Category Archives: Corporate Strategy

The Rhythm of Strategy

I confess – I poked the bear a little last week. Not too much. Just a little. I purposely oversimplified one side of an argument to set up a debate. I knew there would be those that would swing to the other side in defense of strategy. I initiated an action, for which I knew there would be an equal and opposite reaction. I sometimes do that, because I believe in waves, or oscillations, or rhythms. Call it what you want – I believe in them because they always beat stasis or straight lines. Nature doesn’t move in straight lines.

You didn’t disappoint. You very ably defended strategy. And you did it in an intelligent and nuanced manner – unlike, say – Donald Trump. From a post in response by Rick Liebling: “I would … argue that the “seizing of opportunities” is not the antithesis of strategic thinking, but rather the result of it.  A strong brand strategy helps a company understand what it should, and just as importantly, shouldn’t do. This type of discipline is what allows a company to seize those very opportunities.”

And from Nick Schiavone: “I believe that Principles, Vision and Execution are more critical to “success & satisfaction” than strategies, ideations and systems when it comes to launching, building and sustaining brands.  The end result is really an ongoing, experiential relationship between a special “customer” (i.e., a person of need or desire) and the product or service provided under the auspices of a special “preparer.”(i.e.,  a person of art & science). “

Here’s the thing. When I said much of a businesses performance comes down to luck, that sounded disparaging. But it’s far from it. Luck could also be defined as the circumstances of our environment. They are the factors that lie beyond our control. And they tend to be rhythmic in nature. Sometimes they’re good, sometimes they’re bad. Sometimes they’re huge swings in either direction – what Nassam Nicholas Taleb calls “Black Swans.” And if you look as strategy as Rick Liebling does, then strategy is simply being very good at detecting these rhythms and responding to them.

But that’s not how we typically look at strategy. In fact, our entire mythology and methodology around strategy tends to run in decidedly straight lines. Strategy should be decided on high and be disseminated down to the front line masses. In the case of brand strategy, it may be determined by an agent working on your behalf and delivered in the guise of branding guidelines and polished ads. It should be decisive and unerring. It should plough forward, despite circumstance. Phil Rosenweig’s point in The Halo Effect was not that we should just surrender to the whims of fate, but that we shouldn’t kid ourselves about the importance of fate and our ability to control it. There is no single, “straight line,” universally applicable recipe for dealing with fate.

The problem with strategy, as it is practiced in most organizations, is that it blinds us to fate. We tend to execute in spite of circumstance, rather than in response to it. Rather, strategy in the new marketplace should perhaps be renamed “sense-making.” It should embrace the rhythms and oscillations of fate rather than dampen them in the name of strategic thinking. Organizations should become one massive sensory and experimental organ, constantly monitoring the environment and responding in a rational and opportunistic way.

Finally, let’s not discount the impact of effective leadership and management practices. I said last week that leadership, when isolated from other variables, only accounted for 4% of an organization’s performance. Management practices accounted for another 10%. That sounds ridiculously low, but only because we tend to excessively canonize those things in our business mythologies. Let’s approach it in a more rational way. Let’s imagine that two companies, A & B, both launched this year with $10 million in sales. Over the next 20 years, both companies were subject to the same rhythms – positive and negative – of the marketplace. But, because of superior leadership and management, Company A was able to more effectively capitalize on opportunity, giving it a 14% advantage over Company B. In 2035, what would be the impact of that 14% edge? It’s not insignificant. Company B would have grown in sales to $21 million, growth of just over 100%. But Company A would have sales of almost $290 million. It would be almost 14 times the size of Company B!

It’s not that I don’t believe in strategy. It’s just that it’s time to rethink what we do in the name of strategy.

Is Brand Strategy a Myth?

BrandStrategyThemeOn one side of the bookshelf, you have an ever growing pile of historic business best sellers, with promising titles like In Search of Excellence, 4 +2: What Really Works, Good to Great and Built to Last. Essentially, they’re all recipes for building a highly effective company. They are strategic blueprints for success.

On the other side of the bookshelf, you have books like Phil Rosenweig’s “The Halo Effect.” He trots out a couple of sobering facts: In a rigorous study conducted by Marianne Bertrand at the University of Chicago and Antoinette Schoar at MIT, they isolated and quantified the impact of a leader on the performance of a company. The answer, as it turned out, was 4%. That’s right, on the average, even if you have a Jack Welch at the helm, it will only make about 4% difference to the performance of your company. Four percent is not insignificant, but it’s hardly the earth shaking importance we tend to credit to leadership.

The other fact? What if you followed the instructions of a Jim Collins or Tom Peters? What if you transformed your company’s management practices to emulate those of the winning case studies in these books? Surely, that would make a difference? Well, yes – kind of. Here, the number is 10. In a study done by Nick Bloom of the London School of Economics and Stephen Dorgan at McKinsey, the goal was the test the association between specific management practices and company performance. There was an association. In fact, it explained about 10% of the total variation in company performance.

These are hard numbers for me to swallow. I’ve always been a huge believer in strategy. But I’m also a big believer in good research. Rosenweig’s entire book is dedicated to poking holes in much of the “exhaustive” research we’ve come to rely on as the canonical collection of sound business practices. He doesn’t disagree with many of the resulting findings. He goes as far as saying they “seem to make sense.” But he stops short of given them a scientific stamp of endorsement. The reality is, much of what we endorse as sound strategic thinking comes down to luck and the seizing of opportunities. Business is not conducted in a vacuum. It’s conducted in a highly dynamic, competitive environment. In such an environments, there are few absolutes. Everything is relative. And it’s these relative advantages that dictate success or failure.

Rosenweig’s other point is this: Saying that we just got lucky doesn’t make a very good corporate success story. Humans hate unknowns. We crave identifiable agents for outcomes. We like to assign credit or blame to something we understand. So, we make up stories. We create heroes. We identify villains. We rewrite history to fit into narrative arcs we can identify with. It doesn’t seem right to say that 90% of company performance is due to factors we have no control over. It’s much better to say it came from a well-executed strategy. This is the story that is told by business best sellers.

So, it caught my eye the other day when I saw that ad agencies might not be very good at creating and executing on brand strategies.

First of all, I’ve never believed that branding should be handled by an agency. Brands are the embodiment of the business. They have to live and breathe at the core of that business.

Secondly, brands are not “created” unilaterally – they emerge from that intersection point where the company and the market meet. We as marketers may go in with a predetermined idea of that brand, but ultimately the brand will become whatever the market interprets it to be. Like business in general, this is a highly dynamic and unpredictable environment.

I suspect that if we ever found a way to quantify the impact of brand strategy on the ultimate performance of the brand, we’d find that the number would be a lot lower than we thought it would be. Most of brand success, I suspect, will come down to luck and the seizing of opportunities when they arise.

I know. That’s probably not the story you wanted to hear.

Feed Up with Feedback Requests

Sorry Google. I realize this is my last chance to tell you about my experience. But you see, you’re in a long line of companies that are also desperate for the juicy details of my various consumer escapades. Best Western, Ford, Kia, Home Depot, Apple, Samsung – my in box is completely clogged with pleas for the “dets” of my transactional interactions with them. I’ve never been more popular – or frustrated.

I appreciate the idea of customer follow up. I really do. But as company after company jumps on the customer feedback bandwagon, poor ordinary mortals like myself don’t have a hope in hell of keeping up. It could be a full time job just filling out surveys and rating every aspect of my life on a scale that runs from “abysmal” to “awesome” The irony is, these customer feedback requests are actually having the opposite effect. Even if my interactions with the brand are satisfactory, the incessant nagging to find out if I “like them, I really like them” are beginning to piss me off. In the quest to quantify brand affinity, these companies are actually eroding it. Ooops! Talk about unintended consequences.

So, if we accept the fact that knowing what our customers think about us is a good thing, and we also accept the fact that our customers have better things to do with their lives than fill out post-purchase surveys, we have to find a more elegant way to get the job done.

First of all, customer feedback should be part of a full customer relationship continuum. It should be just one customer touch point, not the customer touch point. You have to earn the credibility that gives you the right to ask for my feedback. Too many companies don’t worry about gauging satisfaction “in the moment.” If you don’t care enough to ask if I’m happy when I’m right in front of you, why should I believe that you’ll pay any attention to my survey. But too many companies jam this request for feedback on their customers without doing the spadework required to build a relationship first.

Worse, because compensation is increasingly being tied to feedback results, you get the “please say you’ll love me” pleading on the sales floor. See if this sounds familiar: “You’ll be receiving a survey from head office asking me how I’ve done. I don’t get a bonus unless you give me top marks in each category. So if there’s anything I can do better, please tell me now.” There are so many things that are just plain wrong with this that I don’t know where to start. It’s smarmy and disingenuous. It also puts the customer in a very awkward position. When it’s happened to me, I just murmur something like, “No, you’ve been great,” and run with all speed to the nearest exit.

The next thing we have to realize is that not all purchases are created equal. Remember the Risk/Reward matrix I talked about in last week’s column about how our brains process pricing information? While this applies to our motivational balance going into a purchase, it also provides some clues to the emotion landscape that exists post-purchase. If the purchase was in the low risk/low reward quadrant, like the home improvement supplies I picked up at Home Depot this weekend, it’s a task that has been crossed off my to-do list. It’s done. It’s over. The last thing I want to do is prolong that task by filling out a survey about said task. But, if it’s something that falls into the high risk/high reward quadrant, such as a major vacation, then I am probably more apt to invest some time to give you some feedback. The Rule of Thumb is: the higher the degree of risk or reward, the more likely I am to fill out a survey.

The final thing to remember about customer surveys is that you’re capturing extremes. The people who fill out surveys are usually the ones that either hate you or love you. So you get a very skewed perspective on how you’re doing. What you’re missing is the vast middle of your market that may not be sufficiently motivated to toss you either a brick or a bouquet.

I’m all for getting to know your customers better. But it has to be part of a total approach. It begins with simple things, like actually listening to them when you’re engaging with them.

How Our Brains Process Price Information

On-Off-Switch-For-Human-BrainWe have a complex psychological relationship with pricing. A new brain scanning study out of Harvard and Stanford starts to pick apart the dynamics of that relationship.

Uma R. Karmarkar, Baba Shiv, and Brian Knutson wanted to see how we evaluate a potential purchase when the price is the first piece of information we get as opposed to the last piece of information. They used both fMRI scanning and behavioral tracking to see how the study participants responded. Participants were given $40 dollars to spend and then were presented with a number of sample offers. In all cases, the price represented an attractive bargain on the product featured. But one group was given the price first, and the second group was given the price last.

There was another critical difference in the evaluation process as well. In the first phase of the study, participants were shown products that they would like to buy, and in the second phase, they were shown products that they would have to buy. The difference between the two was how they activated the reward center of our brain – the nucleus accumbens. I’ve been talking for years about the importance of understanding the balance of risk and reward in our purchase decisions. This study provides a little more understanding about how our brain processes those two factors.

In the first phase, participants were shown a variety of products that they would consider rewarding. These would fall into the first quadrant of the risk/reward matrix I introduced in my column from 5 years ago. The researchers were paying particular attention to two different parts of the brain – the nucleus accumbens and the medial prefrontal cortex. For a layman’s analogy, think of you and a five year old walking down the toy aisle in a department store. The nucleus accumbens is the five year old who starts chanting, “I want it. I want it. I want it.” The medial prefrontal cortex is the adult who decides if they’re actually going to buy it. In the study, the researchers found that the sequence in which these two parts of the brain “lit up” depended on whether or not you saw the price first. If you saw the product first, the nucleus accumbens started its chant – “I want it.” If you saw the price first, the prefrontal medial cortex kicked into action and started evaluating whether the offer represented a good bargain. In the case of the reward products, although the sequence varied, the actually purchase process didn’t. In most cases, participants still ended up making the purchase, whether price was presented first or last.

But things changed when the researchers tried a variety of products that fell into the second quadrant of the risk reward matrix – low risk and low reward. These are the everyday items we have to buy. In the study, they included things like a water filtration pitcher, a pack of AA batteries, a USB drive, and a flashlight. There was nothing here that was likely to get the nucleus accumbens starting to chant.

Now, it should be noted that this follow-up study did not include the fMRI scanning, but by tracking purchasing behaviors we can make some pretty educated guesses as to what’s happening in the respective brains of our participants. Here, presenting prices first resulted in a significant increase in actual purchases over instances when price was presented last. If price comes first, we can imagine that the prefrontal cortex is indicating that it’s a good bargain on a needed product. But if a relatively boring product is presented first for evaluation to the nucleus accumbens, there’s little to excite the reward center.

An important caveat to this part of the study comes with knowing that the prices presented represented significant savings on the products. After the simulated purchases, participants were asked to indicate a price they would be willing to pay for the product. When the price was the lead, the named prices tended to be a little lower, indicating that if you are going to lead with price, especially for quadrant two products, you’d better make sure you’re offering a true bargain.

If anything, this study provides further proof of the value of knowing a prospect’s mental landscape. What are the risk and reward factors that will be motivating them? Will the media prefrontal cortex or the nucleus accumbens be calling the shots? What priming effects might an early introduction of price introduce into the process?

When I wrote about the risk/reward matrix five years ago, one commenter said “a simple low-high risk/low-high reward graph is not very useful for driving just in time and location based offers, discounts, etc.” I respectfully disagree. While more sophisticated models are certainly possible, I think even a simple 2X2 matrix that helps map out the decision factors that are in play with purchases would be a significant step forward. And this isn’t about driving real time variations on offers. It’s about understanding the fundamentals of the buyer’s decision process. There’s nothing wrong with simplicity, especially if it drives greater usage.

The Coming Data Marketplace

The stakes are currently being placed in the ground. The next great commodity will be data and you can already sense the battle beginning the heat up.

Consumer data will be generated by connections. Those connections will fall into two categories: broad and deep. Both will generate data points that will become critical to businesses looking to augment their own internal data.

First, broad data is the domain of Google, Apple, Amazon, eBay and Facebook. Their play is it to stretch their online landscape as broadly as possible, generating thousands of new potential connections with the world at large. Google’s new “Buy” button is a perfect example of this. Adding to the reams of conversion data Google already collects, the “Buy” button means that Google will control even more transactional landscape. They’re packaging it with the promise of an improved mobile buying experience, but the truth is that purchases will be consummated on Google controlled territory, allowing them to harvest the rich data that will be generated from millions of individual transactions across every conceivable industry category. If Google can control a critical mass of connected touch points across the online landscape, they can get an end-to-end view of purchase behavior. The potential of that data is staggering.

In this market, data will be stripped of identity and aggregated to provide a macro but anonymous view of market behaviors. As the market evolves, we’ll be able to subscribe to data services that will provide real time views of emerging trends and broad market intelligence that can be sliced and diced in thousands of ways. Of course, Google (and their competitors) will have a free hand to use all this data to offer advertisers new ways to target ever more precisely.

This particular market is an online territory grab. It relies on a broad set of touch points with as many people across as many devices as possible. The more territory that is covered, the more comprehensive the data set.

The other data market will run deep. Consider the new health tracking devices like Fitbit, Garmin’s VivoActive and Apple’s iWatch. Focused purpose hardware and apps will rely on deep relationships with users. The more reliant you become on these devices, the more valuable the data collected will become. But this data comes with a caveat – unlike the broad data market, this data should not be striped of its identity. The value of the data comes from its connection with an individual. Therefore, that individual has to be an active participant in any potential data marketplaces. The data collector will act more as a data middleman – brokering matches between potential customers and vendors. If the customer agrees, they can choose to release the data to the vendor (or at least, a relevant subset of the data) in order to individualize the potential transaction.

As the data marketplace evolves, expect an extensive commercial eco-system to emerge. Soon, there will be a host of services that will take raw data and add value through interpretation, aggregation and filtering. Right now, the onus for data refinement falls on the company who is attempting to embrace Big Data marketing. As we move forward, expect an entire Big Data value chain to emerge. But it will all rely on players like Google, Amazon and Apple who have the front line access to the data itself. Just as natural resources provided the grist that drove the last industrial revolution, expect data to be the resource that fuels the next one.

An Eulogy for “Kathy” – The First Persona

My column last week on the death of the persona seemed to find a generally agreeable audience. But prior to tossing our cardboard cutouts of “Sally the Soccer Mom” in the trash bin, let’s just take a few minutes to remind ourselves why personas were created in the first place.

Alan Cooper – the father of usability personas – had no particular methodology in mind when he created “Kathy,” his first persona. Kathy was based on a real person that Cooper had talked to during his research for a new project management program. Cooper found himself with a few hours on his hands every day when his early 80’s computer chugged away, compiling the latest version of his program. He would use the time to walk around a golf course close to his office and run through the design in his head. One day, he engaged himself in an imaginary dialogue with “Kathy,” a potential customer who was requesting features based on her needs. Soon, he was deep in his internal discussion with Kathy. His first persona was a way to get away from the computer and cubicle and get into the skin of a customer.

There are a few points here that important to note. “Kathy” was based on input from a real person. The creation of “Kathy” had no particular goal, other than to give Cooper a way to imagine how a customer might use his program. It was a way to make the abstract real, and to imagine that reality through the eyes of another person. At the end we realize that the biggest goal of a persona is just that – to imagine the world through someone else’s eyes.

As we transition from personas to data modeling, it’s essential to keep that aspect alive. We have to learn how to live in someone else’s skin. We have to somehow take on the context of their world and be aware of their beliefs, biases and emotions. Until we do this, the holy grail of the “Market of One” is just more marketing hyperbole.

I think the persona started its long decline towards death when it transitioned from a usability tool to a marketing one. Personas were never intended to be a slide deck or a segmentation tool. They were just supposed to be a little mental trick to allow designers to become more empathetic – to slip out of their own reality and into that of a customer. But when marketers got their hands on personas, they do what marketers tend to do. They added the gloss and gutted the authenticity. At that moment, personas started to die.

So, for all the reasons I stated last week, I think personas should be allowed to slip away into oblivion. But if we do so, we have to find a way to understand the reality of our customers on a one to one basis. We have to find a better way to accomplish what personas were originally intended to do. We have to be more empathetic.

Because humans are humans, and not spreadsheets, I’m not sure we can get all the way there with data alone. Data analysis forces us to put on another set of lenses – ones that analyze – not empathize. Those lenses help us to see the “what” but not the “why.” It’s the view of the world that Alan Cooper would have had if he never left his cubicle to walk around the Old Del Monte golf course, waving his arms and carrying on his internal dialogue with “Kathy.” The way to empathize is to make connections with our customers – in the real world – where they live and play.  It’s using qualitative methods like ethnographic research to gain insights that can then be verified with data. Personas may be dead, but qualitative research is more important than ever.

The Persona is Dead, Long Live the Person

First, let me go on record as saying up to this point, I’ve been a fan of personas. In my past marketing and usability work, I used personas extensively as a tool. But I’m definitely aware that not everyone is equally enamored with personas. And I also understand why.

Personas, like any tool, can be used both correctly and incorrectly. When used correctly, they can help bridge the gap between the left brain and the right brain. They live in the middle ground between instinct and intellectualism. They provide a human face to raw data.

But it’s just this bridging quality that tends to lead to abuse. On the instinct side, personas are often used as a short cut to avoid quantitative rigor. Data driven people typically hate personas for this reason. Often, personas end up as fluffy documents and life sized cardboard cutouts with no real purpose. It seems like a sloppy way to run things.

On the intellectual side, because quant people distrust personas, they also leave themselves squarely on data side of the marketing divide. They can understand numbers – people not so much. This is where personas can shine. At their best, they give you a conceptual container with a human face to put data into. It provides a richer but less precise context that allows you to identify, understand and play out potential behaviors that data alone may not pinpoint.

As I said, because personas are intended as a bridging tool, they often remain stranded in no man’s land. To use them effectively, the practitioner should feel comfortable living in this gap between quant and qual. Too far one way or the other and it’s a pretty safe bet that personas will either be used incorrectly or be discarded entirely.

Because of this potential for abuse, maybe it’s time we threw personas in the trash bin. I suspect they may be doing more harm than good to the practice of marketing. Even at their best, personas were meant as a more empathetic tool to allow you to thing through interactions with a real live person in mind. But in order to make personas play nice with real data, you have to be very diligent about continually refining your personas based on that data. Personas were never intended to be placed on a shelf. But all too often, this is exactly what happens. Usually, personas are a poor and artificial proxy for real human behaviors. And this is why they typically do more harm than good.

The holy grail of marketing would be to somehow give real time data a human face. If we could find a way to bridge left brain logic and right brain empathy in real time to discover insights that were grounded in data but centered in the context of a real person’s behaviors, marketing would take a huge leap forward. The technology is getting tantalizingly close to this now. It’s certainly close enough that it’s preferable to the much abused persona. If – and this is a huge if – personas were used absolutely correctly they can still add value. But I suspect that too much effort is spent on personas that end up as documents on a shelf and pretty graphics. Perhaps that effort would be better spent trying to find the sweet spot between data and human insights.

Mad Men: 2065

So, Don Draper is now history. Well, actually, he’s always been history. He started and finished as a half-century look back at what advertising was. Part of the appeal of Mad Men was the anthropological quaintness of the whole thing – “Can you believe they used to do that?” We, smug in our political correctness, can watch an episode secure in the knowledge that the misogynistic, substance-abusive, racist world of Sterling Cooper and Partners is long gone. The world, and with it, advertising, have come a long way!

But, one wonders, what would happen if a similar premise was launched in 2065? What about advertising now would look similarly unacceptable to viewers then?

Draper’s world was the world of the creative spark igniting the big idea. It was the world of the catchy jingle and meme-worthy slogans. The Don Drapers of the world could do no wrong great enough to tarnish the glow of their ability to blow away a client in a pitch or snag a Clio. Creative gods stood firmly astride their kingdoms on Madison Avenue.

Now, of course, we know better. Those were simpler times. Clients, and consumers, are not nearly that naïve. Today, we demand quantitative data and testing to back up our creative inspirations. It’s not just about Big Ideas. Today, advertising is also about Big Data.

But, 50 years from now, will our current preoccupation with data look anachronistic or prescient to that future audience? Are we exhibiting some equally entertaining naiveté? Will the pendulum swing back to the big idea – or will some other alternative present itself? Will data profiling, targeting and programmatic buying look as quaint then as a corny jingle and a three-martini lunch look to us now?

Advertising in the era of Don Draper had gone through its own evolution. At the turn of the century, thanks to the Industrial Revolution, a flood of new products entered the market. Advertising’s first job was to make consumers aware of new offerings, opening new markets in the process. Its primary goal was to inform.

But, by the 50’s and 60’s, mass media had made consumers aware of most product categories. Advertising’s job became to persuade consumers to purchase products they already knew existed. Its primary goal was to persuade. Market share, rather than market expansion, became the end goal. Hence the era of the big idea. You don’t need a big idea to inform, but you do need one to persuade.

Today, however, with the expanding capabilities of technology and micro-manufacturing fueling a new revolution of innovation, we may be coming back to a time where awareness is the primary concern. Advertising’s job seems to be to navigate increasingly complex filters to create awareness in increasingly targeted audiences. The era of branding that found it’s legs in the era of Don Draper already seems to be morphing into something much different that what we’ve known previously. Who knows what that will look like in another 50 years?

The thing about history is that it gives you the intellectual distance required to recognize how silly we once were. The greater the distance, the safer we feel in laughing at ourselves. In the case of advertising, 50 years seems to be an adequate buffer to feel pretty smug with our historical hindsight. Of course, if somehow you could be transported back to 1965 and talk to the average creative director at a big agency, it’s doubtful they would appreciate being enlightened about their ignorance.

So, if we project that forward to today, it makes you wonder. What are the things we do now that our grandchildren will be laughing at in 50 years?

The Mother of All Disruption

Once again fellow Online Spin author Tom Goodwin has piqued my interest. He starts to unwrap a tremendously thorny problem in his column of last Thursday – Time to Think about Regulation for Disruption. Today, I’d like to take this question up one level – do we have to rethink government entirely?

Government is almost entirely a reactionary business. Even far sighted, historic documents such as the Constitution of the United States and the Magna Carta were reactions to the untenable circumstances that preceded them. And these are the exceptions. The vast majority of governing involves a highly bureaucratic and excruciatingly slow process that attempts to respond to emerging breaches in the unspoken code of fairness that our society tries to live by. Realistically, from the time the need for a new law is recognized to the time a bill is passed, months or even years can pass.

Months or years were, practically speaking, adequate in the world we once knew. But today, that is no longer the case. In that time, complex ecosystems can establish around the breach in question, and, as Tom points out, entire industries may have been decimated in the process. This is the reality of disruption.

In a world that seeks order and governance, this is a bad thing. But, now that we have unleashed the technological Kraken, is that a world we can reasonably expect? Slowly but surely we are dismantling every aspect of our hierarchical society and replacing it with a horizontal network. Hierarchies can’t work horizontally. Something has to give.

Disruptions are a characteristic of networked structures. In order for networks to work, each component of that network has to be given the freedom to act. If the action of an individual resonates with other parts of the network, the actions are picked up and amplified. Each individual act has the potential to become a disruption – with corresponding consequences. Everything becomes accelerated in a network.

Government is built on the ideological foundation of a hierarchy. The word “government” means “to steer.” The assumption is that our society is capable of being steered. This, in turn, assumes that our society all wants to go in the same direction. But if we enforce these restrictions on a network, networks cease to work. Yes, we quell the negative disruptions, but we also eliminate the positive ones.

The United States of America is one of the least restrictive societies on the planet. The founding fathers drafted their articles to enshrine that freedom. You (as a Canadian, I have to say “you”) have managed to balance the practical necessities of government with the lack of restrictions typical of a market economy. Markets naturally emerge from networks. Because the U.S. treasures freedom and innovation, it was inevitable that it would emerge as the testing ground for the impacts of technological advances. You are the canary in the coalmine of massive disruption.

Tom urges lawmakers to become more proactive. But historically speaking, that’s just not the way government works. It’s like riding a cow in the Kentucky Derby and wondering why you can’t keep up. I just don’t think that our current hierarchical system of government is up to the job. It’s a great system, with a ton of democratic checks and balances, but it was built for a different era – one built along vertical lines.

The final issue is one of enforcement. Even if laws are passed to deal with emerging disruptions, it’s becoming almost impossible to enforce them. If lawmakers are scrambling to keep up with society, law enforcers have capitulated entirely. We just can’t afford to enforce the laws we already have on the books.

So, if this is the problem, what is the answer? I think, perhaps, it lies in the very same properties of networks. Government and laws became necessary to avoid abuses of power. Power comes from hierarchies. As societies level out the old dictates of fairness become increasingly relevant. We all have universal concepts of fairness. Abuses of what we consider to be fair are generally dealt with quickly and effectively at the network level. Networks tend to police themselves, as long as there is a common understanding of what is acceptable and what is not. In short, we have to think of regulation in terms of market and network dynamics, not hierarchical governance.

I admit this is tough to wrap your head around. In a world of disruptions, this is the Mother of all Disruption. But symptomatically speaking, it appears that our historic notion of government is ailing. As frightening as it may be to contemplate, we should start thinking about what may replace it.

Deconstructing the Market of One

“So, what are you doing now?” My old college friend asked, right after he finished swearing at me because of my early retirement. He assumed I’d be doing something related to marketing.

“I’m starting a cycling tourism business.”

“A what…?”

“Cycling tours.”

“Do you know anything about cycling tours?”

“Not really.”

“Hmmm. Okay. Well, that’s good. It is good, isn’t it?”

“I guess so. We’ll see.”

Truth be told, I’m probably getting too much pleasure from these little flashes of cognitive dissonance that happen when I tell people about my current project. I like watching as they struggle to connect the dots. Maybe it’s because it gives me some comic relief from my own struggles to connect the dots. But I’m beginning to suspect there may by a silver lining in my ignorance. Because I know so little about this business, I’m also taking a different approach to the one aspect I should know something about – the marketing of it.

Connected People in NetworkI could have jumped in and started lining up search campaigns, digging into social media targeting and setting up email campaigns. But instead, I took a step back and looked at the most successful cycling tourism operation I know – the Hotel Belvedere in Riccione, Italy. It’s become a mecca for road cyclists. This year, TripAdvisor rated it as one of the top 20 hotels in the world, based on the rave reviews of it’s cycling clientele. If you’re a road cyclist, chances are pretty good that you’ve heard of the Hotel Belvedere. And if you have heard of it, chances are extremely good that you heard about it from a friend who also cycles. The Belvedere has built its substantial business largely on word of mouth.

We all know word of mouth is the most effective form of advertising. But why is it so effective? We typically assume it’s because the message is coming from an objective source that we trust. But I suspect there’s more to it than that. I think it’s because word of mouth is almost always delivered from one person to another. Word of mouth is messaging to a market of one.

There are some fundamental aspects of this that bear closer examination. Word of mouth usually occurs between friends, or, at the least, acquaintances. That means both parties have at least a passing understanding of each other. They know of common interests and personal likes and dislikes. This allows the message to be tailored for optimal reception. The most effective points of persuasion can be embellished and the least effective ones can be skimmed over. Messages are pre-filtered based on an implicit understanding of the audience.

Secondly, word of mouth advertising is based on a two-way conversation. The message evolves according to that conversation. Questions can be asked. Areas of interest can be explored more deeply. Concerns can be addressed. And, all along the way, both parties learn more about what a future engagement between the prospect and the product in question would look like.

I suspect the power of Word of Mouth comes not just in the objectivity of the sender of the message, but also in the medium in which the message is delivered (thank you Mr. McLuhan). And, if this is the case, then we should see how the strengths of that medium could be extended to other marketing efforts. We should deconstruct the advantages of targeting a Market of One.

The biggest hurdle seems to be the lack of mass normally associated with marketing. In my case, I’m actually planning for a slower approach to marketing, building allowances into the business plan for a marketing plan based on building engagements one at a time. If you’ve ever read Eric Ries’s excellent book, The Lean Start Up, you already know such things are possible. The advantage of the Market of One approach is that each encounter also provides invaluable market feedback, allowing to you to continually evolve your offering. You focus on going deep, rather than going wide. Each encounter gives you the opportunity to create a friendship.