private company with offices around the world and zero interest in accessing the public markets, they keep their financials well hidden. It’s part of the Zoho culture of investing profits back into the company and its people. It’s also part of a strategy that emphasizes making everything rather than buying it—no acquisitions, that is—and invests heavily in educating its people in how to focus on customers, the Zoho way.

    Bootstrapping might not be for everyone, but it has worked at Zoho. The company has a culture well-focused on customers and empowering employees. Zoho was founded in India and most reminds me of another company with some Indian roots, HubSpot. It might surprise some people that a Boston company has roots in India, but as I wrote in “Solve for the Customer,” its co-founder and CTO, Dharmesh Shah defined its culture and published it in a Slide-Share deck that is still available titled Culture Code: Creating A Lovable Company.

    Culture Code is too long to go into detail here so check out the deck. One thing that stands out to me is this prime directive for employees:

    Favor your team over yourself.

    Favor the company over the team.

    Favor the customer over the company.

    Why? Because this directive speaks about not making lazy mistakes that have to be fixed by applying money. When you are funding your own growth, the last thing you need to spend money on is replacing the revenue you lost because you hurt an employee who hurt a customer, so, yes, favor the customer over the company.

    My two bits

    What’s interesting about Zoho is that the company is expanding from its core constituency of small business into a larger universe and it is bringing its unique culture with it. Zoho understands the moment we’re in, which includes a turn toward efficiency and effectiveness driven by reliance on automation. But it still sees treating people well as core to the business. So Zoho is in favor of profits but, in an inversion of the lifestyle company, it is not interested in profits at any cost while simultaneously showing great interest in manufacturing happy customers and employees.

    As a practical matter that’s what supports the strategy of building everything in-house and not growing by acquisition which would require compromises as disparate systems must be bound together. There’s a lot to like about a single platform and an intense focus on customers and employees. It’s kind of old school and goes back centuries. So I’m now following Zoho, just to see what they do next.





    Published: 5 years ago

    There’s been way too much obsessing about how AI and machine learning will eliminate jobs. In just one example, on Sunday January 13, 2019, 60 Minutes on CBS ran a feature about artificial intelligence venture capitalist Kai-Fu Lee, another one of many stories predicting the elimination of jobs and a dystopian takeover of the world (it seems) by machines.

    Lee is a persuasive voice having been educated in the US but now residing and working in China. He’s also well published with titles on Amazon like, “AI Superpowers: China, Silicon Valley and the New World Order.” On 60 Minutes, Lee said that in 15-20 years 40 percent of our jobs would be “displaceable.” Being diplomatic and unwilling to buck Chinese policies he was unwilling to go all the way to saying the jobs would evaporate.

    For the interview go here

    But the reality of how AI and machine learning are and will continue to penetrate modern life is much more complicated than a Chicken Little reaction like, “The machines are coming!” To get the subtlety you might not be able to do better than pay check out Salesforce’s Commerce Cloud announcements from the National Retail Federation show in Manhattan this week.

    What will surprise you is not that AI and ML are definitely making inroads into retail but, at the same time, they aren’t taking jobs away from humans. In retail, at least, machines are creating niches that only they can fill.

    Here’s what I mean. There are lots of jobs in retail that could exist but they might add so much overhead that they’d eat up profits, also they could not be done timely i.e. in a few seconds within a transaction with a capricious customer. These functions form a niche that AI and ML fit nicely into. Back at the dawn of retail, vendors were product light, meaning there weren’t many choices. You bought in bulk or you bought cloth and not clothing, and, of course many product categories simply didn’t exist. Henry Ford’s famous dictum that customers could have a car in any color they wanted, “As long as it’s black” typified retail for many decades.

    But today the situation is reversed. Amazon pioneered the infinite store shelf making it possible to carry ridiculous assortments and many retailers, even traditional brick and mortar ones, see no alternative but to follow. Their models have hybridized with options like buy on line but pick up and return in store—a software mediated work of art if you ask me.

    Retail has gone through at least three iterations that can be summarized as, being assisted by a clerk, self-service, and now, being assisted by a machine. For example, the Einstein Recommendations API that Salesforce announced at NRF enables merchants to embed product recommendations in their ecommerce apps. Yes, the recommendations are based on what the machine knows about a customer, what they’ve bought, sizes and the like. Also, Einstein Visual Search enables users to send a picture through a merchant site to identify their product needs. In this the machine “sees” a picture and finds things that correlate. Who doesn’t want that?

    Both of these services are human-ish jobs that improve the customer experience and ought to increase sales but that retailers can’t afford to supply. Nevertheless, tools like Einstein can easily provide such services at low cost and timely. And if you’re new to all this, Einstein is Salesforce’s AI functionality. To see the full press release go here.

    To my way of thinking this is all confused with terms like customer experience but that’s what merchants are delivering with these AI and ML driven tools, an experience, and a good one. Imagine how seductive it is to want to purchase something and have the very item provided without the hassle of wrong size, wrong color, or wrong location.

    But wait a minute, let’s also consider a situation in which the item is in stock but at another location and that it can be sent to you overnight. That would be thanks to the new Salesforce High-scale Inventory Availability Service. This platform service enables companies to see in store and fulfillment center inventory as one to facilitate sales.

    My two bits

    These and other products announced at NRF are either in beta or pilot meaning they have no prices yet. But it’s reasonable to expect that in nine months or so, in time for Dreamforce that is, these products will have their own place in price lists and cool demos on the main stage.

    So to all the critics that worry about the decline of work for the masses and fret that we’ll need some form of universal basic income, wait a moment. The jobs being eliminated are either those that no one will want in the future or they’ll be machine generated services that were never considered for humans to begin with.

    A century ago ocean-going passenger liners and cargo ships ran on steam power. Humans in the bowels of the ship literally shoveled coal into furnaces that made the steam. Less than 50 years later the laborers were gone. Ships still ran on steam but the furnaces were fired by oil that was mechanically fed to the burners. No one minded.

    If Kai-Fu Lee is right and 40 percent of jobs could vanish in a couple decades let’s not fret. My research shows that such has happened 6 times since the Industrial Revolution and we’re at the end of number six. Disruptive innovation, what Schumpeter called creative destruction, has a way of back filling.

    Published: 5 years ago

    I’ve been writing a forecast column every year at least since W was president. Nothing’s wrong with that, lots of people do. But I often find that my forecast is more of a wish list than a true prognostication so this time I’ll dispense with the fiction of analytical rigor and just say what I think needs to happen.

    Platforms and leaders

    First, the industry is consolidating. The big and successful companies are competing on a different plane than the smaller ones. The smaller guys are working harder than ever and some are realizing they need niches, that they’re not going to be able to cover the whole CRM landscape.

    This is mostly a good thing because it clarifies the mission and lowers the costs of being in the market. I can also mean better and more verticalized software. But there are two basic kinds of these companies—those that have credible platforms and those that don’t. Among those that do I’d list several including Oracle, Salesforce and Zoho.

    Oracle and Salesforce should not surprise but Zoho might. They’ve spent decades building a global solution and platform. There is only some overlap between the two with Salesforce attacking the really big enterprises and offering a huge ecosystem. But Zoho is a powerful solution for the small to mid-enterprise. It also has a good ecosystem. One of the big differentiators is how much ERP functionality you’re likely to need and where you plan to get it. Salesforce integrates well and has ERP partners like Financial Force. But Zoho offers good back office apps as a part of their service as well as having that ecosystem.

    Another vendor in the mix is NetSuite which has been setting sales records since Oracle bought and significantly invested in them. NetSuite’s idea of CRM is eCommerce though, so customers will self-select.

    So on the flip side, there are small-ish vendors still working on their own platforms and whose development teams are measured in the hundreds. The market leaders have thousands of developers in contrast, which is why it’s time for these vendors to find a niche and try to excel. With that comes a decision point about their platforms.


    Next, we’ve had years of AI and social media, and even years of integration. I think it’s time for a year of integration on major pharmaceuticals. We need better networking and this needs to be led by the biggest names. A consortium including Microsoft, SAP and Adobe announced the Common Data Initiative (CDI) last year which I still think is not only too little, its major purpose is more aimed at slowing the advances of Oracle and Salesforce. Oracle’s autonomous database and enhanced security present a major challenge to other DB vendors. Salesforce is drafting behind the Oracle RDBMS on this one and has that advantage.

    CDI focuses on building a common CRM data model and that sounds good, but it has too many moving parts as in potentially every vendor in the industry. Smarter people have said the better approach to making everything talk is to facilitate the communication at the API level. I agree. No surprise, some of the vendors conspicuously left off the Microsoft, SAP, Adobe invitation list, are pursuing the API approach, like Salesforce, and I think 2019 will be a banner year for more API centric networking.

    We need that approach too, not just in CRM but throughout the tech world as we continue to build what will be a true information utility in the not too distant future.

    Taking social seriously

    Social media has deep roots in CRM—recall the year(s) of social CRM—and because it does, I think there’s subtle pressure in Silicon Valley for the likes of Facebook, Twitter, and all the rest, to clean up their acts and mature their business models and security plans.

    Recent reporting shows that virtually every social network has either been compromised or willingly gave access to private information to entities that shouldn’t have had it. You can’t do CRM if customers get worried about how their data is being used. CRM is an unwilling victim of social shenanigans and they don’t want to be seen as willing partners, so the pressure is on.

    Foolish social leaders will think they can wait out the federal government on regulation but that approach could backfire when the feds deliver a set of regulations that don’t work. Remember, many of the people who would pass this legislation are in their 70’s and have an archaic understanding of tech. Smart leaders will see this and volunteer to define what’s possible.

    My two bits

    I’m looking forward to 2019. I don’t think it will be a time of runaway growth and major innovation in CRM though I would be pleased to be proved wrong. In a consolidating world, there will be some losers too so be prepared.

    I think the year ahead will impress by showing unprecedented innovation, of people and companies doing some unexpected things that make a lot of sense. I’m looking for the second or third tier of companies to be more aggressive in the mergers and acquisition arena in a bid to become more competitive. After a lot of years in this seat, I’m still having fun and I appreciate you letting me share my views.


    Published: 5 years ago