What innovates?

So many marketing organizations try to un-code the secret of innovation, some with decent success (e.g. Apple, Google, P&G), most fruitlessly and without real impact. I won’t pretend to know the final answer, but it might help to look at core sources of innovation that drive marketing.

Three categories seem to generate the most innovative impact:

• Technology still provides an incredible fertile ground for consumer oriented innovations. It starts with consumer oriented products like the iPod, Search Engine technology a la AltaVista or Google, and goes to more infrastructure oriented products like the latest campaign management solution or web based analytical applications.
• Consumers: Here it’s much more difficult to pinpoint one individual innovation, but consumers do innovate everyday marketing solutions, either through their participation in the R&D process, feedback to companies, or by building a particular demand for smaller and smaller gadgets. If I would pick two interesting and recent consumer driven innovations, I would vote for mass personalization (e.g. Nike shoes, personalized M&Ms), and Co-Creation where the Consumer becomes part of the Product or Service Creation process (e.g. Lego’s strategy of launching newest product line)
• Marketing Individuals: Great visionaries with an open mind are still a very important source to drive innovation. If it’s Richard Branson with his Virgin Empire, or start up founders with small or big business success (from BlueMartini to Space.com). Interesting enough there are not that many advertising personalities who could be regarded as true Innovators.

After understanding these three major innovation sources, every marketer faces a three-fold challenge: How to tap into any of these innovation sources? How to cultivate them? How to keep them as a competitive advantage? To attack these challenges, I recommend a very simple first step: Analyze how many true innovations did your organization generate over the last 3-5 years! If you were able to find any, cluster these innovations into the three sources described above. After these 2 simple steps, you will be able to better understand how innovative your organization has been in the past, and where do the main innovations come from.

Best-in-class organizations started long time ago to not only measure their innovation level with several metrics (e.g. number of patents or new products) but also have a clear process to nurture the three sources of innovations. One of the more interesting examples is Best Buy’s collaboration with several West Coast Venture Capitalists. Best Buy attempts to benefit from the Silicon Valley innovation kitchen by tapping into a lot of aggressive and very innovative start-ups. If you have seen any other interesting innovation approaches in the marketing industry, please feel free to share.

Open Source us

Some trends seem very obvious; therefore it's pretty perplexing to me that I meet so many marketers that have not reflected on one of the most important trends for the next decade: "The Open Source Movement".

What is the Open Source Movement? It originated in the software industry around 1998, when developers started to dislike proprietary systems and gathered online to write “Open Source” software (e.g. Linux, Mozilla). Open Source combines the elements of collaborative development, individual contributions from a wide range of individuals, and the free access to anyone. The movement tries to bring the best minds together on a global scale in developing a particular solution and demands that the outcome is shared without any fee with as many people as possible.

Since its beginning stage, the concept of “Open Source” has aggressively moved beyond software applications. Great examples are Wikipedia (Free Online Encyclopedia), Google’s free software applications like Google Earth, or the tremendous free picture and video libraries of any of the major Web Portals. Now it’s less about building better software than Microsoft as it is about building platforms enabling individuals to create and provide relevant content for a much larger audience.

Over the next years this Open Source movement will further penetrate consumer marketing and influence strongly many value aspects of the marketing services industry. The proprietary value notion of any marketing service provider will be challenged. I believe that three key elements of marketing will become more and more open source:

• Data - The foundation of any communication is “Information”, which is nothing else than interpreted data. This Information is more and more readily available, 24/7, free, and can be combined with any other Information to provide even richer Information. Think “Craigslist” on top of Google Earth, think Real Estate Information connected with household specific value indicators (Zillow.com)
• Ideas - Google, Yahoo!, and any other aggregator of created Content (either by individuals or corporations) enable our access to billions of Ideas. The nature of proprietary ideas and concepts will be challenged by the ubiquity of any kind of ideas, most of them boring, but some of them very interesting.
• Applications - Proprietary software are under heavy attack by multitudes of open source projects (Sourgeforge.net counts more than ten thousand open source projects). Look at the Open Source statistical software package R that matches proprietary software applications like SPSS or SAS.

This will lead to a democratization and proliferation of information and software applications that will fundamentally change any aspect of the so often “proprietary” marketing industry. The chance for us marketers lies in the opportunity to utilize and combine all three areas of open source to build smarter insight driven marketing solutions, all for the benefit of the customer.

Personal Media revolution

There is no linear communication anymore: Today’s Consumers have stopped following the desired communication consumption path that most companies and agencies still dream of: From 30 Second Ad spot to going to the store, from receiving the direct mail piece to picking up the phone, etc. Consumers get their ideas, their desires, and their product interests from a wide range of media and information sources. It could start with an online game, or with a comment on a favorite blog, or a visit to a new store concept that surprises with its Japanese product assortments. Consumers don’t think and behave anymore linear but follow their own path of relevant message, right moment, and appropriate media.

Some call this phenomenon the personal media revolution where communication interaction paths are as diverse and expanding as never before in the history of mankind. Let me try to describe the key ingredients of this personal media revolution, away from Linearity:

• The volume of information grows daily; luckily the tools to search the information grow, too. It all can be summarized as the trinity of today’s Information world: More Information, more tools to make Information relevant, and more media to access and create Information.
• Everyone can be an Information Creator and Contributor. It has never been easier to create your own Information and share it with everyone across a multitude of media channels.
• The personal media revolution has not changed the power dynamics of relevant information for a bigger community. Most information is absolutely irrelevant beyond a small circle of friends and family that centers on the Information producer. Relevant Information is still linked with superior and exciting content paired with credible authority over the subject matter (e.g. LA Times, CNN, Wired).

This personal media revolution of non-linear communication patterns is not just driven by technical innovations but equally influenced by the cultural change from traditional communities (e.g. families, towns, and clubs) to media enabled groups fulfilling the need to feel part of a larger community. Personal media enables anyone to choose or create its own community. It’s non-linear communication at its best. Marketers of the world: Get ready to be part of it.

Democratize Intelligence

Marketers focus a significant amount of their time on developing the right Marketing Intelligence to design and execute smart and hopefully revenue-generating marketing programs. Common belief is that the right tools, clean data, and smart people will generate the most relevant Intelligence. Unfortunately, mostly due to a false understanding of the power and limitations of technology, most marketers focus heavily on the first ingredient, the tool and infrastructure side, but rarely on democratizing the insights across the organization and beyond.

I would rather have a simple excel sheet with meaningful insights that is widely spread throughout an organization than a fancy tool in the hand of one analyst, attempting to achieve job security by a mixture of secret code and indecipherable nomenclature. Numerous marketers still follow the dream of the 90s in throwing a significant amount of money against the tool and infrastructure instead of focusing on building first simple and actionable Intelligence.

Why do I stress so strongly Democratization and Proliferation of Intelligence? Because the smartness of your marketing increases exponentially with the number of individuals who have access to the Intelligence and use it. A more mature organization will go even one step further and share most of this marketing intelligence with its key partners, so that they can do their job better, too. These organizations replicate the learning of optimizing supply chain management, where firms like Wal-Mart integrate their suppliers into their Data Streams and supply related Intelligence.

Let’s think even one step ahead: I predict that in a couple of years the most consumer centric and obsessed companies will start to share this Intelligence even with their best consumers. Why would they do that? I give you three reasons:

• Only open, honest, and transparent companies can learn from their consumers and thereby really follow the mantra of “The consumer is boss”. This needs to apply even to the realm of marketing success and failures
  
• Share Intelligence with the Consumer and he will share his intelligence with you. Invite the Consumer to Co-Create your Marketing. An honest invitation to “Co-Creation” needs to include a feedback on a company’s marketing performance, too
• If your consumer knows how good your marketing has performed, he has the most interest, in improving it. Don’t underestimate the consumers’ engagement with beloved brands.
  

I don’t know yet, which company will do this first, seemingly crazy step of sharing Marketing Intelligence with their Consumers. Most companies still need to even start embracing the concept of democratizing Marketing Intelligence across their own organization. But there are always revoluationaries out there, even in big firms.

Reorganizing Agencies?

If Fortune 2000 companies talk about the constant reorganizations of their marketing organization (under the premise of ongoing optimization) – from product to customer segment centric, from centralized to decentralized, from a line reporting to a complex matrix structure – why do marketing agencies rarely talk about it? It can have several reasons: they have found the perfect organizational form (perhaps), they don’t care as much about organizational structure since it’s a very strong personality driven business (very likely), or because they have learned that the constant reorganizations by their clients have rarely generated any qualitative improvement or real value (definitely true).

Let me share my perspective of what’s going on with marketing services and their good fortune of organizational ignorance. The impact of organizational structures for marketing services companies is extremely overestimated. It has much less importance than most people believe. Why? Because good marketing agencies focus on three things, and they get it done in any kind of structure: Client focus, Creative Brilliance, and Innovative Insights into the Consumer Mind. The focus on these three core elements outweighs any organizational structure.

Additionally, organizational forms will further lose its importance due to two overpowering forces that delete any claim to the power of org charts: Company culture and Talent. Whoever has the most aggressive, innovative, and consumer obsessed culture will win and grow relationships with Fortune 2000 companies. Whoever has the best talent will be hired and will be able to deliver great impact for clients. Strict organizational structures, at least in marketing agencies, will become more and more the relict of an old world - Great ideas, collaboration, and quickly created and disbanded task teams will win. The war is about culture and talent, not about titles and divisions.
But not everything is peachy in the marketing agencies world. Most talk about a lack of accountability in their work for clients. I prefer to call it the questions of "Value Creation". Do the fees paid to an agency generate sufficient incremental net profit for a client to justify the fees? Agencies, who will focus on solving and answering this call of proven value creation, will win. Agencies, who are trying to mirror the speed of their client's reorganizations, will be very busy, but it won't matter; they have already lost.

Geeks in Marketing?

Is something going on in the field of marketing that will change this practice forever? Are Geeks taking over this business discipline without anyone noticing? Are the Malcolm Gladwell’s and Stephen Levitt’s type of individuals the new heroes of the progressive Marketer (Authors of “Blink” and “Freakonomics”)? Data-Driven, analytical, and always out looking to understand and explain patterns and structures in seemingly unrelated events?

I am observing that this trend is accelerating. That’s one of the reasons why this blog is called “Marketing Geek. Here is my premise: Over the next few years Geeks in Marketing will become one of the most disruptive force in a discipline that traditionally was driven by big creative personalities.

What are the characteristics of a Marketing Geek? He or she seem to have several distinct qualities and behavioral traits:
• Obsessed with Data, Numbers, and (unfortunately) excel sheets
• On a mission to see and understand patterns, (causal and non-causal) correlations, and structures in everything related to business events, consumer behavior, and marketing programs
• Friendly arrogance to seek the truth, and unfortunate ability to call bullsh… by its real name

There seem to be a couple of reasons, why Marketing Geeks gain a stronger foothold. It’s driven by a stronger accountability pressure for any marketing expense, the staggering growth of available customer data, and the proliferation of technology tools that enable us to decipher and explain patterns better (Think Open Source). But how will the rise of the Geek influence the practice of Marketing? I suggest three key changes:
• More and more marketer in more and more meetings will ask the question: “What does the data tell us?” This will change how marketing programs are designed, and executed!
• The sophistication level of any marketing dialog between companies, agencies, and 3rd parties will rise due to a data and number centric foundation that everyone will share (hopefully)
• The currently dominant strategic and creative forces within marketing will learn how to share the power of decision making with more and more Geeks. I believe that this will make the creative better and more relevant for the consumer instead of pleasing the personal preferences of some executives within a Fortune 2000 company

But beware: Geeks can be dangerous and obnoxious. Therefore I am betting that the most successful marketing teams will be the ones who are able to marry successfully the three key tribes of marketers: The Creative, The Strategist/Account Guy, and the Marketing Geek. It will be an interesting encounter, hopefully more “Dancing with the Stars” than “Survivor”!

The asset "Customer"

Companies ask themselves quite often how they could categories and measure their customer assets, meaning what kind of value do they really have with their existing customer base. 500,000 customers do not equal 500,000 customers; their value can be significantly different. Let me suggest three categories that will help measuring this asset.

Traditionally most companies only cared about the likely guaranteed revenue that the existing customer base will provide, either through long-term contracts, subscription deals. Let’s call this category “Secured Revenue”.

The other relevant asset category is “Customer Engagement”. The first measure in this category that got a lot of attention over the last 20 years is Customer Satisfaction. Companies deployed a lot of methodologies to measure the right level of Customer Satisfaction and installed early warning systems if something changed. Another measure in this category, which became more popular the last 10 years, is expected “Renewal or Repeat Rate”. This is measured by either asking directly a panel of customers or analytically predicted by looking at historical data points. It describes of how likely is a customer of repeating the past purchase. The third measure here is “Customer Referral”, meaning how likely is an existing customer to recommend the product and services of a firm. This “Net-Promotor” Concept became very popular over the last 2 to 3 years, promoted heavily by Service Providers like Satmetrics and firms like Intuit.

I predict that we will see a new emerging category, called “Willingness to Co-Create”. What does this mean? Willingness to Co-Create describes a customer’s desire, interest, affinity to invest time, emotional and intellectual energy, and potentially even money to influence a company’s product or service to create a better product for himself and potentially others. The most common forms of performing “Co-Creation” are

• Old fashioned Customer Feedbacks (think product ideas and other suggestions not complaints)
• Personalization (think personalized Nike shoes, think individually crafted text on “My M&Ms”)
• Value-Adding (think local Real Estate listings on top of Google Earth, think LA Times Editorial blogging idea, think Lego's latest product development strategy)

Most companies still struggle to increase its asset value “Customer” in the first two categories “Secured Revenue” and “Customer Engagement”. Innovative firms understand that they need to understand and master the 3^rd category “Co-Creation”. The more you are able to involve your customer base in this process, the more you are able to transform Customer Centricity in a loyal fan base of customers, into real evangelists of your brand.

Media Layering

Tony Weisman, CMO of Draft in Chicago, shared this idea of “Media Layering” with me. Let me try to explore it.

Everyone in today’s marketing world talks about integrated communication, but it has been a buzz word for at least 10 years without meaning too much for most Fortune 500 companies. The original buzz of Integration meant that a company’s marketing have an integrated approach across all media channels (e.g. TV, Radio, Direct Mail) while targeting particular customer segments, or even individual customers.

Most companies tried, most companies failed but now something new is happening which changes the game of integrated communication. The customer is consuming marketing messages and media simultaneously in an aggregated manner, meaning he or she watches TV, browses the Web, while talking on the phone with the best friend. We call this “Media-Layering”, the customer does not consume one media at a time but integrates several media into one consumption act. The customer integrates the different media himself, but in a manner that the Fortune 500 companies and its agencies have not planned and do not control. It’s a customer driven, desired, and controlled act of media integration.

What does this mean for us marketers, especially for our continuous strive to integrated communication? We believe this trend (which will only get stronger) will create three key opportunities:

- Embrace “Media-Layering”, don’t’ fight it: It’s less about coordinated integration of all marketing messages but it is about accepting “Media-Layering” as a customer reality which leads to an even shorter time of getting your message across, it all results into a further decreased customer attention span for our marketing work. If you thought of 30 seconds TV spot, 10 seconds for a DM piece, or 5 seconds for an email, cut all these attention spans by 80% and you know what kind of time you have for your communication

- Be on top of the “Media-Layering” hierarchy: Every marketing communication should not just get shorter but utilize customer’s “Media-Layering” behavior as the challenge to be on top of the consumed media layer. You can only do this if you transform every communication element into a real value add. The marketing program needs to be more than just communication; it has to transform itself into customer centric service. If you purely communicate to your customers, you will be at the bottom of the consumed media layer, if you service your customer, you will be at the top of the consumed media layer.

- Pay less per “Media-layered” customer contact: The economics per customer contact changes. Fortune 500 companies and their Media agencies should not pay anymore the established rates per impression, or audience volume since all contacts are layered. Layered contacts dramatically reduce the value of one singular contact. The most value per contact is generated by either marketing vehicles which force a singular media attention span for some period of time (e.g. Direct Mail,) or for consumption locations in which the customer is unable to “Media-Layering” as much as he would normally like to (e.g. airplanes, retail story, movie theaters)

The world might have gotten flatter but marketing consumption has gotten denser in every single customer contact.