The Game-changing Economics of Fractional Availability

The tech world is in many ways like a large city. While we spend most of our time in a few neighborhoods, it doesn’t really come as a surprise to encounter an old friend or colleague that you haven’t talked to in years, hanging out in your corner café. So I was not surprised to hear that my old friend Antony Brydon had started a new company with a compelling value proposition, called Directly, and that he and his head of marketing, Lynda Radosevich, thought I’d like to learn about it.

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Antony Brydon

I met Antony when he was CEO of Visible Path, an innovative social startup, one that was working to build the work graph — through email analysis — in the ‘00s. Visible Path was acquired by Hoovers in 2008. Perhaps they were a bit ahead of the market, but that’s a sign that Brydon & Co are generally ahead of the power curve.

I was also not surprised that Directly’s value proposition is very, very smart: helping other companies scale their customer support capabilities by breaking out of what I think of as the skills versus wages snare (see figure 1).

The snare is this: as the necessary skill level for customer support increases, the wages that must be paid increase. This is a fundamental aspect of supply and demand.

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figure 1 — The Skills v Wages Snare

But Antony and his partners have come up with a way to break the snare, and Directly is the platform on which that magic happens.

I recently interviewed Antony about Directly, and why the company is growing so quickly.


The Interview

Stowe Boyd: One thing I’d like you to do is tell the origin story. In every superhero comic strip, there’s the story that they tell about how Peter Parker got bitten by a radioactive spider, or Steve Jobs visiting PARC. So, what led to the founding of Directly?

Antony Brydon: It was not as dramatic as Peter Parker and the radioactive spider, but it was interesting. And it was interesting because the company founding  and the initial  inspiration were probably 15 years apart. Back before Visible Path, I worked in a call center for a few years: back in ’98. I worked for a venture firm which invested in Genesis, Aspect, and Aurum: a lot of the early call center players.


Call centers was an interesting beat, but it was a little depressing because the customers were very rarely happy with the service they were receiving. – Antony Brydon


For the better part of three years, that was my beat. And I was looking at a lot of Fortune 100 call center buyers to figure out what products they needed. Call centers was an interesting beat, but it was a little depressing because the customers were very rarely happy with the service they were receiving.

The agents in the call center were a downtrodden labor force: modern-day galley ships. The call center managers were doing the best they could, but often saw themselves as sort going to war with the tools they had. Under equipped and underserved. Very tactical.

Genesis had some incredible skill-based routing that I used in a project. It could actually connect a customer to an absolute perfect agent. But that capability wasn’t being used very broadly. There were a lot of reasons it wasn’t. Some of the call centers didn’t want to hire the truly skilled agents because it could cost more money.

SB: Right, and I bet they didn’t want to test people to gather all that data, either. That was expensive, too.

AB: Yes. They didn’t want to break their agents down into different pools based on skills levels because utilization would drop. If you had one homogeneous pool, you could give a call to anybody. If you had 10 skills-based pools, utilization fell through the floor, so the economics fell down. A great example of really great technology that didn’t get applied anywhere near the degree that it should because of the constraints in the business model. And that, entrepreneurially, was pretty depressing to watch.

My diagnosis was that the problem wasn’t the technology. The problem was the talent side of the equation, and how that talent was being managed. There was no amount of technology to fix it. When you’ve had very low skill folks being hired at very low wages, who are being pushed to handle 60, 80, 100 customers a day and sort of being churned out 12, 13 months later once they met the learning curve, well that invariably put a low ceiling on customer experience. A depressing trend, and that was the reason I made a conscientious move to stop working on it

That wasn’t the inspiration for Directly, per se, but that was my diagnosis at the time. That was the real problem. It made me very unexcited.

For the last kind of 15 years, whenever Jeff [Paterson, the co-founder and head of product at Directly] and I sold a company, we would come back to this problem that had bothered me a long time ago and just started hacking to see if we had any new approach or insight that we had that we could bring to bear on it.

SB: You’re saying the obvious thing was being blocked by the business model, which led low-skilled people to become more skilled, and then their higher wages would become unaffordable.

AB: Yes, absolutely. Skilled workers could have been created very quickly. So, if you had a Samsung Galaxy question that was routed to a Samsung Galaxy expert, and that person was doing a normal number of inquiries for the day and wouldn’t have the boot on the back of their neck to get off the phone in 6 minutes. But that was blocked by the economics of the business model, and that blocked the talent model.

We looked at this in 2001 after eMusic had just got acquired. We looked at it in 2008 after we sold Visible Path. When we came back to it in 2011, we had the benefit of seeing a lot of these on-demand companies coming up. We saw Lyft coming up. And Uber coming up. And Airbnb. And all of these companies taking advantage of a kind of fractional availability.

When we applied that to the old problem, we saw for the first time we saw the potential of pulling together people with much higher skill sets than would ever sit in a call center. And then making them available for small fractions of time. When their skill set really matched a customer’s problem, and at levels where they could really opt in and delight a customer. With that combination of the ability to get more talent than had existed before, and then also to render that talent. Making the business model, the economics of it, work.

So that was the initial insight. That’s what started down that pathway quickly, building some quick primitive apps and starting testing that idea. It bore out very quickly.

We did some initial tests in kind of 6, 12 weeks of initial building. We got some very good signals back that we could attract very skilled folks and pair them with customers very efficiently and very quickly. It took a lot of work to actually develop the engines and all of the enterprise innovations. But those are the book ends. There was that insight in ’98 that no amount technology could fix broken talent model and a broken business model. Then there was that ‘aha’ in 2011 and 2012 that the on-demand piece would be a very elegant solution to this problem.


At that point in the interview, I started to sketch a 3D model in my journal, based on Antony’s use of the term ‘Fractional Availability’. In figure 1, the 2D model above, we saw the snare, the dead-end that Antony has described as an economic problem that technology couldn’t fix in 1998. But with the surge of interest in on demand platforms — like Uber, Lyft, and Airbnb — a new alternative appears.

An additional dimension appears, so that people with high skills can still be affordable, because they don’t have to be hired as full-time workers sitting in a call center. They can be paid only for the time that they are handling customer support requests, and they have gained their expertise at no expense to the company using their services on a part-time, on-demand basis. They’ve gained that skill as a power user, on their own time, for their own reasons.

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Figure 2 — Fractional Availability

Here we see the 3D reality: it is possible to pay low ‘wages’ (perhaps ‘costs’ would be better) for highly-skilled customer support because of the wormhole that is fractional availability. (I think of it as something like the Guild Navigators in the Dune series, who can ‘fold space’ and travel ‘without moving’ from one star system to another light years away.)

So, if you take the 3D chart above and look at it end on — concealing the dimension of fractional availability, it would look like figure 3, below. Directly allows companies to shift the needle from high costs for high skills, by tapping into the game-changing economics of fractional availability.

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Figure 3 — Back in Two Dimensions

Theories into Practice

In the next post in this series, I will dig into the specifics of how Directly has moved the needle at a specific customer’s call center operations, a case study based on the adoption of Directly at MobileIron. But behind that practical and tactical step-by-step adoption is the origin story of Antony’s frustration with call center economics in 1998, and the role that fractional availability is having on the world. Directly’s success has come from harnessing that theory, and making it do the heavy lifting.

Also, you might like to hear Antony and Jonathan Keane,
Director of Customer Service at Republic Wireless in a livecast on the topic: How To Deliver 2.9 Minute Response Times During A New Product Launch, Thursday, February 25 @ 11:00am PST/ 2:00pm EST.

Microsoft buys Parature, Verint buys KANA: A trend?

Two competitors in the customer service applications market are being acquired.

According to Alex Williams at Techcrunch, Microsoft has acquired Parature to integrate the company’s customer support knowledge base technology into Microsoft Dynamics as a counter to Salesforce. The prices was supposedly $100 million, but the acquisition and price have not been confirmed by Microsoft or Parature.

Meanwhile, Verint, the business intelligence player, has announced the near-term acquisition of KANA, the customer support and social metrics company, and add its 900 customer companies to Verint’s 10,000.

Sometimes having two deals like this happen so close together is random, but I think there is a trend here. And it’s one that was articulated by Duke Chung, the co-founder and chief marketing officer of Parature in a recent HBR post. The trend? The confluence of customer support and an internet of things:

Duke Chung, Customer Service in the Age of the Internet of Things

Today, innovative customer service means being able to contact a company on multiple platforms — not just by phone, but via email, web, Twitter, Facebook, and mobile devices. However according to ABI Research, by 2020 more than 20 billion additional devices will be wirelessly connected to physical things — TVs, washing machines, thermostats, refrigerators, even cars.

Good customer service in this age of the Internet of Things will take one step further and take place right on the device itself — screens to tap to search knowledge bases for answers, chat live with a rep, or schedule a service appointment. Imagine a service rep talking you through changing your tire, or a virtual agent who advises you to adjust specific settings on your refrigerator so that it runs at greatest efficiency.

With this kind of customer service evolution happening over the next few years, big changes will be in store for support departments across major industries.

Chung goes on to catalog those changes: more robust knowledge bases [which is why Microsoft bought Parature], invest in a strong data analytics platform [ditto], and hire and train smarter customer support agents [he cites Zappo’s, Warby Parker, and Nike as examples]. More importantly, in a world of smart refrigerators, light switches, thermostats, and slow cookers (yes, Belkin debuted one at CES this week), customer support access will need to be embedded in the devices, and well-designed to keep customer support costs down.

 

 

This is, perhaps, the end of the beginning

Winston Churchill was searching for a phrase to capture the sense of a turning tide in the war with Nazi Germany after the defeat of Rommel in North Africa, and came up with ‘the end of the beginning’.

In the past week a number of events and observations combined to give me the sense that we are, perhaps, at the end of the beginning with regard to social business.

Several of those stimuli came at last week’s Social Media Week. At one session, I was impressed at the transition that the various panelists recounted going on in businesses large and small, as they adopt social media tools for customer support, and the changes that this is causing:

Stowe Boyd, We’re at the customer support stage of social business

The big take away for me was that social customer support is happening, and it is growing fast. More importantly, tools that people use for social media marketing are likely to be a mismatch with the needs of customer support staff. However, in a lot of companies, marketing ‘owned’ the social channel to the business. They were the first out there, using Twitter and Facebook, analyzing sentiment about the company’s products and services, and trying to influence influencers to advocate.

Then, as people online saw that GoDaddy was on Twitter, they naturally assumed they could use that medium for customer support issues: How do I do this? Why doesn’t that work? Why did I get charged for a domain registration? And, at first, those messages were received by marketing folks. Marketing folks who are not necessarily trained in technical issues. So they were being passed along to customer support, and so, we enter a new stage of social business: the customer support stage.

Another major indicator of an inflection point — perhaps of a different kind — is coming from Salesforce.com (see Salesforce CEO Marc Benioff backing off on social?). Apparently the acquisitions of Buddy Media and Radian6 have not turned out too well, and as a result it seems the company is moving away from — or dropping altogether — its former focus on social. The company even tried — and failed — to trademark the expression. I am attending a Salesforce event in NYC tomorrow, where CEO Marc Benioff is giving a keynote, so I’ll have more to report then. I am betting that even if Benioff opts to rally around new marketing based on ‘customer-centric computing’ it will turn out to be social at the core, anyway.

Also on the corporate knife-fighting side of things, Cisco attacked Microsoft the night before its first Lync User Conference for being too PC-focused in a post-PC world (see  Cisco goes after Microsoft Lync on breadth of collaboration). This demonstrate only that the competition is heating up in the social software marketplace, and the stake are getting serious.

My bet is that other indications of us moving into a new phase, where social business moves from experimental and used exclusively by innovators and early adopters into mainstream early majority adoption, to use the Ev Rogers’ terminology.

Everett Roger's Diffusion of Innovations curve source Wikipedia

Everett Roger’s Diffusion of Innovations curve
source Wikipedia

Adam Pisoni, the CTO of Yammer, made the case for the kind of adoption going on in the earlier stage being driven by a desire to have the same sort of communication they were using on the open web  but in the business context:

Yammer exists because companies weren’t offering these [many-to-many] communication tools to their employees, and employees really wanted efficient communication that lets them connect to each other, wherever they are, whenever they need to.

I think we’ll continue to see rogue adoption, but also increasingly, companies moving more deliberately to roll out social tools and practices across the company as a means to get the next stage of productivity and innovation.

Salesforce CEO Marc Benioff backing off on social?

I wrote recently (see We’re at the customer support stage of social business) that social business is entering a customer support stage, and moving past the social media marketing phase. Maybe there is a faint echo of that in recent movements at Salesforce away from the ‘social enterprise’ concept they’ve been hawking.

Aaron Ricadella, Salesforce CEO Benioff Tries Out Some New Material

For the past couple of years, Chief Executive Officer Marc Benioff has been pitching prospective customers on becoming “social enterprises,” capitalizing on the buzz around social networking. In an interview, Benioff revealed his company’s new tagline: “customer companies.” After withdrawing a trademark application for the old brand last year, Benioff plans to formally introduce “customer companies” at a Feb. 26 event at New York’s Waldorf Astoria hotel. The presentation, which he previewed during an interview at his home in San Francisco this month, will include a smattering of everything that’s hot in tech: Facebook, Twitter, iPads, “big data,” self-driving cars and the Nest thermostat. […] “We are our customers’ customer platform,” Benioff said. “That’s not where Oracle or Microsoft or SAP have focused.” […] But the company’s long-touted “social enterprise” concept wasn’t winning many fans, Peter Goldmacher, an analyst at Cowen and Co., said in a Jan. 24 research note. It’s against the backdrop that Salesforce is making changes to how it sells the strategy. The “social” component has been a big part of Salesforce’s pitch to businesses. Benioff said he’s spent about $1 billion acquiring software makers that help companies place ads and communicate with users of their products through social networks, such as Facebook and Twitter. Yet the biggest such deal, for Buddy Media, hasn’t met Salesforce’s projections, said Brent Thill, an analyst at UBS. “They’ve been pretty up front that the Buddy deal didn’t work out,” he said.

And Peter Goldmacher specifically said this in that Jan 24 research note (according to Larry Dignan):

Despite making a big splash around Social at its user conference in October, conversations with the CRM ecosystem around weak “Social” pipeline conversion, a lack of customer traction around Social Marketing and accelerating declines in sales productivity lead us to believe that Salesforce’s latest marketing gambit isn’t paying off.

Personally, I don’t think Salesforce has the right tools to be promoting the social business, or even social CRM, which is where you’d think they’d be strongest. But Benioff seems to be heading the company toward a new push in task management, although they aren’t releasing those tools until October. I have asked for press credentials for the 26 February event. More to follow.

How smart videos can change the face of customer service

AT&T has been reducing the number and length of calls to its call centers by relying on so-called smart videos from New York City-based SundaySky. The videos are personalized tutorials that are built on the fly using pre-scripted clips mixed with the subscriber’s own data.

Web Work 101: Communication Methods

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A friend of mine who is new to teleworking was complaining that her overseas prospects wanted to speak with her on the phone. Since she didn’t want to have to pay for international calls, she turned down these lucrative offers. “I don’t want my fees to be consumed by phone bills,” she said.
“You don’t need to use the phone, you can always use voice chat or VoIP,” I suggested.
“What’s that?”
It seems that not everyone who sets out to do web work knows how to establish their communication methods. There are many tools that allow us to sidestep more traditional — and usually more expensive — means of communicating with our clients, such as client visits and phone calls. For those who are just starting out, here are your options: Read More about Web Work 101: Communication Methods

How to Rebuild a Working Relationship With Difficult Clients

Many freelancers, especially at the beginning of their careers, may find themselves working with very difficult clients. When this has happened to me, either I helped change the client’s working behavior or stopped working with them altogether. While I always aim for the former approach, sometimes the better option is to end the working relationship. Whenever this happens I hope that if I do work with the client again in the future, they’ll be more cooperative — but that’s not guaranteed.

When one of your more difficult clients contacts you for a new project, how do you work with them again, without repeating the problems you previously had?