Today saw the publication of Smarter Together — How Communities are Shaping the Next Revolution in Business, a new book by Coupa CEO Rob Bernshteyn setting out what he sees as the next phase in the evolution of digital enterprise. As I mentioned in my review of the book published earlier today, to my mind the big question the book leaves unanswered is how the model might work outside of the business spend management arena where Coupa has been applying it.
I had the chance to talk through this question with Bernshteyn in a Zoom call last week. He's essentially arguing that businesses can gain competitive advantage not by hoarding information and data but by pooling it. He has a wealth of proof points from his experience of operating this model at Coupa, but does that necessarily mean it can be applied in other fields? There are two ways of looking at this question. One is to examine how Coupa has made it work for its customer base. The other is to look at potential obstacles in sectors outside of Coupa's own domain.
Trust and confidence in the network
My first observation is that one of the most potent factors in the success Coupa has had in operating the model is that its customers have been willing to trust Coupa with their data. They have absolute confidence that it will only be used for the purpose of benchmarking performance — from which they themselves will also benefit — without any individually identifiable information being shared.
Building that trust and confidence in whoever is operating the community intelligence engine is therefore crucial to its success. Does that mean we need some kind of central regulation, like we have in the banking industry? When I put this to Bernshteyn, he pointed out that what's more important is transparency around the rules.
I think the ultimate thing you're looking for is truth. You're looking for transparency. You're doing trust before you can get the truth, the transparency. Because you can't see, and you don't know, so therefore you have to trust.
What if you could see and definitively know? So if you expose those rules of engagement, if you expose the data - obviously, in anonymized ways - that can help mitigate a lot of these challenges.
When Google got started, he adds, it had to overcome a lot of distrust. Were the results trustworthy? What if people tried to game the results by outwitting the search algorithms? Google has earned trust by delivering results, and in doing so providing benefits that outweighed any doubts about what might go wrong. This is why people should resist the temptation to focus on the potential downside of anything new, says Bernshteyn.
I think what's missing in that conversation often is the other side of it. Maybe there are risks, maybe there are challenges, maybe there isn't the willingness to provide? All that. Why aren't we talking about what you're going to get out of it? What you're going to get out of it needs to be more than what you are going to contribute. That's the starting place of any kind of business relationship.
Instrumenting the data
Another factor that has allowed Coupa to make progress with this model is the investments it has made in having the instrumentation in place so that the data can actually be collected. Coupa started pooling customer metrics more than ten years ago, and ensured that it had the necessary permissions in place to use that data in aggregate for trend analysis. It has since made significant investments in data science and AI capabilities to analyze that data. Other vendors are not so far advanced in their journey — but Coupa can be a role model for them, says Bernshteyn.
You could say it's going to take other people longer, so they're not as well suited to push this dimension quickly. That's probably true. But I think the other side of it is, because we're on the bleeding edge of this dynamic, folks could look to us to see how we stumble, as well as how we progress, and how we move this conversation forward. That's the spirit of the book. It's, put a position paper out there, get some intrigue going and get some conversation around it, because that's how we see the future.
Part of the problem I think in others following down this path is that companies are still getting used to being so connected, and there are a lot of habits and mindsets that have to change. Hand-in-hand with that goes the need to change a lot of the infrastructure and the ways in which businesses have connected and managed their data in the past. But Bernshteyn believes companies are being forced to adapt by the pace of change.
The amount of information and data — and the speed at which it's being created and being consumed — is growing at such an exceptionally fast pace that even attempting to keep up with that seems like a losing approach. You have to look at ways to make sense of it ...
I think that [is] happening in tandem with a greater willingness on behalf of human beings to share their data anonymously ... that's the kind of the wind behind us can really push us into a place where we can do things we haven't done before.
He cites retail as an industry ripe for reinvention using a community intelligence approach. Currently each vendor, whether it be Target, Google or CVS, collects data independently. What if they were to pool that data and work in concert to offer the right product at the right time and the right price point?
None of that's happening. They're completely in three different worlds offering their own value propositions, with the exception of Google beginning to show me pharmacies, maybe when I'm driving somewhere. But that's so rudimentary and so early.
He goes on to conjure up a future in which all these vendors are pooling information such as which sites I've been visiting, where I've been looking on the page, the sentiment expressed by my facial expression, or whether I'm sitting down or moving around. The problem with that, I point out, is that privacy concerns have thorougly undermined confidence in the likes of Google, Facebook or Amazon to be on the consumer's side. His response is to point to the example of how Salesforce made it mainstream to save sales data in the cloud — something that would have seemed completely alien to the Rolodex-carrying sales people of the 1980s.
It's absolutely a big speed bump in the way, but I think ultimately it'll be overcome ...
What looks like it's ridiculous and non-trustworthy and whatever, back then, today is like, 'Are you kidding me? Obviously I'm going to use it, that's not even in question.' So I think it'll be very much the same way with this over time.
Nevertheless, sectors such as customer engagement or talent management lack the converged data sets that are the key to unlocking these community insights. Bernshteyn believes the market will open up these silos.
It's like going to one doctor versus going to the universal, latest information about the health conditions in my current situation. The question is, how we're going to get there and how long it will take ...
There's so many new companies getting started in the Valley and everywhere, that are focused on some of these domains that have a chance to build it from the ground up. I think the other thing that's helping us is ... greater standards being developed around data sharing.
In conclusion, I ask what are Bernshteyn's goals for the book. He has two objectives, he tells me. The first is simply to generate debate:
This is my attempt at providing some element of thought leadership, trying to put forth a position paper that'll spawn dialog and information exchange and continued development of ideas and progress.
The second, he frankly admits, is to help position Coupa as an enterprise software leader.
I want us to be the tail that wags the dog in enterprise software. I think we're on the bleeding edge of some things that are going to happen in enterprise software.
I think we're learning, we're stubbing our toes, we're pushing forward, we're creating a lot of successes. We're starting to get a voice a little ... and I'd like us to be seen as the innovators and thought leaders that we are.
In a total addressable market worth $50 billion, at the end of the day, Bernshteyn wants to see more companies using Coupa.
Why do we have to expend this continued energy on awareness? I'd rather that awareness developed through thought leadership and through truth and honesty and transparency and innovation, than through paid clicks on Facebook.
On that note, Coupa's Q2 earnings last night showed continued progress although a jittery market sent the stock price down more than 5% today. Quarterly revenues were $125.9 million, up 32% on the same quarter last year, while GAAP net loss was $43.1 million, worse than the $20.0 million recorded a year ago, due mainly to costs acquiring treasury management vendor BELLIN Group. But with the full year revenue outlook maintained at just shy of half a billion dollars, Bernshteyn maintained a positive outlook:
We're playing to win in this category without any question whatsoever. And to that end, we've continued to develop a really rich and robust and very sizeable pipeline, and we continue to have incredible engagement within that pipeline.
I think it has been a lot easier for Coupa to pool spend management data than will be possible in sectors such as customer engagement and talent management. This is because spend data is calibrated in highly standardized metrics, such as dollars, days and weeks. There's far less standardization around customer sentiment or candidate skills — perhaps there should be and perhaps greater demand for standardization will spur their development. But for now, I think Bernshteyn's notion of community intelligence will spread slowly out of spend management into other areas. Perhaps this will spell opportunities for newcomers to find niches where the metrics exist but have not yet been exploited. Overall though I think this trend will be a slow burn rather than a rocket ship.