Software vendors as data vendors - How will convergence, interplay & privacy make a difference?

Last week, we saw Microsoft announcing the acquisition of Linked-In for US $ 26.2 billion. With the acquisition of Linked-In, Microsoft now has access to over 400 million accurate profiles of professionals from Linked-In across the world. Over the last year or two, I have been seeing this trend where large software vendors like Salesforce.com acquiring Jigsaw and Oracle acquiring Blue Kai, who predominantly own data. So, this got me to think, what are the implications one can expect or must see over the next few years with these kind of trends?

Meanwhile, I was also reading an interesting article written by Sangeet Paul Choudhary in his blog, where it is mentioned how Linked-In was trying to get into the enterprise CRM space but lacked the infrastructure & tools( post written by Myk Pono) and Sangeet's view on how Microsoft can take advantage of this acquisition but lacks the understanding of network & data layers.

The key questions that came-up to me was - What does it take for a software vendor to work  & behave like a data vendor or as a platform player? Also, how can all these data seamlessly flow into Microsoft's strategy of leveraging its Enterprise CRM, Windows, Azure, gaming business etc.?

To understand & appreciate this, first we need to look at some of Google's acquisition of DoubleClick, Andriod etc. way back in 2007 & 2004 which made a huge difference to their platform strategy. As Google transformed itself from a search to an online advertising platform, many of these acquisitions made sense - with Android becoming the defacto mobile OS platform while still Microsoft was managing Nokia as a Mobile Phone company and not as a platform.This led to the death of Nokia as a mobile phone brand, as Microsoft thought of it like a licensing business(which is their DNA) more than a mobile computing platform. 

If Microsoft needs to take advantage of Linked-In's acquisition & their data, then - the transformation of Microsoft as a platform company is critical. For example,they need to look at  Office365 as a central platform or a hub is critical. This free & paid subscription based platform must leverage the 400 million Linked-In professional's data for their own personal devices & computing services- Home PCs, mobiles, gaming consoles etc. This then can change the game for Microsoft. However, if we look back at history, neither Hotmail or Nokia was leveraged to its full by Microsoft due its software vendor thinking. Microsoft will have to change its strategy & execution this time.

The next most important question was the issue of Privacy. What is the sanctity of privacy information owned by Linked-In & do the limited or full permissions that was given to Linked-In by these 400 million professionals, hold good for Microsoft too or how does Microsoft use these in its platform intelligently without diluting any of the privacy issues that may arise? For this, the permission-based sharing professional community that Linked-In nurtured, needs to thrive, without advertising as the primary revenue driver unlike other online platforms like Google, Facebook etc.

For software vendors to transform & think like data vendors, it forces, disruptive platform thinking from them. It requires a services, community, subscription & marketplace mindset with a strong interplay between them. Only time will tell if Microsoft is able to make this mindset shift but transform they must, if they need to play this game on the web for a leadership position.


Cost-to-Serve(CTS) Vs Cost-to-do-business(CTB) - Looking at it from customer's eyes!

I often hear a lot of businesses and managers talking about a metric Cost-to-Serve(CTS) - reducing cost-to-serve a customer. They continuously talk about moving customers to lower cost channels and hence reducing the cost-to-serve & improving profitability. I find this ridiculous as an independent metric measured by businesses.

Index

 

Let me explain you why:

What does Cost-to-Serve(CTS) mean?

Currently, if a business is using high cost channels, resources to service customers and hence it eats into the  profit margin of the business. Hence, the managers & leaders in the company are mandated to move customers to lower cost channels so that it is a self-serve channel for the customer and minimizes resources from the business's end.

Let me now look at it from a customer's point of view - What is Cost-to-do-business(CTB)?

I reached out to my service provider thro' the phone( a relatively lower cost channel) and spent about half hour explaining my problem to the associate on the other side of the phone. I was told that the problem will be resolved in 24 hrs and that they were transferring it to another technical team who will address it. I waited and nothing happened - no response or no resolution was in sight. I called my service provider on the phone again and this time to my horror, I had to repeat the problem all over again for another half hour. Here's one hour of a customer's time that has been wasted by the company -that's pretty precious, in my view which businesses give a damn, as it does not cost them anything.

I also emailed the problem I was facing, to put things in writing to customer service - which took me another 15 mins and then there was a spate of automated mails that were generated promising resolution within further 2 working days! Now, I had lost close to 72 hours in addition to an hour over the phone. Now, the web channel again was a low cost channel to business but it was a high cost-to-do-business for me, as a customer, as nothing was resolved. Neither, the channels were integrated to treat my problem on priority given my prior poor experience. The Cost-to-do-business with the company was too high for me, as it was eating into my time and effort - that close to 73 hrs and 15 mins( 72 hours of lost opportunity and 1 hour and 15 mins of interacting with them over different channels). How does business pay for these costs and factor for these?

Many of the financial services companies who I do business with, have asked me to move to e-statements, mobile app, online banking etc. Now, I am increasing my storage space on cloud to factor for these and storing them as if I ask for an e-statement beyond a year or so, then they charge me for it. However, none of these businesses have optimized the charges they debit to me - as earlier they were sending me all of these and providing services. Now, all my online fund transfers are charged, my POS transactions on debit card has increased but my debit card annual fees is not reduced, it is the same as I had paid couple of years back! Since, the time I moved to online & mobile banking, am not visiting their branches which saves them a lot of money as they have reduced their cost-to-serve me. The cost of doing business- CTB- with my bank has in fact increased for me - If I factor my time and transactions charges that I pay to them.

I believe there is a balancing metric that companies need to look at -which is Cost-to-do-Business(CTB) for the customer while they look at cost-to-serve metric. For my bank, if my branch visits have come down, if my ATM transactions have reduced & POS transactions have increased or my problems with my utility service provider is not resolved over phone, web channel etc. the cost-to-business in fact has increased and they must pass on the benefit.

It's time for business to think from a customer's point of view and then factor for these as customer migrate to newer channels & touch points. The cost-to-do-business(CTB), then it is to be tracked as a metric and differential value of benefits passed on to customers too.

 


Marketing is getting rewired- How do marketing specialists rewire themselves?

I was reading Bill Lee's  HBR blog article on Marketing is dead. Quite an evocative headline, I must say. We have either heard or seen such headlines for example - CRM is dead, Long live CRM!

So, I wanted to get away from the hyperbole to the real message or take-out there from his article. There is nothing extraordinary in the article that one has not read or seen in the blogs, conferences or discussion forums over the last couple of years. The key questions to me is how is it being practiced on the ground?

I agree with Bill Lee that there is a tectonic shift in how traditional marketing will be done in the future but the chasm within the marketing specialists still remain which is the biggest challenge and pain for marketers. 

Lee talks about about four key points that is needed to rewire marketing as against the traditional marketing model that is broken:

  1. Restore Community Marketing
  2. Find your customer influencers
  3. Help customer influencers with social capital
  4. Get your customer influencers involved in the solution you provide

The interesting aspect of making this change happen is how will marketing specialists - advertising, public relations, digital marketing, CRM & analytics have to adapt themselves to these new rules. What I observe today is that the advertising folks have a poor understanding of community marketing or content marketing or database marketing while digital marketers have a relatively poor understanding of brand keys and architecture and public relations folks talk only about online reputation management(ORM). This is where marketers get frustrated with their marketing partners. 

Here's what I believe can make it happen on the ground:

  1. Hire outside their disciplines- Many of these specialists need a higher appreciation & respect of the techniques of the other and a seamless fusion of each of the strategies into their marketing plans is increasingly important if this model has to be fixed. 
  2. Identify leaders as orchestrators - There is a need for what I call as orchestrators in each of the specialist disciplines who have the ability, skills and competency to tie-up the loose threads that emerge of out their team's plans into the other discpline or play a seeding role of embedding an idea of the other discipline within their marketing plans. Therefore, they lead the customers across their decision journey for their client's brands. 
  3. Clients need to identify conductors within their teams - I believe time has come for CMOs to look for conductors within their teams who demand and define the "tight connections" between the outcomes of each of these specialist disciplines & orchestrators within these specialist teams to make this happen.