A Couple More Thoughts on Enterprise Tech Versus Consumer Tech

Two other quick thoughts on this topic... Why is enterprise tech behind consumer tech?

1. Slower development cycles: B2C companies can innovate and release much faster than B2B (often B2B product changes need multiple approvals), "MVP" as a development strategy doesn't go over well with big companies

2. Many large companies (especially banks) are still on old operating systems and web browsers -- many top banks still use IE6.  This requires enterprise providers to dumb down their products and allows for less innovation.  I don't think Facebook or Youtube are even operational in IE6

4 Years of Blogging

I started this blog in December of 2007 -- 4 years ago this month.  Since then I've published 160 posts totaling around 50,000 words -- technically enough words to be classified as a novel. The chart below shows posts per month over the last four years.

I'm happy that after four years I'm not only still writing on this blog but I'm writing more consistently than I ever have.  And this month I'm on track to post more frequently that I have ever have.

I've tried to go on runs where I write a post every day but I find that inevitably I get busy with work or other things and the quality of the posts begins to suffer.  That said, I definitely plan to post much more frequently in 2012.  I'll post this graph again next December to see if that holds true.

Microsoft Office: Winning at B2B and B2C

I've been thinking more and more about how and why consumer technology is so far ahead of enterprise technology.  There are a variety of reasons why, though as I've said, I believe that the primary reason is simply that it can be; i.e. the "B2B" structure simply allows businesses that are focused on the enterprise to get away with less than cutting edge technology and products (i.e. a good Biz Dev team just needs to sell a few people on the product and those people force their employees to use it). That said, there are certainly exceptions.  Take Microsoft Office for example.  An almost ubiquitous enterprise product that is used in the office and at home.   Employees use the product in the office and they like it so much that they buy it for their home computer.  By creating an awesome product, Office has been able to dominate both the B2B and B2C markets.  This is an amazing accomplishment when you think about it.  To do this they have to have the unique combination of an elite Biz Dev team and an elite product/engineering team.

Of course, Google Docs and other web-based applications are legitimate competitors to Office and are taking market share.  As more and more users begin using Google Docs at home you could see them demanding that their IT departments switch over to the enterprise version.  To obviate this, Microsoft has created a "Home Use Program" where they offer their enterprise users Microsoft Office Professional for use at home for only $9.95 (the same product goes for ~$382 on Amazon).

A very smart and probably necessary pricing strategy to help Microsoft keep their unique stronghold on both the B2B and B2C markets.

Beware of the Low Hanging Fruit

One of the most significant challenges that comes with the launch of a new initiative is knowing whether or not it truly has long term potential.  

To make this assessment even harder, when most initiatives launch there's always some low hanging fruit that can give you the perception that the initiative is working.  Smart engineers or good business people can usually prioritize the quick wins and grit their way to some success in the first few days or weeks of a launch.  But what's hard to evaluate is what will happen once all of that low hanging fruit has fallen off the tree.  A couple ways to help address this:

1. Ask each team member to create one perfect case study of success out of the initiative as fast as they can.  Rather than going out and getting 30 wins, ask them to get one win and dive into the detail.  Why did that win work?  What were the challenges in getting it there?  What might make this win different than others?  What might make it similar?   By diving into intense detail and building a case study on a winning opportunity, managers will be able to understand the strengths and challenges that they didn't know about at the beginning or can't see just by looking at results.  So often the true path to success lies in the detail.
2. Keep a simple to read and easy to update log of initiatives; include learnings (what worked/didn't) and results against your goal.  Use this log to set a benchmark for future initiatives.  Over time, this log will help you get a good feel for when the initiative has turned the corner on the low hanging fruit and is picking up steam or fizzling out.

Low hanging fruit is a good thing.  It can help build momentum and excitement around a new initiative and is often a great way to pick up insights that help a team move faster or prioritize more effectively.  But it can be a trap that leads to over-investment.  The simple steps above have helped me avoid that trap in the past.

Charge More than your Competitors

Jim Keenan had a good post a while back titled, The "Lowest Price" is a Business Model not a "Sales Tactic". The key line in the post was:

Pricing is a business model, it's not a sales tactic.  Yes,  you can wiggle a little on price.  It's to be expected, but competing on price has no place in sales -- unless it's your business model.

It's a great post, I recommend checking it out when you get a chance.

That said, I'd like to extend the idea a bit.  In my mind, a good salesperson shouldn't want to compete on price; in fact, on the contrary, they should want to be the highest priced player in the market.  Not only does the highest price lead to higher commissions but it also implies that you're not afraid to compete on product (to justify the price, you must have good quality).  And it raises the bar on the quality of your sales talent and sales approach (you have to be better than the rest).

A while back, I was on a sales call and the prospect said, "you know, I've done some research and it seems that your product is more expensive than your competitors."

Our answer was this: "well, you can stop doing research on that, because our prices are higher than anyone else in the market, much higher."

While bold, most people would be amazed at how productive this can make the sales process.  It also goes right to the heart of the matter (gets the elephant out of the room) and levels the playing field in the process; i.e., "do you want to work with the best?"

Apple is a perfect example of this approach -- their prices are far higher than Dell, HP, Lenovo, etc. but they can justify it because they're perceived to have higher quality products.  Apple never competes on price strategically, and I'm sure their salespeople on the ground don't even try.

Of course, this sales tactic has to be supported by product quality and company strategy, but regardless, I want the salesperson that wants to sell a product that's of the highest quality and proudly quotes a price that is consistent with that value.

The "I'm Here" Rationale

In the offline world, once you get a customer into your store there’s generally a good chance that you’re going to get them to buy. 

They took the time to drive to the store, park, get out of the car and walk inside.  There’s a negative feeling of wasted time if they don’t buy something.  So if your store doesn't have the best price or best selection the consumer is still likely to buy: “well, this shirt isn't perfect, but I’m here, I might as well buy it".  I’ve felt this way many times as a consumer.

This feeling doesn’t exist online; if it does, it exists to a far smaller degree.

The cost of leaving an online store is less than a second (just close the browser window).  The "I'm here" rationale doesn't work.

This is an important insight as it disrupts many traditional conversion methods used by marketers.  For example:

1. Loss leaders don’t work online: if you get someone to your site with a great deal and they miss it, they won't buy something else, they'll go somewhere else
2. Impulse buying -- a huge offline revenue driver -- is almost impossible to replicate on the internet; you’re not stuck in a checkout line, the line moves as fast as your internet connection 

Of course there are multiple other examples.  Like so many other things, the internet is disrupting old fashioned conversion tactics and putting the consumer back in the driver's seat.  A good thing, in my view.

Usage Metrics

Most web services closely track their site usage and site conversion.  A "user" that "converts" equals $.

In e-commerce, you could describe it like this: get people into the box (drive usage) and do well for them when they're in the box (drive conversion).  

I thought I'd take a moment to clarify a few of the key terms associated with usage metrics in e-commerce as there's often some confusion around how these metrics are defined.  In a subsequent post I'll talk about some of the key conversion metrics. 

Usage Metrics:

• Registered User: a new user, or a user that came to the site for the first time in a given period and accepted terms of use and (generally) provided the site with their email address
• Total Registered Users: sum of all new users
• Unique Users or Unique Visitors: the number of individual people that came to the site in a given period (only count 1 visit per person)
• Sessions: the number of total site visits during a given period (count all visits for all people)
• User Activity: the % of total registered users that visited the site in a given time period

To keep it simple, when evaluating a web service's usage I really only want to know two things: 1.) how many total registered users do they have and 2.) what % of those users visit them each month?

Generally, I find that usage is pretty healthy if around 25% of registered users are coming back to the site each month, though this can vary widely depending on the vertical.

Touchpoint Frequency & the Attention Asset

We all know that the more spam you send or the more often you bother a sales prospect the more likely they are to begin ignoring you. Said differently, if you have built up a certain level of trust and credibility,  you have built up an "attention asset" with a user or prospect -- and spamming them will quickly deteriorate the value of that asset.

The conventional solution to this problem is to simply stop touching the user or prospect, or to at least do so less frequently.

While certainly intuitive, this is exactly the wrong solution.

Instead, I believe companies should strive to touch a prospect or user every single day, if not more often.  BUT, at the same time they should challenge themselves to bring the prospect or user enough value in every single touchpoint, every single day, so that not only do they not deteriorate the attention asset, but instead they increase the value of it.  I wrote a post back in April titled, Drip Marketing that outlines this approach.

In practice, of course, you don't have to reach out every day (be sensible) but I do believe that the approach of reaching out every single day will require you to create content that is compelling, interesting and highly valuable.  And that this is a far better approach than taking the easy way out and solving the problem by simply backing off.

"User-First" Client Acquisition

I built the simple framework below to help me think through the enterprise product conversation happening yesterday.

A B2B company could find itself in one of four situations.  The goal is to be in the top right quadrant (good sales talent, good product quality) so that you can simply accelerate what you’re doing.   But the most interesting to me – and the one that I think will be the fastest growing – is the top left quadrant: when you have a good enterprise product but little or no sales talent.  I’ve seen more and more startups come along that have super cool products but no enterprise sales experience or talent.

The old fashioned solution to this problem would be to hire, partner or find an experienced distributor that could move product for you.  But largely because of what I think is an increasing hesitancy among early stage companies to over-invest in sales & marketing, there’s a ‘user first’ strategy that seems to be gaining traction.  Companies like Yammer are providing value at no cost to individual users but charging the company for “premium upgrades”: system integration, security, admin rights, etc.

At its core, “User-First” seems like a no-brainer: get employees to use your product and love it so much that they demand their companies purchase the upgrade.  But like most things, the challenge may lie in the details of the sales process; i.e. how does this approach align with a potential client’s buying process?  Good B2B salespeople have adapted their process to match their prospects’ buying cycles.  And in my experience the buyers like the process, control, security (and bureaucracy) that these cycles allow.

Products that decide to go “User-First” will have to learn these details and adapt their upsell process to fit in neatly with institutionalized buying cycles.  If they can’t do that well, “User-First” will simply be a fancy lead generator and sales talent will continue to be a requirement for B2B success.

Consumer Tech is Better Than Enterprise Tech

Chris Dixon asked this question in a blog post yesterday: why does most enterprise technology feel like it is a decade behind consumer technology? 

It's a great question and one I've thought about quite a bit.  I see so many sub-par enterprise products that are able to succeed simply because they have a strong sales force.   The enterprise sales model is such that one good salesperson can sell thousands of "users" just by selling one person on the product.  And because of high switching costs within a firm, these products are often very difficult to displace.

I posted my answer to the question in a comment on the post and Chris was kind enough to write a blog post about my comment this afternoon (the shout out is much appreciated).

It's nice to see that more and more companies are taking a "user first" approach to client/user acquisition.  If this approach becomes the norm, it should weed out the weaker technologies and allow enterprise tech to catch up with the slicker consumer tech we use today.  

Never Underestimate the Network

Chris Dixon likes to say that the next big thing will start out looking like a toy.

Some good examples are companies that are building networks on the web.  In the beginning, many web services can look like they’re serving relatively frivolous needs.  Sharing photos or music, booking reservations, writing reviews, playing games, shopping, etc.  It seems that most of the popular web services currently aren’t filling critical human needs and solving critical human problems.

But what all of these companies are doing is this: they’re building huge networks of individuals connected by common interests.  And the services that capture the critical mass of users in any given space are in the best position to begin to start to solve the more important problems of that space.  Many problems can’t be solved on the web until a strong network is built on the web

Facebook is a good example.  Today, it seems that they’re filling a somewhat unimportant need: connecting friends and providing entertainment (allowing people to essentially kill time).  But by building a platform that does these few things better than anyone else, they’ve built a network that is almost impossible to match or displace.  And it is this network that provides the foundation that allows web services to solve far more important problems.  I would bet a lot of money that ten years from now Facebook will be solving problems that we (and the founder) haven't yet imagined.

In short, the point of this post is to say be very careful of dismissing any web service that is building a network as just a toy.  It’s likely that they’re simply undershooting, or haven't fully realized, the full breadth of their users' needs and the problems their network can solve.

Healthcare & The Web

One of the things I'm a bit obsessed with is how we can better use the web to drive down the cost of healthcare.  With that in mind, I saw a post from Fred Wilson (the VC/Blogger) last week talking about healthcare and healthcare investment.  His simple point was that his VC firm hasn't found a large number of companies to fund in the healthcare space that fit their investment thesis.  In his words:

"But we haven't seen many large networks of engaged users emerging in healthcare. "

As usual, his post started a wave of comments -- 394 last time I checked.

Because I'm very passionate about this topic, I weighed in with my two cents and I thought I'd post my comment here (see below).

Over the next few years I expect that we'll see more and more companies using the power of the web (social, gaming, mobile, engagement, incentives, etc.) to address the healthcare problem.  And as a a result we'll see more and more capital (early stage and late stage) flowing into this space.