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?

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.

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.  

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.

Groupon - Another Advertising Company

I have said the Google and Facebook are advertising companies.  So is Groupon.  Sure they have smart engineers and they build internet enabled tools, but they get paid by their clients for delivering advertising that works.  They are advertising companies.  These companies are not internet companies any more than General Electric is an electricity company.  

Whether or not you think Andrew Mason was crazy for turning down six billion dollars (like I do) you have to respect the guy for building a business that is adding 3 million subscribers a week.  

Here is a great video of his interview last week with Charlie Rose.  Clearly a smart guy.  And also very funny.  Check it out here.

LeWeb 2010 - An Incredible Event

As you know I did not go to Paris.  I was here in Seattle with my team working to learn as much as we could about observing awesome events like LeWeb over the internet.  And learn we did.  

We have now watched the live stream or the video for 45 sessions, and we still have 16 to go.  We have provided notes on these sessions, links to the videos, and links to as many other blog posts as we could find.  

We are very interested to know if you think we are in fact making it easier to follow events on the web.  Please take a minute to check out our new web site and give us your feedback.

The Site:  www.shownotes.co

Twitter Feed: @show_notes

The Contra China Argument

There is an article in Fortune magazine this month about short seller James Chanos and his big bet against China.  I have written a fair amount about China, one of my first posts is still my favorite:  Do We Want China to Fail?

The competitor in all of us wants to win, and China failing would be one way to accomplish that.  Despite this, I still think a failure in China would be bad for everyone.  Certainly it would be bad for the Chinese, but here are a few reasons why it would be bad for those of us in the technology industry:

1. IP Theft.  The work that the Chinese government is just now starting to do on piracy and IP theft will be the first thing abandoned if things turn for the worst.
2. Aggressive Cyber Behavior:  The Chinese government is already allowing or maybe even sponsoring efforts to compromise computer networks in the US.  A stable and prosperous China will give us the chance to address this diplomatically.
3. Nationalization:  Fear of a Chinese economic collapse could drive nationalist factions inside China to take control of foreign investments in China with government support.
4. Loss of a Market:  While there is sufficient evidence that China wants the domestic consumer market to be served mostly by domestic companies, there will always be opportunities for US companies to benefit from a rising China.  A declining China would remove the opportunity for either domestic or foreign technology companies.

So we want China to continue to succeed in raising itself up in the world economy.  We absolutely want to stay ahead by making ourselves more competitive.  James Chanos has some good arguments about why China may be in trouble.  Let's hope he is wrong this time.

Missed It By That Much

Product designers live in a cruel world.  The distance between delightful and disaster is very small, but like an egg balanced on the peak of a roof, it only takes a fraction of an inch to be rolling the wrong way.  I have had a Droid X for a few months now and there is no doubt it is a well engineered device and that Android is a viable operating system.  Unfortunately for Google and Motorola, it is not a delight to use. 

I don’t have an iPhone, but I do have an iPod Touch and it is a delight to use.  I first got it in 2007 and it still just feels good when I pick it up.  I rarely ever find myself staring at it without knowing how to do what I want to do.  Even after three years I am still regularly amazed by the elegance of its design.

This is the mastery of Steve Jobs and he is so very far ahead of everyone else.  If you want to be inspired, read this great blog post about Steve Jobs and Edwin Land, the founder of Polaroid.

The idea is that great designs already exist in the universe and people like Steve Jobs and Edwin Land discover them.  

A Tale of Two Restores

About a week ago I had been playing with the passcode lock settings on my iPad -- and the thing stopped putting itself to sleep.  So if I left it overnight it would be 100% dead in the AM.  I worked to change the setting back, searched online, but could not figure out what to do about it.  

So I clicked restore and just like that, Apple rebuilt my iPad in about half an hour.  Asside from a few minor issues where I had to download apps over again -- it worked like a charm.  My email set up was undisturbed, my paid apps were all there.  

About every quarter or so I completely rebuild my Windows 7 machine.  I have set the machine up to make this as easy as possible -- with two partitions on the SSD drive, one for my data and one for the OS.  This way I can re-format the OS partition, reinstall Windows 7 and all of my programs (I keep an external hard drive with a folder I call program installers just for this purpose).  Each time I get 10 GB of disk space back -- and on a 36GB SSD that is a big deal.  Each time the machine runs like a dream afterwards.  The only problem is it takes me about 10 days to really get back to a place where everything I need is installed on the computer.  Not 10 days of non stop work, but 15 minutes here and there when I find a program that I need for the first time and have to find its installer, install it, update it...  I am sure you have been there too.

Luckily I have an older Vista machine that I can work on while the restore is going on.  Also luckily, more and more of my work is being done using online services like Socialtext, Evernote, Squarespace, LinkedIn, and Twitter -- so it doesn't matter all that much that my Windows 7 machine is sidelined for a while.

I suppose it should come as no surprise that each time I go through this, I have a reason to migrate more of my work to the cloud.  

I wonder if anyone at Microsoft is working on this problem.  I would love to have a restore button that works like the restore button on my iPad.

Wait!  Before you post a comment saying that Microsoft already has restore points built into Windows 7, here are a few questions:

• Has going back to a restore point ever actually worked for you?
• Did it give you back space on your hard drive?
• Did it accurately create restore points per its design (before each install or dll change)?

Unfortunately, like the comical troubleshoot window that offers to help fix problems but never can, Microsoft has over promised and under delivered in this area.

I will wait eagerly for someone to close the gap between these two restore experiences.

New Trade Routes

Every so often there is a big enough change in the way business is done to make evolution look like a revolution.  If we are not in one of those times, it is just around the corner.  

The process of evolution may seem slow and hard to follow.  The thing to remember is that no species actually changes during its lifetime.  The adaptation occurs when the combination of two different sets of DNA create a new set that just happens to be better equipped to compete.

The better equipped being lives to reproduce, the others do not, but a single being does not genetically "adapt".

There are many new companies starting right now that may represent a new way of doing business.  Some will create value and survive, others will not.  The result is surely to include new routes to market.  These new trade routes will illuminate the winners and the losers.

So just like the lost city of Petra pictured here, some once prosperous companies formerly on the main trade routes will be long forgotten.

If you want a quick look at a company that drives the point home -- check out Gnip, and Brad Feld's thoughts about Gnip.

Gnip is Twitter's first authorized reseller.  

This is going to be interesting.

RetroDex is Tomorrow (and Comdex too)

If you are in Seattle or Silicon Valley (Mountain View) on the evening of November 16th, you should join us for RetroDex.  It should be a bunch of fun.  Info and registration here.  Use the code "CSGfriend" for a discount.

This has been a very fun project.  Starting new things is something I like to do and it is the all consuming part that I like the most.  I suspect my blogging frequency will be picking back up later this week.

We started this whole project because Comdex is being reborn this year as a virtual event.  If you have not yet registered for ComdexVirtual click here.  

Today we closed the loop on the Comdex theme with our new Escape from Las Vegas web based game.  So tomorrow when you are sitting there doing the Comdex thing virtually, you can have a little fun by playing our game.  Try it out and let us know what you think.

Also, we are partnering with the UP CON 2010 Cloud Computing Conference for discounted tickets.  If you did not get the special offer email, please send us an email at sales@retrodex.co.  If you are already going to UP CON 2010, check your bag for discounted tickets to RetroDex.

Three Trends to Watch in 2011

I want to get a jump on this prediction season with a few thoughts about things I think will be significant for selling to the enterprise in the year ahead.  

1. Protecting Corporate Data:  There is an obvious and large need for better protections for corporate informational assets.  Anyone who can address this need will jump ahead of their peers.  This is not just a technology issue – better policies and procedures will be required to address the ever growing willingness of employees to share everything with everyone.
2. Run Ahead of Expectations Transference:  My favorite example of this is Mint vs Quicken.  Quicken has been the market leader forever.  Mint is elegant and easy to use.  Quicken users did not even know they were unhappy until they started using other elegant and simple systems that do complicated things (online banking for example).  They expected more than what Quicken was offering and as soon as they saw it – they jumped.  That is why Intuit bought Mint for $170 million.  This is going to play out in CRM and other legacy systems.  Anyone not yet unhappy with enterprise CRM – will be soon.  I bet the solution will look like Mint.com.
3. Search/Location:  Enterprise search is way behind consumer search and getting farther behind.   We no longer have any patience for organizing things.  Searching the enterprise for people, things, expertise, and trends is going to be gigantic.  If you knew what your employees were searching for and if they found it – would that information be useful to you?  Why are we not doing this right now? Google just put one of their MVPs, Marissa Mayer, in charge of its location based initiatives.  Properly executed, location specific search will enable you to put “my house” in the search box and up pops your house.  In terms of the enterprise, I will expand this to include context specific help.  Being able to present different information to different employees based on their context will increase productivity and satisfaction immensely.

Who Is Driving Technology Sales: The Consumer or the Enterprise?

Even though a significant majority of technology purchases are made by businesses, the consumer is rapidly gaining a meaningful position in the market.  According to Gartner, in 2010 businesses will drive 72% of technology purchases.  The iPhone/iPad revolution is largely driven by consumer purchases.  As these devices are introduced into the enterprise computing environment, IT professionals are developing strategies for managing them.  Forward thinking technology marketing people are presently working to understand how these changes will impact IT purchasing decisions in the enterprise.

Here we examine the arc of this revolution and make an attempt to help marketers position themselves for the evolved technology marketplace.

The Cost of Selling is High for the Enterprise and Low for the Consumer

Maybe it is cheap to sell to the consumer because consumer products are cheap, or maybe consumer products can be offered cheaply because it is cheap to sell them.  Either way, it costs much less to sell to the consumer than the enterprise, and in some cases the cost of customer acquisition is approaching zero.   Alternatively, over on the enterprise end of the spectrum, we find companies like Salesforce.com – whose largest expense is for customer acquisition.  For 10 years SFDC has spent over 50% of their gross margin on sales and marketing – and this year they will spend over $700 million.  Ten times as much as it will cost them to deliver their services.  Right behind Salesforce.com are Oracle, IBM, HP and Microsoft each spending over 20% of their gross margin on Sales and Marketing. 

When it comes to selling the approaches cannot be more different, consumer companies like Google sell by getting their customers to act as their own salespeople (filling out a form on the web), quite a contrast to Salesforce.com and the others who are seeking business customers by blanketing the earth with salespeople and partners.

Getting to Market:  To Advertise or Not To Advertise

Even companies with buckets of money must select a go to market strategy and concentrate their resources in what they believe are high value activities.  There are as many opinions about which strategy works best as there are CMOs – but just about all CMOS will agree that resources must be concentrated in high value activities consistent with their strategy.  Anyone spreading their resources thinly over too many activities is doomed.  The decision tree starts with advertising.  There are companies like Apple and Dell that go big on advertising and PR and companies like Microsoft and HP that invest their resources in building partner ecosystems.  A completely different third approach is lowering prices so far that solutions sell themselves.  Google and Craigslist price their services at 1/10^th of their offline competitors.  Prices this low promote themselves – a $3,000 car or a $1 movie ticket would not require advertising or salespeople – the newspapers would write about it and the message would spread virally.

Let Someone Else to Pay

There is no charge for using a search engine or web service like Twitter or Facebook.  Using a free product does not make you a customer however.  The customers of these companies are the advertisers, and their payments for advertisements make it possible for companies like Google, Twitter and Facebook to offer valuable services for no charge to those benefiting from them.  No monetary charge would be a little more accurate.  The truth is:  those not paying for a service are not the customer, they (or their data) are the product being sold to someone else.  This is where the gulf between consumer and enterprise gets interesting.  Individuals are much more willing to give up their data in exchange for a free service.  Enterprise data is almost always a strategic asset and therefore most businesses are reluctant to trade their data for services.  Salesforce.com’s clients are businesses and they pay for the service because giving up their data to be sold to a third party would undermine their viability.  Google gets right up to the line on this one because they are selling the data they have about their customers to third parties – and many of their customers are businesses.  Admittedly Google is not going to one client and saying they will sell the content of another client’s searches or emails.  They will however allow one client to present advertisements to a targeted audience that is likely to include its competitor’s customers or employees.  This is evidence that the gap between consumer and enterprise buying habits is closing.

Mixing it up:  Put the Blender on Whip

Twenty years ago, with the exception of a few intrepid door to door salespeople, the consumer went to the store and salespeople called on businesses.  Then Amazon.com brought the store to the consumer’s home, and Dell cut out the salesperson by giving businesses the ability to serve as their own salespeople over the phone and web.  The consumer and business buyers including those in the technology market had been oil and water, and they were about to get poured into the blender.  When the first killer app for the consumer oriented Mac turned out to be the business oriented use case of desktop publishing – it was like hitting the chop button on the blender.  Employees connecting their home computers to corporate networks, enabled largely by broadband deployment, was the equivalent of the stir button. Social media tools like MySpace, Friendster, LinkedIn, Facebook, and Twitter turned the blender up to puree.  And as we are learning in our one question survey this month, the iPhone and iPad have cranked the margarita making machine up to whip and the water and oil have emerged as thick as chocolate mousse.  With consumer tech and enterprise tech all whipped up together, selling technology now takes on a combination of enterprise selling and consumer selling tactics. 

Enterprise Marketing Must Change

Right now there is a great deal of energy being invested by enterprise marketing people in social media.  This is important, but not the only area where the enterprise / consumer collision is impacting the market.  We will never know if the big brains at Apple developed their iPhone/iPad strategy with an eye on the enterprise market.  Intentional or not, their shiny new devices are changing the marketplace and buying patterns significantly.  Starbucks is moving to HTML 5 and away from dot net as a result.  Flash is being marginalized.  And products like those from Parallels that tie the new environment together, are ramping fast.  Enterprise marketers need to free their minds from a focus on making the things they have always done more efficient and start experimenting to develop new strategies that are effective in this new marketplace.

On the Horizon

As participants in technology marketing for the enterprise, these are the trends we expect to see accelerate as a result of the blending of the consumer and enterprise markets:

Social Media:  Clearly social media will be central to these changes, both driving and being driven by the marketplace evolution.  The key to social media is authenticity.  They key to authenticity is flexibility and IQ.  Companies with intelligent and autonomous actors on social media platforms will win.  It does not hurt that the highest value customers are the early adopters of social media.  100 years ago, when telephones had been deployed in 10% of the households, companies realized that the early adopters of the telephone were on the high end of the socio-economic ladder and should be treated as such.  Once telephones achieved 98% penetration, and the overwhelming majority of phone calls came from average customers, companies shifted their approach from high investment in high value customers to cost containment.  This is why a Comcast customer can get a high quality response from @comcastcares, and not from the Comcast call center.  Comcast knows the demographics of their social media savvy customers.  It will be some time before social media is democratized.  To Do:  Get smart people into the social media game.

Computer Operators:  Before the computerization of the telco central office, switching was done by telephone operators.  An operator could manage approximately 200 telephone lines.  We now have 180 million land lines and over 200 million mobile lines in the US.  If we had to rely on manual switching – we would now require 1.9 million telephone operators.  Thanks to automation we only have 22,000 telephone operators now and none of them are switching calls.  In the early days of the computer an operator with significant training was required to run the device.  This continued during the early days of the PC.  The devices were complicated enough that every user was essentially a trained computer operator.  It has only been in the last 10 years that computers could be operated without the barrier of significant training.  The iPhone and the iPad are revolutionary in that they require no specific training at all.  A child can pick one up and figure out how to use it.  Many businesses now operate without a single IT resource on staff.  Computer operators are not dead however, they have shifted to managed IT service providers, web service operators, and application developers.  This trend will continue to accelerate.  Business will be less technically aware and will purchase services from specialized service providers.  The service providers will have all of the computer operators and accordingly will increase in sophistication and technical capabilities.  This will split the marketplace into the sellers of the services and the sellers of the underlying technology.  The services will be purchased by people with business needs and a low level of technical sophistication.  The underlying technology will be purchased by people with an extremely high level of technical sophistication.  To Do: Market services by business use case and technology by engineering merit.

Partners Migrate to Service Sales:  The bifurcation of technology into unsophisticated (technically that is) buyers of services and very sophisticated buyers of the underlying technology will force a split in sales and marketing strategy.  The big technical deals will get bigger and will be increasingly sold using internal salespeople.  This will shrink the high end of enterprise technology sales and marketing done through partnerships. Who is going to sell servers to Amazon.com?  IBM, Dell, HP, and others will be competing for that deal directly.  Who is going to sell desktops to the law firm?  Channel partners.  Historically those partners have been companies.  Of course because partnerships are relationships, and relationships are between actual people, the reality has always been that the success of these partnerships depend heavily on the relationships between the people inside the companies.  For fifty years, people have been getting more and more mobile, a trend that has been accelerated by the latest economic challenges, and facilitated by social media tools.  Technology companies that are able to shift their thinking from partnering with companies to partnering with people will jump well ahead during this transition.   To Do:  Orient partner programs to individual people that sell services.

In the years ahead businesses will remain the most significant source of revenue in the technology industry. Businesses will however increasingly behave like consumers when purchasing service offerings. They will be looking for cost effective solutions to their most pressing needs, and they will be buying those solutions on short lead times and with relatively low technical sophistication. Vendors and solution providers that position themselves for this change will win in the transition.

Consumer and Enterprise: Oil and Water?

Somewhere around the fifth grade we learned that oil and water do not mix.  I was reminded of this lesson not long ago when my daughters did the experiment that we all probably did in grade school.  They put oil and water in a glass beaker and stirred them up – and then watched them separate.  Anyone who has introduced water into engine oil, via a blown head gasket on an old engine for example, also knows that with enough heat, pressure, and agitation: oil and water can be whipped into a grey goo that takes some time to separate.  Of course the lesson from grade five still stands and the oil and water do separate eventually, but it takes longer than you might think.  With constant heat, pressure and agitation the two incompatible substances can be mixed. 

Thanks to Steve Jobs, this same thing is happening right now in technology marketing.  The incompatible substances are the consumer buyer of technology and the enterprise buyer of technology and the mobile device is the heat, pressure and agitation.  Consumers are bringing mobile devices into the enterprise and disrupting the computing environment significantly. 

Here are some of the differences between Consumer and Enterprise technology buying:

We are currently conducting a One Question Survey of IT decision makers and asking them:  What one technology product changed your business computing the most in 2010?  The number one answer so far is the iPhone.  I thought it would be up there, but I did not think it would be number one.  Number two is VMware’s virtualization suite. 

The survey is still ongoing – so if you want to weigh in on this matter you can do so here.  It will only take one minute to fill out the one question survey.

We will be announcing the final results at our RetroDex events on November 16^th.  You can learn more about RetroDex here.

The Microsoft Thread in the News

Here is an interesting post from Computerworld about Linux losing its spark.  I wonder how much of the Linux movement was or is powered by dislike of Microsoft.  If Linux is losing its steam it could be because the anger or angst about Microsoft has declined.  The article I link to here does not propose such a thing as the reason -- instead it lists too many versions of Linux and the decline of the fat client.

Here is an insightful post by Robert Scoble with an interview with Starbuck's CIO, Stephen Gillett, about their new in store digital network -- now live in 6,800 stores and attracting 31 million users per month.  The overwhelming majority of users are on iPhones and Ipads -- so that means Safari browsers and no Flash and no dot net for Starbucks.  

Here is an article in the Wall Street Journal about Steve Job's not so candid appearance on the earnings call (it sounds like he is reading a statement to me) where he blasts away at a bunch of competitors, calls Windows the most open system in history, links Android to Windows and makes an effort to sweep Microsoft and Google away at the same time.

Admittedly, Microsoft is not the center of any of these events or coverage, but there is an interesting thread running through them all.  Collectively they cause me to ask the question:  As Microsoft fades in industry importance -- who is going to fill the void?  I would argue that there is no one ready to fill Microsoft's shoes and that is creating a vacuum that makes everyone uncomfortable.

It will be interesting to see what news comes out of the Microsoft PDC next week.