The Black Swan

I just finished reading “The Black Swan”, a book that has been on my list since it came out in 2007 and I highly recommend it, though it is not easy reading.  There is a great deal of set up before you get to the whole point of the book in the last 50 pages.

“The Black Swan” is about uncertainty in the real world and the subtitle explains it all: “The Impact of the Highly Improbable” and it is something that I can see affecting CRM and its users on many levels.  Highly improbable things happen frequently and they have deep and unpredictable impacts on our world.

Uncertainty is related to risk and randomness, and while we lay people might lump all of them into the same definition, they are different.  My understanding of the three is that risk is something to which you can attach a probability like a coin toss landing heads (50/50 or .5).  Randomness is less constrained than risk if only because it is too complex to compute — if we flip one hundred coins we might reasonably expect half of them to land heads but we can’t say which ones.  Uncertainty is a condition or event that will surprise us, one that is not on the radar.  A blue bird, sometimes called an unknown unknown.

The blue bird interests me most and is an important factor for CRM.  I have been trying to get my head around some data that I collected earlier this year about sales and forecasting that seems to relate to this.  As you might recall, the data showed that the vast majority of sales forecasts (better than 90% of them) are worthless.  They are so inaccurate that they can make a coin toss look like the model of precision.

My question: Is this the best we can expect or are there things we might do to improve our forecasts by reducing uncertainty?

The data also show that most sales managers engage in a process of downloading forecasts to spreadsheets in which they massage the data with the intention of improving it.  If the dismal forecasting results are the product of an improvement process, it can only suggest that the starting point data is no better (remember GIGO).

All this evidence notwithstanding companies continue to make money more often than not and sales people manage to sell things.  And according to Jim Dickey and Barry Trailer nearly sixty percent of them make quota.  How can this be?  How can we be so profoundly bad at sales forecasting and still manage to sell things?

First, though there is a great deal of uncertainty in sales forecasting, uncertainty is a two-way street.  Deals come in that were not forecasted or perhaps not even known about — so-called blue birds — and some deals that appear to be a lock simply evaporate.  Anyone who has tried to sell — and forecast — knows this.

Customers do rational things for emotional reasons, the saying goes and the irony to me is that at precisely the moment when we need the customer to act emotionally — to buy a product — we expect that customer to act rationally.  If you doubt this then how can you explain attaching a probability to an otherwise emotional decision.  It’s not wise to do that so if you are going to forecast using a probability of close, then you have to assume a set of rational expectations.  In other words, if we have been through a sales process with the customer — understood the business problem demonstrated how our solution solves the problem and asked for the order — we expect the logical conclusion, a purchase order.

But while the situation might look certain or at least logical to us, we have little or no visibility into the similar process being conducted by our competitors and there lies a great source of uncertainty.

What can be done?

As mentioned above with GIGO, we need to acknowledge that the way we are forecasting is not working; in other words, stop digging the hole we have gotten into.  There’s too much uncertainty in a forecast to believe the numbers we generate.

But stopping the excavation will not solve the problem; it will simply prevent the hole from getting deeper.  As sales people we can try to eliminate some of the uncertainty in our deals but by definition, we can’t do that.  We don’t know what we don’t know.  Even if we know everything our competition says and does we have no visibility into whether the stock market will crater the day before we expect the P.O.  There is always something.

Nonetheless, a company’s sales usually fluctuate around a level that is near to the level of the goal — few sales teams in aggregate hit the ball out of the park and few get shut out.  Uncertainty makes sales a numbers game meaning the more irons you have in the fire the more opportunities you have and the better insulated you are against risk.  Notice I said risk and not uncertainty.  More opportunities reduce the importance of a single opportunity because there are many ways to make your number, that’s risk.  But there is nothing that will insulate your forecast from the remote (we hope) possibility of the stock market cratering or flu breaking out in your customer’s headquarters.

If sales really is a numbers game then it makes sense to have systems that can help you manage big numbers of everything — opportunities, deals you know.  More important, it is also essential that we have ways to get as many good opportunities into a pipeline as possible.

For years, we’ve had a discussion about the efficacy of SFA — is it good, is it worth the effort, isn’t it just a management tool?  Ironically, there are still companies out there that believe they are too small for SFA or that it doesn’t work.  In a few years it will be the same stories with social CRM and by then the companies that failed to adopt SFA will be completely out of business.

Truth is, we need both these days.  We need SFA to manage our large data sets and we need social CRM to help us take uncertainty out of deals.  If we never use an outbound social CRM tool such as a blog or micro-blog or networking site we would be fine as long as we had some exposure to tools that help us know what customers think in aggregate.  For me that’s where the power of social CRM is, it’s in helping us reduce uncertainty by that radical idea of asking customers what they think.

Selling Thought Leadership

This spring and early summer have been fertile times for social media and CRM.  The traveling shows, Sales 2.0 and Enterprise 2.0, made stops here and each had some interesting ideas on offer.

For sheer completeness I tip my hat to Enterprise 2.0.  If you are wondering what the Enterprise 2.0 fuss is about it’s considerable and it relates directly to social media and ultimately to CRM.  Netting it out is difficult but here’s an attempt.

As corporations flatten out some of their decision making authority goes down closer to the customer and some of it evaporates to be reconstituted on the customer side.  Rather than a traditional command and control or hierarchical organization structure we end up with something more like a network.  Social CRM is the front office analog.  Social CRM aims to have more direct conversations with customers rather than attempting to tell them what to do.  You could get all of this from a wonderful book, “The Cluetrain Manifesto” published in 1999.

As is typical of big concepts, it took about ten years for the seminal ideas in “Cluetrain” to percolate to the market.  But now that the ideas are here they are leveraging things like twitter and Facebook and other sites to remake the corporate landscape.  Beyond that they have the potential to remake our lives too.

With all of this as background, I have been thinking about the implications for CRM for a long time.  What might seem intuitively obvious may not be and there are many ideas lurking that have not bubbled up yet.  For example, you might think it’s a slam dunk that social networking would make for a great conventional marketing tool but there I think you’d be wrong.  Some people are advocating for social media as if it was e-mail on steroids.  Sure, you can reach a heck of a lot of people for zilch with social media but there’s reach and then there’s reach.

In truth social media is about intimacy built on trust which is why spam doesn’t work with e-mail and why trying it with social media will be a colossal flop.  But social media is good for marketing and sales if you — the marketer and the seller — can build trust over time and become what I refer to as thought leaders.

In a revision of Andy Warhol’s famous dictum that in the future everyone will be famous for fifteen minutes, someone (wish I knew who) recently said that with social media everyone will be famous to fifteen people.  That’s pretty clever and it goes to the heart of thought leadership.  Think of your Facebook friends and your twitter contacts and there are probably more than fifteen people on your list but  the number is small by cosmic proportions and that’s the point.  You are, to one degree or another, already famous to a tight circle of people, some of whom you know well and others you hardly know at all.  But they respect you and your opinions to some degree and that’s probably much more than they know or respect some corporation or politician.  You can use this in business with social media.

The challenge for sales and marketing is to learn how to tap into these circles of trust without violating anything or anyone.  We know this intuitively and it’s why spamming won’t happen in social media — it will not be tolerated.  With that in mind the new model for selling is leveraging social media to disseminate thought leadership.

We already know that people think about and discuss purchases with their friends and acquaintances long before they enter a sales process and the trick will be for sales people to be seen as truthful sources of authoritative information in their own territories.  Thought leaders, in other words.  That’s not easy but it can be done, but it can’t be done using old methods.

How often do you get links to things on the Internet and what are those links for?  There are many links for articles but increasingly those links lead to other media like pictures and video.  I think that is a big hint.  The modern sales glossies, white papers, brochures and Powerpoint slides are all of another time — the era of hierarchical command and control.  The era of broadcast advertising.

My hypothesis is that much more of this material will find its way into low cost and easily produced video and ultimately I would not be surprised if it also included music.  Your favorite TV shows have theme songs so I don’t think this idea is that far fetched.  (I also have two kids in music school who will need jobs someday.)

Taken as a whole I think this gets us to the idea of selling thought leadership.  You can’t expect to sell anything until you have convinced the customer of the correctness of your line of thought.  Today too many vendors are letting random chance do the educating.  That’s going to change.

Birth of the new

Note: Historian William Manchester once described 1968 as the year everything went wrong.  Hard to dispute that.  Two assassinations, riots and a pointless war added up to a meltdown.  If’ ‘68 was all of that (and more) then 1969 might be seen as the beginning of what we think of as modern and our first attempts to put it all back together. The first fruits of the great technology shift were evident in the moon landing and the generation that would make technology so much a part of modern life found its voice.  Like the Big Bang, the echoes are still all around us.

What a summer for remembrances.  Forty years ago a couple of people landed on the moon and a half-million of them landed on Max Yasker’s farm in upstate New York for the Woodstock festival.  That might sound like ancient history but of course without the space program who knows where the technology industry would be today.  And the people who propelled the industry in its early years, and even today, were largely of the Woodstock generation.  Hold those thoughts.

Closer to home, this year also marks the first decade of the Cluetrain world — ten years since the publication of the “Cluetrain Manifesto.”  I was re-reading it on the beach the other day.  It’s a seminal work and not exactly beach reading material but with the perspective of ten years it was interesting to consider it in context with our love of technology and the aspirations of the Woodstock generation.

It seems to me that the last decade was mostly lag time between the ideas embodied in the book and the reality of today.  Along the way there have been many false starts and wrong turns but what fascinated me most is this: Despite Cluetrain’s ample warnings that people want to be treated like people, not some demographic to be marketed at, corporations enabled by CRM and its related disciplines disregarded the warnings.

Sound too harsh?  Maybe it is, but not by much.  Did the Woodstock ethos melt away or was it simply submerged?  I think it was submerged waiting for appropriate technology.

The early years of CRM were heavy on management and light on everything else.  SFA quickly became a tool for managing sales people more than deals, call centers too often became places where calls went to die and call handling time became a metric.  And marketing automation?  An accounting system to manage marketing spend.

Then something wonderful happened, something that Cluetrain alluded to but could not predict because it was an unknown unknown.  Social networking evolved rapidly and made it possible for the Internet to deliver on its promise, which looks a lot like an incarnation of some of what was best of the Woodstock era.

Ten years on (I could have said ten years after but I didn’t) we have Twitter and Facebook, Linked-in, MySpace, YouTube and a lot more ways to share ideas.  In the short term, it gives life to Bill Gate’s observation that we overestimate what we can do in two years and underestimate what we can do in ten.

More importantly, social computing is finally changing the ways we live and work — ways that are at once profoundly human, surprising and humbling.  Technology, both social and otherwise, is destroying industries that were once pillars of our civilization.  The Internet is eroding the revenue base of newspapers, magazines, radio and television while social media makes all of us the heroes of our own lives as bloggers, innovators, arbiters of taste and product reviewers — and that’s just in our private lives.

Our work lives are nothing like those of our older peers who can easily remember a time when not even a fax machine was part of regular business.  We are enormously more efficient and productive and in more normal times these traits drive phenomenal economic growth.  We communicate — asynchronously most of the time — with the expectation that others in our circle will receive and respond if our thoughts are interesting.

And the corporations we work for and buy from have at last gotten the message that our attention and loyalty can not be taken for granted.  We are not out of the woods yet.  Too often people and corporations take the view that the new social technologies are things to be bolted onto old ideas and the result will enable them to sell more and faster.  But that’s not where we are.

We are at the point of a great paradigm shift — actually many shifts, which is makes these times so interesting.  With so many iconic companies and whole industries teetering, we are at the point where the Woodstock generation thought they were.  Energy, finance, communications, transportation, food, healthcare and who knows what else — a perfect storm — all need to be rethought to one degree or another.  The thing that unites these efforts is how to reorganize the relationship between producers and consumers, vendors and customers, and us to ourselves.  What a great time to be in this business.

Shih wrote the book on social media

Clara Shih is a friend I met through Salesforce.com.  She recently published The Facebook Era, which looks at the relationship of social networking to front office computing.  She is really busy these days promoting the book and she recently left Salesforce to pursue new ideas in social networking and to form a company dedicated to the task. 

Shih is bright and articulate and she’s been involved in social networking and social media for several years.  She even wrote a little code — the first integration of Salesforce and Facebook (Faceforce now Faceconnector).  I caught up with her in an airport as she was leaving to visit family in China.  I wanted to congratulate her on the book and learn about her thinking on some important issues surrounding front office computing and social networking. 

I think we’re in violent agreement on most points and I have to respect the fact that she spent a year researching social media — especially Facebook — and writing her book.  One thing Shih makes clear in the book as well as in conversation is the disruptive nature of social media, “As disruptive as the Internet was for any industry,” she says.  “Who knows who and how will be critical in sales going forward.” 

True enough. 

As the market continues to move from one where innovators sell to early adopters toward one with more stability, we can expect that personal relationships will become increasingly important, that only makes sense.  When early adopters buy something it’s to gain a competitive advantage by being the first to implement a new technology.  Early adopters are like the one eyed man in the land of the blind.  They buy stuff and play with it to find a profitable use.  They don’t need a lot of hand holding and often the most basic documentation is fine so it’s no surprise that selling to early adopters is pretty easy.

Most of us today have lived through a long series of new waves not just in technology but throughout the economy and we have all been early adopters.  The new economy is a lot more about mainstream buyers and many of us might have forgotten (or never learned) how to sell to them.  That’s where social media comes in and it’s why the amalgamation of CRM and social networking is such a big deal — if it gets done right.

What exactly is meant by doing things right is a tricky question.  According to Shih, if you think about a maturity model for the space, “We’re about at phased 1.5.  In phase one people didn’t understand what it (social networking) was or why it mattered.  We’re at the stage now where people know Facebook and Twitter but they don’t necessarily know what to do with them in business.”

Shih makes the analogy to the early Internet when no one knew how to monetize their investments in Web sites.  In a lot of cases companies simply “…tried to apply old models to new media,” it sort of worked but today we’ve moved on in many respects.  Whenever you apply old models to new media you are basically trying to extend the old paradigm, getting the most you can out of it before you have to invest in something new and expensive.  It also gives you time to see which models are most likely to be the winners because no one wants to go down the wrong path and end up spending twice.  Not that that ever happens in the software market.

There is also the issue of developing the right metrics for measuring success and to do that the business objectives need to be in place.  So what are the business objectives and which social networking tools are right for each objective?  “It depends,” Shih says diplomatically.  “There are different tools for different environments,” and her book goes into more detail.  But suffice it to say that a blog has a different purpose and orientation than Twitter with a 140 character limit.

It might seem that several social media are carving out niches for themselves.  Facebook for sales, Linked-in for personal networking and Twitter for quick bursts, Shih is the first to acknowledge that things are very fluid.  “We’re in an exponential growth phase,” she says, “ Everything can change in a year.” 

Right you are.  In a year we could have more clarity or simply more companies contending for hearts and minds (and wallets) as the social networking boom takes over in full force.  If things work out as Shih expects, there will also be a company headed by her to advise companies about social networking and its uses.  WE could all use the help.

Social networking’s bleeding edge

Facebook faces an interesting problem in how to deal with a small group of Holocaust deniers using the service to meet and share ideas.  Facebook is a private service so there should be little doubt the service could shut down the hate group if it chooses.  But a larger question of how such social networking sites should be policed is at stake.

In the past Facebook stepped in to remove pictures of breast-feeding infants if the company thought too much breast was showing.  That episode provoked an outcry of a different sort.  But together with the Holocaust deniers it focuses us on this point – who gets to decide this stuff and how?

How much latitude should there be on a social site and who gets to decide?  This is the definition of slippery slope because I think reasonable people might agree that motherhood is sacrosanct and hate speech should not be protected.  But what happens when the issues are less black and white and the choices not as clear?  Could Republicans demand Democrats be excluded from a discussion?

The Holocaust issue is being chased by anti-hate groups right now that are petitioning Facebook to take down the offensive speech.  But is this a model that scales?  Again who gets to decide?  This looks like a mob, err, I mean, wisdom of crowds issue and that makes the slope slippery.

This puts me in mind of the newspaper model.  There are lots of things that reasonable people disagree with in the newspapers yet we all acknowledge that journalists maintain a level of professionalism and fair-mindedness – most of the time – that serves to give them a pass when handling difficult issues.  More importantly, no one gets to spout a flat-earth theory in a paper without some diligent fact checking.  If the facts don’t check out, the story doesn’t go up.

It strikes me that we need some form of journalistic standards even for private sites like Facebook.  But standards require editors and a whole infrastructure of people whose jobs and passion are to get the story right.  Are we all going to become journalists?  Take some kind of oath?  Just another example of life at the bleeding edge.

Medieval wisdom of crowds

I wanted to write a piece about the wisdom of crowds for a long time but I needed a clip from Monty Python’s “Holy Grail” to make it work.  After a lot of procrastinating I went to YouTube, did the hard work of reviewing all of the Python clips and found the right one.  There is no limit to the effort I will make to write a piece — this research was physically demanding and my sides still ache.

If you are a Python fan you might want to review the clip for sheer fun and even if wacky British humor is not your cup of tea, watching the clip will enhance your understanding of what I am going to say.  So, go ahead, take a look.  I will wait.  Really, it’s OK, there’s a recession on and I have the time.  It’s a little over four minutes.

Ok, welcome back.

If you cheated and just forged ahead without the benefit of Michael Palin and the gang, the clip is a medieval mob scene in which the mob, convinced that a woman is a witch, asks permission from the local knight to burn the witch at the stake.  The knight is skeptical of the claim.  The mob has dressed the poor woman in a witch’s costume and given her a conical hat and fake carrot nose.

The whole scene is contrived and at first you expect the knight through tortured reasoning with the crowd to convince them that the woman is not a witch.  I will leave it to you to watch the clip to find out how the woman is nonetheless condemned and the gods of comedy are served.

My point for a long time, which this clip illustrates, has been that the wisdom of crowds is only as good as the crowd.  That’s because you can’t get new information by asking what people already know.  Those people believed in witches, even the knight, so it was easy to proceed from that error to a burning at the stake.  New information and, hopefully truth, comes from research including setting up an experiment, collecting data and then careful and dispassionate analysis of the data.

Monty Python’s mob simply illustrates that a crowd can pool its existing knowledgebase to provide accurate feedback of group-think.  It also cleverly illustrates Mark Twain’s brilliant observation that “It ain’t what you don’t know that gets you into trouble.  It’s what you know for sure that just ain’t so.”  At least by Twain’s time we weren’t burning witches.

My point is that in our rush to embrace all things social we run the risk of acting — with all good intentions — like that mob and that’s especially unhelpful because no one has been given the knight’s job of playing devil’s advocate.  I think we can take too much as fact just because it comes from a community of customers, especially if that community has no controls. 

To be sure, there are valid and useful things to be gleaned from customer feedback but feedback is only the first step.  Ideally, feedback should give us some testable hypotheses from which we can extract true knowledge.  All the testing in the world would not have helped the woman in the movie, but that’s the essence of comedy.

The film clip, and the wisdom of crowds, shows the difference between feedback and discovery.  We can run our companies pretty well using feedback most of the time but unless there is a little discovery mixed in and unless the lessons of the discovery process are put to use, we can find ourselves in trouble.

Last week we saw an example.  Chrysler got ready for a bankruptcy filing and GM is not far behind.  In their histories, both companies spent prodigious sums gathering customer feedback.  It showed how much customers liked big cars (maybe that’s all they knew?) and the car companies used the information to justify building even bigger cars and trucks.  I wonder if these companies bothered to ask what people felt about climate change or the high price of fuel.  Since public perception and opinion can change much faster than a company can design and develop cars with higher fuel efficiency, it might have been good to know those things.

Customers can tell us an awful lot but we have to ask the right questions and we have to step out of our contemporary biases.  Technology can do a lot to automate and speed up the asking process but the human element is still important.  We still have to ask the right questions and not flinch when we get the answers.

Tracking the trackers

I have been remiss in not paying enough attention to social media monitoring software.  I suppose it’s understandable given that social media is at the margin of CRM—moving to the center, but still in the outer shell—and monitoring software is somewhere beyond that orbit in the software equivalent of the Kuiper belt.  Maybe it’s time to pay a little attention there because monitoring software can be a big addition to your marketing strategy, and much of it is free.

First, what is it?  Social media monitoring software is a class of applications, delivered on-line that track aspects of how you and your company are being talked about on the Web. 

There are applications that track text—twitter feeds, blog posts, comments and the like.  These have been around for a while and a classic example is what might still be called a vanity search on Google and other search engines.  The basic idea is that the search engine looks for fragments like Beagle Research or Pombriant, and brings links back to your email.  If you recall the Steve Martin classic movie, “The Jerk” getting a Google Alert is equivalent to receiving a new phone book.

There are lots of sub-specialties in this area.  For example, products like del.icio.us can tell you when someone bookmarks a web page.  Blogpulse can tell you who is picking up on a blog posting that you might not think is going anywhere.  It can also tell you about the use of keywords, like your product name for example.  And Co.mments can track the comments left on blogs—do people like your posting or are they panning it?  What else are they saying?

The proliferation of different types of social media, especially video, seems to have spawned a cottage industry of companies that will gladly scour the video sites to bring back tidbits that may be informative or salacious.  Suppose someone snaps a photo of one of your executives in a compromising position, a search of flickr, YouTube, Google Video, MetaCafe and other sites can alert you to trouble. 

Then there are consolidators like Keotag that tracks which keywords are being used as tags.  Is your company name being used as a tag?  It might bear looking into.  I was impressed to learn there is even a search engine product—oodle—that scours online job listings and aggregates the information.  Is your competitor advertising a new position for what looks like a new product line?

Then there’s Edgar Online.  Edgar is the SEC site that captures and makes available public filings on public companies.  It gives you a window into the health of public companies.  There is also SeekingAlpha which lets you subscribe to the RSS feed of conference call transcripts (think earnings calls).  Also, Google Patent Search (beta) is self-explanatory.

There’s more too.  Marketing Pilgrim (www.marketingpilgrim.com) lists 26 of these and similar sites that are available free to track what the world is saying about you and yours.  I don’t have the heart or the stamina to go into all of them though.

What’s the net of all this?  A couple of ideas.  First, social media is not just for individuals, companies can make very good use of free filters to understand customers and competitors better. 

Remember clipping services?  They were dedicated to scouring magazines and literally clipping articles for you.  Every month you would get a file of clips that helped you understand what the market thought about you last month, or more realistically, three months ago when the reporter filed the story, in the case of magazines. 

Now it’s instant.  Everyone is a reporter too, wittingly or unwittingly.  That photo of you or your boss three sheets to the wind and scantily clad playing tiddlywinks at midnight at the user conference in paradise last month was a lark but it ended up on-line.  Can you say damage control?  In the arms race that is marketing, you need to know because your competition wants to know and you know what that means.

As you might expect, there are consolidators of these filters and companies that span the differences in media and I think they bring a certain cloak-and-dagger quality to all this.  Imagine being able to get a clippings service worth of this kind of information streaming into your face every day.  The sheer volume of information out there is impressive and there is almost a CIA-like (I am sure they will track this keyword, Hi, guys!) quality to getting this kind of market intelligence. 

It’s a great use of technology but I wonder about some of the ramifications and potential for abuse.  In the time it took to write this, it feels like social media just grew up.