Aligning Incentives: Imagining a B2B Demand-Gen Blockchain

Aligning Incentives: Imagining a B2B Demand-Gen Blockchain

by Glen Drummond, Chief Solution Architect

Blockchain might be in the trough-stage of the “hype-cycle,”  but there are some convincing arguments that blockchain will change things. These arguments are not, incidentally, dependent on the success of bitcoin or blockchain currencies generally. Rather, they are based on the compelling integration of a distributed ledger, smart-contracts and micro-payments. 

I have a hunch, one that I’ll lay out in a minute, that this combination could have an impact on the B2B demand-gen space. Before that, let’s step back and look at the kind of blockchain use cases that are already underway.      

There’s nothing particularly mysterious –  or blockchain-dependent – about “smart contracts.” They’re already a part of our lives.  When you step out of an Uber ride, you’ve executed a smart contract – with the help of the Uber platform and your credit card. When you close the door to leave your Airbnb you’ve executed another. When you buy groceries in an Amazon Go store, you’ve executed yet another.  

From a user’s standpoint, what makes these contracts smart is that they focus your experience around the core satisfaction of your goal. Everything that’s not core is automated out of the foreground and into the background of your experience. The experience in other words, is more about what you want, and less about what you have to do to get it[2] . In a not unrelated extension of this point, what makes these contracts smart from a business standpoint is that they kick the stuffing out of incumbent business models and grab market share like a gangsta. Especially when network effects tip in their favour.    

Now, clearly, from the examples above, you don’t need a blockchain in order to have smart contracts. So, what conditions make it helpful to combine the concept of blockchain technology (an indelible, distributed record of events) and the concept of a smart contract? The answer cited by blockchain experts is in conditions where there are numerous independent participants in a value chain.

Think, for instance, about the farm-to-table journey of a single bag of pre-washed lettuce. 

Let’s run a speculative tally of independent participants in this value chain: 

  1. The primary producer who grows it and hauls it to the processing plant. 
  2. The processor/packager who buys the lettuce and prepares it for its journey to market. 
  3. The long-haul transport that moves it from the packaging facility to food terminal or retailer warehouse.  
  4. The food terminal or retailer warehouse. 
  5. The transport firm that moves it from warehouse to retail point. 
  6. The retailer.   
  7. The purchaser. 

Potentially, that’s five different databases through which the record of that bag of lettuce needs to travel.  

So what? 

Well suppose that bag of lettuce is determined to have some E. coli problems. Tracing the problem back to source goes more quickly and certainly when all of these independent members of the value chain collaborate in a single system of record that tracks each skid of lettuce in an indelible, externally-validated way. (If you want to learn more about this sort of farm-to-table traceability, there’s lots written about it, like this essay in Medium.)   

Now let’s overlay smart contracts on this case.   

Let’s suppose the retailer knows that the progression of E. coli in a bag of lettuce is a function of (a) bacterial levels at origin, (b) the management of the cold-chain over the journey, and (c) the duration of the journey. Still assuming, say that the retailer is very interested in not having any customers getting sick, or worse, from ingesting produce purchased at their store. In that case, it would be in the retailer’s interest to orchestrate a system in which smart-contracts link compliance with source quality assurance testing, cold-chain standards (as measured by IOT sensors) and delivery-timing standards to payment. 

Non-compliance with standards could produce non-payment. Performance above standards might produce incremental incentive payments. And once translated into smart contracts, this system of aligned incentives could operate persistently without much cost and effort devoted to enforcement, validation or back-office. This kind of thing is actually happening now and other examples are coming very soon.   

Now that we’ve established the lettuce use-case as the basis for an analogy, let’s think about the number of independent participants involved in enterprise-scale B2B demand-gen. We’ll begin with software providers.   

At last count, according to Scott Brinker, the marketing organization of the average enterprise employs 91 cloud services, and Sales uses another 43. To develop the analogy, think of the IP address of a prospective customer like a bag of lettuce, traveling through the hands of dozens of separate parties (the cloud-software providers) on its journey to a purchase from the enterprise.  

Granted, these hand-offs happen very quickly because they take place in virtual not physical space. But they happen, and they certainly cost a substantial amount of money – paid for today mostly through SaaS subscriptions. (More on that in a moment).  

Then there are the creative contributors. Most Enterprise B2B firms have some combination of agencies (plural), in-house contributors, and freelance talent. Are enterprises today able to truly connect remuneration with performance from those contributors? Attribution of marketing effectiveness (ROMI in industry jargon) is not yet an exact science. And that’s probably putting it mildly.

So then, what if an enterprise involved in B2B demand-gen were to approach the providers of both technology and creative services and ask them to restructure their compensation model into smart contracts instead of monthly SasS fees on one hand and, creative and professional services fees on the other?

Imagine a blockchain infrastructure, spanning the host of technologies that  span the journey of a prospective buyer’s web-browser, from first contact to signed contract.   

Imagine smart contracts arranged around indicators of progressive buyer engagement, executing micropayments for content that works, and software processes that help.  

And imagine an incentive framework in which there’s no question that the work that matters is rewarded, and the work that doesn’t is of less and less concern to everyone involved.

Of course there will be many obstacles.  

We will need a blockchain platform that is vastly more energy-efficient than the one powering  bitcoin. 

We will need a blockchain platform that is viable for micropayments at the fraction of a cent level and free of the transaction overhead levels associated with traditional financial clearing services.  

We will need at least one determined and courageous enterprise to create the conditions for technology and creative contributors to join this loose-knit smart-contract consortium.  

We will need a period of experimentation and learning.   

And, perhaps most difficult, we will need the people in charge of those technology and creative firms to deliberately challenge  their current business models.[3]   

But, with the relentless drive for more accountability around marketing spend, it’s not hard to imagine how attractive it would be for an enterprise to focus [4] remuneration more directly around the core satisfaction of their goal, while everything that’s not core is automated out of the foreground and into the background of their experience. 

No more agency hourly rate cards discussions.  

No more scope-change discussions. 

No more annual SaaS subscriptions.  

No more “supplier lock-in” worries.   

The enterprise will, instead, automate remuneration for both technology and creative services through smart contracts triggered by purchaser behaviour. It’s a “pay-for-performance” model with almost unlimited granularity, and once established, very low friction.    

With seven thousand mar-tech software firms now competing for a share of the same B2B enterprise demand-gen budgets, it’s not hard to imagine that late-comers on the long-tail of this community would seek an invitation to the party by means of a business model shift.  For the major SaaS players, smart contract revenue could offer a strategy for reaching a broader market, and for testing new offers. 

With agency business models under pressure from all sides, there are clearly incentives for a change that better rewards creative excellence and expertise according to the value of its performance. Smart contract revenue could also buffer the revenue volatility inherent to businesses with a handful of big clients that come and go, since smart-contract revenues could continue to flow from content that continues to perform in the aftermath of a client’s departure.  

Blockchain enthusiasts have suffered from the accusation that blockchain is a hammer looking for a nail; a solution looking for a problem.  But in B2B demand-gen, we have pent-up stubborn problems at multiple points in the value-chain.   

When we look at how the incentives of all these players align around this new model, there are reasons enough to imagine that network effects will eventually kick in, if someone can get this ball rolling. But what will it take for that to happen? 

As noted above, we’ll need some new technology – specifically a blockchain platform that is energy-efficient and can handle micro-transactions at scale. 

We’ll need a handful of firms in every stage of the value-chain who view their business model as an instrument of their strategy rather than an expression of their identity.  

We’ll need a leader who goes first:  An enterprise marketing leader who is willing to take the risk of creating a new paradigm for managing B2B demand-gen, in order to achieve persistently  guaranteedreturns on marketing investment in both technology and content.

And, we’ll need a community of innovators, all across the demand-gen value chain, who want to collaborate on solving the novel problems that will come up.

So, there you have it – a back of the napkin (abeit a big one) sketch of a B2B Demand Gen Blockchain. Nearly impossible. Or inevitable. Or both. What do you think? I’d love to hear your thoughts.

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Why We Are Ripe For AI

It’s coming, the “futurists” are saying that the hype about Artificial Intelligence is real. The reason according to Andrew Ng, chief scientist at Baidu, is that AI is no long a “magical thing” but is now creating real value for companies, like Google and Baidu. Companies are now finding “pockets of opportunity” to invest in AI. But there is also something else at play that is also making the timing right for AI.

Americans are now living in highly polarized political environment. We’ve seen it play out in TV commercials, “resistance movements,” and daily news coverage.

At the same time, researchers have recently shown that it’s more than a person’s mindset that determines their political beliefs; it’s their actual mind itself. More specifically, the physical structure of the brain of those people on the ”right” and the “left” are different, and it impacts how information is interpreted, decision are made and how you see the world.

People who describe themselves as “liberals” tend to have a larger anterior cingulate cortex, the area that is responsible for taking in new information and that impact of the new information on decision-making. Meanwhile, “conservatives” tend to have a larger right amygdala being a deeper brain structure that processes more emotional information, in particular, fear-based information.

As a result, the adult world is made up of, to a certain degree, two hard-wired types of people, who see and interpret the world differently. In fact, according to the Pew Research Center there has been a dramatic political polarization of Americans over the last 20 years (see the graph below).

Put it all together and you have a perfect scenario for AI machine learning. Machines look for consistency in patterns to make predictions, and apparently we have become more predictable than ever before. Using psychographic segmentation along with online research tools, machines can more accurate and effective target and message to unique audience segments.

Our minds are already predisposed to interpret information differently. Layer on that our opinions and beliefs are becoming more distinctly aligned with other like individuals and you’re seeing the “middle” is disappear.

These distinct groups also use unique channels for information and communication that reinforce their beliefs and opinions, making it easier to find and message to them. In the end, the target, channel and message are all becoming increasingly more defined as a result.

While polarization is making it more difficult for one group to understand the other, it is making humans a lot easier for machines to understand.

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From SXSW to ISBM: Where Tech is Leading Us

Last week I had the opportunity to attend two conferences that spanned the horizon of marketing. I went from “hoodies” at SXSW to “blue blazers” at the Institute for the Study of Business Markets (ISBM) Winter Member Meeting

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Attendees at SXSW Interactive were young digital marketers, at the early stage of their careers. The ISBM crowd was comprised of mostly senior-level executives with 20 to 30 years of experience working for established companies.

Below are some insights from both of the events:

  • Marketing is a tech wonderland. I had the chance to wander the event floor at SXSW, marvel at all of the new technologies, play with new apps, as well as attend a couple ofsessions by new tech vendors. The theme of the ISBM event was Analytics & Analysis, and I got more than my fair share of data analytics, business intelligence, econometric modeling … you name it. If you still think that half of your marketing budget is wasting away, but you don’t know which half, you’re behind the times.
  • Analytics and dashboards are foundational. I saw a great presentation by Dell, which showed how the company has now mapped buyers across the buying process, complete with understanding their needs, time spent at each stage and how to optimize the experience. Likewise, Wesco and Teradata shared a wonderful journey of how Wesco put into place the tools needed to become a data-driven marketing group, enabling the company to tie its activities to business outcomes, or in this case, revenue. From what I heard and saw, companies have built the foundation to pull, analyze and report marketing performance data. Some have even made the leap into forecasting and predictive modeling.
  • Investment is still a challenge. A thread ran through the ISBM event concerning the challenge of securing the funding to buy new marketing tools and/or staffing teams. Despite several speakers presenting solid case studies with clear ROIs, they were still challenged with getting the support and funding needed to continue making progress.

After having time to digest the week’s sessions, I still had a few lingering questions in my mind concerning what I heard and saw. For example:

  • Is there a lack of organizational acceptance and/or appreciation of marketing insight and activities? The question that popped into my head regarding the funding challenge was, “Are marketers able to make the business case in a way that makes executives want to fund their request?” The other issue was marketing’s ability to communicate effectively across the organization based on itScreen Shot 2015-03-23 at 11.13.16 AMs culture. One speaker, Bill Rozier from Ciena, provided insight into how to do it effectively. Bill created a lead generation report in an easy to understand PowerPoint slide. As Bill said, “The sales team has to be able to get all the information they need in 30 seconds or less, or we’ve lost them.” Since Bill’s new report launched less than two months ago, lead reconciliation rates have gone from 13 percent to over 70 percent.
  • Is there, or will there be, a communication gap between the “Hoodies” and “Blue Blazers”? It’s not necessarily a generational one, although there is that. Rather, it’s one based on what they view to be important and valuable. I saw some great social media tools at SXSW that provided deep insights into audience engagement and buyer intent. But close to half the marketing executives at the ISBM meeting had revenue targets, and almost all had lead targets. It made me think that there may be, or may soon be, a potential communication issue between the digital-savvy “engagement and intent” crowd and the “lead and revenue” veterans. From what I saw, there is still work to be done to close the gap between social media results and the connection to key performance metrics valued by marketing executives.
  • Will marketing overplay analytics? Perhaps my biggest concern reflecting on the week is twofold. In business-to-business companies with strong product (and engineering) cultures that are empirically driven, will the utilization and reliance on new marketing tools and data limit an organization’s creativity, and/or innovation? The second concern has to do with organizations where marketing feels like they are under attack. Will marketers use their new reporting capabilities as a defense mechanism, hiding behind the data, instead of using it proactively to provide the organization with new insights and opportunities?

Despite these and other questions still weighing heavily on my mind, I did reach two solid conclusions. The first, Austin is by far the best food-truck town in the United States, and the second is that Tampa’s weather is the salve for the burn of the harsh Northeast winter — a point brought home to me as I returned from Tampa just in time for our first-day-of-spring snowstorm.

Why Apple’s Touch ID Could Be Huge – and It Is Not The Reason You Might Think

Like much of the world I tuned in last week to watch Tim Cook unveil the latest Apple products and services. Afterwards, I was curious to see the analysts and so called “tech experts” reactions on the announcement. Most were ho-hum “nothing new here”, and “it was what we expected,” the market response was similar, with the stock getting a small bounce then falling after the announcement.

Apple, better than anyone, gets the “use case” right for its technologies. And it is why I was surprised by the media and analysts reaction. Listening to the announcement and recap, most of the focus on Apple Pay was on Retail use. In the press release, Apple discusses the near field communication (NFC) technology, names its retail, credit card and bank partners. Pointing out that there are merchants ready to accept Apple Pay as a very secure payment method. But nothing that really got the media excited, go into any Starbucks on any day and you will see plenty of mobile transactions.

Digging a little deeper, buried at the bottom of the announcement is something more intriguing – “Touch ID” which enables “one touch checkout” for Online Shopping Apps. Say good-bye to the hassle of entering your credit card information on the small screen. See something you like, touch it, and it’s yours!Screen Shot 2014-09-14 at 3.49.05 PM

App developers have already started building Touch ID into retail apps. On the same day of Apple Live, Target announced that it has adopted the Like2Buy platform that which allow the chain’s Instagram followers to buy products featured in photos and Target is now integrating Touch ID into its mobile app. Touch ID for mobile apps is the big deal, but not for the reasons you might think.

Apple is a “big play” kind of an organization. A $349 watch, and people upgrading to an IPhone 6 isn’t going to move the needle for a $171 billion dollar company. Apple Pay helps but that’s a basis points play that gets split multiple ways between the service provider, credit card company, the bank, etc., and it will take years for it to be widely accepted. So where’s the “big play” with Apple Pay?

It’s mobile advertising. According to Mary Meeker in her 2014 Internet Trends report, mobile advertising represents a $30B opportunity in the US alone, based on time on device. Ad spend has lagged because of issues relating to tracking and measurability.

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This is why Apple Touch ID is so important; it has the potential to improve tracking, measurability and ROI significantly. With TouchID the buyers never leaves the screen to transact. Attribution, tracking and conversion rates will improve, but the challenge remains — how do you get consumers to transact?

According to McKinsey’s From solutions to adoption: The next phase of consumer mobile payment, you give them a special deal or offer – an ad. There’s the closed loop.

Most important Drivers of Mobile Payments

Respondents ranking most important (light blue) and least Imports (dark blue)

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Apple has had a long history of introducing products at the beginning of the “hockey stick”, usually relating to the consumer adoption curve of new technologies, this time the hockey stick is mobile advertising. The real payoff of Apple Pay for now, in my humble opinion, is not retail, it’s mobile and it is about buying on your phone versus paying with your phone.

The Next Generation of Apps Will be All About You

I had a dream last night that I was hiking along a stream with my family.  The same path we’ve hiked and geocached dozens of times. Except this time, Siri’s voice interrupted our hike and asked if we’d like to play a game.

An app I had downloaded came on, and using GPS, our hiking history, and topographical maps of the area, had created a real time obstacle course, complete with the map, times to achieve, and “land mine” rocks to avoid.  The “App” had proactively invaded our routine hike by creating a totally new experience.

When I awoke I wondered if I had read this, or if it was truly a dream. Concluding that it was a dream, I knew the article that helped to “inspire” it, and perhaps, playing a little too much Candy Crush may have lead to the creation of the “land mines”.

Earlier in the week, I had read about fitness apps that, for the first time, were positively impacting behaviors. I thought it was noteworthy because even with time spent on mobile devices continuing to grow, we have not invited them into our lives as an active participant, although my teenager may disagree with me.  In 2013, Gartner reported consumers spent an average of 2 hours and 28 minutes per day on devices (phone and tablet), and 80% of that time spent inside apps.

Apps have been in “ondemand” mode waiting for us to engage. They haven’t been invited “in” because, for the most part, they haven’t been smart enough to provide us with value.  With the era of the “internet of everything” we are entering a new world of connectedness.  With devices able to communicate with each other, and soon apps, is this the beginning of new phase of app development?

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An era that goes beyond the first generation of “dumb” apps, similar to “dumb terminals” of yesteryear, in that they, with a few exceptions, mostly games, are nothing more than version of existing websites that have been optimized for mobile devices.

Next generation “smart” apps will have the potential to become an active part of our lives by tracking, and understanding our unique behaviors and habits, to creative highly personalized recommendations and experiences.  But by 2017, Gartner predicts that mobile apps will have been downloaded more than 268 billion times, and mobile users will provide personalized data streams to more than 100 apps and service every day

Our mobile devices, which many of us carry 24/7, can remember where we’ve been, what we’ve done, and when we did it.  They can listen in on our conversations, as we’ve learned, and can access data we have stored on the device and in the cloud.

As a result, be on the watch for the following in the near future:

  • The emergence of “small data” – the value and functionality of your mobile device will shift from connectivity to data capture and transfer.  In a sense, your phone will act as your own “black box” recording your daily activity, similar to a flight recorder.  Apple and Google have the ability to track activity across devices so that most of your waken hours will be captured.
  • A “listening” mode on your phoneit already exists the difference is that it will be a setting you control (instead of others).  This will add a layer of richness to the data that is already being collected and enable apps to pick their spots to intervene with information, recommendation, etc.
  • Highly personalized experiences – apps will leverage multiple sources of data and with artificial intelligence begin to create experiences and recommendations in real time, much of it designed around our daily lives and routines.
  • Intelligent Ads – yes, someone has to pay for the free apps and advertisers will be at the ready.  As the apps get smarter, so will marketers! Ads will appear at the right time, with relevant offers based on your interest, past buying behavior, and preferences.   Some will be rewards based on certain behaviors, and other offers will incent them.

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Signs of these types of apps are starting to appear.  Apps like the Sleep Cycle alarm clock, that gently wakes you by analyzing your sleep patterns.  Using your iPhone as an accelerometer, Sleep Cycle monitors your movement to determine which sleep phase you are in (see the image on the right). Once learned, the phone alarm then wakes you with soothing sounds in your lightest sleep phase.

Think of the convenience of having an app on your phone listen in on conversations when you’re traveling abroad and translate, in real time, in the dialect of that region.  Or, as in my dream, the value of taking a routine outing and creating a totally new and highly engaging experience.

Of course progress comes with a cost.  Increasing the availability of personal data also increases the threat of those who would like to get their hands on it.  In fact, it will slow the progress of this smart app generation.  That said, we will see improved security built into devices, and hopefully, there will be “an app for that” as well.

Microsoft Kinects with Audience…Finally

Original post date 11/29/11

With the Christmas shopping season fully upon us, Microsoft’s Kinect motion-sensing game device is expected to be at the top of the gift list for many consumers. Last year, Microsoft sold 1 million Kinect devices for its Xbox 360 in 10 days, and in a recent poll it was at the top of the wish list for children 13 and older. But what you might not expect is that some of those orders are going to be coming from businesses.

Early this month, Microsoft launched Kinect for Windows SDK with a brilliant, new ad called “Kinect Effect.

The Kinect Effect TV Ad

Microsoft is pushing Kinect hardware for Windows SDK for business applications.  As staff writer Jason Kennedy from PCWorld states: “SDK will make it possible for programmers and dreamers from the world over to tinker with the system and make it do things Microsoft hadn’t thought of, and push the development of NUI [natural user interfaces] to the next level.”

What is noteworthy about the Kinect Effect ad is what it took for Microsoft to make it. Six years ago, in an interview with CMO magazine, Microsoft CEO Steve Ballmer confessed to a problem long known by many consumers of Microsoft products:

During Microsoft’s climb to the top of the software industry, rapid-fire product cycles often happened without much front-end input from the folks in marketing. Engineers would develop new software, pack it with bells and whistles, decide on an acceptable number of bugs and toss it over to marketing for a press release and a launch event.”

At the time, Microsoft had set out to change that course through an expansive and expensive relationship marketing initiative. Internally, it aligned marketing with product groups, created a “mea culpa” marketing campaign to reach out to past customers, and targeted loyalists hoping to turn them into advocates.

But because of its past transgressions, and a perception that many of its products were “necessaries” with little to pique the desire of consumers, Microsoft struggled with finding an ignition point, or something to connect customers with the brand and ignite their passions.

Well, those days appear to be over. With the Kinect Effect, the tech titan proves that it can be relevant, even desirable, with a campaign that is expansive, inspiring and incredibly human. The campaign asks audiences to dream about how they might use Kinect by inspiring them with images of people playing air instruments, a doctor flipping through X-rays, and a student deconstructing DNA with only hand motions.

The expansiveness of the idea allows Microsoft to reach, and hopefully inspire, all three of its targeted audiences, including consumers/users, businesses and developers.  Any one group can have the dream, but all three are needed for it to become reality.

Perhaps the most significant point of the ad is that it’s proof that the relationship marketing effort was a success, Microsoft now understands the strategic importance of the “front end” as Ballmer calls it.  Five years ago the message of the commercial would of been about the “bells and whistles” of the Kinect device.  This ad is an elegant and visually stimulating vision of what Kinect can enable, the virtually unlimited imagination of dreamers.

If Microsoft can continue to build this connection with the customer while retail store openings roll-out into 2012, it could transition itself from the company that makes the “have to have” product to the company that is the “want to have” brand.