Archive
Software Eating Your World? Would You Like a Byte?
Last week, Marc Andreessen published an essay in the Wall Street Journal entitled “Why Software is Eating the World”. A particular passage resonated with me:
‘Companies in every industry need to assume that a software revolution is coming. …new software ideas will result in the rise of new Silicon Valley-style start-ups that invade existing industries with impunity. Over the next 10 years, the battles between incumbents and software-powered insurgents will be epic.”
Since we are all going to be software companies (eat or be eaten), I think it is important to understand how/where value creation is shifting within the software industry itself. In short it is a tale of migration from features and functions to data – a trend which many of the enterprise software companies I work with see and understand, but are slow to adapt to- primarily because it is a trend highly disruptive to their existing business models.
To examine this shift, let’s look at how software has evolved over time.
Software as Tools
The first business applications were ones that helped individuals do tasks more effectively. Remember Lotus 1-2-3? Wordstar? In short, for roughly the first decade of the PC era, software was primarily a tool that you used to make some individual function/task more efficient to complete. Software was an interface that allowed us to leverage the rapid advancements in computing power and get the work all of us were doing anyway, get done faster.
Software as a Repository of Best Practice
From point solutions that streamlined highly generic tasks, vendors began to create value (and charge for this value via licensing and services) by embedding specific business process knowledge into applications. People could move down the learning curve more quickly and be managed more effectively by having them operate in a well defined and highly customized software environment. Software became a way of capturing and propagating best practice within an enterprise and something that became critical in very specific functional areas of enterprises. CRM was an early example of this, integrated ERP (HR, financial accounting processes, inventory management, payroll) systems followed quickly thereafter. The economics of SaaS/PaaS are generating a proliferation of these models across every industry vertical/ functional process imaginable. All of these applications create standard work process and control mechanisms that drive productivity and consistency.
Software as a Communication Medium
As the various parts of a business process started to be connected, and common standards for connectivity (e.g., XML) evolved, communication/collaboration has become a central function integrated into applications. Indeed, communication has given rise to a new value creation mechanism for software- transaction platforms. Ebay? Paypal? Skype? They didn’t make money by selling software licenses- rather they made platforms for communication, collaboration and validation that allowed them to make money on the transactions that they brokered.
Software as a Data Collection Mechanism
So now we arrive at data.
Is Zynga a game or a data collection mechanism? Google search engine or data-based advertising platform? Facebook communication tool or targeted marketing platform?
We now have access to literally millions of useful applications at little to no cost. To be sure it is cheaper to create them, but firms are finding new ways to offer subsidized or free software because of the data they hope to compile through widespread distribution of their products. Software has become a data collection mechanism and analytic competitors are hoarding data and learning how to make these data streams useful to refine their own businesses and create value for others.
One thing is clear. Across all of the disruptive models that have dominated “bubble 2.0”, none have involved licensing fees. Indeed, the primary source of value that Mr. “no bubble here” Andreessen is so confident in is data. The extent to which his investments will pan out will depend on whether they will be able to meaningfully realize value in the petabytes that his firms control.
What it all means?
If you are building a software product, you need to incorporate all of the means of generating value that I reference above. Doing so not only maximizes value for your users, but provides you with flexibility to morph your business model for the future.
As you build, expect that at some point soon you will face someone willing to be highly disruptive that will be seeking to generate profits through business models that are vastly different to your own.
Recognize that value is shifting towards data and that to win, you had better become great at collecting, managing, analyzing, and MONETIZING all of the data streams that you control.
So if you are in a business that charges fees for software licenses, or a platform that makes fees on transactions and have no vision or plan for how you will monetize the data you control, welcome to a decade of pain. The “Silicon Valley-style” startups that Mr. Andreessen is funding are coming to eat your world.
Stay tuned for more on data and analytics- if you are in/around San Diego, and interested in the topic, be sure to check out an event I am moderating on 9/13.
Publish or Perish- The New Paradigm for B2B Marketing? (Part 2 of 2)
A few weeks ago, I posted on the importance of getting your business to think like a publisher. Presuming you buy into the need for this mindset, what do you do about it? If you are a B2B marketer, how exactly do you think like a publisher?
Here are some thoughts:
Create targeted content- It goes without saying that you need to create high quality content. However, you could have videos produced by Steven Spielberg that generate little or no interest from your audience. To build relevance, organizations need to build a range of content that appeals to the broad array of stakeholder interests and concerns associated with what you sell.
Here is what I mean by this. Consider a complex technology solution sale and the number of people who can get involved in the process. Is the content you produce and manage adequately oriented around the business owners, IT personnel, line managers, and contract/procurement teams that all have influence in the buying decision? Is it organized in a way that these influencers can easily learn about the issues that are central to their function in the buying process?
In my own practice, I have observed lots of companies who are trying to reach multiple stakeholders with the same message, through the same channels. At best this results in a mishmash of generalized information that proves to be only marginally useful for engaging the influencers in the buying decision. As well see in an upcoming example, segmenting the message creates an opportunity for better focus and more relevance.
Consider not only who they are but where they are in your relationship-So much of what companies do from a content perspective is oriented around prospecting and closing new business. For businesses whose model is subscription based (e.g., SaaS models), information about how users can generate more efficiency and value from the solutions they already buy can be even more important to the long-term health of a business by further cultivating the relationships they already have.
Make full use of the channels at your disposal-Today’s content distribution mechanisms give you a wide range of options for targeting who you talk to and what you say. Use them to segment the content that you feed to the various constituents you are trying to reach. For example, Dario’s company (from Part I) uses a blog for driving awareness and education and the company home page for driving sales. This bifurcation of purpose allows his company to be extremely focused in messaging and UI design.
Give it to them in the media format that they want- There is lots of choice now on how you communicate with your audience, so don’t force white papers on customers as the only way to learn about your offerings. Besides, have you heard about the Forrester report that states that video increases the likelihood of a front page Google search result by 96%?
Give your audience a voice- I heard a very interesting statistic from SplashMedia, that stated that only 14% of prospective customers were inclined to believe the marketing messages that came directly from the selling organization, while 78% of prospects tended to believe the opinions of other customers. To be sure, giving your customers a voice is a big risk, and may not be such a great idea for companies who are not highly responsive to customer needs and complaints. Then again if you can harness the enthusiasm that people have for your offerings, (as implied by the statistic above) customers can be a great way to generate complementary content that helps close new business.
In the end, keeping these ideas in mind will help you think more like a publisher. While your audience is not paying for your content, it is sacrificing its time and attention to read/listen to/watch what you create. Orienting your organization around building specific messages for the right audience at the right stage in the customer relationship is most likely to generate the engagement that you need for driving and sustaining growth.
Market for Mobile Business Apps to be $6B+ by 2014
According to Compass Intelligence, market for mobile business apps to grow to $6.12B in 2014 from $3.21 last year. By far, greatest use of apps is for navigation/tracking (nearly half of businesses use apps for this purpose). Link to article here.
Enterprise Selling- Not Just for the Salesperson Anymore
Great thinking from Sameer Patel on Saleforce.com acquisition of Radian6 and discussion of implications for Customer Experience Management (CEM).
Most relevant points/learning for me in the article that resonate with my own experience in selling enterprise solutions:
- Customers now come informed before they are ready to buy
- This is pushing a shift in marketing which requires involvement of entire organizations, not just sales/marketing (marketing fluff won’t cut it with these educated prospects). Note: just because this is needed doesn’t necessarily mean that this is what the selling organizations are offering
- This is in turn driving increased need for all parts of the organization (not just sales) to be listening and engaged in the discussion with customers- and where social networking tools can provide additional value
- The combination of Radian6/Salesforce.com provides an opportunity to begin to manage and mine these interactions, but it has a ways to do this before the vision is realized
One hole in the “stack” that Patel points out in the combined offering is the ability to generate leads. He coyly suggests Marketo/Hubspot as solutions for this, but my question here is how effectively an application can do this. In my view applications help manage the lead generation process, not execute it. If anyone has experience in the effectiveness of these tools or has come across resources which point to the success of these tools, I’d welcome your thoughts and input.
Link to the article here:
Network Based Selling- Can it shorten the enterprise selling cycle?
Long sales cycles. How many of those of us who have sold enterprise software before have had to deal with this problem? To be sure it’s a challenge that many IT companies face when peddling their wares to clients (and a big challenge for startups that want to sell to enterprise http://wp.me/p1hDJ1-1A). But is it something we as business development professionals just accept and live with? Should we all just crawl back into our respective caves and hibernate until our clients thaw out? After all, what influence could we possibly have on how fast an organization can move?
Over the years I have been developing some thoughts on this based on the experience of the companies that I have worked for and advised, and I believe that in fact there are ways for companies to influence faster decisions, open new market segments and raise awareness by thinking beyond their core customers and looking to the various constituents in their respective supply and distribution chains to provide value. It’s a concept that I am calling “network based selling” which I try and describe in more detail below.
I came across this concept while serving on the board of a company that sold compliance solutions for the insurance industry. Due to the regulatory morass that is the nightmare of the insurance industry, there was this massively complicated paper-based process that involved insurance companies, regulatory bodies and the independent and captive agents that sold insurance policies to end customers. The company I served was formed to take these processes to the digital age. It began by creating a platform for state governments then moved to manage licensing processes with agents, then moved to serve insurance companies.
What is interesting in this case was the momentum and selling inertia that this company was able to gain with the most intractable customers (can it get any slower in IT than government and insurance companies?) because of the fact that it had strong penetration within constituents in the insurance regulatory/distribution chain. Agents liked the company because it had a fairly seamless way to deal with regulators in each state. Insurance companies liked having access to multiple states and thousands of agents. As we bulked up the number of agents and insurance companies we served, we got more attention from state regulators.
The important point here is this. You can accelerate the speed and ease with which companies make decisions about your solutions if you engage other constituents in your client’s ecosystem. Think carefully about your prospective customers’ upstream and downstream constituents- their customers- their suppliers. Is there anything that your company or your solution can do to provide these entities with value? Do these constituents represent potentially new markets for growth? Because if you do build traction in these markets that comprise the “network” of your core clients constituents, you’ll be sure to garner more attention and likely deliver more value for the companies you seek to serve.
I’ll blog more about this concept of “network-based selling” and provide more examples of companies who do this effectively. I’ll also present some ideas on how/where I think this concept can be used more effectively ( e.g., Enterprise Purchase to Pay industry), but my point here is to introduce the topic to my blog and return to it with future posts, examples and content.
Happy selling (in shorter cycles).
Enterprise Software Applications Becoming More “Social”
Below is a link to a WSJ article which talks about how enterprise SW vendors and customers are increasingly using social applications to drive productivity in the enterprise:
Key takeaways include:
- Social application spend by enterprises estimated to reach$630M in 2011 (IDC)
- Many organizations would rather build functionality on platforms that they know (on sharepoint?) than use third party vendors (one company, Eaton claims ($900k investment and ~$200k maintenance)
- ROI measures still seem to be pretty foggy (wondering if they measure how much time employees are burning on this)
- Focus seems on a new form of internal communication rather than using it to build revenue (perhaps just the bias of the article)
Link to the article can be found here:
Erasing the Stigma of Enterprise Software
I read an interesting article last night (thanks to @JHaughwout) reporting that Andreessen Horowitz (Silicon Valley VC) is bulking up its capabilities in enterprise computing and solutions. There were a couple of great points made in the piece:
1) many VCs have shied away from investments in enterprise solutions because
- Sales cycles are long
- IT purchasers are a difficult sell (are a pain)
- The companies they fund compete with industry stalwarts such as IBM
2) there is a great divide between the quality and usability of B2C software and that of B2B solutions
Why is the elegance we find in consumer applications so blatantly missing on the enterprise side? As the author of the article points out, our experience at home increasingly raises the bar for those who want to play in the enterprise side. People will demand solutions at work that are as functional as those they use at home. Companies who get this will not only be highly differentiated, but will be able to bring a new set of evangelists and advocates for their solutions.
We believe that this “consumerization” of the enterprise space is a very important trend. It is driven by the proliferation of Saas models, infrastructure on demand, outsourcing and increasingly efficient marketing and distribution methods. Its why you will see more content from us on successful tactics used in B2C social media and how these can be applied to the B2B/enterprise world.
Through my experience with small enterprise software companies I have lived through the painful truth of the points above, but currents in the competitive structure of the enterprise software space that suggest that they may not be the status quo for long.
Link to the article:
