I have an unpopular confession to make: I didn’t really like the Mad Men finale. It had some great moments but… it didn’t really make sense to me. Long going (and going and going) story lines suddenly wrapped up in radical 2 minute scenes. Old characters killed off in a snap. Multiple major life redirections all happening in simultaneous bursts. Don hugging his way to enlightenment, which yields… more of good old Don. Huh?!? It seemed like my long-time girlfriend was leaving me and she wanted to make it easier by insulting me first. It’s not you, it’s me. You know who did like it? All the pundits, professional and amateur (if there’s a difference) who reviewed the show with the vigor of Parisian art critics. Then I realized, “Oh. That’s who they made it for, the critics not the audience.” I felt stupid. Then I thought about it some more. Does that work? Can you create for the critics and end up with something good?
The paradox of the digital era is this: As the power of the individual increases, so too does her vulnerability. The business response to “digitalization” of our lives is known as Digital Transformation. Even in these early stages of the process, it is clear that some businesses are choosing to acknowledge the power of the individual customer and find ways to engage on more equal terms, while others are exploiting the customer’s vulnerability. That is a defining choice for any business and many are getting it wrong.
First of all, what is Digital Transformation? This is what I think Digital Transformation is, long form. Here’s a net definition: Digital Transformation is part of society’s evolution, enabled by technology, to relationships defined primarily around the individual rather than the organization. That statement appears simple and innocuous but the implications of this change are profound. Upheaval is occurring at a level worthy of comparison to the Industrial Revolution. We don’t view the Industrial Revolution as a change in the way business was done, though that certainly occurred. Like its predecessor, Digital Transformation is a paradigm shift that is visible in every facet of our lives. Organizations — from store-fronts to massive multinationals to sovereign governments — that have failed to understand this change have failed to survive, much less succeed. If that seems like an overstatement, check out Henry Kissinger’s World Order, which questions the viability of nation-states as a functional model for the future and cites technology as a major contributing factor.
It is not all about digital technology. As the Industrial Revolution could not have happened without the steam engine, harnessed electricity and mass produced steel, Digital Transformation would not be possible without networks, mobility, micro-chips and a host of other dramatic improvements in tech. These innovations hinge on much broader societal realities though. Major advances in health, food production, communication, education, transportation and the global spread of democratic principles have all been critical factors contributing to a radically different global society in just the last 40 years. With ever-increasing billions of people jamming themselves into cities, we’ve created a crucible from which new technology had to spring and was destined to thrive.
Hooray Everybody, We’re Digitally Transformed!
What are the implications to business? The broader societal transformation is cultural, as the business response must be. Changing corporate culture is as tough as it gets. This is to say: A shiny new app or a town hall rah-rah session ain’t gonna cut it. These token steps are very much in vogue as substitutes for transformation. Grand visions on IT architectures, miracle product design and the much-ballyhooed but vaguely understood “customer experience” are also stand-ins. All those things may happen as part of an enterprise digital transformation. They are milestones and artifacts of a bigger process which, by themselves, won’t transform anything. If you believe in Digital Darwinism — Survival not of the strongest or the smartest but those most adaptable in response to change — then you “naturally” (ahem) recognize that we should start with proper diagnosis of the changes to which we are adapting.
Start by focusing on the rising power and influence of the individual. The center of gravity for power is descending from major national and multi-national entities to smaller, more localized groups. Ultimately, this is the continuing rise of the individual, not just the consumer/customer. But while the business community pays lip-service recognition to the rise of the consumer, two diametrically opposed responses have evolved; one of which embraces the change, the other fights it. Acknowledging customer power leads down the Customer Engagement path. Companies still seeking to find new control points over the customer have begun heading down Corporate Espionage route. As the individual is empowered, the company / customer relationship is being defined as a person to person relationship, based on customer expectations of a ‘normal’ relationship. Most companies aren’t skilled at interpersonal relationships; some are learning and engaging while many are pursuing the “reality TV” version of a relationship: high drama and lots of deceit.
Trust is the Foundation
Before examining market response to the empowered customer, let’s reset on the broader goal of the company / customer relationship. Regardless of business model — B2B, B2C, B2B2C or the rising Peer to Peer (sharing) models — the provider, in order to have a sustainable business, must continually generate one foundation emotion with their customer: Trust. The degree to which trust is established and maintained will determine the long-term value of any relationship. Continue to provide what the company promises and the customer will continue to reciprocate. The collective market trust in a company to deliver on its promise is its brand. To the extent the company is consistent in delivering and exceeding the promise, customer loyalty is created. Trust and loyalty lead to a sense of shared purpose and community among customers, together with the company. This engenders collaboration towards a common goal: Improve the offering. Active collaboration with the customer to improve the offering is a fine definition of Customer Engagement.
That is a worthy and difficult goal, which takes time and effort to realize. In other words, it is a true transformation. But that is not the way the market is going, as a rule, which provides an excellent opportunity for businesses to differentiate themselves.
Die Hard Losers
If old habits die hard, old business models are Bruce Willis. It has long been a standard business practice to coerce and leverage the customer into action. Lock-in contracts, monopolistic tendencies, confusing pricing and market manipulation are all examples of business leverage over the customer. In a brick and mortar world, it was enough to be “the only game in town”, literally. Any and every possible advantage gets exploited. Leverage models depend on a customer that doesn’t have choice, access or power for a variety of reasons. Those limitations are largely removed in the digital world. There are thousands of start-ups exposing bad business and stealing away customers. They’re called “disruptive” and “innovative” miracles of the digital era. For the most part they are simply doing what challenger businesses have always done to incumbent powers — exposing poor business practice (then in turn being quickly exposed themselves). Society’s digital transformation has made that easier. The empowered customer has made it a very real threat. Still, a mega-corp seems to stumble and fall every couple of months because they would rather stick with what they know and fail than try to make the hard changes, the transformation, required to be successful in the digital era.
Monkey See, Monkey Do (No Evil)
In the midst of this chaos, a deceptive option has emerged and been widely embraced. On the surface it appears to empower the customer by offering desirable services. In fact it’s a new form of the leverage tactic. This model is best described as Data Monetization and its pioneers can be understood as big data monopolists. They monopolize not only the network but the data it generates. In this model, the provider goes to great lengths to extract as much data as possible about the customer, generally without the customer’s full understanding, then sells the data to 3rd parties for advertising or marketing purposes. The lack of use awareness makes it a Corporate Espionage play. Businesses leveraging the data generated in these networks, or trying to emulate their tactics, need to understand the risk. This has been the basis for wildly successful companies, titans of the digital era. But the erosion of privacy and user trust in these networks is the severe downside of playing Corporate Espionage. (Remember, the most effective path for government to invade privacy has been to obtain personal information from big data monopolists.) These networks consistently leverage their monopolies against users. You want to be part of this network? You sacrifice your privacy. If you don’t like it, leave. That’s tough to do when there is no comparable network. But how long will that last? Increasingly, big data monopolists are using this power against their customers (advertisers) as well. That’s how they make their money and it’s a classic leverage play.
Businesses eager to exploit or emulate big data monopolies need to be extremely careful. There are two reasons for caution. First and foremost, the model is based on deception , the antithesis of trust. Using any and all means to gather data on unsuspecting targets often results in a skewed and inaccurate picture of the customer. So business tends to miss its mark often. It also unnerves the customer often, angers them more frequently and, increasingly, provokes them to legal action. Customers need the courts to exert their power against the monopoly of a proprietary digital network. But they can and certainly will reject the brand promise of a company exploiting a model based on deception. Second, a proprietary digital network is controlled by its owner, not its advertisers. Just as they leverage power over users (i.e. data providers) data monopolists routinely coerce customers (i.e. advertisers). They will decide who sees what content, when and whether it is suitable to the larger mission of the network. They will decide what data is available externally. If for any reason the advertiser’s purposes are at odds with the network’s, the advertiser loses. The relatively slow adoption of digital proprietary networks as marketing platforms, compared to say, email, can be traced to the fact that email is an open protocol, not a proprietary network. Email follows the original Internet ethos of Peer-to-Peer , whereas proprietary digital networks are fundamentally monopolies, a model as old as business. Proprietary digital networks also differ from traditional print and broadcast media because the later are highly regulated regarding access. Proprietary digital networks? Not so much. That reality is rapidly changing. Witness the increasing government regulatory involvement in the digital domain (Net neutrality, privacy, anti-trust suits, etc). The Data Monetization model will have to change because the empowered individual demands it and governments are acting. So, seller beware: Exerting leverage via Data Monetization is a dangerous game, with dubious results.
Getting to Good Data
In the digital world, customer data is a critical asset to serving the customer better. As most businesses have discovered, it’s not about having huge volumes of customer data, that’s easy. It’s about having good data that can actually be used. “Good” in two senses of the word. First, it is accurate. Second, it has been obtained in the right way. A happy customer will share their data when you collaborate with them. It will be accurate, trust will build and the virtuous cycle is enabled. A deceived, coerced customer will result in “Bad” data, from both perspectives. Initiate vicious cycle. The way in which customer data is acquired makes all the difference between a leverage model and an engagement model. Going forward, the choice of engagement vs espionage will determine success or failure in the digital era. Open, collaborative exchange of information in the mutual interest of business and customer is the pinnacle of engagement. Deceptive data monetization is at the other end of the spectrum. That route is full of errors and recriminations (a word I choose deliberately as regulators move in). Yes, big data monopolies will continue to be successful, at least for a time. Do not be confused into thinking that any organization can ride those coattails. At root are the same priorities that have mattered to customers since long before the digital era began: Loyalty, Control and most of all Trust.
There was once a model understood as a “Funnel”, where the organization leveraged masses of customers through the AWARENESS – INTEREST – DESIRE – ACTION sequence. That’s over. A digitally transformed model recognizes the power of the individual customer with these milestones: make a PROMISE, establish TRUST, build LOYALTY and foster COLLABORATION towards improvement of the offering. That is the Customer Engagement path. Agility and openness are the keys to Engagement. The customer follows whatever sequence they choose, using whatever means are available to them. Fortunately for business, the digital world makes a true Customer Engagement model possible. Now business leaders have the hard task of making it real.
We are now ending the lust phase of our relationship with big data. Thank God. The next phase promises to be equally exciting, albeit considerably more turbulent. Some maturity, some retribution.
For the purpose of this discussion, set aside our myriad definitions of “Big Data” the technology and focus instead on the powerful oligopoly of companies that have grown to dominance by gathering and selling data — your data. The concept isn’t new. Selling data has been an industry for many decades. The Internet era exploded data. Then some Internet companies exploited data — in a way and to a degree that we could barely conceive 20 years ago. A concentrated group of companies, some household names, some not, have set the world on fire by acquiring and selling data about you. Yes, you. Call these behemoths collectively “Big Data”, because they are heading down the path blazed by the Tobacco oligopoly affectionately known as “Big Tobacco”, with potentially similar disaster in store. We can hardly compare the damage Big Data does to the health crisis Big Tobacco provided us. On the other hand, Big Data has no exclusive control over the addictive commodity underlying its business. If they lose the public trust — a process well underway now — a major piece of the economy is going to have to change or die.
Doctors Smoke Camels.jpg Credit: Flickr.com photographer – itsnitram
Smoking is Good For You!
More data, more services… and games, phones, watches, appliances, tools, cars, rockets…everything. It’s an amazing deal right? Maybe. First be sure you understand the deal. Most people don’t. Or maybe they don’t really want to. Those gadgets are cool! So, like the teenager who strikes the Joe Camel pose for the first time or the unemployed laborer who scores a zero-down adjustable rate mortgage, the relationship begins. Sure, smoking is “bad for you”, you shouldn’t borrow more than you can repay and you should understand the license agreement before you click. But everybody’s doing it! They can’t ALL be wrong. Anyhow, if it was really bad for you, the government wouldn’t allow it, right?
Then the lawsuits begin.
Let’s look back at the progression of Big Tobacco. In 1950, the British Medical Journal published the first scientific study correlating smoking and lung cancer. It wasn’t until 1964 that the US Surgeon General also explicitly connected smoking cigarettes to cancer. Over subsequent decades, evidence mounted despite being routinely obfuscated by Big Tobacco. Already in the mid-50’s however, individuals had begun to sue Big Tobacco on various grounds, mostly asserting fraud and violations of consumer protection laws. The success of these cases? Through 1994 — 40 years of victim vs. Big Tobacco — over 800 cases were brought in the US. Big Tobacco didn’t lose once. That’s power. They knew how to win in the courts and in Congress. That changed in the late 90’s.
Two things forced a 180 degree turn on Big Tobacco’s US fortunes. First, tobacco insiders (THE Insider — Dr Jeffrey Wigand, among others) delivered compelling evidence that not only did Big Tobacco know their product was harmful and dangerously addictive but they literally designed the product to maximize addictive effects. “We’re a nicotine delivery business.” The truth was out and it was ugly. Second, the government got involved when the victims could no longer be ignored. Several States Attorneys General banded together and eventually won the biggest settlement in history against Big Tobacco in 1998. The complaint asserted fraud, deception, negligence and public nuisance, among other things. In the US now, smoking is pariah activity and illegal in most public spaces. Big Tobacco knew the writing was on the wall in the US. Long before the judgment came, they had diversified into food and other consumables.
Big Data is running down a similar path. Deception? Check. Users are only now realizing on a broad basis that many companies are watching, recording and manipulating them CONSTANTLY. It’s not just what you buy. That’s primitive stuff. Every site you visit, everything you ‘like’, every person you interact with online, every word you type in “free” email or chat service, every picture you take (yes, including those you thought were instantly deleted), every physical place you go with that mobile device, the middle of the night drunken surfing… yes, yes and yes. And it’s not just online activity. Remember, companies have been at this for decades. All the publicly available information is now being tied together with your digital life to deliver an incredibly intimate picture of who you are and what you are likely to want, spend, do. Just leave it to Big Data to make the predictions. (What’s the best way to make an accurate prediction? Manipulate the outcome!) Anyone not living in a gun shack has a profile that runs to literally thousands of data elements. You don’t need to be a Facebook addict to have a file 6 inches thick which carries your purchase history, voter registration, residence, major credit events, network of friends etc. That list is growing exponentially because now the cottage data industry has become Big Data, with limitless resources. Increasingly, Big Data isn’t even bothering to ask user consent for any of this. As they say: “Not paying for the product? You are the product.” The government (US and EU) is taking notice and taking action. Users feel deceived and governments have picked up the scent.
For a full expose, check out Aral Balkan’s Free is a Lie, scrutinizing Big Data’s business practices. (@ 8:30 it includes a great metaphor about risks to all citizens, not just Big Data customers. “Just like exposure to second-hand smoke”!)
The Government Steps In…Slowly
Bad news for Big Data, we are accelerating through the litigation step and going straight to government intervention. If you thought the EU ruling on ‘The Right to be Forgotten‘ was crazy, you would be shocked to know that the US Federal Trade Commission recently recommended far more radical legislation in the US. The FTC’s somewhat unheralded publication “Data Brokers – A Call for Transparency and Accountability” is a landmark document that should be a bright, flashing red light to the entire industry of Big Data. It’s the result of a multi-year investigation into the practices of Data Brokers (e.g. Acxiom) but it applies equally well to titans Google, Yahoo, Amazon, Facebook and others that live off user data. Here’s a summary in the NYTimes. The fact that Google and other Big Data players are not called out in the FTC report is incidental. They have fundamentally the same model as the Data Brokers, although they execute it far more effectively and have considerably more influence in Washington. The report speaks to Big Data’s billions of users (i.e. data providers), as well as their customers who buy data about the billions! In the document, the FTC condemns deceptive practices of Data Brokers, primarily for their failure to disclose the information they are collecting on consumers or allowing them to control it. (Duh. That’s what they sell!) Yes, it might surprise a user to know that their frequent history of browsing sites on motorcycles could identify them in a high-risk category for an insurance company considering coverage. Oh, did you assume all data collected about you was a current and accurate depiction? Oops. No, no, no. Who knows if it’s accurate? It’s just out there to be bought and sold. Among other things, the FTC recommends legislation that would allow users to “opt out” of having data collected about them. That would be interesting, to say the least. Imagine if everyone opted out. Suddenly the services for data for advertisement continuum screeches to a halt. The Obama Administration has also called for a “Privacy Bill of Rights” to protect on-line consumers. That seemed to have lost some momentum until recently. In May, the president’s commission on the topic cited big data’s threat to civil rights. All these recommendations walk the fine line of positioning the Big Data co’s as a potential threat on a discrimination basis, while largely ignoring dubious industry practices. Again, this follows the Big Tobacco path: Lobbying will sway government policy for a period of time. Ultimately, public sentiment will determine when and to what degree Government will step in.
Do we have an Insider? Oh yeah. However you view Edward Snowden, the great irony of his revelations is that he actually exposed the guys late to the party: federal governments. Phone tapping strikes a chord with everyone because the tactic is so well established in the folklore of our society. That’s how they catch gangsters! But wait, don’t many of us reveal as much or more in email and social networks, which are richly mined by Big Data for their benefit? Maybe more so. Meanwhile, Google’s outrage over NSA spying on their data centers is rich. Hey, no fair! Only we should be able to look into the intimate details of our users! Quite true, when that is the core of your business model.
What is Big Data’s equivalent of the “nicotine delivery business”? Simple. They are a data monetization business. Yes the Big Data oligopoly sells advertising. That is one, but far from the only, strategy for data monetization. So while Big Tobacco spent billions in R&D to deliver nicotine to as many bodies as possible, as efficiently as possible, Big Data’s mission is to extract as much data as possible from as many people (or “things”) as possible, as intrusively as possible. They are finding incredible ways to extract and monetize data, well beyond advertising. Search was the killer app to find out what mattered to us in exchange for organizing the web. Then it was/is social networks, which kept people connected with each other, businesses, causes, you name it (as long as we can listen in). Need more? There’s an app for that. In fact, there are millions of apps for that, most of them ‘free’. As long as you don’t mind telling us precisely where you are, who you are and what you are doing every waking second. The new strategy is to get smaller and closer. Enter the next big thing: Wearables. We’ll stop messing around with games and just extract info directly from your body. (Did you think this was about fitness?!?) This is particularly clever. The smartphone replaced the watch… so there’s an open spot on that arm! There’s also an open spot on the wall, in the sky, on the road… If you’re not going to oblige us by walking around with our mobile device, we’ll just build something around you to watch. Awesome investment follows. We recently saw a glimpse of where Big Data wants to take this and it goes well beyond advertising to mood control, which has dizzying possibilities.
Surgeon General’s Warning Cigarettes.jpg credit: Wikipedia
Warning: Duplicity is Harmful to Your Health
The issue here is not whether it is “right” or “wrong” to run your business this way. There is a highly energized debate on these points which gathers more and more attention each day. The issue is whether / how long consumers will tolerate it — and what happens if/when they don’t. That is where the enterprise has to focus its strategic analysis.
There are two increasingly obvious conclusions to draw from this situation. First, the Big Data model created by major brands like Google and Facebook is not sustainable in its current form. It is a safe bet they will adapt quickly, which is their strength. Second, enterprises that think they can copy that model are heading down the wrong path. Now ask, How quickly can we adapt if we push hard in this direction and hit a dead-end? Whether it is core to your business model or an important part of your customer engagement strategy, deception won’t work long term.
We learned a long time ago what the art of persuasion, and by extension the sales process, is all about. Aristotle taught us that the three key elements to communicate with and convince your audience/customer are: Logic, Emotion and Character (as in, virtue and advocacy on the audience’s behalf). In the profession of sales, we have placed major emphasis on the first two, increasingly at the expense of the third.
Much closer to our time (and without the need for vagaries of translation) is the wisdom of Esteban Kolsky, CRM thought leader, who points out that “Trust is the currency of engagement”. He continues “delivering what is in the best interest of the other person in the relationship, accurately and repeatedly over time, generates trust….the trust generated is what (over time) engenders engagement.” Esteban focuses on the brand promise as the proxy for trust from business perspective. See full white paper here. Whatever your brand promise may be, it seems safe to assume that deception is not part of the message you are trying to convey. That would seem particularly true for a company whose values explicitly include “Don’t do evil.”
But Big Data continues its push. Just like Big Tobacco tried a feint with the “safer cigarette”, Big Data is repeating its old tricks in new ways. That is not innovation. That is optimization. The underlying business model is the same. All companies stuck in optimization mode are ripe for disruption. Don’t assume Big Data is an exception just because they have been tremendously successful in the recent past. Remember that Henry Ford rode the Model T too long and gave up over half of his market share in the process.
Is all big data (lower case) bad? No. It is, however, time to discriminate the effective uses of big data. You already know it is not a panacea. Now that the crush is over, we all need to take a critical look at how big data can support sustainable business practices. That includes an ethical element.
But All the Cool Kids Are Doing It!
Mainstream enterprises are trying, albeit with limited success, to copy the model that has created the Big Data oligopoly. It started with enterprise use of data brokers (e.g. Acxiom) and moved to their full-service, modern equivalent, the aforementioned behemoths. But there are also a huge range of tools that are popping up to make this DIY for the enterprise. Digital marketing analytics tools offer to harvest a lot of clandestine data. If the internet bigs are taking a short cut (by deceiving consumers into providing more data about themselves than users realize), does it make sense for enterprise to follow aggressively? No. At least not at high scale or until we understand where the privacy pendulum will settle. It is one thing for Google to throw some of its limitless resources to accommodate the “Right to be Forgotten” ruling — and potentially many others to follow. That’s their core business. It’s quite another for enterprise to do it. A short cut on a short cut is not a smart play. And maybe, just maybe, Big Data doesn’t have the killer model after all. Remember that public — and legislative — sentiment is turning against this business model.
Enterprises have a much better option. Rather than destroying trust through deception, this option develops trust and leverages it up to the engagement all enterprises seek. But first, a quick detour to understand why this is happening.
We are in the throes of Digital Transformation as a society, a scary and exciting prospect for the enterprise. In short, the physical, analog world — that is, everything we do — is being converted and recorded digitally. All the traditional processes of the physical world are being redefined in the digital world, including sales. The key tenets of this transformation are that it is entirely centered on the individual and it is evolving fast. Very fast. The Big Data companies are responsible in part for the incredible speed, innovation and disruption. They can’t go fast enough, far enough. The enterprise crowd is generally struggling to keep up. “Go fast. Excel at this game, even if you don’t understand it.” (That’s a loose translation of orders from the CEO). The situation is ripe for serious mistakes.
The enterprise, often led by the CMO for this scenario, is tasked with understanding the customer in intimate detail and creating a wonderful, completely personalized “experience” for them, each one of them. The short cut is to join the Big Data game of harvesting infinite troves of data about the individual by whatever means necessary. Sometimes it’s good data, sometimes it’s not. But always the enterprise has a voracious appetite to learn more about the customer. The deception sometimes employed in gathering this data erodes trust and ultimately defeats the purpose – to enhance the enterprise relationship with the customer through trust. The enterprise has to go the other way: Transparency.
Aggressive transparency can be an excellent strategy for engaging customers. It does not involve hidden tracking or the purchase of data obtained surreptitiously. It centers on the hard work of creating an open environment across a wide range of interaction points and finding the preferred method for customer interaction. Each customer. As enterprise engages the customer, it must take great care to not only listen and record but share their understanding of the customer’s interests – with the customer. Involve the customer openly in the collaborative process of creating and maintaining the right experience consistently. Consider the major legislative recommendations of the FTC: Consumers should be allowed to know what you know about them, they should have the ability to correct data and the chance to opt out of data collection. For a business model that thrives on crafty data surveillance, this is a nightmare. For a customer-centered company that thrives on doing what their customer wants, this is practically a mission statement. In the era of the super-empowered consumer, which model is likely to thrive long-term?
If you want true innovation, look at the Vendor Relationship Management (VRM) movement. Harvard’s Doc Searls, who is at the forefront of this movement, positions the situation best. If, as most would agree, the consumer is in control, why should the commercial relationship be dictated by the enterprise? In itself, that’s not a very controversial statement. We all agree that this is a joint process that fully involves the customer. Now add this: The customer should own her data, be collaborative about ensuring its accuracy and share it when and where it suits her. Oops. That crosses the line. The irony of the current state of CRM is that conventional wisdom recognizes the power of the customer. But very few sales processes have evolved to the point that they embrace the customer’s power. Many processes are trying to maintain the illusion of full enterprise control, increasingly through the use of Big Data-like tactics. That has serious risk attached. The VRM vision seems extreme in the context of the way business is done today (hence the disruption). Whether it is ready for broad adoption remains to be seen. Certainly this is a step beyond the very trendy “Customer Managed Relationship” mantra. It is also a logical extension. In any case, VRM clearly points the way towards a more healthy model; one that builds on our evolution to this point.
Yes, it is tough. Consider, though, how much you already know about your customer. The first big step in this process is not going out and seeking external data sources. It’s gathering what you know into a logical framework that can be leveraged to properly engage your customer. That is no short cut. Then comes the difficult work of creating the environment of constant, heavy attention over time. Digital channels will help simplify that. There is no short cut.
The transparency approach is not vogue. Deception is in, for now. However, with the onset of major consumer upheaval and government action, transparency will have a strong case. It very well may become mandated. In any event, it is the inevitable path we are on. Now is the time to ask whether you actually believe we are in a customer-centric world. If the answer is yes, it’s a good idea to stop spying on your customers, even if you have Big Data agents do it for you. The enterprise needs to work openly with the customer for mutual benefit. Truly innovative companies will see this trend, without the aid of Predictive Analytics, and capitalize. Just read the warning on the pack!
Once upon a time there was an incredible concentration of wealth and power around a few men and their companies because they built and controlled the infrastructure of a booming new economy. If you think Bezos, Zuckerberg, Page/Brin et al control large portions of the economy today; you should also know that men like Carnegie, Vanderbilt, Morgan and Rockefeller dwarfed them in scope of power. The business world has never seen the accumulation of capital to compare with the titans of the late 19th / early 20th century America. Then it came unravelled. Why? They messed with the public trust.
(Joseph Keppler’s “The Bosses of the Senate”, 1889)
The parallels between the current era and the age of the “Robber Barons” are striking.
Mass industrialization completely changed society in the countries that embraced it. Those that did not would be reduced to colonial exploitation for another 50 – 100 years. The creation of wealth in industrialized countries was completely unprecedented in its scale and speed. Global populations shifted, from rural to urban and subsistence to abundance. Since everyone seemed to be benefitting regulations were few and far between. Who knew how to regulate entire industries that had never existed in human experience? Aggressive actors – first movers – were rewarded for their risks and they dominated everything they could get their hands on. The individual was expected to appreciate the good things big business was doing for them and not make trouble.
Is there any part of this that DOESN’T sound like present day? Swap the birth of the industrial economy to the digital economy and you have a close reflection of our current, equally dramatic, period of constant change. It’s moving fast and creating huge wealth. Regulation is still very loose. Maybe we’ll shake our heads someday in the memory of internet transactions that weren’t taxed. Certainly the incredible innovations will all look inevitable on our path of progress, in hindsight.
But it went too far.
Around the turn of the 20th century, the biggest businesses, sometimes called ‘Trusts’, became so large they could and routinely did stifle competition through coercion or manipulation of markets that no one fully understood. It was ultimately bad for their workers, who had practically no rights, and consumers, who had to pay whatever the monopoly dictated. This gave rise to landmark legislation. Most notably the Sherman Antitrust Act of 1890. Soon, there were populist candidates and parties – most notably US President Teddy Roosevelt and the Bull Moose party – fore-runner to Tea Party and Occupy movements. His primary platform was “Trust Busting”. TR’s administration brought suits against scores of companies. His hand-picked successor, William Howard Taft, would carry on the work as President and then Chief Justice of the US Supreme Court. It was the end of an era for big business and the rise of unions, the Federal Trade Commission and countless other regulatory bodies. Gone were the mega-powers.
We appear to be on the verge of another major correction. Again it is targeting the big guys and again it is based on a crisis of Trust. Too Big to Fail is the battle cry of many populist voices (or “Not Too Big to Jail” as we heard from the US Attorney General this week). While populist outrage initially focused on Banks, the target is clearly shifting to the digital titans. The digital economy is based on trust. That trust has been abused in the eyes of consumers, employees and now regulatory bodies. While there has been a great uproar over government spying on citizens, an April poll by Reason found that US citizens trust the vilified NSA more than they trust Facebook with their private information. The American Psychological Associations 2014 Work and Well Being Survey found that roughly 1 in 4 employees distrust their employer, 1 in 3 say their employer is not always truthful while only half think the employer is open and honest with employees. Seizing on this momentum, the Obama Administration has called for a consumer privacy “bill of rights”, specifically calling out big data and its potential for abuse.
These are critical warning signs for any business which depends on trust in its ecosystem, which means every company out there. Trust, developed through clear communication, is the centerpiece of all relationships. Those of us focused on creating better customer relationships – oops, I meant engaging customers better to create a perfect customer experience – had better take notice. In business, trust is created when you and I agree on what we will do for each other. Not only do we understand the definition of the exchange (e.g. delivering a product for money… or is it a service in exchange for information?), we also have confidence in each other’s ability to execute. Target and a dozen other high-profile security breach victims couldn’t execute. If a company doesn’t trust a customer’s ability to pay, they put a credit card between them. If a customer doesn’t trust a company’s ability to do what they claim to do or starts to worry that company has ulterior motives (e.g. the harvesting of data we’d rather not share) they go somewhere else. Quickly. There is no relationship without trust. Maybe you get a transaction. But what you’ve got is not trust, it’s antitrust.
We are in the early stages of a major paradigm shift, which for now is called Digital Transformation. What is Digital Transformation or DT? If you have no familiarity, take heart. First, this DT is not delirium tremens, a medical condition of uncontrollable shaking. Although there is considerable uncontrollable shaking occurring in the business world as it broaches this topic — and with good cause. Second, you can find a great primer here by Estaban Kolsky, with help from Sameer Patel and Paul Greenberg. Ray Wang also writes about this regularly. All very smart guys. I draw from them heavily, albeit on an informal basis.
This is a major change in the way we live and work. So it has been slow to receive a common definition.
The basic realities underpinning this shift are clear to everyone. Business is moving at a much faster pace today than it ever has. That pace is increasing. A recent study by CapGemini found that >70% of executives recognize pressure to digitally transform, coming from customers, competition and employees. The same report cites a general self-assessment that enterprise the culture of innovation is inadequate; we’re too slow even though we’re moving as fast as we can. We know that customers are more informed and empowered than ever before, so we are seeing the changes in sales and marketing first. Customers shift allegiances quickly, based on their own understanding of the company. Beyond this, however, we see the somewhat more muted pressures from employees and partners. All of them demand to work with the same fluidity in which they live their digital lives. That’s not an incremental change, that’s a transformation.
So with great respect to the more learned colleagues mentioned above, I offer a layman’s definition. Digital Transformation is society’s evolution, enabled by technology, to relationships defined around the individual rather than the organization.
Let me break it down.
“Society ” instead of “business” because this move is already well underway in our day-to-day lives and it covers much more than our business relationships. If the majority of what you are doing – socially, commercially, even physically – is not captured digitally today, it soon will be. This is not limited to a demographic group; it crosses age, race, economic and geographic boundaries. Forget the “Gen Y” distinction. It distorts the issue. See Constellation’s classifications of Digital. We are all digital to some extent now, becoming much greater with time. The fact that our lives are becoming seamlessly digital gives you the first strong inkling of why this is an imperative for the enterprise and why it is much bigger than a technology shift. And the change doesn’t stop with us humans. Every THING around us is participating. Sensors, cameras, drones and an unending new array of devices are capturing the physical world in digital form. Once it’s digital, it becomes part of the rushing river of data that drives new business models never before conceived, which are delighting customers. Does that sound like your business?
“enabled by technology ” because it is the maturity and general availability of networks, sensors, mobile devices, data stores, analytics tools and delivery via Cloud that makes it all possible. The individual has always wanted the world on our terms. Advances in the technology have made it possible to get it. Has technology driven behavior change or simply caught up with our lifestyles? Either way, the change is massive because it is happening in all facets of life. This point should NOT be confused to mean a new technology is the answer to DT. The tough part is the cultural, organizational change.
“defined around the individual ” is the cornerstone of the paradigm shift. This change is fundamentally about the evolution from generalized, largely static interactions to a focus on the dynamic individual; whether customer, employee, partner, stakeholder or citizen. In many respects, this is a continuation — though a radical acceleration — of a much larger societal trend we have experienced over a longer period. For business purposes, we need to understand that models built around “B2B / B2C”, broad segmentations like “soccer mom”, Gen X, party affiliation, etc are quickly becoming outdated. It is possible to know the individual in extreme detail, even as they change day to day. How? Because the individual is basically screaming their identity to the world daily. Yes, social media is part of that. But only a part. A browser session leaves a trail of thousands of cookies and tags. All our endless gadgets and services exist to define our digital identity, that’s how they get funded. Driving a car, watching TV, all of that contributes. This is — and always has been — the premise of the Internet. I tell you about me, you give me services that are useful to me. (When government steps in and takes information we didn’t intend them to have, that’s a problem.) “Who I am” is a highly fluid situation. I am changing constantly so you better be able to move fast and stay very agile. If your view of agility is an upgrade every 3-5 years, get ready to lose. In this era, adaptation to the individual must be constant. That is extreme agility. (The primary driver of Cloud.) Now consider your hundreds, thousands or millions of unique customers and prospects who are also constantly changing. So, if you’re not an infrastructure provider, you have no business scaling to meet that volume on your own. (Secondary driver for Cloud)
The crop of companies disrupting all markets now have two common features — they are extremely agile and they revolve around their customer. Agility can be designed but it demands a focus on core business and requires tough choices (What is core value vs what is ‘just the way we’ve always done it?) Of course, every company would like to believe they are customer-centric. Just as every government claims to serve its people. Nevertheless, there are despots in this world. And while the tyrants are obvious, even among the most advanced countries we see dysfunctional government (ahem). So it is with business. No organization has “bloated process designed for an outdated business model” in their mission statement. Still, that’s the hard reality of many companies today. So just as the tyrants are getting nervous, internally-focused businesses should too. The Individual Revolution has begun — and these people mean business.
SCN: Which industries/LoB are the most impacted by cloud computing and why?
TBW: First, we need to understand Cloud in the context of a much larger change we are living through called Digital Transformation (DT). In short, DT is a fundamental shift in the way we live and work such that the world is being defined around the individual, rather than the individual conforming to existing mass patterns. We increasingly live our lives expecting the world to adapt to our needs. That’s because it has become a realistic expectation. This has implications far beyond technology, for example the acceleration of democracy movements globally. Still, technology is the great enabler. Things we used to do in the physical or analog world are now blurring into the digital world (how crazy is it that 3D printers are now a reality?). Nest is my favorite example. The networked thermostat is the hottest thing in Silicon Valley :). Google recently bought them for $3.2 billion! There are other networked thermostats, virtually all of them much less expensive and at least one provided by a dominant traditional brand in building automation. But none of them understood how to make the thermostat revolve around the occupants needs like Nest did. Apparently that’s worth billions. If you need more evidence for DT than a 4 yr old thermostat manufacturer beating a 130 year old Fortune 100 company, don’t worry, there’s plenty.
Advances from sensors on everything (Internet of Things) to wearable tech (glasses, wristbands, clothes, etc) to global high speed networks to social media make DT possible. Cloud is a very important part of that. If you’re going to deliver the world to individuals as they expect, you better be able to move very fast and at extremely high scale. There will be nine billion of us soon… and we’re a fickle bunch! In case you have any doubt, delivering B2B is not fundamentally different than the demands of B2C — there’s a consumer at the end of every value chain. There is no question that Cloud is the only way to keep up, no matter what business you are in. We are in a transition period now, where there is legitimate debate about how to evolve to an all-Cloud world. But make no mistake, Cloud is becoming the default model. So much so that we won’t talk about “Cloud” as a distinct topic. It’s just assumed, the same way network access is assumed. No one is debating the value of high-speed access. It’s just a question of what’s the best way to connect the whole world. And there are very few corners of the world that aren’t connected, for better or worse. Cloud’s going the same way. So, in sum, every sector is impacted greatly. It’s just a question of pace of adoption.
SCN: How is the cloud changing your job or jobs in your company?
TBW: Consistent with the DT trend, everything flows up from the end customer, who is driving incredible change throughout the value chain. Companies, particularly large enterprises, are lagging the consumer’s pace of change in this transition period. As pace continues to accelerate, the impact on roles in the enterprise — and its partners/vendors — will be dramatic. For consumers the move to cloud was largely incidental as a result of the great new services. No one questioned the infrastructure behind “web mail” or thousands of new apps on their mobile devices. They just embraced a valuable service they didn’t have previously. The parallel will hold, with uneven delays, for the enterprise. Enterprise concerns blocking the adoption of Cloud, while legitimate in their nature, are significantly overstated in practice. Security, for example, is absolutely critical for any datacenter. The notion that individual enterprises are more secure than major Cloud providers is… dubious at best. Do security breaches happen? Yes. And they always will, unfortunately. The value of an enterprise trying to keep pace in that arms race does not hold up. Most of the market understands this today. Regulation has some catching up to do. The direction is undeniable though.
Surprisingly, there are still many doubters with regard to Cloud, some of them in very influential positions. That herd is thinning and increasingly migrating to a new pack of cynics; one which likes to play semantics in their definitions of “Cloud”. They tend to throw many alternate definitions and flavors of Cloud around in an apparent attempt to create confusion while maintaining the status quo. I won’t take that on here! Sufficed to say, “fighting it” is not a great career strategy.
Vendors and practitioners whose primary value revolves around core datacenter services need to be with Cloud providers who focus on Infrastructure or Platform as a Service. There are a very select group of companies that will be effective as IaaS/PaaS providers, maybe 20 – 30 globally, because of the massive scale required to extract value. Watch the progression as Cloud eats the IT stack. It’s turning each layer to commodity in succession to the point where only the IaaS/PaaS players can get value at extreme scale. Meanwhile, the long-standing trend of function being pushed down the stack continues. To illustrate: Storage, low end servers and PC’s are already heavily disrupted by cloud. Major vendors have been pushed out of the market. OS is long gone as a value driver. What’s next? Well, it’s a moment of truth for database. At the high end, we see application function delivered in the DB (e.g. analytics), which preserves its status as a platform, not just infrastructure. At the low end, basic DB functionality has already been commoditized and is a feature of IaaS with little differentiated value. It’s interesting to see how major DB vendors are straddling this line. Some are pushing hard to be preferred Cloud infrastructure, thereby focusing their target on major Cloud providers. Others are still prioritizing enterprise application infrastructures, which has a limited future. For SAP, it’s critical to establish HANA not only as the platform of our Cloud but also a premier PaaS offering in itself. “SAP: The Cloud Company, powered by HANA” is absolutely the right strategy. So it follows that sellers who don’t understand how to make this relevant for their account are putting themselves and SAP in a rough spot! The current enterprise IT ecosystem — including the thousands of enterprises and vendors/partners that serve them — has a major over-supply of “datacenter” skills. There is only so much of that required in the coming era of full Cloud adoption.
SCN: Which new job opportunities are being created?
TBW: This will create some interesting dynamics over the next several years. Just as core services are being commoditized and delivered as standard Cloud infrastructure, more business-specific functions are being delivered as differentiating value on the top of the stack. A major trend is the increasingly vertical nature of all offerings. Horizontal services such as sales-force automation are no longer unique. Delivering field sales tools for retail versus healthcare providers, for example, are very different propositions. In the past, it was enough to say “it’s cloud, that’s a lot easier than on-premise, so get on board like everyone else.” Some economics and operational issues made that an easy choice. If a client wanted specialized function for their business, they had to go build that with a long services engagement. Now, vertical CRM solutions are pushing hard into the space. It’s no longer the client’s burden to build it out from a horizontal, generic package. It starts out as a 90% fit with minimal customization required. That’s a big opportunity for those with industry expertise, while the first generation cloud application vendors are feeling the heat to keep up.
The migration of custom services into standard function is occurring in several areas and creating huge value. One of the most interesting, from my perspective, is the entrance of digital agencies. As digital marketing takes off — projections have it at $120B spend in 2014, roughly 20% of total ad spend — we have seen a wave of companies rising to meet demand. They are a mix advertising agency, media buying firm, consulting house and technology (always Cloud) provider. Five years ago, it was exceptional for an enterprise to have a serious investment in a social/digital strategy. Now, we find the emergence of a Chief Digital Officer, a kind of CIO/CMO hybrid, across the enterprise landscape. Serving these needs, which are a direct result of DT, creates huge opportunity. The question now is, Who will seize it?
SCN: Are any jobs at risk?
TBW: See above! Yes. We are living in a low growth economy with extreme change. That has winners and losers. My thoughts on the basic criteria are above. Either you are leading in the direction of Digital Transformation or the market is moving away from you. Fundamentally, you need to add value at the top of the stack rather than fighting the paradigm shift.
Who is impacted? Everyone from the CEO to the recent graduate trying to break in.
How fast is this happening? There is a commonly referenced statistic regarding the Fortune 500. Since its inception almost 60 years ago, 82% of the Fortune 500 has changed. Since 2000, 52% of the Fortune 500 has changed through bankruptcy, mergers or acquisitions. Companies that once defined corporate America are gone or struggling to survive and it doesn’t take long to go from top of the market to dinosaur. No one is immune to the risk of stagnation.
SCN: Which skills do you need?
TBW: Find your way to the top of the value pyramid, always closer to the customer. For sellers, if you are focusing on ‘speeds and feeds’ or closing your deals by financial repackaging of maintenance streams, you’ve got a problem. Cloud selling forces us to know the business impact of our work. In early days of Cloud, the case was often made on a simple cost basis. That’s not the message now. The core of Cloud’s value is agility. The speed with which we can constantly meet and exceed the needs of the business. Of course that depends on us knowing those needs very well. Pace of change is everything (insert evolution reference here). So the critical skills come back to the things our best professionals have done all along: Understand your client’s business extremely well and guide them on the path of constant improvement. Often, that means understanding your customer’s customer as well as you possibly can!
Q: What are the education options?
TBW: We have many. All the traditional enablement tools are there.
I would encourage anyone to dive deep into the business they want to serve. Fortunately, there are endless sources of information. The fact is, our clients are telling us all about themselves all day through all the touch points we have. Take the opportunity to listen, listen, listen to your potential and existing clients. Live discussions are gold. Make the absolute most of understanding what your client is telling you. Social media is also an invaluable resource. There’s no shortage of information available to you. Dive in!
Hello Aidan, my wonderful 11-yr old boy. You and your sisters make many days great for Mom and me. So, in the spirit of our times, I thought I would write you a personal note of thanks and guidance…to be blasted to the world. Actually, my brand is pretty limited, so this will stay between us, a number of internet robots (who proudly claim me as a friend) and a few actual people who clicked ‘follow’ reluctantly, compulsively or by accident.
Sound foolish? Good. There is hope yet for your Christmas.
You know I am a seller, kiddo, and for this brief moment in our lives, you think that’s what you want to do because it’s what I do. Now, just as I have taught you to be a Lions fan (may God forgive me), you’ll discover that not everything I do is healthy… or even sane. I knew I wanted to sell because it’s what Grandpa did too. Remember I told you he worked for 30 years for a big company called Kodak? I’ll tell you who they are… err, were… some other time. It’s kind of like Detroit. Anyhow, he received a nice pension from them which helps cover his healthcare and… oof. Lots of terms/concepts there that you wouldn’t understand and probably will never have to. Nevermind that for now. Let’s just say you should keep your options open.
So this is a note about selling and Christmas. And you should never use either term in business. Both words have been euphomized, which is what we do in business to words that become so sickly their quality of life is inadequate to our standards.
For the entirety of your short life, at this time of year my sway between sheer joy and depression has been part of our “holiday” tradition (See what I did there? You’ll get the hang of it.). All year long I work to make this part of the year joyful for all of us. When I work hard, the season brings joy. Doesn’t that sound wonderful? That’s not really the deal at all, actually. In practice, the end of the year manic depression ritual is the only thing we can count on with great certainty. Which is to say, because it’s just you and me here: Sellers go crazy at Christmas, there’s no avoiding it.
That’s why I love and hate what I do at this time of year. Sellers all know this reality (Except those who work for companies that don’t operate on calendar year. Not sure I can trust those guys). Most of us embrace it. My big, big, big boss just celebrated this point – in different words – with a tweet. I thought that was good of him. So I say to him, and all my bosses, we’re still swinging down here. Some of us still have a simple view of this as a fight. That helps us muster the energy. Others of us know that deep down there is the constant ‘swing’ between euphoria and tragedy. What did my sponsor mean when he wrote that he would “try to get it done”? My year hinges on whether he walks up a couple of flights at the precise right moment, has all the proper forms filled out, cases made, correct relationships greased, favors due and duly called in. Does he mean it? Does he have the juice? Why won’t he respond to the messages I have left in all 16 networks where we are connected, not to mention our personal connection through the neighbor’s in-laws? Is this some kind of cruel trick? HE MUST SURELY REALIZE I HAVE ENGAGED HIM WITH A STORY FIT FOR THE AGES!! …please? At this moment, there is sadly little credit given for mastering the zeitgeist, knowing the current buzzwords or even wearing the requisite black T-shirt with jacket at all the appropriate times (You know I sell software, right?). This desperation is timeless and wonderful.
In the end, against all logic, there is surprise. When it works, as it usually does, there is delight. There is the joy that comes with success. The money, which is certainly useful, is a marker to legitimize the success. Habitual losing is death. But if the winning becomes an expectation, that’s trouble. Paranoia is life blood for any successful company and it flows through the veins of its sellers. Bad luck for my hair line. Failure recurs despite all our efforts, like a genetic flaw that helps us evolve. Think we can programmatically predict emotions that decide success vs. failure in this contest? Maybe. But I am drifting. Remember that surprise, the joy of a positive outcome that exceeds expectations, is the essence of this game. When done correctly, all parties experience unique satisfaction.
And so it is, Aidan, that I have a surprise for you. The mystery of Santa went out of Christmas for you a year or two ago (thanks for breaking it to me gently, by the way). You thought our negotiations had resulted in a satisfactory agreement. Many good things… but not the game console. Nope. We got our act together too late and you remember the great Xbox on eBay fiasco from the last round. This emptor has caveated (go look it up). Not gonna happen. Except it will. We don’t need to discuss how but sufficed to say, I found a way that wasn’t crazy. You will be surprised and we will be delighted and that is how it should be on Christmas for a seller.
The message should end there but it would be too easily misunderstood. Remember my boy, just as Grandpa taught me, you will struggle if you can’t communicate effectively. So let me go just a little further to make it clear.
Selling and Christmas are strange companions. It is easy to attack either or both, especially when they are together. Go interpret all the messages on the lost meaning of Christmas and the damage done by, well, sellers. You’re a smart kid with a great heart. You’ll figure it out. The trick for you is to look beneath the surface rants and common disappointments to see if you can understand the human side of these events. I think you’ll find at the core, with all the ornaments and trappings stripped away, there is still something pure, basic and honest. All the expectations are set… and raised…and adjusted until we struggle to understand just what is expected and what is right. It’s the true seller that reconnects with the basic promise, the human emotion underneath all the noise, and delivers the joy.
Merry Christmas, bud. I have to go find out what my Engagement quota will be next year.