The original software company CEO is Johannes Gutenberg.
More than any other invention, the printing press shaped the last millennium. As the printing press swept across Europe, old political and economic structures tumbled and new ideas emerged. Peer review, a bedrock of the Scientific Revolution, emerged from the publication of Philosophical Transactions. Protestantism sprang from Martin Luther’s 95 Theses. Intellectual property rights developed. Capitalism materialized. Humanism flourished. The world moved.
Gutenberg’s screw press did not create new ideas; rather, it enabled the distribution of them. The technology of mass production publication surmounted numerous obstacles that had previously constrained the spread of knowledge, most significantly the extreme cost of copying texts by hand. This created an expanding class of literate people, circumventing restrictions on knowledge imposed by religious or regal authorities. Johannes Gutenberg’s pioneering invention empowered people, eroded central control, and led to such profound sweeping social, economic, and political change that we now call this period Renaissance.
A new Renaissance is underway in capitalism, and it’s enabled by the next great wave of visionary software leaders: Sergey Brin, Larry Page, Mark Zuckerburg, Evan Williams, Mark Benioff, and more. The applications they create possess such game-changing new functionality that they hearken back to the printing press. Gutenberg’s great invention reduced barriers that inhibited ideas from scaling. Today’s technology companies are eliminating them.
Facebook.com allows brands like Starbucks to instantly communicate with millions of consumers at no marginal cost. Salesforce.com enables both large and small businesses to manage and analyze complex sales processes without any capital expenditure. Google Apps provides information technology solutions to the enterprise at $50 per user. Anyone armed with a $150 Flipcam and a free YouTube account can post a message and share it anywhere in the world – within 10 minutes.
It’s almost hard to remember that in 1990, numerous limitations still inhibited the dissemination of ideas. Regulatory barriers restricted the number of television or radio broadcasters permitted in a given market. Cable operators could only carry so many television networks. Phone companies charged (heavily) for “long distance” calls. Newspapers required extensive delivery networks, which demanded substantial capital expenditures. The size of bookstores constricted book publishers from expanding their offerings. And the Web was not yet in its infancy.
As the next generation of technology companies scale, the princes and priests of media are losing their last vestiges of control. Already, we see it remaking society. In business, the greatest value creation story of the last decade was Google, a company that organizes the information this new digital ecosystem creates. In politics, activists used social networks to elect a U.S. President. In media, the once high-flying Chicago Tribune and Philadelphia Inquirer, unable to monetize the content they produce, declared bankruptcy. In society, ubiquitous access to the Web has created hyper-connectivity and information overload.
All the while, the pace of change is increasing exponentially. It was 87 years before the telephone had 150 million users. It was only five before Facebook hit the same mark. What is the implication for business? As customer behaviors change, how does customer decision-making? How does an organization with the same resources execute across proliferating new channels? How do managers meet, and beat, their numbers in an information landscape that looks nothing like it did when they began their careers?
During my second year at Harvard Business School (HBS), I began to hone in on these questions. I studied how to start high growth ventures and explored how the digital marketing landscape was evolving. I published several research pieces with the Chair of the Marketing Unit at HBS, Professor Sunil Gupta. And after graduating, I launched Three Ships Media, a digital media agency. There was a transformative shift in the way companies communicate with their customers. And I didn’t want to miss out.
Three Ships Media has grown quickly to 25 people, serving clients such as AT&T, Bayer, American Airlines, Deloitte, Harrah’s, Entergy, and Verizon. We help connect companies with the customers they want to have. Our approach is highly data-driven. We have built proprietary datasets on digital marketing performance that map markers’ activities to the audiences they reach, the engagement the foster, and value they create. Every day we try to fail as many times as possible. When you’re working in an industry that changes every six months, you must constantly fail, and quickly learn from it. Innovation cannot occur without iteration.
Just to correct the imbalance between where customers spend time and where marketers spend dollars, at least $30 billion of traditional marketing spend needs to shift to digital marketing spend. In the years to come, effective digital marketing will become a central element of every company’s marketing strategy. Eric Schmidt, CEO of Google, has called advertising the last bastion of unaccountable spending in corporate America. Our goal is to help companies narrow the gap between their most effective and least effective activities so they can compete and win online.
The shift from “mass” communication to “interactive” communication is epic. Essentially, supply lost the battle to demand. Suppliers once controlled the development of products, and they controlled the distribution of products. They even controlled information about products! Today, the customer is fully in command. Social media emblematizes a new era of open commerce in which information is free and distribution is costless. Consumers can react to companies’ faux pas, they can suggest ideas to companies, and their voice can resonate (or ReTweet) beyond the organization.
United Airlines suffered a $170 million loss in its market value after a YouTube video chastised its customer service. Gap scrapped its new logo after a social media backlash, and invited customers to lead the redesign. Threadless T-Shirts pays its customer base to design its product. Best Buy previews advertisements with social media followers before airing them, and incorporates followers’ suggestions. Victor & Spoils is an advertising agency which crowdsources its scripts. Want to join? Log on.
In this era, the evolutionary vocabulary of variation and selection best captures the constant adaption required to connect with customers. Why evolution? The theory holds that constant variation produces a distribution of new characteristics in species, some of them superior and some inferior. Nature selects the former, and disposes of the latter. Likewise, in today’s marketing environment, marketers can rapidly iterate on messages. The viral Old Spice campaign in 2010 released dozens of videos across a day. The cream rose to the top. One advertisement received more than 23 million views. The hard cost to distribute the ads? $0.
Companies exist to serve customers, and they live or die by how well they adopt to rapidly changing customer preferences. And those organizations which plan for the future are most likely to profit from it. Across the next five years, we’ll see these factors intensify:
Speed kills.
As the velocity of information accelerates, big ideas matter less and the execution of them matters more. Companies that get it wrong but adapt will outperform those used to getting it right. Marketing (and product development) are now completely iterative.
Content is king.
There is no such thing as the right message, because each customer is different and demands customized communication. Identifying what audiences want is more important than figuring out how to reach them because empowered consumers screen out advertising. In July 2007, 32% of Internet users clicked on a display ad in a given month; in March 2009, only 16% of Internet users did (ComScore). Consumers will go beyond just ignoring online advertisements though. Widespread adoption of Caller ID, DVR or TiVo, and satellite radio have made all forms of “interruption marketing” increasingly difficult.
The new metric for content: Do customers interact with it? Do they share it? The content they don’t want (“interruption”) will be screened out; the content they want (“permission”) will stream across email, mobile, and Web. This creates two new categories of content: content people want and content people don’t want. Effective marketers will love their audience so much, they will only create content that engages them, helps them, and ultimately builds loyalty with them. A “market of one” – where you feel like you are a company’s only customer – is not far off.
Channels are irrelevant.
While media consumption increases, the barriers to creating media have fallen. Every consumer will find it intuitive to create and share text, images, audio, and video—making real-time interaction ubiquitous. Social networks, and social purchasing, increase in importance. Facebook is where the Internet starts for Gen Y. Blogs are asynchronous, a reason blogging has never developed mass appeal. Social networks are life in real time. And they will only become more powerful as smart phone adoption increases, layering in location-based features to the existing real-time, two-way communication capabilities of social networks.
As automobile companies integrate media hardware into vehicles, consumers buy more smart phones, and hardware companies introduce new consumer devices, media consumption will become easier and easier. Consumers will access media anytime, anywhere.
Math is back.
Customers don’t have to be asked whether they like your advertisement; they constantly vote with their attention. Creativity and customer empathy – once only felt – can now be measured in real time. Moreover, advanced analytics will attribute purchases to media consumption. Imagine the power of knowing that it was the fifth branded television advertising impression that finally led a prospective customer to visit your website, seek information multiple times across several weeks, and ultimately make a purchase.
These factors – speed, content, open distribution, and analytics – are accelerating the convergence of marketing services, media, and technology companies. In this environment, ideas scale better than dollars. Marketers who simply adjust budgets by reallocating dollars from traditional media advertising to new media risk treating social media or mobile marketing as just another channel. They miss the “reset” that a content-focused, rapidly adapting evolutionary marketing cycle requires. Companies playing catch up must quickly cast aside the distinction between “earned” and “paid” media in favor of audience development and content development. Most importantly, they must close the gap between the ways they communicate and the ways their customers receive information.
Successful businesses will transform their traditional marketing function into brand-centric media companies that create content and develop audiences similar to the ways in which television stations or newspapers have done so historically. Bluntly, the typical marketer should be planning to shift 25 to 50% of their paid media budget to content development. As campaign cycles move from months to hours, companies that wish to remain connected to customers will have to rebuild their DNA – focusing on speed, agility, and insight – across proliferating channels and content formats.
Heading into the new decade, the velocity of information will increase further. The table stakes are interactivity and customization. The new reality is rapid adaptation, Evolutionary Marketing if you will. Just as the printing press disrupted the existing power structure’s monopoly on information, social technology will undoubtedly disrupt existing power structures. But as it unlocks new ideas and forces authenticity into two-way communication, the world will live more freely.
{ 1 comment }
