The Power to Destroy

In 1819, Supreme Court Chief Justice John Marshall penned the famous phrase, “the power to tax involves the power to destroy.” This insightful commentary came as part of the Court’s ruling in the case of McCulloch v. Maryland. The case involved a move by the State of Maryland to favor in-state banks by taxing the bank notes of the federally chartered Bank of the United States. In a unanimous decision, the Court ruled that Maryland couldn’t try to run the federal bank out of town through clever tax schemes.

This famous phrase pops into my head every time I see data and software companies get too arrogant or too greedy and start to abuse their market dominance. This is because software and data companies that dominate their markets have some of the same coercive power as governments with their ability to make rules and set prices.

I got a direct taste of this earlier in the week when an email arrived from QuickBooks to tell me that they were more or less doubling my annual subscription fee. The rationale for this massive increase? The folks at Intuit (parent company of QuickBooks) feel they work very hard and deserve more money. You may recall that Intuit has recently been hard at work with its fleet of lobbyists trying to get legislation passed to prohibit the IRS from offering an online tax filing service. In its annual report, Intuit specifically calls out the threat of federal and state “encroachment” on its business. A touch of entitlement, perhaps?

My email from QuickBooks was followed by an email from DropBox announcing a 20% price increase. At least DropBox doubled my online storage in exchange, not that I really needed it.

It’s not just in the software industry where market power is being abused. As just one example, StreetEasy, the dominant real estate listing platform in New York City, stopped accepting automated listings feeds from several major real estate brokers in a fit of arrogance and competitive gamesmanship. Try not to laugh when you read StreetEasy’s justification for suspending automated feeds:

“Sending a feed sounds simple and seamless. It’s not. Continuing to receive listings in such an inefficient way wasn’t doing anyone — agents or consumers — any favors. So, we innovated.”

StreetEasy’s innovation? Data entry screens that require brokers to re-enter all their listings … manually. You can’t make this stuff up.

Often what damages or even kills great data and software companies with dominant market positions is the abuse of their market power. They forget why they exist and who the customer is. In many cases they get lazy, finding it easier to raise prices than continuing to innovate. Sometimes these companies impose big price increases, as in the case of QuickBooks, simply because they can.

Market dominance creates coercive power that can destroy. With taxation, the party that can be destroyed is the taxpayer. But with private companies, coercive power comes with the ability to destroy … themselves.

Just Do It for Me

The app economy, as many have noted, is primarily based around creating convenience, not delivering true innovation. Despite this, its impact has been profound and pervasive. Consumers have come to expect that they can manage almost every task and life activity via a smartphone. 

The competitive pressures of the app economy lead inevitably to apps trying to one-up each other. Ready availability of risk capital encourages this trend.

Consider something as basic as food. We’ve seemingly solved all the issues that used to make home delivery of groceries such a daunting challenge. We then moved to meal kits, where your food ingredients come pre-measured, cleaned and chopped. From there, the move was to fully-cooked meals delivered to you via a subscription meal plan. 

There is a clear trend towards task automation, often in the extreme. And this trend is migrating from the consumer world to the B2B world. 

 You can see the trend at work in the wonderful world of sales leads. First came software to let users better manage their prospects. Then came services to let users add or augment their prospects by seamlessly importing new names. When users discovered that their prospects names needed to be maintained and updated, services emerged for this task. When users discovered they had too many prospects to manage effectively, services emerged to rank and score these prospects. Then came “purchase intent” services that tried to turn cold leads into hot leads using automation tools. And now we see a raft of services that offer to do actual appointment setting.

 For data publishers the implication is clear: your customers are finding the idea of purchasing just data less and less compelling. Providing them with tools to act on your data was the next obvious evolutionary step, and this has worked out well for most data providers. But there is a new evolutionary phase underway: task automation services that do more and more of the customers’ work for them.  It’s well underway in the lead gen world, but it’s coming to your data neighborhood soon. How this plays out will vary by market and product, but the general direction is that customers will pay more to offload some of their work. And that means opportunity for those who can figure out how to take it on.

This Score Doesn't Compute

This week the College Board, operators of the SAT college admissions tests, made a very big announcement: in addition to its traditional verbal and mathematic skills measurement scores, it will be adding a new score, which it is calling an “adversity score.”

In a nutshell, the purpose of the adversity score is to help college admissions officers “contextualize” the other two scores. Primarily based on area demographic data (crime rates, poverty rates, etc.) and school-specific data (number of AP courses offered, etc.) this new assessment will generate a score from 1 to 100, with 100 indicating that the student has experienced the highest level of adversity.

Public reaction so far has been mixed. Some see it as an honest effort to help combat college admission disparities. Other see it is a desperate business move by the College Board, which is facing an accelerating trend towards college adopting test-optional admission policies (over 1,000 colleges nationwide are currently test-optional).

I’m willing to stipulate that the College Board had its heart in the right place in developing this new score, but I am underwhelmed by its design and execution.

My first concern is that the College Board is keeping the design methodology of the score secret. I find that odd since the new score seems to rely on benign and objective Census and school data. However, at least a few published articles seemed to suggest that the College Board has included “proprietary data” as well. Let the conspiracy theories begin!

Secondly, the score is being kept secret from students for no good reason that I can see. All this policy does is add to adolescent and parental angst and uncertainty, while creating lots of new opportunities for high-priced advisors to suggest ways to game the score to advantage. And the recent college admissions scandal shows just how far some parents are willing to go to improve the scores of their children.

My third concern is that this new score is assigned to each individual student, when it is in reality a score of the school and its surrounding area. If the College Board had created a school scoring data product (one that could be easily linked to any student’s application) and sold it as a freestanding product, there would likely be no controversy around it. 

Perhaps most fundamentally though, the new score doesn’t work to strengthen or improve the original two scores. That’s because what it is measuring and how it measures is completely at odds with the original two scores. The new score is potentially useful, but it’s a bolt-on. Moreover, the way this score was positioned and launched opens it up to all the scrutiny and criticism the original scores have attracted, and that can’t be what the College Board wants. Already, Twitter is ablaze with people citing specific circumstances where the score would be inaccurate or yield unintended outcomes.

Scores and ratings can be extremely powerful. But the more powerful they become, the more carefully you need to tread in updating, modifying or extending them. The College Board hasn’t just created a new Adversity Score for students. It’s also likely to have a caused a lot of new adversity for itself.

Data.Gone

On May 4, 2019 it’s official: data.com connect is shutting down. You may remember data.com connect in its original incarnation as Jigsaw.com. Salesforce.com acquired Jigsaw in 2010, paying huge dollars to kick-start an ambitious plan to not only be a software platform to manage sales activities, but to help companies maintain and grow their sales leads as well.

Lest you think Salesforce was lacking in ambition, it then acquired the data.com domain name for $1.5 million. Jigsaw moved over to data.com, and Salesforce began to execute on its vision of a data marketplace, where its software users could discover, purchase and seamlessly import third-party data into Salesforce. It was a big, slick and arguably brilliant idea.

But an idea falls far short of a successful strategy, and data.com never appeared to be much more than an idea, or more accurately, a series of ideas. And Salesforce, for all its success, never figured out decisively what it wanted data.com to be when it grew up. Add in competing corporate strategies, office politics, a high-growth core business and a go-go culture, and it’s perhaps not surprising that data.com quickly became a corporate orphan.

 More fundamentally though, we see once again that software companies – despite lots of brave talk – just don’t “get” data. In particular, a good database needs care and feeding using processes and techniques that are messy, imperfect, never-ending and perhaps most importantly of all, impossible to simply automate and forget.

 Jigsaw probably looked like a light lift to Salesforce. After all, the brilliance of Jigsaw was it was crowd-sourced data. The people using the data committed to correcting it and adding to it. On the surface, it probably looked like a perpetual motion machine to Salesforce. But that perception couldn’t be farther from the truth. Crowdsourcing is an intensely human activity, because you have to motivate and incent users to keep working on the database. You have to construct a structure that rewards top producers and pushes out bad actors. You have to relentlessly monitor quality and comprehensiveness. It’s endless fine-tuning, lots of trial and error, and a deep understanding of how to motivate people.

This is where Salesforce failed. It either didn’t understand the commitment required or didn’t want to do the work required. And just as a crowdsource database can grow quickly, it can also decline quickly.

I’ve said it before: I see more success among data providers that develop software around their data than software companies trying to develop their own databases.

Does B+C=E?

When Steve Lucas talks, people listen. After all, Steve was the founder of Marketo, which was sold to Adobe last year for $4.8 billion. Now the SVP of Digital Experience at Adobe, Steve gave a talk at the recent Adobe Summit in Las Vegas to describe his vision of the future, which revolves around B2B and B2C merging to become B2E – Business to Everyone.

 Steve acknowledged that B2C is all about individuals in their personal buying capacities, and that B2B is about accounts – typically groups of buyers and influencers within an organization, so he understands where and how B2B and B2C differ. But he then cites Amazon as a company that is both a B2C seller (think Whole Foods) and a B2B seller (think Amazon Web Services). Steve thinks there are lots of B2C/B2B sellers out there, and that there is a great unmet need for a single, integrated marketing platform. May I politely disagree?

 Sure, there are always a few hubristic companies that are flush with cash and feeling their oats that will be willing to chase this inchoate vision of the future. But are there many of these companies? Most companies are still trying to get their B2B or B2C marketing straight. B2B marketers are only a few years into their embrace of Account-Based Marketing (a new name for a very old concept, but that simply reinforces my point) and B2C marketers are warily picking their way through a growing minefield of privacy and regulatory rules that actually creates a bias against being too cutting edge.

As to the information need, a simple question: why? In a B2E world, Amazon would indeed be able to know that, for example, the VP of Purchasing at Boeing likes organic lemons. But how does this knowledge advance the sale of either Amazon cloud services or Whole Food produce sales? Indeed, B2E creates the opportunity to build such detailed dossiers that the end results will toggle between scary and silly.

There are already B2B data companies that build detailed personal profiles of top corporate executives to help with high-level selling. That makes sense. Trying to do the same thing with even more granular detail and at scale doesn’t make sense.

B2E reeks of “wouldn’t it be cool if…” syndrome. Making databases bigger and more complex doesn’t inherently make them more powerful or useful. I remember a marketing database at AT&T many years back. It was state of the art for its time, centrally tracking every purchase of AT&T equipment, services and merchandise for 20 million customers. Then one day, an AT&T executive had an epiphany: not only should the database track what customers bought, it should also track everything they were offered but didn’t buy. Everyone thought the concept was brilliant, though at the same time nobody could articulate how all this new information might be used. The initiative involved building a huge new data center, and the sheer volume of data being collected and stored brought the system to its knees. The system became so complex and so slow that the marketing organizations stopped using it … for anything. The whole database was quietly abandoned a few years later. 

I can understand why Adobe would find B2E appealing, but it’s a mystery to me why anyone else would.