Competitive Advantage Is Gained with Services not Software

If only business technology were as simple as consumer technology! We pursue this "grass is greener" mentality to its natural conclusions, showing how competitive advantage is remarkably easier to achieve in the current state of the business technology market than it would be if you had everything you think you want.

It is the dream of business that software could be as easy to implement as it is for a consumer to download Instagram. As consumers, we are accustomed to a different (and arguably better) service level than we are as businesses. A successful app needs to be Geico-simple or it will never gain widespread appeal. So, when a CRM as complex as Salesforce rises to the top-right of the Gartner Magic Quadrant, people wonder, can an intuitive CRM be this difficult to create? Why should my people need to train for hours just to be able to use this thing passably?

"Why" is a great question, but it is not always the right question to ask. It is the wrong question to ask at the beginning of a journey, simply because "why" harbors the wrong intention, wanting to regress to the past rather than push forward. The question becomes a moot point as soon as we consider what would happen if business technology were as easy as consumer technology. If it were, if changing a business platform were as easy as taking a pill, then the pill wouldn't bring any sustainable advantage. Everybody would just pop the same pill; operational efficiency would rise across the industry, and each competitor would be forced to take up the slack in profitability, leaving everyone in exactly the same position as before.

I am not defending Salesforce; in no way am I saying that software should be difficult. I am saying that even if Salesforce were as easy to implement as Instagram, differentiation would occur further down the line - in the ability of the business to fully integrate the technology with its strategy. (This is where differentiation occurs anyway, not in the software but in deployment.)

Success is decreasingly a matter of replication and more a matter of communication.

Software is replicable. Everyone knows this but does not necessarily see the implications on business technology, possibly because on-premise business technology took years and substantial upfront investment to implement, possibly because the cloud has only recently surpassed on-premise deployments in the middle market (Deloitte, 2016). The cloud is lowering upfront costs and increasing speed to value; the plasticity of business technology is also shifting the source of differentiation from software to services. Winning isn’t about what you use; it’s about how your users use it.

On a macro level, you can see this trend reflected in the adoption of general softwares versus more nuanced components. The CRM market grew at a rate of 12.3% in 2015, a lower rate than many software components such as 16% growth for Contract Management (CM) and 20% for Configure-Price-Quote (CPQ), each for its own reasons requiring significant customization around specific business rules. As the cookie-cutter softwares saturate the market, best-in-class companies have already turned to these more unique, strategy-sensitive tools to gain strategic advantage, competing around the “how,” not the “what.”

Achieving advantage will not be a simple matter of having these technologies; it will require integration with the business strategy, taking the leap of faith and shooting for objectives that these technologies make possible. Success is decreasingly a matter of replication and more a matter of communication.

Even looking at consumer technologies we can see how this is true. Of all Instagram users, only a few accounts seem to “win.” It is more interesting to consider that winning is defined differently, as each user positions Instagram differently within the context of his/her life or business. From eCommerce businesses looking for inbound marketing to families that merely want to gain the spotlight, users define winning differently. Some accounts draw followers whereas others draw revenues; some accounts seem to be there simply for observation and not to participate in the conversation, others framing the conversation and influencing followers. Clearly, some users are winning; others are learning; many might be wasting their time. Advantage is not in the tool, no matter how simple; advantage is gained by use - in consumer technology and increasingly in business.

In business lingo, use is process: the way a tool is integrated, what the tool is used for, whether the deliverable is valued by the company, these are less defined by the tool, more by how the tool is used.

So maybe it is fortunate that technology needs to be scoped, mapped, developed, understood, customized, aligned, deployed, used, valued, and fully integrated before it can bring the differentiating advantage, as promised? These complex requirements actually make winning more predictable by sorting the smart from the sore. If it were Geico easy, then everyone would have it, and competition would take place elsewhere.

Resources

Deloitte. “Technology in the mid-market.” Deloitte Growth Enterprise Services: August, 2016. https://www2.deloitte.com/content/dam/Deloitte/us/Documents/Deloitte%20Growth%20Enterprises/us-dges-deloitte-tech-survey-report.pdf

Gartner. “Gartner Says Customer Relationship Management Software Market Grew 12.3 Percent.” Gartner: May 25, 2016. http://www.gartner.com/newsroom/id/3329317

Infiniti Research Limited. “Contract Life-Cycle Management Market - Market Overview 2015-2019.” technavio: September 2, 2015. http://www.technavio.com/report/contract-life-cycle-management-market-market-overview-2015-2019

Columbus, Louis. “The key takeaways from Gartner’s 2016 CPQ application suites market guide.” Cloud Tech News: December 22, 2016. https://www.cloudcomputing-news.net/news/2016/dec/22/key-takeaways-from-gartners-market-guide-for-configure-price-and-quote-cpq-application-suites-2016/

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