Tracking Every Pitch

There were many great parts to the book and movie Moneyball.  If you have not either read it or seen it – you should.  In addition to the great storytelling by Michael Lewis, the main theme resonates in our business and just about everywhere:  we now have the capability to track everything.  This may not seem like a big jump from the prior method of measurement by sampling, but it is a big big deal.  Sampling is the Nielsen ratings: where a small population of representative viewers track their TV habits and the results are applied to the total population.  The tracking everything equivalent is having every single set top box send in data for every single viewer.  The story in Moneyball helps to demonstrate the difference.  To know from sampling that a pitcher behind in the count is 25% more likely to throw a fast ball than anything else – could help you.  If you know from measuring everything that this particular pitcher is more likely to throw a fastball on the next pitch because you have a complete database of every pitch he has thrown in the past 5 seasons – well, that is different.

For the past decade, businesses have been making this same transition.  From sampling data about their customers to tracking everything.  The leaders in this revolution will win.  The businesses that understand this will jump very far ahead of their competitors.  The businesses that do not understand this will say that a statistically significant sample is the same as a complete database and will not go to the effort to track everything.  They will lose.  Some businesses, like the grocery stores, are tracking our every purchase, but I just don’t think they know what they have in the data.  Here is my post from last year on that topic. 

Governments will be in a unique position to capitalize on the data they collect.  A dramatic example of that is happening right here in the Seattle area with the tolls starting on the 520 bridge.  I can go online and see a record of every time my car has gone across the bridge.  Imagine the possibilities here!  Not only could parents or insurance companies learn about driving patterns, but some super smart PHD is going to figure out how to match up drivers for ride sharing – by evaluating the driving patters in the data.  Or I could sign up for a service that sends my family a text when my car passes the tolling camera – that calculates what time I will be home based on the other traffic data.

In our marketing services business, we started tracking every single interaction about five years ago.  Before that, the proprietary closed databases in many of our systems aggregated data – because storage space in the database was more valuable than individual activity records.  Sounds hard to believe given the current environment, but these old databases actually wrote over themselves every night – just to save hard disk space.  As a result we have pretty good predictive data on what will happen if we email an email address, or call a phone number, based on our past experience.  Using that experience data, we direct resources to the highest value activities first.  It is a game changing practice. 

Privacy experts say that this kind of customer data collection is an invasion and should be made illegal.  There definitely are steps that should be taken to protect the consumer and protect the data.  Increasingly however, customers are demanding that the businesses that serve them know their stuff.  Today there are many simple requests that I want in this area.  I want Amazon to tell me if I am buying a book for the second time.  I want the credit card department at my bank to realize that I already have a credit card and to stop calling me with new credit card offers.  I want Starbucks to know my order before I order it.  I want Delta airlines to know what seats l have sat in.  This is just the beginning.

Free HP OfficeJet Pro L7580 – slightly used, may not work

I have had this printer for a few years and it has worked pretty well.  Some time ago I stopped using the scanner because it was quite slow and I could not stand to have the bloated HP software on my pc.  Nevertheless, the machine has continued to print with only the driver installed on my PC – so it has been good enough.

Today however the device reached the end of its time with me.  Despite the fact that I use it quite regularly and replace ink cartridges a few times a year, today the printer informed me that my ink cartridges had expired.  Clearly this is a ploy to sell more ink cartridges.  The printer gave me the option to print anyway, but I had to agree that it would void my warranty.  So it is either an attempt by HP to sell more ink, or lower its warranty exposure, or both.  Either way, as a customer I really don’t like being treated this way.  I went ahead and pushed OK, but the printer still would not connect back to my PC.

I do have a second printer in the house, an Epson, that all of the sudden I like a lot more than the HP.  So the HP is out.  I probably won’t buy another HP product.  I will definitely never call HP to tell them.  Customer lost for life. 

It happens that today a friend asked me what type of computer to buy.  I did not recommend HP.  I also related this story, probably another customer lost – maybe also for life.

Increasingly customers expect the products they buy to work.  If a replacement can be had for a few hundred dollars it just does not make sense to spend the time and effort required to get support and repair it.  If HP is monitoring complaint calls, or unresolved support incidents as a way to measure its customer satisfaction, I will not show up on any of those measures.  Silently and precipitously however, the company is losing customers.  Some may never return.

The first US based person to put their shipping information in the comments section of this blog post will get the printer.  I will pay the shipping to anywhere in the US.  I would also gladly send it back to HP – so if you are listening HP – just let me know.

Be Insanely Great -- or Go Home

Steve Jobs was widely considered one of the best salespeople ever.  Who else could have sold the music industry on iTunes?  However, he also recognized the downside of too much dependence on salespeople: Here he describes it to Walter Isaacson:

…The company does a great job, innovates and becomes a monopoly or close to it in some field, and then the quality of the product becomes less important. The company starts valuing the great salesmen, because they’re the ones who can move the needle on revenues, not the product engineers and designers. So the salespeople end up running the company. John Akers at IBM was a smart, eloquent, fantastic salesperson, but he didn’t know anything about product. The same thing happened at Xerox. When the sales guys run the company, the product guys don’t matter so much, and a lot of them just turn off.

Google also does salespeople differently. Here is a great post from Charlie Warner describing the differences.    Like Apple, Google seems to recognize that salespeople are important, but all companies have to work to ensure that the salespeople do not steal all of the oxygen at the company.

Salesforce.com spends half of its revenue on sales and marketing.  They also spend very little on R&D.  Here is a post I did comparing sales to R&D spending at the leading technology firms.

I think all customers are in one of two states.  They either believe that the product or service they are getting is unbelievably great, or they believe there must be something better out there.  Every company should employ this measure of customer satisfaction.  The danger is to think that the customer is happy because they are still paying the invoice.  There are many customers who do not complain, but are still looking for an insanely great solution.  When they find it, they will not go to their current vendor and say:  do you want to compete to keep my business?  They just leave.  

Products must be insanely great to compete in the marketplace. 

China Buys the New York Times

Even though I am a conservative at heart, my favorite newspaper is the New York Times.  They have always been the one newspaper that is actually trying to do a good job – until now. 

I recently converted my digital only subscription to digital plus Sunday delivery and I have been surprised to see twice in the last month that the China Daily has purchased two page advertising spreads in the Sunday edition (these advertisements do not appear in the digital editions).  China followers are quick to dismiss this a as a cheap trick, but those who are less likely to realize the extent the Chinese government (who prints the China Daily) will go to deceive its readers will not. I am surprised that there has not been more of an outcry from the protectors of Journalism.  Is this old news or something?  Here is the only article I could find.

Just as Goldman Sachs will likely be successful with its new philanthropy campaign, the Chinese government will likely win over many readers with its New York Times partnership.  Until now I had hoped there would be customers who the New York Times would actually not take money from.  We should all brace ourselves for what comes next, because if the precarious state of the newspaper industry has brought us this, next we will get something even worse.

If there is a newspaper with a “Chinese wall” (ha ha) between advertising sales and editorial decision making, it should be the New York Times.  Recently, this article appeared.  I wonder what kind of phone calls it generated. 

Michael Lewis recently pointed out in Boomerang that Germans by their nature believe in order and process and cannot escape the idea that everyone else does too.  When Moody’s said that the bonds were AAA – the Germans actually believed it.  When they turned out to be toxic junk – the Germans were actually surprised.

The Chinese believe that their paper is full of lies, and when they find out that Americans actually believe what is printed in their paper – they will be surprised.  The Chinese also believe that when you pay someone money, they do what you ask them to do.  So when the China Daily calls up the New York times and asks that they no longer print negative articles about China – they will actually be surprised when the New York Times says they will not.

Well, I am still a subscriber.  But I will be getting my China news somewhere else.  Anyone have any suggestions?  Al Jezerra English?

Update:  Post from the Nieman Lab at Harvard on the subject.

Book Review: Boomerang by Michael Lewis

Michael Lewis is one of my favorite authors. His magic is the ability to rapidly become an insider on a subject, without losing the perspective of an outsider.  He is an Earthling that sees the world through the eyes of a Martian.  Or a bond trader that sees Wall Street through the eyes of main street.  His latest work, Boomerang, takes us on a tour of what he is calling the new third world.  This is great irony capitalizing on the recent fashion of using the term “developing nation” instead of the term “third world”.  It is no longer correct to count the worlds.  Counting or not, we have leap frogged in the backward direction - over the developing nations.  His tour of countries worse off than the third world starts in Iceland, and goes to Ireland, Greece, Spain, Germany, and well, California. 

The recurring theme is examining what people do when told they are in a room full of money and:  “The lights are out, you can do whatever you want to do and no one will ever know.” It’s a great mental picture that takes all of a half second to absorb.  Lewis makes it even more powerful by applying it to nations.  “Americans wanted to own homes far larger than they could afford, and to allow the strong to exploit the weak. Icelanders wanted to stop fishing and become investment bankers, and to allow their alpha males to reveal a theretofore suppressed megalomania. The Germans wanted to be even more German; the Irish wanted to stop being Irish…”

The section on Germany was particularly interesting as Lewis investigated that culture’s fascination with human waste, which made them particularly vulnerable to the toxic waste products being packaged by our people on Wall Street.  It will be a long time before anybody anywhere in the world ever trusts Americans again.  WMD + Abu Ghraib + Goldman Sachs = Americans are liars. Our reputation could not be repaired even if we had the money to do another Marshall Plan.  Looks like we are going to be sewing Canadian flags on our backpacks for many years to come.

There have been many great reviews of the book.  Here are links to a few of them:

NY Times:

The Guardian:  

Forbes: 

Washington Post

Seeking Alpha:  

As I do with many books, I listened to this one on Audible.  It was another great production, this time read by Dylan Baker.

Conditions for Real Change

David Brooks posted an interesting piece this week showing how we are in an unusual situation with both parties losing favor with the voters.

We can see our nation getting more polarized every day, but this is the first time I have thought about how the polarization is hurting both sides.

Here is an interesting poll showing one example of how the people fueling the fire are impacting their constituents:  Fox News viewers less informed than people that consume no news at all.

Add to this the way the the Occupiers are shining a bright light on inequality and the growing number of people that are giving up hope of earning a living, and we could be approaching a time where real change could happen.  I am not talking about the kind of real change that is easy, measured, and pleasant.  

I am talking about the kind of change that Michael Lewis chronicles in his new book Boomerang.  Here is the part about what is happening in Vallejo CA, and could happen to other parts of our country.

Meanwhile those jokers in DC are arguing over who is to blame for the demise of the Supercommittee...brother.

Book Review: Steve Jobs by Walter Isaacson

In 1990 Michael Lewis wrote his now famous book: Liars Poker. His intent was to expose the bad behavior of people on Wall Street and help to bring an end to the steady stream of our best and brightest wasting their abilities in a parasitic business. To his surprise, his book just added fuel to the fire and all of these years later we still lose bright and motivated and capable minds to the pit of greed.

This 571 page book reads like a 200 page book because it is well researched and well written and the subject is familiar to all of us. I read it on my iPad -- a device I did not know I needed until after I got it and that I spend several hours a day with now. In fact, I am writing this review on my iPad.

It will be interesting to see how history views Walter Isaacson's latest master work: Steve Jobs. Of course everyone is talking about it and I have put some links to other reviews below. The common thread in the commentary about the book is to marvel at the fact that even though his own life was shaped by his adoption, Steve Jobs was still able to abandon his own daughter. The barefoot thing, the diet thing, and the personal hygiene thing also seemed to get a fair amount of attention.

To me the biggest question posed by the book is whether Steve Jobs was successful despite his narcissism, or because of it. This is the central question because a great many young entrepreneurs are right now reading the book and getting ready to emulate Steve Jobs. I hope they are learning to operate at the intersection of Liberal Arts and Technology, and to have an uncompromising focus on design and quality. I fear they may be encouraged to put themselves in the absolute center of their universe and make everyone else feel less than adequate. Will this book encourage the next generation to belittle co-workers, send food back at restaurants, and put themselves before their own children?

I have said before that I believe Steve Jobs was the best CEO we have ever seen. There is no question that he created amazing products and a company that will not only survive, but will thrive for years -- just by coasting on the lead he built before is death.
The pain he inflicted on those that loved him was also of epic scale. At the end, he knew he was dying, and even then, he could not connect with his daughters. I hope that legacy is forgotten.

Here are my take aways from the book:

1. Narcissistic Personality Disorder is real and Steve Jobs had it.
2. A passion for simplicity and quality has to start at the top.
3. Leadership makes a big difference.

Here are other reviews of the book:

• NY Times
• New Yorker

I hope that 20 years from now we look back and find many companies built by young people that were inspired by Steve's passion for great products and design. It would be even better if they learned how to do that by building up the people around them.

Great Marketing is Self Propelled

A few of us at the office are participating in the Movember fund raiser to benefit mens health -- specifically Livestrong and the Prostate Cancer Foundation.  Clearly worthy causes, and also just plain fun to participate in.

I am making pretty good progress half way through the month, moreso on the not shaving than on the fund raising:  so if you want to make a contribution, click here!

Participating in this effort has been so fun and easy that it has made me think about the greatest self propelled marketing campaigns of all time.  

Ad Age has a list of the top 100 Advertising Campaigns of all time.  The top 5 are the ones you would expect:

• Volkswagen
• Coca Cola
• Marlboro
• Nike
• McDonalds

Those are great, but hardly self propelled.  Maybe "Just Do It" but even that has some serious investment behind it.

I am reading the Steve Jobs biography now so I can't go without mentioning the "Think Different" campaign he created with Chiat/Day when he came back to the company in 1997.  That has to be on the list.

For me though, there has never been a campaign quite as effective as washing your hands after using the restroom.  Sure it is not as exciting as the 1984 superbowl ad, but think of the beauty of the thing.  

I am no biologist, but of the germs we want to kill when washing our hands I bet only a fraction of them origniate in the restroom.  What makes the campaign so elegant is that everyone has to go multiple times per day, and the sink is right there.  It would be a tall order to launch a campaign to convince people to wash their hands after shaking hands or after coughing or sneezing or touching a door knob.

Anyway, Movember.  Check it out.  It is propelling itself into a great movement -- now with over 800,000 people participating. 

Last Mile to the Channel Partner

Just like with other networks, the Last Mile connecting a Partner Network to its Partners is expensive and complicated.

All channel partner programs have infrastructure designed to manage the relationship with partners.  From the simple to the sophisticated, this infrastructure accomplishes a variety of critical tasks including registering partners, enabling them with sales materials and support, delivering leads, tracking performance, managing certifications, and many other functions.  These processes and systems are in effect a network of sales and marketing people and PRM/SFA databases and applications.

To function, all networks must reach their customers and a partner program network is no different.  The link between the network and the customer is called the last mile, and just like with a phone network, the last mile is the most challenging because the investment required to reach a new partner is uneven, and in many cases will never pay off.  Extending the phone network to the last farm on the road will never make financial sense – that is why the FCC has made the phone company provide service to everyone.

Companies have tackled the last mile problem with their channel partners in three distinct ways:       

• Invest everywhere and dominate the market (Microsoft)
• Invest heavily in obviously high value partners (HP)
• Make the partner come to the network (Google, Amazon)

These differences are logical when taken in the context of gross margins.  Microsoft and other software companies have the highest gross margins, so they can spend much more than everyone else.  HP and the hardware companies have much lower margins, so they have to be more careful to invest only where they know it will generate additional sales.  Google and Amazon and other similar businesses have many more partners, and their transaction size is much smaller – making anything other than a fully automated approach hard to justify.  It is just not possible to cater to the individual needs of partners if there are millions of them.

As the technology industry evolves and these companies move into new markets, they will have to adapt to new margins and transaction sizes.  This will be much easier for companies working up the list, than those working down the list.  Those with skills developed in low margin and small transaction sized businesses will have to learn to invest more in the last mile – learning to spend more is enviable compared to those who have to learn to spend less.

To Correlate

cor·re·late:  (verb) to have a mutual relationship or connection, in which one thing affects or depends on another.

We live in a time when the relationship between cause and effect in sales and marketing is known more than ever.  We measure the actions, we count the reactions, and we try to do more of the things that get us the biggest reaction.  In sales and marketing, the reaction we want is revenue.  It sounds easy, but the fact is, even with all of this progress, we still waste half of all spending on sales and marketing and we still do not know which half is wasted.

This is the kind of thing I write about from time to time, and in looking back I found this piece about measuring that shares some ideas about targeting, landing, and measuring effectiveness in marketing campaigns.  Many other people write about measuring the effectiveness of sales and marketing so if you are intrigued by this kind of thing, you will have no shortage of material to read.  The balanced scorecard has been around since the 90s and is likely one of the best methodologies for making measurements central to performance management.  With all of these measures, why has the relationship between sales and marketing spending and revenue growth not changed?  

Some would say that the recession has reduced revenues.  I think it is that our capacity to measure has for some time exceeded our interest in measuring.  Finding the truth is hard when one is not looking for it. 

Here are some reasons this may be happening:

• The Rise of Integrated Marketing: There are many ways to reach customers and marketers are employing them in overlapping ways.  The overlap fogs the cause and effect.
• Carrot and the Stick:  An increased emphasis on pay for performance compensation structures, and an increased focus on cutting headcount has made the very people measuring effectiveness unwilling participants.  Everyone wants to be part of the good story, and everyone runs from the bad story.
• Grab and Go Mentality:  Large company marketing departments move people around often, so people grab onto the best metrics, claim responsibility, get promoted and repeatability is never tracked.

Small companies that don’t know how to sell die – so evolution is alive and well in small companies. In large enterprises however, these behaviors are deeply ingrained and not likely to change.  

Two Great Presentations at SMB Nation

I am attending smb nation in las vegas this weekend and it has been a great show.  I will be presenting a little bit later today, and I will post my comments here with a link to the slide deck.  

Yesterday I was lucky enough to sit in on two great presentations that sparked an addition to my presentation.  Here are some notes:

Anurag Agrawal in his presentation about mobility and SMB:

Top three issues for SMB customers:

1. Reduce Operating Costs
2. Enter New Markets
3. Improve the Effectiveness of Sales and Marketing

Dave Michels in his presentation about Voice:  Voice is an IT service now

I thought these points were notable because we are seeing the same thing in our business.  In IT it is easy to think we are all about the technology, but in fact, the customers don't care about technology, they care about the growing their businesses.  If we want to sell technology we have to answer the question:  "...yes but, what does that do to grow my business?"  

Some will say that this is solution selling and we have been doing that forever.  I agree, but sometimes the solutions we are selling take on a life of their own, and get too far away from growing our customer's businesses.

In the case of Dave Michels comment -- "Voice is an IT service now",  the point is again that the customer does not care that telephone systems used to be sold and supported by different people.  The customer just wants to grow their business.  There are many big things that phones can do now and someone needs to be bringing those things to the SMB market.

Lessons from Alaska Airlines

Recently I found myself in the common situation of wanting to adjust the time of a flight I was taking to the Bay Area.  Alaska Airlines makes this quite easy and I am willing to pay the $75 change fee for the flexibility.  Everyone wins.  I get just the flight time I want and Alaska gets a few more of my dollars.  This time however, the earlier / later flight buttons did not come up during the web check in process. 

I like Alaska Airlines.  I don't fly enough to get to their highest points status every year, but I am usually enough of an MVP to get a few perks.  I am also quite familiar with their web site, so when the option to go earlier or later was not presented I thought the web site must not be working right.  So I called customer service.

As I would expect from Alaska Air, I got right through to a customer service person who said that it would be more than the original cost of my ticket to change the time.  The person was friendly, but offered no explanation.  The message was:  The situations was what it was.  I was disappointed because my travel plans were not working out the way I wanted, and my favorite airline was falling a few notches.

Again, I do appreciate a good customer experience and Alaska Air usually delivers. They also make a good effort to run their airline the way I would run it, with a focus on the customer and on quality.  They also run it in a way that often is profitable, which is deserving of our respect in an age where the Wall Street types are sucking the life out of many of the airlines - ala Gordon Gekko.

So, disappointed, I went back to the web site to check in and fly the time that no longer fit my schedule.  Imagine my surprise when the web site was now asking for volunteers to fly at a later time – just what I wanted!  Well close.  I wanted to fly later, but I did not want to have to show up at the time of my scheduled flight and find out that I may have to wait around the airport for a few hours until a later time.  A quick check on the Alaska Air reservations page showed that there were seats available on the later flights.  OK.  I want to go later, Alaska wants me to go later, and there are seats on the later plane – a great opportunity for everyone to win.

Unfortunately for all of us, customer service, even though they were friendly and answered fast, still told me I would have to pay big bucks to change. 

For many years the airlines have been out front in the quest for both efficiency and customer loyalty.  They achieve efficiency by reducing the mechanics of consuming their service to policies that can be carried out by travel agents, call center agents, and increasingly the customers themselves.  They generate customer loyalty by offering benefits that are difficult to reproduce elsewhere (increasing the cost of switching), and just plain making their high value customers feel good.  The airlines understand that people do business with people they like.

My company manages relationships between large technology companies and their resellers.  Since there are hundreds of thousands of these resellers, we have become experts in making policies and carrying them out efficiently.  Our clients depend on their partners for most of their revenue, so we are quite sensitive to the traps that invariably arise when trying to be both efficient and build lasting relationships.

This background may make me more interested than the typical person in my experiences as a customer.  Every interaction with a vendor is an opportunity to discover things to do and unfortunately often not to do. 

My experience with Alaska Airlines was a good reminder that we have to be careful not to let our pursuit of efficiency degrade the customer’s experience, or even worse, prevent an outcome that even Alaska Airlines wanted.  Here is a quick list of three lessons we can learn from this episode:

1. Use Available Information:  Each time I called into the call center, the customer service person should have seen my status level and other interesting things about me.  A world class company would know at that moment that I am using slightly less of their service this year than last, that I was recently on flights that had been delayed – where vouchers were given out – and maybe even that the voucher I had been given was not redeemed.  All of these indicators point to an opportunity for Alaska Air to regain ground recently lost in our customer relationship.
2. Empower Humans to Intervene:  The fact that I was taking the time to call should have been a signal to Alaska Airlines.  The fact that I called twice in two days about the same issue should have been a trigger to the person handling the issue to make an extra effort.  These days, companies get very few opportunities to talk one on one with their customers.  The fact that the customer service people either did not know or did not care about this situation was a lost opportunity for a high quality interaction with what might even be a high value customer.  Once engaged, who knows what the outcome might have been?  My company does not have a company wide purchasing agreement with Alaska Air – I don’t know if they do that kind of thing, but it could be valuable to Alaska Air.  After all, many of my employees are more loyal to Southwest or Virgin than to Alaska Air.  Also, I have never really understood how the Alaska Air lounges work.  I know that I have to purchase a membership, but no one has ever asked me to do so, and every time I walk past the lounge I think I should figure that out one day. 
3. When All Else Fails – Empathize:  In the end, there may not have been anything that could have been done to put me on a later flight and relieve the overbooked nature of the flight I was on.  Such “facts of life” are common in the real world.  A great deal of good will could have been gained if Alaska Air’s customer service people had just said they were sorry that a solution was not available.  Saying I had to buy the ticked all over again – take it or leave it – really benefited no one.

Of course I am grateful to Alaska Air for the many times they have provided me with safe, reliable, and friendly travel.  I also appreciate this reminder to check in and make sure our policies are not needlessly degrading our client relationships. 

It would be much more fun to have gained this insight without having to waste most of a day traveling at an inconvenient time. But hey, managing relationships at scale is a difficult business.

A Facebook for Government Transparency

We want to know more about the way our government works and we want the government to know less about what we are doing.  Unfortunately, right now the trend is going the other way. But what if it did not?  Right now governments use Facebook to follow their citizens.  This is pretty widely documented in countries with poor human rights records like Syria.  We can only hope that Facebook is putting significant effort into keeping our government from turning Facebook into the ultimate citizen watching system.  Ironically, in America where Facebook was created, we are the ones that are supposed to have access to the doings of our government and our government is not supposed to have access to our private lives. 

Imagine a Facebook for government.  Each representative would have a page.  All associations ("friends") between elected officials and donors and lobbyists would be listed.  All meetings, emails, phone calls, and flows of money would be cataloged and displayed for anyone to see.  It would be a citizen’s dream: transparent representation.  Right there on your representative's "wall" would be their attendance and voting record.  Cool. 

Who wouldn’t want such a thing?  Well, what honest government would not want such a thing?

The Value of Second Level Assets

A smart Wall Street guy recently described to me a new way to think about the value of a stock in an overheated market.  He proposed that there were really two parts to value.  The first of course is the underlying value of the share.  And the second is the option the holder of the share holds implicitly to sell the share at a time of his choosing. This could be called the option to sell to the greater fool, but let's not start calling people names.

This second layer of value can be greater than the first.  In other words, particularly in a momentum market, the right to sell is worth more than the stock itself.  This is interesting because it is a good visualization of an emerging class of assets that derive their value entirely as a function of their relationship to an underlying asset. 

Some will say this is nothing new.  A steak at a steak house costs three times as much as a steak at home.  Such an item could be described in two parts as well: the steak and the experience of eating it at the steak house.  Again the second part is likely more valuable than the steak itself.  Milk at the Mini Mart has two parts, the milk, and the convenience of buying it quickly. 

In markets where innovation is changing the cost of producing and delivering things, the cost of the underlying asset is decreasing quite quickly.  Take ebooks for example, the cost to create and deliver the next copy of an ebook is essentially zero.  This creates an environment where it is easy to see how there is relatively more value in the second, derivative asset, than in the ebook itself.   The derivative asset to an ebook could be merely the recommendation of the right book, or who is reading what book, or comments about the book, or quotes from the book.  If you were about to pitch a big deal, how much would you pay to know what the person on the other side of the table was reading the day before your meeting?  At the risk of offending the authors who clearly invest themselves in their craft and create valuable work, we must ask: Is there more value in the marketplace to the second level information about the book than in the book itself? 

Apple, Google, Amazon and Facebook have been named as the new horsemen in technology.  These companies recognize the value of being one layer removed from the actual asset.  Google and Facebook both pay their customers (by offering free services) in exchange for this second level information – so clearly they assign value to it.  Apple exploits the second level information less than the others – mostly because it’s history is making money selling devices.  They are getting smarter about this all of the time and the Apple iCloud announcements last week betray their interest in being in the second level game.  Amazon is the one with the superior business model.  Not only does Amazon make money selling products, but they are expert at using the second level information to sell even more stuff.  Amazon has a much more concrete awareness of what you “like” and knows how to use that information to present you with other products to purchase.

More examples of this construct emerge every day, and many in places commonly thought of as confidential:

• Banks:  I received an offer today from my bank to purchase access to their database of financial statements.  These are financial statements their customers have submitted as part of their traditional banking relationship.  Banks make money in many ways, and now they are making money selling access to the information they collect about their customers.
• Phone Companies:  The contents of your phone call cannot be “tapped” without a search warrant, but law enforcement regularly pays the cellular companies for the second level information.  That data includes, who you called, how long you talked, and where you were (while talking or just while the phone was on).  Law enforcement does not need probable cause or a search warrant to get this information and the cellular providers have automated access to the database, so the fees they collect are pur profit.
• Credit Card Companies:  Your credit card issuer makes 2 to 5% off of every transaction, plus they sell the information about how much you spend at what vendor.  Soon you will be seeing advertisements on your credit card bill.

Where could this go next?  Here are the services I would like to buy:

• On the plane:  I would pay extra to sit next to a thin person or better yet a client or potential client.  In the case of the potential client, I would probably pay more than the cost of the ticket itself.  This could also go for any event.
• Buying Things:  The next time I buy a house I would like to know which houses are going to come on the market next.  So information about people looking to move, getting transferred, or experiencing other life changes would be valuable to me.  Facebook could have this already, but other big databases will likely get mashed up to provide information like this.
• Healthcare:  The next time I get a cold or the flu, or better yet, before I get a bug, I would like to go online and see what is happening in my area.  Who is suffering symptoms (Google has this because people do searches for their symptoms, the healthcare companies have it once people go to the doctor, and schools and employers have it once people call in sick) plotted on a map and compared to historical data.
• The Government:  The government could become the biggest player in this area.  Think of the gold in the IRS’s databases.

Things are definitely getting interesting. Maybe my next post should be about privacy!

All New Horsemen

Erik Schmidt got some attention at the All Things Digital conference naming new horsemen in the tech industry.  The old horsemen were commonly listed as Microsoft, Intel, Cisco, Dell.  Schmidt rather self congratulatorily named Google,  Amazon, Facebook and Apple as the new four.  Sure things are changing, but a completely new field of horsemen, really? 

What is it with the horsemen anyway?  One must wonder how we got onto the horsemen thing in tech, it seems like we would want to stay as far away as possible from an allegory rooted in conquest, war, famine and death.  If you have some time to kill, check out the Wikipedia entry for the Four Horsemen of the Apocalypse, for a not so brief introduction to the idea of horsemen.

Is there a new reality in tech and if so is this it?

With the possible exception of Dell, which specialized in advanced supply chain management, the old four developed technology and sold it to individuals and businesses and those customers employed the technology to achieve their ends.  The old horsemen are in fact still in business, and will be for some time.  IBM may not have liked being left off of the old list, but they have done pretty well for themselves in the last decade with their stock up 50% in the last decade compared to losses for the others.

With the possible exception of Apple, the new four don’t sell technology at all.  I suspect they are often thought of as technology companies because of their use of the Internet in their business models.  The wholesale switch is notable, and mostly for Microsoft.  Indeed, Microsoft has not been performing well on the stock market over the last decade with a drop of over 50% while all of the others are up and Apple is up a whole bunch.

These new horsemen are going to drive the delivery of a new kind of computing services. Even if this shift only turns out to be half as big as Mr. Schmidt predicts, it is going to have a profound impact on how technology is sold.  This is commonly referred to today as the migration to the cloud, and is so overhyped that often we forget to stop and think about what that actually means. 

First a review, technology resellers used to make money marking up hardware and shrink wrapped software.  Then they made money adding integration and support services to the sale of hardware and software, and next they will make money delivering innovation.  Here are some examples of this phenomenon:

• DropBox (www.dropbox.com) is a file system in the cloud.  You can get to your files from any device.  It is Amazon’s infrastructure on the back end, but no one has to know that.
• WordPress or SquareSpace (www.wordpress.com; www.squarespace.com ) are content management systems in the cloud.  Anyone can publish a website or blog on these sites and all of the hosing is handled.  Although one step removed, these companies rely on Google for indexing and discovery.  Google is also seeding the next wave of these companies with Picasa and Google voice. These may seem like birds of a different feather, but before you say so think about searching images or audio files.  Google’s partners make money by helping their clients manage content and show up online in the right places.
• Security is making sure content does not show up in the wrong places like when credit card information is stolen, or weapons system blueprints land in Peking.  Facebook has designs on knowing who you are and where you are and (soon) what you buy and what you have access to.  Making sure the keys to the kingdom, your keys that is, remain in your own control is important and will be big business.  Emerging in this field are upstarts like Reputation.com and Klout.com, and established firms like Symantec.

Before you think that this blog post has gone off of the rails, let me state plainly that I am not proposing DropBox, WordPress, SquareSpace, Reputation.com, and Klout.com as services that partners can mark up and resell.  I am proposing that these are the new channel partners and that they exist in a sympathetic ecosystem with the new horsemen.

These forward thinking channel partners do not think of themselves as channel partners.  They think of themselves as the inventors of a new wave of services.  Nevertheless, they are channel partners because they make money packaging new technology into services that add value to consumers and business.

A Strong Finish is Everything

I was one of thousands of people impacted by airline problems this weekend.  United had a computer problem that stranded all kinds of people in the US, and I was in Tokyo where a handful of flights were cancelled by Delta in the poorly organized and poorly communicated fashion we have all come to expect since Delta took over Northwest.

I was frustrated enough to send out some crabby tweets this time and swear off flying Delta - I thought maybe I would just donate all of my miles to charity and call it good.  There has to be another airline out there that actually cares about customers, instead of producing videos about how they value their customers while treating them like cattle.

Then came Miss Yamato. 

Thinking there must be a way to get to Manila faster than Delta offered I checked available airlines and found some seats on Philippine Airlines.  We got to the airport early and asked nicely that Delta fly us out on PAL instead of waiting 12 more hours for the Japan Airlines flight they had lined up.  Our request was turned over to special agent Yamato and she made it happen.  It would have been easy for her to say it was not possible, but she rose to the challenge and overcame no response from PAL, the distance to the other terminal, and a short timeline.  She commandeered a motor coach, marshaled another agent in the office, and even ran through the terminal to get us to the  plane on time.  It was quite an effort and at one point I realized she had rescued the relationship even if the effort came up short and I had to serve out the entire 24 hour sentence.

In the end she prevailed and my girls and I were so elated we asked Agent Yamoto if she would pose with us in a picture.  So thanks to her, I will be back.

The whole episode is a great reminder that a strong finish can really turn around even situations that seem hopeless.  So the next time you catch yourself thinking that a client relationship is beyond rescue and not worth the effort of a diving catch, just think about Agent Yamato and how a strong finish is everything.

Golden Age of the Internet (ending now?)

About a year ago I argued in this post that the Internet would eventually be regulated and we should work to regulate it in a way that works.  I still think that someday the government will get its hands on the Internet and the outcome will most likely be bad.  For that reason I propose that we are currently watching the sun set on the golden age of the internet.  Soon government regulation will be added to the ever suffocating weight of security issues and we will no longer be able to have free access to all web sites or the pace of innovation that we have enjoyed over the past 15 years.

I site the Protect IP bill currently working its way through the halls of Conress as support for my argument.  If passed, this bill will allow the government broad powers to prevent citizens from accessing certain web sites. This affront to free speech would undoubtedly be used by rights holders (entrenched businesses) to prevent innovation.  If you are interested in this subject at all, please visit:  www.demandprogress.org.

Leo Laporte and his guests on TWIT had a great segment at the end of the show on Sunday about this.  Go to the last 7 minutes of the show.  Soon we could be saying: Remember when we used to be able to [your favorite online activity here] on the Internet?

I happen to think that if an Internet dark ages does come about, the overriding maxim of information wants to be free will eventually prevail.  Maybe we would have another round of offshore pirates like we did in the '60s as depicted in the movie Pirate Radio.  A new Internet, located in the ocean and not in any country, beaming its signal directly to the users without government interference.

Book Review: Social Animal by David Brooks

I like David Brooks when he appears on the News Hour every week with Jim Lehrer and Mark Shields.  He regularly delivers insights I would not have on my own and in a way that is kind and even handed.  I also enjoy reading his column in the NY Times.  He has a writing style that draws me in and delivers a payload of quality analysis.

Somehow all of the things I like about David Brooks just don't make it into his books.  I thought the idea for his 2007 book, Bobos in Paradise, was great:  to describe the elites of the generation after the yuppies in a way that the generation before the yuppies would understand.  Unfortunately the satirical tone was thick enough that I just could not make it all of the way through.

I thought I would give him another try and recently read Social Animal.  Contrary to many of the not so flattering reviews, I did find it interesting and well presented.  My divergent opionion from that of the reviews in the NY Times, Forbes, and Salon, could be the result of my thinking of the book as an innovative way to present the mountains of research done for the book so that the reader could grasp the ideas.  As a work of non-fiction, the narrative of the two invented characters is much more bearable.

Here are the main themes I want to remember from the book:

• There is plenty of research supporting the idea that there is something in between nature and nurture -- that in early life, the brain is being wired in a way that later will seem like hardwiring (nature), but in fact came from the environment (nurture).
• The 90 percent of the brain that we don't use, as the saying goes, could be in charge of the show.
• The crowning American achievement is upward social mobility -- and we have no idea how we achieve it.
• Our culture has no idea what happiness is.

I still like David Brooks and I am glad I read the book.  It did give me some insights I would not have had otherwise.  It was a little sterile, so if you are looking for a real life counterbalance, here is my review of Life, Keith Richards autobiography.  I highly recommend it.

Time Flies and So Does Life

It has been over a month since my last post.  The first full calendar month without a post since I started writing this blog.  I enjoy writing and my work on this blog has helped develop my writing skills and organize some of my thoughts. I should do it more often.

A few months ago my marriage of 15 years ended and gave me a pretty good reason to take a step back and think about things.  I suppose the fact that we agreed not to celebrate the last couple anniversaries should have been a clue.  With the aid of a little perspective I can now see how many seemingly small accommodations we each made to make the relationship work.  No need for those anymore.

I used to think that a relationship without accommodations would be distant or boring or both.  I may still think so, and I am looking forward to learning more about myself and my life as time races by.  It is a good time to assess how I spend my time, who I spend it with, and the projects I undertake.  

This should be a very interesting summer.

Arrange Your Performance Measures in a Stack

Just as all sales teams have top performers, all channel partner programs have top performing partners.  Every sales manager and channel chief strives to figure out what the top performers are doing and how those practices can be shared with others.  The top 20 are already producing 80 percent of the results – so helping the next 10 perform like the top 20 will move the revenue needle – and helping the bottom 10?  Wow!  Transferring best practices is tricky business however, so I propose that first the marketing performance measures should be arranged in a three layer stack.  This methodology borrows some terminology from the OSI Model in computer science and delivers many of the benefits of the divide and conquer mindset of engineers. By breaking down the most effective marketing initiatives into these three layers, the learning can be more easily packaged and transferred.  With a little effort we could probably expand this to seven layers, but we would not want to threaten the CS types!

In addition, this methodology can also be applied to figure out underperforming campaigns.  All three of the layers must function properly in order for the campaign to work.  It is important to remember that a failing campaign can have properly functioning lower levels, and may not need to be discarded entirely.  This approach can also be used to refine cost optimizations.  Changes to reduce budget can sometimes dramatically impact performance and cause an entire marketing effort’s value to be challenged.  By evaluating the performance on each layer of the stack the impact of such adjustments can be truly understood. 

Like the OSI Model, our stack is oriented hierarchically with the most fundamental layer at the bottom. 

Application Layer: Message Effectiveness

Understanding the impact of the message or the campaign can only be accomplished after knowing that the first two layers have been satisfied.  The effectiveness should be measured against landed messages, not the overall population or even the targeted and prioritized population.  Once we are confident that the first two layers are functioning properly, we can swap out messages to test for better performance.

Transport Layer: Landing the Message

Delivering the message is difficult and time consuming.  Sometimes good targeting can raise the level of difficulty.  Being able to measure how many times the message landed is essential and must be separated from measuring the impact of the message.  This can be meetings, conversations, or even click throughs.  The investment in each message is critical and by properly targeting, the investment – which should also mean quality -- can be increased.  Higher quality delivery should increase performance.

Physical Layer: Picking the Targets

Since we spend our time managing channel partner relationships for our clients, we see the value of heavy investment in proper targeting first hand every day.  Time spent managing the wrong relationships is time (and money) not spent on the right ones, so we advocate for taking the time to target properly before launching a partner marketing effort.  Even after rigorous work narrowing the target population, prioritization should be applied so the highest value targets are pursued first.

Some would argue that proven marketing programs do not require this layered approach to measurement and they do have a point.  There are many demands on a channel partner marketing team and spending time fixing things that are not broken may not be the best investment of resources.  However, a great deal can be learned when dissecting effective campaigns and that learning can be applied to fix other campaigns, or to make it easier to bring new campaigns to life.  And having a clearer understanding the underperforming campaigns has obvious benefits.  We all spend a good deal of energy thinking about how well our partner marketing efforts are performing.  By deploying a layered measurement strategy we can capture best practices in a repeatable context and dig into the root causes for underperforming campaigns.