Monday, August 31, 2009

The principle of "Good enough"

Robert Capps has a close to brilliant article in this month’s Wired Magazine, writing about the phenomena of things and services that don’t strive to be perfect but just good enough. It’s the old but highly relevant story of creating value stories instead of striving for perfection. His examples are covering a wide area: From traditional phone to Skype, from high end video cameras to the Flip, from military jets to drones, from books to the Kindle, from the traditional television to Hulu and from computers to netbooks.

Why is the principle of “Good enough” so successful? A few reasons:

  • Over- Engineering: A lot of consumers never use all the functionalities that a particular product or services offers. In most usage occasions they only use a fraction of the overall offering. Today’s consumers have realized the myth of over-engineered products and are willing to get for a “Good enough” alternative.
  • Accessibility beats Complexity. For a lot of consumer it’s more important to have an easy to use and ready available product or service, instead of spending a lot of time and energy to unlock all the different potential functions that a product might have.
  • Value = Low price + sufficient quality. Consumers are more price conscious than a few years ago, so they are thinking twice before making a high price tag purchase decision. These “Good enough” products lower the threshold for a purchase, and they still provide good quality.
It seems that there is a strong parallel to today’s approach of designing marketing programs. The programs that require a huge amount of money and time will be more and more replaced by a larger number of quickly developed and quality wise sufficiently produced programs. These programs will cost only around 10% of the previously large scale generated programs, enabling a brand to launch 10 of these programs to the same prize. And these programs will be less placed in highly paid media locations but in the brands owned (e.g. Website, Store, Packaging) or brand earned (e.g. Social Media, Buzz) spaces.

It would be an interesting research exercise to count the number of all marketing programs that a particular brand is launching in 2009 versus 2005 or 2000. My hypothesis is that most brands have a significant higher number of programs with a dramatically reduced expense number per program. The principle of “Good enough” will enter the marketer’s vocabulary faster than we can say ‘Web 2.0”.

Monday, August 24, 2009

The Value of Culture

Two very separate articles that I read recently reminded me of how culture in organizations, either in corporations or in high schools, are a much more important determinant of long-term success than most other elements.

Friend and colleague Dominic Whittles referred me to this highly interesting posting by Zeus Jones. He writes about the major advantages of a web-based community enabled through the ever growing numbers of web applications and endless cost reduction of anything Internet. But he makes a strong argument for the importance of organizations that are connected through physical proximity, stronger formal commitment (=employment), and other intangible benefits of a traditional organization. It all comes down to one critical differentiator: Culture.

Successful organizations are using their culture as one, maybe even the most critical, competitive and strategic asset, especially in industries where talent is the domineering factor over high capital intensive investments. It is surprising that not more companies are spending more intellectual brain power and time against understanding and leveraging their culture.

The second article is from the WIRED magazine in which Daniel Roth writes about the attempts of improving the educational level in high schools. He quotes Alex Grodd who surprised recently a high minded conference of do-gooders that the critical factors of increasing the skills of high school students is to make “Nerds” cool. Every child in school wants to belong to the cool tribe, and as long as the athletic quarterback cliché dominates the standards of “coolness”, we are going to fight upstream against a children value system that values Brett Favre over Bill Gates. Our efforts should be stronger focused on making geeky and smart behavior cool. Maybe the government or well endowed educational organizations can fund a few Hollywood movies that can help of transforming “geekness” into coolness.

Both articles demonstrate the importance of culture and its intrinsic value and derived behavioral paradigms that either drives people and their organizations to success, or not.

Monday, August 17, 2009

R&D in Marketing organizations?

The slowly ending recession in North America can’t hide the fact that the last year has dramatically changed consumer’s behavior and therefore all marketing efforts by any marketing organizations. Any projection in regards to Marketing Spend in North America over the next few years assumes an overall spend decline which will hurt especially agencies very hard, independent of how fast the recovery is coming. Marketing Investments are a declining category in North America.

A declining category should always bring up the critical question: How much do we invest in R&D to steal market share in our declining category? Surprisingly, most marketing organizations don’t even enter this discussion. They are not used to be thinking about client non-specific R&D, very different from any software company that spends between 2 and 10% of their revenue against R&D, not to mention Drug companies who are spending on average 12% on R&D. Even large service organizations like IBM or Accenture have a separate R&D Budget by department that can reach close to 4% of overall fee revenue.

Why do marketing organizations don’t think R&D? A few reasons:

  • Most marketers are living only by solving the problem right now in front of them. Probably more than 90% of marketing organizations don’t have a three year plan that would justify and explain the value of any R&D investments. The thinking and planning in every shorter time frames hurts any serious R&D discussion.
  • Agencies are used to be working only on client specific challenges and tasks. It is a very foreign concept to invest against something that no client has asked for. The concept of scale and impact beyond one single client is a rather unusual one that most agencies are not able to understand. Similar, brand marketers in large organizations associate R&D with the product department, not with initiatives within the marketing team.
  • The major advertising holding companies don’t ask for real innovation from their agencies, they demand a good profit. Some of the holding companies are trying to encourage R&D projects on a holding level but it is extremely difficult to develop something unique and competitively worthwhile for them, since the entities in the holding companies are often far away from a particular client need. And good R&D is always driven by attempting to solve a particular very well understood need that can be identified across multiple clients.

I believe the weakening of marketing organization will only be accelerated by not understanding the value of R&D projects. Any marketing executive should ask “Where are the key areas that we should put R&D projects against?” and “How much should we be spending on R&D?” Most likely we will never reach R&D investments in even single digit percentages of revenue but any marketing organization can define three to five projects that could pay significant dividend in case of a success.

Today’s young talent will demand such thinking, they are not interested in just executing against a narrowly defined work scope. A R&D budget is not just a bet onto the future to create a competitive advantage but it could be the best retention tool for outstanding talent, too.

Sunday, August 09, 2009

Decision Calculus

Pradeep Kumar, practice head for “Marketing Mix Modeling” at Draftfcb and colleague of mine, referred me to a very interesting and surprisingly old article about “Decision Calculus” by John Little. “Decision calculus” describes a methodology that combines statistical analysis with expert opinion to solve a particular problem, primarily in marketing. John Little introduced this concept first in 1970 when he tried to develop an approach to get managers more involved in analytically derived decision making. The AMA dictionary defines “Decision calculus” as…:

“…the quantitative models of a process that are calibrated by examining subjective judgments about outcomes of the process (e.g., market share or sales of a firm) under a variety of hypothetical scenarios (e.g., advertising spending level, promotion expenditures). Once the model linking process outcomes to marketing decision variables has been calibrated, it is possible to derive an optimal marketing recommendation”.

Over the last 40 years, these attempts to stronger formalize the expertise and human knowledge of managers into analytically derived decision has had as many supporters as opponents. I think that something is lost in this quite often heated debate. Pradeep Kumar says it best when he says: “Understanding is more important than predicting”.

The underlying genesis of “Decision Calculus” resides in the desire to not necessarily create the most perfect analytical model but to build model based processes and systems that get used more often. Too often statisticians try to build more and more perfect mathematical models that are then used by analytical ignorant managers to the detriment of smart decisions in a fast changing business environment. The better approach might be to invest more time in building potentially less complex models but incorporating the user’s expertise on the path of solving a particular problem. The question of how much do I need to invest in marketing programs for a particular new product launch could be dealt with purely academically and mathematically by using the most sophisticated analytics. Or it can combine analytically derived insights with the heuristically based and incorporated insights of the expert and ultimately budget responsible marketing manager.

Over the last years data visualization has been the key application to “democratize” data. Now, we might be at the point of “democratizing” more complex statistical models. Visualization only get us so far, since marketers can use dashboards and visualized models without understanding the real foundation and strong limitations that any analytical derived model has. The concept of “Decision Calculus” continues to show tremendous promise, even 40 years after its birth. We will need to continue utilizing and expanding it in real life situations to improve its impact and define better rules for its successful application.

Sunday, August 02, 2009

Creator or Observer?

This year the artist community is celebrating the 40th anniversary of John Lennons’ and Yoko Ono’s performance piece “In Bed” which is probably one of the most well known artistic expressions of a particular life philosophy. In a recent discussion about her artistic mindset and drive for this kind of work Yoko Ono simply says: “I am not an observer, I am creator.”

Her statement, strongly implying a clear separation between both activities, contradicts the more common understanding that one most be an observer to be a creator. I rather like her absolute statement because it reflects a truth about most business organizations that splits heavily between functions that are primarily observers and functions that are primarily creators. In the agency world, most markers consider the creative unit the “creators”, more advanced agencies might include the “strategic planners” in this camp of Yoko Ono.

Marketing organizations that will survive and drive will have already understood that the key for true long-term success is in turning every department into “creators”. Observing is important but the value generation resides in creating things, independent if you are a creative, a data analyst or a media planner. In world class marketing organizations, everyone is a creator, just in a different way. The organization’s value resides in commercial creation on as many levels as possible.

While “In Bed” seems at first glance to stress the importance of observing, it ultimately celebrates the power of creation. And not just for Yoko Ono, but for anyone who has seen the piece or has experienced it through different media. Realizing this is a good way to celebrate its 40th anniversary.