Tony Safoian (00:00):
All right. Welcome to another great episode of Cloud N Clear. This time, my guest is James Glover, CEO of Coherent Path. Welcome James.
James Glover (00:26):
Hi. Great to be here. Thanks, Tony.
Tony Safoian (00:29):
Recent customer of ours but we’ve gotten to know each other and I think work together as two companies pretty quickly. So, I’m very excited to be able to bring you on and have you tell your story and tell our story together. You’ve been doing this for a long time. I think that’s a good starting point.
James Glover (00:48):
Yeah. It started in 2012 and it’s been a while.
Tony Safoian (00:54):
What gave you your idea to do this? Where did you see the market fit and what led you to this passion around marketing and email marketing and communications?
James Glover (01:08):
Yeah. Great question.
James Glover (01:09):
I was working with my co-founder. He’s a math professor out of Dartmouth College and we’re actually working on a couple of longer running fraud problems. So, one of them is instead of stealing Tony’s credit card and run to the wrong liquor store, there was a company called Fair Isaac that would flag and alert and say, “That’s not what we guess Tony would do next.” But what happened as people started to acquire stolen identities, they needed a way to monetize them. So, we’re working with JP Morgan and Wells Fargo and folks like that. And what we would see is that a customer would apply for a credit card, try to look like a normal person for six to nine months and then run the card up to the limit and disappear. And so, the analytics that you need to fight that is more like trying to model a customer through time in the data and then try to use that to spot the counterfeits.
James Glover (02:05):
He actually also worked for the US government. They gave us all soldiers, medical and prescription data and said, “Find the ones that are becoming addicted to prescription drugs.” So, it’s a journey but a journey with an inflection point that you’re trying to model through time. So, I’m not trying to guess what you would do next. I’m trying to guess whether or not you’re on a journey towards a bad place. And so, we did that for a while and then we sold that business to Fidelity Information Services. And we said, “Who else cares about the journeys that their customers are on?” And we felt like in the world of retail, the analytics there was very oriented towards the next step and guessing what Tony would do next as opposed to thinking about the customer journey through time. And so, we hit on that as a great way to leverage our experience and to move into a new space. So, that’s the history side of it.
Tony Safoian (02:56):
In 2012, those were the early days of big data and sophisticated data analytics, ML and a little bit of AI in terms of being able to build predictive models. Was that part of your co-founders math thesis and work that he was doing, that he was able to figure that out so early?
James Glover (03:18):
Well, what he discovered is that you could put a geometry on a product and transactional space and then our customers such as L.L.Bean and Gap, et cetera… Then you put the customer into the geometry and you see the dynamics of how they’re moving through it. And then you try to lead them on a journey towards becoming the highest value version of themselves. We often use the example of ET. When ET was in the forest, Elliott put down a stream of Reese’s Pieces to try to get him back to Elliot’s house there. And so, Greg, that’s his branch of math. And so, he published some academic work around putting hyperbolic geometries on transactional spaces. And so, that was the foundational work that we used for our patent. And then we needed to figure out how do you put that into the real world in a big data environment?
Tony Safoian (04:16):
Wow. So, there’s a patent behind this.
James Glover (04:21):
Influencing customer journeys through product and transactional spaces. So, that’s pretty strong.
Tony Safoian (04:26):
I love how you describe it as a journey because I think so much of the world still tends to operate in a transactional mindset.
James Glover (04:35):
Tony Safoian (04:36):
But I think what you’re alluding to, and this is probably where you found the product market fit or whatever the current popular vernacular is, is that it’s about building a relationship with that potential customer or existing customer over time. Is that the primary thesis?
James Glover (04:56):
James Glover (04:57):
We sometimes also use the analogy that we would be like a nutritionist or a dietician or something like that to emphasize the fact that we want to think about that relationship through time and we want to create a meal plan for Tony over the next couple of years that’s going to have him grow up to be big and strong. So, retailers are notoriously oriented around tomorrow. It’s a difficult time for a lot of retailers. And so, the easiest solution is the biggest possible discount, which will make the cash register ring for today as opposed to thinking about that relationship with the customer through time and exposing them to as many categories as possible. We often use the example of a personal shopper. If you were to walk into Bloomingdale’s and there’s James, your personal shopper. You wouldn’t expect them to say, “Do you want to buy some more of whatever,” or, “Hey, can I induce you to shop with some huge discount?”
James Glover (05:58):
They would be optimized around trying to show you more and more of the catalog.
Tony Safoian (06:04):
Winning the lowest cost game is very, very hard. Almost nobody can do that unless you’re Walmart or somebody. You can’t really do that sustainably. So, absolutely the value game is where brands and companies can differentiate themselves. And I think what a lot of retailers don’t realize is that people are willing to pay maybe more than they think based on the experience.
James Glover (06:31):
Yeah. We did a study once with one of the big retailers where we found that 70% of their customers were no more likely to respond to a discount than to a content based offer. And so, 70% of the time when they were offering a discount, they were doing it without needing to, where as they could have motivated that customer by exposure to a new part of the catalog.
Tony Safoian (06:56):
That sounds like so much money if you just discounting needlessly 70% of the time. That sounds like a lot margin leaving the P&L for no good reason.
James Glover (07:07):
Yeah. Well, it’s knowing which 70% is the one that you didn’t need to do. So, that’s the challenging part.
Tony Safoian (07:15):
So, has your business experienced a different level of interest because of the last couple of years?
James Glover (07:24):
Do you mean COVID specifically?
Tony Safoian (07:26):
James Glover (07:27):
Yeah, totally. We’ve more than tripled in size over the last 12 months. It’s been amazing and I would say that a big part of that… We have some great brands like Bloomingdale’s. And Bloomingdale’s for 15 years tried to become more of a dot-com and then COVID came and they became a dot-com overnight. And it was amazing to see the transformation and they just did a great job at responding to the circumstances and driving the relationships through the internet as opposed to in person and still leveraging the stores for pickup and things like that. It just forced a massive transition that would’ve taken them 10 years otherwise. And so, we rose with the tide of those great retailers such as Gap, et cetera.
Tony Safoian (08:26):
We see it from our side as well and not just with retail but other types of businesses who have had this… If you’re a silver lining type of person, you look at it as urgency and opportunity to transform in a way that maybe you thought you had much longer to figure out. There’s been a great divide of companies, whether it’s retail, food service or other things where they’ve adapted very quickly to this new paradigm versus those that resisted or couldn’t move quickly enough. We’ve seen this complete division of good fortune versus the risk of an existential risk.
James Glover (09:09):
Yeah, totally. And what we’ve seen is that it’s given power to the folks in the marketing org. There were turf wars that were being adjudicated over the last 10 years, where all of a sudden all the power shifted to a different part of the organization. I think that’s a big part of what let them move quickly.
Tony Safoian (09:31):
What’s great about technologies like yours is that, and just new modalities of marketing or communication or service delivery… You mentioned pick up and curbside at Bloomingdale’s. By the way, I don’t know how you knew I shop at Bloomingdale’s but this is [crosstalk 00:09:57].
James Glover (09:56):
Hope you’re in the test group.
Tony Safoian (09:58):
The new capabilities and the muscle memory that’s being created… My thesis is that is not going away. I feel like that’s just going to be another modality that they will continue to use because customers will continue to desire. They will want to maintain digital experiences. They will want to maintain curbside pickup for big population. As soon as others can go back to the store, they’ll want to go back to the store before a lot of people who thought they could never shop this way or interact this way or consume this way are like, “Actually, this is pretty convenient. I’m going to keep doing it.”
James Glover (10:36):
Yeah. And it goes down to that it’s the basic strength of the value proposition. And so, the store is good for some kinds of discovery but online is convenient and great for other use cases. And so, I think for sure, these big retailers have got good at leveraging their competitive to advantage such as what they do have over Amazon and the things that Amazon can’t do. And so, that omnivores’ perspective has been great for them. And so, they’ve all of a sudden beefed up their online presence but now they’ve got both. And so, they can really actually compete, which is great to see.
Tony Safoian (11:15):
Speaking of the market and not waiting for anyone, the biggest irony ever as you walk around is borders that’s no longer there that has been replaced by a physical Amazon store.
James Glover (11:29):
Yeah. I know. It’s crazy.
Tony Safoian (11:33):
But to your point, I think even Amazon realizes that there’s this other brick and mortar advantage that these other retailers have but if they wait too long, Amazon is just going to have both. So, they have to use the distribution and the customer base. They have all of these advantages that if they execute well on the digital side, I think will make them thrive. There’s other brands who have done really well. I think Best Buy and The Home Depots and the Lowes and a lot of these companies have figured it out but the ones who have not, it’s been really tough.
Tony Safoian (12:06):
Same thing for food service. Some restaurants did exceptionally well during the pandemic period because they figured out a different modality of driving relationships and servicing their customers. So, I think what you’ve seen is a subsection of what we’ve seen, which is this acceleration of becoming digital which is a great opportunity.
James Glover (12:34):
And once they do that, once they sort out the distribution, these are just channels to the customer and it goes back to what they’re actually good at, which is making great products and marketing that motivates people to explore those great products. They’ve always been good at making product and they’ve always been good at marketing creative. And so, if those become the differentiators, if it’s no longer, “I have all the features of Amazon. I have free shipping. I have in-store pickup,” or maybe some features that Amazon doesn’t have but then it’s not going to be about that. It’s going to be about the products and their core marketing abilities, which is what they have been good at historically. So, that’s good.
Tony Safoian (13:18):
So, going back to the technology and the company a little bit. So, you’ve chosen primarily… Email is the medium by which you’re building these relationships. So, how does it actually work?
James Glover (13:29):
Think of it this way. I don’t know how many times you shopped at Bloomingdale’s in the last year but I’m going to go with something like two to four times. And then think about how many times you visited the store or their website. Maybe 10 times in total. How many emails did they send you? 200. So, if you think about the primary mechanism.
Tony Safoian (13:50):
I get rewards. I get this email for that or this email for that.
James Glover (13:54):
Yeah. So, it is the primary vehicle that they use to communicate to their customer. And if you are a machine learning or an artificial intelligence solution like we are, email is the perfect place to be because it’s where the conversation is happening with the customer. And they have a ton of them. They have millions and millions of customers. They produce a lot of creative. And so, the machine has a lot of options to choose from and it knows it’s going to have 30 bullets over the next month. And so, it can construct that diet that we talked about in terms of trying to make the best customer.
Tony Safoian (14:32):
Is it able to change that formula, the plan in flight based on my behavior?
James Glover (14:38):
Yeah. So, we talked a little bit about that geometry like ET in the forest. And so, the geometry is relatively stable but for each and every customer, their place in the geometry is constantly moving. And so, we update that every single time we have an opportunity to talk to them. And then we also build an ideal version of that customer for every single customer. And we try to put Reese’s Pieces or content in front of them to try to lead them to that ideal version of themselves. And so, that dynamic is changing every single time we have a chance to send an email or to communicate to that customer. And so, you’re talking about a billion and a half emails a week, where each and every one of them are being personalized for the recipient.
Tony Safoian (15:28):
That’s powerful. And I think the other thing that’s potentially helped you has brought email lists back to the forefront of importance in general, which is what Apple did with iOS, with the Do Not Track. It’s actually completely changed the marketing paradigm, especially with D to C where the social platforms… You just couldn’t deliver ads as an effective way anymore.
James Glover (15:58):
Yeah. Cost of acquisition goes up or becomes impossible in some instances. And folks like us who use only zero party or first party data, which is still totally valid. It’s a good time to be alive for those of us who are using first party data. And we have none of the duress that folks that were focused on Facebook ads.
Tony Safoian (16:26):
That was a big change. That was a huge change. And I’ve heard from many people that the importance of email and first party has skyrocketed.
James Glover (16:37):
Tony Safoian (16:39):
Hey, it’s better to be lucky than good but it’s best to be both. It’s best to be both.
James Glover (16:46):
Tony Safoian (16:47):
So, tell me about how the tech stack for you has changed. In 2012, you’re dealing with a completely different tech stack that’s available now. By the way, the beauty of your story and the customers we serve in general, either customers like you who provide software to other types of customers we have or them directly is, you’re pretty much limited by your imagination today in terms of what you’re able to do. But you didn’t start in the current embarrassment of riches of how much technology’s available in this super advanced public cloud space. Tell me about your journey over the last 10 years of your tech stack. How do you figure this out in 2012 and how does that evolve?
James Glover (17:34):
I’d say there were two phases. The first phase where we started out on Amazon. We thought about them as our enemy on some level because we’re trying to help these big retailers in their war against Amazon. And then the second phase when we moved to Google. And maybe in the first phase-
Tony Safoian (17:54):
You were never on [crosstalk 00:17:55].
James Glover (17:56):
Historically, in my career, I have been on Premise and one of the things that-
Tony Safoian (18:01):
Not in the last decade.
James Glover (18:03):
Not in the last decade.
James Glover (18:04):
What we love though, moving from OnPrem, which is what we were with the fraud solution and that solution for the federal government. The difference between doing things OnPrem and doing things in the cloud, I would say the single biggest difference is you can build your business around letting people try the solution for free. And if you think about it, that has two massive implications. One is that they know it works for them. You get better customers who you’re actually going to add value to because they’ve been able to make sure that there’s good fit between what you do and what they do. So, that’s huge.
James Glover (18:42):
But the second thing is when customers are trying it, you’re always testing the value. And so, it makes the whole company very oriented around that AB test that we do for the customer and figuring out, “Okay, how are we going to make this work better?” So, every day your mindset is around, “How do you improve the solution?” And you’re very focused on that in a way that when you are shipping software and you had a huge enterprise process for the solution, you had some vague target of what you were trying to build together but it was super hard to stay focused on the value. Whereas when everything is built around a trial that is going to do an AB test. Where I know to the dollar, how much money I made Bloomingdale’s yesterday.
James Glover (19:34):
So, that changes the whole culture of the company to be oriented around, one, removing as much friction from the sales process as possible by letting people try it for free. And then secondarily, letting everyone in the company focus on the value that you’re providing. And so, you just keep getting better and better from that perspective. So, I would say from the micro-magnon previous experiences to living in the cloud world, I would say that has been a huge difference, which has meant a lot for the business.
Tony Safoian (20:11):
Yeah. And look, I don’t blame you for starting on Amazon 2012. I think Google wasn’t quite there yet. It’s pretty common in the more mature digital companies that we serve. I want to talk about that journey to GCP. What was the inflection point? How much you alluded to your customers or retailers issue but I want to hear about that. And actually, the technology as well. What did you discover in the process of switching?
James Glover (20:41):
Maybe two big things. When we started out, we were rolling our own on a lot of our spark and infrastructure. I’m not the most technical guy in the world but what happened is, as we got farther and farther along, the world passed us in terms of what we could capably do as a thirty person company at the time and as we were rolling our own infrastructure because none of it existed in 2012. We were watching the world go faster and faster and we were sitting there pretty enviously saying, “Huh, this sucks.” And so, when we moved to Google, we basically used a ton more off the shelf components that the world had developed that just weren’t around when we started.
James Glover (21:41):
And that was an investment in the beginning but it’s enabled us to go so much faster. And so, that was a huge part of it, the ability to take advantage of the fact that the world was working for us on some level. So, that was huge. And then the market pressure such as our customers. What they tolerated in 2012, they wanted to contractually prohibit by 2018 or something like that. Do you know what I mean? Where they were like, “Okay. We like your stuff but we don’t like it enough to tolerate you giving some of that money to our worst enemy.” And so, it became a part of what the customers wanted to put pressure on. And so, between the desire to go way faster by not rolling our own on a lot of these things and the desire to truly be a good partner to our customers and hear them when they say, “This really bothers us.” I think those two things combined to make the move make a ton of sense for us.
Tony Safoian (22:48):
Yeah. The second part is something we’re hearing more and more and not just in this case. Of course, retail is probably the most prevalent case where we see the retail customers of ours, themselves or in the software community that serves them, which we have a bunch of ISVs that are serving them, which is the market pressure is just, “I don’t want to risk my data being there. I don’t want to send revenue there,” and all of this other stuff. The number of businesses Amazon is entering, I’m like, “Are they going to have any footprint whether or not competing?” But of course, retail is the most sensitive right now. So, I think that’s going to be interesting. And what TK said and Rob said when they first came on board at Google, especially TK three years ago. He was very, very clear of like, “Look, we’re not going to compete with the market with our customers and we’re not going to compete with the software community. We don’t want to be in everyone’s business. We want to be the most desirable building blocks for every other software company.”
Tony Safoian (23:50):
So, I think that’s hopefully what you’ve discovered. The other part I’ll say and I applaud you for this is, when we’re doing these takeouts or migrations from any platform, we really do encourage the thoughtfulness around the opportunity to re-architect. We don’t want to do… I mean, sometimes you have to and do them in phases, which is fine but there’s nothing inherently wrong with a, migrate then re-architect. But if you’re able to do it as you’re moving, that’s what we want to hear. We want to hear, “We could do three releases a year. Now we’re doing 30 a month.” That kind of capability. And we’re using more platform services as opposed to compute and storage services, which is cheaper and scales better and all that stuff. So, I’m glad that’s the direction you went as well.
James Glover (24:47):
The feeling was like paying off your mortgage or something like that. That feeling when all the debt rolled away that we’ve been carrying around for four or five years was a great feeling.
Tony Safoian (24:59):
As far as data in general, again, a deliberate investment by Google and accentuating the areas that google.com forced Google Cloud to be very, very good at and all those platform services to be good at. Data’s number one. They want to be the data lake, data warehouse, data processing platform to the world and big query and the surrounding technology is quite magical. And hopefully, you are able to do even more as far as feature and functionality development on your own platform over time by virtue of being on GCP. That’s what we hope.
James Glover (25:36):
Well, if you think about when we started out, we were very interested in controlling the contents of the message but as the solution is solidified… By the time Bloomingdale’s lets me decide the contents of every email that I’m sending you, they’re in a good position to let me say, “What time of day I should send it to you and how many emails?” “Why do they divide it into just a small number of buckets such as small, medium and large,” in terms of the amount of content that you give. And then ultimately, those promotions. How much of that are they willing to turn over to a machine? And if we do a great job on the contents and what time of day and how much email, then we’re in a great position to help them with the mother of all problems, which is the discounting problem. So, having a much more flexible infrastructure where we can continue to build models and solutions and have Greg work in his sandbox has been great.
Tony Safoian (26:35):
So, if you’re able to share your thoughts on the future, which I’m sure as a CEO, you think about the future quite often as I do. What can you predict about the future of retail and the future of Coherent Path as well? You’ve been around for quite some time. You’ve been very prudent with the amount of money you raised, not very much, but what are you thinking the next three to five years looks like for retail and for you?
James Glover (27:05):
For the future of retail, if you think about… I think of the core value proposition of a retailer understanding their customer. And so, I could pick a random new product and you could tell me which of your customers that would appeal to. And so, part of building a relationship with the customer is providing that role of curating the universe of products down to the ones that Tony will be interested in. Otherwise, they’re going to get dis-intermediated by companies that are trying to go direct to consumer. And so, if they can maintain that value proposition, that is a valuable thing. You’re busy, you know what I mean? Someone who can curate the universe down to the stuff that you’re interested in, that’s the core value proposition of the retailer. That and marketing from my perspective. The ability to put that product into a context that can help you visualize why it might be great for you, which is the essence of the marketing.
James Glover (28:07):
And so, I think retailers that are good at that and understand that, that’s their core differentiation and are making the investments in order to continue to get better and better. And especially to stand for a part of the market. I love L.L.Bean, “Be an outsider.” They stand for something. “We want to be about outdoor family enthusiasm. And so, we’re going to get great at picking products and bringing them to people who care about outdoor family enthusiasm.” And so, that’s a retailer that stands for something and will be successful. So, I see that as that’s where retail’s going and you will be under great pressure if your value proposition is providing discounts that say, “Today only, 70% off.” That’s not as strong of a value proposition. So, I would say that’s on the future of retail.
James Glover (28:57):
On the future of Coherent Path, we want to tuck in behind that value proposition and we want to be the experts. Let them be great at making products. Let them be great at building marketing materials and let us help them with the data science that’s required to, at scale, to do it for five million customers individually for each and every one of them, help to decide, “Okay, this is the right product to put in front of that customer,” at the right time and the right channel and the right context with the whole message being built out by a machine.
James Glover (29:30):
And so, that’s a special machine that you want the marketer to turn over his customer to that kind of a machine. We think that’s pretty valuable. And so, we’ve got the top of the pyramid in terms of TJ Maxx, Bloomingdale’s, L.L.Bean, The Gap and Banana Republic, et cetera. So, we’ve got the best retailers that are out there now and now we need to distribute it to the rest of the market. And so, that’s the future for us, which is continuing to automate as much of that task and to bring it to the rest of the market.
Tony Safoian (30:02):
It feels like you’ve made a lot of progress in the technology and the market has moved quite a bit but it also feels like it’s super early days. I’m super excited that you’ve bet on GCP and Google Cloud and SADA to be your partner because ideally, we’ll be there for the journey. You’ll have us to depend on as your needs shift and change. And please continue to tap us on the shoulder when you’re thinking about doing something new. Our job is to make sure that we’re always ahead of what technology is going to be released by Google that may be transformational in nature and what our customers can use. So, really excited for you. I loved the way you articulated the opportunity in retail and the evolution of retail. I haven’t quite heard it put this way before. So, I learned quite a bit, James.
Tony Safoian (30:52):
So, thank you so much and I think the audience is going to enjoy this quite a bit.
James Glover (30:57):
Thank you. We really appreciate the partnership and the opportunity to share some thought with each other. Thanks a lot.
Tony Safoian (31:02):
Thanks so much.
Speaker 3 (31:06):
Thank you for listening to Cloud N Clear. Check the show notes for links to this week’s topics. And don’t forget to connect with us on Twitter @CloudNClear and our website at www.SADA.com.
Speaker 3 (31:17):
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