Why is digital transformation disruptive?

I’ve found that other functions struggle with innovative technology when:

  1. They don’t know their processes particularly well. In this scenario, discussions about a mere port to a new platform get stuck on basic process misunderstandings.
  2. They try to jam existing processes on a new platform without considering new opportunities the technology brings. It’s a reasonable implementation strategy to simply port processes, However, if one doesn’t account for new cases — e.g., using mobile form factors to present demos or quote and approve in real-time — one may inadvertently foreclose those opportunities via short-sighted design choices.
  3. They deploy new process cases without a organizational change strategy beyond training. Take my CRM example above: if one’s sales force is made up of “order takers”, will they be able to leverage the new capabilities without intervention? If nothing else, one must ensure that debriefs of the top performers in this new capability happen and are passed along (via training, coaching, etc.).

Adapted from a comment I made on LinkedIn on this ZDNet post by Sven Denecken, noting some concrete reasons why digital innovation is disruptive:

Podcast on barriers to successful IT/CRM

Michael Krigsman over at IT Project Failures hosted the first in what he hopes will be a regular series of “Town Hall” podcasts (here)  It was originally supposed to be a meet-up, but the weather was dodgy at best so the session went virtual. 

Anyway, Paul Greenberg moderated an excellent discussion that covered a lot of ground.  As Michael notes, Paul’s CRM background focused the conversation

…on issues drawn from customer relationship management. CRM brings together core business functions — how a company interacts with customers — with technology intended to streamline and improve those relationships. Since these goals are business-oriented, CRM offers excellent examples of non-technical failures connected with technology implementation projects. For example, one participant noted corporate managers sometimes deploy CRM hoping to control end-users, who in turn reject the system in a predictable failure. 

Be warned… I jump in at about the 30 minutes mark!

This downturn’s test for SaaS/On Demand

This almost-inevitable downturn will answer one of the open questions about SaaS/On Demand: How “recession-proof” is Saas, really?   Already, an number of SaaS vendors have seen their forecasts taken down, just like normal enterprise vendors (here and here, for example). 

Of course, many still believe that SaaS is recession-proof (see Jeff Kaplan posts and comments here and here).  I certainly don’t believe that as a blanket statement.  In fact, I believe that on demand vendors that focus on edge processes will be in deep trouble.   That’s because one of the benefits of SaaS to customers is the ability to stop consuming whenever they like — and edge applications will get stopped first. 

It is funny how we don’t hear about the benefits of “consumable” services now that consumability doesn’t exactly match the “SaaS is immune” narrative.  Per my earlier rants on this topic (here and here):

The ease with with one can consume services — which certainly does promote usage — is matched by the relative ease with which one can stop consuming services.  If one can get in easily, one can get out easily…. Also, trying to mitigate that risk by locking-in revenue with longer subscription periods sounds good, but it makes SaaS/On Demand too strongly resemble an On Premise relationship.

That last sentence is one example of the On Demand catch-22: as SaaS gets more embedded in the enterprise core, the more it behaves like on premise (e.g., SFDC’s lengthening sales cycles). 

Maybe Harry Debes isn’t so crazy after all (here and here)!

On Demand — is it just “one damned thing after another?”

The struggles of on demand make that old Churchill chestnut seem appropriate.  Especially since they’ve made it to Business Week (here), which should be a buy signal according to my “Business Week Reverse Lock” theory.  It is a Sarah Lacy piece, so I figure that it has to be somewhat plugged-in to the Valley’s, ummm… wisdom.  And I sure have my doubts that on demand/SaaS will “immamentize the eschaton” as well (here, here, here). 

However, while this news isn’t “news”, there was one passage that struck me as telling:

Not every startup has the patience—or funding—to stick on demand out for 10 years and $100 million-plus in sales. Those mid-slog are feeling it acutely.  [Bruce} Richardson {of AMR] says he increasingly hears about “founder fatigue,” entrepreneurs being ground down by the endless travel and ever-ballooning marketing costs. It’s worse for the publicly traded companies constantly under Wall Street’s what-have-you-done-for-me-lately scrutiny.

An “aha” moment (for me at least).  How many entrepreneurs — never mind SV folks — have the patience for a ten year “Long March“?  On demand places such a premium on execution that it seems unlikely that the very same “swaggering, elephant hunter-style salesmen [who] would drive up in their gleaming BMWs” could wait out on demand’s growing pains.  No wonder they’re fatigued…

SaaS/On Demand not immune to the downturn

Per Joe Panettieri’s article (here), I’ve never agreed with analysts who believe that the SaaS/On Demand players would somehow be recession-proof (read my earlier rant here).  There’s a lot about the business model that’s compelling, but not this.

The ease with with one can consume services — which certainly does promote usage — is matched by the relative ease with which one can stop consuming services.  If one can get in easy easily, one can get out easy easily (sure, there are caveats, especially if one has been hooked for a while).  Also, trying to mitigate that risk by locking-in revenue with longer subscription periods sounds good, but it makes SaaS/On Demand too strongly resemble an On Premise relationship.

I agree with Joe that this period will shake out the SaaS/On Demand players.  Those who don’t have a truly “sticky” value proposition will be gone or acquired.

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