deal architect

Teflon SAP?

In the ASUG Executive Exchange on Monday morning at Sapphire I joked that it was fitting that we had yet another rumor floating - would Bradley Cooper show up with Lady Gaga at her concert later in the week? I cannot remember a Sapphire with so much rumor and speculation in the build up to the event. I was impressed how SAP executives handled much of it during the event. In one on ones, however, several of them were hurt and even angry about the coverage. Even more striking was how little customer execs had heard about or cared about the chatter.

Some of the topics about which there has been some wild speculation

Qualtrics

Yes, it was an expensive acquisition - a "high-beta" one. I am not a big fan of M&A in software. But in my new book, I point out several trillion dollar markets SAP, Oracle, IBM and others missed out on in the last couple of decades - digital advertising, smart products, cloud infrastructure etc. So I cannot fault Bill McDermott for betting a pile of chips on his view that the "experience economy" is going to be a massive one. Not only will it differentiate SAP's CX offering it is already opening up product design, employee engagement and other new opportunities for SAP. It also allows SAP to benchmark and reshape its own product ideation and customer relations. And it has brought a new breed of impressive, high energy execs into the SAP ranks.

HANA

There was some really irresponsible "HANA is dead" speculation. I told several journalists and analysts weeks ago I was baffled by the talk. So it was nice to hear Hasso Plattner after lowering expectations that his was an "old-style", "low-cost" keynote then proceed to announce “SAP HANA is too good a database just to lock it inside SAP enterprise applications,” Watch this keynote where along with Gerrit Kazmaier, he set ambitious new goals for HANA and for the broader portfolio of SAP's analytical offerings. 

Layoffs

There has also plenty of talk about layoffs including some of my colleagues asking for more "openness" from SAP on the topic. I was in Salt Lake City with several of the execs as they were being announced and I could see the hushed conversations. I chose not to pry given the legal and HR considerations that surround such moves. Besides, as I write in my book, SAP has to evolve to a much more cloud, open-source, machine learning savvy culture. So do its systems integrator partners. So do its customers. Continuing with legacy customizations is a growing security and compliance risk. Much worse, it is a recruiting liability when trying to attract younger technical talent. The transitions at SAP are just a start. The ripple effects will be felt throughout SAP Nation. The sooner we start planning for them the better, and we should not just hammer SAP for kicking them off.

Management changes

Nick Tzitzon, EVP of Marketing and Communications had told me "we have individuals in some cases who collectively have worked for SAP for 100 years, and who decided that it was time to try something else in their career. Does this not happen in every company?" Hasso Plattner was even more emphatic when he told a few of us that several customer executives have marveled at the smooth transition. He told us SAP is much "younger" now and he has never been more proud of the company. Watch this keynote and see the energy of execs like Christian Klein, Ryan Smith, Jen Morgan and others

Elliott investment

Geoff Scott, CEO of ASUG had to explain to an audience of customers who exactly Elliott is. That calm struck me as radically different from the panic I have heard from of my media colleagues. Yes, Elliott is a feared force as an activist investor but I am familiar with at least a few executives who have worked collaboratively with them. I liked Bill McDermott's comments during a Q&A “I’m very confident in our top- and bottom-line development,” McDermott said, and that he and the Elliott reps were “psyched” by SAP’s prospects. As I write in my book, there is a huge opportunity in "tilting the bell curve" - transitioning ECC and customizations, BW, S/1 to the new portfolio of S/4, C/4, SAC, SCP, Qualtrics, SuccessFactors, Ariba and many other products SAP now has to offer.

My book

Finally, I am bracing for potshots about my book. I had a chance to give my book to both Hasso Plattner and Bill McDermott. I warned them both it had many sections which would make them cringe. They were both gracious in their thanks - can I dare say they are mature enough not to expect a puff piece from me? But if hear some of my colleagues who have clearly not read the book, you would conclude it is an unqualified endorsement of SAP. I had a chance to sign several copies for SAP customer executives this week. Trust me they are not looking for fawning support of SAP when they talk to me.

No, Bradley Cooper did not show at the concert. But Lady Gaga was amazing on her own. I did not know much about her music prior to the concert but you have to admire her amazing pipes, incredible energy and her body of work. More importantly you have to acknowledge the sheer admiration she got from the audience. SAP is not everyone's cup of tea, but you have to similarly admire its wide body of work and the fact that it is the backbone for over 400K customers.     

I heard an executive say this week media attention on any topic lasts about 5 days. You wait that long and any PR crisis will blow over. That is not a compliment to our analyst/media side of the fence. We have to take the much longer customer view points when they invest in technology.

From my side, this week made me resolve to be even more careful in my reporting and to continue to validate my viewpoints with even more customer conversations.  

The Paradox of Selling Progress: a guest post by Mark Galloway

Mark Galloway and I go back to our respective Lawson and Gartner days. I caught up with him recently - he is Co-Founder & CEO of OppSource, developers of next-gen sales engagement tools. He told me of an interesting use case of his tools as he describes below.

After watching multiple waves of “transformative” technologies come and go in the enterprise over the past 30 years, none in my opinion have been as transformative as what we are seeing with the “Amazon effect”.  No, I am not talking about AWS or the cloud.  Rather, I am talking about the online consumer shopping experience that many of us interchangeably call “Amazon” regardless of whether we are actually shopping at Amazon or some other online retailer.  You ask, so what does Amazon have to do with transformation in the enterprise?  Let me tell you, a lot.  As consumers, we have taken our desired consumer experience for self-service and moment-of-interest engagement into every corner of the workplace.  The net result, we have created a new normal for a radically different B2B buying journey.  We don’t want to talk with salespeople until we absolutely have to, and in many cases, we don’t ever “have to”. 

On the other side of the commerce equation, sellers are having to quickly and radically change their sales coverage models to adapt to us modern buyers.  The days of press-fleshing sales calls are waning. The cost/per sales engagement for this traditional sales approach used with today’s modern buyer is no longer economically feasible.  As a result, companies everywhere in every industry are now grappling with how to transform their sales coverage models to grow more profitably. 

Many organizations have favored hiring young, smart, and high-energy “inside sellers” who come with almost no business, industry or product acumen.  Why hire on this profile?  Because they can force high velocity and high-volume outreach and engagement efforts on these young go-getters at a fraction of what they were paying their expensive, highly compensated field-based predecessors.  Yes, these new reps are sharp and yes, they are quick learners, but without any contextual understanding or experience, smart learning can only take them so far.  The paradox of progress for the modern buyer is that while they don’t want to talk with salespeople until they absolutely have to, when they do, they want to speak with someone who brings value and relevance to their unique buying situation.  The current hiring model for insides sales teams that many companies are using is out of alignment with the modern buyer’s sales experience expectations.

This is where artificial intelligence and machine learning can lend these young sales guns a hand.  Imagine as a young rep, being prompted with questions to ask, similar customer stories to tell, and appropriate product/solutions to position all while you are engaged real time with one of these modern buyers.  This is all being made possible by leveraging machine learning and AI to listen to conversations.  Using modern AI and machine learning models, sales reps can be provided these real-time prompts that will augment the missing business, industry, and product acumen that next generation sales reps will need. Working together, salesperson and machine will be able to satisfy the buyer’s expectations for a modern sales experience, one that comes as the highly personalized and relevant engagement they desire.

As an example, Lifetouch, the nation’s largest K-12 school photography studio used to rely on field sales people to drive around and call on schools in their local territory.  This model worked well in days gone by. However, the modern security measures employed by most schools today discourages unsolicited sales calls and in many cases are not even allowed.  Coupled with these security changes, today’s modern school administrator have enormous time constraints just keeping up with running their schools.  They simply don’t have time to meet spontaneously with sales people of any variety. These market changes required Lifetouch to rethink their sales coverage model. 

They chose to hire recent college grads as inside sellers who work collaboratively with strategically located field sales specialists.  Their job is to line up scheduled and qualified appointments with school principals and other picture day decision makers at schools.  But getting engaged with enough of these contacts to keep a field team of sales people busy with qualified meetings required a much higher volume and velocity of market outreach than what these inside sellers could do with just a phone and their CRM.  They needed a specialized system that provides touchplan automation, AI and machine learning to capture conversation data, and automatically setup callbacks, and appointments.  Working with our company and our OppSource Sales Engagement Platform, they saw the average revenue per rep driven by their inside sellers grow 4X over 24 months.  An incredible ROI by anyone’s standards.

This type of progress driven by AI and machine learning is coming quickly.  A recent McKinsey Institute study found that by 2020, as much as 80% of transactional sales related functions will be possible with Ai and machine learning. 

If your sales organization isn’t experimenting with AI and Machine learning to augment your evolving sales force, you may soon experience the paradox of progress.

You can reach Mark at mark DOT galloway AT oppsource DOT com

 

Sapphire 2019: A curtain raiser with Nick Tzitzon

As I prepare to drive to Orlando for the annual SAP conference I had a chance to talk to Nick Tzitzon, EVP of Marketing and Communications about what we can expect on the main stage.

If you think about the big picture, Vinnie, in terms of where the economy is and where our customers are, we approach SAPPHIRE with a really clear view of the challenges that we need to address and the opportunities we need to seize.

If I had to give you the top three headlines, number one is continuing to deliver on promise of the intelligent enterprise, which as you recall is something we launched last year. This was the pinnacle moment, if you will, in terms of what we always knew that the SAP HANA era would lead to for SAP. Our customers know it’s a big data world. They know that they need end-to-end connectivity in their business. They’re hungry for the exciting machine learning use cases and the new wave of industry best practices. You’ll see a lot more of this in Orlando.

Look for Bill McDermott to make the argument that we want our customers to focus on something of a cultural transformation. The idea here is “you need all people inside companies focused on people and opportunities outside of companies.” Demand chain integrates to supply chain in any truly digital business model.

This leads me to the second headline, which I think will surprise a lot of attendees in terms of the energy it creates in the SAP community. In looking openly at the same challenges facing our customers, we recognized there’s a big gap we needed to solve for. No company in our industry at scale, not SAP, not our competitors, could bring in real-time experience data to complement operational data. This goes directly to the culture change McDermott wants to hit. Nobody questions the operational heft of SAP. The question is – how can we help customers direct those systems to what their key stakeholders, customers and employees, actually feel. Experience Everything , Everyone is a Customer, Customer is Everywhere.

It's widely known that we went out to find a partner here. We found not only the market leader, but the pioneer of the experience management category with Qualtrics. SAPPHIRE will now be the largest event ever focused on experience management and helping businesses operate with greater agility in terms of knowing what's going on in their business, knowing why things are happening, being able to connect the two and personalize outcomes to a far greater degree. So while I think people have read the headlines about the Qualtrics deal, I don’t think there’s a full appreciation of the paradigm-shift that experience management on the Qualtrics XM platform will enable.

Number three, I think the consistent feedback you see, not just from reading about SAPPHIRE, but from reading about all vendor events in this industry, the customers do a better job talking about the solutions than the vendors do. Perhaps this a career-limiting admission for someone in the marketing and communications function, but I’m willing to take the risk. This year we made a concentrated effort to bring as many customers to Orlando as we can to let them tell the stories, to let them explain the experience they're having with SAP, why they chose SAP, why they're excited about the idea of experience management as the latest frontier for the intelligent enterprise.  You're going to see hundreds of customer-led sessions, and the dominant ‘red thread’ is that customer testimonials will be steering the conversation. 

Those would be, at a high level, the three things I think about.

In terms of product announcements, we're going to do a lot around SAP HANA. I can’t tell you how aggravating it is to read speculation in the media about our product strategy. Josh Greenbaum wrote a nice piece about this earlier this week. HANA remains—as Bill calls it--the intellectual foundation of SAP. You're going to see Hasso do what he does best as we blaze a new trail in the data management space with some announcements about SAP HANA, which is very exciting. 

You're also going to see some additional progress being made on the idea of combining experience management and intelligent enterprise capabilities. You have heard us talk about this as “X Data plus O Data.” You'll see some early releases, giving developers the tools to build on our platform and accentuate the capabilities of X plus O. There'll be exciting announcements on this front as well.

You have another breakout on C/4HANA?  Is Qualtrics going to be more in that? Is that its own sub-event within the big tent? 

Qualtrics is going to be everywhere, first of all. CX LIVE is the customer experience event focused on SAP C/4HANA and the five integrated clouds that run in that suite. Frankly, the interest has been so high since it was announced last year, we had to do a dedicated CX track at SAPPHIRE because we ran out of space. That’s why Alex Atzberger and his team are hosting CX LIVE as a separate but connected track in Orlando. I’m sure Alex will happily tell you that it's a bigger crowd than they anticipated, which is good news. I should also say that any registered SAPPHIRE attendee can also participate in CX Live. Bill will appear with Alex at CX LIVE.  Ryan Smith from Qualtrics will appear there. It’s going to be a fun event. 

What about all the drama over the last few weeks?  Will Bill touch on it? Are you going to let the media openly ask their questions?

Yeah, I think the media, influencers, analysts, can and should ask any questions they want.  Personally, I don't see the drama. People have been following us for years and have very high expectations for us. Bill tells us all the time – take the high interest in SAP as a compliment that people believe we’re a significant company with a lot riding on us. Having said that, I worry that much of what’s out there right now has largely been the result of speculation and not necessarily the result of facts. In the case of the executive departures, we have individuals in some cases who collectively have worked for SAP for 100 years, and who decided that it was time to try something else in their career. Does this not happen in every company?

And the other piece of those changes, we have a particularly strong bench of talent at the leadership level and at the engineering level. Names like Adaire Fox-Martin, Christian Klein, Jennifer Morgan, Juergen Mueller, Thomas Saueressig, Gerrit Kazmaier, Abdul Razack. I think these leaders and the quality work done by our engineers will be on display at SAPPHIRE. Maybe the only thing that will quiet the conspiracy theories is seeing a totally thriving SAP in action in Orlando. So I guess I’m happy it starts next week.

Vinnie, I'm normally, as you know, somebody who is pretty sensitive to what's going on across the company, and I feel like the company is going in with a full ahead steam with a pretty clear sense of what it has to accomplish.  I just don't see a lot of this so-called drama.

While I understand there is some sensational stuff in the media, we put more credibility in the facts.

If there’s any learning I have from all this, it’s that we need to do a better job over-communicating about everything. We know what our customers expect, we know what our shareholders expect, we feel motivated and excited about the future. That’s the story I personally need to do a better job getting out into the influence channels.

Any other big announcements?  Any other directional stuff?

You’ll see a re-invigoration on the industries focus from us. There's a lot of really good content we're going to have at Sapphire on the industry side, a lot of good road mapping and best practices. 

You're going to see a lot on the ecosystem. I think our partners are fired up for SAPPHIRE.  You're going to see some more detail in terms of how our partnerships with cloud infrastructure providers have matured. These are topics that we know the SAP customer base is interested in, so they will be well featured at the event. 

I also think you're going to see an increasingly good balance between the technology topics and the business topics. This is something that all vendors struggle with. We, like many, have an audience that comes from multiple perspectives, but what we really like about the intelligent enterprise, particularly now in the context of the experience economy with experience management from Qualtrics, this is a conversation that bridges the gap between business and technology.  It completely unites the value chain on what needs to be done to keep companies successful or, in cases where they're struggling, gets them back on the right track. SAP is talking end-to-end now in multiple respects and we're excited for SAPPHIRE, if for no other reason, because it's our best opportunity of the year to show people just how complete and broad our portfolio is and how complete our strategy is in terms of giving them the tools that they need to be successful.

Plus, we're going to be distributing copies of exciting, new, future best-selling books. In case you have any recommendations in that regard.

Well I know at least one person - the publisher of SAP Nation 3.0 - will enjoy that drama :)

Thanks for the sneak preview.

Digital Transformations: Too little, too late?

I find Frank Scavo a great sounding board.  He has a way of simplifying things and pushing back when things are buzzword-y. I have quoted him in several books. He has introduced me to case studies I have profiled in my books and blogs.

I liked his recent post on Digital Transformations, especially the graph on left.

But it reminded me of 2 things.

In The New Polymath, I had invoked Doblin's (a design strategy firm) 10 types of innovations. You could take Scavo's graph and nuance it some more.

However, the key point I want to make is I started to write that book in 2009. It was inspired by innovative people, products and places I had been cataloging on the New Florence blog since 2004.

In 2012, in The New Technology Elite I had bunches of examples of companies making smart products - taking analog products of the past and embedding sensors, software, satellite and mobile support. They had started designing those products years before.

In 2014, I helped Karl-Heinz Streibich wrote The Digital Enterprise. It cataloged a number of companies rethinking their supply chains, their business models. They had been doing it for years.

In 2016, in Silicon Collar I cataloged companies in over 50 work settings changing their business processes with all kinds of automation - robotics, drones, wearables, 3D printing etc etc. They had been doing so for years,

In my latest book, SAP Nation 3.0, I point out the countless missed opportunities at some of our favorite vendors. Markets don't wait. Startups, corporations as in healthtech and healthcare, SIs have been developing solutions they should have 

What's my point?

If you are only now starting to think about digital transformation, you likely are years behind many of your competitors and your peers.

Here is something even more sobering. The solutions you are likely looking at also missed out on working with those pioneering customers. Their SI partners will try to convince you the solutions embody "best practices". No, they don't - the best practices belong to those pioneers.

Which is why I was pleased to see Brian Sommer write his new book Digital with Impact. In my review, I wrote:

"Brian Sommer and I go back a long way and we have consulted with clients on several projects he describes in the book. We are both worried that today's "digital' project is becoming the "re-engineering" project of the 90s. It starts off with the right goals, then many companies just implement off the shelf solutions justifying them or being told by their consultants they embody "best practices in a box". End result in 90s was massively expensive ERP and CRM projects and failures. Companies risk making the same mistake again with similarly poor results. This is where I like Brian's 4 step framework - spend plenty of time looking for digital opportunities (not just move your back office to the cloud) and build your own jigsaw of solutions given the plethora of cloud apps, automation technology, developer platforms and other tools available today. I also like his emphasis about thinking about in terms of a circle. Rinse, repeat - don't view it as a project which is one and done. Finally, he has a slew of exercises you can use to encourage lots of back and forth with colleagues.."

Frank is right when he concludes "each digital journey is different, because every company is different." In addition, as I said at the end of my review of Brian's book

"Its important you scream and debate. Opportunities like this come only every couple of decades - you want to do far better than most companies did with the "re-engineering" wave in the 90s."

You are likely late. But in addition, please do not do too little with your digital transformation project.

The joys of book reviews

I saw an article aimed at authors and publishers on how to handle critical reviews. And I chuckled to myself  "I could have written that myself"

I took most heat for the first volume of SAP Nation - mostly from SAP fans and partners. It was actually a generous history of SAP as it grew from small German vendor to global powerhouse. What I drew attention to was its poor handling of partners and the massive costs and project failures in the ecosystem. Five years later, I can say with some pride that it had a significant impact. The strategies I highlighted in the book like ring fencing with cloud, two-tier ERP and third party maintenance have gone mainstream. Also, in writing volume 3.0 I saw customers have become cautious in their use of large SIs, they are minimizing change as they move to S/4 etc. That to me is gratifying. I was talking to the customer audience and many of them have benefited from the book.

I was criticized for not being alarmist enough with Silicon Collar. The book came out when prominent Oxford profs and Gartner analysts were screaming about catastrophic job losses from automation.  Mine was a tone of optimism - automation makes us safer, smarter, speedier workers. Machines typically impact repetitive tasks not complete jobs. Automation takes time to mature, it is not cheap. History has proved me right so far. Very few job losses from machines. We are pushing back dates for autonomous vehicles, for payback from machine learning. Two disappointments from the book- I had hoped SIs and outsourcers would automate their own operations - but they are mostly sticking to labor intensive models. The other was software vendors would reshape processes to reflect growing drones and telematics in logistics, sensors, 3D printing and wearables on the shop floor, robotics everywhere but it may take a wave of greenfield vendors to come along to do that.

I am starting to hear criticism I am "too nice" to SAP in the latest, volume 3.0 of SAP Nation. I am actually pretty tough on SAP in a number of chapters. What I do point out is how little its competition has evolved in the last 5 years. So many missed opportunities. Some of the criticism is coming from them for highlighting their performance. To me, again, that is background noise. The book gave me a chance to highlight 200+ pages of case studies talking about a slew of new SAP products. Hopefully, the customer audience benefits from that and sees that this is not "your Dad's SAP". And the competitors realize the clock is reset and they can show much more progress by the time I start to write volume 4.0 in the series.

I tend to be a tough critic myself. The New Polymath was one of my best reviewed books and it was gratifying to get a number of comments about people wanting to expand their own skillsets. What I had hoped in addition was it would spur Polymath organizations like the GE Global Research Center I described in the book "Conversations in the cafeteria, in the hallways, and at the 40 - room lodge attached to the center effortlessly drift from pathology to holography, from one “ aha ” to another. The Global Research ethos is “ Innovation occurs at the intersection of disciplines. ” So, put chemists, mathematicians, engineers of all stripes, and biologists in close proximity and who knows where the conversations will lead."

The New Technology Elite was about smart products (analog products made digital with software, sensors and satellite support)  and covered design, IP issues, the application of Moore's Law, a need to plan multiple releases, product documentation and training and a number of other dimensions. I see so many smart products launched in the last decade which could have used that advice. You wonder, for example, how things would have worked out if Boeing had provided better documentation and training around the MCAS software and the Angle of Attack sensor on the 737 MAX.  

I write books to stay in touch with practitioners - my case study heavy style makes me reach out to over a hundred for each book. They provide me the reality checks and validations for the themes of each book. They also provide fodder for our advisory work. The ultimate compliments and criticism also comes from them, not from social media. Nothing is more pleasant than a note from a client which says "thank you from saving us from a $50 million mistake" or "you forced us to consider couple more scenarios we had not factored"

Having said all that, I happily sign my books, and enjoy presenting on themes from my books especially to audiences on campuses. See you at an event soon. 

The bad old days of consumer tech

Not a day passes without some harsh story about Facebook and data protection. How un-innovative Apple has become. Why Amazon should be broken up. Why Google should be regulated.

And I ask do these folks not remember the days when consumer only got technology dregs? It was not that long ago. Elite government agencies got the best in satellite, computing and other support. Then came corporations. Consumers, if they were lucky, came much later in the technology lifecycle.

Today, consumer tech leads enterprise tech in capability and design. Enterprise software repeatedly turns to consumer tech for innovation. Mobility, multi-tenancy, cloud infrastructure, machine learning - the leadership has not come from IBM or SAP. It has come from Apple and Google.

I think of this every time I hear Mark Hurd, co-CEO of Oracle, present in keynotes. He particularly likes to point out that consumer spend on technology has caught up to enterprise spend — annually about $1 trillion each — and is growing faster. Even more dramatically, over 80% of enterprise tech is spent on keeping the lights on, not innovation. In contrast, the consumer is getting almost pure innovation for her dollar.

Enterprise tech vendors — especially ERP/ CRM vendors, their systems integrators and other partners — were set to dominate the technology landscape in the late 90s. They had emerged very strongly from the Y2K crisis, and the launch of the EU’s common currency promised another bonanza. Instead, their share of the market steadily declined over the ensuing two decades. They missed out on the contract manufacturing of smart products, digital advertising, cloud infrastructure and several other trillion-dollar markets. Two decades ago, not many of us had heard of Foxconn which has delivered billions of iPhones, iPads and smart products. Few of us considered Amazon or Alibaba as tech vendors. Few of us would have speculated that Apple, near dead, or Google, not born yet, would have many times Oracle or SAP’s annual revenue.

To me, that has worked out better for consumers. Enterprise vendors have delivered nowhere near the price/ performance improvements or innovation that consumer tech has seen. It should be no wonder then that the tech the consumer gets at home on Sunday night or in her car is so much better than what she finds at work on Monday morning.

So, let's ask for a vote - how many consumers would give up the advertiser funded or subscription models and sign up for enterprise licenses and audits? So, we can criticize consumer tech for data privacy issues, but honestly, it is a tradeoff consumers have been willing to make. Us smart folks making snide comments or worse forcing GDPR type regulations are not doing them many favors.

Talking about regulators, let's look at their track record with tech. They have not fixed spam email and phishing, robocalls with IRS or Microsoft scams, misleading or fraudulent TV ads. Honestly, those cause way more damage to consumers. Regulators have given immunity to telcos after they violate our privacy rights - why do we think they will do better with consumer tech? GDPR to me is "feel good" legislation like Sarbanes-Oxley was post-Enron. Lot of noise and expense but little in results.

Be careful what you clamor for. You may bring about the bad new days of consumer tech. And that is not what tens of millions of consumers, including me, want. Respect our ability to make choices.

Groan - yet another TLA

Every good analyst is entitled to coin a couple of TLAs in their career. It is a badge of honor. So, I certainly understand why my friend Phil Fersht and his team at HfS have coined a new one IAP - Integrated Automation Platforms to evolve today's RPA or Robotic Process Automation.

"RPA provides a terrific band-aid to fix current solutions; it helps to extend the life of legacy. But does not provide long-term answers." they say

I groan because I am sore from TLAs. In my new book, SAP has so many new product names and TLAs that my editors recommended a glossary at the front of the book. Imagine what my poor transcriptionist had to go through to interpret all those TLAs in 20+ accents of the interviewees in the book.

But back to IAP. I hope Phil and team consider a couple of things

a) putting systems integrators on top of their graph sends the wrong signal. We should be highlighting automation - not more expensive labor and "change management". Besides, it would be nice to see SIs showcase automation in their own operations.

b) automation is about way more than white collar processes. In my book Silicon Collar, I had case studies of BP using drones and autonomous vehicles in remote, harsh parts of the globe. UPS with telematics guiding its trucks, factories with wearables and sensors, hospitals with tow bots, wineries with automated irrigation, waste management with robotic arms on garbage trucks, CGI at digital agencies, Exari (which Coupa announced today it is acquiring) which helps mine complex contract data, and many other examples including RPA.

So, hope Phil and team plan to start covering a broader range of automation, especially in operational areas.

Bruce Cleveland - Part 2 - thoughts on current enterprise market

In Part 1, Bruce Cleveland talked about the framework in his new book, Traversing the Traction Gap. Here we talk about partnering and white spaces in the market.

Most enterprise vendors now offer their own platforms. Could they use your framework to develop a vibrant network of startups on their platforms?

At Siebel, we used partners to dominate – I know the word is overused— the industry.  We grew from initial product release to $2 billion in revenue in 4.5 years. In 1999, Deloitte named Siebel the “fastest growing company in the US” with a staggering CAGR of more than 750,000%.  We only accomplished this because we (by “we” I mean Tom Siebel) put significant resources (personnel and capital) into building a technical platform and a robust ecosystem to support it. 

Tom knew he had to “remove the constraints on the growth of the business.” We needed systems integrators who were trained and certified on Siebel implementations. We needed to our applications tuned to run optimally on various hardware systems. And, we needed numerous third-party applications that could interface and interoperate with our application suite.

Consequently, Tom charged me with building the Siebel Alliance Program. Tom had created our first systems integration partnership with Andersen (now Accenture).  He also had created our first hardware relationship with Compaq and our first software partnership with Microsoft.

I simply took Tom’s initial ideas and those partnerships and developed a scalable partner program from them.  We began the Siebel Alliance Program with Accenture, Compaq and Microsoft and over the course of three years we accumulated a total of 750 partners. These partners generated about a $B of additional annual license revenue for Siebel and helped us ensure that those licenses were implemented successfully. By partners, I don't mean they were reselling Siebel applications.  I mean we partnered with them to market, sell, and implement our joint solutions. We were compensated on our products/services and they were compensated on their products/services.

So, as you might imagine, I am a huge fan of partnerships. We won the Forbes award for the most innovative partnering program in the technology industry at the time and every technology company knew how powerful it was. It wasn’t a secret.  I find it interesting – with all the success we had with the Siebel Alliance Program - that none of the incumbent technology companies have replicated its form or function.

I believe the current technology platform leaders have a tremendous opportunity to develop a similar program. Sure, they all have partner programs, but those programs don’t really put a lot of skin in the game. By that, I mean, they don’t obligate the leaders to do much or to invest in their partners beyond providing basic access to some technology and lightweight market awareness. 

For our program, we actively recruited and hired hundreds of MBAs from the top universities as well as industry professionals and chartered them to create joint business plans with our partners, advocate for our partners with our product and sales organizations, and held the Siebel Alliance organization accountable for helping our partners achieve their revenue and market share objectives. We built specific marketing programs – brand and demand gen – that partners could sponsor to generate leads for themselves. We put skin in the game.  

The program was so successful that Harvard Business School wrote a business case study about it. So, I'm pretty proud of it.

Today, though, for the most part, the large technology platform companies offer what I call “paper partnerships”.  Those partnership don’t obligate either party to much of anything.  They're not “skin in the game” partnerships so they are anemic, at best. 

Most startup teams have little experience partnering with these large technology providers. And, even if they do, they have found that those companies offer little that their startup can benefit from. There's little provided by the large company that is likely to generate significant market awareness or revenue for the startup. For example, startups need to know who, from the partner’s organization, wakes up every morning worried about helping the startup to succeed; where are the demand gen programs they can co-invest in to generate awareness and interest in the startup’s products?  Which teams inside the large company are held accountable for achieving the market share and revenue objectives of the startups in their partner community? The answer? None. Those partner programs are essentially worthless – at least as far as the startup community is concerned. 

Salesforce built an App Store and prospective customers can certainly search for and find add-on applications and products for the Salesforce ecosystem there. However, that's a pretty lightweight endorsement for startups. Who is held accountable within the four walls of Salesforce to wake up every morning, ensuring that a particular partner has the leads it needs, generating a robust pipeline, and helping the startup to convert that pipeline into revenue?

I don’t mean to call out Salesforce. At least they developed an innovative approach and put a lot of energy behind it. And, they have done some advanced partnering with Vlocity. Vlocity was founded by some of my former Siebel colleagues.  What's Vlocity doing?  They're building vertical applications on top of the force.com platform. 

Salesforce saw a need to have much deeper vertical versions of their platform.  That's what we did at Siebel (create vertical solutions of Siebel) and David Schmaier led that initiative as the executive VP. David is the founder and CEO of Vlocity. David and his team are replicating what we did at Siebel for Salesforce and it's going very well. 

I'm an investor in Vlocity, and, to your point about partnering, it's an example of what can – and I think should - be done between technology platform providers and the startup ecosystem.  As this example shows, it's not just about partnering with systems integrators. 

If you want these partnerships to amount to anything there needs to be alignment and shared objectives. For example, if you want to garner the attention of the partner’s sales organization, there is nothing like making partner revenue a part of the sales rep’s quota.

The truth is that partner programs as conceived and implemented by the current technology platform leaders just don’t do much for startups – in terms of market share and revenue - and therefore it shouldn’t be surprising that those programs aren’t valued by startups.

Apple has done well in its ecosystem – with the App Store - but the consumer world doesn’t require face-to-face interactions. In the B2B world, people's work reputations are on the line when they make a buy decision. And, in almost all cases, there are multiple decision makers who must be convinced.  For B2B, startups need brand credibility from the platform provider. This happens when they implicitly endorse the startup by working closely with them. 

In the consumer world, a startup can “borrow” the brand of Apple because if their application is admitted into the Apple App Store, it tells consumers, "Look, we vetted this product. It adheres to our rules." 

Conversely, I don’t think that Salesforce’s App Store does a lot for startups. It’s essentially a digital catalog with some ratings/rankings. That’s not enough for most businesses to make a buy decision. If you speak with startups about the Salesforce App Store and ask them if it is a significant source of revenue for them, I think you will find that for most, it isn’t.

Startups lack credibility.  They lack access to prospective customers.  And, they lack sufficient marketing dollars.  This is where the enterprise vendors could really help startups.

I had hoped that the technology leaders would have adopted at least some of the best practices we had created with the Siebel Alliance Program. Tom Siebel and his new company, C3, are developing a similar program to what we had at Siebel Systems. So, I believe the principles are as valid today as they were back then.

When you look at the cloud apps market there are so many white spaces - major geographies, industry verticals etc - and they do not seem to be targeted by established vendors or even by startups. How are investors like you guiding them through these white spaces?

Cloud computing with its subscription business model - and delivery and usage model -has democratized business application software. Prior to cloud computing, it was prohibitively expensive for smaller companies to acquire and implement enterprise-class applications.

But, by dramatically dropping the cost of these solutions, I suspect it has constrained the application providers’ ability to support smaller geographies and industry verticals.  Going after smaller markets that require significant translation and support infrastructure at much lower price points isn’t practical. 

Even with traditional (re: higher priced) enterprise software, it was always challenging to create localized versions of products for a specific market.  Most US companies started out with the English speaking markets and then typically moved to countries such as Germany, Spain, and France with relatively large populations.  But, when they were asked to support a Dutch or Finnish version, it was seldom worth the upfront and ongoing cost.

For a large company to continue to grow at a significant rate, it needs to acquire or build new solutions that add significant revenue streams – quickly. In that context, let's talk about SAP and Salesforce.  One is a classic enterprise technology company with primarily a perpetual license business model.  The other is the "modern" cloud computing company with a subscription business model. 

The challenge with both of those organizations is that to grow meaningfully they have to build or acquire something of meaningful size.  Moving into a small geography requires the same resources or at least the same FTE costs that might be invested in something else and could generate a much larger impact.  So, it should be little surprise why we are seeing these large companies look to make large acquisitions and avoid niche industries and geographical markets. 

To your point, one might think, “Hey, if these market leaders are not seeing a lot of companies growing fast enough to make a measurable impact on their top line why aren't they helping smaller companies to grow so that they can eventually acquire them?”

Technology leaders may want to look at making investments in smaller technology companies where they see strategic value. These leaders can protect their interests by exchanging an equity investment and access to their channels with a Right of First Refusal (ROFR) that allows the leader to acquire the smaller company when it reaches a certain revenue threshold, at some predetermined price based upon a number of factors such as the acquirer’s stock multiple at the time. 

With respect to investing in and expanding the number of verticals supported, there may be a dearth of deep domain expertise inside some of the larger technology companies to do that well. I don't know whether these companies have initiatives to try to hire subject matter experts from industry to help them drive their product management.  They may and I'm just not privy to it. 

I do know that Salesforce took a run at creating vertical solutions and it wasn't as effective as they had hoped, at least not at the time. This is one of the reasons that led to their investment in Vlocity.  I think this makes the case that the technology leaders, at least those in the B2B markets and not normally inclined to partnering, could really benefit by embracing partnerships. 

Instead, it looks like the majority of them sit back and wait to see which startups “make it”, without their help, and then acquire the few that do. This seems rather silly because by doing that they have to then compete in the open market – and pay a premium - to keep them out of the hands of competitors.

What do you find interesting in today's enterprise space?

Roughly every ten years, new technology is introduced that dramatically changes our work and personal lives.  In the 60s it was mainframe computing. In the 70s it was minicomputers. In the 80s it was PCs. In the 90s it was client/server computing and in the 2000s, it was largely cloud and mobile computing which spawned “digital transformation”, beginning in the consumer markets with companies such as Amazon, Apple, Facebook, NetFlix, Google, etc. Digital transformation has now moved full speed into the enterprise markets.

I believe digital transformation - digital disruption - is such a big transition it will require multiple decades.  I think it has a chance to undo a lot of the current market leaders in every industry.  To your point, maybe vertical providers will emerge and dominate the markets due to digital transformation issues.

The emerging opportunity in the enterprise is in systems of intelligence. This is where I think vertical solutions can dominate.  Systems of intelligence use the data generated and captured by systems of record and systems of engagement to enable companies to derive better business insights, faster and far more accurately than ever before.  I mean real-time insights and real-time responses, without humans involved, that can be triggered via key business events and moments of value. 

Here is an example in the retail space. Let’s say I'm walking through PetSmart and I'm a repeat PetSmart customer. I’m a member of the PetSmart loyalty program. If PetSmart has implemented a system of intelligence and placed beacons throughout the store, I have PetSmart’s loyalty application on my phone, and I provide my permission to send me offers, PetSmart can enable brands to generate contextually-relevant real-time offers to me as I walk through the store.  An offer could be from a brand I don’t normally buy for my dog. The system of intelligence has access to POS data from my prior store purchases. PetSmart makes $ by serving up the competitive offer and if/when I decide to redeem the offer in a coupon that could be set to expire if I walk out of the store without making the purchase. Powering this type of application requires a different type of computer and systems architecture. 

The biggest opportunity may come from vertical systems of intelligence built on top of the older systems of record and systems of engagement.  In my PetSmart example, it means that you've got to be able to interface with an existing point of sale system, not replace it. This is where I would advise B2B application startups to focus. Trying to replace the existing systems of record and engagement is tough to do. 

Trying to rip and replace technology is hard to do.  Building next-generation systems of intelligence that utilize the existing systems of record and engagement is far easier. That's what a lot of the startups we work with are doing.

Bruce Cleveland: Part 1- Traversing the Traction Gap

Bruce Cleveland, who many readers may remember from his Siebel days is now an investor and has a new book out, Traversing the Traction Gap. I had a long ranging conversation with him about the book and also about trends he sees in today's enterprise software industry. In this part we focus on the book, in Part 2 tomorrow he will discuss partnering and how to go after white spaces in the market.

How did the book come about?

Many people have asked, "How long did it take you to write the book?"  It took about a year of nights and weekends and a bunch of rewrites with others helping along the way. Not writing the book – I did that - but performing the interviews, creating graphics, getting legal sign off to use the quotes we collected, and that type of thing.  I learned it really does take a village to get a book out - at least something that's meaningful. More importantly, it took me 35 years of experience to accumulate the knowledge to write it. It required 10 or 12 years on the venture side and 25 years on the operating side.  

I was fortunate to work for and with some of the most amazing technology CEOs and leaders in the Valley.  Luminaries such as Larry Ellison and Tom Siebel were - and still are - the visionaries who created massive markets and incredibly successful technology companies.  Tom's new company, C3, is doing exceptionally well.  I had the advantage of a ringside seat observing the decisions they made and helping to execute them. Over the course of ten years as a venture investor, I met with and listened to presentations from at least 1,000 teams. I learned from those experiences as well. Finally, for the book, we interviewed dozens of successful founders and CEOs to better understand what led to their success.  So, the Traction Gap Framework is something that I developed but the ideas came from the cumulative knowledge and experience of many smart and talented people. 

Over time, patterns began to emerge as I began to see what tended to cause startup failure: 80% for enterprise or B2B oriented startups. B2C -- 90% to 95% failure rates.  CPG -- 98% failure rates. I realized that there are a lot of great ideas and very talented teams, yet many make mistakes that are avoidable. 

So, I started to unpack all of this.  When I joined two other people to create a new venture firm, Wildcat Venture Partners, I brought those ideas with me based upon the patterns I had observed. The most common cause of failure? Many phenomenal product teams stumble when it comes time to take their products to market. While they may have great product engineering skills, most teams lack “market engineering” skills – a term I came up with to represent category creation/redefinition, thought leadership content, market validation processes, pricing models, etc. I decided to double-click on this. 

All early stage startups – and new products inside an existing company – must go through 3 phases: go-to-product, go-to-market, and go-to-scale. There is a lot of help from angel investors, incubators and accelerators for the go-to-product phase. There is also a lot of help in the go-to-scale phase from groups such as Bain, McKinsey, etc. However, there is very little help for that murky go-to-market period. And, the evidence – 80% failure rates and higher – shows us that this is the most challenging phase for startups.  One of my partners is Geoffrey Moore, author of “Crossing the Chasm”. That book has taught millions of entrepreneurs how to think about markets. 

Most of the groups we invest in come out of great colleges or great companies, be it Salesforce, Google, Facebook, or wherever. There, they have learned how to develop a product. However, many of those groups have never experienced bringing a product to market. And, there has been virtually nothing written with respect to how to do it successfully.  There are no prescriptive guides.  There aren't’ guardrails or guideposts for startup teams to follow. I decided that, based upon my personal operating experience taking an early stage startup from an idea to a billion-dollar outcome and investing in multiple early stage startups that went on to become billion dollar outcomes, that I would share my experience and the experience of others who had succeeded.

The Traction Gap Framework

We don’t need more acronyms introduced into the technology landscape. I decided to adopt Minimum Viable Product – MVP -  a term that Steve Blank, Eric Ries, and Marc Andreessen propagated, and derived the names of the value inflection points for the framework from that term. It may be debatable about what constitutes an MVP, but it's something that people are familiar with.  In my experience, if you can explain new ideas in terms people already understand, then they can quickly pick up on those ideas. 

I adopted the “minimum viable” format and applied it to the value inflection points associated with the framework.  The reason that I call them value inflection points is that as you reach each successive point, your company increases in value because you have diminished risk in the eyes of the investor community. In fact, it’s a step function change in value, not a smooth curve.

The first value inflection point of the Traction Gap Framework is called minimum viable category or MVC.  Creating a category, or redefining an existing category, is critical market engineering work.  You must to this early, while you are in the process of deciding whether the product has a viable market. You need to define/redefine your category because the current “category king” defines the “rules” – the attributes - of the existing category and you will be compared against them. This is not a battle you can win – well, at least not very easily.

The next value inflection point is called initial product release or IPR.  This is the first time that you make your product available publicly.  It can be an alpha or beta version, but it's basically the time at which you first place it in front of people, and they tell you whether it's great or it sucks.  Based upon the feedback during this period, you polish it up and, eventually, you reach what you declare to be a minimum viable product or MVP; something that you can begin to actively market. 

The next value inflection point is minimum viable repeatability or MVR. This is the point where you have successfully built and released multiple versions of the product, hired multiple people, experimented with and hardened pricing models, and are now beginning to build the systems such as sales, marketing and governance processes that you need to scale your company.

Then, finally, if you can scale for 12 to 18 successive months - growing quarter over quarter - you will reach this theoretical point called minimum viable traction or MVT. There are actual metrics associated with each value inflection point, including MVT.  But, to provide you with a visual image; you know you’re at MVT when you travel to “Sand Hill Road in Menlo Park” (Venture Capital Row – although SF has become far more popular for VCs over the past few years), meet with the venture capitalists located there, and they begin to sell you why you should take their $ vs. you selling them.

In addition to the value inflection points, the Traction Gap Framework consists of four architectural pillars: product, revenue, team, and systems.  These pillars are present from the moment of ideation and last in perpetuity, as long as there is a company. 

At the various value inflection points, the Traction Gap Framework architectural pillars take different points of prominence.  In the go-to product phase, product and team take center stage. From MVP to MVR or minimum viable repeatability, revenue architecture comes to the fore. Then, finally, as you reach MVR on your way to minimum viable traction, systems finally become important as you prepare to scale. 

The Traction Gap Framework breaks down this very murky time where there is very little data. It provides startup teams and investors with some guard rails and milestones they can target.

During this time, most startups are what I call “PowerPoint companies” -- they don't have a lot of market or customer data to prove that their products will succeed or feedback regarding what it will take to generate success. The challenge for startups at this stage is to get to a point where they become a “Spreadsheet company”; a company with performance data —metrics - that the team and investors can react against. Most venture firms are not comfortable investing in early stage startups that are still in “PowerPoint” mode.  Some will – like the Pre-Seed/Seed firms. And, even the best-known firms will invest early if they know the CEO and/or have strong conviction about the market opportunity. But, most teams will find that the venture community is hesitant to invest until they see tangible traction. 

Understanding what constitutes traction has been elusive for entrepreneurs because there's typically not a lot of feedback given to them by the venture community. And, most venture investors haven’t personally built a company from startup to scale, so there is little expert counsel they can provide based upon personal experience.  I wanted to expose some of the metrics venture investors associate with traction (e.g., capital raised, net burn rate, revenue growth, and usage rates) and how to achieve them. 

That's the background on the framework, the reason I developed it, the terminology I created, and the overall rationale for it.

How portable is the Traction Gap Framework?

I sat down with Geoffrey Moore and asked him, "When you were thinking about publishing ‘Crossing the Chasm’, were you worried that you didn’t have enough proof of concept?  At the time, your ideas were quite nascent, right?”  Geoff said that he wasn’t really worried about that. Geoff said he published it and subsequently augmented and supplemented his original thoughts as needed. So, that gave me the confidence to put my framework out there.

I use variable names for the value inflection points of the framework so that it can support a variety of different business models.  In fact, I treated very lightly - in this book - the B2C business model.  The reason is that most of the investments I make use a B2B or B2B2C business model. 

But, I gave considerable thought to the framework’s applicability and adaptability to other business models and other industries.  We've now accumulated metrics for B2C and we can swap in those metrics at their appropriate value inflection points.  Over time, I can see us doing something similar by industry verticals.  So far, it seems to hunt well.  I suspect it will readily work with other business models.

And, for the most part, I believe the framework is flexible and adaptable enough to scale to other geographies and cultures.

In Part 2 tomorrow we will cover Bruce's thoughts about the current enterprise market. 

Be like Bill and Warren and Elon ...

Michael Simmons writes about the 5 hour rule of many successful executives

"Over the last year, I’ve explored the personal history of many widely-admired business leaders like Elon Musk, Oprah Winfrey, Bill Gates, Warren Buffett and Mark Zuckerberg in order to understand how they apply the principles of deliberate practice..... Many of these leaders, despite being extremely busy, set aside at least an hour a day (or five hours a week) over their entire career for activities that could be classified as deliberate practice or learning.... For the leaders I tracked, the 5-hour rule often fell into three buckets: reading, reflection, and experimentation."

If you want to emulate them from the reading angle, you are in luck - as there is a bumper crop of just-released books 

I am a long term member of the Enterprise Irregulars. We are known as a group of analysts and bloggers. Well, almost to make the point that long-form content is still alive and well, 5 of us have just released books. Denis Pombriant and Brian Sommer have already contributed guest columns about their books on this blog. I am interviewing Paul Greenberg about his book next week. Thomas Otter has just finished his dissertation around data privacy and is turning that into a book. You have been reading on this blog excerpts from my new book, SAP Nation 3.0.

That's just the start. I interviewed Bruce Cleveland about his Traction Gap book and will run a two part conversation next week. Similarly, I talked to Tom Bogan at Adaptive (now part of Workday) about their new eBook and will run that interview soon. I hope to talk to Brian Solis about his new book, LifeScale.

Two people I have long admired, Tom Peters and Rick Karlgaard both have books on very different topics, Excellence and Late Bloomers, that I hope to review soon.

Paul says it very well for every author in his book intro

"Sigh. Every time I finish a book, I vow never to write another one. They are so hard. But then, within two to four years, the book is almost obsolete because a sea change of some kind comes along and makes dramatic alterations to institutional thinking, approaches, systems, technologies, and cultures that stirs my blood and makes me get back into it again."

The books I am reading and reviewing cover a wide range of topics from Denis with renewables to Rich with societal expectations. Paul's books are always chock full of interesting anecdotes. My book has plenty of history - that of enterprise tech in last two decades and that of the US westward expansion in the 1800s.

For me, each of my 7 books has opened up opportunities for conversations before, during and after writing the books. I interviewed over a hundred SAP customers and watchers for my new book. After he reviewed the book, I interviewed Ray Lane about what he is seeing now as an investor. These conversations in turn give me ideas for my blogs and make our client services richer. It is a virtuous cycle for my three roles as advisor/analyst/author.

Budding authors now routinely ask for my advice. To me, that is so heartening. And if more readers start following Bill, Warren, Elon and others in their reading habits, it will be so much more.