Archive for the ‘Social networking’ Category


This story caught my eye in the New York Times and I can’t get it out of my mind.  The title says it all — Number of Protestant Americans Is in Steep Decline, Study FindsThe Pew Forum on Religion and Public Life did the research and discovered that white Protestants from liberal Episcopalians to right leaning “born agains” were leaving their faiths and replacing them with…nothing.  Young people are not engaging in religion as they once did.

This loss is measurable and steep.  Over the last five years the percentage of Americans expressing no religious preference rose from fifteen percent to nearly twenty, according to the piece, a gain of five percentage points on the overall demographic.  While you can point to forty years ago and see seven percent of American adults expressing no preference for religion, the drop over the last five years appears especially precipitous.

The report speculates that the reason both Protestants and Catholics became disenchanted with organized religion came when those religions took a right turn and became more active in conservative causes like opposition to homosexuality, gay marriage and abortion.

To back up this contention, the article quotes Phil Zuckerman, a professor of sociology and secular studies at Pitzer College in Southern California.  “The significant majority of the religiously unaffiliated tend to be left-leaning, tend to support the Democratic Party, support gay marriage and environmental causes,” he said.

Ok, I don’t want to get into politics and I dislike talking about religion much more than this so here’s my point.  Five years ago (2007) social media was embryonic.  LinkedIn launched in May of 2003, Facebook in February 2004 and Twitter in March 2006.  So, does the evolution of social media have anything to do with the decline in religiosity?  Consider that the biggest group of non-believers is “younger millennials,” people between 18 and 22 — the same people who led the social medial wave.  Fully one-third of this group checks off the “none of the above” box when it comes to religion.

So, did right leaning religion leave an opening in the hearts and minds of young people?  Did disaffected young people gravitate to social media to access the feeling of community once the exclusive province of religion?  I am not asking this to hurt anyone’s feelings.  Maybe I am making too much of this but that’s how my curious mind works.


At the recently completed CRM Evolution conference, sponsored by CRM Magazine in New York, Esteban Kolsky presented some of the results of our social media research.  We’d been working on it for most of the year and we were writing up the findings almost until Esteban gave the presentation.  It killed me not to be there but I had a client engagement.

The research was sponsored by Microsoft, Kana, Moxie, Dun and Bradstreet, Attensity and Salesforce.com.  And while we will be issuing a free white paper for general consumption soon, I thought it would be good to share our key findings, which will be part of the paper, as an early thank you to all of the people who used social media to drive the response rate up.  Using social to study social might not have been a first but it was certainly demonstrative of the benefits we were studying.  So, without further preamble, here are the key findings.

  1. It’s still an early market.  The majority of companies surveyed have some experience with social media primarily through the big name social media companies such as Facebook, Twitter, LinkedIn, corporate blogs and video sharing sites like YouTube.  This suggests that companies are just getting started; other data shows that reliance on these media is primarily outbound.  In other words, companies are using social as a low cost way to broadcast a message but not necessarily as a means of collecting customer input that can be turned into valuable information.
  2. Obstacles to adoption remain but they are largely not technical.  Executives “get it.”  The line of business people are less sure and younger people generally have more experience with social media and they get it too.  The sticking points are not IT related.  People say they have some concerns about legal issues, security and many haven’t figured out where in their organizations to first apply social media or which business processes to start with.  This shows there’s plenty of opportunity AND that vendor messaging has not cracked the nut yet.  It also shows a tremendous opportunity for vendors and providers to show the way to do social well, including lessons learned, best practices, frameworks, and methodologies.
  3. The usual suspects have the greatest adoption e.g. Twitter, Facebook, LinkedIn, plus the corporate blog and video.  Reliance on these media, which are primarily oriented toward outbound personal communication, is a good indicator of the level of sophistication for social media use.  While these channels are important they represent the last mile for social media use.  Other activities like capturing customer input lag and a strong case can be made that companies are building out their social strategies in a sequential process — from the customer in or from the data out.
  4. It should not be surprising that video and picture sharing are among the top social media.  Many organizations have not yet adopted video as a messaging tool in part because it can be expensive and it requires additional expertise that must either be hired or bought on a consulting basis.  But in this and other research, we have seen that organizations that have adopted video and sharing sites like YouTube and Vimeo are discovering strong ROI especially in the sales and marketing process.  Video sharing through links in social media is a natural fit and companies are eagerly adopting it.
  5. Marketing and service have more uses for social media than does sales, so far.  Customer service has more use cases for social media than the other two areas combined.  Sales adoption is clustered around the early parts of the funnel such as prospecting and providing information.  Marketers know that social is useful for capturing supplementary customer data and using it in nurturing programs.  Customer service uses social media in a variety of situations for improving first call resolution and providing correct information to customers. Overall, marketing’s use of social media appears to be more sophisticated than either sales or service as these two departments use social for outbound communication primarily.  Marketing is at least beginning to collect customer input for data collection.
  6. Social media has also made significant impacts inside the organization for communicating with and among employees.  Among its benefits are, better employee feedback, greater individual participation in problem solving and greater job satisfaction.  Although people see easier recruiting benefits, they do not see improvement in employee retention with social media.  Nonetheless, a company’s positive experience with employee give and take through social media will give some the confidence they need to use social media in novel ways with customers to capture more feedback — internal successes will easily lead to further adoption of the technologies and to seek external use cases.
  7. Content is king.  Ranking the three major social media for usefulness, Twitter is first followed by Facebook and then LinkedIn.  Interestingly, corporate blogs and product/service blogs are rated higher than the top three services indicating that people want specific content and they are not put off by content size or the time it might take to read or view it.  So the three popular social tools might help get the conversation started but successful companies will quickly discover that they need more content for follow up.  Our CRM Idol experience this year confirms this point: we are seeing a larger-than-normal number of vendors focused on content creation, tracking, and management.
  8. About 70% of those who completed the survey said they were involved in the purchase process and 27% said their job titles were in a range from SVP to C-level or board members.  We therefore feel that this report represents opinions of serious decision makers.
  9. We conducted this survey in Europe too.  But the results did not yield a sufficient response to be deemed quantitative.  This analysis focuses only on data collected from the primary, U.S. based survey and while there may be some responses from overseas in this data we are considering it the primary data and not loaded with a significant response from outside the U.S. or North American market.

Stay tuned for more.

 


This week Esteban Kolsky and I launched a research initiative aimed at better understanding how businesses across the world are adopting social media for their business processes.  There has been anecdotal evidence over the last five-plus years about social’s efficacy as a business tool and there have been about as many stories of companies that have failed to see any benefit.  We say enough of this, let’s get down to brass tacks!

By the way, do you know where brass tacks comes from?  You probably do.  In the 19th century people made most of their clothes for which they bought material from the general store.  Cloth came in bolts made up of a specific number of yards (some bolts are longer than others, even today) and the purchaser might order a few yards for a project.  Storekeepers got to be pretty good at estimating a length of cloth.  I would have been a natural at it because my wing span is six feet.  At least I could easily measure out even numbers of two or more yards but measuring three would present a small problem for me.

Every general store had a mark on the counter delimited by, guess what?  Brass tacks!  Measuring out a yard of cloth became nothing more than comparing a length of cloth to the reference on the counter.  This might also be where the idea of a benchmark comes from but I have no proof (but it would make a nice story, no?).

So our effort regarding social media follows an honorable and perhaps convoluted history.  My casual observation has been that small or emerging companies like Zapatos have been better at adopting socialized business processes than larger companies but then there are companies like Burberry’s and Toyota who have gone whole hog on the social enterprise vision of Marc Benioff.  So, enough with prognosticating, let’s get some answers.

Therefore, after all this time getting the dope on social media adoption might be something that should be of genuine interest to all of us — Esteban and me especially.  If this is something that interests you as well, then we have a small favor to ask.  Take the survey we’ve put together and tell us what you see and think.

The questions are easy in that they don’t require special effort or math skills, just tell us what you think.  There’s a prize at the end but you will need to answer the whole survey to discover it.  So please take our survey.  The future of western civilization does not hang in the balance, but your job might.  Just sayn’.


The Enterprise 2.0 conference comes to Boston next week.  I am working the event as the chair of the sales and marketing track, so consider this full disclosure.

The idea of E2.0 has long made me wonder about its place in the market versus CRM.  Is it a competitor or another way of saying much the same thing?  Or perhaps is it the anteroom to CRM?  Is it the thing that takes in and civilizes ideas before they hit the more mainstream CRM world?

My first experience with E2.0 a few years ago was that it was more social than Paul Greenberg or certainly CRM in general.  Every kind of social tool and vendor was there but significantly none of the vendors I saw thought of themselves as a CRM vendor.  They felt they were different.  But with the rapid uptake of social by CRM in the last few years, it will be interesting to see how much of that attitude still prevails or whether more mainstream CRM vendors have taken up the E2.0 idea.  Will major CRM companies have booths, for instance?

There is certainly good reason to think that the two ideas are moving together.  In my estimate E2.0 came out of the seminal work of the Cluetrain Manifesto whereas CRM was simply the brainchild of pragmatic software developers who wanted to make a buck rationalizing backward front office business processes.  And maybe that’s it — the intellectual inquiry into the future of business against a relentless effort to normalize and economize work in the front office.

Both needed to happen and it was a bigger job than a single industry could perform.  But is it time for them to come together?  It is clearly one of the greatest “your chocolate got into my peanut butter” moments in technology.  And more important, outside of CRM Magazine’s CRM Evolution show in August, there are precious few CRM shows outside of vendor conferences and hence few places to sample ideas not previously vetted by a vendor.

So in our track we will have sessions on business-to-business social marketing from Gerry Murray, Research Manager and Joe Ferrantino, Research Analyst both from IDC; a discussion of revenue from the marketing side by Phil Fernandez, CEO Marketo; plus a session on leveraging the social graph to attract and select new customers by Jerek Sygitowicz, CEO Smartupz; and a session on how virtual agents will revolutionize eCommerce from Pam Kostka, CMO of VirtuOz.

It looks interesting to me, but I picked the agenda so what do you expect I’d say?  Seriously though, the sessions are a bit heavy on marketing and its increasing reach and influence but that’s to be expected.  In a socialized world, where everything quickly reduces to communication and analyzing its output, marketing becomes the go-to idea center almost by default.  That also means that selling is an extension of marketing and service becomes a way to capture customer input and a true marketing opportunity.

There are nine tracks in all including one on unified communications, which I hope to attend in my spare time because I think it has a huge future.  For my money if you want to get an inkling of what to expect coming into the CRM suite or front office computing over the next few years you won’t do better than to take a look at Enterprise 2.0.

And no one paid me to write this.


A door closed this quarter and another opened.  We’re now oriented on a new computing paradigm that will serve us for the rest of the decade.  There is now broad agreement on the big IT issues of our time and they can be summarized in the Four Big Buzzwords mobile, social, big data (and analytics) and real time.

We’ve been bantering these words around individually and in groups but in Q2 2012 most vendors came to a tacit agreement that these would be the issues around which marketing campaigns would orbit for the intermediate future.  Since Oracle’s CEO Larry Ellison is the original proponent of decadal cadence I will use his company as the measure of the short timeline that brought us to this moment.

April 2009.  Oracle buys Sun Microsystems.  The purchase of a failing Sun was seen as a retrograde effort.  The conventional software company buys a conventional hardware company and many of us expected them to fade into the sunset together.  It didn’t go that way.

September 2009.  In an interview at the Churchill Club Ellison said that cloud computing was a bunch of hot air.  Less sincere words have rarely left his mouth as subsequent events would prove.  No matter that by then, Ellison disciple Marc Benioff had already built a billion dollar business offering nothing but cloud computing as a delivery mechanism.  The prior decade bred an entire industry devoted to cloud computing and multi-tenancy but no matter.  Ellison had the database that drove these cloud companies and not much else.  He also had a huge installed base dedicated to conventional on-premise computing, so he was a late arriver intent on making up ground.  The first step might have been this bit of indirection.

OpenWorld 2009.  Oracle announced a new strategy and line of hardware starting with Exadata a huge database server with monster truck-like capabilities for serving data and crunching it into submission ten times faster than conventional technologies.  Exadata was followed by Exalogic, a compute server and Exalytics an analytics appliance.  There were other things too.  Before long little boys playing in sandboxes had traded their toy trucks, backhoes and other construction paraphernalia for Exatoys and Oracle had announced its engineered systems strategy.  Ok, I made that up just to see if you are still with me.

2011 Anthony Lye plus Oracle’s checkbook proved to be a potent combination as Lye developed a vision of Fusion driven applications and business processes of tomorrow.  Lye bought five companies proving that while you might not be able to buy love you can certainly buy R&D.  By the end of 2011 Lye had purchased ATG (ecommerce), RightNow (customer experience, service and support) Endeca (ecommerce and business intelligence), FatWire (web content and web experience management) and Inquira (service knowledge management software).  The combination, when knitted together positions Oracle as a contender in the Four Big Buzzword Categories.

But it wasn’t just Oracle that was making moves.  As early as late 2010 Microsoft and then others began preaching a gospel of multi-tier ERP, a strategy that would keep existing ERP systems and their pricy maintenance contracts in place while providing much of the new functionality required by the Four Big Buzzwords through a second tier of ERP from up and coming players like NetSuite and Zuora.

The approach ended a potentially disruptive moment for ERP vendors and their customers who were beginning to contemplate rip and replace on a scale not seen since four digit date formats were all the rage.  But beware ERP vendors, you are being surrounded and at some point you will be made irrelevant by the increasing functionality of the second tier and at some point there will be a bloodless coup d’état.

So what happened this quarter is that one ERP vendor after another admitted defeat of a sort.  No one any longer pooh-poohs cloud computing (even Ellison) or questions the validity of social technologies in business.  It’s all SOP today in what some are calling the post-digital era.  Post-digital doesn’t mean we’re beyond it, simply that it’s established fact and beyond debate just like evolution, global warming and a round earth are in most precincts today.  Yes, there are laggards who haven’t bought into the message yet but increasingly they are to be pitied, not argued with.

So, as they say in the reality shows, Who’s safe? And Who’s going home right now?

Well, as it happens very few need to go home provided they’re cloud oriented all ready and that they’re at least making noises about the other three Big Buzzwords.  Companies entering the market with anything that enhances the two-tier strategy will be welcome and some, like NetSuite, which has announced a defacto three-tier strategy should do fine.

In the years ahead look for the following ideas to gain primacy in business and enterprise computing as the post-digital era gains momentum.

Increasing use of the Four Big Buzzwords.  This will show up most obviously in mobility technologies but they will be supported by increasing use of centralized analytics crunching big data derived from social media.

Social will continue to be a big draw, not so much for what we know of social right now but for advances such as gamification that will become key drivers.

Multiple-tier solutions will continue to blur the distinction between on-premise, cloud and single vs. multi-tenant.

We will need to turn our attention to the internet of things later in the decade as machines increasingly talk to machines a la buy more milk, eggs and bread.

The key battleground will become platform and development tools.  Increasingly, the goal in business is to project agility through the capacity to change with customer demand.  Tools will be important but platform will be key.  Platform increasingly is the place where security, social, mobile and all the other Big Buzzwords have to be built in.  You can’t add any of them on after the fact.

Platform therefore is key and positions companies like Oracle (Fusion) and Salesforce (Force.com, Heroku, Sites.com, Database.com), NetSuite and others in the catbird seat.  Vendors with older platforms rejiggered for the cloud may not fare as well.

So there it is.  They’ve figured out what to do about cloud, as inelegant as it might seem, they’ve embraced the big Four Buzzwords and for the next several years, provided the economy holds up, we’ll see renewed competition as different vendors compete on slightly different permutations of a similar story.  We can already see Salesforce focusing on the social enterprise, Oracle the customer experience, NetSuite commerce, Microsoft catering to its large installed base with cloud versions of the things it used to sell in boxes.

SAP will do something but it’s still hard for me to figure out what.  They’re working with NetSuite according to Zach Nelson, CEO of NetSuite and Business by Design appears to be catching fire.  Never a strong marketing presence they need to get an elevator pitch for a small building.

Later in this cycle we’ll begin talking about video and voice embedded in the front office suite.  They’re about where social technologies were in 2006 and moving toward the center.


With the Facebook IPO just around the corner some people have started wondering if a “Facebook killer” might be lurking in the bushes and the new photo sharing website Pinterest has become the new darling.  Well, maybe.

I got a message from an industry watcher today, Kenneth Wisnefski, social media expert and founder / CEO of WebiMax, that said Pinterest was up and coming and a threat to Facebook’s IPO, but I disagree.  Here are some bullets from the email and my thoughts.

  • I expect Facebook’s stock price will soar in the beginning of the trading session, however once investors look closely at their fundamentals they will realize that Facebook really lacks a solid revenue stream (90% of revenue stems from advertising).
  • Facebook’s dependency on advertising revenue in addition to their vulnerability from smaller social media firms, like Pinterest, decreases my confidence in their long-term sustainable growth that we once expected.
  • Pinterest’s ease of use makes it more attractive to small businesses and we have already seen small business marketers shift toward using Pinterest and divert away from Facebook.  If this is sustained, consumers may gravitate toward Pinterest versus Facebook.

Well, then, here’s what I think.

  1. Advertising is not necessarily a bad business model.  It’s done good things for the likes of Google but as more companies enter the space and become good at the model, the demand for ads will prove to be less elastic than the supply and we will see tightening in the market and a decrease in profitability for the model.  Nonetheless, Facebook is early to the party and I believe their SEC filings make the point that they want to diversify so calling the business model a liability at this point is overblown.
  2. “Vulnerability from smaller social media firms”?  This sounds like somebody is trying to repeal the law of gravity.  It doesn’t work this way.  Certainly markets are open to disruption and certainly small companies disrupt bigger ones.  But for disruption to occur the disrupter has to demonstrate superior attributes in a market slightly adjacent to the disruptee.  Salesforce disrupted Siebel not in CRM but in the delivery mechanism.  I don’t see a sustainable difference between Pinterest and Facebook, especially since Facebook bought Instagram.  I think Pinterest will be a niche player in photo sharing.
  3. Pinterest might have the ease of use thing down simply because there is less of it than there is of Facebook.  When Salesforce started out with just four tabs they claimed ease of use and simplicity.  But that doesn’t say anything about the richness of the product or the experience.
  4. There is also the issue of switching costs which most people take into account when they consider going with a rival.  Facebook is a network and according to Metcalf’s law, networks are valuable because they have lots of connections.  A new network by definition has fewer connections than an established one, which makes switching more problematic.  Switching here gets you less not more and for the vast majority, Facebook’s network is a walled garden.

As I look at Pinterest I see a consumer site for sharing photos whereas Facebook has developed from those roots to a budding platform for doing real business and for hosting applications.  This platform is what enables Facebook to look toward other revenue forms and what makes it a better business solution.  So while Pinterest might very well be better than Facebook in some ways, to say it is superior or that it is a disrupter is to overstate the case.  It is a mistake to think that better technology wins the day.

Time after time we see that the company in first and with greater marketing resources is the winner.  If you doubt this, check out “The 22 Immutable Laws of Marketing” by Trout and Reiss.  It was published in 1994 and while it shows some wear and tear, it still gets this idea right.


Well, this is interesting.  On the very day that CRM Idol launches its second season, last year’s winner is launching a passel of new products.  It’s just coincidence, you can’t plan something like this.

The new Get Satisfaction widgets are interesting for many reasons.  First, they’re widgets, little bits of applications designed to be embedded in a company’s web outreach to its customers.  They are not websites that link to your web properties, just things that make your existing properties better for your customers.

As Wendy Lea, CEO, Get Satisfaction said, “For the first time, companies now can blend social conversations anywhere on their website instead of relegating social to separate ‘destination channels’ such as Facebook or forums.”  I agree, I think this idea has legs.

So what do these widgets do?  All kinds of things.  I count ten capabilities including self-service, social marketing, e-commerce and product development.  In other words, something for everyone with the focus on leveraging the community to crowd source great ideas.

To me, this is the promise of social media in business.  It provides the ability to have social conversations without necessarily getting off topic and discussing weekend plans.  And unlike other products that have an in-house collaboration slant, this solution set is all about giving customers access to processes that are increasingly collaborative but which not too long ago were closely held by the vendor.  So, good luck to Get Satisfaction on the new products.

What a difference a year makes!


CRM vendors that have wondered about the necessity of porting their applications to the small screen (i.e. mobile) should take note of last week’s acquisition of Instagram by Facebook.

Instagram is the tip of a big iceberg and is perhaps a signal of yet another disruption in a disruption prone industry.  It represents a big trend by emerging companies to build their applications first for the handheld device market and later for larger environments like laptops and conventional desktops.  Remember when the laptop was a “small” device?

Mobile device uptake is driving demand for applications more suited to business like a flock of Angry Birds.  And vendors that build first for the small platform find there are advantages to this.

I think this provides an interesting correlation with early PC era when mini-computer software companies moved their products to PCs.  The ports were largely successful but they made the PC run like a mini-computer.  But when we all saw the kinds of applications, the performance and the intuitiveness of PC native applications we all knew that ported solutions were merely a weigh station.  I think the same thing is happening with the new generation of small and very powerful devices.

According to a story in the New York Times, http://nyti.ms/HH4e7u it’s not only the companies themselves that are ushering in this phenomenon but venture capital firms are also fanning the flames.

As a technology decision, going small makes perfect sense.  Small means small in most conceivable ways.  So why architect an app for a larger computer when you know you will be reducing its footprint when you attempt to cram it onto pocket devices?  In many cases apps that are hits on the handheld will transition to the larger formats of more traditional devices and they can easily grow in the transition once the developers have a clearer understanding of customer likes.

Of course, a growing percentage of device centric applications have no real analog on larger devices.  For instance, Foursquare, an app that enables people to let their social followers know where they are and what they are doing, absolutely requires a mobile device to give it context.  Foursquare for the desktop would barely make sense and have to be re-imagined.

So a billion dollars for Instagram not only highlights the importance of mobile devices but it reveals many new niches.  For example, the already mentioned venture capitalists already have another technology area to analyze and invest in.  And device makers have greater incentive to be first to offer specific applications running on their infrastructures.  Where it was once enough to offer internet access for first generation social networks like Twitter and Facebook, device vendors now need to ensure that these third party apps look completely at home on their platforms.

But there’s more.  Tool vendors who offer cheap, fast ways to develop, deploy and ultimately port applications from device to device become essential to this play.  That means, the VC’s will quickly need to zero in on the infrastructure that supports device app building.

And what does this mean for CRM?  A year or two ago vendors realized they needed to scramble to get their applications running well on portable devices because users were demanding it.  The mobile sales person is ditching the laptop or at least leaving it at the hotel and managing the day to day with a smartphone or tablet.  The better networks and more affordable communications plans, longer battery life (compared to most laptops) open new application areas too.

I am told that one of the favorite tablet applications on the iPad for pharmaceutical sales people is YouTube.  That’s right, because instead of trying to ramble through a 30 second pitch, the rep simply asks permission to show a short video.  Video packs more information and holds attention.  It’s also more passive for the viewer so it has a future in CRM and thus so do smart and inexpensive devices.

The only yellow flag I see is the monetization issue.  How do you make money at this?  With many applications available for free and most costing under five bucks, it’s hard, if you are a VC, to see how these emerging vendors might become the billion dollar success stories of the next decade.  Facebook can only buy so many companies.

Finally, for a long time we’ve been attributing the success of Arab Spring and Occupy Wall Street to social media.  And while there is no doubt that social was a big component of the success, we’ve overlooked mobile devices, which are inseparable.  Increasingly, as social media spreads around the world, it is being driven by the affordability of mobile technology.  Mobile might be just another form of computing we all use, but for a growing segment of the global population, it is the computer.

In a world of Big Data, you don’t need to fret about CRM going away.  The back end becomes more, not less, important as analytics surges.  Big Data is surging too because social networks and by extension the mobile devices that inhabit them are generating the avalanche of data that must be processed.

And here we can see the most efficient model taking shape.  The mobile device is rather dumb compared to the big CRM system, but it is a vital link.  It sends data to the mother ship and expects information back fast so that the user can leverage the knowledge it contains and drive faster decisions.  Time to invest in faster networks.


Thanks for the overwhelming response to last week’s post, “Why CRM Works.”  It was surprising and gratifying that so many people read and tweeted about it given its length — almost double my usual contribution.  Since it was based on Daniel Kahneman’s groundbreaking work, I give all the credit to him and his great career in trying to understand how we think.

One comment came in that I thought would make a good jumping off point for this week.  Barry Dalton wrote:

“I’m confused as to how the Sales VP involvement metric is a System 1 decision point. If it is based on quantifiable evidence, derived through an analytical method, wouldn’t that be a system 2 decision? Or, is it the fact that, once the analytics proves the assumption to be true, it no longer requires analysis at each decision point, so therefore moves from system 2 to system 1 because you’re now accepting it as fact without additional analysis?”

Dalton answered his own question in his second interpretation.  Once the thinking has already occurred, the result is a real metric that with use becomes a KPI or key performance indicator.  In my response to him I said that the great thing about KPIs is that they cross over from System 2 into System 1 land.  Everyone doesn’t have to do the same thinking and re-discovery, they only need to use the KPI as a valid new measure.

The best analogy I can come up with for KPIs like this is of an enzyme, a biological catalyst that makes reactions happen faster or require less energy than the reaction would require under un-catalyzed conditions.  Ultimately that’s what we all want — ways to do the right thing without having to cogitate over it incessantly.

System 1 and System 2 are really just the beginning of the story though and the value of understanding Kahneman’s work is that it helps us identify when we might be slipping into System 1 thinking even when our limited System 1’s might be out of their depth.  According to Kahneman, System 2 is powerful but “lazy” in that our brains would prefer to rely on a more or less automatic System 1 response than engage System 2.

You can see this in real life.  System 1 is rarely stumped for an answer and often when confronted by a System 2 problem we might simply opt to change the subject.  So, for instance, you might find yourself or someone you are speaking with answering the question they wish they’d been asked rather than the one they don’t have an adequate answer for.  This happens all the time.  No wonder we can sometimes seem to be talking at cross-purposes!

There is a practical CRM application here too and I’ve been waiting for weeks to set it up.  So much of conventional sales and marketing is mired in System 1 activity.  Customers have short attention spans and we have relatively small windows to try to get a new idea (our products and services) into them.  If an idea seems the least bit foreign there is a good chance it will be rejected by System 1.

The solution is to attempt to reach a customer’s System 2 thinking apparatus.  That’s what we do in a conventional sales process in which a sales person builds up credibility and trust with a customer so that he or she can educate the customer through System 2.  It’s often said in sales that people make logical decisions (System 2) for emotional reasons (System 1) and this is my interpretation of how and why.

But how do you achieve this today?  Companies trying to cut costs put products into other channels, for example or they develop freemium models that enable customers to educate themselves.  Unfortunately, the revenue potential of a freemium is often bupkus.  That’s where social media is so valuable.

If we believe the research, then people have greater trust in “someone like me” when it comes to understanding a product or service.  Social networks and communities are places where people feel secure enough to expose the System 2 side of their thinking and to receive other people’s ideas.  And that’s why social media is so important to the future of business.  If you can use social techniques to reach System 2 you can catalyze your business processes.  But there’s a cost associated with this.

The new role of the enterprise is to ensure that in its social space people are respected for their ideas and that only truth is allowed to be broadcast.  That’s also why potentially embarrassing or negative information about the vendor is allowed to circulate.  Nobody’s perfect and trying to suppress truth is how to engender dis-trust.

This is all very interesting to me and another question worth exploring is how social media can really succeed inside the enterprise.  Consider this: if social media has the potential to make us work or work harder and our brains love to be in System 1 mode, how do we use social constructs to get people to willingly engage their System 2’s inside the enterprise?

That’s not an idle question as many organizations are attempting to cross a chasm right now from old style thinking (and business) to become new and modern social enterprises.  Let’s tackle that one next time.


I have great admiration for the work of Daniel Kahneman.  He’s an Israeli psychologist whose work with the late Amos Tversky won the Nobel Prize in Economics in 2002 even though neither was obviously an economist.  The pair built the foundation for behavioral economics and did early work on framing, or how we perceive issues based on what other information surrounds them.

Kahneman’s work — the part I am most fascinated with — focuses on how we think and his new book Thinking Fast and Slow summarizes his work and that of others in the field and it has significant implications for our daily lives as well as many applications within CRM.

Kahneman postulates two systems, or ways of thinking, which he calls System 1 and System 2.  The systems are really metaphors for how the brain works — they don’t show up on an MRI.  System 1 supports thinking quickly, reflexively and in the moment.  It is the snap judgment or gut instinct that evolved to keep us safe from hungry lions and we rely on it still.  System 2 is what many people would call “real” thinking.  It supports the number crunching we do to get quantitative answers, and other deliberate work we do whether or not it involves algebra.

Both systems likely evolved on the savannah.  When confronted by a predator System 1 was most responsible for fleeing the scene.  System 2 would have been more useful for an individual trying to find the best place to cross a river — not too deep and no crocodiles, please.  You get the idea.

Kahneman shows through experimentation how the systems work and how we may prefer to let System 1 do the heavy lifting even when it is out of its depth because System 2 involves real work and the brain would rather not engage.  Here’s an example.  A bat and a ball cost $1.10 as a set.  Individually the bat costs $1 more than the ball, what does each cost?

According to Kahneman for most people System 1 springs into action concluding that the bat costs $1 and the ball $0.10.  Did you get this answer?  It happens to be wrong because $1 is only ninety cents more than ten cents.  If the ball costs ten cents then the bat would have to cost $1.10 which would make the set $1.20 not $1.10.  If you do a little algebra you discover that the bat costs $1.05 and the ball can be bought for a nickel thus conforming to both conditions.

For many situations the difference between an answer of ninety cents and $1.05 is a difference without a distinction.  But a willingness to accept the wrong answer tells a lot about our brains and CRM use too and the propensity some of us still have to blow off CRM as too much work.  How many times have you heard this regarding SFA, “It doesn’t do me any good.  It’s just extra work because I’m just collecting data for my boss.”?

I hear it often.  In fact some emerging companies use this as a reason that their products are superior to what’s on the market right now.  Their products are easier to use, less invasive they say.  But forecasting results tell a very different story.  These new vendors claim to be better because they, in effect, don’t ask the user to think and in the process they perpetuate wrong answers.  Thus the road to CRM enlightenment is pockmarked with potholes of ignorance.

Part of each one of us prefers the ignorance of the wrong answer because System 1 took care of it and we didn’t have to engage System 2.  The ninety-cent answer gets us close enough — that is until we go to the store and discover that we don’t have enough money.

For a long time there’s been anecdotal information about CRM’s benefits, which has been unconvincing to at least some people.  A diminishing number of System 1 types assume it’s too much work while others might see it as the path of least resistance — two valid System 1 responses.  At the same time though, some System 2 types think there isn’t enough proof and want clear ROI numbers, which are hard to get.  Actually the System 2 types are really just engaging System 1 by expecting someone else to do the work.  It can get complicated.

The advent of analytics as a part of the CRM suite was supposed to shed new light on CRM’s efficacy and some clear information is now coming to the fore.  Last week I spoke with Swayne Hill a founder of Cloud9 Analytics and the SVP, Global Field Operations.  He’s started blogging about his experience using analytics in selling and the findings are very interesting.

From his writings I can say that one of the knocks against CRM is valid, it is used to capture data for future analysis, but for a long time that analysis was performed by many managers operating in System 1 mode.  They took the forecast and added their gut feel for the data often promoting some deals and de-emphasizing others.  Despite this effort though, our data suggests that most sales forecasts are profoundly unreliable.

To take a System 2 approach with a sales forecast almost demands analytics because there is simply too much data for a human brain to crunch in a timely way.  So using his own analytics including a new forecasting tool, Hill began analyzing his company’s performance.  He freely admits in one post that the company missed its forecast a couple of months running which got him and his peers very interested in figuring out why.  Indeed, a company that specializes in sales forecasting has to both eat its own dog food and benefit from it.

In short order Hill discovered that his sales reps were three times more likely to win a deal when the VP of sales for the prospect was involved in the decision.  That sounds like a no-brainer but it isn’t.  Lots of large organizations have sales operations groups and often they can make the purchase decision for a product like this, especially if it can be shown to save money (that’s the emphasis in operations).  That’s basically a System 1 decision.

But it’s the sales VPs who can drive a decision if they think it really will boost sales.  So while the operations side of the house might not buy if the ROI isn’t great enough, the VP of sales might be more willing to make the purchase if a vendor can show a modest performance improvement over time and that is a System 2 decision.

Hill’s discovery led to a metric, a sales milestone that is now built into the Cloud9 internal sales process.  If for some reason a deal gets to forecast stage without the customer’s sales VP being involved the forecast it is marked down for that reason.  So ironically, and very interestingly, this new milestone has become a System 1 decision point.

Hill’s blog is full of observations like this and I think he’s right to focus on ensuring data collection in sales.  I think every sales organization can go through an exercise like Cloud9 and come out the other end with valuable new insights into how and why it is successful.  But that analysis is a System 2 activity that will ultimately drive System 1 activity.  We need to challenge ourselves to not take the easy route of what’s been done before, to fully engage our minds.

Finally — and I know I’ve said this before — as important as data is, it is useless without analytics to turn it into real information.  Hill had plenty of data about the importance of the VP of sales but sitting in the database it was diffuse and useless.  When it was organized by analytics it became information, which was, in turn, converted into knowledge that future System 1 types can leverage.

CRM works and it is worth doing because it gives us the tools to engage in System 2 work to make ourselves more productive.  If we’re simply relying on data capture and System 1 cogitation, our results will be mediocre.  But there’s nothing wrong with using a System 1 shortcut once you know it’s based on knowledge.

Systems 1 and 2 play into social CRM strategies as well and I will be writing more on the subject soon.