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| Home - Industry Article - May 06 Issue |
The Software Industry's Other Transition
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No More Sour Grapes
Another investment of ours, Novazone, helps its customers - in industries ranging from produce, food processing and poultry to pharmaceuticals, bottled water and manufacturing - increase revenues by using ozone-based solutions to improve the freshness and safety of food, water and other processes naturally without the use of chemicals.
The company incorporates an array of patented ozone technologies into complete, automated systems that are reliable and cost-effective. Novazone has more than 250 customers in 15 countries including Coca-Cola, Pepsi Cola, Arrowhead, Sun Pacific, Orchard View Farms, Paramount Farms, Safeway, Colgate-Palmolive, Procter & Gamble, and Wyeth Pharmaceuticals.
In recent months, Novazone has doubled down on the food industry, a $3.3 billion market, where orders quadrupled in just two months. The benefits are real. For example, spoilage is a big issue for Chilean grape producers shipping their produce overseas to Europe. By adding Novazone ozone-based purification technology to each shipping container, spoilage is slashed from 20% to almost nothing, which adds $5,000 of value to a $25,000 shipment.
Don't Aggravate Customers - Sell Them More
In a third example, shortly after the bubble, companies handling front line customer support via outsourced agents and automated voice systems found themselves in a death spiral. Reduced demand drove down the volume of transactions, which further eroded economies of scale in the customer support function. To correct this problem, companies looked to "fix" the cost side of the equation rather than strive for revenue increases. They replaced talented US based outsourced agents with lower quality offshore talent and additionally drove for higher automation to eliminate agents all together. The result was a dramatic decrease in customer satisfaction for the companies and a rapidly eroding market for agent outsourcers and speech IVR vendors.
In 2003, partly out of desperation to find alternative uses for agent talent and to justify speech IVR investments, a select number of companies switched their message from cost reduction to revenue generation and up selling. Agents were trained on appropriate up sell messages, "I can consolidate your accounts and offer you a lower monthly APR if you sign up for our Platinum Card. Are you interested?" CRM systems were dusted off and put to good use in scoring potential callers and matching them with likely offers and IVRs were modified to pull callers out of the call flow and get them to agents who were idle and had proven track records of successful up-selling. One notable example, LiveOps, utilizes highly skilled home-based agents to upsell new products and services to inbound callers of customer services.
Successful up selling has significantly reduced call center budget requirements and, in a few cases, has turned these cost centers into revenue centers.
Final Thoughts
These are just a few examples where technology companies are hard at work to help their customers make more money vs. simply slashing IT expenditures to the bone. The challenge is in finding new value propositions - significant business needs that, with the help of technology, can be addressed. It is my hope that, in Silicon Valley and beyond, we will see more new companies take this approach.
Paul Holland is a General Partner with Foundation Capital. His primary focus is to help software start-ups go from zero to $100M in revenue. He helped take two venture-funded software start-ups, Kana Communications (KANA), and Pure Software (RATL), public. Paul currently serves on the board of directors for Edge Dynamics, Ketera, TuVox, Conformia, Codefast, Bella Pictures, Mendocino Software, and Simply Hired; and previously for Talking Blocks (recently acquired by Hewlett-Packard) and RouteScience (recently acquired by Avaya). For article feedback, contact Paul at pholland@foundationcap.com
 
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