CRM Watchlist 2015 Elites, Part 2: Microsoft gets ecosystems
As I made clear in last week's post, winning elite status ain't easy. It takes a company that not only had a strong impact in 2014 but is built for the future, too - which takes all the moving parts I've mentioned recently - great culture, excellent product, strong management team, powerful vision and mission, highly evolved ecosystem of partners and other allies, and excellent outreach along with the right positioning and messaging - all leading to a sustainable strong impact on their customers and their market in the future. Wow, is all I can say about that.
Previously
The three remaining Elites -- Salesforce, Microsoft, and PROS -- share those characteristics but are otherwise unlike one another. Salesforce and Microsoft have been perennials here -- their powerful impact in the market place undeniable. But PROS is a newcomer. Winning the Watchlist last year and becoming an Elite this year -- especially in a year that the number of Elites went down, not up -- tells me that this company is not only the real deal, but is built to continue to be just that.
Each of the Elites gets its own rather lengthy review, because it's worth understanding what makes them Elite -- something that other companies should take to heart. I also want to honor them with the individuated effort so I can be clear on what I think they need to do to improve and be back among the best next year.
So, let's take this in alphabetical order, with Microsoft today, PROS next, and Salesforce after that - all this week.
Since the last third of Steve Ballmer's reign and continuing right through the current reign of Satya Nadella, Microsoft has made a commitment to thinking in ecosystems -- and just in time. It permeates their thinking and their actions in so many ways that they are too numerous to count, but I will count some of them -- because in large part, it's what gives Microsoft its second straight year of Elite status.
Visionary alignment
In the opening parts of the submittal, there is this statement (this was not their Vision statement, to be clear):
"....In a world where digital life and digital work blur, we believe passionately it is our job to empower individuals with intuitive tools that allow them to do their best work. Customer experience ultimately comes from great people doing great things, and this is never about just doing one business application but providing ease of access to information and ease of use in making it available, useful and actionable."
True, a lot of this is just positioning; but what underlays the positioning are two crucial concepts -- ecosystems (the blurring of digital life and work, and providing for its span) and outcomes-based thinking (ease of use in making information "available, useful and actionable."). These may be mere positioning but what Microsoft can prove is that this thinking permeates how they are being structured and what they do.
Here are a couple of examples to highlight this:
The transformation of Dynamics CRM to a platform with the completely revamped Dynamics CRM application suite
This sounds like one thing - a technical thing - and is actually considerably more. Microsoft completely rewritten the Dynamics CRM applications from scratch under the aegis of CRM industry legend Bob Stutz and best-in-class Enterprise Architect Jujhar Singh. In addition, they've made some solid (Marketing Pilot) to great (Parature) acquisitions and built two brilliant strategic partnerships - the OEM deal with InsideView and the go-to-market strategic alliance with Thunderhead.com.
This puts them into contention at the top of the market because they are thinking in ecosystems, which portends more work to fill out the matrix and optimizing their work with the partners. They have wisely chosen the course that they can't build everything, so a reasonable acquisition here and there in combination with some strategic alliances can build out an ecosystem needed around not just CRM but customer engagement. They are in the process of doing just that.
Partner and alliance programs
Microsoft has always been the gold standard (not to be confused with the Xbox Gold subscription) for partner programs. They have taken what were 54 partner programs a bit more than a decade ago and made these into a single program. They have fine-tuned the program to the point that now, even with 640,000 partners, they have a clear cut set of standards, are generally fair to the allocation of resources among the partners, and operate truly as partners.
So the value in the program is reciprocal. Do the work, get the resources, everyone makes money. According to the Wikipedia entry on the Microsoft Partner Ecosystem, for every dollar Microsoft makes from a partner, the partner makes $8.70 (as of 2009, so the numbers may be a little different now). Microsoft derives 95 percent of its total revenue from partners according to a 2011 IDC report entitled "Partner Opportunity in the Microsoft Ecosystem." The same report estimated that in 2010, the Microsoft partner ecosystem had a total revenue of $580 billion. What's a better indicator of success than this? None.
Beyond the ecosystem
There are several other things that kept Microsoft at their Elite level. One of the important improvements was the revivification of the analyst relations program under Cass Whobrey, hired in 2014 to run it from the Microsoft side. Cass, in sync with Waggoner Edstrom star Umran Hasan, has taken a program that was fragmenting due to the loss of so many key personnel from both the Microsoft side and the Waggoner Edstrom side, and revitalized it. It has reached what it once was - a world class program - which means that they get outreach and understand what it takes to actually interact with analysts and influencers.
To put it in simple terms - it's not what they (analysts/influencers) are, it's who they are. I'm not going to go into extreme detail on what it takes - if you want to know that, send me an email at paul-greenberg3@the56group.com and I'll send you an 84 page Guide to Influencers I wrote in 2013 that is still relevant. Suffice to say, that Microsoft, once again, gets it right.
So, with all this good stuff (and there is so much more I could say), what is it that they can do to improve?
Read this
1. Do a LOT better on thought leadership - Oddly for an $86 billion and counting company, Microsoft, especially on the business, has lagged rather badly over the last several years.
Personally, the last document that I used that was sponsored by Microsoft, not even written by them, was 2008's Peppers and Rogers "New Power Couple" groundbreaker in which they presciently identified the alignment of sales and marketing that is now a full bore trend in the business world. That was the last thing I saw (not sayin' others haven't seen benefit) of real thought leadership caliber out of them.
This is actually unacceptable for a company that is reinventing itself and as significant a company as Microsoft. Aside from simply starting to crank out valuable content in contemporary formats (video, audio, etc), Microsoft needs to go one step further. It's a bold one. Microsoft should establish a public, agnostic, research institute along the lines of the IBM Institute for Business Value (IBV). Perhaps they have one that I don't know about. Boom! If I don't know about it despite looking into it, how significant is the research going to be and how publicized.
IBV is out there with brilliant research but also brilliant marketing of the research. They have become a highly trusted, top of mind, research organization when it comes to presenting superb data in a way that provides insight. Microsoft either has to create this same kind of entity or if they have one, make it a helluva lot better known.
2. Make the platform-based thinking company wide - There is no doubt of the value of Microsoft Dynamics CRM as a platform. It already exists and there are myriad examples of proof of its value that way. I was actually a judge in a pre-xRM era contest that challenged partners to come up with a credible application build on the Dynamics CRM platform in a week - and four of the five contestants build credible if primitive applications. The xRM platform is far more refined than that was.
The biggest problem I see in the company is that the idea of Microsoft products as a platform or as a unifying hub or as a deeply intertwined hub is only sporadically adopted by divisions of the company. Ecosystem thinking has to be embedded in everything they do including their products. It does exist in nascent form in their Office 365 division with a transformation of Office as a mere productivity tool to a unified communications hub. It exists in pockets on the Dynamics side (the industries group, for example), with xRM being the desired platform and thus a lively ISV program. It exists a bit more murkily with many seeing Azure as a foundation for delivery. It exists in principle with the well-publicized idea of single code base in Windows 10 for all formats - PC, mobile, tablet, etc. But, that said, on the Dynamics side, it isn't consistent, nor even a thought in multiple other groups across the company.
I'd take a few shots across the bow, but that's not the purpose of this. So Microsoft has to be much more cognizant, consistent and proactive about seeing their Dynamics product portfolio as an end to end platform - which will make them competitive in the 21st century.
3. Expand their vertical focus - including being more visible with the ones they have. If you go to the Dynamics Industry page you see the following industries: Banking & Capital Markets, Discrete Manufacturing Hospitality & Travel Insurance Media & Cable Process Manufacturing & Resources Power & Utilities Retail & Consumer Goods and Telecommunications. This is notable for two reasons. First, public sector, health services and sports are not listed though Microsoft has a deep presence in all three of them - a dominant one in sports. Second the total, even if you include the three missing ones is 14, far less than any of their competitors. SAP, for example has 2X or more the number of explicit industry solutions and process maps.
If you have attended Convergence, the main stage discussion has been retail and not much else due to the back-end retail application that Microsoft built. This is a crying shame. Microsoft, of all companies, should be considering an all-out assault on multiple industry fronts. For any of the players in the customer-facing market this is a huge opportunity, especially as mobility/portability continues to grow dramatically. Tablets are becoming de rigueur for industry solutions.
There are a large number of verticals that are ripe for engagement, those that I call emotional verticals, because they are industries that have a deep emotional commitment from the people who are involved in them. That would be retail, entertainment and media, sports, health services, financial services, hospitality, consumer goods, transportation and a few others. All of them are places where Microsoft can or already does shine. I said this last year, and I'll say it again this year, since they haven't done the level of work they are capable of, it's time to ramp and move up.
4. Marketing Cloud please? - Another one from last year. Microsoft has a strong marketing management application, more competitive with Teradata than anyone else in the marketplace. Their 2012 acquisition of Marketing Pilot gave them competitive integrated marketing management functionality. But, sadly, the big guns in this are Adobe, Salesforce and Oracle and to some extent Marketo. The former three probably don't compete in the resource management realm but digital marketing is where the opportunity. Marketo has wisely scrapped their revenue performance management positioning and built up their engagement functionality and now are positioned as "engagement marketing."
A year ago, I said, "Microsoft make some noise." But that's no longer enough - because they really didn't make the noise. They need to step up and build out something resembling the marketing clouds of their competitors before it's too late to do that competitively. I won't go into the details here of what I think they should add. Suffice to say they should look at what their competitors - in this case - especially Adobe, offer. Because all three of their biggest competitors are far ahead of where they were a year ago in the digital marketing world - as is Marketo. Microsoft has to step it up now, like right now, or it will be too late to really do what they have to - though they, being Microsoft, will always be competing.
5. Messaging transformation - Despite their underlying thinking around ecosystems, Microsoft has a problem making their positioning and messaging relevant - both at the business level and the corporate level - more so at the business level. Customer engagement should be their core message and they shouldn't be afraid to make the dramatic changes that this implies.
Think about this. If Marketo could go all the way from Revenue Performance Management, which while not out of sync with the market at the time (alignment of sales and marketing) to Engagement Marketing which puts them wholly in sync (marketing as the first line of engagement), then Microsoft, even though they are much bigger, can go from the core CRM message to a core customer engagement message especially with the existing alliance with Thunderhead.com in their ecosystem. There are moving parts that would have to, well, move and additional capabilities that would have to be added to the portfolio but, it could - and should - be done.
Even without all this stuff to do, Microsoft's arc, especially in the customer facing universe, has been nothing but steeply up - that's why they remain among the Watchlist Elite for a second consecutive year.