My New Newspaper Route

Readers of this blog know that I am a big fan of the NY Times.  Some people would say that I am more of a Wall Street Journal guy, and in fact I started reading the NY Times some 25 years ago because I wanted to understand the more liberal perspective.  Over the years the NY Times has gotten better and I might pick up the Wall Street Journal every couple of weeks.  In short, the opinion pieces in the NY Times are well written and thought provoking, those in the WSJ just sound like screaming.  I am not sure if it is the owner coming through or if it was always like that but now I rarely read the WSJ Opinion pages.  I suppose they would be a good source for humor if it didn’t make me feel just plain depressed about our country.

Anyway, back to the NY Times and its pay-wall.  Hard to tell I know but that is what I am writing about in this post.  Like I said, I am a big fan of the Paper of Record and would give them money just because I appreciate them.  Dave Winer and Jay Rosen had an interesting point in their Rebooting the News podcast last week about putting shortened links in Twitter that go to the NY Times.  It seems that some people do not like to be surprised by shortened links in Twitter to the NY Times because it tricks them into using up one of their 20 free articles per month.  This could produce a trend in Twitter etiquette to indicate NYT before the shortened link so people could decide in advance if they wanted to spend one of their 20 articles per month before clicking.  I know I used to send out dozens of links to the NY Times before the paywall and have not sent out any since.  I also never link to the WSJ – because I don’t want my readers to link to a subscription screen.

Dave Winer goes on in the podcast to say that NYT Columnist Paul Krugman negotiated that his column would not be hidden behind any paywall ever.  Krugman posted on his NYT blog on 3/18 that his readers can always link to his column through twitter without “spending” one of the 20 free articles per month.  I do think the columnists are the most important factor in this debate.  About a year ago I predicted that the paywall would hasten the decline of the NY Times and I still think so.  I also still think we will know the NY Times is in big trouble when the columnists leave for more visibility elsewhere.  Again, I love the NY Times so I don’t want to see this happen. 

Since the paywall started on 3/28 I have done a little experiment on one subject – myself.  I have tried to go without my favorite new source for a while.  Well, not completely cold turkey, but not subscribing.  I wanted to see what it would be like for someone who was an occasional reader of the paper, but not a subscriber.  I learned that there are a bunch of great news sources out there that I never had taken the time to visit.  I put the Reuters and AP apps on my iPad – so anytime I wanted to make sure I was not missing something big I could scan the headlines.  I started going to Al Jazeera English more often.  The Washington Post and the Guardian web sites all got more regular visits from me.  I spent more time looking at my RSS feeds.  None of these captured my attention like the NY Times used to.  In fact, I think I have a better sense for the news without the NY Times.  My newspaper route changed.  Before I went to the NY Times, and ran out of time before I went anywhere else.  Now I take in a number of sources – sometimes including the NY Times, and sometimes not.  I also spent more time with one of my other favorite publications, The Economist.  When it comes to thoughtful essays it is hard to beat the Economist.  I can never get all of the way through one issue before the next one hits – so more time with this publication is a good thing for me.

So to sum it up, I can absolutely live without the NY Times.  So here is My New Newspaper Route:

• Scan the headlines at Reuters and AP for headlines – only rarely do I read beyond the first paragraph
• Scan The Guardian, and sometimes the Washington Post – again for headlines
• Scan Al Jazeera English and maybe read something
• Go to my RSS feeds and read a few things
• Go to The Economist and read a few things – every few days
• Go to the NY Times and read the columns – every few days; also I have returned to buying the NY Times Sunday edition in printed form at the store and reading it all week – like I used to 5 years ago.

It is interesting to note that my perception of the NY Times paywall impacted my behavior more than the reality.  I was never actually able to hit my 20 article limit.  One time I got the warning that I only had 5 left and I tried like crazy to get it to stop me at 20 and could not.  Maybe it is because I have multiple machines, stopped signing into the web page (as part of my experiment), or who knows what.  Either way, the paywall never actually stopped me from reading, I stopped me from reading.

After all of this, today I signed up for the full digital subscription.  Like I said, I really value the NY Times and I want them to be successful and according the the NY Times, over 100,000 new digital subscribers have signed up.  The special deal gives me full access for a month for 99 cents.  So I am not helping them very much!  After that it goes to $35 per month.  I don’t know how long I will last at over $400 per year unless my paper route changes back to the NY Times at the top of the list and I stop getting all of my news from those other places.

The Third Wave of Partnering

Thirty years ago the PC revolution spawned a significant number of companies that today we call “the channel”.  These companies resold computers, parts and pieces, software, and expertise.  Since no company could reach the entire market with an internal sales staff, the millions of people in the channel built the big technology companies like Microsoft, Intel, HP, and Cisco.   These companies have experienced extraordinary change as the decades have passed. 

The first wave of the channel was driven by the mark up associated with selling retail, and it ended about fifteen years ago.  It was replaced by the opportunity to sell services.  This second wave started with simple network administration services and grew to the full complement of services we have today.  The big vendors then got into the game.  Lead by IBM as it recreated itself as a services company in the ‘90s and now generates over half of its revenue from services.  In the last few years, HP bought EDS for $14 billion in 2008, Dell bought Perot Systems for $4 billion in 2009, and Xerox bought ACS for $6 billion in 2010 making the services business – very big business indeed. 

The service offerings of these large firms include everything imaginable and are sometimes easy to visualize: Xerox for example sells document management services instead of copy machines.  And other times incredibly complex: like EMC’s high availability enterprise network attached storage in the cloud.  We are watching big iron make its comeback as each of these big companies builds monstrous data centers and offers a cloud solution for everything.  Wasted processor cycles and storage capacity are being wrung out of these systems and IT labor is being used more efficiently driving down the incremental cost of computing quite rapidly.  Enterprise computing budget line items that used to be over $1 million now seem to cost $50,000 and those that used to cost $10,000 now start at $15 per month per user.  All of this disruption will present many opportunities for add on services – which is the hallmark of the second wave – so the companies in the channel will thrive in the cloud.

If that is not enough excitement for you, the third wave is forming.  At the risk of using another already overused word, let’s call this the platform wave.  There may or may not be a better word, but at least we are not calling it the “Cloud Wave”. To review, in the first wave channel partners marked up hardware or software products, in the second wave channel partners charged for their time/expertise (still a big business), and in the third wave channel partners are part of a platform ecosystem.  Sure, this has been part of the Microsoft strategy for 30 years. Microsoft pioneered the transition from big proprietary platform systems offered by IBM, HP, and DEC in mainframes, to their own small proprietary platform system:  Windows.  Along the way, Microsoft has grown its partner ecosystem to over 600,000 partner companies that have millions of employees worldwide implementing, customizing and maintaining solutions built on the Microsoft platform.  So it is tempting to say that there is nothing new here.  However, one dominant platform is one thing, a dozen is something different all together.

The new platform builders look different because their consumer focus can obscure the view.  Is Google search or a platform, is Facebook social or a platform, is Apple a shiny device maker or a platform, is Amazon a giant online department store or a platform?  They are all of the above, and even if there is a small chance search, social, devices, and shopping could coexist; there is no chance all of these platforms can.  Both Facebook and Amazon made significant announcements last week with the Open Compute Project and Amazon Cloud Drive respectively.  Google, with Docs and Gmail have been in this space for a while, as has Apple with Mobile me, and Microsoft with their rebranded Office Live services and Azure.  Salesforce.com, Oracle, SAP, HP, and Dell are also developing cloud solutions.    

As stated above, the second wave (services) is likely to get bigger as these platforms deploy because companies are going to need more help than ever to take advantage of all of the new offerings.  So what exactly is the third "platform" wave? 

Wikipedia defines a computing platform as:  some sort of hardware architecture and software framework (including application frameworks) that allows software to run.

The third wave is the new products built on top of the platforms. There have always been products built on platforms (think MS Office on Windows, or Garage Band on OS X), but this era is different because the platforms are not machine dependent (i.e. are accessed by devices ranging from smart phones to set top boxes), and there are so many products.  If you still think this is the same old thing, consider Dropbox, Evernote, Zotero, or SpotCloud, or even a Wordpress server running on Amazon’s EC2. These new applications run on the platforms, and also enable other new applications – Zotero can be made more portable by storing files in Dropbox. 

At present there are over 380,000 active apps in the Apple App Store and over 250,000 in the Android Market.  Amazon does not publish numbers, but the growth of its EC2 and other cloud offerings is pervasive.  The opportunity to carve off a small specialized piece of this new marketplace is attracting many new entrants to the channel – and converting a sizable number of existing channel partners.

In the months ahead, channel partners will be spending considerable energy evaluating the merits of the platforms offered by these and other companies and success or failure will ride where they choose to make their investments.  

The Phone is Dead... Again

Last month there was this interesting article in the New York Times about how we are using the telephone differently now.  For those of us in the business to business marketing industry there are several choice one liners in the article including "The telephone has a very rude propensity to interrupt people." and “I remember when I was growing up, the rule was, ‘Don’t call anyone after 10 p.m.,’ ” Mr. Adler said. “Now the rule is, ‘Don’t call anyone. Ever.’ ”

This is particularly interesting to us at CSG because a very big part of what we do is talk to our client's channel partners: on the phone.  As the article points out, people are more sensitive to the interrupting nature of the phone call, so we do this with ever increasing number of our calls scheduled in advance through other means.

Now in our 14th year of doing a majority of our business over the telephone, we have seen the predictions of the end of the telephone before.  Here are a few of them:

• The email killed the phone
• The web killed the phone
• Cell Phones killed the phone (AT&T’s service is so bad that people just stopped calling)
• Skype killed the phone (Skype is pretty cool and will continue to take over)
• Social Media killed the phone (Really? I don't buy it)

The way we use the phone is indeed changing. However, I spend more time on the phone now than ever before.  Just about all of the calls are scheduled on my calendar as meetings for a specific time and duration. In many cases the phone calls include more than one other party, and often are aided by shared online workspaces or presentations.  These calls are much more productive than the old calls, and even when all of the participants live in my city they consume much less time than in person meetings.  

There are many reasons this is happening.  Here are a few examples:

• People are more sensitive to interruptions 
• People seem less likely to meet face to face
• The conference bridge brings in multiple people
• Desktop sharing creates a rich experience

In the middle of all of this is the phone.  I guess the reports of the phone's death have been somewhat exaggerated.

The New Microsoft

The departures at Microsoft have hit a point where local journalists are starting to produce lists.  Nick Eaton at the PI has this great list with dozens of links, and Sharon Pian Chan at the Times has another one here.  Whether or not there is a wizard behind the curtain with some kind of a grand plan, change is on its way.  This kind of turnover guarantees that a new Microsoft is being formed.  A company with 90,000 employees will never be a blank canvas, but new ideas must be working their way into places that have not seen new ideas for a while.

Into this mix we add Paul Allen with his memoir out this week and a less than flattering account of early scheming by Bill Gates.  This will keep Microsoft in the news for a while and start a whole new avalanche of What Microsoft Should Do articles.  This does not take much prodding however.  People have been telling Microsoft what to do for so long that advice sounds like the din of the cars going by on HWY 520.  People suggest that they bring back Bill Gates, fire Ballmer, and ask if Microsoft is still relevant so often that if you want to make a suggestion, just get in line.

In an attempt to avoid adding to the cast of advice noisemakers, I am going to make a prediction or three about Microsoft’s future.  Sure you could say that these predictions are thinly veiled suggestions – after all, the answers on Jeopardy are really the questions.  Either way here are three thoughts.

The Enterprise

Some think this is the name of the ship on Star Trek, but that would be the “Starship Enterprise”.  Others may think of the first nuclear powered aircraft carrier, but that would be the “USS Enterprise”.  Those of us in technology marketing think of the Enterprise as bigger businesses who still control 72% of all technology spending.  A very large part of that spending still goes to Microsoft.  Microsoft knows the Enterprise and even without much innovation - it will take decades to blow that lead.  They cannot coast forever, but I think it is a lot like the USS Enterprise which has to refuel its reactors every 20 years.

Partners

Most of Microsoft’s success in the Enterprise is a result of its ability to sell through channel partners.  No one has the partner reach that Microsoft has with its over 600,000 channel partners.  These companies, ranging from big consultancies like Accenture to Joe’s Computers next door, make their living selling Microsoft’s products and the services required to keep them going.  Salesforce.com has been spending 50% of its revenue for ten years trying to make a dent in Microsoft’s dominance in this area.  Admittedly Salesforce.com’s $1 billion in revenue is a dent.  But as soon as Salesforce.com stops spending over $700 million in sales and marketing every year – then what?

Security

Microsoft knows more about security than anyone.  Microsoft has legions of very smart people evaluating and responding to attacks on Windows and releasing patches every week.  Right now consumers willingly trade their privacy for “free” services.  Consumers don’t care if Google reads their emails and Facebook analyzes their relationships because there has not been security Pearl Harbor yet.  It is coming and when it does, consumers may reconsider.  The galvanizing event does not have to be a municipal power grid take over by terrorists.  It could easily be convictions for treason based on private emails and Facebook updates that consumers thought they deleted, but lived on in the cloud and were accessed by law enforcement and a Committee Against Un-American Activities.  Sound crazy? What about kidnappers, bounty hunters, stalkers, or even paparazzi accessing mobile carrier databases and hunting people by electronic data trail?

Change is on its way at Microsoft and I think many people are going to be surprised.

On the Origin of Marketing Initiatives by Budget Allocation

Marketing is getting better at measuring itself.  The switch from broadcasting messages one to many, to one to one messaging we are often capable now of has made possible granularity we never even dreamed of ten years ago.  At CSG, we have been willing participants in this march and continue to measure everything we can.  We collect dozens of data points on each individual interaction with customers and partners, aggregate the data into campaigns, roll up campaigns into initiatives, and slice and dice and evaluate with the best of them.  However, it is probably a good idea to back away from this mountain of measurement every so often to gain a little bit of perspective. 

We should be asking: What impact does an obsession with measurement have on creativity and new initiatives?  At its root, measuring enables decision making.  The decisions made are usually about budget.  Marketing efforts that turn in good numbers get more budget, and those that do not get killed off.  Every large company marketing department has become an evolutionary machine.  Today’s Darwin would write a book about it and the title would be On the Origin of Marketing Initiatives by Budget Allocation.

In the wrong hands, this trend is more about cost reduction than about innovation.  Lowering costs and increasing efficiency are good things in any part of a business including sales and marketing.  Taking the idea to the extreme however is disastrous.  A company with no marketing would be infinitely efficient – for a quarter or two.  And then dead.  So what can marketing decision makers do to both embrace marketing measurement but avoid the trap of cutting too much?   Here are three ideas:

1. Big Picture Gut Check:  A regular high level review schedule where marketing decisions are evaluated in the context of the overall good of the brand and the enterprise is critical.  These sessions have to be rigorous, but also free flowing enough to allow the introduction of new ideas.  It would be at these sessions where someone should ask – are the good numbers over here the result of moving revenue measurement from over there – or are they actually good numbers?
2. Think Like a Portfolio Manager:  Portfolio theory in financial management balances risk and reward by looking at investments both individually and as a diverse pool of performance metrics.  Removing the lowest return investments and doubling down on the highest performing investments will increase the risk profile and may not even improve the results.  Just like in marketing, the past performance of an investment does not guarantee future results. 
3. KPI Free Zone:  Some CMOs have established KPI Free Zones where experimentation is encouraged and measurement of new initiatives is not tied so dramatically to budget allocation.  This practice reminds me of the Google 20% time – do whatever you want – but be prepared to talk about it at your review.  A healthy competitive culture doesn’t hurt either.

Top performing marketing organizations must use tactics like these to ensure that they are getting the benefit of measuring without going too far and undermining their creative engine.   Clearly our industry has embraced the movement started by Edwards Deming to “expect what you inspect” but we should also be vigilant to ensure that we are not losing in the highly creative part of marketing.  

Who is Hiring the Black Hats?

Ever since David Segal wrote his great piece in the NY Times last month about JC Penney’s black hat antics of SEO, I have been thinking – really?  JC Penney intentionally gaming Google!  There has got to be more to this story.  Danny Sullivan followed up with an insider’s take on it – but I still thought – where is the rest of the story?  The web lit up with all kinds of commentary including this from SearchEngineWatch, and this from SearchMarketingWisdom, who also posted this response from JC Penney with an enthusiastic corporate speak counter argument to the New York Times. 

All of this has contributed immensely to the celebrity status of Matt Cutts, the guy at Google who fights search spam and swiftly pounded JC Penney’s search results into the ground.  The story continued with this good piece on NPR’s On the Media show with Bob Garfield last week.

I think we live in a country where the good guys, the white hats, win in the end.  Who knows, if Libya’s citizens prevail, maybe we live in a world where the bad guys, the black hats, are more readily punished.  In following this saga however, I have still not encountered what I have been looking for as the rest of the story;  who is hiring the black hats?  So I am going to propose this hypothesis:  the black hats exist because the white hats hire them.  It is the laundering of bad behavior through the presumed respectability of the good guys. After all, the US military hires Blackwater (now Xe Services because their reputation got so black they had to abandon their old brand) to do it’s black hat stuff.

We see this from time in our industry.  In the marketing services business we have encountered competitors who produce false reporting – and amazingly they don’t get fired by their clients.  They don’t get fired as long as the reports continue because the good people who hired them need the “results” to keep their budget or their jobs. 

It is a competitive world out there and marketing is getting more and more focussed on measurable results.  It is not hard to imagine a good, well intentioned, marketing services firm getting desperate and going to the bad guys -- just to boost the number -- just this one time.  Then, well, you know the rest of that story.

Maybe our industry needs a black hat amnesty day.  A day that all performance expectations can be re-set so our industry can purge the black hats and get back to doing the work of the good guys.

Loyalty and Achieving X Ray Vision

There is a scene in Daniel Suarez’s book Daemon where one of the main characters hacks into a security network for the video feed and puts it up on his heads up display glasses.  The result is the equivalent of X-Ray vision.  In fact in some ways the result is better than the X-Ray vision we have dreamed of since Superman Comic Books because the feed from the security system may provide better view angles and could include sound.  Technology often produces the futuristic things we imagine in ways we never could have imagined.

We can now deposit checks into our checking accounts by taking pictures of them with our phones.  Our phones can translate for us, navigate for us, and perform many other tasks that not long ago were only comic book dreams.  The pace of this innovation is accelerating with incredible new tools introduced every day.  We have been dreaming about time saving tools that free us from mundane tasks ever since the first home of the future exhibit at the world’s fair. 

Anything helping us buy stuff has to be on the top of the list because commerce is driving this innovation.  Here in the US, we spend $450 billion a year on groceries at 65,000 grocery stores – so I am guessing that even though we are all tired of predictions of refrigerators that make our shopping lists for us – I bet there are many people out there working to build tools to take the pain out of the weekly trip to the grocery store.  Just like with the X-Ray vision in the book, I am guessing the solution will not come from the place we expect.  In fact, I think all of the parts are in place for system that would build my grocery list for me and at the same time increase my loyalty to a brand by 10x.  Very simply it would mine my supermarket loyalty card database and:

1. Suggest my shopping list for me
2. Organize the list by store lay out
3. Suggest things that I don’t usually buy
4. Suggest recipes from the ingredients I usually buy
5. Offer savings…

It is the home of the future system without having to have a PC in my refrigerator and scan every item in my pantry.  Properly executed, I would never shop at another store. 

This same scenario exists in just about every business.  I have to think that the businesses that give back data to their customers and give them the tools to manage that data more effectively will break out of the pack because their customers will be more loyal and they will get a dramatically increased share of their customer’s business.

The Pursuit of Customer Loyalty

I love speaking to groups so yesterday was a great day for me.  The setting was an internal planning meeting for one of our clients, the subject was creating customer loyalty, and the context was customer service.  I speak in front of groups fairly often and this one turned out to be particularly fun because the people were clearly passionate about the subject and were eager to jump into the conversation.  The title of my presentation was Five Assumptions that Drive Loyalty, and when I say assumptions I am talking about assumptions we need to make about the customer.  They are:

• The Customer is Smart
• The Customer is Well Intentioned
• The Customer Values Their Time
• The Customer Has Friends (power)
• The Customer Will Share With Them (will use it)

These assumptions are so obvious that they really don’t need much explaining.  However, they are not that easy to accomplish.  Making your customers wait in line is a clear way to tell them that you think your time is more valuable than theirs – and we all hate waiting in line.  Despite this, no one has figured out how to get hundreds of people onto an airplane without making them wait in line.

During the presentation I was also able to squeeze in two other of my favorite points:

• Customer / vendor relationships can only be in one of two categories (buckets):  “Unbelievably Great” or “There Has To Be A Better Way”.  There is no middle ground.  Any company that accepts the middle ground of “Good Enough” is only deceiving themselves – because their customers are absolutely in the “There Has To Be A Better Way” bucket.
• Companies must find structures for their businesses that naturally promote positive relationships.  Blockbuster’s late fees cause everyone to look for an alternate solution.  It is not that Blockbuster is unjustified in charging the late fees, because clearly they have to get their movies back.  It is that the late fees drive the customers away.  Netflix found a way to build a movie rental business without late fees – and their customers are very loyal as a result.  I suppose their amazing execution also helps.

In the discussion a number of very interesting ideas surfaced.  This of course is the most fun part about getting 150 smart and energetic people into a room – ideas just appear and there is a pretty good chance that no one might have come up such great thoughts sitting alone in a room.  Here are the three ideas I like the most in our conversation:

• Customers are loyal to companies that manage their information well.  In its simplest form this means not making the customer give basic information over and over, but rapidly accelerates to using customer history to improve the experience.  Log on to Amazon.com and you can easily see your entire purchase history, and Amazon.com is also using that data to make recommendations to you about what you might like to purchase next.
• Customers are loyal to companies that trust them.  If you lose one of Netflix’s DVDs, just tell them, and it is no big deal.  I bet many customers find the lost DVDs later and actually return them – even though they do not have to.
• Customers will pay.  Customers are exhausted by poor quality free things and are ready, willing, and able to pay for quality.

We ended the hour talking about the companies that do a great job creating loyalty in their customers.  The list included:  Zappos.com, Netflix, Apple, Amazon.com, and Starbucks.  Don’t be shy about adding to the list.

Matchmakers You Can Trust

Just about any 17 year old American male will tell you that finding a date to the prom is a difficult and humbling experience.  Similarly, employers will tell you that finding a good employee is nearly impossible.  Buyers of IT products and services will echo the sentiment:  It is much harder than one would think to find and procure the technology a business needs to remain competitive.  Ironically, if you talk to the other half of each of these matches you will find quite a different perspective.  The Difference is enough to make you wonder if your grasp on reality is starting to slip away. 

Girls start planning on being asked to the prom 6 months before it even enters the consciousness of boys.  Even in this down economy, four million jobs change hand in the US – every month.  And companies spend millions of dollars trying to find their next customer.  For the past fifteen years the most successful companies on the web have aimed to do the matchmaking in these examples.  Online dating sites like match.com, eharmony.com, and some would say the entire porn industry have set out to capitalize on the first matching challenge.  Monster.com was one of the first Internet companies to buy a Superbowl ad, and Google, Bing, eBay, Amazon.com and now Groupon get paid quite well to connect would be buyers with would be sellers right at the very time the buyer wants to buy.

So successful internet business equals:  find an area where matchmaking needs to be done and have at it.  If you think you are late to the game, think again.  This internet thing is just getting started and there are many more untapped opportunities than tapped ones.  Yes indeed, Classmates.com, Facebook, and Yelp have all been invented already.  However, no one has even started to work to match enterprise technology buyers to enterprise technology sellers.  We all have lists of markets we would like to see better matchmaking tools on the internet.  Doctors to patients, kids to educational tools, scientists to research subjects, and even people to movies as the million dollar Netflix challenge demonstrated are all up for grabs.  For now, let’s focus on enterprise IT match making.

There are many things that stand in the way of solving this problem, but none as big as the lack of trust.  Trust has been eroded between the buyers and sellers of enterprise technology through repeated over promising and under delivering of products and services to the point that even the historically accepted measure of ten times better is no longer sufficient to get a business buyer to make a change and buy something new.  In the technology industry this phenomenon is sometimes labeled vaporware – software that has been promised to customers that does not even exist.  The risks for the buyer are quite large and even larger without vendor trust – and this slows down the adoption of new technology significantly.

Adoption of new technology is the key to increases in productivity and increases in productivity drive our economy and increase our standard of living.  Therefore one of the things standing in the way of our economic recovery is trust.

Successful matchmakers employ three simple tactics to get right at the trust issue:

1. Make money on the success of the match:  A business model built on making the match between technology vendor and technology user, instead of making the sale of technology, aligns the interests of the parties and turns the matchmaker into a trusted advisor.
2. Be transparent about how money is made:  A matchmaker advocating for a particular solution will always be suspected of doing so selfishly.  Full disclosure of how the matchmaker gets paid will drain away this suspicion.
3. Demonstrate deep and wide knowledge:  It is natural to sell what you know and stay away from what you do not know.  Demonstrating a detailed understanding of all of the products in the category will validate the trusted advisor status.

The two most trusted matchmakers in business IT are Accenture and Deloitte.   IBM is a giant in the IT matchmaking business, but is also pushing its own technology.  At one time EDS, Perot Systems, and ACS were on this list -- until they were acquired by HP, Dell, and Xerox -- which changed their motivation from matchmaking to selling their own technology solutions. 

This will be a very interesting area to watch in the years ahead as new companies flood in to fill the trusted matchmaker void created by this consolidation.

Facebook's Deal with the Devil

The Economist last week recalled a vivid description by Rolling Stone of Goldman Sachs:  "a great vampire squid" that likes to stick its "blood funnel" into anything that can make it money.  So given all of the advantages that Facebook has, why would a smart guy like Mark Zuckerberg subject himself to a bleeding by the many tentacled machine of Wall Street?  

Maybe Zuckerberg knows that there are bad guys in the world and bringing in the firm that is the best at aggressively pursuing its own self interest will equip Facebook to fend off the other bad guys.  In essence, a deal with the devil.  Who are the these bad guys?  One of Facebook's biggest shareholders is Digital Sky Technologies (DST), the firm of Alisher Usmanov, a Russian oligarch with ties to Vladimir Putin and Dmitry Medvedev.  Even executives with ten times Zuckerberg's experience would be worried when considering how to control DST.  With Goldman at the table could the dynamics of the relationship between Zuck and the Russians be improved?

If that is not enough incentive, there could be a bigger one right here in the USA.  Goldman Sachs may be good at the things it talks about on its web site, but they really shine when it comes to manipulating our government.  And Facebook needs all the help they can get controlling the US government. Twitter disclosed last week that the government had requested access to data on Julian Assange and people associated with him.  To Twitter's credit they chose to disclose this request to the public.  We can be sure that similar letters were sent to Facebook, Google, and other service providers.  But we did not hear a word about those.

It is a little spooky thinking about government agencies combing through Facebook data, but we can be pretty sure that Facebook's nearly 600 million users, their relationships with other users, and all of the interactions between them must be irresistible to our many law enforcement and counter terrorism groups.   I know that if I had to figure out how to deal with the FBI or CIA, not to mention the SEC,  having Goldman's muscle to back me up would be quite welcome.  

Could Blackwater or Halliburton be next?

Bigger Was Better Until Now

The Factors of Production Disassemble and Big Business Dissembles

Companies have been citing economies of scale as reason to acquire, merge, or grow ever since the beginning of industrialization.  It is not hard to grasp the idea that the cost of each additional unit will drop as more units are produced.  There are every day examples of this from ordering business cards to getting the next bigger bag of popcorn at the theater.  Doubling the size of the order rarely doubles the cost.  In addition to increasing competitiveness by lowering production cost, manufacturers have also been heavily incented to acquire their suppliers to secure raw materials consistently.  In addition, when significant research and development investment is required - large scale is required to justify that investment.  Bringing a new drug, airplane, or car to market can only happen when large scale production is the likely outcome.

Natural monopolies are sometimes formed when new technologies are discovered and more so when large initial investments are required.  The first railroad, telegraph, and electrical grid are good examples of natural monopolies.  Once the track was laid down, the cost of running the train was so much less than the next competitor (who still had to build their track) that protecting the monopoly and remaining profitable was not only conceivable by likely.  In the case of the telegraph, the network effect rewarded the first to market because the usefulness of the network increased as more people were connected to it, further securing the monopoly.

For all of these reasons we have lived our entire lives in a world where bigger was better.  Until now.

Over the past 30 years just about every part of business has been disassembled and the parts can now be purchased as needed, when needed, and for cheap.  Big time computing infrastructure is available for rent.  Enterprise quality business process systems from the mundane (travel expense management) to the exotic (advanced materials management) can be provisioned in a matter of days and delivered economically to large and small teams alike.  Anyone with an idea, some know how, and a credit card can bring it to life and to market faster and cheaper than ever before, and tomorrow it will be even faster and even cheaper. 

The railroad company may still have a monopoly on the use of its tracks, but the customer can pick from any of dozens of carriers that are putting containers on the train, so businesses large and small are able to ship their products anywhere for no initial investment, and very low cost.  Amazon.com may own all of the distribution centers, but anyone can sell their products through Amazon.com.  Apple may own the iPhone, but just about anyone can put an app in the app store.  Google may have the biggest search engine, but anyone can buy an ad.

However, before we get too excited about this new world of entrepreneurship we must look at the remaining barriers.  There are still two large hurdles: government regulation and selling cost.  Any large firm not offering access to its railroad tracks is doomed unless government regulators can be deployed to prevent competition. Also, in selling, some large businesses can prevent their customers from being exposed to new entrants by blanketing the market with salespeople.  Oracle and its mini-me Salesforce.com, dedicate $5B (20% of revenue) and $700M (50% of revenue) respectively to sales and marketing.  They have the reach to simply shout down any competition for customer mindshare. 

These government and selling advantages are significant because to date they have overcome the many large firm disadvantages.  Poor performing employees have many places to hide in big firms, even top performers spend an inordinate amount of time fighting internal battles, and real live feedback from the marketplace rarely makes it through the ranks to the top decision makers.  For these reasons top talent gravitates to smaller firms where the opportunities for advancement and the big payday are greater and there is just plain less brain damage.  The small firms have the smartest people, whose motivations are more closely aligned with business success, who are closer to the customer, and who have access to all of the tools and infrastructure previously only available to the big players. 

Both of these problems are self-correcting. 

Government protection may benefit a business but it kills the market.  More people every day make their residential location decisions based on access to high speed internet.  Taken to the extreme, these decisions may not be between one part of a city and another, but instead over an international border.  People went to Canada to escape Nixon’s draft, why not Australia to escape the reach of Genachowski’s FCC?  It is not hard to imagine a young software engineer with school age children attracted to Australia by fiber to the home and good schools.  Comcast and its lobbyists win in the short term, but even they lose in the end as they ride their shrinking market into the ground.

WikiLeaks may offer a middle ground to the all or nothing proposition of killing the entire economy.  They have announced plans to release documents targeting big business starting with the big banks.  It is suspected that the first target is going to be Bank of America.  This will expose the tactics large enterprises use to protect their positions.  In banking it is likely the manipulation of the bank regulators and deceiving their government and shareholders about their financial condition.  In technology it will probably be the anti-competitive behavior associated with patent trolls, mergers, and the implementation of standards.

In Selling, the small firms need to push forward while gravity does its work.  Salesforce.com spends fifty cents of every dollar of revenue on sales and marketing because they can.  With 95% gross margins, they have the money.  The increased competition from the many small businesses offering sales process automation tools will drive gross margins down. Each bee sting may not seem like much to worry about, but even Microsoft expects its margins to drop from over 80% now to 40% as their customers move to a cloud computing model.  This is happening to the entire industry and the big spenders on sales and marketing are going to either get crushed, or adapt.  Either way, there will be much more oxygen available for the little guy at the customer’s table.

As the disassembly of business offers opportunity to small up starts, the big established firms will dissemble.  Watch for support of entrepreneurial activity while absorbing potential competitors, claims of working with the government to open markets while increasing regulatory burden, and ever increasing attorney headcounts.  Change is hard for anyone and really hard for the big guys.  

Post 272

Well it has been a year and this is my 272nd post.  I set out to write a blog entry every day and even though I came up a few short, I have enjoyed organizing my thoughts and working on my writing in 2010.  

Thinking about why I do what I do, or what I plan to do in the future is unavoidable (for me anyway) as the calendar changes to a new year.  The blog posts I wrote this year were adequate notes to myself about what I was thinking at the time, and the fact that 4,000 other people found my posts interesting enough to read is flattering.  

So what to do in 2011?  I have no plans to become a journalist, so I am not looking for a scoop or to break a story.  I do think I could put more effort into some bigger writing pieces that further organize my thinking into actual arguments.  So in the weeks ahead I am going to pick a few main themes and start to develop them into longer essays that argue a particular point.

Here are some possible subjects based on the number of entries I made this year organized into broad categories:

Tech Marketing (113 entries):  I write a lot about this because my company helps large tech companies with sales and marketing.  I think the changing role of the salesperson is worth spending time thinking about with Google and Facebook on one end of the spectrum because they really have no salespeople, and Salesforce.com on the other end spending 50% of revenue on salespeople.  I don't know how this is going to work out but it sure will be interesting to watch.

New Media (51 entries):  My second most written about topic is new media.  To me New Media is the decline of the newspaper, publishing, and TV we grew up with and the rise of blogging, micro blogging, social media, and streaming media over the Internet.  We live in a very interesting time and the creative destruction of this sector is one of the things that makes it so interesting.

Politics (47 entries):  Next in line is politics - mostly in the US, but invariably overlapping with the rise of China as a world power.  The big question of course is whether or not the US will stay on top and how many wars will we start as we struggle with our identity.

Economics (44 entries): Finally economics.   In the world I want to live in, those that create the most value get the most rewards.  It does not take long to see that right now getting rewarded is often disconnected from value creation.  Will my pollyannaish view of the world find its way into reality, or will Goldman Sachs continue to gobble up everything for themselves?

There is one other subject that I find very interesting and that weaves throughout all of this: demographics.  We often define people in groups and evaluate the relationships between the groups based on our understanding of the average within that group.  This tendency prevents us from seeing the real picture.  The growth rate of a nation's GDP or even the GDP per capita does not tell us very much.  The unemployment rate in the US is around 10% -- but some sectors cannot find enough workers and others have 25% unemployment.  If you are interested in this subject, read this from Foreign Affairs.  Sure there are well over a billion people in China, but half of them are subsistence farmers who do not participate in the economy.  

I am looking forward to digging in on these topics during 2011.  As always, your comments and thoughts are appreciated.

Looking up in 2011

I have had the chance to catch up on some reading this week and overall my sentiment about our prospects in the US has turned a corner.  Over the past couple of months I have been finding more and more reasons to be bullish on America and some of those thoughts seemed to have crystallized in the last week.  Here is my attempt at a list:

Attention on Education:  I have been involved in non profit initiatives to improve education in the US for 20 years and I have never seen the kind of focus and awareness on the education problem as we saw in 2010.  There were always a few high profile people working on this -- now there are dozens.  2011 is the year we will start our climb back up.  We have a long way to go, but not going down further is a great victory.  

Realism in the White House:  We may not like the state of things, but just accurately assessing the problems is a big victory.  In the past we had leaders that just made things up -- it is hard to address issues when no one wants to talk about them.

International Humility:  We have said it over and again enough times that the world community is starting to believe that we are not going to solve everyone's problems.  We said we would get out of Iraq and we are actually starting to do that.  There was a great line I heard the other day (not sure of the source):  Saudi Arabia is willing to fight Iran to the last dead American.  We don't seem likely to get sucked into that game.

No Need for a New War:  Yes Assange should have been on the cover of Time Magazine.  I am glad he was not because that one event has jinxed many other people, and the WikiLeaks story is just getting started.  Here is a great post on The New Republic about how WikiLeaks could end big business and big government.  I don't know if that is true, but we do need a way to reduce the influence of big organizations before they drive us into a new war.  Uncontrolled power always gets diffused somehow, and quite often it is a war that does it.  Perpetually bad economic times also promotes war.  We have very powerful big organizations and bad economic times -- a tough combo.  WikiLeaks, or something like it, could be just the thing to pull the rug out from under the oil companies, bankers and the warmongers, and just in time too.

In America we know that we have the most adaptable form of governance on the planet.  I know that once we wake up and view our problems in the light of day -- we will prevail.  I think 2010 could have been the year we accurately assessed things, and 2011 could be the year we start doing something about it.

If you have some time this week and want to read some great background material, check out David Brook's Sydney awards for best essays of 2010.  

Doctors of Selling

I have written several posts this year on the topic of selling and the future of salespeople.  A good many of the articles involve Google because I think one of the central themes in Google's business is to eliminate the inefficiency of the sales process in general and salespeople in particular.

Clearly the sales process and salespeople are vulnerable.  Salespeople strike out much more often than they make contact -- so much so that a part of sales training is to help salespeople handle the rejection.  If a salesperson only closes one out of ten deals -- the salesperson is not producing value ninety percent of time!  That is a pretty fat target.

On the other hand, if salespeople could close 100% of deals, they would be considered "order takers" and replaced by automation.

Salespeople are purveyors of information.  They help people with problems find the solutions.  Hey, that is the business Google is in - helping people find information.  Could it be that if Google did its job better, anyone looking to buy anything could find that thing without the aid of a salesperson?  For more on this see my post earlier in the year about the Changing Role of the Salesperson.

Enter the paid trusted advisor.  Some will say this is that consultative selling stuff all over again, and maybe so, but either way salespeople as we knew them are on their way out.  They will be replaced by consultants that get paid to advise.  Instead of thinking of this as consultative selling, I prefer to think of it as Doctors of Selling.  The salespeople that survive will be specialists -- just like doctors.  They will be paid for all of their time, and they will differentiate through reputation and brand association.  

Evolution or Revolution in 2011

Every other newspaper story in 2010 seems to include a reference to how this next generation of Americans will have it worse than their parents for the first time in well, ever.  I have been there among the alarmists trying to get people to worry more about the balance of trade, the state of our educational system, corruption in Washington, and others issues.  Change does not come easily to humans and we all know that the bigger the problem, the more likely we are to change our behavior.  This creates bad news inflation to inspire change.  We hear it all day every day from just about every interest group.

I have to wonder:  Does it work?  Do people really change their behavior from fear of bad things happening?  There is some evidence that people do.  There are many waterways in the US that have recovered from terrible pollution, we all recycle, and after suffering heart attacks - eating and exercise habits change.  It could be said credibly then, that people's behaviors can evolve.

Alternatively, people often do new things.  Electricity, railroads, the Panama canal, the car, the plane, the space race, the computer, the Internet, and the cellular phone came to us as new things.  New things that humans adopted vigorously.  These were revolutionary new things.

When talking with founders of start up companies or the people that finance them, the common belief is that new things get adopted if they are ten times better or ten times cheaper than the thing being displaced.  The new thing gets adopted, the old thing dies, Schumpeter is proven right, and change happens.  Revolution brings about much more change than evolution.

Could 2011 be the year where some of this revolution happens and we regain the hope that our kids will be better off than we are?  Here are a few areas to watch:

1. Innovation Engine:  Innovation happens because the innovators have confidence that they will preserve the value of what they create.  Many companies are built round the patent and copyright systems, but many more have captured the value of their innovation without those constructs.  Neither Google or Facebook are protected by patents or copyrights.  This structural IP protection scheme will fuel an explosion of innovation -- limited only by the ability of people to think freely.
2. Leap Frog:  The idea that an emerging nation can leap frog the developed nations by rapid deployment of new technologies is a myth.  A village with no telephone landlines and just cell phones has acquired communications capabilities much faster than anyone had dreamed, but can anyone really argue that they have leap frogged over and ahead of a town that has had landlines for 100 years and has cell phones too? This phenomenon will create markets for products from the developed nations.  The first will be healthcare, the second will be education, and right after that -- anything that conveys status.
3. Work Redefined: Soon we will be re-allocating all of the time we used to spend as computer operators to other productive activities.  This could represent a dramatic change in productivity.  Here is a post on the subject from November 30.

I hope that 2011 is the year that the revolution takes hold.  I hold out less hope for the evolution part.  Either way it will be quite interesting to watch these things play out.

Dave Winer and Steve Jobs

Yesterday I wrote about how much respect I had for Keith Richards regard for his heroes -- particularly once most of his contemporaries were worshiping themselves.  On the theme of heroes, and not on my being Keith Richards but rather following his example, here are two of mine:

Dave Winer:  A cantankerous techie who has returned to New York for yet another chapter of his career. If you are not already a follower, there is a pretty good page about him on Wikipedia here.  His blog Scripting, and his podcast Rebooting the News with Jay Rosen are two that I follow, but he has done/is doing so much (see the links on his Scripting blog).  I have never met him, but would thoroughly enjoy a beer and a lively discussion about tech -- particularly on his self removal from the middle of the circle in Silicon Valley to foster the growth of a new circle in NYC.  

Steve Jobs:  I am hardly the first guy to say that Steve Jobs is a hero.  His work over the past 14 years at Apple says alot of it.  Not that market cap is a true indicator of value, but here is a chart of the stock VS the NASDAQ since his return in 1997.

 

I imagine a moment when Steve is looking at prototypes of the iPod Touch, to this day I think it is the most amazing of his amazing machines, sometime in 2006 deciding on the size, what to have in or out, the fine points of the form factor...  Mine lasted for three years, the third of which I was often heard marveling about how I used it every day and the magic was still there.  The guy has a passion for what he does.  Unbelievable.

Upon meeting him I would ask:  have you ever hung out with Keith Richards?

Later:  Links added and if you want to hear one of the best podcasts ever, listen to yesterday's Rebooting the news with Dave Winer, Jay Rosen, and Doc Searls (guest).  There are some podcasts that I skim through at 2X, this one I am going to listen to twice.

A380 Spotting

I am sitting here in the Delta Lounge at Narita waiting to board my plane for home.  Hardened travel veterans all around me.  Who else would be here on Christmas week?  In rolls an AirFrance Airbus 380.  I knew they were making them, but I had lost track of whether they had been put in service.  

The thing pulls up right in front of me between two 747s and everyone reaches for their cameras.  If you have not spent much time flying in Asia, the 747 still rules here.  Even if it was introduced in 1969.  From my seat I can see 12 planes.  All of them are widebodies, 6 are 747s, a DC10, two A340s, 3 777s, and the A380.  

Ever since I few on a 707 to Manila in 1970 I have been a student following the planes.  I don't know if anyone else was into knowing the difference between the planes: they were pretty much all Boeing planes back then; probably didn't even get me 7 year old street cred, but I was into it anyway.

It is cool to see others marvel at this flying beast.  It just pulled up right in front of my window.

Book Review; Life by Keith Richards

I just finished reading Life by Keith Richards.  Actually, I had Johnny Depp read it to me via Audible.  An truly enjoyable experience even if it was hard to figure out why the voices were changing.  Who knows, Depp may have been doing a little method acting and using while reading.

I am not a giant Rolling Stones guy, in fact the only CD I own is 40 Licks.  But I am close to going out and buying the whole archive after experiencing Keith Richards through this book.  I have a list of real reviews below.  Here are my main take aways from this experience:

1. Heroes:  Keith Richards has heroes, and lots of them.  He maintained his respect for venerable blues players like Muddy Waters, Chuck Berry, and John Lee Hooker even after he eclipsed their accomplishments or discovered they were not all that he thought they would be.  Most any guy who had done what he has would eventually expect the tables to turn, just like another well known guy in the band, and start thinking he was the hero.  Not Keith Richards, at least not by my reading of Life
2. Music:  Keith Richards loves music.  No way to avoid it in the book.  He cannot live without creating music.  What a passion.  Anyone who is wondering if they should follow their passion (instead of being practical) should read this book and just do what cannot be avoided.  He got to the point were he recreated the guitar as a 5 string instrument.  I am not deep into music, but to me that sounds like unrestrained thinking.
3. Changing the World:  The Rolling Stones took black music, made in America, and played it back to Americans. These guys did as much for our civil rights movement as anyone.  Anyone.  Just crazy how they were colorblind.  Even more than that, they were sought out the black side of town.

New York Times

The Guardian

LA Times

Have a great time with this one.

6 Years That Were Worse for the US Than Now

it is funny how current experiences can randomly conspire to focus our attention on particular times of the past.  The Wikileaks story reminds me of the Pentagon Papers, and I am also reading Keith Richards biography that reflects a lot on that same late '60s early '70s period.  

These days it is easier than ever to think the USA is worse off than ever before.  Here is a list of five times since WWII that I would argue were even worse:

1947:  House Un American Activities Committee creates the Hollywood 10 Blacklist

1954:  Joseph McCarthey reaches the height of his power 

1968:  The Assassinations of Martin Luther King Jr and Sen. Robert Kennedy

1970:  The Kent State Shootings

1974:  Nixon Resignation

1980:  Iran Hostage Crisis

Through these were broader ongoing negative narratives like the Civil Rights movement, the Vietnam War and the 70s oil crisis.  

Sure things are bad now -- but I would argue that we are a long way from the worst time ever.  The one thing that makes our current situation seem so dire is another year:  1989.  The difference between all of those bad years listed and now is that back then we did not view ourselves as the undisputed sole superpower.  

Could it be that the fall of the Soviet Union and our ascendance to the top of the heap has put us at an altitude where the thought of a fall is more than we can bear? 

Birds of a Feather

In recent posts here and here I have proposed that Facebook, Google, and Groupon are advertising companies because their clients pay them for advertising.  I argued that they use the Internet and technology to do what they do, but that calling a company an Internet company is soon to seem very old fashioned.  Would you call General Electric an electricity company?  Would you call the New York Times a printing press company or an Internet company, or a news company? (I think news because they still do have subscribers that buy the paper, but advertising is right in there too.)

Where does Twitter fit in?  Right now they don't seem to be getting paid for anything.  It is likely that their monetization scheme will be advertising.  Whatever they pick, I am sticking with my assertion that companies serve the people that pay them.  Before long Twitter will be an advertising company too.  

Here is a post from some time about about Third Party Payers.  True, there are many industries with third party payment systems and most of them are broken.  Companies would be smart to recognize that they serve their true masters -- those that pay the bills.