Category: Strategy

Edelman Brandshare2014: a manifesto for brand survival, but will brands take heed?

Edelman has just released its latest Brandshare report. It has the rather uninspiring title ‘How brands and people create a value exchange’. It is, however, a very important report: one that every single marketing director should not just read – but read and actually think about – because it presents credible evidence that explains how the relationship between brands and their customers or consumers is changing. In effect, it lays out a framework for what it will mean to be a brand in the future – even if the report itself doesn’t quite go so far as making this claim.  Perhaps more starkly, it makes it very clear that what it is that built brands in the past will not be relevant in building brands in the future.

 

The report starts with the assertion that “people’s needs have changed due to an increasingly complex and interconnected world.” Fair enough – but I think a better way of phrasing this is to say that the world has changed and this is creating new opportunities (indeed requirements) for brands to better meet people’s needs: a fact which ‘the people’ are now starting to realise. The reason I think it is better to phrase the issue this way is that believing that ‘the people’ are changing can often result in an attitude which seeks to blame or resent ‘our consumers’ for spoiling the brand party. Not the right mind-set. People have not really changed (they rarely do), what has changed is the world around them – and it is this that brands need to understand and react to. The people are not the problem here. Anyway – a small quibble.

Edelman then introduce the concept of ‘the value exchange’ and demonstrate that consumers now feel they are not getting sufficient value in this exchange, which I took as ‘strategy talk’ for saying that the relationship between brands and consumers is breaking down. The report identifies three reasons for this:

  • Brands are not really giving consumers what they now want (“there is little value for the consumer in the current value exchange.”)
  • Consumers want actions, not words (“emotional and rational needs are merging”)
  • Being seen as a good corporate citizen is becoming more important (“meeting societal needs delivers real business value”)

More specifically, consumers want brands to:

  • Respond quickly to concerns and complaints
  • Provide ways to ask questions and give opinions
  • Communicate openly about how products are sourced and made
  • Invite people to be a part of the development and refinement process
  • Have a clear mission and purpose at the brand core
  • Use its resources to drive change in the world
  • Let people know the company’s mission and value for the future
  • Take a stand on issues consumers care about.

These points clearly fall into two distinct groups – the first four relate to process and delivery and they are very functional. No BS here about wanting to be ‘surprised and delighted’ by brands or wanting ‘rewarding brand experiences’ – just very clear instructions that are essentially all rooted in listening and responding.   The remaining four cover the more emotional territory – but are equally explicit. They are an exhortation for a brand to demonstrate that it stands for something other than simply the creation of profit.

I think these eight points represent a crystal clear manifesto for what a brand needs to deliver against if it still wishes to be a brand in the future. However, the interesting thing is the extent to which conventional marketing activity  delivers against almost none of these points. For example, customer service has been seen as an issue that is peripheral to marketing and indeed peripheral to corporate activity in general: a cost that should be minimised by outsourcing it to India. Likewise what Edelman identifies as ‘societal needs’ have been marginalised in CSR or CRM activities that are similarly peripheral to marketing and corporate activity rather than being something that is seen as being at the core of the brand.

Perhaps it is worth restating this conclusion more bluntly: what it is that built brands in the past will have almost no relevance to what will build brands in the future. Edelman has not been as explicit in stating things this way – but this the inescapable conclusion of what the evidence collected actually demonstrates.

Of course, brands have paid lip service to these issues to date. Customer service has long been talked about as being an important component of social digital strategies, but very few brands have actually done much about it. It is incredibly easy to address all of the four functional needs through the creation and management of online customer communities – but why do so few brands have them? Most brands still make it incredibly difficult for a consumer to do any of the things the report shows that they want to do (ask questions, get responses, provide opinion, access relevant information). Why? Dell showed the way with its Idea Storm site seven or eight years ago. Why have so few followed its lead?

The ‘strategy du jour’ these days is all about content marketing. But rarely is this content actually aligned against responding to complaints, providing answers to questions, or giving transparency about how products are made and sourced. Rather we have organisations like Coca Cola (my current bête noir in the content space), telling people how to make cups out of crayons. Why?

I guess the answer to this question goes back to the conclusion that what built brands in the past won’t build brands in the future. Perhaps it also helps explain why Edelman stepped back from putting this conclusion centre-stage. What built brands in the past represents a huge set of vested interests that define the world of brands and agencies as we know it. While it may be acceptable to recognise the problem, it is much harder to embrace a solution that addresses this problem. Instead it is far more seductive to believe that the solution is content, or ‘reaching out to consumers’ (rather than responding to them), or creating ‘engagement’ (whatever that means) because this is a solution that doesn’t upset the brand and agency apple cart.

Personally, I take great heart from this report. It gives me the hard evidence to support what I have been saying for a long time: namely that social media strategies need to be based on listening and response, that content strategies should be seen as a process that matches brand answers to consumer question in real time rather than strategies designed to fill-up the channels with brandfill, that the social digital space is a medium of connection not a medium of distribution, that communities will become the new media, that marketing people should forget trying to target consumers and recognise that they need to get consumers to target their brand.

As a brand owner I guess you can take this report in either one of two ways. You could brush it aside as just another one of ‘those’ reports by a consultancy telling me I need to change my business. Or you could see it as a message from your consumers, telling you what you need to do if you still want to be relevant to them in the future.

Advertising is just a big, pink, inflatable, pointy finger

2014-10-10 10.16.29I spent two days last week on the Slovenian ‘Riveriera’ attending the Golden Drums International Advertising Festival (basically Cannes, but for eastern Europe). Slovenia has almost no coastline and therefore appears to have turned all of it into the edge of one gigantic Adriatic swimming pool, complete with chrome steps and handrails, interspersed with a couple of pretty fishing villages. You can almost hear the tourism pitch idea now, “hey, this is not much as a coastline, but as a swimming pool it could be pretty impressive!”

These events are always interesting to see how the practice of creativity and the practice of marketing are currently entwined. Two things stood out for me. First was the familiar problem of category confusion. It was impossible to put most of the best ideas in any one category. For example, there was an idea for the Belgrade State Theatre (I think) which placed actors as drivers in taxis wired up with hidden cameras. In true taxi driver style, the drivers began a tale of lament about their lives, drawing the passengers into the narrative. At the end of the journey they then reveal their true identity and that the story was actually the plot of a Shakespeare play, currently playing at their theatre. Very funny to watch (in the show reel) especially once you were wise to the format and were trying to identify the play.

But the problem was that this ‘event’ was forced into the category of film (because it was filmed) and sat there alongside conventional 30 second ads. However, the event wasn’t in any way a conventional ad. In fact it became compromised by the requirement to render it into the restrictive frame required to create something that can sit in paid-for TV space and that is seen a number of times by a ‘target consumer’. It worked as a show reel (but consumers never get to see the show reel) or it worked if you could get consumers out of expensive advertising space, to a space (i.e. YouTube) where you had sufficient time to tell, or even interact with, the stories properly.

This leads to the second problem – one of scale. Most of the best ideas were small scale ideas, or rather ideas which were not naturally adapted to working at large scale. This was either because, as in the case of the theatre example, it was difficult to fit them into a distribution medium which would give them scale (i.e. a TV ad) or because their strength was in their relevance – often local or cultural relevance – which by definition has limited scale. The most decorated agency on the night was an independent Russian agency called Voskhod. Their stand-out ideas (i.e. the ones I can remember) were all small scale. Actually, they were all PR ideas. For example, they created a poster for a local steak restaurant that featured a picture of a raw steak. One night they ‘grilled’ the steak by actually burning strips into the poster. Result – the restaurant was booked out the following week. And they did a campaign which linked an up-and-coming band with a single fashion shop. Very geographically and culturally specific stuff. And this stuff is the anti-thesis of the generic, international campaign that forms the bread and butter of most big brands and major agency networks. An impending problem there me-thinks.

Of course all of these ideas were surrounded by clouds of ‘social media’ – i.e everything was YouTubed, Facebooked, Tweeted etc. etc. In fact, these ideas lived much more comfortably in social media than in traditional media. But social media isn’t a channel. Just because something is ‘in’ social media, doesn’t mean it actually goes anywhere – unless you then invest significant time and effort driving people to that social space. Which perhaps provides a clue to the future of advertising and creativity. As I have posted previously, one of the principal consequences for brands and creativity of the social media revolution (which is the separation of information from distribution) is the separation of creativity from the means of delivery. Ideas have to sit above any particular delivery channel. Ideas have to define the channels, rather than be defined by the channels.

The channels themselves only have relevance in-so-far as they have a specific purpose and quite possibly the purpose of advertising in the future is not to actually carry, or even illustrate, brand ideas, but simply to be the big, pink, inflatable finger which points at brand ideas. Advertising is a distribution medium, so that is what it should focus on – bringing attention (scale) to an idea which lives in a (social) space which doesn’t naturally have scale attached to it. And these ideas will in most instance have a degree of specific geographical or cultural relevance that, even with advertising attached, will limit their ability to achieve international scale. It also points to what I have previously talked about, which is that the challenge for brands is to convene an audience, not to target it.

The overall winning idea came from Romania, and it involved connecting a young, relatively photogenic shepherd to the internet via a smart phone, thus allowing him to share his life with the world (or at least that bit of the world which might be interested). Quite a lot of people (in Romania) were interested as it turned out and said shepherd became an ‘internet celebrity’. I think this says more about Romania than it does for the practice of marketing generally. One thing is for sure, we are not going to be handing out awards for this type of thing in five years’ time (except perhaps in Turkmenistan). The brand was Vodafone. Although it could have been almost any mobile network, technology or sheep-related brand.

images_iman_highres__mg_7473Or it could have been Coca-Cola, since pretty much anything can be a ‘Coca-Cola story’ in these halcyon days where the focus has shifted from creative excellence to content excellence.  This, incidentally is what I was there to talk about – our obsession with content marketing, otherwise known as brandfill.  Here I am, in action.  I think I will use this as my new social profile pic, since it pretty much sums up my professional life – waving my hands around telling people what not to do.

There was also one other stand-out. What is it with creatives, beards and jackets which are at least one size too small?

Convening an audience: the new challenge for marketing

sermon_mount2I believe there are now two consumer worlds: the world of the audience (the world of ‘traditional’ media and marketing) and the world of the individual (the world of social media). These worlds are very different, not least because in the world of social media consumers will expect to be treated as an individual and will tend to resent or ignore attempts to treat them as just another member of an audience. This doesn’t mean that consumers don’t ever want to be treated as a member of an audience, just not when they are in the social digital space.

This presents two problems for brands. First, almost everything we know about marketing (including digital marketing / media) comes out of the world of the audience. Marketing, to date, has essentially been audience-based marketing. But putting audience-based approaches into the social space just doesn’t work, because it can’t support the potential for creating high-value relationships with individuals. Traditional marketing is a high reach but low engagement business and there is no point in putting the low engagement techniques of traditional marketing into the low reach environment of social media.

Audiences are very hard to find or create in the world of social media. This is because when people are in this space they are looking to create connections and you can’t create connections with an audience, only with individuals or within groups. The social media space is a medium of connection, not a medium of distribution. When a brand operates within the social space it has to accept that it can realistically only talk to very few people at any one time so it therefore has to (and can) create relationships of far higher value than anything that is associated with traditional marketing. But you only do this by recognising what it is that people want from you in this space, which is real-time individualised response and recognition, answers to questions and information.

However, this fact is not stopping many brands from trying dump audience-based, low engagement approaches in the social digital space. Content marketing is the latest iteration of such an attempt. Continue reading →

Converged media: is it the Next Big Thing?

Blessed Trinity of mediaHere is a lift from a Sprinklr blog post about its recent purchase of TBG Digital – a “top global social paid solution company”.

With the obvious and inevitable decline of organic reach, paid is increasingly the only lever that can predictably control brands’ reach across channels. It’s absolutely critical that brands learn to coordinate messaging across paid and owned.

I look at this and feel conflicted. At one level, what Sprinklr are saying here is absolutely true. It is certainly true to the extent that brands are starting to recognise that what Sprinklr call ‘organic reach’ just doesn’t happen at any scale in the social digital space (for brands at any rate). It also is validation of what I have been going-on about for some years now – namely that there are no audiences in social media and therefore social is not a reach and frequency (channel and message) game.

I am also aware that ‘the conversation’ within the social digerati of social media managers and consultants has been shifting back towards a greater emphasis on paid social solutions. This is a conversation that is heartily sponsored by the likes of Facebook and Twitter of course because it supports their agenda of discouraging organic (i.e. free) usage of their platforms and encouraging paid usage.

But here is the conflict. Why is it that we therefore think converged media is the answer and is the concept of ‘paid social’ really a contradiction in terms?

I first wrote about this almost exactly two years ago where I argued the point that converged media is really a construct of convenience for those that have an interest in traditional media and mass, audience based marketing. It is a way of trying to preserve the relevance of traditional approaches within the new social space. From the consumer / customer / citizen perspective however, media is going the opposite way. It is diverging and creating two very different media spaces, what I call the world of the audience (traditional media) and the world of the individual (social media). I also questioned the relevance of the Holy Trinity of media (Bought, Earned and the Wholly Owned), suggesting instead that media is now better understood as a spectrum, with participatory media at the social end and non-participatory the traditional end.

It seems to me that what has been happening in the last couple of years has been a growing realisation that most brands’ social media strategies are not working. Rather than try and deal with the fact that this is because these strategies were all about trying to make social work as a traditional, audience-based space (so that traditional audience-based marketing can continue to work) the response has been to try and converge ‘organic’ social with a steroid injection of paid social.

Therefore, converged media is really just the next step along the wrong road. Brands will only hit the right road when they realise that the challenge in the social space is not defined by reach and frequency, channel and message – it is defined by behaviour identification and response. Social ‘media’ is a connection medium, not a distribution medium. You deal with much smaller numbers of people at any one time, but the value from these connections is much greater, largely because they are based upon what your customers want from you, rather than what you want your customers to have.

Agencies, the future and The Big Why

(Warning: this post is over 4,000 words. Get a coffee)

This post in a nutshell: The business model has fractured: creativity is becoming separated from delivery.  Delivery is becoming a commodity (as procurement departments are realising) and thus no longer able to subsidise creativity.  This is an enevitable consequence of the social digital revolution, which is all about the separation of information from distribution, message from channel.  What was once a single business is now three businesses.  At one end is a high margin, low volume, insight/creativity business.  At the other end is a large pool of specialist deliverers within which there are no scale advantages associated with size or aggregation.  In the middle is a ‘commissioning’ business which is all about the outsourced management of creative ideas.  These three businesses cannot live together within one house because they have significantly different business models (albeit it large agency groups can own the three separate houses).   This is the end state, ten years down the track.  Agencies therefore need to manage this separation or else the new reality will be built from the wreckage of broken business models.

 

It has become something of a tradition to use the post-Cannes period to reflect on the future of agencies. The standard analysis will include the observation that the boundaries between the various disciplines are collapsing (usually illustrated by the amount of PR awards being won by advertising agencies), frequently followed by some portent of the imminent death of ‘something as we know it’.

This is nothing new. For many years the power of advertising as a killer punch has been progressively eroded, driven by increasing media fragmentation and the evolution of more sophisticated consumers. This has forced brands to develop a more integrated approach: 360 degree communication was the (now rather hackneyed) buzz-word for this. And about eight years ago I remember Lou Capozzi, then global head of the MSL network, looking at the agency landscape and saying to me “it’s all become PR with zeros added to the budget” – still the best sound-bite description of what is happening that I have heard. However,what is new is the thing being called the social digital revolution, but this has also been with us for quite some years, all that is really new is the fact that brands and consumers are finally working out how to actually use all the new shiny tools.

What is missing from the debate, in my opinion is The Big Why. Everyone is looking around and describing What is going on, but very few have a cogent analysis of Why it is happening. And the lack of this Why makes it difficult to predict what might happen next, or to make plans for how to react effectively. So here is my contribution to The Big Why.

Scale: it is becoming re-acquainted with commodity and utility

I think there are two tectonic forces which are responsible for driving much of what is happening in the client / agency space: one is related to scale and the other to the separation of information from distribution (message from channel and thus creativity from delivery). Let’s look first at scale. If you stand back see what happens when the social digital revolution touches a business sector, what you will see is that scale advantages start to leak out of its business model. Being big no longer confers the sort of advantages that it used to and in-so-far as scale advantages remain, they tend to retreat back towards the cave of utility / commodity within which the big beast of scale is most comfortable living.

We should look to the music and news businesses to illustrate what happens here, given that these were the business sectors first touched by this revolution, and while they were the first, they won’t be the last. Scale has been leaking out of the music business for some years now, largely driven by the inability of the major players within the sector to retain control of the means of distribution (see second point below). Interestingly, while the sector has been losing scale advantages it has gained in scale, in terms of the number of players and content within it (again because the distribution barriers to entry have come down). The remaining (big) business opportunities within the sector are now moving towards commodity and utility, providing the aggregation infrastructures necessary to allow music consumers to manage the increased flow and volume of content within the space. Provision of music has, in effect, become a utility (see Spotify) – something that David Bowie predicted in 2002.   Bowie is a very clever chap – as his longevity in the business testifies. All those who wish to remain relevant while the music around you changes should learn a few lessons from him.

Likewise, in the news business, news has stopped being a finished product and become a raw material (i.e. a commodity) – something news organisations are, in large part, failing to come to terms with. The opportunities that will evolve here are likely to be clustered around how you allow consumers to assemble their own finished news products – a function that requires very little actual news gathering and minimal human editorial input. In fact one can well foresee that much of this function will be handled by algorithms: you will simply subscribe to the news algorithm that matches your particular political or social preferences. However, the idea that the Guardian or Wall Street Journal will simply become algorithms doesn’t sit well with the current management or employees of these businesses.

What is dying is the business model that provides the thing, not the thing that the business model provides(d)

As with so many things with this revolution, what is dying here is not the thing itself (i.e. news, music or even advertsing and this thing being called content), in fact these things are enjoying an explosion in creative energy: a phenomenon Clay Shirky has labelled ‘the cognitive surplus’. What is dying is the restrictive business models that provide the thing, not the thing that the business model provides(d).

How is this effect likely to affect the agency sector? The agency sector has always had two components to it: channel (i.e. media buying and campaign delivery) and message (i.e. ideas and creativity). Of these two, media has been the area where scale has always been more important and creativity has had scale thrust upon it, largely to force it to conform to the scale requirements of mass media / mass market campaigns. To an extent this has always been a rather forced marriage and its imminent demise (see below) will allow creativity to go its own way, removed from the constraints of scale, and for media / channel to devote more attention to becoming a commodity or utility via becoming an infrastructure or process – something we are already starting to see in things such as real-time media and media trading. While the creative side of things can become liberated by its separation from channel, it will not be immune to the scale problem, largely because of the extent to which this problem will affect the brands who are its clients.

For brands, being big has become harder, largely because being smaller has become easier

For brands, being big has become harder, largely because being smaller has become easier. To date, brand marketing has played on both sides of fence. Brands have been able to extract the scale advantages of being a commodity, (operating in mass markets, using mass production techniques and mass media channels) while positioning themselves as being in some ways superior or unique. In effect, the art of brand marketing has been about creating a perception of uniqueness around a commodity product. Communication has been the way in which it this has been done. The products or services themselves may be largely undifferentiated or similar to commodity, unbranded / own label offerings but premium positioning has been created through consumers’ experience of the layers of communication that have been built around the product. In effect, consumers of branded products have been paying a form of consumption tax which has been spent on buying Porsches for creative directors and lunches for marketing directors.

The problem now is that, what I call the premium myth is becoming harder to maintain as alternative offerings emerge and consumers themselves become connected and smarter and thus able to find and evaluate these offerings, or stress test the genuine premium-ness of the offerings of so-called premium brands. For example, look at what Airbnb and Trip Advisor combined are doing to the hotel sector. They are allowing individuals to compete with major hotel chains and forcing the big players to live up to their brand (grand) promises.

A one-size fits all markets approach is fast becoming a liability

Large brands, who provide the base load of fee income for the agency sector, are now finding they either have to be big in a very small way, or small in a very big way. Either way, being big doesn’t carry the clout that it used to. A one-size fits all markets approach (which was always something of a compromise) is fast becoming a liability thus eroding the advantage of the larger agencies who are basically set up to deliver this, while also creating a space for boutique creativity. Size is becoming re-acquainted with commodity and, as with all commodities, associated with high volumes and low margins. Longer term, this could have some profound implications for brands and brand owners, especially P&G-type brands that operate in low interest categories that have always had to invest heavily in marketing activity to inflate interest and keep commoditisation at bay. If you want to be big, you may have to look to other areas such as purchasing, trade relationships and genuine NPD (as distinct from NPD simply designed to create superficial ‘innovations’ that merely provide an excuse for a new ad) as the scale advantages associated with marketing as a discipline melt away.

Everyone decries the intervention of procurement departments into client / agency relationships, resulting in the driving down of margins. But all procurement departments are doing here is drawing attention to the fact that what agencies are delivering is becoming a commodity – or needs to be delivered as such if it is to reconcile the fact the ever decreasing returns ‘conventional’ agency services deliver no longer justify the margins they allegedly require to deliver them.

The social media revolution: separating information from distribution

Apologies, these last few paragraphs have become something of a ‘what’ analysis. We all basically know this – so to return to the ‘why’. In many ways the scale / commoditisation / fragmentation issue is really just a symptom of what I think is the most important driver of change, which is the separation of information from distribution (message from channel). This is really what the social digital revolution is all about.

This is the thing that is destructive of business models, because the business models (for both agencies and brands) are founded on the idea of their being a marriage between information and distribution. Break the relationship and you break the business model. The reason this is so momentous in its potential implications is that this is a marriage first created 600 years ago when Gutenberg created the printing press and moveable type. From this point on, message became wedded to channel and because the channels were expensive, channels (silos) were the dominant partners in this relationship. Their expense also dictated that they could only be used cost–effectively to communicate with audience-sized groups of people. This had a whole host of implications for how the information business became structured and the rise within it of large institutionalised players, be they media owners or brands (scale again). At a more fundamental level it is why marketing became a channel and audience game and was responsible for the creation in the first place, of the now collapsing channel-based silos.

The marriage between news and paper was always a marriage of economic convenience, rather than a love match

Wherever we look, we see this separation cutting business models in two: where The Thing is being separated from the means of delivering The Thing. Take newspapers for example. News (information) is being separated from paper (means of distribution). In fact, we can now see that the marriage between news and paper was always a marriage of economic convenience, rather than a love match. Looking at the music business again, the information (music itself) is no longer imprisoned within expensive distribution formats such as CDs. It is important to recognise that this divorce changes the nature of the information as well as just its selection of distribution partner. Not only can information find the distribution means for which it is best adapted it can change its own nature, now that it is freed from the constraints its distribution partner placed upon it. Probably one of the reasons that the businesses most affected thus far have been music and newspaper publishing is that a music track was actually very poorly adapted to the distribution medium of vinyl or CD: likewise, news is very poorly adapted to the medium of paper. But, now they are liberated, both music and news can go and do their own thing. And that means they can change. The concept of a music album is a creature of distribution, which is why it is dying. Likewise, news doesn’t have to live in 500 word segments or 30 second video packages, or even be defined by concepts of newsworthiness that are themselves shaped by the economic requirements of news media and its need to attract an audience-sized group of viewers, readers or subscribers.

This doesn’t necessarily mean the end of the media, it just means that mediums (channels) have to go and find the roles for which they are best adapted. The print medium won’t die, it will just loose most of its content, and be forced to court the content for which print is best adapted. In business parlance, distribution media will have to return to their areas of core competence.

Con-tent is defined by its requirement to be con-tained (within a channel), but we no longer live in a world where information requires containment

This is one of the reasons we have to be very careful with this thing we are calling ‘content’. Con-tent as a word and as a concept is defined by its requirement to be con-tained: to sit within a channel. Water flowing out of a tap is not content. It only becomes so when you put it within the restraining distribution medium that is a glass (or a channel that is a pipe). In a world where restraining distribution mechanisms are dying, you have to question whether content itself is a concept which will continue to have relevance. We no longer live in a world where information is constrained and contained within pipes or containers. It therefore cannot be con-tent because it cannot be con-tained. Content also requires an audience, but audiences are hard to find in the new social digital space. Audiences are a function of the expense of the channels that information used to sit within. There is now no longer a requirement to be part of an audience if you want to received information (even that which was designed for an audience in the first place). The new world is the world of the individual, not the world of the audience.

At an even more fundamental level, this separation is changing the nature of trust. Trust used to sit within channels: we trusted information because we trusted the channel (institution) that delivered it to us. But now information is being separated from its channel and thus separated from its source of trust. As a result, trust is shifting from institutions to transparent processes. We trust information, not because of the channel it sits within, but because of context or process that surrounds the information. We don’t trust a tweet simply because it comes from Twitter, the Twitter channel confers no trust upon the information that sits within it. But this doesn’t mean we don’t trust tweets, we simply need to understand more about the context of individual tweets. Likewise we don’t trust Wikipedia as an institution (channel) in the same way we trust Encyclopaedia Britannica, we trust its individual entries only in so far as we trust the process that is Wikipedia. This is what is driving the rise of communities and defines why communities will become the new media. Communities are all about process-based trust. When you trust a comment on Trip Advisor, you are not really trusting the person who has made the comment, so much as the process that is Trip Advisor and the context within which that person is making their comment (i.e. that they have already experienced the thing you are interested in).

End of theory. What’s the future for agencies?

Anyway – enough of the theory. Getting back to the future of agencies. The separation of information from distribution doesn’t simply mean the destruction of silos. The silos simply represent delivery channels. What is happening is that creativity is becoming separated from the means of its delivery and silos are not so much collapsing, as becoming empty and redundant. We can already see that clients are asking agencies to deliver ideas which are not constrained or defined by the means (channels) by which that idea will be delivered. In the first instance these requests may have been framed within the context of integration, driven by cross-channel or multi-channel ideas. Clients wanted ideas that could live in many channels and agencies could respond to this by adding channel competencies to their mix. But this client pressure was simply a reflection that the clients themselves were still largely channel-based in their thinking and internal organisation. In the integration world an idea was defined as being something that could sit in a range of channels, rather than being something that transcended channels.

Great ideas will define for themselves the way in which they will be delivered, rather than being defined by the way in which they are delivered

But clients are starting to realise that the strength of an idea is not defined simply by its ability to be multi-channel or integrated. In much the same way that information can now select for itself its preferred means of distribution, great ideas will define for themselves the way in which they will be delivered, rather than being defined by the way in which they are delivered. This is a problem because to date clients have never really had to pay for ideas: agencies give them ideas for free because they make the money on the delivery channel. This problem can only be resolved by the recognition that what agencies once did, as a single business with a single business model, is now becoming two businesses with two business models. One business is all about delivery – which is a high volume, process-based, low margin, commodity game: the other is about creativity, which is low volume, one-off, high margin game.

I actually think there are three business models which will emerge and the construction industry provides the template. The creation of a large building involves three separate, but related competencies: the architect to come up with the creative idea, the structural engineer to make the delivery of that idea a reality and a builder to actually make the building. These businesses need to be conversant with each other, but because they all have different business models they can’t really exist as a single business. The construction of a brand will be similar. First you will need tier one people to come up with the ideas and you will need to pay them to do this. Making it clear that this is a separate function and separate business will assist in this process because as long as it is seen as being part of a delivery offering, the temptation will always be to try and get it at a discount. Remember, a procurement department could never have commissioned a Rembrandt portrait. Procurement departments can only see a picture as paint and canvass because they will never have a model that can attach a number to whatever it is that makes a Rembrandt different to the tragically sad offerings of George W Bush.

Media buying is ahead of the game because it separated itself from creativity 20 years ago

Second, you will need tier two organisations that can manage the delivery of an idea. This function will be all about real-time process management and making the most of what scale efficiencies remain. To an extent, media buying is already at this place mostly because it separated itself from creativity more than 20 years ago. What these agencies will really provide is the outsourced management of creativity in much the same way that Accenture provides the outsourced management of IT. A large part of the function will involve the commissioning of ideas and then the assembling of delivery teams, but not owning the deliverers. Unlike with creating a building, it is unlikely that the actual builders can be contracted under a single large contract, mostly because scale advantages won’t exist at the delivery level. This final aspect of delivery is likely to be comprised of a whole host of ‘boutique’ craftspeople or technicians operating as independents or as small businesses and this will therefore define what the second tier agencies need to do, which will thus be an integration, project management and commissioning role.

Third, as already mentioned, delivery or activation will be done by a third tier comprised of delivery specialists. This will be a volume game, in the sense that this will be where most of the people in the sector actually live and where there will be a wide variety of choice. It will be a low margin game only to the extent to which someone other than the practitioners themselves seek to extract a margin from it. For the individual practitioners, margins will still be respectable simply because they won’t have to carry the same burden of costs that were laden onto them when they lived in large agencies and had to pay for the creative director’s Porsche.

In this new arrangement the only area where scale advantages will persist will be in the tier two ‘structural engineering’ or ‘commissioning’ layer. The players in this space will look the most similar to the agencies of today. A large part of the client relationship will be held at this level and despite the creative importance of the ideas architects, the client interface with the architecture level may be minimal (in much the same way as creatives are often kept away from clients currently). In fact it is quite possible that the ideas architects will be commissioned by the structural engineers as much as they go and pitch for client business directly. Therefore, what we currently think of as agencies will morph into commissioning and integration businesses, surrounded at one end by a group of independent (or quasi-independent) creative specialists and at the other end by a cloud of independent specialist deliverers. What is currently delivered as one business will have fractured into three.

Create separation in a managed way, rather than fall apart in chaos

What might all of this mean for a Martin or a Maurice? At one level, not a lot in the short-term. It would be foolish to try and completely re-structure a business such as WPP or Publicis into these three sets of disciplines or functions, especially since it is questionable as to the extent to which all three functions can easily live under one umbrella. However, in terms of making current decisions, it will be important to recognise that this position is likely to be the end destination some years down the track. In preparation for this it will be a good idea to start to identify where the opportunities for separation exist, so these can start to be teased apart in a managed way, rather than falling apart in a chaotic way.

There is a template for this if we look at what happened more than 20 years ago when Saatchi & Saatchi spun out its media buying department into a stand-alone agency, Zenith, which had the freedom to work for both Saatchi and non-Saatchi clients – probably the single smartest business decision the Saatchi brothers took.  This move created the independent media sector as we now understand it and Zenith (now Zenith Optimedia) still remains a successful company within the Saatchi (now Publicis) portfolio. In today’s context, this means thinking about spinning out creativity as a separate function.

Most ‘creatives’ are too wedded to a delivery discipline to become ‘new creatives’

It also means re-thinking the nature of creativity. The new definition of creativity will also encompass insight and will therefore draw to it as many planners as it does traditional creatives. Indeed, many of the people that currently live in creative departments are not actually sufficiently creative in that their skills and mind-set are too wedded to a delivery discipline. These people are more like master-builders – they will end up living within the delivery specialists. None-the-less, scattered across any large agency organisation like WPP or Publicis, there will be suitable people. Pulling them all together may be difficult and indeed undesirable in that it may bleed their ‘home’ businesses of necessary skills, but there is surely an opportunity in the short-term to start to identify these people and package their skills in a way which can become a separate offering, even if they still ply the majority of their trade back in their home agency. As much as anything, someone needs to start the process of allowing clients to see the value in buying creativity and ideas as a stand-alone service. It is also quite possible that a ‘new creative’ consultancy will emerge from the independent agency sector (since, unlike with media buying, scale is not a consideration) and once the template is established, others will follow suit.

However, this spinning out of creativity is a necessary, but not sufficient step. It simply creates the tier two environment within which the future agency can emerge, which is as a business which provides the management of creativity as an outsourced function. The templates here are the consulting companies such as Accenture. These companies call themselves consultancies, but they are not. They provide the expertise necessary to outsource the management of the provision of information technology. This expertise is largely in process management, the real technical (creative) knowledge lies with the developers of the systems these companies sell. Likewise, project delivery is often managed by contractors. The good news, from an agency perspective, is that Accenture has shown that there is good money to be made in the outsourced management of a business function. The more tricky issue is that the model for outsourcing the management of ideas, by the very nature of ideas-people, is likely to be harder than commissioning and managing geeks – which is what Accenture does.

The third tier is the one area that is currently in the state of most advanced construction, largely as a result of agencies shedding head-count in recent years. There is now a huge number of experienced people operating as freelancers or coalesced into small, boutique operators and it will not require too much effort to provide the infrastructures to allow these either to link-up with each other or to operate on a more efficient / formal way with commissioning agencies. I suspect that even today, many clients would be surprised to learn just how many of the people they are dealing with when they deal with agencies are actually not permanent agency staff.

It is also possible that within large agency groups, delivery can be packaged up into smaller specialists which can which can operate more independently with significantly lower costs (see earlier note about Porsches) and be responsible for finding their own revenue rather than being dependent on being fed by large network clients.  This may, of course, involve working for ‘rival’ tier two agencies.  An agency therefore becomes a much looser structure, acting as a host for specialist units, rather than trying to aggregate specialist units into larger structures – which has tended to be the direction of travel to date because of the assumed (but now increasingly redundant) cost efficiencies of operating at scale.  You can also suggest that big brand owners, such as P&G, will also have to reorganise themselves into much looser structures, where scale and coordination efficiencies are created in areas other than in marketing.

The key is to not make the Kodak mistake

The current agency groups, to a certain extent, still have time on their side. There is the opportunity to experiment. However, the key is to not make the Kodak mistake. Kodak saw the digital future coming and it started to innovate to find the sorts of products and services that would thrive in the digital photographic future. Kodak was one of the first companies to develop a digital camera for example. Kodak’s mistake was a failure to recognise that at some point, the business model of its core business – i.e. chemicals, cellulose and paper, would eventually collapse. Kodak never built its innovations into business models, largely because of a fear that these would cannibalise their core business. But their core business got eaten anyway and they were left with nothing but dusty prototypes.

So, in summary.

  • Scale is leaking out of both the agency sector, but especially out of the world of the big brands that supply the base load of fee income for large agency groups. This requires a recognition of what is, and needs to be delivered as, a commodity separate from a recognition and delivery of, what is a high margin specialism.
  • As the social digital revolution separates information (message) from distribution (channel), so creativity is becoming separated from delivery and also changing in its nature now that it isn’t defined by the delivery silos /channels it used to sit within. Agencies therefore need to identify and spin-out this new creativity, so that it can be sold as a separate, high margin product, removed in most part from the clutches of procurement departments (Rembrandt v George W Bush etc. etc.).
  • The margin problem at the other end of the scale needs to be addressed by shedding the costs associated with ownership of delivery specialisms. There are no longer scale efficiencies in this space, so the costs of delivery aggregation are no longer valid. In so far as large agencies can continue to own delivery businesses, these businesses need to be liberated to find their own way in the world and potentially work for ‘rival’ commissioning agencies (in much the same way that Zenith worked for ‘rival’ clients).
  • Within the middle space a new business needs to be founded, based on the concept of the outsourced management of ideas / creativity. This concept will mostly only be relevant to large clients, smaller ones sourcing ideas and delivery direct from the specialists. These businesses will be formed out of the remnants that remain from existing large agencies, once they have spun out insight / creativity and delivery specialism.

This isn’t going to happen overnight, but this is probably what the sector will look like in ten or 15 years’ time. The only real choice the sector faces is the extent to which it can manage the move to this end state, rather than having this built out of the wreckage of failed business models.

The sword, the printing press and the algorithm. Three technologies that changed the world

It is always a good game to identify the game-changers: to reduce the complexities of history (and perhaps even the future) into simple cause and effect relationships.  No more is this so than with technology, given that we like to think we are living in a technological age and thus there is a certain vested interest in either talking-up, warning of, or dismissing the impact of technology on the course of our lives and our societies.

I am not a real fan of technological determinism.  Technology is (or should be seen as) a tool that helps us achieve certain objectives.  Focus on, or worship of, the tools can lead us into dangerous territory.  Nonetheless, I do think there have been certain technological breakthroughs which have played a fundamental role in shaping the way our world has evolved.  Interestingly, these technologies have been so fundamental, they have become invisible – insofar as we focus on the effect these technologies introduced often without fully appreciating the connection between a technological shift and subsequent events.  They are a bit like foundations – you see the building that sits on top (the effect) but the connection between a building and its foundation remains invisible.

The three technological shifts I would single out are the sword (specifically the iron sword), the printing press and the algorithm.  The interesting thing about these three is that they have all superseded each other to a large extent.  We have moved from the age of the sword, into the world of the printing press and are about to enter the age of the algorithm.  Here is what I mean.

The age of the sword

If I had to go back in time and live my life again, I think I would head-on back to the middle bronze age.  Life was pretty cool around 1500 BC (at least it was in the area now known as Great Britain).  A lot of the complications and hassles associated with the tricky business of agriculture had been sorted out by the geeks of the time, resources were in abundance, the weather was pretty good, religion was seen as a shared set of practices, beliefs and endeavours (such as dragging large stones around the country), rather than an instrument of power and everything was generally sweet.  But then some clever geek went and invented iron, and what did the powers that be then go and do with this?  They created swords.  Now swords had been around for some time, but they were more ceremonial than anything else.  You could cause a bit of damage by thrusting one of them into something, but in a full on clash of bronze against bronze they very soon lost their edge.  Iron swords, on the other hand (especially if the hand that held them was a fiery-tempered Celt), could give you serious power and influence.  Result: the quiet and gentle societies of the bronze age faded away into misty-eyed myth and the world became an altogether more brutal place.  I oversimplify, but I think the fundamental truth remains.

It wasn’t so much that possession of iron weaponry made us more violent, it just gave violence a greater competitive advantage.  For millennia groups of men had been clobbering each other using little more than sticks and stones.  Now sticks and stones can break your bones, but they don’t scale very easily.  If you had vast armies facing each other intent on annihilation, armed only with sticks and stones, they would have to go at it for quite a long time before they started to make serious inroads into the business of killing.  Battles would last longer than cricket matches and also have to have tea breaks.  In fact cricket is pretty much a sticks and stones sort of game, a relic perhaps of our stone age ancestry.  Sticks and stones were therefore used to solve relatively small scale, local disputes.  Or to look at it another way – larger scale disputes were simply not feasible.  You could not project power and influence over a large area using a sticks and stones army.  You could not build an empire based on sticks and stones.

Iron swords, however, gave violence a scalable benefit.  Land ceased being something that had only localised value, with a value cap limited by your personal capability to exploit it.  With a group of men armed with swords, you could extract value from land at some distance because you didn’t have to exploit it yourself, you could force the people exploiting it to pass some of that value onto you.  Thus both empires and taxation were born at the same time.  Some bloke sat in Rome could expect another bloke in the north of Britain to hand over a portion of his cash because he knew that if he didn’t there was a system in place which would deliver a posse of blokes with swords to his doorstep in pretty short order.

Armies became a finite and precious resource and thus, like all finite and precious things they ended up in the hands of a small, elite group who then were able to call themselves kings and emperors.  Or rather, if you aspired to become a king or emperor, you first had to get yourself an army.

And so the age of empires and armies (facilitated by swords) continued.  I guess you could say that after a while guns took over from swords – but I don’t count these as a fundamental technological shift, because this didn’t really change the order of things.  Swords gave violence a scalable benefit and guns just simply extended this.  They didn’t change the rules of the game, just conferred upon those that had them the ability to play the game more effectively.

The age of the printing press

A printing press is somewhat different from a sword or an army.  Not that we should necessarily be surprised by this.  Revolutionary shifts are usually defined by the fact the new thing doesn’t look like the old thing it is replacing.

What the printing press did was shift the battle away from a clash of iron to become a clash of ideas.  Ideas ended up becoming more powerful than armies, albeit armies were sometimes employed in the service of ideas.  Ideas allowed you to control the actions of people on the other side of the world without having to put a gun to their head or a sword to their throat.  It is down to the question of scalable benefit again.  If Galileo hadn’t had access to a printing press, his ideas would have lived and died within Italy – largely because the dominant institution of the time (the Catholic Church) would have supressed them, by suppressing him, in order to ensure that it retained its monopoly on ideas.  Printing allowed Galileo’s ideas to escape beyond the reach of the church.  The church could suppress the man, as it did, but it couldn’t imprison his ideas.  Printing gives ideas a scalable benefit.  It allows them to become something that can challenge the established order without having to raise an army.

Printing, or rather the ability to give scale to the distribution of information, does a whole lot of other things as well.  It allows you to give scale to trust and reputation.  Money lenders can become banks because banks can build a reputation that encourages strangers to trust them with their money, even if those strangers have had no previous personal experience of transacting with them.  Pretty much every institution associated with the modern world, from science to modern democracy – can trace its lineage back to printing and the ability to give information a means of mass distribution.  In fact you could say that democracy represents the ultimate triumph of the idea over the sword in that it has allowed large numbers of nations to organise their internal and external affairs without resolving things on a battlefield.

But just as armies were finite and precious resource and thus the monopoly of kings and emperors, the ability to distribute information (publication) was likewise finite and expensive.  This meant that its power could only be wielded by institutions, or rather institutions evolved in order to wield its’ power – first amongst them, of course being the institution that we call the media.  This is why Rupert Murdoch is more powerful than prime ministers and also why Procter & Gamble is the world’s largest advertiser.

But then something happened which changed the rules of the game.  The ability to control the mass distribution of information was no longer limited to institutions.  This thing called social media gave this power to individuals.  The social media revolution is all about the separation of information from its means of distribution and the associated shift of trust and power from institutions into transparent processes.  I used to think that this shift was the next big game-changer: the end of the Gutenberg age and the dawn of something new.  But now I am not so sure, because something else has emerged that confers a new form of institutional (and thus elite) advantage on those who can have access to it – and this thing is the algorithm.

The age of the algorithm

Algorithms are nothing new, but what has changed is that the thing that they feed on has exploded.  This thing is data.  In the world of small, or restricted, data – algorithms had to remain likewise constrained.  Even in the area where algorithms have perhaps carved out the most important role, which is financial asset trading, they have still remained constrained by the limited availability of financial data and haven’t broken out into the world beyond the markets.

Again it is a question of scalable benefit.  Until recently there wasn’t really a scalable benefit available for algorithms outside of what we might call data rock-pools.  But now the tide of data is coming in allowing these to become connected and for the algorithm to become the master of the ocean rather than the rock-pool.

Once algorithms can be fed with large, multi-layered and multi-dimensional data sets, they acquire an almost magical ability.  They can predict the world and at the same time have the power to make the world conform to their predictions.  They can predict the behaviour of consumers, or citizens and thus shape the response of the brand or the government.  In relatively short order, algorithms will define the identities of almost every person on the planet.  You will not be able to walk into a shop without an algorithm determining your desirability as a potential consumer and devising a pricing structure accordingly.  It won’t be long before goods will not have price labels, algorithms will estimate your desire for a product and your ability to pay and pitch you an appropriate price.  Goods may even be discounted according to their ability to harvest data from you – and thus ‘improve’ the ability of algorithms manage your relationship with the supplier of the product you have just bought.  Indeed – in the future we won’t own products anymore, because their primary allegiance will always be to their data masters.  But buying and selling goods will just be the start – algorithms will determine access to all resources, both those of the state and those of the market.   They will determine the insurance premiums you pay, the interest rates you are charged, your ability to benefit from access to healthcare and thus the healthcare you receive.

It is almost impossible to conceive of an aspect of life which algorithms cannot control, for wherever there is data, so will there be algorithms.  Forget quaint notions like artificial intelligence.  Algorithms are not in the business of allowing machines to become as smart as humans, or act in a human way – they are about predicting the actions of humans so that they (we?) can do things that transcend human capability or even comprehension.  Algorithms tell you what the world is like, or will be, without the essentially human need to understand why it is like that.

And here is the thing.  Algorithms are tricky things to make.  Anyone can write a blog post, or write a review, but not anyone can write an algorithm.  Like swords and printing presses algorithms confer an advantage upon an elite.

And that is why I think algorithms will be the third great technological game-changer.  We will have moved from a world of Alexander the Great, to Rupert the Great to … what?  Who can really wield the algorithm or will we have reached that dystopian point at where we become the tools and technology becomes the master?

Why the tag (and tagging) will replace emails (and emailing)

MZtagProbably the biggest change to management practice in recent years has been the rise of email.  Almost all forms of management, from review of information to actual decision making, take place within email.  Even decisions that may take place in face-to-face meetings (real or online) frequently require the validation of a confirming email.  This is all going to change.  Rather than spend time dealing with email, managers in the future are going to spend time dealing with tags.

This is why.  Email is basically a form of distribution, it doesn’t really have any function outside of this.  A tag, on the other hand, is a form of connection.  It is a mechanism that allows the right people to be connected with the right information.  We are just starting to realise that value within this new social digital space is only created when we harness its power as a medium of connection, rather than a medium of distribution.  The things that exist within the social digital space (like Facebook, Twitter and LinkedIn) are actually best understood as infrastructures, not as media platforms.  Media is all about distribution, whereas infrastructures are all about connection.

Connection is something that best takes place within communities and there is huge value that can be generated by creating communities of connection.  These can be communities of connection with, or between, your customers or consumers – or communities of connection within your business.   Take a senior executive, show them how they could create and use a community within their business and I can guarantee you that the first thing they will do is breathe a huge sigh of relief and say, “phew, this will allow me to get rid of email”.

Activity within a community is created by the act of tagging.  We already know how you can use tagging to identify spaces, create conversations or ‘file’ information.  But tags can also be used to allocate action.  They can be used not just to identify what something is, but what needs to happen to it and also to identify when the appropriate action has been completed.  Here is a very basic example of this process in action.  Suppose as part of your monitoring of the relevant digital spaces, the monitoring team pick up on an important customer issue that they are unable to deal with.  But rather then having to go through a laborious process of identifying the person who could take action, alerting them and giving them the relevant information – this issue could simply be pitched into the appropriate action space by attaching a tag to it (according to a system of tags already designed).  The relevant people would be watching this tag space – and therefore see when they need to pay attention to something and once the relevant action is completed, they could then pitch the issue into ‘job done’ space, again by putting another tag on it.  You don’t ‘flag’ information, you ‘tag’ information.  The tag space becomes the equivalent of an intray – and your workload (indeed your whole job function) becomes defined by which tag spaces you have to track.  Hence why people will find themselves checking their tags, rather than checking their emails.

This is a whole new way of doing business and it is not just limited to tagging.  Communities tend to dissolve the artificial boundaries that exist around hierarchies – mostly because these boundaries are defined by restricting access to information.  However when you have a community, the value of the individuals within it is not determined by where they sit in a hierarchy, but via the value of their contribution.  Good ideas don’t have to be passed up a chain in order to register with a ‘decision maker’: the idea and the decision maker can be instantly connected.  Indeed the concept of needing a single decision maker starts to melt – decisions can start to be taken, or at least very significantly influenced, by the community.

Most organisations, of course, are still doggedly trying to extract value from social media as a medium of distribution.  It is why we are so obsessed with numbers, reach, engagement, content etc.  However, I think we are approaching a moment when this obsession is starting to loose its grip.  It is interesting to see the extent to which community platforms such as Jive and Yammer are really ramping up their marketing efforts as they position themselves to take advantage of what they hope will be a much bigger pipeline of interest.  I have also recently been deluged by information from Get Satisfaction.  I have long been a fan of Get Satisfaction: they have been one of the tools I have been waiting for to ‘take off’ – although I now notice that their response to the opportunity seems to have been to wildly increase their price.  For a service that started off as being free (indeed started off as being a tool to allow customers to build their own communities about organisations- a bit like Trip Advisor, but for brands) it now seems that the entry level cost is $1,200 per month.  But of course you don’t really attach that sort of a price tag to yourself unless you are pretty confident you can create a lot of value and that there will be a significant demand for your service.

 

 

Social media and the big scale question

Scale is a very important concept in social media and I think there are three reasons for this.

  1. We are all inclined to define the value of scale in terms of reach and frequency, because this is how we defined value in traditional media.  However, social media doesn’t deliver reach or frequency very effectively.
  2. There is the question of scale as a unit of measurement of this thing we call engagement.  The problem is that almost any form of traditional, marketing activity can never register at the social end of the engagement scale.
  3. The social media revolution leaches scale from the business models of every industry it touches and completely changes the scale dynamics (in essence, big stops being beautiful – certainly in a marketing or product design context) – and this is the main long-term challenge all businesses need to address.

Scale is not achieved through reach and frequency

Measurement and metrics in traditional marketing were all about reach and frequency.  This was because marketing was defined as a channel and message challenge and the channels were expensive – thus requiring that they ‘reach’ a large number of people to make them cost-effective to use.  Thus media came with an audience already built into it, and that is effectively what we were buying when we bought, or gained access to, media – we were acquiring scale.  A great deal of time and effort was spent devising creative messages (content) and campaigns and we gave these scale by putting them into media channels.

Social media doesn’t have scale built into it: it doesn’t come with an audience attached.  Continue reading →

Don’t waste time ‘joining the conversation’ in social media

You can waste a huge amount of time having conversations in social media, just as you can waste a huge amount of time having any sort of conversation.  This isn’t to say you should not be using social media to have conversations – but simply having or creating conversations is not a sufficient objective (as is the case with the similarly vague concept of ‘creating engagement’).

Now while it is good to see that businesses are starting to understand the benefit of using social media as a way of listening and responding to the customers (see this recent article in the Guardian), moving away from seeing spaces such as a Facebook page as an opportunity for ‘Brandfill’ (love that concept from Paul Armstrong), the simple act of having, or joining conversations, cannot be seen as an end in itself.  As a business, the time you need to invest in having conversations is precious: it can only be done by capable people, not by machines or mass-produced content.  Therefore you need to be highly selective about what conversations you decide to join and what you want to get out of such conversations.

Social media (like any form of conversation) is a low reach, but high engagement activity.  If you are going to do it, the value you create from each contact has to be an order of magnitude greater that the value we are accustomed to generate through conventional, impression-based, audience marketing.  I would suggest (see chapter 3 of my recent ebook) this means that the only basis for conversation is with what I call the Gang of Ten – i.e. the ten people who identify themselves by the fact that, right now, they are either complaining about you, praising you or asking a question for which your organisation provides an answer.

Any other sorts of conversations are either a waste of time, or could be counter-productive if the desire to see conversation as a commodity (much like we erroneously measure and value ‘engagement’) encourages organisations to insert themselves within conversations where they do not have permission to enter or have little or real value to contribute, or expend effort creating conversations which no-one really wants to join.

 

The three stages of social media

Take a look out there at what organisations are doing in the world of social media and you will see there are basically three groupings: those who see it as a form of media, those who see it as a form of infrastructure and those who understand it as an agent of change.

In this piece I look at what each of these stages look like and what business opportunities (for agencies and consultancies) these stages present.

Stage One: social media as a form of media

This is the stage where organisations see social media as a way of reaching an audience, i.e. doing the job that we have always used media to do.  Because it is ‘social’ media we don’t call it reaching an audience, we call it ‘engaging’ with an audience – because that sounds more social.  This is the stage where the challenge is therefore seen as maximising ‘engagement’ and creating audiences of followers (we tend to call a social media audience a community – again because this sounds better).  This stage usually involves the production of a great deal of content, largely because social media is seen as an extension of conventional channel and message marketing – and because there appear to be so many more channels, the task is seen as filling them with something that consumers will see as engaging.  The task in this stage is identified as being a channel and message task – the same as that associated with conventional mass-marketing.

Measurement in this stage is likewise based on how we used to measure effectiveness in the world of traditional channel and message marketing – that is reach and frequency.  In pursuit of reach and frequency, organisations will tend to select the tools or platforms based on where it is their consumers appear to be (our consumers are ‘on’ Facebook, therefore so should we; our consumers are posting pictures on Instagram, therefore so should we) which is an extension of the thinking behind conventional media planning.

The agency opportunities in this space are considerable.  Most organisations will want to outsource the management of their various social media platforms, because they don’t have the people or skills immediately available in-house.  This is a process I call social media childcare – looking after the Twitter kids if you like.  Each new campaign will also need to be given a presence within social media and indeed campaigns can be created specifically to generate social media response.  All of this creates business for digital, social and PR agencies and also opens up new creative and content avenues – especially in terms of video production as brands become seduced by the chance to create a viral campaign.

Stage Two: social media as a form of infrastructure

Organisations enter this stage when they realise that the real value in the social digital space is derived from understanding and responding to the way customers, and indeed employees, actually use social media.  They are using it to talk to each other, have conversations and ask questions – i.e. they are using it as a form of infrastructure not as a form of media.  The organisations at this stage have either got there because they have worked this out for themselves, or because they have not been able to establish what value chasing reach and frequency metrics (generating likes and maximising engagement for example) is actually delivering to the business.  Incidentally, helping organisations get to this stage is what my business is about.

In stage two, the focus of social media activity will shift – away from pushing out content to an audience of people, towards listening and responding to what it is that consumers or customers actually want to talk to an organisation about.  Perhaps not surprisingly, the introduction for many organisations to this stage comes from customer service, and the realisation that customer service is not just a business cost, it is a source of value creation.  The task in stage two is identified as a behaviour identification and response task and the output of strategies in this stage shift from being things (messages, content, campaigns) to being processes – the process of matching answers to consumers’ questions in real time for example.

The commercial opportunities for agencies in this stage are less (one of the reasons many agencies wish to keep their clients in Stage One) but they are still considerable.  The organisations which make the tools that help businesses listen and respond will do well as will the agencies that provide intelligence based on the ability to listen to relevant conversations.  Within this stage, there is a much greater focus on the organisation itself, and the processes for managing flows of real-time information – creating business opportunities for those consultancies and platforms, that facilitate this.

There will still be ‘old-fashioned’ campaign-based opportunities here, simply because it will be recognised that social media presents an opportunity to allow consumers to contribute to conventional marketing activities, even if it is realised that social media is not a very effective channel to carry these activities to a significant proportion of them.

Stage Three: social media as an agent of change

This stage involves giving scale and effect to what an organisation learns in Stage Two.  It is probably very difficult to get to this stage unless you have passed through Stage Two (although it is possible to get to Stage Two without passing through Stage One).  It is also possible that the main trigger that will get the majority of organisations to this stage will not be an ability to proactively recognise commercial advantages, it will be the fact that consumers and customers have got here first – i.e. they are using social media to fundamentally change the markets and terms of business, and this forces organisations to react.

It has become fashionable to call organisations in this stage ‘social businesses’.  Personally I don’t much like this term because it is not the purpose of business to be social, it is the purpose of business to create customers and profits.  I prefer the term ‘connected business’ because this implies a business that uses the power of connection to constantly be in touch with, and responding to, the needs of all of its stakeholders (and thus be better able to create customers and profits).  Stakeholders want connection and response – they don’t necessarily want a business to be social (whatever that means).

(Note: see this interesting piece by Chris Heuer, which covers this debate)

The most important thing about Stage Three is that organisations will be changing the way they operate in fundamental ways.  A connected business will look, and be structured, very differently from a business that is adapted to work in the old-fashioned channel and message, command and control, world.  As a result, the commercial opportunities for servicing (or creating) such businesses will lie in areas of leadership and change management counselling, management consultancy and new forms of data analytics based on the construction of algorithms and the layering datasets gathered from the explosion of data sources that are emerging as objects, as well as people, start to acquire connected, digital identities (what is being called the Internet of Things).

As you might expect, most organisations (probably 80 per cent) are at Stage One, around 19 per cent are at Stage Two and almost none have yet reached Stage Three although a larger number are starting to recognise that this represents the destination.

– Social media: its not complicated –