From CIO to CMO, A Data Story

 

“If you came into marketing because you didn’t like numbers, then you don’t have much of a future.”
-Beth Comstock, CMO at GE

Much has been written about the shift in spending from the CIO to the CMO, Gartner has been out front on this by forecasting that by 2017 the office of CMO will spend more on IT than the CIO function. Whether this proves to be true or not masks a more stark reality for professionals in marketing organizations, which is that their jobs are fundamentally changing.

The era of Mad Men in marketing isn’t over but the creative and communication aspects of the marketing function are diminishing in importance. Marketing can no longer exist as a siloed function, isolated from product, engineering and operations, and more significantly there is a substantial skills gap that marketing professionals will need to fill to respond to a complete shift to digital.  Traditional skills are not going away but the emerging reality is that data-centric strategies for engaging radically different customer behaviors and more complex buyer journeys will not be realized without retooling people.

The other reality that marketing teams cannot escape is that they alone cannot anticipate and develop all of the content that will be required to successfully execute on company objectives. More reliant than ever before on earned and sponsored content, marketing teams will need to better instrument and provide social incentives for the creation and re-use of earned media and that goes well beyond what is the norm today for social media engagements. However, the shift to digital also requires organizations to think beyond text.

Video has rapidly emerged as the new whitepaper, and this should not be surprising given that YouTube is the second most used search engine on the web. If you are tempted to raise your hand and say "hey Jeff you just said Mad Men is over!" let me stop you know and point out that video relies on 2 core strengths in addition to the creation skillset, which is the ability to drive distribution and more significantly instrument video for data collection that enables refinement of creation and distribution. Video is data… and then there is Pinterest which has it’s own unique dynamics but is proving itself to be a powerful contributor to digital marketing success.

Whether text, video or images, the common requirement is instrumentation of the content to measure the interaction and the impact. No piece of content exists in isolation, and just like you measure demand generation activities in the context of a funnel where each stage of development passes through, discards or recycles leads, marketers have to measure content through a parallel funnel that captures people according to interests and things they find curious.

The content funnel is more like publishing than sales development because it is all about building a sustainable audience that trusts you as a source of authority. Measuring the impact of content through social channels, time on site, and referral sources is a valuable technique for sourcing new ideas, concepts, and influencers in your market.

I came across a fascinating post that explores the concept of brand newsrooms as a marketing function. This is something my friend Tom Foremski has been writing about for a long time, the notion that brands are just another form of media entity and this post certainly reinforces that.

In the age of social media, overnight viral sensations and the constant flow of information and multimedia experiences, it’s not surprising that brands find the newsroom idea enticing. In order to keep up with the times and current media-consumption behaviors, brands are starting to shift towards higher-metabolism marketing that responds quickly to culture, much like how journalists in newsrooms act quickly in response to important events.

The Changing Role of Marketing Changes Everything

The fact that IT spending is shifting from CIOs to CMOs is interesting but not a full and complete story, and for vendors who will look at this trend and shift their strategies to selling to a different title miss the point and will ultimately fail. Marketing as a function has to become more integrated with other functions because, like customer service, it is on the front end of business processes that will ultimately prove to be game changers for how companies engage their customers, prospects and ultimately establish competitive position in their markets.

Professionals in the marketing function will need to become more data scientist, looking for every conceivable opportunity to instrument content and then use that knowledge to drive audience and participation. Marketing budgets, as a consequence, will become less campaign and project based, more process and systems based as a result. so while we all may be selling to a different title it may not matter all that much.

The 2012 Social CRM Tragic Quadrant

Last week the respected industry analyst firm Gartner Group released their 2012 Social CRM Magic Quadrant. For those of you who follow these proclamations, the inside baseball crowd, the MQ is an event unto itself and despite what anyone would suggest, it really is all about the 2×2 chart.

The methodology of the MQ is rigorous, focusing on vendor positions, customer references, and product offerings. The coveted position is upper right quadrant, the intersection of the “visionary” and “ability to execute” axis, and typically the landscape changes incrementally reflecting the arduous pace of change in any technology solution segment.

Companies trumpet placement in the MQ as an approving nod from Gartner that they have passed muster and represent a safe choice for organizations in the market for such a product. It has been like this since the 1990’s and will no doubt continue into the future.

(Full disclosure: Get Satisfaction did not participate in the MQ process, in fact we asked to not be included and did not submit any material to Gartner but they evaluated us and placed us in the Niche quadrant.)

The Social CRM MQ always sparks debate, about the placement of vendors and more significantly about the methodology employed to evaluate the vendors. This year is no exception.

Gartner defines social CRM as

  1. Encourage many-to-many participation with customers, prospects, selling partners and internal staff.
  2. Capture and share user-generated data and content.
  3. Cede control to the community by providing varying levels of autonomy and engagement levels.
  4. Demonstrate a mutual, balanced purpose for company and community use.

Leading to the benefits of successful social CRM strategies, which are, according to Gartner:

  1. Building trust
  2. Gaining customer insight
  3. Differentiating products or services
  4. Increasing sales

The stated #1 benefit is “building trust” but here we get into the soft center of the entire social CRM market, which is the ability for any product or service to “build trust” if the organization deploying it does not itself define “building trust” as an organizational value. Is Gartner asking the right things or are they throwing in things that any software provider by itself is incapable of achieving on behalf of a customer? In other words, are they evaluating what is achievable with a good social product or they holding vendors accountable for the aspirational goals of social technologies in general?

Of the four benefits the most tangible is #4, increasing sales, but this is the one that causes the most consternation for companies implementing social strategies. What is the value of a tweet, shared Topic, customer interaction, and Like? We have theories and models but the fact remains that the economy of social engagement is being defined on a day-by-day basis and modeling the ROI of social interactions is highly theoretical (for a good read, check out the paper Social Dollars: The Economic Impact of Customer Participation in a Firm-sponsored Online Community and McKinsey’s breathtakingly deep report on The Social Economy: Unlocking value and productivity through social technologies)

More problematically is that after starting out by defining social CRM as a set of values, Gartner then proceeds to evaluate vendor offerings not on how they contribute to the stated organizational values but on the functionality, use cases, and vendors attributes… which in the end is pretty much all they can evaluate.

In each Vendor Profile the strengths and cautions line up according to attributes that have little to do with how companies are taking advantage of the solutions; rather the primary critique of the MQ is on based on evaluation through an IT lens.  The fundamental challenge remains that Gartner is attempting to evaluate solution providers according to the business strategies their customers will adhere to… social CRM is, as defined by Gartner in the first sentence of the opening paragraph: “Social CRM is a business strategy…”.

As a result, the proclaimed leaders in the MQ are what they always are… well capitalized, suited-based offerings, and in 2012 we saw little movement from 2011, which itself saw little movement from 2010. I predict that in 2013 the map will look pretty much like 2012, barring any acquisitions in which case the names will change but the offerings will remain the same.

Broadly speaking, how can the same companies hocking the same products be declared leaders when the market itself is recognized as highly dynamic and fluid? More significantly, when has IT led any organization when it comes to values and capabilities related to customer engagement and experience? Mitch Lieberman states the case well:

“Social CRM does NOT need a quadrant. What companies need is help understanding how to humanize their CRM practices.”

The False Dichotomy of B2C and B2B

Ray Wang wrote a summary of CRM Evolution that I found particularly interesting, and one point in particular resonated with me because it aligns to something I have been talking about at Get Satisfaction for a while now… B2B and B2C distinctions are dead.

The segmentation of business (B2B) and consumer (B2C) behaviors is a false dichotomy to begin from, what really matters is the customer lifecycle and renew-ability of the relationship. Is a purchase cycle highly deliberative in nature, does the post transaction phase focus on repetition of purchase or a shift to services and add-ons, how does the retail experience inform purchases, and much more.

Cars and diapers… that’s what I keep thinking about.

A car is one of the major purchases a consumer will make and represents the pinnacle of brand-to-customer lifecycle in the b2c space. It involves peer review, needs assessment, technical evaluation, financing, service agreements… all like B2B as we know it today. Once the transaction is complete the relationship shifts to one of services between the dealer and the customer involving maintenance and accessories and the lifecycle repeats with a lower entry bar at each interaction.

Diapers are a situational purchase that is effectively commodity driven, in spite of diaper manufacturers touting specific feature benefits the fact is that buyers view diapers as fungible. As a result companies are now shifting to marketing the relationship they have with a customer around the journey of newborn to potty training. The entire point of the marketing strategy is to ensure that you reach for Pampers every time you are in the aisle for the 3+ years you will be buying diapers and that is because you trust the brand more than competitive offerings, and interacting with your customer community, wherever it is, is essential for sustaining the customer relationship.

B2B purchases also span the highly deliberative capital expenditure to the fungible commodity and the buying impulses for each map precisely to each end of the spectrum in the consumer space, yet because the person making the purchase has a business card and pays for it with company funds we call it B2B. It doesn’t make sense.

The marketing and sales tactics for B2B and B2C may be different but the point is that thanks to the Internet the differences are now outweighed by the similarities. For software companies the reality could not be more stark, in order to survive and prosper in future years the need to create multiple channels to market that address how SMB buyers are behaving is critical and that means delivering through an e-commerce channel, adopting marketing techniques that are common in the B2C space (ratings/reviews, SEO, promotions), deliver information products, and adopting pricing/packaging strategies that scale from the very small to the very large without becoming overwhelmed time/cost of sales on the very large end of the spectrum.

B2C and B2B is dead.

More on this topic (What's this?)
Ray Dalio’s Q2 Outlook & Markets Discussion
Ray Dalio’s Bridgewater
Read more on Ray at Wikinvest

Is Freemium Compatible with Enterprise Software?

Sure it is… despite the gnashing of teeth that regularly flares up when the discussion of freemium is engaged in.

Freemium is not magical pixel dust, it is a way to deliver a multi-channel business model that intersects customer segments regardless of size, complexity, and revenue opportunity. It does require you to rethink your business from top to bottom, beginning with how you meter your pricing model and ending with how you use your website.

The metering discussion is critical and you have a range of implements you can take advantage of, including metering by number of users, time, type of organization, features, and specific capacity dimensions. If you are offering free to high priced enterprise license agreements the metering by feature model creates landmines that you will have to deal with, most notably the bias that will emerge in your development process which results in packaging of high value features to defend your high price points which then results in the most interesting stuff you build being available to the smallest audience in your customer base.

Pricing for growth and pricing for margin are on different ends of the spectrum and if metering features supports margin then capacity must be in support of growth, right? Wrong, pricing on pure capacity creates a different kind of problem that you have to consider, which is leaving a lot of money on the table as a result of product realities that frustrate consumption. An example is a complex signup process that frustrates casual users or a deficient getting started process that creates barriers in the initial trial process. When pricing by capacity everything your development organization does must be viewed through the lens of creating consumption, even at the expense of value.

By the way, speaking of the initial trial process… will you have one? The trial process is valuable only if you are using it to facilitate a purchase decision otherwise you are better off having a “buy now” process or at a minimum have it as an option. If someone coming into a trial product experience isn’t using it in the first 30 minutes then it’s unlikely you will get them to use it over 30 days (which by the way is optimal if for no other reason than managing your internal reporting… all trials created in one month convert in the next).

Will the free product experience initiate in the trial process or as an explicit free product signup? If I were you I would go with a single trial product that converts into a paid or free product at the end of the trial, which works only if you don’t front load the trial process with payment information. The conversion rate for trial-to-paid will be low, probably 3-6%, at which point the debate shifts to getting people into the website and as efficiently as possible into a trial experience… it’s a pure numbers game at this point, feed the funnel with x number of site visitors to get to y number of trials to z number of paid customers.

The website is where the conflict between enterprise and monthly subscription customer segments will be realized. Enterprise marketing – the traditional kind – is entirely focused on content and getting contact information from a site visitor in order to have a sales resource follow up with them. This doesn’t work well for online freemium goto market strategies because it frustrates the goal of moving site visitors from the top of the funnel (your homepage) into a trial experience.

The conflict gets exacerbated when you realize that enterprise leads are opting into the low friction trial experience and once in that buying path the effort to shift them into the traditional enterprise path is cumbersome, mostly because of the pricing disparity. However, this fails to acknowledge that you, as a business, should not care how prospects come into your funnel and if your pricing model is appropriate for your business then prospects will naturally coagulate around the pricing plan most appropriate for them… pricing for growth.

The other dimension of the perceived channel conflict that you should consider is that it is unreasonable to think that the majority of your customers will start in free and end up in enterprise. Customers who select into one buying path are doing so because of what they want rather than what you are getting them to do… a customer who comes in via self-service trial, automatic conversion and monthly subscription renewal, and never talks with someone on your team is doing exactly what they want…. and that is not talking to you. Get over it, you can still serve them well and they will be happy, as evidenced by the fact that they renew each month.

You can help customers find the best fit for them among your product portfolio but doing so successfully at scale is as much dependent on in application marketing as it is good content on your website. Once you acquire a customer spend money designing and delivering a compelling product experience that facilitates upgrades and add-ons, rather than extensive email marketing campaigns and call centers.

Some enterprise products are not appropriate for freemium models but almost exclusively the result of high COGS and/or specific industry vertical issues (e.g. compliance). These are edge cases but you do need to be aware of them.

In summary, freemium works for enterprise software if you:

  1. Carefully consider all of the consequences of various packaging and metering models.
  2. Build your product to maximize the Hour-1 customer experience and then in support of the metering model you select.
  3. Build your website for throughput and efficiency in support of customer acquisition through the trial experience.

Mobile Enterprise

I am moderating a panel tomorrow night on “mobile and enterprises” featuring key people from Google, HP, and DoubleDutch (white label FourSquare). This is shaping up to be a really interesting discussion and what I like about this venue is that the event itself is intimate which encourages good discussion.

The way I’m approaching this is as follows, there are 3 fundamental dimensions to the mobile enterprise:

  1. Unified communications: The integration of voice telephony and a range of messaging technology, as well as the unchaining of these technologies from the desk, are changing how people conduct business
  2. App ecosystems: We have evolved along a fairly predictable path with regard to mobile apps, first we started out replicating desktop applications as small screen formatted and when the limits of this approach were reached developers started building mobile apps as if they had no desktop counterpart. In other words, the development of mobile applications is in a renaissance period exhibited by user experience creativity and the integration of mobile specific hardware capabilities, like location based services.
  3. Mobile internet devices: The enthusiastic reception that devices like the Kindle, Nook, and iPad have received underscored the point that mobile devices do not have to be mobile phones. We are fully unwinding the notion that mobile data and mobile telephony are one in the same and this will have profound implications for companies that have a vested interest in the mobile enterprise, as well as the carriers who are providing the infrastructure services for large enterprises.

I hope you will be able to attend this event, I’m looking forward to a spirited discussion that touches on all three of the points I raised above.

Columnar Data Storage

Hasso Plattner, SAP
Image by dfarber via Flickr

At the SAP academic research conference yesterday Hasso Plattner spent a lot of time talking about database design and why it’s still important. More significantly, he drilled into why re-architecting applications to take advantage of a fundamentally differently database than what we are used to with relational databases is critical if we are to simplify code bases and develop new generations of applications that take off where the current state of the art ends.

This area has a pretty steep learning curve so to get started here’s a good explanation of the distinction between columnar vs. row database architecture.

Reblog this post [with Zemanta]

Jive SBS Launches

I spoke with Sam Lawrence at Jive about their new Social Business Software (SBS) product and came away impressed on two fronts, the first being that the product is wicked cool and perhaps more significantly they are skating to the proverbial puck rather than following in the footsteps of other companies.

Longtime Jive followers will notice something immediately, Clearspace and Clearspace Community have been retired as naming conventions. For SBS, the technologies represented in both of these products are now referenced as “Jive Foundation” which forms the underpinnings for the new products and initiatives.

200903100946.jpg Jive is looking at the market opportunity from the standpoint of what people do with the software, and that represents the work centers which map to a neatly presented perspective on what happens in all companies. Within each of these centers is a business process in which a social component is integral. Based on my own experience in very large companies, I think this is a realistic perspective and it’s worth noting that the overlap between centers is probably proportional not by design but based on what actually happens.

In addition to process centers there are cross application modules that allow for top down functions across the entire suite of services. Analytics represent an obvious cross application module but it was the Bridging Module that really captured my attention.

200903100920.jpg

What the Bridging Module enables is a federation of related communities for an integrated view. As an example, Kaiser is a Jive customer and with the Bridging Module any Kaiser user could add components that represent content and functionality in the American Heart Association community.

To be clear, this federation capability works exclusively with other communities that are built on Jive technology, but with 2,500 customers this is a significant list and represents the greatest strategic opportunity for Jive, to become a vertical industry standard where they have strong representation. This is class Law of Accelerating Returns stuff, a vendor will win more new business as a consequence of being perceived as the accepted standard by a group of competitors within a specific vertical industry.

In the “old days” we would have called these things portals but it’s really an understatement to reference any of these products that way now. Portals relied on a single vendor or approved partners to supply functionality that was unavoidably focused around a single vendor’s products and was also typically transactional data focused. With the emergence of unstructured content and social interactions being the bigger drivers of user focus, portals were poorly equipped to deal with this and it opened the door for a menu of competitive products to emerge, Jive being one of the more successful offerings.

A further data point that underscores the point above is that the technical specifications for what constitutes a portal component are less of an issue today, and as Jive and Socialtext both demonstrate, an OpenSocial widget is just as accepted as a native component. The evolution of widgets demands that they move beyond content and creative to social awareness, in other words, how the widget or component interacts with other components is of equal importance to what the widget or component itself does.

This is a pretty competitive sector and there are firm lines that are developing. Microsoft and IBM offer the biggest footprint enterprise social software stacks and as can be expected they are expensive and timely to implement but on the other hand they offer a lot of functionality and demonstrable ability to scale to very large user numbers while also offering strong integration options to other important enterprise products. Other vendors have emerged that challenge Microsoft and IBM, such as Jive, while another class is extending the big enterprise offerings (most significantly what NewsGator is doing on Microsoft Sharepoint). With a flight to quality as a consequence of current economic conditions, the large vendors will continue to dominate while challengers like Jive with extensive customer lists and mature product offerings will close the window for new startups to establish a foothold.

Today the focus in on what users are doing rather than what companies want them to do and Jive’s SBS is well positioned to take advantage of that with a compelling user experience, strong social functionality, a “marketplace” for third party components and federated community sites, and lastly, advanced functionality (e.g. analytics) that grow in importance as usage grows.

Ubikwiti – DIY Business Processes

Ubikwiti is, despite a really unfortunate name, a very cool service. In a sentence, this is what I’ve always wanted to do with business mashups, combine off the shelf componentry at the business user level to achieve highly personalized business process models that still accommodated the need for master data and workflow integrity.

This is a huge challenge for any company because this is not how business users are accustomed to interacting with business applications. It’s also not clear that an significant number of business users want to do this but IT definitely wants more control over business apps in a manner that is abstracted from writing code, so maybe IT is really the front door in to business users.

The company is correct to assert that big enterprise apps don’t scale down well and large vendors have economic issues that obstruct a shift to pay-as-you-go pricing. The a la carte selection of business processes is something traditional enterprise companies will never do on their own but considering the waste that is in modern ERP systems from seats and functionality bought but not implemented, this is a good move aligned with the best interests of customers. Having said that, it’s also clear that there is a big functional gap between the top and bottom of the market so comparison to traditional enterprise software isn’t appropriate all the time.

Ubikwiti pricing is not pure a la carte though, it’s all you can eat for $4.95 a month per user. This is roughly half of the price point for Quickbooks Online but I am not in a position to evaluate the functional footprint relative to QB Online so I’ll reserve any judgement on their pricing model, but suffice to say, it does make it easy to get on to the system.

This is an intriguing service, I will be watching to see how they progress.

Open Source Companies to Watch

This is a good list, the three that I very much like are Untangle, SnapLogic (fyi, I met SnapLogic last year, wrote about it here) and Kickfire.

It’s easy to focus on SaaS companies in the enterprise space, relegating on premise to a wheezing and gasping dinosaur in it’s final days, but the fact remains that on premise software remains the overwhelming majority of spend for enterprise IT and that’s not likely to change for a few more generations.

Open source has been a bigger disrupter to enterprise IT than on demand SaaS but because it tends to focus on IT needs rather than business user needs, it gets much less attention. While open source for enterprise business applications has moved up the food chain more slowly than I predicted, it is happening and in the coming years we will see traditional proprietary code vendors come under assault once again by the prospect of open source, this time resulting in more significant progress than in years past.

Other open source companies I like:

Zenoss: Network and system monitoring software.

Enomalism: Build your own private elastic compute cloud.

rPath: Virtual appliances.

Qumranet: Red Hat just acquired this company, more virtualization technology (hypervisor).

OpenAir: Project management software for professional service organizations.

Piling on the VMW Mess Today

Lot’s of commentary today about VMware missing their number and CEO Greene out of the top job. For the record, when I was at SAP Ventures we looked at this deal but passed because of the husband/wife team (generally a big red flag for venture deals). It worked out for Diane and Mendel, and it would be stating the obvious to say that I regretted we passed on that deal but not just for the financial implications, Diane is the kind of entrepreneur you want to deal with, sincere and genuine but also really really smart.

Having said that, I think comments like this are misplaced and reactive:

Er, VMware may have tweaked its revenue forecast for 2008 to be “modestly below” previous guidance of 50 per cent growth. Few executives of multi-billion dollar companies usually get fired for 49 per cent growth, especially with an imploding worldwide economy in the background.

[From EMC CEO’s ego has cost investors billions | The Register]

VMW has been at the center of a lot of confusion about their revenue forecasts and actual performance. Following the catastrophic Jan 28th conference call with analysts there was a lively discussion on the Enterprise Irregulars message board about their call and the details. In Q4’07 the company put up $412m against a $417m forecast… which being off $5m doesn’t seem disastrous but the fact that they came up $5m short while sitting on $550m in deferred revenues made no sense.

On that Jan 28th call they forecast that revenue would grow from $1.3b to $1.9b in 2008, 50% growth which again does not look bad. What that meant is that the company would need to add about $650m in 2008 revenue to meet their growth target of 50%, but when you consider that $550m in deferred revenue on the books it means they were really treading water for 2008. Basically they weren’t growing 50% at all but rather just covering their bases… and this from a company that had reliably put up 80% revenue growth.

At the time there was a line of thought that the company was resetting Wall St. expectations but today we can comfortably suggest that the company has some serious competitive and market challenges facing them. Blame Wall St. for being overly reactive but what investors were challenging is that apparent deceleration in VMW’s business and no substantive answers for what was going on.

More on this topic (What's this?)
VMware Worn Out
Time to Revisit the Trouble Maker
VMware Inc Approaches The 50-Day Moving Average
Read more on VMware Inc. at Wikinvest