INSIGHTS

Beyond CRM 2.0

Last week, and for many other weeks, I discussed CRM 2.0, but today I am thinking more about the world beyond 2.0. Maybe it will be CRM 3.0, or maybe some wise guy like Paul Greenberg will change the numbering and call it “CRM 20xx,” who knows?

My reading and research tells me that there will be a need for something else, partly because the market won’t just evaporate, but more importantly, because the market is going to change again, and, I think, dramatically. The change will be caused by the cost and availability of fuels used in transportation. Here are some quick facts to ponder.

  • The U.S. Department of Transportation announced last week that cumulative travel for 2008 is down by 2.1 percent at 934.8 billion vehicle miles traveled, compared to the same period in 2007.
  • Also, mid-size SUV sales were down last month 38 percent over May of last year; car sales, which had accounted for less than half of the industry volume in 2007, rose to 57 percent in May.
  • Sales of new hybrid cars passed 3 percent in April 2008.

Energy and the Economy

Because all this data is from the U.S. Department of Transportation, I am sure it’s pretty accurate. To net this out, we are traveling less, and our cars are not getting better mileage — there are over 200 million cars on our roads and most of them are the same cars as last year. The average age of a car on a U.S. road is eight and a half years, and the life expectancy is 16 years. Although I don’t have similar information for air travel, I presume airlines are logging fewer seat-miles or however they measure capacity utilization.

Travel and energy consumption go hand in hand with economic output. There has always been a correlation between energy used, miles driven and the health of the economy. The only notable exception I know of was when the country went for smaller cars in a big way during the Reagan administration. At that point we actually saw economic activity improve while fuel consumption increases lagged.

At more than US$4 per gallon, you don’t need to be an economist to see that the same conditions are in place today, and the evidence of lower miles traveled and increases in purchases of smaller vehicles including hybrids are laying the ground work. This all will have an impact on CRM, and at this moment, I don’t see any vendors anticipating a change or preparing to do something about it.

Peak Oil and CRM

My biggest concern is that, unlike the 1980s, the shift this time will be more drastic and permanent. I am one of a growing number of people who think that the planet is at about the halfway point in the available petroleum supply. In other words, half of what we started with has already been used. Don’t take my word for it; the term of art is “peak oil,” and you can run a search on it and get almost five million hits in the blink of an eye.

Peak oil is a lot more than a bunch of Doomsday prognosticators running around the countryside, which you’ll see if you do that search. In a finite world, any sane person would have to expect that the supply of petroleum or any other commodity, no matter how large, is finite. So bear with me for a moment longer and consider some implications and their effect on CRM.

First of all, there’s no need for anyone to panic. There are lots of alternatives that can help preserve our way of life and traveling. However, we are at the beginning of a massive infrastructure change-over, which could take a generation, and the interim period is what we need to consider.

If fuel prices continue to increase — a reasonable assumption given rising demand for a limited (and most likely dwindling) supply — then we can expect more downward pressure on travel. Less travel means fewer face-to-face sales calls and a greater reliance on technologies that will enable us to work with and administer customers in indirect settings. Less travel might mean fewer trips to the mall, too, so I would expect that B2B (business-to-business) and B2C (business-to-consumer) commerce will be affected, and that automatically means CRM.

Riding the Changes

Under those conditions, there will be greater need for the Internet, greater bandwidth requirements and the need for additional technologies to support voice capture, video communications and simulated presence (for lack of a better term). All this online activity will transform the package delivery service business, too. Moreover, the cheapest way to ship freight is rail, and we can already see smart investors buying up railroad shares.

According to MarketWatch, part of the Wall Street Journal Digital Network, Bill Gates is a big investor in Canadian National Rail, and the quoted value of the investment is a cool $1,589,028,000. Other very rich investors are taking stock in rail too. Warren Buffet’s Berkshire Hathaway recently said it owned 11 percent of Burlington Northern, another major railroad. Rail is a long way from technology, so why would people like this bother with those investments if they didn’t have an inkling of what is happening?

The railroad example is just one in a constellation of opportunities that await us in transportation, technology and even in CRM. The continuing tightness in the energy markets will definitely cause some dislocation and pain. It is the classic example of a disruption in the market place, but there is opportunity here as well, even in our own backyard. If you are a CRM company, it’s smart to begin asking how you can play in this changing marketplace.


Denis Pombriant is the managing principal of the Beagle Research Group, a CRM market research firm and consultancy. Pombriant’s research concentrates on evolving product ideas and emerging companies in the sales, marketing and call center disciplines. His research is freely distributed through a blog and Web site. He is working on a book and can be reached at denis.pombriant@beagleresearch.com.


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