Conversations eat apps\u2019 lunch.\u00a0 Twilio founder and CEO Jeff Lawson made this statement. It happened at the company's annual user conference, Signal.\u00a0 The statement stayed with me for a while. A few other remarks from his talk stuck with me too. And eventually led to an article I wrote. It served as part of a thought leadership series the company is currently featuring. It focuses on how more of our interactions with companies seem conversational in nature. And those conversations shape the path of our customer relationships. Modern communications technology saw to that. While at the conference, I spoke with Dan Miller. Miller founded and serves as lead analyst of Opus Research. He pioneered research into communications technology. The research looks at how this technology transforms the enterprise. For\u00a0 example, take the call center. Customer service provides another opportunity for communications technology. Dan shared his thoughts on how technology helps companies. He explained the need to be conversational when interacting with customers. And we discussed the impact this has on the relationship going forward. Check out the edited transcript of our conversation below.\u00a0 And watch the full conversation in the video or click on the embedded SoundCloud player below. Defining the Customer Engagement Model Small Business Trends: What is conversational AI? Dan Miller: So if you generalize and say, "Oh, there's $60 billion being spent on conversational AI", then you get the, "Well, what the hell is that?" Small Business Trends: Well, what the hell is it? Because there are a lot of people using that term. And sometimes it's like one person says it and it has a completely different kind of meaning than someone else\u2019s. Dan Miller: Absolutely. Right. Small Business Trends: What do you say? What is it for you? What is Conversational AI? Dan Miller: Well, so we put the technologies that we cover under a huge umbrella called conversational commerce. And then within that, as you look at the application of elements of AI and probably the most important really is machine learning. That's what's revolutionized the ability for computers to understand us. Whether we're typing or talking. A lot of the early recognition of what some people were saying happened on the voice channel. So there's some early work done with slow neural networks. That built essentially operational dialogues. There's a constant tug of war between what's going on. With intelligent virtual agents that use natural language understanding. Which is part of the machine learning family. And constant improvement in the ability to understand what we're saying. And what does that have to do with IVRs (interactive voice response) and investments that companies have made in these systems that answer the phone and do automated handling today of people calling in for customer support to get a question answered. Increasingly And in response to a promotion, that's how it all started. And increasingly to maybe buy something. So that's what we're figuring out. A Look at Where We Are Small Business Trends: So where are we today in the spectrum? Over the last couple years of course it seems like things kind of sped up or got more broader appeal when the smart speakers came aboard and people could actually talk to a device and get a question answered quickly or get some service requests fulfilled. So it seemed over the last four or five years it's definitely picked up and spread out and seeing all sorts of different use cases. But you've been there 20 or 30 years, so where do you see things today as opposed to where they were a few years ago? Dan Miller: That's a great qu- ... I went back in the Opus research archive because we'd covered what we called back then the Telephony API. I'm thinking the first report I wrote was in 2011 and it was saying that here's what's going to happen is the ... and this is what's going on with Twilio specifically at Signal is that it's part and parcel of how the world has become API driven. We live in a developer's world. We get to co-habit with them, but in this place of the 4,000 people you're talking about, 99.5% are developers here. And you can say the same thing about, when I was at the Voice Summit last week and that was three thousand, four thousand people and they were all developers too. So there's tremendous amount of energy in dev nation going on right now. There are, at least in the Voice Summit, some real similarities in what went on with apps. But one of my takeaways from yesterday was up on the screen when Jeff was talking- Conversations are Replacing Apps Small Business Trends: Jeff Lawson, by the way. CEO and founder of Twilio. Dan Miller: Yes. And it just said conversations are replacing apps. Small Business Trends: Right. Or, is eating apps, sort of like software eats whatever. Now it's that. The other thing that stood out for me, too is, being the CRM background, customer engagement was like their third pillar and they talked about it from a standpoint of what they announced with Twilio conversations. But the thing that really stood out as he was talking about this is he talked about how customer journey is really the company's brand today. Which to me- Dan Miller: Yeah. Something of a stretch. Customer Journey is Becoming Brand Small Business Trends: It's a stretch, but you could actually see that potentially happening because as services and experiences become as much or as important as products are today, those tie together and create something like a customer journey that could be your brand at some point. Dan Miller: Yeah. And what's good making that part of Twilio's story is that we're entering a world where the contact center has been redefined. Small Business Trends: Right. Dan Miller: And once you accept the fact that there's now communications platforms as a service or set of services and APIs and one of the categories within that is the contact center as a service, meaning that there's some core customer interaction management stuff that takes place. And then there's a marketplace of microservices and APIs that require the kind of brains that this developer community is growing comfortable with, and this is in your answer to your question of what's different now from five years ago, there weren't these tools and there wasn't this community of interested developers who found telephony interesting. I mean, phones go off the hook, deliver a dial tone, completed a call, IVR is played a message and now they're not discreet. Customer Journey or Conversation? And to your point, it's not necessarily a journey, the interactions that take place are better captured as a conversation and a synchronous conversation. And then it takes a company like Twilio and there's others, there's Vonage, there's what Amazon's doing with Connect and they're all trying to figure out how you weave together the moments that individuals either want to talk to one another or talk or chat. Small Business Trends: Right. Communicate. Dan Miller: Communicate with others and build the confidence and when they choose to do that you know it's me, I know it's you and we can be more productive achieving our own objectives. And we're better off doing it with this kind of infrastructure than the old dinosaur bones of the phone system. Small Business Trends: Well, it's funny because email is still really the dominant channel when it comes to interaction and I think they popped up an astounding number of like they have 80,000 customers that are sending 50 billion emails a month or something like that. Dan Miller: They had the entire ... where they put all these zeros after ... What is that? Customer Engagement Model and Email Small Business Trends: Unbelievable. Yeah. So still email is prevalent. And then they started talking about apps in particularly with texting of course, but apps, like WhatsApp. In particular, 53% response rates when you interact through WhatsApp, at least that's what they found with their customers. And we all know that's an unbelievable number. Dan Miller: Yeah, well right. So when Twilio bought SendGrid and that's the context of what we're talking about here. Small Business Trends: Yeah. The email part\u2026 Dan Miller: And SendGrid is ... I mean their main product is validating email addresses for companies, so they have confidence that when they do send out one of those quote targeted unquote emails that is not spam, they insist, that it's going to a legitimate mailbox. Small Business Trends: Somebody who actually is expecting an email from them. A Look at Twilio Dan Miller: Right. So Twilio started out as a family of Telecom APIs and then in its early days the organic demand for it, what developers wanted to do was get a lot, I mean it's phone, right ... They get a lot of phone numbers and initially they discovered that it was a great tool for bulk texting and texting in this case is a precursor to all the messaging platforms. So when you started talking about apps but then brought up WhatsApp, WhatsApp is a messaging platform. I mean everything manifests as an app on a smartphone, but at that point you're logged onto WhatsApp, you're authenticated because you logged onto WhatsApp and you do stuff as you in a messaging context. Dan Miller: And, yes, it's an engaging thing. It's addictive. But when you message a brand, you're usually have an objective in mind. And if a brand messages you, it's not as spammy or undirected. So the 53% sounds about right, but it is a shock to email people. Small Business Trends: Yeah, they're usually like three or four or five percent open rates. Dan Miller: Yeah. Open rates. Small Business Trends: Open rates. Not even response. How to Improve the Conversation Dan Miller: Right. So we're kind of improving. If the idea is to improve the conversation using conversation as the engagement model as opposed to inaccurately sending out some- Small Business Trends: Just blasting away. Dan Miller: Yeah, just blast away. We have better tools and that's what's being validated here. Small Business Trends: There's a couple of things. The ending was interesting because of the way that they showed, it's really being able to add in people to the conversation regardless of what channel it's on and for a company to be able to orchestrate that in order to create the kind of ending experience that is going to leave a customer who's looking for a service or for help satisfied. Dan Miller: Yeah. And this was a \u201cyou had to have been there\u201d moment. I mean they had people dressed up as birds and puppies and the pilot, but they started out with a totally plausible situation where within a messaging platform, when a person is engaged with the airline- Small Business Trends: And this is like a situation where they need help, their flight might've gotten canceled or something is going on. Drilling Down with Real Life Examples Dan Miller: Right. And then they discover they left their laptop on their seat and so it's things that were like really annoying and require some immediate action and it isn't in an age where you wouldn't know who to go to and you call the airline, you go to the help desk, that they were showing that in a sort of a conversational messaging realm. You want to talk to the pilot, here's the pilot. You want to talk to the person cleaning the interior of the plane, you can do that. Small Business Trends: Or the folks that are getting your luggage. You can talk to anybody. It was an extreme case of course, but the idea of being able to communicate with the right people and you don't have to worry about you finding them or what channel that you have to use to find them. It's done for you because the company has a platform that allows them to incorporate the right people in at the right time, it doesn't matter what the channel is. Dan Miller: Yeah, and it's a vision. I mean, and that's what's kind of cool. Small Business Trends: What was the biggest takeaway theme subject that you thought is going to at some point be the important thing in the next couple of years? Looking to the Future Dan Miller: I'm going to lean on my old reliable one. Which is how much of this just becomes a commodity. And not a commodity in the, "Oh, it's valueless, blah, blah, blah, blah." It's a commodity that, whether you're a contact center administrator, whether you're somebody that's a CX expert, whether you're the person responsible for the digital transformation of your company. What components ... We started with this, "Hey, you can call it conversational AI if you want to, but what is just going to be table stakes. And their working reliably when it comes to natural language understanding. Which is in essence recognizing an individual's intent and having the capability of matching that intent with an answer or recommended action. And we're at a point where a lot of this stuff is working really reliably. \u00a0It's getting moved into the critical path between companies and their customers. The engagement model is becoming a conversation. Not a journey. And life's good. Small Business Trends: Well, I think the way I look at it, conversations are part of overall interactions or vice versa. And it's those interactions, those conversations connected over time that create experiences and those experiences are what make up the journey.