November 15, 2007
Measuring ROI on social media investments
A lot of people and companies are struggling to come up with good ways to define an ROI for social media investments - Patrick Schaber's recent post on the topic is just one of the many thoughtful pieces on the topic.
The key to measuring your investments in social media is to first define what it is you are trying to do - are you trying to increase sales, improve the SEO of your site, get more new product ideas into your new product development funnel, trying to improve customer service, or enhance your PR by getting a bigger share of voice in the social media space? And yes, you can do all that with various social media strategies - we have case studies in each and every one of them.
So once you have defined what it is you want to do - measure it the same way you would measure any other program deployed for that same purpose. If you already track idea sources and various percentages to gauge the success of your new product development pipeline, just add a category for the new social media-based community and measure everything else the same way. If you want to increase sales, just measure the efficacy of the social media based campaign the same way you would measure any other lead generation program. And if PR/awareness in the social media space is your goal, then there are many more tools at your disposal in the social media space to measure progress than there are in traditional media. One bonus of social media-based programs is that they will impact multiple marketing functions much more so than traditional marketing programs. So in effect you might develop an ROI in one area and see the cost of doing business in other areas go down at the same time.
Now, the real problem is that we measure traditional marketing programs the wrong way. Almost everything in traditional measurement programs is customer transaction-based - how much will it cost to get a customer to buy...ONCE. What we really want to measure is how programs affect a customer's life-cycle value - including his/her ability to influence others in making buying decisions. The other problem with most traditional measurement yardsticks - and ROI is perhaps the most famous of them - is that they are trailing indicators, not leading indicators. Not enough companies measure things in ways that give them indications of where their business is going, or how sucessful add-on programs will be.
We are currently working with Deloitte on a research project to uncover how companies are measuring the progress and success of various social media-based external communities. If you would like to help with that or if you have opinions on the subject, feel free to email me at francois [at] emergencemarketing [dot] com.
August 16, 2007
The CMO role is broadening...
McKinsey Quarterly has an interesting article on the evolving role of the CMO (requires subscription). In it they argue that while most CMO's have their hands full, their role should be further expanded - to represent "the voice of the customer" throughout the organization.
(Yes! finally some common sense on the role of the CMO from an authoritative voice ...)
In the face of a rapidly changing customer - ignoring "push" marketing and making buying decisions based on their own research rather than sales recommendations - and with bloggers and other consumer-generated content now determining corporate reputations, companies need to change the way they meet customer needs, the way they innovate, and the way they behave in the marketplace. That will require change efforts across the entire corporation, and who is better positioned to lead those charge than the CMO?
You don't buy the fact that "push" marketing is dead? Then consider this: in consumer electronics more than half of the buyers buy products based on their own research rather than advice from sales staff. More than 60% of baby boomers use the Internet to supplement their doctor's advice (so pharma marketers have to rethink the pitch to doctors). And by 2010, it is expected that 80% of all insurance purchases will be based on consumer research rather than information supplied by insurance agents.
You are not worried about consumer generated content? McKinsey Quarterly says" "User-generated media account for almost one-third of all the time individuals spend on the 100 most visited US Web sites, up from roughly 3 percent just two years ago."
The change in consumer buying habits is broader than some may expect. It is not just that the number of customer touch points with a company has increased dramatically, there is also a more rapid growth of the low and high ends of the the market at the expense of the middle.
So a marketer does not just need to understand the changing customer need as it relates to their product or service, they also need to understand the changing buying needs of those same customers and adapt the whole company to deal with those changes.
July 24, 2007
In New Product Introduction - more is less
The Executive Corporate Board has a great white paper entitled "Boosting the Impact of Innovation and New Product Launch Processes." In it they have some mini case studies of how companies who try to achieve top line growth by introducing an increasing number of product/service extensions often times end up with reduced revenues instead.
They also recommend that companies focus on "market segment" innovation rather than pure product innovation - which has traditionally been used to help differentiate products. With the advent of fast followers becoming increasingly faster, product innovation no longer helps with product differentiation. They describe the case studies of P&G and Best Buy as good examples of "market segment" innovation - where you look at product innovation based on the insights gained from well defined market segments.
May 17, 2007
Companies need to add "Customer UI" expertise to their talent pool
And I am not talking about product UI (User Interface) - I am talking about the "company" UI from the customer's point of view. After all my poor buying experiences with companies that have very bright and dedicated people working for them, it became clear to me that most companies should hire or staff a group of independent customer advocates with UI experiences to ensure that all the touch-points through which a customer can interact with the company are all compatible with one another and are all delivering against the same promise that is being made during the pre-sale cycle. That includes packaging, in-store support/returns/etc, phone support/billing/etc., web support/shops/registration/etc, and any other way through which a customer could interact with the company after they first buy a product.
The fact that HP as a company has multiple logins for different shops, and that a "customer" case manager for one division can not handle problems the customer has with another division would go away if you would have a customer-centric company UI group who would police this stuff. The fact that my insurance company sends me statements with a different look and feel, different information in the same places, and different content for the various policies I have would go away as well. The fact that most corporate web sites are organized around the companies' divisions instead of being customer-centric would also go away...you get the point.
A good example of a company doing this right is Apple. I recently bought a new iMac for my son, as well as a new Airport Extreme to upgrade my home office network. I registered those products online, and required some support for setting up disk and printer sharing with the new Airport. I have also been using iTunes to buy my music for years. At Apple, all the touch-points reinforce the same message - we are easy and fun to work with. From the store interactions to the packaging, to the online support and registration systems, all the touch-points are perfectly tuned to one another and they all have "me" at the center.
March 20, 2007
Is the end of the hierarchical organization in sight?
The latest issue of FAST company has an interesting article on how the traditional business organization is meeting democracy and how that could radically transform the way we think of enterprises in the future.
It's not a new notion - the idea of the "externalized" project-based organization and talk about the impact of the disappearance of friction in communication, cooperation and collaboration on traditional corporate business models and the power that goes with it have been around for a long time. It has become an agreed upon fact that in this interconnected world, size and scale of an organization no longer ensure viability. The notion that only large companies have enough resources to market their products to mass markets of consumers, and to fund serious scientific research, has been shattered for a long time. According to the article, recent scientific breakthroughs in the area of nanotechnology may now break one of last remaining reasons for large companies to exist - namely that they are the only ones having enough capital to build and run manufacturing plants. Heck, even Caterpillar now thinks of itself as an "intellectual property company!"
So are we moving towards a world of a billion single-person enterprises? Probably not soon enough...
March 19, 2007
Marketing shift: from 'one->to->many' to 'many<->to<->one'
At last week's Community 2.0 conference, an interesting discussion developed after John Hagel's keynote address, in which he said that customers do not want 1:1 marketing, but that they instead want to be put in touch with many connections and resources.
In a way, that is like describing marketing evolution from the one->to->many, to the 1<->to<->1 to the many<->to<->one, with the vendor having the opportunity to facilitate the connections between customers and other people and resources - also called community building. Despite a wave of excitement about the potential of 1to1 marketing in the 90's, popularized by the success of the One to One books by Rogers and Peppers, one attendee argued that we were never able to successfully achieve 1to1 and that therefore many-to-one may be an elusive goal as well.
But is this true? Is this truly an evolutionary process in which we cannot skip a step until the previous one is complete? Or did we missread the need for many-to-one as the need for one-to-one and launched on another marketing fad that never materialized? Could community-based marketing be like that as well?
It could be argued that this time we are dealing with the genuine article - and that some companies have known that for a very long time - skipping the 1to1 marketing wave all together in favor of many<->to<->one, and in the process reaping tremendous competitive advantages (note the bi-directionality of the arrows - a key ingredient to make it work!).
What do you think? Community-based marketing: another fad or a real competitive differentiator?
February 15, 2007
You can no longer hold on to your brands...
Last week I moderated a webinar panel on the role of communities in B2B marketing with Rob Leavitt from ITSMA and also with Mike Smith from BMC Software (recording can be found here - requires registration). It was a great conversation with good lessons learned from BMC Software.
As part of my opening comments I harped on one of my favorite topics again - that the field of marketing is undergoing tectonic shifts and that the old rules no longer apply. The old techniques of interrupt marketing that involved interrupting people to show them product or company messages or as Alan Moore, one of the co-authors of Communities Dominate Brands, calls it - the just in case marketing techniques - do not work anymore!
You can no longer broadcast messages to individuals and hope that they will get it and retell your story. Funding traditional communication programs like that is like pouring water into a sinking ship. Not only are people fed up with it, you are also competing with an exponentially growing number of companies who are trying to reach the same people. Plus you now compete across multiple media - many of them always-on and where prime time is between 9-5.
As a marketer you really need to solve the ambient findability problem - be there when people need you and where they need you. Madison Avenue calls it "engagement" - although most agencies are very confused about what engagement means. No it does not mean engagement with the ad...
One way of solving this riddle is to engage with communities who are already communicating amongst themselves about topics that you want to talk about. If your message resonates with them then it will automatically get amplified within the community before being "retold" outside the community. In some cases they may not like your message, but still like what you do and simply replace your message with something else before retelling the story. And then there will always be the case where they really don't like what your doing, will reject your message and talk back and in the process expose flaws with your company or product in public.
This is of course the end of control. This will happen whether you like it or not. You have to give up your brand to your communities to succeed. And if you do it right you will once again reach your customers and do it with budgets that are dramatically lower than what you are spending today.
January 22, 2007
The community-driven marketing department - a romantic notion or a possible reality?
In a couple of different discussions (on this blog as well as on the Future of Communities blog) I was taken to task over the suggestion that a company could eliminate their marketing department and replace it with customer communities much like what happened at Ducati.
Over at the Future of Communities blog I looked at what it would take to replace a traditional marketing department with a more lightweight community-based group - concluding that while you may not want to get rid of your marketing department, you should definitely look into making it much more community-driven.
January 16, 2007
Escaping the middle-market trap
The latest McKinsey Quarterly (requires subscription) has an interview with Electolux CEO Hans Straberg in which he describes how Electrolux escaped the middle-market trap.
The middle-market trap happens when a market gets polarized with low cost Asian brands taking the low end of the market and premium brands growing at the high end of the market at the expense of the middle-of-the-road brands. This is a common occurrence in markets, a threat to which most companies respond by cutting costs. History is littered with companies - some well known icons - that have cut themselves into oblivion.
One of the main changes implemented in marketing was the way they segmented customers. Instead of using the traditional industry segmentation based on price and a "good-better-best" hierarchy they started segmenting customers by lifestyle - ending up with more than 20 different product positions. Amazing how companies are only now discovering the power of actual customer scenarios as a basis to segment markets - a technique described by Tom Peters in his very early books.
Another change they implemented - which allowed them to play at both ends of the market - was to set up two different business models, with separate sales forces, to serve the value end of the market differently than the premium end of the market.
Mass-segmentation does not work anymore, except perhaps for some commodity products - like gas, or corn. Most mass markets, however, behave like collections of micro-niches and benefit from being served the same way you would serve customers in the long tail.
January 3, 2007
You are your context
Try tapping a song for someone else – chances that the person you are tapping it for gets it right is 2.5%. What makes a lot of sense to you, because you have the song playing in your head – sounds like total gibberish to others. The same is true when you meet someone online for the first time – their chosen handle may symbolize some imagery for you that was totally unintended by that person.
The difference here is that we all interpret signals based on the context we have. And when our context is different, we interpret things differently. A different context is also the main cause for friction and conflict between people.
In the past, there was a higher likelihood that people’s context in a particular geographic region was somewhat similar – there were only a limited amount of TV programs and radio shows, people had a much more limited supply of books and newspapers, music preferences were more uniform, there were fewer options for schooling and there were less churches to choose from. Now on the other hand, much of the popular culture is consumed through 100’s of cable channels or through the internet, you can read books that are self-published and reach audiences in the 100’s of people, you can read any newspaper in the world online or get your news from specialized blogs, you can pick from music bands that self-publish their music on social networking sites and have fan clubs in the tens or hundreds of people, and you can come up with educational programs that are totally unique to you. Add to that the increased mobility of people and the ongoing trend towards more extreme and fractioned faith-based groups – and you have a world when there is almost no shared context anymore. It’s what Wired Editor Chris Anderson calls the long tail…except that perhaps there are more people moving into the long tail now that it can be served.
Marketers, advertisers, communicators and politicians have been struggling with this phenomenon for a few years now – mostly because the old ways of “framing” issues does not work in a world where people’s context or “world-view” is so vastly different from one another.
A world populated with people that have very different contexts should also be a world where innovation explodes – or is Kathy Sierra right when she says that the “wisdom of crowds” mostly results in safe, well-balanced and non-offensive solutions?
What do you think?
December 6, 2006
No meetings, no office, no rewards for face time - just get the job done
Imagine this - not getting rewarded for face-time in the office but instead for getting projects done, all meetings are optional, work from the beach, work while hunting, work from the road, you chose - as long as your projects get done!
This new work environment at Best Buy is called Results-Only Work Environment, or ROWE. By next March, 75% of all Best Buy corporate employees will be on the program. A modified version of the program is also under development for people who work in stores - although it is a little harder to imagine how face time will be eliminated in those customer-facing positions.
Sure, there are a lot of companies that have gone virtual over the years, including pioneer HP, IBM and Sun Microsystems. But no company of this scale has ever taken it to this level - allowing for a great deal of employee self-organization.
Interestingly enough the program did not come from the top down but instead began as a covert guerrilla action that spread quickly and eventually became a revolution within the company. The top brass at Best Buy really needs to be commended for embracing this change instead of killing it. These practices have been tried in many start-ups, only to be killed when VC's bring in the "professional" or "seasoned" "senior" managers.
Come to think of it, many innovative things get killed or never see the daylight when those "guys" move in...
December 5, 2006
Social media 2.0: empowering communities to solve problems
In a recent interview for the BBC, Tony Blair's outgoing strategy advisor brings up a few good points on how the Internet is fueling a crisis between politicians and its citizenry. Many of his points are actually valid for the world of business as well.
Too often he says, the web is "used to encourage the "shrill discourse of demands"." What he would rather see is "more needs to be done by the web community in general to encourage people to use the Internet to "solve problems" rather than simply abuse politicians or make "incommensurate" demands on them." Talking about the immaturity of the whole environment he said ""We have a citizenry which can be caricatured as being increasingly unwilling to be governed but not yet capable of self-government," and further comparing the citizenry to teenagers he said "Like "teenagers", people were demanding, but "conflicted" about what they actually wanted, he argued."
Social media empowers people to "speak up" and "make demands." It can also be used to leverage collective intelligence to "solve problems." Yet the tendency at this stage is for people to whine more than to collaborate on constructive problem solving. This can perhaps be explained by the fact that the dominating tool in the new social media toolkit is the blog, which works better as a single person or small group mouth/shout piece than as a true collaborative environment. Sure, blogs are well suited for conversations or raging debates, but that is not how one typically solves problems. Wiki's are more appropriate, but still limited to a very small segment of the population - too insignificant to truly act as an empowering environment for community based problem solving and self-governance.
So maybe that is what we could expect from social media 2.0 - a set of rich and intuitive collaborative environments that enables groups of people to spontaneously congregate and collaborate on helping others to solve problems, whether they'd be socio-political problems or problems related to their favorite brands.
Some interesting experiments in developing collective problem solving environments are already underway - such as the Community Wiki, where Keith Hopper discussed the same BBC interview and suggests a few actual projects projects to tackle as a group.
November 29, 2006
People don't get your marketing speak, nor do they get your strategic executive gibberish...
Chip Heath and Dan Heath wrote an interesting article in the Harvard Business review this month about the "curse of knowledge" (requires subscription).
The curse of knowledge happens when your language, which is based on your level of knowledge, cannot be understood by others. So an executive who uses language like "achieving customer delight!", or "unlocking shareholder value", phrases that have real meaning to him based on his years of immersion in the logic and conventions of business, will sound like a person who has a love affair with vague strategy statements to frontline employees who may not be privy to the underlying meanings.
An interesting experiment done at Stanford University in the early 90's proves that point rather nicely. In the experiment they assigned people one of two roles - "tapper" and "listener." The tapper would pick a well known song, such as "Happy Birthday" and tap it out on the table. The listener had to guess what the song was. Before tapping the song the tapper was asked to predict the probability that the listener would get it right - and they predicted 50%. When they actually tapped the songs, the success ratio was a whopping 2.5% - out of 120 songs, only three songs were guessed correctly. So what sounded like the perfect tune for the tapper actually sounded like some kind of weird tapping code for the listener.
One way to avoid this is by "translating" your message in very simple language, and one company that does this right according to the article is Trader's Joe. They actually develop their messages for the imaginary unemployed college professor who drives a very, very used Volvo.
This is a great reminder of the power of using real and actual scenarios in doing business. Not only can real detailed scenarios with real people help you with messaging, they will also help you with the design of better products and and the development of better customer interaction processes.
November 27, 2006
Would you poison a whole community just to catch a few freeloaders?
Communities are hot - with every other company rushing to deploy them to enhance their innovation processes, their new product introduction success ratios or their customer satisfaction ratings. Yet at the same time most companies seem to be very busy destroying what is perhaps their most important community - their employee community. And they are doing it by affecting one of the fundamental forces that drive communities - trust.
Indeed, according to the American Management Association (free but requires registration - via "It's time to start trusting the workforce" article by Jeffrey Pfeffer in Business 2.0 - not yet online), 76% of companies monitor employee web site connections and 55% retain and review email messages. The number of companies tracking telephone calls, including amount of time spent on the phone and phone numbers called has grown to 51%, up from 9% in 2001. And this does not include companies who require periodic medical checks and random drug usage tests.
So while the balance of power between consumers and companies has shifted towards the consumer in the last few decades, the balance of power between employees and companies has clearly shifted towards the employer. We have to give up our right to privacy in return for a paycheck. And what good does that do? Employees at companies like that feel disenfranchised, lack motivation, distrust their company and management, badmouth the company, etc... Not exactly the motivations that can lead to great results.
The good news is that employees can bail - and with a strong economy, hopefully many at those "big brother" shops will do just that. According to the Business 2.0 article, signs of this happening are already here, with the number of executives, salespeople and production personnel exiting their companies more than doubling since 2003, and with the number of technical and professional people who leave going up 70% in that same time period! Maybe someone will start realizing that the cost of labor in high employee turnover environments goes through the roof. Just ask Walmart - where recent research on their low wages vs. employee turnover compared to Costco's makes for a well documented case study on the impact of employee turnover ratio vs. the real cost of labor.
It all comes down to "return on information." If employees do not see personal benefits in return for the personal freedoms they give up - they will bail. With employees being perhaps the most valuable asset a company can have, it is amazing how many of them squander it in the name of "control."
November 24, 2006
Upcoming Community 2.0 Conference
As mentioned before, I have agreed to chair an upcoming conference on the business of communities - Community 2.0, which will happen on March 12-14 in Las Vegas.
Communities are hot – every company thinks that they need one, but no one is too sure how to set them up or how to leverage them. As with most new buzzword-compliant memes many will approach the opportunity by throwing technology at it and fail miserably. Others will inevitably trespass ethical boundaries and muddy the waters for those who follow.
But some will take the lead of the existing pioneers and integrate the lessons learned into their approach to the business of communities. Those companies will succeed and derive returns that will shame their competitors.
Community 2.0 is for those people who are interested in networking with other community professionals to develop a deep understanding of what works and does not in this new world. The conference will provide a snapshot of the current conversations and body of knowledge related to the business of communities. For those who are interested in helping to shape the market, there will also be opportunities to join groups of likeminded people into ongoing community council conversations.
The discussions, presentations, interviews, stories and case studies at the Community 2.0 conference will be organized in three themes:
- Strategy and theory - what are the underlying forces that make communities tick? How does social networking theory impact communities? Can you leverage crowd sourcing?
- Applications and best practices - where can communities help? Have you thought of communities to bring the voice of the customer into your new product development process? Or to involve employees, partners and customers into improving innovation?
- The technology and social infrastructure - what are the technology building blocks beyond the discussion thread that make for successful communities? What rules of engagement do you need to set up to avoid your community to become toxic?
At this stage the program includes leading luminaries from well known academic institutions, professional services firms, solution providers as well as private and public community managers. We can already count on case studies ranging from the world of high tech to financial services to teenage-based communities. The Conference will also include a targeted technology expo where you will be able to talk with product and service providers in this space. The program is continuously expanding, so make sure to periodically check the conference web site for latest additions to the program.
If you think you have something to contribute - please give me a shout (francois AT emergencemarketing DOT com or on my SKYPE which is fgossieaux).!
November 20, 2006
Open Source Innovation - it works!
The latest issue of the Harvard Business School Working Knowledge has a great interview with Harvard Prof. Karim Lakhani (his blog here), in which he describes the results of his latest research - the analysis of how open source norms of transparency, permeable access, and collaboration work with scientists.
After studying the effects of broadcasting or introducing problems to outsiders for 166 distinct scientific problems from the research labs of 26 firms over a 4 1/2 year period they found that this method, borrowed from the software open source movement, was yielding effective solutions. In fact they found that it was those with expertise at the periphery of a problem's field who were most likely to find the answers quickly!
Some of the best innovations do happen at the intersections of disciplines, which is why it is always a bad idea to have siloed organizations.
Another interesting finding is what motivates people to spend time in open source projects. Sure, reputation and the potential for rewards - as is the case for Innocentive - count, but some of the most important drivers are "fun and the enjoyment of problem solving." The more creative people feel in projects, the more likely they are to spend time with those projects!
November 15, 2006
Did the "wisdom of crowds" fail this election?
According to Reason, the wisdom-of-crowds-based prediction markets failed for the Senate race this last election. Most prediction markets were putting the likelihood that the Republicans would keep a majority in the Senate at 75-80%.
Does it really mean a failure of the system? If the probability that most people in the "crowd" would predict that the democrats would win 6 out of 7 tight races in order to win a majority in the senate is less than 50%, then the wisdom of crowds would only reinforce that - at least that is what the Condorcet jury theorem says. Besides, predicting that there is a 20% chance that the dems would win those races and thus take control of the Senate is not a negligible chance. In fact, it probably is somewhat higher than the straight probability that pollsters would have come up with.
What do you think?
November 14, 2006
Dare I say something?
Are you afraid of speaking up at work? That is the topic of ongoing research reported in the Harvard Business School Working Knowledge. Quoting from their research paper (abstract here) Amy Edmondson from Harvard Business School and James Detert from Penn State, the two researchers, made some interesting observations in this email interview.
While there are individual and contextual reasons why some people speak up more readily than others, the main reason why people do not speak up is "fear" - something that we inherited from our earliest ancestors. As the researchers point out: " it seems we're all hard-wired to overestimate rather than underestimate certain types of risk—it was better (for survival) to "flee" too often from threats that weren't really there than to not flee the one time there was a significant risk. So, we've inherited emotional and cognitive mechanisms that motivate us to avoid perceived risks to our psychological and material well-being...Thus, fear of offending those above us is both natural and widespread."
The interview talks about some ways to change a company culture so that people speak up more frequently. The reality is that changing a culture of hard-wired fear is very difficult. Add to that the fact that change hurts and it may be impossible to really change a company culture without also changing the fundamental hierarchical nature of companies.
November 13, 2006
Increasing customer loyalty by creating deep-soul connections
Dori Molitor, the author of the report starts off by talking about the incredible levels of brand loyalty that Harley-Davidson bikers have - attributing it to a deep-soul connection between Harley-Davidson and those who love their motorcycle, and claiming that this is the highest level relationship a brand can have with its consumers.
Companies like Apple, BMW, or Nike can easily be used as other examples of companies that have achieved deep-soul connections with their customers, but can other companies in less "sexy" industries develop deep-soul connections with their customers? The white paper takes us through the stories of less obvious candidates that have achieved that same level of customer connection - including General Mills, Serta, the mattress company and Trader Joe's.
One of the things to remember, says Dori Molitor, is: "A deep-soul connection is not the exclusive purview of ostensibly “sexy” brands like Harley and Nike, nor does it require spending enormous sums of money. It is about transcending those kinds of considerations and connecting with consumers based on a higher purpose than a sterile, financial transaction." And a higher purpose does not mean a "good cause" or a charity - something many marketers will try to use and fail miserably. Finding a higher purpose is all "about the connections that brands can provide to other people (their relationships) or the ways in which they help consumers lead happier, more purposeful lives."
Well said! At the end of the day branding is all about how people feel about themselves...
November 10, 2006
Email marketing delivers best ROI - but do you buy that?
According to a new study by the Direct Marketing Association, and as reported in DIRECT, email marketing delivers the highest ROI of all media available to marketers. Having just finished reading a pre-release version of WOMMA president Andy Sernovitz' new book - Word of Mouth Marketing: How Smart Companies Get People Talking - he would probably argue that word of mouth marketing would have the highest ROI as you can get that going with no investments.
The DMA research shows that the return on email marketing in 2005 was $57.25 for every dollar spent, compared to $7.09 for catalog marketing and $22.52 for non-email Internet marketing. The study also projects that all the ROI's for the different media marketing options are headed down-ward.
The same research also estimates that the commercial email market in the US was $16.5B in 2005, while the direct marketing-driven sales hit $1.806 trillion in 2005 - projected to hit $2.627 trillion in 2011!
Ouch...that sounds like a lot of wasted dollars...there should be better ways to reach people. And no matter what Set Godin says about messaging frequency vs. "being full ," there ought to be better solutions out there to resolve the ambient findability problem in marketing!
The DIRECT article did not mention anything about the methodology used by DMA - but it is assumed that the study looked at investments vs. "new" customers and "new" revenues - which is a really bad transaction-based metric in marketing.
A more interesting metric would have been to understand how email direct marketing impacts long term customer-relationship-based revenue streams for companies. Isn't that where the real profitability lies?
MARKETING - it's not the transaction anymore, it's the relationship, dummy!
November 3, 2006
The winners will be determined because of marketing
In a recent roundtable discussion at Wharton, C. Robert Henrikson, the CEO of Metlife said "In our industry, the winners will be determined because of marketing. By that I mean true marketing, not sales support, which is what the insurance industry is about in the United States" (here via a pre reading documents from the Innovation & Corporate Entrepreneurship Research Center at Babson for their upcoming Idea-to-profit event which will cover the intersections of marketing and innovation).
Henrickson went on to say that most insurance firms have no marketing plan other than to be a fast follower of innovations developed by competing firms.
Now isn't that true for most industries. Marketers mimic their competitors, they go after the same customers with the same offerings, and they end up killing the market with price-wars...
The panel which also included an executive from a major drug manufacturer, a major real estate developer, a major bank CEO, a retired partner from a major investment bank, and a few Wharton Professors, were then asked if they saw major innovations coming from India and China.
Almost all said no, which is rather surprising even though there were no high tech players on the panel. After all, Muhammed Yunus just won the Nobel Price for Peace for Grameen Bank - which is not just a do-good organization, but a very profitable one at that. Does this not count as a major innovation in the financial services sector?
The health care experts saw little innovation coming from India because of their weak patent system, which they claim is holding innovation back. They also see the biggest opportunity in India being with clinical trials, saying that "there are massive patient populations there that have not been tapped in any major way."
Ouch! Is this perhaps a case of real-time marketing myopia? Perhaps those experts should take a look at open source business models - especially the ones that have been applied to non-technology products - and their potential for traditional business model destruction (or is it disruption?). And instead of looking at India as a massive source of (probably largely unprotected) people available for early clinical trials or cheap labor, they should look at it as a test bed for new business models. After all, it is because of Indian generic drug manufacturers that the price of Aids treatment came down from $15,000 a patient to less than $200 in 10 years time - and that Indian generics are now being used to treat half of the aids patients in the developing world. Does this not count as innovation in health care?
October 10, 2006
CEO's with big egos are always bad news
CEO's are supposed to be like conductors, impresarios, major league sport team coaches, or movie directors - you pick the analogy that works best for you. The bottom line is that they need to coordinate disparate and sometimes dysfunctional groups of people - including stars (who frequently have good-size egos all by themselves), connectors, and losers - into doing great things! And they cannot limit themselves to internal resources only. The good ones will do it with externalized communities of people that include employees, customers, suppliers, partners, and resellers. And the best ones will even integrate competitors into their cast of characters that they can influence to achieve their goals.
So what happens when a CEO has a big ego? The answer is simple - a CEO with a big ego cannot play that role!
CEO's with big egos will inevitably clash and compete with other egos in their ecosystem - be they stars in research, marketing, engineering, or other successful CEO's in their industry or region. Those people are their true competition. Big egos do not collaborate - they compete on the ego level. So what comes first in the case of a CEO with a big ego is not the company, the employees or the customers - it is their ego. What is important is how they will look in the eyes of constituents that they deem influential or important when it's all said and done?
At the extreme, the only way for CEO's with big egos to achieve their goals - come out ahead of other stars, or worse, eliminate the other stars while coming out ahead - is by weaving webs of deceit, building a protective cocoon around themselves, and by ensuring that there is a podium/pedestal for them to step on. They surround themselves and protect people who will foster their agenda blindly - in the process creating executive echo chambers and increasingly removing themselves from business realities.
Even though some are really good at hiding their true nature, there are so many tell-tale signs that can point to bad behavior and real bad news in the future. When a new CEO of a well known brand tries to inject himself in the brand by appearing in TV commercials - what do you really think the motivation is? Help change the appeal of the brand in the youth market? A subservient chicken or an office chimp seem to achieve that goal much better... And you know you're in trouble when your CEO tries to limit access to certain people - like the board. Or when she starts bad-mouthing other CEO's who happened to be ex-colleagues and who are now very successful and get a lot of credit for their achievements. And we can go on and on with early warning signs of leaders who can do more damage than good to their organization.
There are a lot of examples of companies with CEO's with big egos that ended up in disasters, and many others where ego-less CEO's are achieving beyond-great results. And as always, there are the exceptions - but we can not all aspire to be like Steve Jobs. But besides these extremes, and because of ego-centric leaders, there are too many companies who never achieve their true potential and too many reputations that get tarnished in the process for no good reason.
October 4, 2006
There is no room for two in a box....
Jim Lavoie and his partner Joe Marino from Rite Solutions presented at the Business Innovation Factory's second annual meeting today (which is being live blogged on the Corante Innovation Hub)and talked about how they were able to create a corporate environment which is totally project-based and where leadership "authority" is based on employees' "sphere of influence" at any point in time during a given project rather than on the results of more traditional "pyramid" based games.
To make new employees comfortable with the fact that pyramid-based schemes of career advancement are not the way to go and to constantly remind existing employees of that fact, both periodically put on skids to make fun of the more traditional antics of command and control/hierarchical organizations.
They performed one of their songs at the event and keep a web site - called tombtunes - with all their current executive musical productions. The first song is supposed to go up tomorrow - it's a an absolute "must hear" for everyone with experiences in corporate life, especially for those who might have become "unemployable" because they got disgusted with the way those corporate games work. If you are a "company-man," you will not enjoy it!
Note that both those guys acknowledged being really good at playing the pyramid game :)
September 28, 2006
Thriving on the edge of chaos
Fortune's most recent issue has a number of articles on the increasing chaos in markets, technologies customer behavior, and products. Business models that sustained companies for decades no longer work. Companies can now enter and leave markets at a moment's notice. Market disruptions happen faster and faster.
According to the article, the way to manage chaos is not by retraining managers, it's by changing people's mindset and assumptions about business, management, and most economic principles we grew up with. Successful companies are meeting the challenges of a chaotic environment with chaos - by loosening controls, getting rid of hierarchies & titles, providing full transparency into all aspects of the business and more.
What causes all this change? For starters, the fact that companies can now operate free of physical assets makes them both more flexible and vulnerable at the same time. Next is the fact that with the advent of the Internet we have witnessed a dramatic power-shift towards the consumer. Information about products and services, which used to be controlled by the seller - giving them an unfair advantage - is not only widely available, it is complemented with free flowing consumer generated content that gives the consumer the upper hand in the power play.
And the chaos is here to stay. As the article points out "the forecast for most companies is continued chaos with a chance of disaster."
The only way to survive is to allow your company to operate at the edge of chaos - something that nature knows all to well how to do. Perhaps the best training for company executives and employees will not come from business schools but from science departments who are studying complexity theory and how self-organized systems can thrive in nature -even in the worst of circumstances.
If you are starting a new company it may be easy for you to inject that right kind of culture in your company's DNA. For existing companies the only answer is change, dramatic change that is - and as scientists have found, change hurts, and people naturally resist it.
So should we get ready to see many corporate icons dissapear in the near future?
September 26, 2006
The future of the Internet
Major predictions by 2020 include:
- A low-cost global network will be thriving and creating new opportunities in a “flattening” world.
- Humans will remain in charge of technology, even as more activity is automated and “smart agents” proliferate. However, a significant 42% of survey respondents were pessimistic about humans’ ability to control the technology in the future. This significant majority agreed that dangers and dependencies will grow beyond our ability to stay in charge of technology. This was one of the major surprises in the survey.
- Virtual reality will be compelling enough to enhance worker productivity and also spawn new addiction problems.
- Tech “refuseniks” will emerge as a cultural group characterized by their choice to live off the network. Some will do this as a benign way to limit information overload, while others will commit acts of violence and terror against technology-inspired change.
- People will wittingly and unwittingly disclose more about themselves, gaining some benefits in the process even as they lose some privacy.
- English will be a universal language of global communications, but other languages will not be displaced. Indeed, many felt other languages such as Mandarin, would grow in prominence.
Some of those predictions seem like they are already upon us and not 14 years out into the future.
It is especially great to see that 56% of the people who were surveyed believed in this scenario: "By 2020, this free flow of information will completely blur current national boundaries as they are replaced by city-states, corporation-based cultural groupings and/or other geographically diverse and reconfigured human organizations
tied together by global networks."
Unfortunately, many still believe that "governments and corporations will not necessarily embrace policies that will allow the network to spread to under-served populations; that serious social inequalities will persist." And according to the report "The experts and analysts also split evenly on a central question of whether the world will be a better place in 2020 due to the greater transparency of people and institutions afforded by the internet: 46% agreed that the benefits of greater transparency of organizations and individuals would outweigh the privacy costs and 49% disagreed.The experts and analysts also split evenly on a central question of whether the world will be a better place in 2020 due to the greater transparency of people and institutions afforded by the internet: 46% agreed that the benefits of greater transparency of organizations and individuals would outweigh the privacy costs and 49% disagreed."
September 22, 2006
Crowdsourcing vs. community outsourcing
Crowdsourcing has been a popular term ever since it appeared in a Wired Magazine article earlier this summer. This past week, Business Week jumped on the crowdsourcing bandwagon with an article in their second issue of Inside Innovation (may require subscription - but you can find a good description of the article by Renee Hopkins Callahan over at IdeaFlow).
What is confusing about the "crowdsourcing" terminology in both articles is that they use "crowd" to refer to the "wisdom of crowds" - a term introduced a few years back by James Surowiecki to describe the fairly simple idea that large groups of people are smarter than an elite few. Many of the crowdsourcing examples used in both articles, however, like the use of iStockphoto to source images cheaply, do not rely on wisdom of crowds at all. Getting your images from iStockphoto instead of from a professional photographer is like outsourcing your photography to the public - where everyone can be a semi-pro with high end cameras below $1,000 these days. In the end you still buy your images from individual photographers. There may be a crowd, but there is no wisdom of crowds involved here.
When a company like John Fluevog Boots & Shoes asks its fans to submit and vote on new shoe designs - that is a model based on the wisdom of crowds. The wisdom of the mass is more likely to identify a winner than a select few (see also related post on when wisdom of crowds does not work).
The Business Week article spells out four rules for successful crowdsourcing - or should it be to outsource your task/process to an outside community.
First, be focused and provide clear guidelines to what you want to have done. Not really all that different from any outsourced project. If you give vague guidelines you will likely get something back that you did not expect.
Second - get your filters right. Since by outsourcing a task to a large set of people you will get a large number of ideas, you need to filter all those ideas so that you can find the gems. But why not use the wisdom of the crowd to do the filtering? IBM solicits ideas from customers and employees during two day innovation jams - which led to 37,000 ideas the last time around. They then use their own employee "crowd" to filter those ideas. As most companies do not have 140,000 employees to draw upon, they could use their fans and customers to select the best ideas. An idea could be emailed to a randomly selected set of active people for voting, rating or ranking.
The third is to tap the right crowd. Pretty obvious when you think about it. Just like you would not outsource a complex engineering problem to a company of 14 year old summer students, you need to be picky about the community you outsource your task to.
Lastly is to build your community into social networks. While this may be key to success in getting certain communities to function in the long run, enabling networks or teams to form within your community goes against the principle of the wisdom of crowds - adding to the terminology confusion.
Renee adds two more rules in her post - find ways to feed the ideas into your company's existing processes and fund the process - as incentives fuel creativity.
In the end, successfully outsourcing product innovation and other processes to outside communities comes down to a deep understanding of two factors:
- understanding of the traditional keys to success for that particular process
- understanding of the fundamentals to successfully create (if needed), manage and interact with communities - virtual or otherwise
September 18, 2006
Integrating "status skills" into your offering
Trendwatching.com has an interesting article on the importance of integrating "status skills" into your offerings.
No matter what you market, people will consume your offering based on how the product or service makes them feel about themselves in the presence of that product or service. The authors of the article refer to this as "providing your customers and clients with status" - perhaps a little too consumer-focused, but true for all industry segments nonetheless. As the authors rightfully point out: "there is little that consumers do that isn't consciously or subconsciously influenced by a desire for recognition from family, friends, and any fellow consumers they come into contact with."
In consumer goods, providing status may be conveyed through luxury, smart-buying, or eco-friendly symbols - symbols that will often be based on "too expensive," "too scarce," "too inaccessible," or other physical and experience based status symbols that will impress others. In the B2B space, status symbols could be conveyed through smart-buying, well negotiated, achieving results - symbols that are often based on the characteristics that make for a model employee in a particular business culture, and which would likely result in career advancement or increased reputation amongst peers.
According to the authors, consumers increasingly value creativity over passive consumption - a trend that originated in the online world - where your fighting skills may not be what is most valued anymore, but perhaps the originality of your avatar, the number of friends in your tribe, or the uniqueness of your home page. They call it "status skills," and define it as follows: "In economies that increasingly depend on (and thus value) creative thinking and acting, well-known status symbols tied to owning and consuming goods and services will find worthy competition from 'STATUS SKILLS': those skills that consumers are mastering to make the most of those same goods and services, bringing them status by being good at something, and the story telling that comes with it."
Several brands are already incorporating "status skills" into their customer interactions - including
Craft, Switch, BMW, Volkswagen, Nikon, Home Depot, Lego, and many other companies which are described in the article. Another example recently covered is the open source beer, which combines a new business model with the belief that many people will want to brew their own beer and improve their reputation as beer connoisseurs through the widespread adoption of their recipe enhancements.
With sites like Flickr and YouTube, where consumers can easily show off their creativity, it shouldn't be that hard for brands to embed at least some basic "status skills" into their offerings.
September 13, 2006
Most important trends for global business in the next 5 years
McKinsey quarterly just reported (requires subscription) on a survey which they conducted with executives from around the world. In it they asked those executives to identify the top three trends that would affect global business and how those trends would impact their company's profitability.
The top three trends to affect global business over the next five years are:
- the growing number of consumers in emerging economies
- the shift of economic activity between and within regions
- the greater ease of obtaining information and developing knowledge
Other noteworthy trends from the top 10 include: the increasing communication/interaction in business and social realms as a result of technological innovation (#6), shifting structures/emerging forms of corporate organization (#7), and more social backlash against business (#9).
Interestingly enough, the survey found that executives perceived the potential impact of those trends to be significantly larger on global business than on their own company's profitability - perhaps signaling a weakness in their ability to translate global trends into corporate strategy.
Another finding - perhaps predictable considering who was surveyed - is that 85% of the executives describe their business environment as more competitive than it was 5 years ago.
When asked what single factor contributes most to the accelerating pace of change in the global business environment today they identified the main reason as innovation in products, services and business models. Other interesting reasons were greater ease of obtaining information, developing knowledge (#2), and rising consumer awareness and activism (#8).
September 12, 2006
Open source beer...what is next?
In the last issue of Wired Magazine, Larry Lessig writes about a Danish artist collective, called Superflex, which started a new brewery that produces beer based on the software industry's open source model. The beer is aptly called "Free Beer" (or maybe it's going to confuse people who are not familiar with open source, as the beer is actually not free.)
The idea is that the beer's recipe is open and licensed freely. Anyone can make improvements, but when they do they must release the changes as well. Superflex maintains a log with all the improvements at www.freebeer.org. The project seems to be off to a good start - with their first batch of beer sold-out overnight and the company now trying to close distribution deals with other breweries.
If you operate in markets with many lead users, a term coined by MIT Professor Eric Von Hippel to refer to users who tinker and modify your product to better suit their needs, then an open source business model seems to make a lot of sense. It comes down to embedding user innovation directly into your product innovation process.
But do all industries have lead users? And is that the sole criterion for potentially rolling out open source business models? Some markets clearly have them. Think about scientific instrumentation markets, where scientists in labs, universities and hospitals routinely make custom modifications to products, so that they would work better within their particular research constraints. Does that mean that an open source business model based scientific instrumentation company could survive? Assuming that a company could get over the culture shock of giving up its patent protections on product innovations, and considering that every competitor could now offer the same instrument, is there a big enough market for that to happen in a sustainable and profitable way?
What could work is to put widely used sub-assemblies in open source - think for example of a lens motion compensation system. In this case the innovation could be embedded in all sorts of products - including scientific instruments but also consumer cameras and perhaps other products. By doing this you would not only ensure a large enough pool of innovators to make it worthwhile from an innovation point of view, but you would also address the market size and differentiation issues which are probably key to make this work in a profitable way.
Yochai Benkler, quoted in the article and author of The Wealth of Networks, has it right when he says: "we are in the midst of a quite basic transformation in how we perceive the world around us and how we act, alone and in concert with others."
August 28, 2006
CMO tenure keeps going down...
According to Spencer Stuart (via Brand Republic), the average CMO tenure keeps going down. A painful side effect is that marketing agencies have to defend their business sooner as well.
The changes are not that dramatic - with the new average tenure for CMO's being 23.2 months in 2006, down from 23.5 months in 2005 and 23.6 months in 2004.
The whole shortening in tenure is likely due to a combination of things: the fundamentals of marketing going through a dramatic shift - leaving many CMO's who are not permanent students of the industry in the dust - and the accountability of the CMO on the executive team being miss-aligned with what their real role should be.
August 15, 2006
The role of customer feedback in innovation
Over at the Fast Company blogjam, Dave Pollard looks at whether great product innovation really starts with the customer - and describes the whole issue as a chicken or egg question.
Involving the customer in product innovation is not an either or proposition - it is something that should always be done - but done in the right context. And when listening to customers companies need to realize that their mileage will vary depending on the type of product or the phase within the product life cycle.
In some product categories, people could care less about the products or the companies that manufacture them - making customer feedback useless at the least, or potentially dangerous if given too much weight.
Newer products that are still primarily appealing to innovators and early adopters have a different problem with potentially similar consequences. Assuming the product is successful, customers probably care about the product in this case. But their ability to innovate ahead of what is available will likely be several steps behind the ability of the team that came up with the innovation - and giving too much weight to customer feedback may limit the future product potential and give the competition an opportunity to catch up and out-innovate the incumbent.
Then you have more mature product categories where people care - probably the area that yields the most valuable customer feedback. Except that here too you have to be careful about how much weight you are giving to that customer feedback. If your goal is to grow your product revenue by 80% in the future, then you have to realize that "all" current customers only make up a fraction of your future customer base. Attaching too much weight to their feedback may eliminate a large number of future customers that do not share their profile. And according to Harvard Prof. Clayton Christensen's disruptive innovation theory, your trajectory of product improvement will eventually cross the mainstream trajectory of customer need - limiting your potential future customer base, and opening yourself up for a disruptive innovation.
All that being said, and according to MIT Professor Eric Von Hippel, in some fields there are a small number of "lead users" who invent new products out of necessity and who can be an important source of new product concepts. The kind of customer listening that is required in this case is very different from what most people think of when talking about customer involvement in product innovation!
August 7, 2006
Are You in Marketing Death Valley?
Have you been in marketing for awhile? Were you trained in marketing? If so, chances are that you’ve been wondering what happened to the “traditional” marketing rules (if there ever was such a thing) - and what replaced them.
There is no question that tectonic shifts have redefined the fundamentals of marketing as we knew it – leaving many marketers feeling like they are in the midst of crossing the equivalent of “Marketing Death Valley.”
At the very least – take a look at one of the fundamental concepts of marketing - the 4P’s of the marketing mix (Product, Price, Place, and Promotion). In the early 90's Prof Robert F. Lauterborn suggested that the 4 P’s should be replaced with the 4C’s (Consumer needs, consumer Cost, Convenience to buy, and Communications). Either way, do you believe that those are still useful as fundamental concepts for defining the marketing mix? How much can you tweak "price" in your marketing mix if some of your competitors came out with free products? What can you do about "place," now that it has become mostly ubiquitous and almost free? And how much should you spend on "promotion," when the new marketing scarcity is "customer attention" instead of shelf space, and where "findability" is the new name of the game? Sure, in some spaces you can still gain some differentiation by changing some aspects of the "product" mix - but most of those are very short-lived differentiations.
In a series of posts during the next couple of months we will be looking at what happened to the traditional rules of marketing – and try to understand what the new fundamentals are. Feel free to join this conversation and help us to make this series of posts worthwhile.
August 3, 2006
You cannot outsource innovation to your users!
Kathy Sierra over at Creating Passionate Users has a great post on why you cannot count on customers/users to innovate for you.
Quoting from her post, she says:
In this Web 2.0-ish world we're supposed to be all about the users being in control. Where the "community" drives the product. But the user community can't create art. (And I use "art" with a lowercase "a" as in software, books, just about anything we might design and craft.) That's up to us...
Our users will tell us where the pain is. Our users will drive incremental improvements. But the user community can't do the revolutionary innovation for us. That's up to us.
Of course you need to listen to your customers, and of course the customer is in control of many things that used to be controlled by the companies marketing their products and services - i.e., information about the product or service that levels/changes the balance of power in buying situations.
But that does not mean that your customers are in control of designing your next breakthrough innovation! It will never happen...and those companies that try to "outsource" their product innovation to their customers will inevitably condemn themselves to a slow dead by innovation monotony and product insipidness.
In an interview with Peter Drucker many years ago in Context Magazine - Drucker adds a few reasons why you cannot or should not outsource your product innovation to your customers:
- 99.9% of your customers couldn’t care less about your product or service.
- 70% of the people or organizations that should be your customers are not yet (and therefore by letting the existing customers dictate what your next generation product should be - you might very well never be able to meet the needs of those 70% who will make up your needed growth)
- customers never buy what we sell
Where will your killer competition come from?
It is a fairly well documented fact that some breakthrough innovations come from spaces that are not originally considered to be competitive. Nevertheless, it is still fun to witness one of those shifts firsthand.
If you have done any traveling in densely populated areas lately you may have witnessed a few of them. Have you noticed how fewer people seem to be wearing wristwatches - especially young people? Where did the competition come from? Cell phones...A quick online check indeed validates that the worldwide market for wristwatches is down by 10-18%.
So what else is happening? Are there fewer people carrying laptops in favor of web-enabled cell phones with email capability? Are more people using their phone to take snapshots instead of compact cameras? A quick online check does not offer any validation of these trends yet - if indeed they are real trends. But could the cell phone disrupt the wristwatch industry, the laptop market and the digital camera space?
Do you know if your industry may be under siege by stealth competition like this? Are you even looking outside your space?
August 1, 2006
Mastering the new marketing practices
One of the great sessions at last month's CMO summit, which was organized by Corante and the Center on Global Brand Leadership, was moderated by Johh Hagel. While the session has been summarized in a variety of places, John now summarized his points on his own blog. At the risk of being somewhat repetitive I will summarize/paraphrase the post here as it has a ton of great insight...
So where does John think marketing is going?
For starters, he thinks that the current shift in the economics of business will force major changes in marketing. With attention being the new scarcity and customer acquisition and retention costs being on the rise - business will have to start focusing on economies of scope instead of economies of scale. In customer relationships it will come down to getting the largest share of wallet of any single customer rather than a fix share of wallet across a large number of customers. This whole trend is reinforced by the fact that the cost of interaction and the ability for customers to find information about vendors and products is steadily declining as well.
According to John, this all leads to the need for fundamental changes in the areas of marketing strategy, branding and performance metrics.
In the area of marketing strategy, we need to move from the 3I's (intercept, Inhibit, isolate) to the 3A's (attract, assist, and affiliate). Another way of looking at it is that we have to move from a "one to one" marketing to a "many to one" marketing mindset.
From a brand promise point of view - we need to move from a "buy this product because I am great" mindset to one closer to "buy this product because I know you and you can trust that I will configure it properly for you."
As for the new metrics, try these on for a change: average life time value of the customer (customer service execs - are you listening!), 80/20 segmentation of customers based on profitability, ROA (return on attention), ROI (return on information).
And so what are vendors doing?
As John says, they are...well...acting like vendors!
In response to attention being the new scarcity - they are bombarding us with intrusive ads on animals, in urinals, in the sky, and with other desperate moves to "grab" our attention. John has it right when he says "Rather than just focusing on how to get attention, vendors might also want to consider how they can help their customers receive attention that is important to them and not just from the vendor, but from others that matter to the customers."
And as is typical with any new wave of tools, they are also jumping on the new social media technology bandwagon - deploying blogs, communities, wikis and other network-enabled marketing tools without really asking themselves how this will help the customer, or how "it will increase return of information for customers."
John finishes his article with some recommended actions for CMO's to take: affiliate with partners to create more useful solutions for your best customers, change organizational roles so execs are in charge of the total customer experience, and adopt performance metrics that measure and reward the increase of the lifetime value of the customer.
As usual - a post chock-full of great insights for marketers.
July 27, 2006
Whatever marketing becomes...
I do agree with many of the assertions in his reply regarding the poor state of marketing and especially product management in the Linux World and the Tech world in general. I would not, as he does, differentiate between marketing technology products versus marketing consumer electronics or consumer packaged goods. The role of marketing and the skill set requirement are very much the same across all industries. Having deep industry experience is an additional requirement layered on top of that.
Across all industries, marketers must play the role of "cultural anthropologist" to distinguish the real needs from the short term annoyances that people will find workarounds for by the time you can address them with either a new product or a new feature. They must also be able to interact, negotiate, and mediate with R&D, engineering, suppliers, competitors, partners, and other groups, to finalize "feasible" product plans that will meet the customer needs and include all the "relevant" innovations coming from those groups. And they need to be able to do that without being a gatekeeper or information traffic cop. In an age of rapid development and co-creation, they need to be comfortable in an environment where everyone can and should talk to everyone - regardless of organizational boundaries. Because, and within the constrains of not aggravating the customer, all of those groups need to have direct access to the customer to test and validate certain assumptions. Again, there is no difference in those fundamentals across industries.
Next they need to find ways to communicate with customers about the new products and services in the face of "attention" being the new scarcity. And while the solutions will differ from market to market, the range of options that need to be evaluated are the same across all industries. As part of that they also need to make sure that they set up the proper infrastructure to "listen" to market feedback on an ongoing basis instead of in episodic waves as they currently do.
Whatever marketing becomes will be enabled by technology. Wiki's, blogs, social bookmarking, technology enabled CGM, and many other new technologies are very powerful tools for companies to execute all the marketing functions - including all the customer touch-points - in different and better ways. Hopefully marketing will not become "defined" by technology, as that would make things much worse. Just take a look at what CRM did to sales and marketing...
Lastly, it is important to keep all things in perspective. What marketing becomes is not all that different from what it should have been all along...just take a look at what Peter Drucker said during the last three quarter century:
- "Because the purpose of business is to create a customer, the business enterprise has two--and only two--basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business."
- "The aim of marketing is to know and understand the customer so well the product or service fits him and sells itself. "
- "The most important thing in communication is hearing what isn't said."
- "Quality in a service or product is not what you put into it. It is what the client or customer gets out of it."
And hopefully, what marketing becomes will also be heavily influenced by other disciplines besides technology - including sociology, anthropology, politics, economics, science, and others. Some of the best "field-specific" innovations have come from seemingly unrelated fields. Again, Drucker has a good example of that: "The new approaches to the study of history have, for instance, come out of economics, psychology and archeology all disciplines that historians never considered relevant to their field and to which they had rarely before been exposed....... By itself, specialized knowledge yields no performance."
July 25, 2006
Markets without marketing?
Doc Searls has an interesting, albeit provocative, article in the Linux Journal, tiled "Markets without Marketing" (via Horse:Pig:Cow, which has a great follow-up post on it, as does Hugh, who also disagrees).
The article has a number of sweeping market observations, predictions and recommendations - many of which are fairly controversial :
- One of the biggest problems with marketing is that it all too often focuses on "capturing and holding customers, rather than "finding and satisfying customer needs".
- As markets are becoming truly free, we do not have much, if any, need for marketing. Marketing should get out of the way and let engineers talk directly with the customers who will be using the product.
- Advertising is going to die and PR is already dead
- Markets have evolved from conversations to relationships - which will require new skills and will get supported by the new tools
- Marketing needs to get out of the website construction business - it should all get replaced with wikis, blogs, and other direct linkage between information about the products and the customer
- Trade shows can be useful, but please do not send marketing folks
- Nothing is worse that vaporware and yet that is what marketing pushes
- Marketing does not know how you make money with technology or products - but engineering does. And besides, the real question is to understand how you will make money "because" of the technology... not "with" it.
Wow - Doc must have been seriously hit over the head by an old-school marketing spin-meister :)
It is true that many marketers are clueless and deserve the bad rap that they are getting. But more often than not, that behavior comes from the very top - with CEO's, CFO's and other VP's expecting marketing folks to do unnatural acts, and getting rid of them if they do not deliver the same old stuff.
Of course, marketing needs to get out of the way. It cannot be a bureaucratic wall between the customer and the company. But there is a huge gap between hearing what the customer says, and building successful products. Engineering has to have first line of communications with the customer. But while that may bring many advantages - ranging from a better understanding of customer needs by the people who are actually building the product, to better morale in the engineering team - this by itself will not lead to great product plans! You need very special skills and training to be able to turn market opportunities into successful product strategies.
And of course, we need to get rid of no-value web sites and replace them with linkages to the information sources that matter and enhance them with tools to enable various people inside and outside the company to talk and communicate with one another. But shouldn't you have someone in charge of that? Or do you believe that a free-for-all environment will result in an infrastructure where the customer will find what they need in a timely fashion?
And yes - marketing is too often focused on "capturing and holding customers, rather than "finding and satisfying customer needs"." As John Hagel says, they need to move from the 3I's (intercept, insulate, and inhibit) to the 3 A's (attract, assist, and affiliate) - no question about it! But shouldn't you have someone take the lead in that?
Look, you can argue that you do not really need a marketing department - and for practical reasons, I think you do. But you cannot argue that a company should have no marketing. Marketing is what a company should do. Everyone within the company should wear a marketing hat!
And yes, neo was right - "the problem is choice!"
July 18, 2006
Successful formulas do not always work for others - especially when you miss the key ingredients
Whenever a company finds a new and successful way to reach a goal, or to reach a hard-to-get-to audience - many others follow quickly - copycatting the original company, often times with dismal results. In some cases, as is the case with word-of-mouth marketing, new entrants screw up the whole playing field for everyone.
There are three main reasons why copycatting does not always work. First off, many companies who copy others do so without really understanding what the real ingredients for success are. The second reason, which took down email marketing and potentially could take down word of mouth marketing for all of us is related to ethics and industry self-regulation in the absence of government guidelines. And the third one is that best practices are not always portable from one company to another.
The entry of Wal-Mart with a Myspace-like offering clearly falls into the first category (via adage - may require subscription). In an attempt to appeal to teens with something else than pencils and backpacks, Wal-Mart launched a social networking site called The Hub. The site is designed to allow teens (hubsters) to "express their individuality." They can create their own page to show it to the world, and they can post hot-lists of songs and movies. They can even shoot and submit Wal-Mart related video clips and have a chance that it will be picked up as part of their TV advertising.
So far so good.
Except that they screen all content, email all parents requiring their consent for teens to put up a page, and forbid users to email with one another. Oh, and they reserve the right to modify the commercial created with the winning video...
And they call that a "GENIUS WEB DESTINATION?"
It is web alright, but where are the genius and the destination parts? If all goes well, they may win the top price for the "most uncool" social networking site!
July 12, 2006
Can you actually get marketing and sales to stop fighting?
According to a recent article in the Harvard Business Review (requires subscription or can be purchased), you could and you should strive towards integrated sales and marketing departments as the benefits of having both groups work in harmony are plentiful.
Stop marketing departments who spend on advertising without tying the results to sales, stop sales departments that only fulfill demand instead of (co)creating it, and stop managers for whom marketing is nothing more than selling and sales support... p.l.e.a.s.e!
The authors see two main sources of friction between sales and marketing - one economic and one cultural. The economic one has to do with the power distribution between sales and marketing in three of the four P's - promotion, pricing, and product. The cultural one, which may be even more entrenched, has to do with the fact that the two departments attract vastly different types of people - with different educational backgrounds, skill sets, etc.
The article offers a few suggestions to better align the marketing and sales departments:
- Encourage disciplined communication - and that does not mean more communication, which is expensive.
- Create joint assignments and rotate jobs
- Improve sales force feedback
Once you have your sales and marketing departments aligned you can go a step further and work towards achieving an integrated relationship. The authors suggest the following actions to achieve integrated departments:
- Appoint a chief revenue or chief customer officer - a CRO or a CCO
- Define the steps in the marketing and sales funnels
- Split marketing into two groups - strategic and tactical groups
- Set shared revenue targets and reward systems
- Integrate sales and marketing metrics
While some of the advise and terminology may seem a little staid or even passé (after all, is marketing still about the 4 P's? and is the buying process still a funnel?), the advise is solid and practical and should benefit any company with dysfunctional marketing and sales departments.
June 14, 2006
Is the need for higher customer transparency really new?
Many people talk about the increased need for customer and employee transparency, or about the fact that people do not trust what companies have to say "anymore." But are those really new? Or are they being hyped up by consultants who are trying to create the next hype-wave to ride on?
if you look at the most recent brain research, it would show that this trait has been with us forever. If the brain is hardwired to detect "errors," and when it finds them it turns our brain into a 2 year old child's brain who will resist anything coming from that source - then we should have been rejecting and mistrusting all "marketing hype" ever since it existed. People have always expected "error-free" (=true) messages! There is nothing new here, we are hardwired for it.
Maybe what happens is that with the exponential increase of phony sounding marketing messages, more people have started focusing on associating them with BS and have developed new subconscious neural pathways or mental maps to discard them all. Or maybe the messages have just become more phony and exaggerated in companies' quests to differentiate themselves within an increasingly cluttered marketplace.
And maybe the fact that some studies show that an increasing number of people distrust companies can be explained by the fact that it has become more socially acceptable and definitely more doable for consumers to fight back and publicly expose the "marketing untruths," - thus changing the collective (un)consciousness which associates corporate messages with mistrust or untruth. Or maybe it is just a cyclical anomaly, and two years from now we will be back up.
Another important consequence of all this is in the area of word of mouth recommendations and consumer generated content. As more and more companies start to "manage" that channel, often times without full disclosure, more and more "errors" will seep into the word of mouth recommendations - over time causing the effectiveness and trustworthiness of word of mouth to erode as well.
One thing is for sure - the customer has more ways to retaliate against a company than ever before - making the "customer is increasingly in charge" statement a true statement.
June 13, 2006
Neuroscientists find: Change Hurts
A fascinating article in the most recent issue of Strategy + Business from Booz Allen & Hamilton, The Neuroscience of Leadership, describes how change hurts, how the carrot and stick approach to management does not work, and how people who focus on different things have physiological differences that prevent them from seeing the world the same way.
It's no secret that people resist change - even when their life depends on it! New advances in neuroscience found that the brain relegates routine tasks to a part of the brain that requires little energy - freeing up the more conscious part of the brain, and also the more energy-intensive part, to process new things. So say you have been driving a car for awhile, you will probably do it "without thinking," but if you get into a country where they drive on the other side of the road, that same activity will now become a very intensive and tiring experience. The same is true with organizational change. After a while people will sell ideas, go to meetings, and manage others unconsciously - and trying to change their routine will be tiring and uncomfortable.
But that is not all - there is another force at work in the brain that resists change. The brain is very much wired to detect "errors" in its environment - perceived differences between expectations and actuality. When an error is detected, it triggers the fear circuitry in our brain, which is one of the most primitive parts of our brain, and which basically hijacks our thinking. We become emotional and start acting impulsively - our animal instincts take over.
So try changing someones behavior and their brain will start sending powerful messages that something is wrong, thus decreasing their capacity for higher thought. Change results in discomfort and stress...
Another interesting finding of the study is that by focusing attention on something - a particular problem or process -, a person will develop new neural connections which if reinforced enough will become part of their subconscious. This has some interesting consequences. The first one is that if a person starts focusing on a "problem", he or she will start developing new connections (also known as reasons) for why the problem occurs. While they may be true, they will do little in support of change. That also means that the "carrot and stick" approach to changing people's behavior is flawed, as it focuses the person's attention to the problems that are causing the behavior that we want changed instead of the solutions.
Another consequence of this finding is that people who tend to specialize in certain fields - marketing, sales, finance, etc. - tend to develop brain connections to handle their job with the least amount of energy possible. That means that a long term finance person and an old engineering hacker have their brains wired differently - and they will never see the world the same way, even if the rest of their worldview were the same!
So what are we to do if we want to foster change? The study also found that if the brain has a "moment of insight" coming from within (coming to a solution/conclusion by yourself), that moment is associated with a sudden adrenaline-like burst of high energy that is conducive to creating new links (change) in the brain. So if you want to instill change, you have to focus people on solutions instead of problems, let them come to their own answers, and keep them focused on their insights. That simple!
Oh - and the next time you get in a argument with the finance guy - remember, his brain is wired differently than yours!!
May 11, 2006
Who needs a CMO anyway?
Marketing communications guru Larry Weber may have been one of the first to publicly question the need for a C-level executive in marketing when during his keynote address at the Syndicate Conference last year he said: "Whenever a business category gets messed up, we get a C title. Now marketing is so messed up, we've got CMOs."
Triggered by the recent Spencer Stuart survey, Marc Babej and Tim Pollack (disclosure: both acquaintances/friends and contributors to the Corante Marketing Hub ) tackled the question in dept in their most recent "Unsolicited Advice" column which gets published weekly on Forbes.com.
In their analysis they conclude that the reason that an average CMO's tenure is shorter than that of a CEO's is because their job is ill-defined, and they proceed by making a recommendation for what a CMO's job description should be - "responsible not only for marketing communications but also (sorry to be stepping on toes) for product development and sales."
More specifically, they believe that a CMO's responsibilities should include: ensuring the company's products and services are in tune with customer demand, directing new product development and ensuring the continuing appeal of existing offerings, marketing communications, achieving top-line growth objectives, and meeting corporate margin goals.
While they bring up some great points, some of them deserve some further discussion. First off, let's start with an area of responsibility that was omitted from the list but that arguably should be part of a CMO's responsibilities. A CMO should be responsible for all customer "touch points," and that should include customer service. You can work for years to build an awesome brand, only to squander it after a few months of poor customer service (and following that with poor communications makes the demise event faster - as witnessed by Dell, Kryptonite, Mercedes, etc.). The CMO needs to be held accountable, and have the responsibility, to ensure that the customer experience is consistent across all customer touch points.
This next point may just be a semantic difference, but from a company's products and services point of view, the focus should not be on meeting customer demand but on meeting customer needs - both explicit needs as well as latent needs. Finding the latter and building successful offerings to meet those is an especially tricky proposition, but one which if done properly, often results in disruptive, breakthrough, and market-creating product innovations. Customers will not tell you, nor could they, how you should build such products. You "invent" them first and then find ways turn the latent market needs into active active needs.
Having a CMO responsible for product development instead of product definition and product marketing may not be such a good idea either. The product definition process is a process that should be driven by the CMO's product management team in partnership with the technical/product development team. But once a product is defined, including cost targets and time-to-market targets, the product development process itself should be run by a dedicated and independent product development executive, not the CMO. In fact, having the CMO in charge of product development may result in more "me-too" products, not more competitively differentiated products. Another unintended consequence of having the CMO run the development show, especially true in high tech and if the CMO is also in charge of sales, may be an abundance of one-off product versions/special editions built specifically to satisfy end-of quarter requirements. Such situations eventually lead to costing a company millions of dollars in wasted upgrade and migration resources, not to speak about the fact that it can also severely limit a company's ability to innovate in the future.
While CMOs should be held accountable for achieving top-line growth objectives and corporate margin goals, hopefully that is an accountability that they share with the rest of the executive team.
April 30, 2006
Foresight 2020 - likely changes to the global economy in the next 15 years
While reminding us that 15 years ago the Soviet Union still existed and that China was still largely a planned economy - making a 15 year global economic outlook look like hubris to some - the Economist lists 5 trends that will bring massive changes to the global economy between now and 2020. They include:
- Globalization - there will be a redistribution of economic power - with China and India taking a much larger slice of the world economy, and with labor-intensive production processes continuing to shift to lower cost economies.
- Demographics - populations shifts will impact economies significantly. Some economies with favorable demographics will enjoy continued growth, while others with ageing populations will see their growth stunned.
- Atomization - with increased globalization and continued improvements in networking technologies, firms will be able to use the world as their supply base for talent and materials. The boundaries between different functions, organizations and even industries will be increasingly blurred - finally delivering the atomic enterprise that some have been predicting for awhile.
- Personalization - while price and quality will continue to matter, personalization will increasingly play a role in how people buy products and services.
- Knowledge Management - focus of management attention will shift to innovation and customer service, where personal chemistry or creative insight matter more than rules and processes. Improving the productivity of knowledge workers through technology, training and organizational change will be top of mind in most boardrooms during the next 15 years
Of the 1,650 executives that were interviewed, 45% think that knowledge management will offer the greatest potential for productivity gains in the next 15 years. 35% believe that customer service and support will offer the greatest potential, while 29% think that strategy and business development will be the key. And 28% think that marketing and sales activity will offer that potential. A majority of the respondents think that "knowledge workers will be their most valuable source of competitive advantage!"
Another promising foresight is that "executives expect organizations to become flatter and employees to have more autonomy to make substantive decisions." That should make for a much happier workforce! The report has a whole chapter dedicated to the future of the company over the next 15 years.
Besides providing overall global economic predictions and the outlook for companies, the report also takes a closer look at specific changes that might occur in eight specific industries.
Surprisingly the study does not deal with the radicalization of religion (i.e., the religious right standing in the way of stem cell research in the US, or the radicalization of Islam - and its impact on innovation), nor does it really deal with education as a major driver of future economic activity (i.e., the impact of the number of graduating science PhD's on those economies).
April 11, 2006
What do you do when your brand becomes the target of xenophobic rumors?
The Sunday New York Times had a great story on how Lenovo has gotten under fire by a bunch of xenophobes including Lou Dobbs, a couple of people from the U.S.-China Economic and Security Review Commission, an advisory body to Congress, and other politicians.
The gist of the story is that Lou Dobbs and a few others, including some members of congress, are "suggesting" - based on mostly unfounded insinuations and allegations - that Lenovo computers currently being sold to the State Department as part of a competitive contract won by Lenovo "could provide shadowy spooks in the Chinese government with an ideal means of conducting espionage."
Being framed in the context of "buy American" and also in the context of "national security," the story inevitably took on a life of its own. It does not matter that it is virtually impossible to "buy American" when it comes to PCs, as most PCs are manufactured and assembled, at least in part, overseas. Nor does it matter that it is extremely unlikely that the Chinese could put "spook" software in the Lenovo PCs as they are assembled in North Carolina and as the PCs have to pass the State Department's two computer security groups, which oversee the administration of their own test suites and install firewalls and other security software. It also does not matter that the company has historically been a meritocracy - now run by Americans. The fact that the story is framed in the context of cultural anxieties will ensure its rapid spread.
Regardless of whether you believe that xenophobia like this is bad or really bad for the economy as a whole (there are some good lessons to be learned from some European economies on that front), it goes without question that it is damaging the Lenovo brand. And while articles like the one in the New York Times, exposing the fact that there is no substance to the points being raised, and undermining the legitimacy of the claims being made, are necessary - from a brand perspective they only add fuel to the fire. In the long run they could potentially cause more harm than good to the Lenovo brand.
So what is a company to do when faced with rumors that either appeal to fundamental cultural anxieties or that are framed in popular worldviews? Rebutting while staying on the same playing field is a losing proposition - a fact proven over and over in the world of politics. Could there be an opportunity to reframe the debate or start a new one on a playing field that is more advantageous to the company? Or should they just paint themselves in green and lay on the grass 'till it all blows over?
Other blog post on the subject:
Brad Feld at Feld Thoughts - "Maybe Penn and Teller should do an episode on Bullshit! on Dobbs and the current “security issues” "
April 10, 2006
Founder CEO's drive higher returns than "professional" managers
Fortune Magazine's latest issue has an article on how Fortune 500 companies that are still run by the founders are tearing up the market.
While the Fortune 500 sample is small, there is other evidence based on research of an Ohio State University finance professor named Radiger Fahlenbrach that companies run by founder-CEOs outperform the broader stock market by 8 %. One of the reasons being put forth for this finding is that founders care more. The study further uncovered other interesting facts - namely that "founder-run companies have bigger capital budgets and invest considerably more in research and development than nonfounder-run firms."
Unfortunately, this is not a widely held belief amongst typical startup backers, who are too often rushing towards pushing founders to the side and replacing them with "professional management"- types to "babysit" their investment. There is no question that some founders are not CEO material, but before taking out founders from the executive team line-up, investors and board members should really look at complementing the weaknesses of the founders in other ways.
April 5, 2006
Learning how to thrive while being out of control
Do you feel like you are losing control? Are your customers taking over your marketing? Are your customers and suppliers getting involved in designing your products? Do you feel like you cannot control your team anymore?
Welcome to the age of control-less management. One way or the other you will have to learn to thrive in a control-less environment or you will commit yourself to obsolescence.
Co-creation of products without being in control can lead to wonderful innovations. In speaking with Johnnie Moore last week, he mentioned the use of some fun improv-based exercises with groups of people that do not know one another where they co-create things in a totally control-less environments. You can read up on some of those exercises in a published paper on the More Space Project.
The same is true for consumer-generated marketing, or for what the Church of the Customer folks call "citizen marketers." You can chose to ignore them and find your next unfavorable ad on YouTube, or you can decide to harness this form of self-organization and turn it into a real powerful competitive weapon.
Now if you accept that control has shifted out of your hands, a recent article published in Point (AdAge's CMO Publication - requires subscription) warns that there are still two dangers in not treating the phenomenon of consumer control with the respect it demands. The first is to interact with consumers without following up, while another is to try to prevent criticism or influence the conversation. Do either one of those and the citizen marketing backlash will be worse than any bad press you've ever had in the old marketing days.
The only thing you can perhaps try to control is yourself. Anything else will require you to learn to function "out of control."
March 28, 2006
More thoughts on selling complex products
I've been involved with the challenges of marketing and selling complex information technology products and services ever since the computer industry was known as IBM and the seven dwarfs. (I'd love to hear back from anyone who remembers who the dwarfs were). Over the years (make that decades) I've seen a recurring set of barriers that stand in the way of adoption of such products. In fact these barriers are as high today as they were when Honeywell (they were one of the 7 dwarfs) was desperately slugging it out with the other 6 for the 15% market share that IBM didn't own.
What I find surprising is how few companies selling complex products today have learned anything from the past. As Winston Churchill advised: "the further you look back, the more clearly you can see ahead." So here is my look back at what stands in the way of success when selling and marketing complex products. The good news is that it is a very short list. The bad news is that they must all be dealt with equally if success is to be achieved.
Barrier 1: Integration.
Complex products rarely stand alone. They must be integrated into existing systems and work flows before they can do anything worthwhile. It is this requirement to work with other stuff that contributes to their perception of being complex. The problem is that many potential customers see the challenge of successfully integrating the new product into their environment to be beyond their capabilities, and for a variety of reasons are not convinced that the vendor can solve this problem for them. Companies that successfully overcome this barrier often do so by pro actively addressing integration as a part of their product offering, They frequently brand the integration process and sell it as a service, with a detailed action plan that lets the buyer see what happens when, and very importantly, what responsibilities the buyer must assume during the integration process. If the seller does not have the resources to handle the integration themselves, they would do well to partner with an integrator whose brand is respected in the market they are selling into. In effect, they can borrow the brand equity of their system integrator to overcome the buyer's concern about achieving a successful outcome.
Barrier 2: Transcendence
The decision to acquire a complex product cuts across multiple organizational (and political) boundaries. Sales success depends on the near-simultaneous buy-in from multiple influencers and approvers, each with their own receptivity to innovation. The bell curve that describes the diffusion of innovation reminds us that the majority of people in any market are followers, not leaders. They resist change, especially when change may require learning and applying new behavior (see barrier 4).
The problem for the seller is that their internal champion is likely to be an innovator/early adopter. They "get it" early in the sales cycle and are eager to see their company adopt whatever the new solution is. So the salesperson is often seduced by the champion's ability to derive the benefits his or her product offers (rarely to be found in any marketing materials about the product) by understanding how the product works. But keep in mind that while the internal champion gets an A for his/her technical understanding and enthusiasm, the typically get a D or F for their ability to build the same enthusiasm across the organization. Why? Because they are not trained sales people. When they share their insight about the product with others they do what they know best: the describe how it works. And in doing so, either put others to sleep, or worse, scare the hell out of them.
To overcome this barrier, the "how it works" story that appeals to early adopters must be supplemented by one or more "how you'll benefit" stories that the champion can use to influence the more conservative decision makers within the organization. The way to think about it is to remember the following play on words: The way most innovators and early adopters think is. "I'll believe it when I see it." But for the early and late majority, that changes to, "I'll see it when I believe it."
Barrier 3: Trialability
Due in large measure to the first barrier, complex products are difficult, if not impossible, to try before they are bought. Many companies attempt to overcome this barrier by offering scaled down "pilot" versions of the product that attempt to give the potential buyer a sense of what the product can do. All too often the pilot fails to impress for two major reasons.
First, buyer expectations are set too high. By the end of the pilot program the results represent a small subset of what the vendor promised the product is capable of. The buyer finds it difficult to extrapolate these results into a full blown implementation and decides against purchasing.
Second, and even more problematic, is the reaction of the end users who are selected to use the product during the pilot project. Typically these poor souls are caught in a tough spot. They are asked to use the new product, while at the same time continuing to perform their assigned tasks using current tools and procedures. Naturally to use the new product effectively they need to go through a learning process (often taking time away from their assigned tasks). And once they learn how to use it, they need to use it a lot in order to truly experience its benefits. The latter requirement is rarely met because they really didn't have enough learning time, and they are too busy keeping up with activities that require use of existing systems. So it is not surprising that these early testers are often unenthusiastic about the product and help contribute to a growing consensus within the company that the product doesn't offer enough benefit to justify the price.
To get around this barrier, wise companies avoid pilots like the plague. Instead they offer a well-defined multiphase implementation (typically three phases work best). This enables them to control buyer expectations, especially during the initial phase. Ideally during that critical phase, you want to define a level of improvement or performance that if attained will pave the way for the customer to fund the second and third phases. To help insure success, some innovative companies provide on-site mentors that work side-by-side with the initial end user group in a master/apprentice relationship.
Barrier 4: Behavior
In order to take full advantage of the many features offered by a new complex product, individuals, departments, and sometimes entire organizations must change their behavior. And the more enterprise-oriented the product is, the more significant this barrier becomes. Lots of enterprise software winds up as shelf ware, not because it couldn't be installed or or used, but because users simply were not motivated (though training, incentives, or stronger measures) to use it effectively. What many sellers of complex products fail to grasp is that there is significant revenue to be had by offering branded programs that focus on bringing about the changes in behavior that are needed to fully exploit the benefits of any new product; especially one that is complex.
March 27, 2006
The challenges of selling complex products
Even though products can have great and demonstrable benefits to organizations, sometimes they can be very hard to buy. That can happen when products are used across functional areas, with no single owner. Or when a product is being sold too high up within an organization. It can also happen with new innovations in markets with few innovators and early adopters as buyers. Or it can happen when products have more than one barrier to adoption, as is the case with most collaboration-based products.
So what is an organization to do when faced with this kind of dynamics? Sure, you can do what most of them do: improve sales force training, develop better tools with tangible ROI's and case studies, have better demo's and make it easier to try out the product, etc. But those are all efforts focused on improving the seller or selling channel for the product.
There are two other levers you can play with in this equation - specifically product and buyer related levers. On the product level you could "dumb down" the product so that it becomes a single problem solution, with a clear owner for that problem. You could also evaluate whether your product could be turned into a service - and as such reduce the buyer's risk for trying the solution. On the buyer side of things you should look at your value proposition and find ways to tweak it so that some, if not all of the value, benefits the buyer personally instead of the buyer's organization. Is there something in your value proposition that the buyer could put on their resume or gain additional professional status or advancement from? Because remember - if there is nothing in it for the buyer or the users of your product, your product will fail - even if you can achieve a few sales early on!
The key point which most companies miss is that they should be focusing on the "buying cycle" instead of the "sales cycle." The buying cycle has a lot more moving parts than the sales cycle - and thus a lot more alternative solutions when things don't work as planned.
January 19, 2006
Ten Trends to watch in 2006 according to McKinsey
McKinsey Quarterly's Ian Davis and Elizabeth Stephenson just released a web exclusive trend article with macroeconomic factors, environmental and social issues, and business and industry developments that will shape the corporate landscape in the coming years (may require subscription).
Apparently success is not always about execution - but more about being in the right markets and geographies with the right technology. So it's more about being in the flow rather of going upstream. The key of course is to find the right currents. And, according to the authors, to predict the right currents you need to look far out into the future instead of focusing on short term changes.
The three macroeconomic trends are:
- Centers of economic activity will shift profoundly, not just globally, but also regionally.
- With a rapidly aging population in the West, public-sector activities will balloon, making productivity gains essential.
- The consumer landscape will change and expand significantly - with 1B new consumers entering the marketplace
They also list 4 Social and environmental trends:
- Technological connectivity will transform the way people live and interact - some of that is already visible
- The battlefield for talent will shift - with a big shift towards knowledge-intensive industries
- The role and behavior of big business will come under increasingly sharp scrutiny - about time
- Demand for natural resources will grow, as will the strain on the environment - think about this (heard on NPR this weekend) 1/3 of the world copper inventory is in the ground, 1/3 in use and 1/3 in landfills
And then they list 3 business and industry trends:
- New global industry structures are emerging
- Management will go from art to science
- Ubiquitous access to information is changing the economics of knowledge
Perhaps the most significant trend is the one related to shortages in natural resources and the increasing strain on the environment. Sure people will behave differently because of technology and come up with new management structures, and the worker profile will change. And while it will be fun to be an active participant in these changes, in the grand scheme of things, those changes will be incremental.
When it comes down to the environment, however, incremental changes will not be enough to result in a sustainable world for the future. What we need is the end of a "human-centric-we-are-the-end-of-evolution-and-everything-in-this-world-is-ours" attitude in exchange for a more symbiotic "world-nature-human-technology" balanced worldview. And that will not happen incrementally - it will require radical new ways of world governance and fundamental changes in people's beliefs about their place and role in nature's evolution.
January 4, 2006
Building emergent business models
As I am working through my (huge) pile of books to read I hit another good one last night. It is "The birth of the Chaordic Age" by Dee Hock. Not exactly a new one, but I never claimed this site to be a news site or a recent book review site...
As many of you know, Dee Hock was the founder of VISA - one of the largest companies in the world. The interesting part about VISA is that it is one of the few large-scale commercial entities where the organizational infrastructure is not based on a command and control hierarchy, but rather on a true emergent self-organizing infrastructure. When Hock realized that none of the traditional company models could handle such a massively complex and distributed business model he focused instead on building a DNA for the new company, based on purpose and principles, rather than building a command and control infrastructure with all of its associated rules and regulations. The results - a huge company that emerged from chaos in less than 2 decades to become one of the most successful self-organizing companies in the world.
It is interesting to see what questions drove him throughout his career and ultimately led to the creation of VISA:
- Why are institutions everywhere, whether political, commercial, or social, increasingly unable to manage their affairs?
- Why are individuals, everywhere, increasingly in conflict with and alienated from the institutions of which they are part?
- Why are society and the biosphere increasingly in disarray?
It's also interesting to read him say that: "...the need to harbor the Four Beasts that inevitably devour their keeper, Ego, Envy, Avarice and Ambition, and of a great bargain, trading Ego for humility, Envy for equanimity, Avarice for time, and Ambition for liberty..."
Maybe that is the way to ensure that marketing is not just another department (or worse - a set of departments) in a company - but rather a way of doing business, a way to behave in the marketplace. Instead of creating organizational structures with hierarchies, goals, rules and regulations we could focus instead on developing marketing DNA that can spread throughout the whole organization and become part of the company's fabric. On a certain level, Ritz was able to do that with their "every employee can spend up to $2,000 to fix any customer problem" principle. That's not a rule which gets enforced, and it's not a goal that gets measured (other than maybe to track potential abuse) - it's really a "behavioral" DNA strand that gets injected throughout the company. We could expand on that and come up with "listening" DNA strands, "innovation" DNA strands, or "branding" DNA strands.
Heck - why stop with marketing? Why not "financial" DNA strands, or a "governance" DNA strands?
December 9, 2005
Big business - people don't trust you!
The NYT today reports on recent polls and surveys from Roper, Harris, and the Pew Research Center to find that nobody here (US) trusts any of their institutions anymore - not their companies , not their government, not their courts, not their media, and not their unions.
Check out the numbers in the chart - it's somewhat frightening.
Animosity toward big company executives is especially rampant - with 72% of those being polled in Roper poll feeling that "wrongdoing was widespread in industry" - up from 66% last year.
One of the many reasons listed in the article is "Technology has given the angry voices a more public outlet. The blogosphere is rife with postings castigating Coca-Cola, Wal-Mart and other big companies, citing everything from unfair labor practices to dangerous smokestack emissions." - hmmm, isn't that mixing up cause and effect?
Wouldn't it have more to do with the fact that people increasingly feel lied to - both by the companies they buy from and by the government they "elected"? And that excesses in both corporate and government behavior are slowly eroding the middle class - which not only made this country so powerful - but which leads to an unhealthy polarization of everything?
December 5, 2005
Firms of edearment returns surpass "good to great" companies
Firms of endearment challenge Milton Friedman's premise that companies only have one social responsibility - maximizing shareholder return. Firms of endearment do not favor any particular stakeholder, but rather treat all 5 stakeholders on the same footing - employees, customers, suppliers, society and shareholders. David believes that firms of endearment are forerunners of a new business model - one that could very well change capitalism at its core.
And how are the firms of endearment doing compared to the S&P 500 or good-to-great companies? Check for yourself...
December 2, 2005
Self-organizing teams at Merill Lynch!
Following up on yesterday's posts on the worker of the future and the comment that Graham Hill left there on whether we may finally be witnessing the end of hierarchies, I ran across this article at PSFK (via Johniie Moore) - talking about financial advisors at Merill Lynch who are being asked to self-organize themselves into team of 2-4 people to better handle customer service - which is of course a very tacit interaction-based job.
If they can do it, then others should not be too far away...
December 1, 2005
The shifting workforce and its new opportunities
The latest issue of McKinsey Quarterly has an article on the "The next revolution in interactions" (here - requires subscription). In it they describe the changing nature of the worker and explore what it will take to improve productivity in the future - both from an organizational point of view as well as from a technology deployment standpoint.
They separate the workforce into three categories:
- transformational workers (miners, farmers, manufacturing workers) - who either extract raw materials or transform them. They made up a majority of the workers at the turn of the last century. By the turn of the 21st century they only made up 15% of the workforce in the US
- transactional workers - those are the people whose jobs involve routine transactional interactions. They include not just clerical and accounting jobs, but also IT specialists, auditors, biochemists, etc. Their jobs are very much rules-based and in many cases have been automated or outsourced. At the turn of century they still made up about 44% of the workforce.
- tacit workers - those are workers whose jobs involve complex interactions - those involving ambiguity and requiring high levels of judgment. They are not rules-based and cannot easily be automated or outsourced. At the turn of the century they made up 41% of the jobs, but had been growing 2.5 times faster than the transactional jobs and 3 times faster than employment in in the entire national economy.
So put another way, 70% of all the jobs created between 1998 and 2004 were tacit jobs that require judgment and experience! And their pay is 55-75% higher than that of transactional and transformational workers. And as mentioned before, the main reason the balance has been tipping is that all other jobs can easily be automated or outsourced.
Of course, those companies that can make this tacit workforce more productive will gain a key competitive advantage - one, which according to the article, will potentially be long term one, as the solutions to make this happen will be difficult to duplicate and best practices will be hard to transfer from one company to the next.
The article continues by saying that the first change that companies need to do to increase tacit worker productivity is to rethink their organizational structures:>
"There is no road map to show them how to do so. Over time, innovations and experiments to raise the productivity of tacit employees (for instance, by helping them collaborate more effectively inside and outside their companies) and innovations involving loosely coupled teams will suggest new organizational structures."
Does that finally mean the end of hierarchical pyramids and the emergence of new models of governance and management? I sure hope so...
Technology is the other place where companies will have to look to improve productivity of the tacit worker. Here again, the authors of the article rightfully warn that:
"First, the way companies deploy technology to improve the performance of the tacit workforce is very different from the way they have used it to streamline transactions or improve manufacturing. Machines can't recognize uncodified patterns, solve novel problems, or sense emotional responses and react appropriately; that is, they can't substitute for tacit labor as they did for transactional labor. Instead machines will have to make tacit employees better at their jobs by complementing and extending their tacit capabilities and activities."
They identify three areas where technology can be deployed - those technologies that eliminate or reduce the low value transactional interactions which the tacit workers perform, those technologies that help them make better decisions, and those technologies that will extend the reach of their tacit interactions, both inside and outside the company (loosely coupled collaborative tools).
Very interesting times we live in... And to me, it's fascinating to see how all this loss of jobs to automation and outsourcing is actually resulting in new jobs that pay 55-75% more and in new long term corporate competitive advantages that have not been seen in decades!
If only the government could realize the importance of schooling and education in this country, I would feel good about the future.