I've digitally ripped this post up multiple times. Every time I think I've got it down, I have to change something. For the most part, I think I now have it under control. And don't sweat it, my Dreamforce coverage will be coming. I want to get this one out first.
Shantanu said this:
"That's where the Adobe and Microsoft partnership is so valuable, because ... we think we are actually creating a brand-new category and industry, which is all about digital engagement and customer experience management."
If this is not just a CNBC sound bite, and I'm pretty sure it isn't, this is a significant comment whether it is meant to be or not -- for two reasons. Both of which I'm going to address in this post.
First, because it is a further declaration of the astonishing partnership that Adobe and Microsoft have forged -- and it is truly astonishing.
Second, because Shantanu is speaking about creating a new category and a new industry. I want to address the specific -- a digital engagement/CEM category/industry -- and address what it takes to create a new category and, how I'm interpreting industry: A new market.
Let's get this party started.
GAR partnership: Adobe and Microsoft up a tree
At the 2016 Microsoft Ignite conference, Adobe and Microsoft joined in holy matrimony and formed what I think is arguably the closest, most intimately connected, and probably the best executed partnership I have seen in all the years that I've been doing this analyst "thing." It is a paradigm for how to do a GTM (Go to Market, i.e., strategic) partnership. Others take note, please.
I call this partnership the GAR partnership. For those of you unsophisticated in the obscure art of the acronym, GAR equals "Get a room," which incidentally, is a gigantic compliment.
I've waxed enthusiastically before on this here and other places, but there are a few things I'd like to reiterate and one that I'd like to add that makes this an epic partnership and a significant one in the annals of the Big 4.5. For those of you who don't know who the Big 4.5 are, it's Microsoft, Salesforce, SAP, Oracle (in no particular order), and the 0.5 is Adobe, which -- on their current trajectory of thinking, execution, and earnings -- may make that the Big 5 in the not very distant future.
The depth of the relationship continually impresses.
- Adobe and Microsoft are both walking, with somewhat different shoes on, the same path: Around ecosystems and platforms. Three years ago, at the Adobe Digital Marketing Summit (which I presume in 2019 will be the Adobe Experience Cloud Summit) Abhay Parasnis, Adobe's CTO, announced a significant transformation of the direction of the company. They were going to focus on the integration of the Document Cloud, the Creative Cloud and the Digital Marketing Cloud into a single platform and build what he called an "open ecosystem" that would cover their customer's needs from end to end. The addition of the adjective "open" to their thinking on ecosystems was important and very specific. When thinking about ecosystems, a company is normally thinking about their customers needs end to end. They are then making decisions about how they are going to fulfill those needs. They can provide those products, services, experiences, and tools that they have built natively. They can provide the products, services, experiences, and tools they have acquired and integrated. They can provide those they have partnered to fill the gaps that existed in the ecosystems. That is the usual norm. Where Adobe took it a step further at least in principle and to some extent in practice in the Microsoft practice, they were willing to forgo their own competitive product if there is a partner or competitor which provided a better version of it. Microsoft was the first true accomplishment in their effort to supply that kind of open ecosystem.
- Internally, the evidence shows integration of the Creative Cloud, the Experience Cloud, and Adobe's AI platform Sensei, but they are showing signs of outcomes of early stages of a genuine platform. I've written extensively on this. However, it also shows with the GAR Partnership, too. The integration of Adobe Experience Cloud and the rest of the Dynamics 365 stack extends deeply into the core architectures of the products, solutions, and platform. There are teams of Adobe and Microsoft engineers working jointly to make sure that the integration is at the byte level (metaphorically, of course, though maybe not metaphorically).
- This Ecosystems and Platforms approach (something I am ardent about being the focus of where things are going) is also how Microsoft is thinking, especially since the ascension of Satya Nadella to the Microsoft helm. He wants Microsoft to be a mission critical part of all 21st century business infrastructure, as I outlined a couple of years back. Their signs are the GAR Partnership for the ecosystem and continual improvements in the output of their platform around things like PowerApps, a citizen apps builder and the integration and rollup of a lot of Microsoft's capabilities into Office 365 as a unified communications hub. Progress, not by any means, fully baked yet. But both are following that path -- and that aligned overarching strategic orientation is very important to the success of this partnership. Again, this strategic initiative on each of their parts is far, far from complete or without flaw. But it is a solid direction.
- The integration of the Adobe Experience Cloud with Azure as their IaaS platform is almost 100 percent -- making it a foundation for Adobe's Experience Cloud portfolio. The reason that I say "almost" is that Adobe Experience Manager is still a managed service in AWS, at least as of this writing. They aren't abandoning other cloud infrastructure platforms entirely. However, Azure is clearly Adobe's strategic priority and core to the evolution of both party's platforms and platform strategies.
- The Go to Market (GTM) strategy is in place with sales teams on both sides of the equation compensated for selling the other as part of the overall solution. According to "sources" (meaning people I know who work at both locations), they are working very closely together and apparently, without rancor or competitive jealousy -- though I can't absolutely corroborate that. I just heard it. But the operational facets of what makes a GTM partnership work are in place, including, most importantly, sales compensation.
- The individuals who manage the alliances are highly capable -- clearly some of the best that each company has to offer. I've met more than once with the Adobe representative Dave Welch, who is not only immensely capable but is also a very good guy, with the right kind of personality to get along with Microsoft's counterparts and still represent his own company's interests well. He's the right guy for the job. On the Microsoft side, the reins are in the hands of long-time Microsoft Director of Product Marketing Dina Apostolou who's "profile" is very much like Dave's -- highly capable, warm, friendly, and knows from whence she comes. All in all, two, who definitely in theory and seemingly in practice, work together well.
- A big factor, which is mentioned more in passing than as central but is actually central, is that the two CEOs -- Adobe's Shantanu Narayen and Microsoft's Satya Nadella -- are actual friends. They have known each other for quite a while and, in fact, both went to the same really good high school in Hyderabad. Don't underestimate the importance of this relationship. We often ignore the "Warmth Factor," meaning the genuine human relationships and thus trust level that's involved in these things, but they mean everything. For example, on a different level, how many of you have partnered with a company and were championed by someone, and while that someone was at that company, things went great, then the champion went elsewhere, and things went south? Raise your hands. I thought so. I rest my case. Their friendship is meaningful here. By the way, Abhay Parasnis, the CTO who first mentioned the Adobe transition to ecosystems and platforms ,is a nine-year Microsoft alumnus and he spent the bulk of his time there working on the creation and evolution of Azure.
- While I can't say that this is part of the thinking, since I have no idea what Microsoft or Adobe thinks on this topic, Adobe's acquisition of Magento, the e-commerce platform, could be highly beneficial to Microsoft, as it's the one piece that Microsoft is missing natively from its engagement suite. E-commerce, while not a core CRM function, is the transactional center of a larger customer engagement platform or at least, part of an engagement solution. There are some e-commerce players in Microsoft's partner ecosystem like Episerver (recently acquired from Accel-KKR by Insight Venture Partners for $1.16 billion), and I wouldn't rule out Microsoft bringing them into their ecosystem at more strategic level. That said, given the Magento acquisition, it would be wise for Microsoft and Adobe to consider enfolding Magento into the joint offering, making them more competitive with SAP, Salesforce, and Oracle.
- Adobe's $4.75 billion acquisition of Marketo announced Sept. 20, 2018 -- I was going to say could have a strong, positive impact on the alliance, but I will instead say it will have a strong positive impact on the alliance. See the next section for more on this. It deserves its own stage.
Adobe Acquires Marketo. Qui Bono?
First, for far more depth than I can possibly provide on the Adobe acquisition of Marketo, please read the esteemed Chris Fletcher -- former Gartner senior analyst and now-independent -- on this in last week's blog post here.
But a few nuggets...
Qui bono means "who benefits?" I love chucking around Latin. Since I know no Latin at all. That way I sound intelligent. Or Roman.
Many of the beneficiaries.
Marketo's stakeholders benefit big time: That is a helluva price for a company acquired about 15 months ago by private equity firm Vista for $1.6 billion -- all on revenues of $308 million, though I've heard tell, unofficially, its closer to $400 million.
Adobe benefits by Marketo providing them with a well-known B2B marketing market leader: I'd classify that as "a" market leader, not "the" market leader. Until now, Adobe could offer perhaps the highest quality business to consumer offering in the market, but were missing the significant B2B piece, which is also the most competitive of the marketing automation market offerings. Now, they have end-to-end and with Magento can offer B2B2C when combining various solutions. An ancillary benefit is that Marketo the last two years has been messaging around engagement marketing, which makes it easier for Adobe and Marketo to align their messaging without losing the thread of the corporate narrative.
Microsoft, as I said, will most likely benefit by the acquisition: Adobe Experience Cloud nee Digital Marketing Cloud is the core solution driving the partnership, and Marketo is an addition to that solution. Given the nature of the partnership, I would assume that Adobe will enfold of Marketo into Azure. An additional benefit is that Marketo has had a seriously tight integration with Dynamics 365 for many years.
The sports industry: One that is near and dear to my heart -- and, thus, please understand there is personal bias infused into the Kool-Aid I'm giving you to drink. This gives Adobe/Microsoft a great big pair of footprints (feetprints?) into the sports world, since Magento, Microsof,t and Marketo all have a strong presence there. An added GAR partnership bonus. Should they actually take advantage of it, I have some suggestions.
The Open Data Initiative re: The Partnership
OK, the last indicator of the power of the partnership and one of the potentially most interesting is at the same time concerning. This is the Open Data Initiative that Adobe, Microsoft and SAP announced at the Microsoft Ignite conference on Sept. 24.
Interesting because there is a desire and a need to find some common data standards that historically have not existed and that's three very powerful companies who are supporting this initiative. So, why troublesome? Well, this was announced while I was at Dreamforce along with more than 200 other analysts, influencers, and press. While welcoming the idea, It is also concerning because I have this nagging feeling that this wasn't just a straightforward attempt to define data standards but that it was also a move against Salesforce. I wasn't the only one. Multiple analysts at Dreamforce had the same nagging feeling, some at a more forceful level, others kind of like me -- wanting to believe that this was a good intentioned effort to do something that would benefit the entire industry and its customers, but at the same time, wondering if there was also something more "political" to it. If you view the extant press, the articles range from the positive to the suspicious, and I think are a reflection of how well meant the initiative is though anyone in their right mind would applaud the stated purpose.
But I know how to settle that.
There is an easy fix to this and one that will allay anyone who cares fears.
Invite Salesforce and Oracle to the dance -- and then it's on them to say 'yes' or 'no'
If they say "yes", well, open means "open" not "open except for..." So, there should be absolutely no problem with that. The initiative can begin more fully supported in earnest.
If they say "no," well Adobe/Microsoft/SAP gave them the opportunity in good faith, and they chose to not be a part of it. And it can move on to start defining the data standards that hopefully will normalize how we define, interact with, store, and use data. For more on data and platforms, see Esteban Kolsky's posts on data and platforms here and here.
So, Adobe, Microsoft, and SAP -- are you going to invite Salesforce and Oracle or not? If not, why not? Feel free to answer and explain whatever your answer is, here. Or just be smart and extend the invite.
Regardless of the polemic here, if you take Shantanu's CNBC statement, the interconnectivity of Adobe and Microsoft at the technical, and GTM levels and the public show of support that they are making for each other, it is undeniable that this partnership -- GAR -- is a paradigm for all companies to follow on how to do something that leads to value for the partnership, the individual companies involved, the individuals at the respective companies and the industry.
Which gets me to the next part, which will be brief, because it's cautionary.
Creating a new category and a new industry
Shantanu Narayen's optimistic statement about Microsoft -- and them creating a new category and a new industry -- which makes me think, though, I could be wrong, that he means new market -- is a very optimistic and ambitious statement. Because, here's the thing: Creating a category and an industry, which from here on out I am going to presume is creating a new market, is hard.
Think about it. First the new category has to be:
Defined: Not just a sentence or two on what it is, but what elements comprise it, what does it literally look like (it is a set of products that do this this and this, or it is a solution that is designed to promote something or another that leads to an outcome)? If a technology, what are the solutions (products, services, experiences, tools) and what do they do? Its purpose, its actual form and content have to be part of the category. A set of things that do somethings specific that are uniquely different than other categories "sets of things."
Justified: Why create the new category beyond the fact that you are doing something that says to customers "well, you need it..." The implication is that we've created this because we want to sell it. What overall benefit is there in creating it beyond helping you sell stuff to your customers via some artificially created need? If helping you sell stuff is the only reason, you won't succeed in justifying it. Self-serving justifications aren't justifications. However, there is some value in being a category-first mover and early leader. But you have to establish the market and/or outcomes based justification for it. "Market research indicates a change in how the world works that creates the need for this, because its able to do this and this and thus aligns with contemporary market/overall needs.
Validated: The customers have to have good reason to buy this.. Once the category is accepted as legitimate, which takes a ton of work and has some parameters I'll briefly identify below, you can begin to sell to the category, which is the beginning of the industry/market that has to be clearly defined and a justifiable reason to continuously exist. Not flare in and fade out. Validation occurs when they start buying it
If they don't buy it, than its likely not a legitimate need nor a category worth continuing support.
Here's an example of something that was category (or a subcategory really) for a short time but was never really a market (though I'm sure I'll get debate from some well-meaning people):
In 2009, I wrote a post that was highly regarded as a definitive statement on Social CRM and what it was. It was when it came to the technological aspects of the discussion and definition called for Social CRM to separate it from more traditional CRM, which didn't integrate social channels into the sales, marketing, and customer services operational functions. By 2013, it was a moot point. Pretty much every CRM vendor had integrated "social" into CRM, so there was no longer a need to separate the two -- and I wrote that about that in a five-part series for Diginomica (parts 1, 2, 3, 4, 5).
Unfortunately, it was accepted as something separate (i.e., a distinct category) from CRM and still is to some extent. Gartner (and other analyst firms) jumped on the ghostly bandwagon and did a Magic Quadrant that was unjustified for many reasons, and the results proved the lack of validity. Salesforce, Jive and Lithium won the leadership position in Social CRM with neither Jive nor Lithium having a single native CRM (sales, marketing, and, at that time, customer service, though Lithium later did get some service capabilities) feature. The bulk of the other players were placed into the lower left -- i.e., niche (11 of them) and most of them were non-competitive, too. They dropped the MQ shortly thereafter.
There was neither justification nor validation for that domain -- Social CRM -- as a standalone category, though there was a definition -- which was for explaining the evolution of CRM, not for a separate category. It went really badly let us just say. No MQ or Wave continues to exist for good reason.
What are the "jobs to be done" when it comes in creating a category (and since words do actually matter, please realize I'm just JTBD tongue in cheek, my fellow JTBD advocates)?
First, be cognizant that what you are creating is somewhat self-serving but must be able to serve a purpose beyond your desire to sell "it." Self-serving here most likely means that you are the first company that you will place in the category or are trying to be the first mover in it, which, by the way, is fine if that's what you are trying to do. "First mover" in this instance, means that there are other companies in the category but you want to be first out of the gate in the hearts and minds of the people.
Second, you will have to agree that it's OK if there actually are others doing this (see first movers above). You might think first and only to exist in the category is better, but when you are creating a category, being alone in it is a lot harder to justify and to validate. It's the social acceptance of the category that defines its validity. Like, "Oh yeah, so and so call it that, too, and there seem to be at least five or six competitors in the space." That indicates that it's more than just you trying to define yourself and that its more than a niche or one-off... For example, in a mature category, SAP just realigned the names of its CRM products to Sales Cloud, Marketing Cloud and Service Cloud - which, while it is the same name as everyone else in the category, allows SAP to compete better with its direct competitors. Sales Cloud means the same thing for all the vendors - no need to be "super creative" in naming what the Sales Cloud is.
If you are designing a category that you feel that is unique, at least at this point to only you, you're better off not creating the category but instead using the definition that you attribute to describe what you do or provide. If you insist on making it a category, which if validated makes you the first mover and owner of it -- at least for a while -- the work is that much harder, because the same rules apply, but there is a lot less external proof of its validity.
The reason that creating a category (or a market for that matter) is not something I particularly advocate is that you have to do a lot more work than create products or services or whatever that fits it. You have to create and distribute the content -- what I mean here is thought leadership content -- that is necessary to capture mindshare before you can ever think of capturing market share, and good luck on getting buy in from your corporate leadership on that. Sadly, at least in my anecdotal research, the willingness to invest in something that doesn't do anything for revenue except cost you some of it for awhile is not all that keen. However, category creation requires mindshare, because ordinarily there is no market when there is no category. To capture market share, you have to have something to capture market share.
There is a lot more to say and I imagine I will say it over time, but I wanted to at least reference the parameters, because the statement that Shantanu Narayen made is not trivial, and I'm presuming, because he is a very smart man, that he knows what he is about to put the GAR alliance through if they proceed to try to develop the new category and industry.
But, regardless of the requirements, I do have one problem with the statement and it is this:
Is digital engagement and CEM something they can create?
In Shantanu's statement, he talks about defining a new category and market/industry, which is "all about digital engagement and customer experience management." Well, as far as category goes -- by absolutely no stretch of the imagination is digital engagement anything new, and in fact, it has been around a long time already. Hell, I just finished a book on customer engagement, which covers mostly digital engagement, and it took me three years to write, and it was a mature well-known category long before I started the book. Adobe's very own partner, Microsoft, in fact, has been claiming that Dynamics CRM was Intelligent Customer Engagement for years. In the course of writing the book, which is called The Commonwealth of Self-Interest: Customer Engagement, Business Benefit, I built out a customer engagement technology matrix and identified 29 categories that fit under the meta category of "customer engagement technology. All 29 can (and vendors in those categories already do) claim that they are involved in digital customer engagement and make the argument and never compete with each other. What all that means is that a complete digital engagement technology ecosystem is so big that no one vendor or 10 vendors working together will be able to support the entirety of it. And it means that the messaging around digital engagement and customer engagement is already a major ongoing effort from dozens of vendors in their respective categories. So, at the moment, the ecosystem is still in a protoplasmic stage.
That goes for customer experience management, too. Ironically, the proof of its "maturity" as a category is Adobe itself. Adobe has long been a leader in providing solutions that allow for the creation of what I call consumable experiences. Customer experience management as a strategy, not a software category, has been around since the 1980s. So, they are not "inventing" anything here. They are a company and a partnership that are defined by those categories. Can they make a case for being a market leader in the category? Yes, when it comes to creation of consumable experiences, Adobe is the best in the business. Again, consumable experiences. Not the broader definition of customer experience. "How a customer feels about a company over time." The larger idea can't be enabled by technology -- it's a long-term, changing emotional state. More on the customer experience definitions here if you care at all.
Now, as far as creating a new market or industry, their unabashed ambition, as stated by Shantanu Narayen, is, let's say , probably overreaching a bit, but there are some things that they can do that can give them likely market leadership in their categories.
Adobe, on the CEM side, if you are willing to accept as your definition of CEM in the technology world as the tools for the creation of monetizable experiences, you are arguably already the market leader already. As I said, there is no way to enable "the" customer experience with technology, but there is a way to create experiences -- to manufacture them in a manner of speaking and then monetize them, if you should so choose. Adobe does that with their combination of Campaign, Photoshop, and Sensei, and, of course, Adobe Experience Manager as the framework and toolset for it overall. Microsoft has the operational core with their Dynamics CRM applications. Being a leader in digital engagement and especially "customer experience management" is on the table. I think, however, if I were Adobe and Microsoft, I would dial down the ambitious rhetoric and develop the tools and content to be the market leaders in categories that, despite the claims, already exist. Creating a categories and markets that exist is, by definition, not really possible -- and all the evidence points to their existence for a long time. Being among the market leaders via the incredible partnership they have is something that they can achieve.
Previous and related coverage:
Thought leader Esteban Kolsky takes on the big question: What will data platforms look like now that big data's hype is over and big data "solutions" are at hand? This is the second part beckoning.
Thought leader Esteban Kolsky takes on the big question: What will data platforms look like now that big data's hype is over and big data "solutions" are at hand?
We spend a lot of time on personalization of the customer's experience, but as the customer demands more control over their choices and greater levels of interaction and better experience with the company, humanization comes to the fore. What's the difference between personalization and humanization and why are both necessary? Paul Greenberg responds.