This is the second in our series of blogs focused on the era of the collaborative enterprise that businesses are stepping into.

The eras of the productive employee and productive enterprise were inherently both very inward looking. This made sense given that:

  • the technology required for external collaborative engagement with consumers had either not been invented or was in its infancy
  • there was clear line of sight ROI that could be driven by attacking the lowest hanging fruit first – i.e. improving average employee efficiency, and overall organizational efficiency

In 2016 the ability to interact directly with consumers is greater than it has ever been, and it’s no longer enough to simply improve profit margins by driving internal efficiencies. In this post we will look at the emergence of omni-channel and how it has impacted the ways in a which a company can interact with the consumers of its products and services. In the next post on this topic we will examine the larger macro-trends that are driving the shift towards focusing on top-line growth.

Improved ability to interact with external constituents:

Interaction with consumers usually occurs in the context of three business functions – marketing, sales and customer service. The most obvious change that has occurred since the dawn of the Internet is the increase in the number of communication and collaboration channels available for each of these business functions. Lets take a look at marketing, sales, and customer service respectively, and see the impact of “omni-channel” communication and collaboration on each of these functions.

Marketing: Until very recently marketing was largely analog and outbound. Even the term inbound marketing was not coined until 2005. Fast forward to 2016 and marketing’s focus is almost entirely digital, and increasingly inbound. Below is a snapshot of how marketing channels have evolved and continue to evolve.

Marketing Channels v01 MA 6Jan2015The technologies that were required to supercharge inbound digital marketing – SEO, blogs, and social media platforms – came into their own in the 2000’s. Beyond providing marketing an outlet to build brand awareness and loyalty, blogs and social media have combined to enable collaboration between brands and consumers, ultimately giving consumers a much more immediate and larger say in shaping a business’ products and services. In parallel, outbound marketing technology is also improving significantly. Outbound marketing efforts are moving past simple demographic targeting to hyper-targeting consumers based on their personal preferences and geo-location.

Sales:  Even though e-commerce sales average less than 10% of total US retail sales, the direction of the trend is unmistakable. As seen from the table below, the sales channels available to companies have increased significantly, and will continue to increase.

Sales Channels v01 MA 6Jan2015With the increased adoption of mobile and social commerce the trend in favor or digital commerce will continue to garner pace. Additionally, the technology available to traditional sales channels, such as door-to-door salesman and in-store sales representatives, is improving leaps and bounds. As we look into the future, with the emergence of big data, wearable technology, augmented reality, and the Internet-of-things (IoT) the line between online and offline sales will begin to merge, and truly become omni-channel. It’s only a matter of time before who you are is determined the minute you walk into a store, your general purchase preferences are almost instantaneously established, and your entire sales experience is customized.

Customer Service: It wasn’t very long ago that customer service was primarily inbound, primarily agent-assisted, and primarily voice. With the emergence of the web some of this started to change – support become primarily self-directed, and became much more text and multi-media driven. Below is a snapshot of the evolution of customer service channels:

Customer Service Channels v01 MA 6Jan2015In customer support, perhaps more than even in marketing and sales, we see a third even more revolutionary change in the works. This change is being triggered by the emergence of big-data technologies and the IoT. It won’t be long before a problem with your smart Whirlpool appliance is detected and fixed by Whirlpool before symptoms begin to manifest. This will make customer service entirely transparent and seamless, in other words a marketers dream.In this new world customer service will be primarily outbound, and increasingly automated. I call this IoT enabled-CX, the basic principles of which are explained well in this HBR article.

All in all the omni-channel world that we are now in opens up the door to consumer engagement and revenue enablement in ever increasing and innovative ways.

 

Over the past 3 decades business related information technology has experienced three key era’s of growth. While the first two era’s are somewhat related, in that they both focused on productivity gains, the third era is quite a bit different.

Evolution of the Enterprise v02 MA 22Dec2015Below are what I consider the 5 key differentiator’s between the era of “the collaborative enterprise”, and the eras of “the productive employee” and “the productive enterprise”:

  • Focus on B2C vs. B2B: Social and mobile have an impact on both B2B and B2C, however arguably the greater impact is on how organizations engage with external constituents (i.e., customers or citizens) vs. internal constituents (i.e., partners or employees).
  • The agile enterprise: Build. Measure. Learn. When you are building a product for the consumer, its best to build lean and iterate vs. to build bulky and pray.
  • Centrality of UX: If you cannot impress a consumer in the first 30-60 seconds of interaction with a new mobile app, then you might have lost them forever. In this new world, UX is king.
  • Decentralized creativity: Ideas for new and interesting products and services, and suggestions for improvement, can come from internal or external constituents, not just top level management.
  • Driving top line growth: The primary focus of enhancing personal or organization productivity is cost minimization. While effective customer engagement can no doubt reduce cost, its biggest pull lies in driving new revenue.

Each of the above differences warrants a deeper look, and we will do so in future blog posts, but the bottom line is this – the productivity-related eras are giving way to a much more collaborative era.

After spending the best part of the last few years talking to companies of various shapes and sizes about their hiring preferences, I developed a simple framework to help answer the question “when do I hire full time developers internally vs. outsourcing development?”

Outsourcing Framework

Tech company building a core product:  If you are an tech company building what you consider to be a core product or service, then you should absolutely look at putting together an internal team, since chances are you will need to iterate rapidly, produce bug-fixes, provide customer support etc related to the product or service. Doing all of this in an outsourced, but yet effective manner becomes cost-prohibitive if the product in question is your companies core product. Perhaps even more critically, if your company is not building product, what exactly is it doing?

Tech or non-tech company building a non-core product: If you are a tech, or a non-tech company, building a non-core product, then you first preference should always be to outsource. This is for two reasons:

  • A company that specializes in building what you consider “non-core”, is more likely going to be better at it than anyone you hire internally
  • Even if you can hire the best, you will need a consistent and interesting enough pipeline of work to keep the best engaged – remember, very rarely do the best at anything make a decision purely based on the money offered to them

Non-tech company building a core product: This is the most interesting combination, and one that companies are increasingly finding difficult to answer. Why is this? This is because as more and more legacy companies start to build digital products and services, they are increasingly looking to transform themselves into tech-companies. However even if a legacy company considers itself a tech company, it should really think hard about whether the digital product it is building is truly core. Lets try and explain this via two (somewhat) hypothetical examples below:

  • NCR Corporation building a competitor to Square Wallet: Here both NCR and Square are in the business of retail checkouts. If Square starts offering a service via. Square Wallet that offers a significantly superior retail checkout experience, than NCR, then all else being equal Square will out-muscle NCR, and win the retail check-out and digital wallet war. In this scenario NCR’s existence depends on building check-out related products and services that match that of Square’s, and like their digitally native competition, do rapid and continuous product development, which generally requires an internal team.
  • American Airlines building the most elegant check-in application in industry: Lets assume American Airline’s mobile check-in app is so far superior to its competitors, that its starts winning awards at UX and industry conferences, and gets rave reviews from its customer base. Additionally check-in’s are a part of any airlines core business process, so it can be considered a core part of an end-user facing service that American Airlines provides. However, the truth is regardless of how elegant and simple to use the app is, the check-in process is only a part of the overall customer experience (CX) that American Airlines provides to its customers, and in isolation, will in all-likelihood not make a significant difference to a customers decision to fly American vs. United.

In summary, unless you are an tech company building your core product, outsourcing development should always be a serious option on the table.

Note: We realize this framework does not take into account supply and demand imbalances that a company might be operating under. Today macro factors in the technology space, have led to a clear imbalance in favor of supply, and hence even if it makes sense for a company to hire full-time, that choice might not represent a realistic option.

I am reposting this from my post at http://blog.neulantis.com/?p=36

In talking to a lot of startup focussed developers recently I hear the words “domain expert” and “idea guy” used almost interchangeably. There is enough confusion on the subject that I feel compelled to write a small piece on the difference between the two, particularly given that over the past decade I have been both – a domain expert, and an idea guy, and to me the difference is stark.

When I was the “idea guy”: During b-school, surprise, surprise🙂, I was in a class called “Launching New Ventures”, and I began researching the topic of using algae to create bio-fuels. A few weeks into it I was convinced that I knew the magic formula to take an idea, that at the time of my research was clearly not commercially viable, and create a commercially viable venture out of it. Now keep in mind this is a problem that some very smart people from the US DOE have been grappling with for at least a few decades, but here I was, a 29 year old b-school guy with nothing more than some superficial understanding of the subject matter and a business plan, trying to change the world. From a sophisticated investor perspective, this was a clear non-starter for various reasons, but most critically because it failed the founder-market fit test.

When I was the “domain expert”: While at Accenture I was thrown into the fire of taking over the CTI (Computer Telephony Integration) capabilities of the then nascent NYC 3-1-1 service. We had just launched, and 3-1-1 was still a few years away from becoming the de-facto city service for everything non-emergency related. Now in order to design, develop and manage NYC’s CTI capabilities, I had no choice but to gain a very deep understanding of everything ranging from network latency, to trunking, to automated call distribution systems, to the intricacies of CRM (Customer Relationship Management) application adapters and how all of these things behaved under heavy performance load, various exception scenarios etc. Can a developer working on building an enterprise-grade SaaS based contact center idea leveraging the Twilio API figure all of this out? I am sure they can, anyone intelligent and motivated enough can, but keep in mind there is an opportunity cost involved – someone has to pay for that learning curve, and a venture with very limited resources can rarely afford to do this.

In short, while it is possible for a developer, designer or even a smart b-school type idea guy to become a domain expert, it takes time, its not an overnight process – just as its not an overnight process to become a top notch Ruby or Java developer, or an expert UI designer. I think it is critical for us to stretch our capabilities by learning each others skillets more, as it will only make for a stronger, more well balanced team, and increase our chance of success. I also think it is equally important for us to respect what each of us brings to the table, and not devalue real expertise and the effort required to gain it.

As an enterprise focussed technology consultant, you generally wait until you have something close to the “perfect” product with all the bells and whistles a v1.0  is expected to have prior to launching the product into a production environment. Truth be told there are some big differences between an enterprise product and the soft launch of a new Internet based product or service, not the least of which includes concerns around security and performance. The truth is, given that you are launching a product into an environment that has a concrete business need for it, there could be some significant negative business impact if the product fails to behave as expected. In the Internet startup space however, other than some market validation and A/B testing that you might have done, you don’t even know if anyone cares about your product. Chances are on day 1 other than your core team and a few early supporters nobody does. Hence its critical for you to get the product out as quickly as possible, and begin getting some real world engagement and quality feedback. This step is countless times more important at this stage of the venture, than building out the new cute widget that you think your product needs.

On July 16th we launched our product and invited a handful of users to begin using the product. Boy, are we glad that we made that decision. Waiting a few more weeks, and building out a few more features might have helped a bit, but would probably have hurt us more. Lets provide some concrete insight into what I mean by this. Our product, Neulantis, currently is being built with the objective of enabling designers, developers and domain experts to incubate their ideas on the platform, and to help them find a team to kick start their vision. All version 1.0 of the product had to enable this was:

  • the ability to create a profile
  • the ability to initiate a project and add required skills
  • the ability to provide project updates
  • the ability to follow or join a project

Some of the key features that were not included in version 1.0 included:

  • the ability to communicate with other users either through a messaging system or through a discussion forum on the platform
  • the ability for updates to be broadcast to project followers and team members

Now, while some might consider this to be a broken product, particularly with the inability to initiate conversations with others on the platform or go back and forth with project initiators, we believe that the core functionality required to convey the idea to people and begin true market validation was already there. Up to this point we had no concrete way of knowing if people even cared to post their ideas on the platform, however following the release when people began posting their project ideas we knew that this could work. This was the ultimate purpose of R1.0, to test our most basic assumptions – that people would be willing to post their project ideas, and other were willing to join or follow these projects.

On the same token, some will argue that we could theoretically have tested this assumption with surveys, basic mockups and splash pages, but the truth is at that point people are still not using the product, and from our perspective the sweet spot to truly test your most basic product assumptions lies somewhere between a splash page, and a fully functioning robust product. You need people using the product in some concrete way before your assumptions can be really validated. Further without an actual product, it very difficult for people to provide any quality feedback, and at this stage of the venture engaging your early user base, and providing them a sense of ownership is as critical as having them take the first step of registering on the platform. Since we launched our product, almost our entire development process has been guided by early user feedback, and hypothesis validation vs. master planning, and the product is better off because of this.

When starting a business in the physical world, it is easy to grasp the criticality of “product first”. Wether someone is creating a new type of vacuum cleaner, garden hose or starting a restaurant with a specific cuisine in mind, people start of with a very specific product that meets some very specific unmet need in the market. However when the same logic is applied to products in the digital world, the response that you immediately get from a lot of people, particularly those inexperienced with launching a product in the digital world is: “hmmn, thats it? thats all the product will do? but you can do so much more, there are so many more bells and whistles that you can plug into the product”. The problem is compounded further when someone like myself, trained as a consultant that implements very large complex systems for very large companies, try’s to launch his or her first product. Invariably we always start with a grand world changing vision, and a complimentary product that does quite a lot from day one.

I remember when I first heard about a product that enabled people to easily unsubscribe from unwanted mailing lists that they may have signed up to consciously or unconsciously eons ago. My gut reaction to the product was that “its so basic, its not world changing, I can probably create a crude version of this product if I locked myself up in a room for a week”.

Product development in the digital space is so counter-intuitive that even an intelligent, experienced professional like myself was missing a key premise in my analysis. To create a great company, one has to start not with creating some average product with a million bells and whistles, but one product, perhaps even something that looks nothing more than a feature in the context of a larger more complex product, that does something better than anything else out there. This premise holds true wether it be Levi’s using copper rivets to to reinforces points of strain on a pant, or Google creating the page rank system. Great companies and great brands, generally start with one product that is exceptionally better than anything else in the marketplace, make themselves relevant, and then begin to expand their product suite. Hence, something that starts of as a very simple but exceptionally executed un-subscription product, and helps solves a major annoyance faced by consumers and business users alike, could be the first step towards a product that ultimately helps reduce all kinds of clutter, digital or physical, in peoples lives. So next time you see a product that looks like a feature, don’t assume that founder is not a visionary that can’t think big, but perhaps simply a more experienced entrepreneur than you.

(PS: A product in this context does not simply refer to a manufactured entity, it also equally well refers to a service being offered. Google search, Facebook social networking, consulting provided by McKinsey, or an exotic derivative created by Goldman Sachs are all services, but in each of these cases the service being offered is the companies product).

When I left consulting to focus on my venture full time, I figured that a lot of what I learnt as a consultant would be easily transferable to my life as an entrepreneur. While this is to some extent true, boy am I surprised by the amount of unlearning that I have had to do! Three things stand out when I look back at the key lessons learned:

1) Focus on getting the product out, vs. the perfect product out: In consulting, the focus is on getting as close to a perfect product out as you can the first time up. Running experiments, creating an MVP, and iterating (though it might actually make sense even in a consulting engagement, a separate post on this later!) is not done often enough. They are really not part of a consultant lexicon. The focus as a consultant is on producing the best possible client deliverable – which may be a powerpoint deck, a study, or a CRM system. While this pursuit of perfection is in itself a must have from the perspective of an entrepreneur, the focus in the early days needs to be on validating assumptions as fast as possible, and if that means putting together a quick and dirty prototype, or an A/B test that falls somewhat short of your perfect standards, then so be it.

2) Learning to embrace uncertainty, vs. attempting to eliminate uncertainty: By definition a venture involves a huge amount of uncertainty. Trying to mitigate every risk imaginable when working on a venture is akin to trying to mitigate every risk involved in making a movie. The best you can do is validate your biggest assumptions quickly, put together a great team, trust the team, and execute to the best of your abilities. Beyond that you simply have to acknowledge that starting a venture is risky business, and while you can get better as an entrepreneur with time, even the best entrepreneurs are not immune to failure. If this is not something that you can handle, then perhaps you should reconsider the entrepreneurial path.

3) Don’t be a consultant for too long: A lot of the most essential skills you need to be an entrepreneur you can learn very quickly – in the first 2-4 years of being a consultant. These skills include everything from effective time management, to presentation skills, to relationship development skills. In fact these are skills that you probably already have to have made into a top tier consulting firm, all you do as a consultant is put them to use consciously every day and make it second nature. However having done that you reach a point of diminishing returns, and every additional day you spend being a better consultant, is one less day you spend learning to be a better entrepreneur.

In summary, consulting can be a good training ground for someone with entreprenurial aspirations, just don’t remain a consultant for too long, and make sure you stop by you local B&N or place an order on Amazon for Eric Ries‘ “The Lean Startup” as part of your exit procedures!

This is in response to an article on Forbes by John Mancini. John’s basic premise is that Enterprise IT is too slow, too bloated and generally unable to keep pace with the changes brought about by Social, Mobile and the Cloud. While there is some truth to his argument, that large Enterprise IT departments are reluctant to cede control, the truth is a lot more complex than that.

Most IT organization today are focussed on keeping systems up and running, through various integration touch points, and a myriad of custom and packaged enterprise applications. Large organizations have upwards of a 1000 enterprise apps, integration touch points and their corresponding infrastructure to support. It’s easy to suggest that IT doesn’t get it, however remember that business professionals are not the only ones that use social media, mobile and cloud, in terms of personal use IT professionals are probably the earlier adopters of these technologies. However someone has to worry about keeping the monster running, and that thankless job falls on IT.

All this being said, the points being made in the article are still valid, i.e. IT needs to evolve from worrying about systems integration, to worrying about data (the “information” part of IT) and adding business value through the wealth of data and information processing capabilities being made available through social, mobile and the cloud. But the road to this, particularly for large organizations is littered with vested interests, legacy apps, band-aids put together to keep apps up and running, and over a decade spent by most companies chasing wage arbitrage opportunities in IT.

I have been thinking a lot recently about some of the reasons why enterprise IT seems so antiquated in comparison to consumer IT. One of the key’s has to be the differences between the talent involved in both sectors. Enterprise IT dwarfs consumer IT in terms of global spend, but their approaches to talent acquisition cannot be more different.

In consumer IT you are constantly looking for the best resources possible to create a better product or service. Whatever your producing is your core product, and hence you want the best talent available to help you create it. Your product is your differentiator, your revenue generator.

Enterprise IT is largely a cost center, and like with any cost center the incentive inherently is towards minimization of spend. Hence while consumer IT chases talent, the key focus of enterprise IT over the last decade or so has been to take advantage of global wage arbitrage opportunities.

Now, while this difference would have been a purely theoretical observation even half a decade ago, the consumerization of IT has changed all that. For enterprise IT to even remain relevant it has to start looking at it’s approach to talent acquisition and more critically start to make a shift from being a cost center to being a clear revenue driver. Wether this means turning to big data, or creating innovative consumer-centric services enabled by IT, they have to do it fast, if not the end game will be hard fought, but the winner is clear.

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