CRM Watchlist 2015, Customer Engagement, Part I - Lithium, Medallia

Customer Engagement puts on its first big boy pants.
Written by Paul Greenberg, Contributor


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Customer Engagement puts on its first big boy pants

If you travel back in time a few years and listen in on boardrooms, customer engagement wasn't much of a discussion. The rage was all "social" but as Gartner would put it, social was in the midst of a rather heavy hype cycle. Nonetheless, social bore out, not as dynamically or as self-importantly as it wanted, but that's what hype is for isn't it? However, it did become a part of strategic considerations when customer strategies were being discussed and customer programs were on the table - as a set of channels with its own protocols that customers communicated with each other and the brands they were interested in. Thus, "omnichannel."

But social led to social CRM and that melding of social data, internal transactional data and systems of record and operational systems with customer facing activity. Combine that with an empowered, well connected, chatty customer and you had a different kind of customer making different demands on companies that needed to be met in return for their money being spent on that company.

All of that forced (in a sense) a realization that customers needed more than just promises, products and services to keep them happily involved with the companies that they were purchasing from. Companies were being put in a position where they had to figure out what customers wanted - and they had to ask them to find out - and they had to figure out where companies were asking for what they wanted - and to accommodate them in those places and ways.

They realized that they had to figure out why customers were acting the way they were acting so they could anticipate what the customers were going to do, relative to them, next. That, all in the name of keeping those buyers buying. To do that, companies began to realize that while they still needed superior products and services, they also needed tools and consumable experiences to both acquire the interest of the customers and then to keep the interest. Key was the market basket of options offered to their customer base (to control costs and to enhance choice) to choose from.

That drove what is now customer engagement to the top of the corporate mental pyramid. In studies done that identified engagement two things became apparent: first, that engagement was important to companies - in a McKinsey survey, 69% of them said it was their number one reason for trying to innovate and second - if done well, it was worth it - Gallup found that there was a 23% premium (in revenue, customer satisfaction, etc.) for a fully engaged customer over a normally engaged customer.

So, now that you all are caught with the rage du jour - though one with serious chops - I will tell you that this year, reflecting the rise of customer engagement in the technology world as a meme and a form of technology devoted to enhancing interactions in some way between the company and the customer, this was by far the biggest grouping I found -- enterprise feedback management (EFM) and has been repositioned as customer engagement. Sometimes it was because of a new player in the space. Sometimes it's because, despite the messaging of the company, I was ornery enough to just put them in that group.

Ultimately there are eight companies that I'm grouping as customer engagement. Here are the first two that have nothing in common except that I'm categorizing them here. They are in alphabetical order and they could just as well been grouped with other customer engagement players. So don't read too much into the order or the specific companies grouped together. They are a random pick of two.

So with that rousing welcome to our first two customer engagement companies - let's dig into Lithium, and Medallia. Remember, alphabetical. Not ranked.


Lithium is a perennial winner of the CRM Watchlist. Interestingly, this company is a perennial winner of everything CRM, harkening back to the days that they won the first leadership position (along with Jive) in Gartner's now defunct Social CRM Magic Quadrant. The Watchlist has been, shall we say, happy with the impact they are making for a long, long time now. I'm not sure how many years they've won, but it's a lot.

But that said, they've undergone reinvention as many times as they've won the Watchlist. From a Social CRM platform, to a community platform to what they are now calling an "integrated social platform" or a "digital customer experience platform" or, more simply, "Lithium platform" - all of which, frankly, are understatements of what they provide and reflective of something a bit concerning which I'll address in the "what they can do", so hold the thought for now. These guys are winners and I want to tell you why.

Keep in mind; Lithium is one of the original companies that proved that communities are important to the engagement of customers for many reasons ranging from supporting the customers to subject matter expertise to marketing. They not only prove the importance, but they were one of the companies that showed that it could scale to the enterprise and in fact, could exist behind a firewall and still have the impact of a social network that was more "freely" available a la Facebook. As the market changed, they went with the flow and at the same time, stayed ahead of the technology in the marketplace.

All of that was and is good. Good tech that addresses the tendencies in the marketplace (whatever market that is) is gonna sell tech. But Lithium was much smarter than that.

They understood more than most companies, including much bigger much longer established companies that market share wasn't the only thing - mind share was too. So starting with their then CMO Sanjay Dholakia and continuing through their current CMO, the incredible Katy Keim (also, deservedly, the General Manager of their Social Dynamics customer service business), they have time and time again provided the assets necessary for thought leadership in the space, often utilizing the services of their Chief Data Scientist and highly recognized thought leader, Dr. Michael Wu.

The combination of recognition and progressive contemporary appropriate technology - both applications and a platform - makes Lithium a company to be reckoned with year after year.

They have been consistently growing for year over year and their marquee customers keep getting even more...marquee-ey. They create and sustain communities at scale. Witness customers like Barclaycard, Best Buy, AT&T, Skype. All marquee, all with excellent defined results - a real measured ROI - from Lithium - and one that they were willing to publicly state.

There is no question that Lithium is starting to emerge at a new level with nothing but the promise of even further evolution and growth ahead. It is a highly optimistic company with good reason to be optimistic.

As always to get to the next level, there are some things I think they need to do - and in their case - sooner than later.

What they can do

Vertical runways: Lithium, throughout its history has been horizontal in its approach. Finding increasingly better ways to access customers and community members via sets of "horizontal" services (e.g. the acquisitions of Social Dynamx and Klout). However, despite their efforts, they have served specific industries quite well especially high tech and retail. However, they haven't made a conscious effort to develop their platform vertically. That means in this case, understanding the processes, behaviors, systems, objectives and outcomes that specific vertical industries such as health care and pharmaceuticals or wellness - all related to health service - identifies to allow them to move forward with whatever their goals are with whomever does it. Aside from the slam dunk in health services and wellness, retail, sports and entertainment, financial services, public sector (specific areas) and high tech are ideal areas to become Lithium templated among others. We're in an era of specialization. Lithium could do well by getting past just personalization and providing verticalization - an area of specialization every bit as valid to a company in a domain as personalization is to the individual.

Step it up on thought leadership: This was their issue last year and this is their issue this year. They have one of the most formidable thought leaders in the technology world residing there in the guise of their Chief Data Scientist, Dr. Michael Wu. They also have the presence of CMO Katy Keim and yet, in an area they once blazed bright, they are now a bit of a more distant star. What makes this a little disconcerting is that they have been tweaking their messaging and go to market strategy significantly over the last several years and gone through multiple permutations that can be a bit confusing at times if you look at their history. They are currently in the midst of a reinvention that is driven by the acquisition of Klout and the changing market. There is nothing wrong with that, the market is changing quite dramatically and their product composition has changed too so a reinvention is called for. But as of now, they lack the continuous body of knowledge necessary to explain and to justify their morphing over time. They are in danger of losing mindshare as they are capturing market share - and while that seems to be laudatory - and to some extent it is - you can't have eroding mindshare and expect to continue to gain market share. The two of them converge eventually. So they need to step it up with both third parties and internal resources. Bring Michael back on stage, so to speak. Explain yourself, Lithium. You are a platform seeking an ecosystem looking for a stage to explain that on. And I am positive given your stellar history and even pioneering in this area, you can do it. So do it.

Clarify the markets they serve: This goes to the heart of the first two parts of this section. They have been evolving dramatically over the past several years as they grow from a social platform to a community platform to a digital experience platform. They have wavered back and forth about their public commitment to customer service over the years - though they have never actually wavered from their continuous efforts in customer service. It's time for a stake in the ground for Lithium. Specify the markets you serve - name them publicly - drive the stake and go serve them.

Lithium as you well know, wins the Watchlist for a reason. They have been, are and will continue to be a leading community technology company that has made their name known and shown their chops in the marketplace. They are at a crossroads now. Their identity crisis (or, at least, concern) needs to come to an end so they can be explosive. Do I think they can do this? Of course. They won the Watchlist - again - didn't they?


Medallia has been consistent in what they've delivered for years. While they've called it different things, their value came from their feedback-focused technology. At one point, they were placed in the enterprise feedback market, more currently they've been focused around what they call "operational" customer experience management software (see "What they can do" for more on this) and making "interesting" claims about it. Regardless of their messaging, the market they were placed in, the applications that they provided delivered.

The success of their technology and the solidity of the company made them a winner of the 2015 CRM Watchlist.

Think about this. This is a company that is well funded (leading investor is Sequoia Capital to the tune of more than $105 million) and at the same time is growing substantially - with a 3X year over year revenue increase over the last 18 months and an even greater employee growth - 3.5X to 700 in a similar time period. More telling of the quality of the company and the relationships it has with its customers - over 80% of the existing customers are referenceable. That is a staggering number.

But they don't stop at solidity. That would be great and certainly bears a great deal on the Watchlist results. But they do something that is often not understood by even very large enterprises.

They understand mindshare.

At one level or another, companies focus on market share. I mean that metaphorically (and literally) Companies are laser-directed toward revenue, profitability, and other metrics that are driven by currency. For example, they go to conferences for lead generation, not for thought leadership and networking. There is a number associated with the value expected relative to the dollars spent.

All of that is fine. But it also misses a very important component of capturing market share that leads to increased revenue. That would be mindshare.

Simply put, capturing mindshare means a company is top of mind when something related to what it does comes up - it could be a place to go for subject matter expertise or a company that would be first on the list for a purchase.

What drives mindshare, especially with technology vendors, is content in two ways. First, it would be content that aligns with the vision and mission of the company but is not particularly sales collateral. It is the production of coherent and cohesive ideas and practices that benefit potential customers with or without the technology that the company itself provides - though with an eye to what the outcomes the company's technology enables.

Second, it is deep subject matter expertise in the company's product. Rather than just sales collateral, it can be training, success management, process analysis and many other services that provide insight into the use of the product(s). It can be delivered in multiple ways ranging from in person to videos to print - and all in between. But one way or the other, it provides a way to deepen the knowledge about the uses of the product, be they technical or business uses.

Whew. That was longwinded.

Medallia is well aware of this, and has addressed both parts. For the second part, they have created the Medallia Institute, which operates as a certification body, a training and education organization and a services group that works consultatively with the clients to gain insights from the use of the Medallia product suite - be it the customer service focused Resolve (predictive analytics), Text Analytics (name says it all); Health Check (ditto) or any one of a number of products additionally that Medallia claims to capture data, analyze data, and provide actionable insights.

Tied to the services offerings, they have formed a CX Strategy and Research team - 20 persons strong whose sole purpose, using a Medallia maturity model (not a customer engagement/experience maturity model), is to help customers with best practices, leveraging all the data that Medallia has captured in the course of its more than a billion interactions per year for the last few - and the original market research that they have been doing for many years. This is an enablement team when it boils down to it.

They continue to do the market research and the benchmarking that provides the frameworks, best practices and methodologies necessary to master the use of feedback and getting the optimal results from the data captured.

They have a vision which at first glance seems to be in the realm of fantasy:

"A world in which every experience is loved by customers." If they were talking about simply continually delighted customers than this would be an unrealizable though modestly poetic vision. But they use a key phrase in their discussion in the submission by a question that they ask when creating product content. "Is this new offering a minimum loveable product?" That is a very important distinction from constant customer delight. It goes to the heart of a vision that is still realizable around the idea of "it has to be an overall and ongoing experience good enough to make the customer want to continue." That's how to realize actual customer love in the 21st century, given how demanding, and even entitled customers can be. Medallia gets that.

What they can do

CEM not a market:While there is no question that customer experience management as a strategy and set of programs is a consulting services market and a very legitimate subject of strategy and programs, it is not and never has been a technology market.

The reason for that is simple. It is impossible to enable an ongoing and/or timely emotional state via technology. It is the product of far too many variables that aren't related to technology - unless it is due to a longstanding frustration with somebody's technology. But technology can't enable an emotional state. However, technology can enable interactions between parties e.g. company and customer and thus you have systems of engagement, not systems of experience.

Medallia, which grew from the enterprise feedback management space, needs to shift to a technology space that has a future - customer engagement technology. I'm not saying to be clear that CXM or CEM whatever you want to call it, doesn't have a future as strategy, program, methodology - it does. Just not as a technology offering. Time for Medallia to make the transition. They will be better served in the short and long run. I know this is a big investment and transition for them to do it, so I doubt they'll listen, but I am going to be adamant on this one - and I think it will be wise for them if they do make the change.

Integration of selves into the CRM industry:Medallia is sitting in the middle of what can be a great market opportunity for them. But at the same time they serve a specific piece of a much larger market. They are focused around feedback that leads to engagement and leads to better products and more responsive companies. Aside from their own tools for acquiring and assessing data, there are a lot of other tools doing that out there. Of course, CRM has been one of the leading sources for data since it functions as a system of record for transactional data - and, realistically, they are not going to be displaced as that system of record for a long time to come, alternatives, which are currently unknown, not withstanding.

That means that Medallia should be integrating with those other sources of data to be able to provide more refined feedback than they even do as of today - and they do. They integrate with Salesforce, Oracle, Microsoft and SAP among others. So, check that box.

But, with these integrations, comes bupkas (that means "beans" in Yiddish - a euphemism for none at all) participation in the CRM industry - something you would think would be a logical follow through for them. The CRM industry has been a large and lucrative one for many years - up to $25 billion last year and forecast to be $36.7 billion in 2017 (by Gartner). There are industry events (like CRM Magazine's annual CRM Evolution; or Gartner Group's 360) and there are people to connect to that focus in that way (see below) that make sense to be in regular contact with. Ultimately, Medallia should participate in the CRM industry. How they choose to do that is up to them, but it would be business-smart for them to do it.

Ad hoc doesn't hack...it:There is no doubt that Medallia understands the value of analysts and influencers. But they clearly have one formal program for larger analyst firms and one they even label as "more ad-hoc" with the smaller boutique firms and the independents. Contrast this with Salesforce and Microsoft among others who treat this as the same thing. Or SAP which has a formal program for the independents of all stripes and hues. Medallia understands the need for the type of program they have but they are not fully cognizant of the landscape as it has evolved and changed. Independents and boutique firms carry a lot more weight than in the past. They are contacted by potential customers, they shape public opinion in marketplaces - in the latter case even more so at times than the larger firms. It is a much bigger, much changed influencer world. Medallia would be wise to formalize an influencer program that eliminated the ad hoc nature of their interactions with small firms and independents and expand their scope with them.

This is a first time winner who is showing the capabilities and the chops to be a player in the customer engagement ecosystem for a long time to come. Solid tech, smart thought leadership, investments in many of the right areas. Make a few changes and voila - impact champs for years to come.


Next up: Customer Engagement Analytics Musketeers - NICE, SAS, Verint

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