Sunday, December 21, 2008

The Writing Is Not Always On the Bathroom Wall

Knowledge is everywhere. I’ve learned about the strangest things in the strangest places. On the business and finance front, I’ve always been intrigued by companies with a core competency in M&A. Recently, I’ve been reading John Chamber’s account of the M&A spree that Cisco went on in the late 1990s. His recollections speak to a universal problem that affects all of us as marketers: inappropriate generalization of historical events.

To many, Cisco was the champion for successful M&A during the late 1990s. They had a success rate of roughly 70%, far above industry average. They maintained an HR retention rate of almost 80% post-acquisition, again far above average. However, they weren’t without flaw and these flaws seriously crippled Cisco for many years. Mr. Chamber’s openly acknowledges that Cisco inappropriately generalized its historical acquisition knowledge to new acquisitions which were fundamentally different. The effect was a series of mismatched acquisitions and losses for Cisco. Ultimately, Cisco recognized the problem of a single M&A model and retooled its entire M&A process. The results, thus far, are promising.

As marketers, there is much to learn from Mr. Chambers. Too often, we use our historical successes and failures as tactical precedents for new campaigns. However, we ignore the fundamental positions that customers evolve and clients change. We may even write revisionist history to account for our outcomes. But even if we’re neither dense nor duplicitous, we often poorly generalize success and failure to inappropriate situations.

Generally speaking, the only time historical conditions project positively on future campaigns is when the experience is truly similar. The factors on which we judge similarity vary from campaign to campaign and your model must be flexible enough to accommodate that. The factors may include size, scope, product, industry, client, customer, platform, timing, or any other item relevant to your campaign. The important thing is that you use an appropriate model before generalizing an antecedent campaign.

Finally, it’s not fair to say that high-tech M&A during the dot-com and dot-bomb era is the perfect proxy for projecting historical past or failures. But what it is, if nothing else, is an interesting mental exercise to find knowledge in unusual places which may inform our marketing.

Thursday, December 11, 2008

Kill the Perfect

The pursuit of operational perfection should be killed for most innovation companies. Perfection has become a competitive position that everyone competes on thereby commoditizing perfection. When everyone is perfect, no one is. The Japanese have the concept of kaizen, continuous improvement. Tacit in kaizen is that perfection can never be reached. Our goals should not be unattainable. They should be framed in areas where we have a competitive position, ripe for continuous improvement. Often, that’s our ideas.

The problem with operational perfection in business lies in what I call the Stakeholder Value Paradox. The Paradox says that those most likely to be in a position to judge perfection have the smallest worldview on which to judge it. Those less likely to judge perfection have the largest worldview to truly understand what perfection looks like. The danger is that we as knowledge experts chase operational goals to satisfy operational stakeholders at the detriment of the strategic stakeholders. Certainly, poor execution won’t be tolerated. However, there is a fairly large range of acceptable values between above average and nearly perfect which will suffice. It’s the pursuit of the last 10% of perfection that gets us in trouble.

In fairness, the existence of the last 10% is a competitive opportunity for a production-oriented firm. But, most of us aren’t built from the ground up to be a production-oriented firm. Instead, we’re a marketing-oriented firm trying to compete under the playbook of firms with a genetically different makeup. In my experience in innovation companies, we’re usually looking to engage Moore’s Innovators, Early Adopters, and perhaps some of the Early Majority. These fellows have a degree of tolerance for less than perfection. They have no tolerance for lackluster ideas.

One of my professors always used to say “It ain’t strategy if you can buy it”. You can buy operational near-perfection. If your firm didn’t breed it, buy it. Spend your time thinking.

Thursday, December 4, 2008

Delight the Cat

The world was simpler when all you had to do was build a better mousetrap. For better or worse, innovation beget market demand. But those days are long gone. As we globalize, firms look far and wide for the most efficient provider of its products and services. Things become commoditized and prices are pushed down. Combating this trend with disruptive technology is expensive and unpredictable. Benefits from traditional incremental improvements suffer the same margin pressure that initiated this whole process.

But, for digital marketers, this is all a very good thing.

In what world besides the digital one can you imagine a 50+ year old cereal company, Diamond Shreddies, who reinvigorates its slacking business and becomes the pride of the nation thanks in large part to people passing around goofy videos? All without the first change to its product. They did it by taking something that people don’t compete on and finding a way to own it.

Forward thinking companies in the digital world raise their second or third order product offerings to first order, front and center. In the case of cereals, traditional companies compete on things like price, taste, texture, and nutrition. They compete on things that can be measured in dollars, cents, grams, milligrams, and calories. What they don’t compete on is smiles. They don’t compete in making bad days better. Yet, their customers love to smile and have plenty of bad days. With the help of their digital agency, Diamond Shreddies noticed and did something about it. The results speak for themselves.

In the digital world, we as marketers are given a great opportunity. It doesn’t take factory retooling or production line changes to add a new dimension to the value proposition. We don’t have to build a better mousetrap in physical terms; we just have to delight the cat.

*I had nothing to do with the Digital Shreddies campaign.

Tuesday, December 2, 2008

Trading Pairs

In Financial Engineering, one of my favorite models is Pairs Trading. The idea is simple: Find two securities who move together. Identify a time at which they diverge. Make money betting the convergence that is sure to happen.

Unfortunately for me, it is never as simple as it seems. My problem with this type of model is that it requires that you largely put fundamental logic on hold and rely on patterns to represent something more than random occurrence. It forces you to do something you don't fully understand and hope for a positive outcome. We spend our lives learning how to think independently and build on fundamentals. Yet, models like this suggest that the trend trumps thinking in many cases.

Certainly, this type of behavior can be hazardous and hazardous is not a word I'd normally use to describe most brands. Yet for some reason digital advertising gives brands a shot of digital courage and they become inclined to let trend trump thinking. The allure of uncapitalized market space can lead them to a place they are not ready to go to. Such is the case with the social space. Brands find themselves chasing the tails of Zappos, Marriot, Comcast, et al while not fully aware of the burden of responsibility one must shoulder by becoming a vocal party in the social space.

Let it be known that the social space isn't always a friendly place. It isn't an empty DJ booth with scores of fans waiting on you to play your record. Rather, it's the dingy, dirty club in the darkest alley of town where everyone already has a dance partner. It's got no toilets, just buckets of ice. There are people looking to out the posers who don't belong. To survive, you have to be legit. You have to suspend your agenda. You have to be willing to say you're sorry, you're wrong, and ask what you can do to make things better.

Or, you don't have to go inside.

Brands often forget that social media involves speaking and listening. When you aren't speaking, you have the chance to learn. As a first step, I'd love to see more brands spend additional time with Search and less time with Post. Find out what people are saying about you, your industry, your environment. Find out what's important to your customers. It might pay off in the long run. You might find something to play that they want to hear.