Monthly Archives: September 2009

Another Thread on the Bursting Media Bubble

Another post in reply to Venkat, and his comment on this thread.

Let’s start breaking this down a little to see if we can find the core.

1. Marketing is all about facilitating an exchange of value. If I can convince you of the value of my offering, we’ll make an exchange.

2. The “convincing” part of marketing can take all manner of forms, from soft requests and artful commercials to hard requests and even expertly constructed situations (economic, social, physical ) where you have, or perceive yourself to have, little alternative but to engage in exchange. (e.g. I need a smoke; I need a memory card compatible with this device.)

3. Each party in an exchange of value, at least in most cultures, is motivated to seek an advantage. I want you to pay more, you want to pay less, and there are many opportunities on both sides to try and game the exchange.

4. Our economy system is hardwired from top to bottom to drive growth. We could have a separate argument over whether this is a fundamental human drive, but clearly the economic drive is wired into our system at the most fundamental levels.

Okay. So, why did I choose those points to make? If you go back to earlier days of history–let’s take medieval England for example–the means of production for any product you were likely to buy, were very close to the marketplace where they were bought and sold. Supply was generally limited. Anyone who was selling in the marketplace was overwhelmingly likely to be known by reputation to the community. You had far fewer alternatives for what you could buy, but you knew pretty well going into the exchange what the playing field was.

As technology enabled producers to create ~more~, it also enabled them to create the means to transport to new markets, or gain new raw materials–for example, the ships that allowed English traders to connect with Dutch markets. The further the market from the production source, the less likely consumers were to know the reputation of the manufacturer. So brands became increasingly important proxies for reputation. And as the remote markets became larger, the need grew to create technology to be a proxy for putting up your stall and shouting your wares. First it was printing that allowed you to push your ad into the hands of people you might never meet, then increasingly efficient mechanisms to reach more and more people.

What I’m interested in is how the relationship between businesses and buyers changed with this growth, how it was enabled by technology, and how it impacts the social fabric of day to day life.

My thesis is that the relationship between businesses and buyers is fundamental, and goes back to the earliest days of social life on earth, accelerating with the division of labor. I have something you need, and vice versa. It’s a fundamental social contract at the very core of human life. But the further technology took us in pursuit of growth, the more imbalanced the contract became, due only, I expect, to the inherent expense of technology–especially in its early phases. Since only businesses, governments, institutions could afford the cost of production, advertising, transportation, they had a massively asymmetrical advantage over consumers. Since, as stated above, there’s an inherent motive to maximize the exchange in your own favor, and an equally inherent motive to grow, businesses have used that advantage (better than governments and institutions) to progressively create the machinery to make the exchange of value ever more efficient–turning consumers effectively into a fungible commodity. To put it bluntly, consumers have become little more than disposable batteries for business. And if you spend enough time in the machinery of modern corporate marketing, you can appreciate how masterfully this machinery can work. In its best incarnations, there is real value and joy on the part of the consumer (Apple products, for example), but make no mistake that the machinery is tuned to maximize the efficiency of converting customers into cash. I’m not putting moral judgment on it, I’m simply saying that’s what we’ve created.

The next part of my thesis is that social media is little more than a signifier that something in this equation has fundamentally changed. Social media is not the cause, it’s the reflection of a cause far deeper than most people realize. And there’s an interesting irony at the heart of it. Because of business’s fundamental drive to grow, they’ve sought and developed new markets for some of the very technology that lent them so much power. They’ve increasingly made computers, communications, production and transportation technology cheaper, more powerful, easier to use for ordinary consumers–not out of the goodness of their hearts, but because there were huge profits to be made doing so. But as soon as consumers got the means of connecting and communicating on a massive scale, the inherent advantage businesses owned began to unravel.

It’s an important part of my thesis that what we’re experiencing is not ~new~, we’re simply seeing the balance of power between buyer and seller shift back to a more level state. Rather than be influenced by your marketing, I can compare notes with other consumers. Rather than have only one option for a product, I now have access to many sources from other places.

So part of my tentative conclusion is that businesses adopting social media as just another new means of influencing customers will not be productive, because the real shift is much deeper than just an adoption of technology. Human beings have been chaffing under the assymetrical power that businesses have used to turn them into disposable batteries, and social media is simply a reflection of how powerful that tide has become once the means to unleash it emerge. This isn’t idle speculation–we’re seeing some of the biggest industries of our lifetime buckle under a new reality where consumers have greater choice, greater access to knowledge, and a growing realization of the opportunities to flex their power. And I think one big part of the equation is also a new realization of the depth of meaning available in the interaction with a broader social group. Look at how many people are thinking more deeply about who they are, even if only for the purpose of creating a Facebook profile, or finding a voice on a blog. Again, I think this is a very real phenomenological shift, not just a surface trend of Web 2.0.

So against that backdrop, my point is that businesses need to have a deeper understanding of what’s really shifting in the marketplace. The “Magnificent Machinery” of turning customers into cash is being challenged. Businesses need to look carefully at the inherent mindset of “acquiring” “targets” with their sales “force”, and start understanding how their markets are becoming more like real communities, where businesses need to find a role that adds real value for consumers.

Let me say really clearly that this isn’t fuzzy humanistic and wishful thinking. I think there is a fundamental need for business to create products that people both need and want. I think there is a fundamental need for businesses to advocate on their own behalf, and to develop core competencies and ultimately new products based on a vision and not just a servile response to market requests. But they need to understand that the old asymmetry that allowed so much power over consumers is eroding, and eroding quickly.

Kodak’s Social Media Strategy: Backfiring Already?


Last week I wrote a short analysis of Kodak’s surprising move with the Zi8 pocket camera, explaining how Kodak had obviously been listening intently to consumer discussions about pocket video cameras, and rather than making the usual incremental upgrade to one or two features for their next release, they threw down the gauntlet and upgraded just about every feature mentioned on user wish lists. This was an unusual move in consumer electronics, where the industry pace for upgrades is typically much slower–a move all the more interesting because it was so obviously enabled by social media monitoring. (How do I know? Because our sister company SocialRep was tracking the same space for Creative Labs, and tracked the same user wish lists in relation to the Vado.)

Jeff Hayzlett, Kodak’s CMO, has been praised and criticized in equal measure for his approach to marketing, which not incidentally includes a big dose of social media. Jeff is an avid user of Twitter and Facebook, and in general a great advocate for social marketing. The fact that he was listening closely to the market is a good thing. The question is, what do you do with what you learn? How does it effect your market strategy?

Last week, I hinted that maybe Kodak has something up its sleeve. Why would a company dramatically accelerate the pace of the product lifecycle? Sure, in the short run, you grab a lead over your competitors and force them to play catch up while you… run ahead. But for that strategy to pay off, you better have some idea of where you plan to run. I had visions in my head of new innovations Kodak might have on deck, from on-device editing tools to face-recognition tagging, or maybe optical zoom and interchangeable lenses. Sure, all in a $200 camera, right? Hey, who would have thought we’d have so much technology in smart phones these days. Well, it turns out I got too far ahead of myself. And maybe Kodak did too.

This week, one of the first hands-on reviews came out from a very influential source. Macworld reviewed the new Zi8, and the verdict was not kind.

Browse through the many pocket camcorder reviews we’ve published and you learn that these camcorders are limited in significant ways—no image stabilization, no exposure or white balance controls, no optical zoom, no support for using external microphones, and no support for 1080p high-definition video. Kodak hasn’t addressed all these limitations with the Zi8, but it does take a shot at some of the most significant—specifically, image stabilization, 1080p shooting, and support for external microphones. Regrettably, none works in stellar fashion or makes up for a camera that’s a fairly average performer.

The review goes on to deconstruct all the areas where the Zi8 falls down, which is a 1-1 list of all the areas the Zi8 was supposed to be jumping ahead of the competition. The best the review could say about the Zi8 is that it “isn’t a terrible pocket camcorder.”

It’s just that in the areas where it differentiates itself from other cameras in this class—1080p video, external audio input, and image stabilization—it doesn’t perform well.

That pretty much throws cold water on the notion that Kodak can run ahead while the competition plays catch up. It also deflates the entire premise of the word-of-mouth excitement Kodak generated when they announced the camera, immediately dubbed by drooling analysts as the “Flip Killer”. The question now is whether or not the bullet-points on the camera box will be enough to sway a large number of customers who don’t know how to Google product reviews.

I don’t know what happened at Kodak, but I can’t help wondering if they let marketing run ahead while production couldn’t keep up. The circumstantial evidence seems to suggest that marketing listened to customer dialog–as well they should–but instead of prioritizing a list of functions they could wrap into the next release at a reasonable level of quality, they got excited by the notion of baking everything into the camera so they could kill the competition. Unfortunately, they didn’t hit the mark, and the result is arguably worse than if they had kept with the strategy of incremental upgrades. The criticism from Macworld is doubly painful because Creative used their production cycle for the next version of the Vado, in part, to vastly improve their support and integration with Macs. Kodak has inadvertently handed Creative a really nice story to tell Mac users when the new Vado is released September 20th.

Not to jump all over Kodak, but there’s another big social media question with regard to Kodak and the Zi8. Kodak made big fanfare of a consumer contest to rename the camera. They got a lot of buzz on Twitter and in the media for the contest–including this breathless review in the Boston Globe. That was weeks ago–an internet eternity. No name has been announced, and the Zi8 is being marketed and sold under the old name they had obviously decided was in need of a change. What’s the deal?

I’ll keep updating on this as the story unfolds. I applaud Kodak for the way they’re pushing traditional boundaries with social media, but there’s obviously still a lot for us all to learn about how social media interacts with market strategy.

RE: Marketing, Innovation and the Creation of Customers

This post is a response to a fascinating post by the remarkably thoughtful Venkatesh Rao at RibbonFarm. Trying to summarize his post would take an entire post in itself, so I’m simply going to respond and see where the conversation goes.

My only quibble with Venkat’s post is the description of marketing as inherently a numbers game, “by definition”. My argument is that we have distilled marketing into a numbers game because that’s a convenient way to reduce perceived uncertainty and market risk. The reason marketing and engineering look so much alike is that businesses have ~made~ marketing more like engineering, because engineering customers with the efficiency of a machine is far more attractive to the numbers-oriented inmates running the corporate asylum. The average marketing executive answers far more to the CFO these days than they do to customers.

The problem with the marketing funnel as the defining metaphor for marketing is that it’s a machine of efficiency, not effectiveness. It’s like a speedometer–knowing how fast you’re going is great, but it doesn’t tell you if you’re driving off a cliff. You can be incredibly efficient in marketing going entirely in the wrong direction. Which is why partnerships between marketing and engineering, as Venkat points out, are critical. But a more perfect partnership for the purpose of simply creating a better machine to manufacture customers is still missing, I think, the point that the social media revolution signifies.

Let me say clearly, first, that I don’t think social media itself is the point–or the really even the revolution that matters. It’s an indicator of something far deeper at play, which I’ll summarize now, but which requires a more lengthy post to give it the kind of justice Venkat has given to the topic in his post.

Underneath humanistic rhetoric about authenticity, the creation of a customer is an act of control…This explains why customers need to be created, and what innovations really are. Innovation isn’t about creating novel products or services. An innovation is a stimulus that causes a novel and stable pattern of human behavior to emerge.

I think that’s a perfect description of the elevation of what I call “The Magnificent Machine”–the distillation and abstraction of business as a self-substantiating institution, connected to society only through the lens of predatory economics. But business has *always* been a social construct as well. The marketplace is social. Business ecosystems are social. Deals are made and brands are built on trust, which is a social contract. And over the past 100 years, business has arisen in many ways to become the defining construct of human and social identity: More people know themselves by what they do for work, what they buy, what they wear and drive, than by the more traditional frameworks of religion, geography and clan.

But business as a social construct is not convenient for businesses. It’s far more convenient, far less risky, to manufacture customers than to participate meaningfully in a customer community–to the degree that most businesses even accept the importance of the social environment, it’s used as a tool to exert leverage in the customer manufacturing process. As a fungible commodity, customers produce greater short-term margins if you can jettison all that messy social contract stuff labeled as corporate responsibility, green business, not to mention all the costly legislation that protects consumers. The problem is, customers are not isolated patterns of human behavior–they interact. They share impressions, compare product notes, and through the growing accessibility to social networking technology, exert a greater influence over brand reputation and purchasing decisions than the marketers trying to influence them in an “act of control”.

My argument is that what’s driving this change is not social media technology–that’s the enabler. What’s driving it is a fundamental response to generations of being preyed upon by business as a fungible commodity–of being targeted by relentless campaigns that reduce the meaning of the social/business interaction to a process of efficiency that’s convenient to businesses, but not to their customers. Why else have we created do-not-call lists, spam legislation, and government programs for consumer protection? In the simple terms, “consumers” are tired of being minimized in the social contract with businesses. Most would not be able to articulate an intention to change the equation, much less identify any chain of causality between their behavior as consumers and the outcomes shaking so many stalwart markets. They just know that listening to commercials sucks–so they buy a Tivo, or watch more content online. They just know that the fun of buying a product is often killed by finding out the product is junk–so they go online to find out what other people have experienced with the product before they open their wallet. They just know that the realm of social relationships defined by school, work or home are now only slice of what’s available–so they connect with distant friends and new colleagues they meet online to expand their base of knowledge and engagement, much in the same way I’m interacting with Venkat now.

This is a ~real~ phenomenon, and again, the technology is a great enabler, but the drive is more fundamental, more human, more social, than just media. If the relentless drive among humans for understanding, for finding meaning in our lives, can give rise to religion, philosophy and science, why would it not also generate a response to a social and economic equation that has minimized the essence of being human to a stream of consumption behaviors manipulated for the benefit of business?

In sum, businesses are motivated to create the most efficient machine for manufacturing willing customers at the greatest profit. Unfortunately, that motivation is predatory by definition to the people framed as the target consumers. Technology enabled businesses to sway the equation in their favor, by using it to improve the cost of production, to enlarge markets with the technology of transportation, and to flood those markets with carefully choreographed messages to influence purchase decisions. As long as all that technology was expensive, it was an equation defined by business control. But as technology has been increasingly commodotized, consumers have found the means and the opportunity to stem the overwhelming influence of business–a reaction I’m arguing has a fundamentally social root. It’s messy and chaotic, but trends are emerging that show how new lines of power might emerge.

I don’t think any of this minimizes the importance of numbers-driven marketing–businesses are still in a game of survival with aggressive competitors, and they need efficient processes to succeed. But I think that’s only half the story businesses need to understand in today’s changing environment. Customers are not isolated and mass-replicated patterns of human behavior. They are communities of real people who function increasingly as self-organizing systems of market influence, and engaging them profitably and sustainably means a lot more social participation in the process of marketing and innovation than asymmetrical and efficient acts of control.

Brilliant post, Venkat. I agree with so many of the details you describe–and wish I did them better justice with a more refined and less rambling response–it’s only the abstracted picture of where those details drive most businesses that I offer a counterpoint.

Update: In one of the funniest emails I’ve gotten in a long time, a company just notified me that my discussion of the concept “manufacturing customers” violates their trademark, so in the future, they’d like me to know I’m required to capitalize it in acknowledgment of their ownership. I would post the name of the sender, but a) it was a private email, and b) I don’t want to advertise the company. However, if they’d like to post their email as a comment, and make good on their offer to “join the conversation” maybe we can start with a discussion of the fair use doctrine.

One Random Digit in the Holy Calculator of Human Experience

CalculatorEvery one of us has unique experiences in life that help shape the way we see the world. In fact, of the nearly 7 Billion people on the planet, or even the 11 Billion estimated ever to have walked the earth, it’s a remarkable thing that we can say with unassailable confidence that every single life is unique. Genes and the circumstances of life experience guarantee that no two human lives across the span of history will ever be identical. Interesting concept.

One of the experiences that shaped my world view was growing up with an older brother for whom circumstance created an unbearable burden. To the outside world I was the good kid, he was the bad kid. I went to college, he went to prison. I was the picture of potential, he was the essence of disillusionment. While that perception was reflected back to me almost every day of my life, I knew my brother’s die was cast long before he was even born. Born on a military base to a soldier who’d brought a villager back from the Korean war as a wife, given up as an infant, and adopted into a lily white family to spend a lifetime as the odd one out.

I grew up in the shadow of his tragic arc untouched. Mostly. I saw the muted and reflexive racism from strangers and even family friends. I saw the desperation of needing to belong. I saw the anger and destruction. How many family dramas? How many arrests? How many times in juvenile hall, and then jail, and then prison, before he dissolved into the shadow everyone shudders to recognize as a homeless heroin addict on the street in San Francisco? And God, how many programs and attempted rescues along the way?

But I knew something else. I knew someone that was part of the family before I was born. Unquestionably my brother. I knew an amazing artist, even though he never had the confidence to see it. I knew someone of extraordinary empathy, borne as it was of an unrelenting isolation. I knew someone with potential no less than mine but for the circumstance that would have crushed me in his place.

I’ve had a lot of time to think about that. What the world sees. What I see. A junkie. A brother. My life and his life and the impossible trajectories of chance.

So I was sitting in the car one day, lost in a long line of traffic behind a stop sign in a leafy neighborhood on the most perfect of days. Inch forward. Stop. Inch forward. Stop. And when I got to the intersection, swimming through a haze of benign and disconnected thoughts, my attention suddenly sharpened into focus on a broken down man sailing through the intersection in front of me on a broken down bike, with a wide and toothless smile. And I caught my first reaction, the reaction I’d seen in the faces of people sizing up my brother, and I started to wonder what I didn’t see in the life rolling past me. And something clicked.

I started thinking, if I were God, aside from the obvious questions–of evil, free will, of why bad things happen to good people for no apparent reason–why would I create a world in which billions of people are guaranteed to live entirely unique existences? What’s the point of that? And why would such a fabulous mechanism of mass singularity, were it created by design, have so much accommodation for suffering so often delivered by chance? The answer materialized as fast as the question, before the toothless guy had ridden past my car.

What if every living soul is one digit in the total calculation of human experience? Every experience, every life, would signify equal importance to the whole, even if the intrinsic value of individual digits–pain here, glory there–is different. The value of one life can be judged by the world, or its owner, to have greater or lesser value, but on a deeper level the meaning of one life to the whole is the same as any other, homeless addicts and saints alike in their contribution to the sum of all possible experience. For some reason that struck a chord with me–as if lending me the freedom to see the life of a heroin addict without denial or condemnation, without the rationalization of victimhood, without understanding or the need of it. One life equals one placeholder in the calculation of human experience, and the engine of singularity ensures the contribution of value for every life regardless of choices or trajectories, tragedies or triumph, and above all regardless of judgment for the ripples of creation and destruction that flow from it.

And the toothless man rolled on.