Category Archives: The New Marketplace

10 Things I Learned from Disney – #5: The Importance of Simultaneous Satisfaction

If you set out to entertain families, you have an inherent challenge in front of you. Successful family entertainment has to appeal not just to one one person, but a group of distinct individuals. In the average family, you have several demographic and psychographic divides to bridge: males and females, age groups ranging from grandpas and grandmas (or great grandpas and great grandmas) to newborns, different education levels, different areas of interest, different levels of patience, different tastes in humor, different thresholds for motion sickness. The question, if you set out to keep a family happy, is how do you possibly keep everyone happy at the same time?

Everybody Laughs..Just at Different Jokes

Walt knew this. It was the challenge that led to the birth of Disneyland. Keeping both adults and children happy in a film or TV show is relatively simple. Early on, producers of successful family entertainment, including Disney, Warner Brothers and Hanna Barbera learned the importance of a multi-level story line. At one level, popular cartoons would entertain children with colors, actions, pratfalls and simple humor. But writers also weaved references into the storyline that would be picked up on by adult viewers. These included pop culture references, double entendres and more sophisticated verbal gags. The device worked well, endearing Fred Flintstone, Bugs Bunny and Donald Duck not just to one generation at a time, but several. The fact that TV and film offered not just video but also an audio track allowed the creators to use the two to appeal to two audiences at once. When the kids were being entertained by the visuals, the adults could catch the more subtle references in the dialogue.

The Secret of Happy Families

But how do you maintain this multilevel appeal when you move beyond the two dimension world of TV or film to the fully immersive experience of a visit to a Disney park? Disney wanted to create an experience where both parents and children could be entertained simultaneously. First of all, the parks had to be immaculate. While children may be more tolerant of a little dirt and crease, nothing makes a parent’s stomach turn faster than the unsavory environment of the typical amusement park. Visions of weird infections, salmonella and just genera ickyness leap immediately to mind. If parent’s were to relax in a Disney amusement park, Walk knew it had to be spotless.

In the last post, I also talked about attention to detail. This becomes more important to the experience as you get older. Your appreciate the care that has gone into the engineering of your experience. It provides a sense of value for your admission price. Kids are plugged more viscerally into the thrill, the excitement and the magic of Disney. They suspend belief easier. We adults tend to be more skeptical, which makes us appreciate the lengths that Disney is willing to go to to maintain the illusion.

A Restroom around Every Corner

But perhaps the biggest reason is that it seems Disney has gone to great lengths to anticipate the needs of a family. It’s uncanny how, just when you start thinking you might need something, it magically appears around the next corner. Washrooms, food booths, sit down restaurants, benches for resting, stroller drop off areas – all these seem to be seamlessly and conveniently integrated into the experience. Yes, a day at Disneyland or Disneyworld can be gruelling for even the most diehard fans, with plenty of highs and lows, but it seems that just when frustration seems to mount to dangerous points, relief is close at hand.

I remember one summer visit during an exceptionally busy long weekend. We were heading out of the park and our nerves were frazzled. Yet, I was told we had to make one more stop on Main Street to pick up a souvenir in one of the shops. While not thrilled at the prospect (getting the hell of there was my primary goal) the day was redeemed by an exceptionally friendly Disney employee who managed to bring the smile back to our faces. And that, perhaps more than anything, is the Disney secret of simultaneous satisfaction. Rather than the bored, vacant expression that’s commonly found on staff faces at the competition (Universal is particularly notorious for this) it seems that everyone at Disneyland is genuinely happy you’re there. Disney people are awesome, but that’s actually one of the 10 Things I learned from Disney, so more on that in a future post.

We’re Only as Happy as the Group We’re In

To wrap up this post, let me touch on some reasons why simultaneous satisfaction is so important if you’re targeting customers in groups rather than as individuals. Perhaps the best way to illustrate this is with an example. Restaurants are another business that typically targets groups. Think about what happens if just one person in the group has a substandard experience. You talk about it. And suddenly, even if your experience was fine, you become dissatisfied. Our opinions about joint experiences are formed as part of the group. We defer to the decision of the majority, and typically, the consensus will sink to the level of the least satisfactory experience.

The other reason why group experiences are so important can be found in the way they’re recalled. Daniel Kahneman had an interesting presentation at the last TED conference about experiential vs remembered happiness. This is one of the little illogical quirks of humans. We make future decisions based not on how happy we were experiencing the actual event, but on how happy we remember being. This is critically important when we look at the group dynamic I just described in the restaurant. If we go to Disneyland as a group, we will also tend to remember our experiences when we’re with the same group. And, as we relive our remembered experience, our happiness level will sink to the lowest level of the group. If not everyone was happy, no one will be happy.

There’s a flip side to this as well. If we were all generally happy (the little annoyances tend to fade with time) the nostalgia effect tends to boost and sharpen the level of actual experience. We remember good things as great. I’m not sure Walt knew the psychology of simultaneous satisfaction when he insisted that Disneyland would be a place where both parents and children could all be happy at the same time, but it’s worked out pretty well for him.

10 Things I Learned from Disney – #4: Details Make the Difference

PartnersstatueThere are a lot of theme parks in Southern California. The competition for Disneyland is tough. Yet, for over 50 years now, the pattern has been the same. People plan their vacation around Disneyland, spending 3 to 5 days at the park, and may add a day at one of the other parks – Universal, Knott’s or Magic Mountain. If you looked at the size of the theme park pie and the slice that Disney carves off, the imbalance would be remarkable. Why does Disney suck up over 80 cents of every theme park dollar spent in the region?

It’s not the rides. Universal’s rides are probably more technically impressive. Magic Mountain and Knott’s certainly has more thrilling rides. Disney’s biggest coaster, California Screamin’, is a rather mild ride for a coaster fanatic (which I am).

I believe there are several reasons, and I’ll try to deal with them in individual posts. Today, I want to talk about attention to detail.

The Hotchkiss Detail Obsessive Guide to Disneyland

My family has been to Disneyland at least 6 times. People hate visiting the park with us because we have routines (others are less kind and call them rituals, or cult-like behavior) that have to be adhered to. It’s important which side of the train station you enter onto Main Street on. And you don’t rush past the circle at the top of the street. You spend a few minutes lingering and drinking in the atmosphere. You either stroll (never rush) down main street or take the horse drawn tram. You may stop at the Blue Ribbon Bakery for a coffee. You make your way to the Partners statue at the center of the park for a few minutes with Walt and Mickey and while you’re there, pay particular attention to the flowers planted around them. Take note, because they may be completely different tomorrow. From the center in front of the Castle, we then veer to the left, usually ambling through Adventureland and head towards New Orleans Square because the first ride has to be (this is non-negotiable) Pirates of the Caribbean.

Pirates is one of our favorite rides, earning it’s place as a Hotchkiss Tradition. And it’s not because it’s thrilling (it’s not) or technically amazing (although it may have been with the ride debuted in 1967). It’s because the attention to detail on this ride is simply amazing. It’s the last ride that Walt himself personally oversaw the design of. Everything has been thought through, down to the smallest scar, gold doubloon or cobweb. And that is the Disney difference. You won’t find that fanatic attention to detail in Universal, Knott’s or Magic Mountain. It’s a Disney hallmark.

It’s What You Do Between the Rides that Counts

Disney knows that in between the momentary jolts of adrenaline, it’s the details that build an experience worthy of a 3 or 4 day investment of your family’s time. Disneyland has this down in spades. Each square foot is jammed with amazing detail, carefully crafted and maintained to add to the experience. And I’m not even talking the obscure Disney-mania touches like Hidden Mickies. I’m talking about carefully planned sight lines, well placed benches, meticulously groomed greenery and the architectural detail on buildings, to say nothing of the imagination fuelling touches found in rides like Splash Mountain, Peter Pan, the Haunted Mansion and Indiana Jones. The competition cut corners. Walt absolutely forbid that in the making of Disneyland.

The post-Walt Disney Parks have struggled with this. We’ve been going to Disneyland for over 20 years now, and the overall look of the park hasn’t changed much. Toontown was added and a few new rides have debuted, but 50 years of planning and development have created an almost perfect entertainment experience. Major overhauls aren’t needed. The same can’t be said for Disney’s California Adventure. Disney is currently overhauling huge sections of the park because the same detailed magic was missing. Visitors treat California Adventure more like a typical theme park, rushing from major attraction to major attraction without lingering to enjoy the experience on the way. Of all the rides in California Adventure, the Twilight Zone Tower of Terror is one of the few engineered to the same standards of detail that you’ll find in the earlier rides. But this legacy of detail isn’t found so much in the rides, but rather the transition zones between the rides. It’s here where the acid test of detail is really found. It’s detail that keeps crowds amused while they’re waiting in line. It’s detail that keeps them from feeling like cattle, shunted from one chute to the next.

Most Skip the Details, Disney Doesn’t

So what’s the takeaway? Disney’s eye for detail came from an absolute certainty about what his visitor’s wanted and an iron-willed determination to deliver that without any compromise. Every last element of the visitor experience was considered and planned for. Every detail you see in Disneyland had a purpose – to make the visitor happy.

I think too many corporations rush past the details when it comes to the experiences of their customers. It’s because details take time. They’re hard work. You can get lost in a forest of detail. And obsessing over detail just doesn’t seem that profitable. In fact, if you get lost in the wrong details, it can be sure death for a corporation. But yet, details make the difference for Disney. Why? How does Disney avoid the trap of paying attention to the wrong details? They know which details are important because they take the time to understand what is important to their visitors. They spend a lot of time thinking about how visitors perceive and interact with those details. This is a legacy from Walt. It comes from a leader that obsesses about details.

Apple and the User Experience: A Lesson Learned

iPad-gallery-books1Another example of attention to detail is Apple. They obsess about the user experience. I recently watched someone demo their new iPad. You know what was one of the first things he showed me? How the iPad mimicked the look of turning an actual physical page in a book. Depending on where you place your finger on the page, the page itself curls up appropriately. It’s a silly little detail, but it was important in creating a Wow experience for this new owner. And it’s something that stood out to me as one reason why, eventually, I have to get an iPad. It’s a feature that probably took an absolutely silly number of hours of programming to implement but it was important to Apple because it was important to users.

Detail can differentiate you from the competition. It adds a premium to the value you provide. It tells the customer that you value them as users (or visitors), not just as another wallet to be emptied.

10 Things I Learned from Disney – #3: Leadership Matters…a Lot!

walt-and-roy-01How many companies today are run by caretakers? How many of the Fortune 500 are run by CEO’s who are really just thinly disguised accountants?

The Leader of a company determines the heart and soul of that company. If you run the company by your profit and loss statements, you’ll end up with a fiscally responsible corporation that will slowly screw itself into the ground. If you have a reckless leader, you’ll flame and burn in spectacular style. Somewhere in between the extremes is where you have to live

Walt Disney was not overly concerned by fiscal responsibility. That was Roy, his brother’s job. Walt drove the company by embracing risk. Roy lost his hair by trying to balance Walt’s enthusiasm.

Risk is the fuel that drives the future. And risk is risk. It can only be calculated up to a certain point. After that, you have to close your eyes and jump. Walt jumped again, and again, and again, each with spectacular style.

1923 – Walt moved to Hollywood from Kansas City with a short film called Alice’s Wonderland that he hoped would net him a distribution contract. The film was pretty much all Walt had. He managed to secure a contract and teetered on the edge of bankruptcy for 4 years. And just when he looked like he had a winner, in a new cartoon character called Oswald the Rabbit, the distributor stole both the rights and the animators, shutting Walt out.

1928 – After losing Oswald, Walt started from scratch with Mickey Mouse. But he only created two cartoons with the new character before deciding to risk it all with the first sound cartoon. The struggling studio dumped everything they had into the cartoon, Steamboat Willie. Luckily, Walt’s gamble paid off. Mickey was a hit.

1937 – Building on the success of Steamboat Willie, Disney turned out a series of profitable Mickey Mouse cartoons, and added the Silly Symphony series, netting himself a number of Academy Awards in the process for pushing the boundaries of animation technology and art. but Walt soon found a new dream worthy of risk – the first full length animated movie. It what was quickly becoming predictable behaviour for Walt, he risked all their profits from the animated shorts on Snow White. And, as before, it was a phenomenal success, becoming the highest grossing movie until Gone with the Wind bumped it from it’s perch.

In it’s following releases, Disney struggled with finding the right balance between budget and profitability. The war restricted access to foreign markets so profits relied on domestic audiences. Walt continued to push the envelope of what was possible with animation in Disney’s next two releases, Pinocchio and Fantasia. This came at a cost – a budget that meant these films didn’t break even until decades after their debut (thanks to eventual release on VHS and DVD). Walt continually tried to find the right balance between artistic accomplishment and profitability, eventually finding a happy middle ground with classics like Bambi, Cinderella and Mary Poppins (another technical and artistic milestone). It’s amazing to consider how quickly animation progressed, from the primitiveness of Steamboat Willie to the polished art of Show White in just 9 short years.

In the interim Walt also explored TV and live action features, finding significant success in both. Finally, it seemed, Disney had found the groove that led to sustained profitability. Almost any other leader would cling to this groove for dear life, building up the bank account and enjoying the rewards that come with success. Not Walt.

1955 – Walt got restless when he stayed in one place too long. he became bored with incremental improvement, no matter how profitable it proved to be. Walt thrived on risk and new, monumental challenges. And so, he looked for a new one. Walt was 54 years old and had been running Disney, in one form or another, for 35 years. By any measure you might want to apply, he was successful. And he risked all this, everything, on a new dream – an entertainment park. Disneyland represented Walt’s biggest roll of the dice yet, because he had everything to lose.

This restlessness and desire to push the limits epitomized the Disney company for the first 45 years of its history. Walt and the company were really one and the same. His leadership determined the soul of the company. When he died of lung cancer at the age of 66, he left a hole in the heart of Disney that took years to mend (and some might say Walt was never successfully replaced). Never let it be said that one person does not determine the direction of a huge corporation. Disney was testament to the fact that a single person’s vision and ideals can shape and guide a company for decades. This is not the job for a caretaker or bean counter. This is a job for someone who can grasp the impossible and shape the future.

10 Things I Learned from Disney – #2: Values are Non-Negotiable

Walt_young_featureWalt Disney’s values were forged in the hardscrabble reality of Kansas City, growing up in a family led by a father that never was quite able to grab success by the tail. Walt was a deeply spiritual individual who held the importance of American and Family values above all else. He spent the rest of his life pursuing an ideal – that of clean wholesome family entertainment. Walt was scrupulous about it. I suspect the adult movies that are now released through Disney’s production arm, Touchstone Films, would have earned a disapproving frown from Walt. Yet of all the major studios, Disney is still the one synonymous with family entertainment.

The normally affable Walt could quickly become contentious when his values came into debate. He drove the overall moral tone of Disney entertainment with an iron will. The door was open for technical and creative innovation, but heaven help the poor Disney employee who let their moral guard slip, even for an instant. It’s only very recently that Disney Park employees were allowed to have a beard, a mustache (ironic, considering Walt himself sported one) or sideburns. Walt felt facial hair detracted from the clean, wholesome image he wanted to maintain in his parks. And the classic Disney films each strove to be more than entertainment – they each carried a strong moral message, usually about the value of a strong family unit.

Whether or not you agreed with Walt’s highly idealistic views, you had to admire the ardor with which he defended them. Walt felt that a corporation without real values was a soulless organization without direction. And his values still live in Disney’s corporate values today:

Values Make Our Brands Stand Out

    * Innovation
          o We follow a strong tradition of innovation.

    * Quality
          o We strive to follow a high standard of excellence.
          o We maintain high-quality standards across all product categories.

    * Community
          o We create positive and inclusive ideas about families.
          o We provide entertainment experiences for all generations to share.

    * Storytelling
          o Every product tells a story.
          o Timeless and engaging stories delight and inspire.

    * Optimism
          o At The Walt Disney Company, entertainment is about hope, aspiration and positive resolutions.

    * Decency
          o We honor and respect the trust people place in us.
          o Our fun is about laughing at our experiences and ourselves.

Are they defended as strongly as they were when Walt was alive? I suspect not, yet it’s a testament to the man that for must of us, Disney and family values are synonymous.

Values are a highly personal thing. You might not subscribe to the same values that Walt did. But the fact is, values have to live at the heart of an organization. They breathe life into it and give it a purpose that’s not open to negotiation or compromise. They are the bearing points that can always be relied on. They stand above profit statements and quarterly earning reports. If they don’t, all you have is a bunch of people standing around trying to figure out the best way to make money. And there are better things in life than that.

10 Things I Learned from Disney – #1: Dreams Make a Difference

waltdisneyMy friend and fellow Search Insider columnist, Aaron Goldman, has gained a lot of mileage from one column. Sometime ago, he wrote a column entitled “Everything I Need to Know about Marketing I Learned from Google”. Since then, he’s managed to stretch that out into dozens of columns and an upcoming book. For the next few weeks, I’d like to take inspiration from Aaron and share a few things that Disney has taught me. I don’t expect to get nearly the same mileage that Aaron did (possibly because I don’t have the same attention span) but it’s certainly not because Disney is any less inspirational than Google. For me, Disney presents one of the great corporate histories of the 20th century and Walt has always been one of my personal heroes. But, I will restrict myself to 10 blog posts, one for each of the lessons that Disney has taught me about life and business success. So, let’s start with Lesson One:

Dreams Make a Difference

Walt Disney was possibly the biggest dreamer of the 20th century. Walt always had his gaze firmly focused not the future, quickly moving on from past successes. The next “thing” was always the most important “thing.”  He knew if you spent too much time patting yourself on the back, you’d have your sights focused on where you’ve been, not where you’re going.

In behavioural economics, there’s a saying, “Loss looms larger than gain.” Most of us, faced with a decision of protecting what we have vs. risking it all for a potential future gain tend to circle the wagons and protect the piggy bank. Not Walt. Walt drove his brother Roy crazy by constantly betting it all on a bigger and better dream. For much of it’s history, Disney rode a roller coaster that came frighteningly close to bankruptcy on more than one occasion.

Walt knew that dreams are the fuel that drive us forward. Dreams that focus forward can be achieved with passion and purpose. Dreams that look backward are just one step away from regret. We can do nothing about the past, but we can do something about the future.

Walt was much more than a dreamer, however. Unrealized dreams have not influence on the world beyond the holder of the dream. And that was the magic of Walt. Somehow, he was able to make dreams come true. He knew how to sell dreams, infusing them in others and thereby inspiring them. His dreams were highly contagious, spreading from him (and eventually his brother) through his company outwards to a circle of financiers and partners. Eventually, his dreams reached far enough to touch each one of us.

Disney has not dreamed quite as big or successfully since Walt’s passing, but it’s still a corporation that knows the power of a dream. It has a history of recognizing dreamers and providing the superstructure required to lift those dreams up to the heights.

In Disneyland there is a plaque that says, “It all started with a mouse.” But really, it started with a dream. Walt Disney knew how to take a dream and leverage it to move the world. Powerful stuff indeed!

A Frog in Boiling Water: are Fortune 500 Clients all They’re Cracked Up to Be?

First published January 21, 2010 in Mediapost’s Search Insider

P&G’s new CEO, Bob McDonald was asked, in a recent interview with Ad Age, what keeps him up at night:

The biggest thing is the parable of the frog in the boiling water. That’s why today, of the Fortune 50 from 1955, only nine of those companies still exist. P&G is one of them. I want P&G to be on that list 172 years from now, because that means we’re touching and improving more lives. The only thing that can kick us off that list is complacency or inability to learn new things or unwillingness to change.

The Allure of the Trophy Client

In search, we love to deal with marquee clients. We love to put the brag badges on our Web site, the list of logos showing the Fortune 500s we all deal with. A quick non-scientific survey shows that every digital and search agency in the world has worked with HP, IBM, Microsoft, P&G and GE. If one is to believe the plethora of logos slathered over the Web, these companies have more agencies of record than employees.

I get the temptation. I really do. In search, we all struggle for credibility. These clients bring the sheer mass of immediate credibility with them — if you’re good enough for P&G, you’re good enough for me. Come on, admit it! We’ve all done it. We’ve all slipped the logos into our PowerPoint “About Us” slide.

But McDonald’s observation deserves our attention. The Fortune 50 in 1955 only had an 18% survival rate. I suspect the toll will get even greater as the digital landscape accelerates the pace of online marketing evolution dramatically. This means that dinosaurs will be dropping right and left. And as the lumbering behemoths keel over and crash to the primordial forest floor, might we SEMs be caught under them?

How Do You Steer an Elephant?

Look at McDonald’s trio of evolutionary sins: complacency, the inability to learn new things and the unwillingness to change. My suspicion is, despite the reams of rhetoric to the contrary in the typical annual report, that McDonald’s fears represent the norm rather than the exception for the average Fortune 500 corporation. I applaud his self-awareness, but can’t help but wonder if even a tuned-in CEO is enough to overcome the inertia, bureaucracy and legacy investment that typify many mammoth multinationals.

And if the CEO can’t change a company’s direction, how the hell is a search agency expected to? For a puny little search agency (and let’s face it, compared to the sheer bulk of a Fortune 500, we’re all puny) to try to change the direction of one of these corporations is like a spider spinning a web to stop a stampede of pachyderms before they plunge off a cliff. I give it an “A+” for intention, but an “F” for grasp of reality.

Where Do You Invest Your Time?

So, this brings up an acutely pertinent question: What is a better investment of an SEM’s time and resources, fighting the inertia of those marquee clients so we can use their logos on our Web sites, or instead, actually doing something with the clients that will eventually replace the dinosaurs in the inevitable march of marketplace evolution?

It’s a good question to ask. And, philosophically anyway, not a hard question to answer. But in practice, well, in the words of Hamlet”: “Ay, there’s the rub.”

Perhaps, for a select few companies, the two categories are not mutually exclusive. Perhaps the answer lies in CEOs like Bob McDonald, who can steer at least some of the Fortune 500 safely into a new digital reality. Let’s hope there are more where he came from.

Everyone’s a Critic: The Splinters of our Discontent

First published January 14, 2010 in Mediapost’s Search Insider

I had a bout of inbox convergence today. Just as I was speculating what this week’s Search Insider might cover, two separate emails surrounded a juicy little topic and delivered it to me on a platter. First, a post from Ad Age about how marketers are reluctant to use online conversations as a source of customer feedback: “‘Listening’ ostensibly has become the rage in consumer research, but the Advertising Research Foundation is finding that many marketers view what would seem one of the digital age’s biggest gifts to marketers — the torrent of unsolicited consumer opinion — as more of an added expense item than a blessing.”

And then, a small blog post on Echouser got me thinking: “It’s a concept for what an iPhone app designed to measure experiences (any experiences, from surfing a website to hopping on BART) could look like… Can you imagine if we were able to rate experiences on the fly, all day every day?”

Customers are Talking…

There’s been a lot of talk about the shift of control to the consumer and empowerment. As 2009 drew to a close, I talked about the shape of marketing to come. One of the key foundations I identified was participation — actively engaging in an ongoing conversation with customers. The two posts in my inbox start to get at the potential of this conversation.

In the first post, ARF laments advertisers’ reluctance to tap into ongoing online conversations as a source of customer feedback. Valid point, but I can understand their reluctance. This is unstructured content, making it qualitative, anecdotal and messy. Marketers balk at the heavy lifting required to mine and measure the collective mood. Some tools, such as Collective Intellect, are starting to take on the hard task of migrating online sentiment into a dashboard for marketers. The easier it gets, the more likely it will be for marketers to actually do it. Until then, we’re stuck with consumer surveys and comment cards.

…Anytime, Anywhere…

But it’s the second post that really got me thinking. Always-on connections have already given a voice to consumers, one that’s heard loud and clear. But what if we did indeed have a convenient and commonly structured way to provide feedback on every single interaction in our lives through mobile connections? What if marketers could know in real time what every single customer thought of them, based on the experience he or she just had? Some cringe at the thought. Others are eager for it. The second group will inevitably prevail.

Given the level of investment required on the part of the user, I suspect this channel would only be used in extremely negative and extremely positive circumstances. We don’t tend to take the time to comment on things that come reasonably close to meeting our expectations. But even so, it’s a powerful feedback channel to contemplate, giving the truly user-centric company everything they could ever wish for.

…So Listen!

Last week, I talked about the mother lode of consumer intent that exists in search query logs and how we’ve been slow to leverage it. This week, we have an equally valuable asset rapidly coming down the pipe — a real-time view of our customers’ sentiment.  That’s a one-two punch that could knock the competition out cold.

Winning Through Tweaking or How to Screw Up Successfully

self_adjusting_wrench1We spend our lives looking for a revolution. But the more I learn about the world, the more I realize that everything is evolutionary. Our lives are lived through a million tweaks here and there, pushing the world ahead a little bit at a time.

The difference between success and failure in evolutionary change comes down to something I call the Rate of Tweaking (giving us the unfortunate and misleading acronym ROT). Some of us have a high rate of tweaking, and for some of us, our ROT is almost zero. The same is true for companies. Some are constantly tweaking. Others do everything in their power to discourage tweaking. In fact, as a rule of thumb, the bigger the company, the slower the Rate of Tweaking.

Four Factors determine ROT….

Passion

If we don’t care about something, there is little motivation to tweak it. Tweaking comes when we can’t leave well enough alone – and I mean that in a good way. Tweaking requires an unwillingness to settle for the status quo, a drive to make it “just a little bit better.”

I could care less about the storage room in our basement. In the 10 years I’ve lived in the house, I’ve spent a sum total of 2 hours improving this room, consisting of putting some cupboards up after a prolonged persuasion campaign on the part of my wife. For me, this is a room that, under drastic circumstances, I go to, seeking some obscure possession that we suddenly have need of, with the goal of spending as little time possible in the room. My strategy is seek – secure or surrender – scramble. My motivation to tweak this room = zero.

But our yard is a different matter. for the first 6 years we lived in the house, it benefited from minimal tweaking. But in the last 4 years, once I started to invest in it, landscaping has suddenly become a passion. I have a picture of the ideal yard in my head and I won’t rest until it’s realized. I hate winters, primarily because it keeps me out of the yard. From late March to October, I’m constantly outside, digging, trimming, pruning, building or cutting (although I’ve yet to develop a passion for weeding). I’m not saying I’m good at it, but I am passionate. The result? Our neighbours are considering dropping the petition to have us driven off the block.

Being Willing to Make Mistakes

One of the biggest obstacles to tweaking is a fear that the tweak will be a mistake, that it will move you backwards rather than forward.

This fear is not irrational. The odds for successful tweaking is less than 50/50. I suspect it’s closer to 1 in 3 or 4. So, for every success, you will have at least 2 or 3 failures.

The biggest mistake most people make, however, is in reducing the rate of tweaking. They believe by spending more time thinking about each tweak, they can improve their success rate. However, when factoring in time, you quickly realize their math is faulty.

Tweaking Scenario A – Cautious Tweaking

Company ABC decides that they will carefully deliberate each tweak, which because of the resources required and control systems in place means their ROT drops to 4 tweaks per month. However, through deliberation, they achieve a 60% success rate on their tweaks.

4 x .6 = 2.4 successful tweaks

Tweaking Scenario B – Aggressive Tweaking

Company XYZ takes a different strategy. They endorse wholesale tweaking throughout the company (it’s not, however, a free-for-all, due to point #3 below) and achieve 25 tweaks per month, a not unreasonable number when the restrictions and bottlenecks are removed. The success rate, however, drops to 33%.

25 X .33 = 8.33 successful tweaks

By being willing to make mistakes, Company XYZ out tweaks Company ABC by a 4 to 1 margin. But, you counter, what is the cost of failure? Good question.

Ability to Learn from Mistakes

In the scenario above, Company XYZ had 4 times as many successful tweaks, but they also had almost 12 times as many failures (1.4 vs 16.33). Surely, these mistakes come at a cost. They do, but the ROM (Return On Mistakes) is far greater than the investment, if you’re smart about making mistakes.

If a company is going to increase it’s ROT, it has to build a process for dealing with failure, and the fact is, failure can be tremendously valuable. In fact, it might be more valuable than success. Why? Because you learn more from failure than success. Failure dictates your future direction.

I’ve been doing market research in one form or another now for almost a quarter of a century. And one thing has never changed in all that time. You always learn more from the negative results than the positive results. Positive results don’t cause you to change direction. Negative results do. They allow you to adjust course, or, in extreme cases, do a 180 and head in an entirely new direction. In a Darwinian contest, without losers there can be no winners. That’s why the words “winnowed” and “winners” share the same etymological roots. And everything (EVERYTHING!) in life is a Darwinian contest.

Course correction through failure has three fundamental requirements:

  • The ability to quickly tell when you’ve made a mistake
  • The determination not to let mistakes slow down your ROT
  • A process to make sure you don’t make the same mistake twice

For the ultimate case study on how these three requirements can make being mistaken your best investment ever, let’s turn to the ultimate arbitrator of winners and losers, evolution.

How to Tell When You Make a Mistake

There’s a pretty clear judge of winners and losers in Nature – it’s called differential reproduction. Winners have more offspring, generation after generation. Losers don’t. Winners thrive in the population. Losers die out. The judgement is brutally effective, if somewhat long in duration.  To introduce effective evolution in an organization, you have to be just a brutal. You need a crystal clear metric to measure success or failure by, similar to differential reproduction and you have to be brutal about holding your efforts up to this metric, cutting the losers, then taking your lessons learned and investing that in your winners.

Don’t Slow Down your ROT

Nature doesn’t deliberate about evolution. Evolution happens by chance. Richard Dawkins called Evolution the Blind Watchmaker. There is not master plan or blueprint. And so, there is no predetermined timeline for evolution. Mutations and adaptions just happen, allowing the very few successful ones to thrive and the far greater number of failures to be winnowed out. But the incredibly high ratio of failures in evolution does nothing to slow down the overall rate. It grinds on relentlessly, paying no attention the scoreboard of winners and losers. The ROT in nature remains constant.

You have to adopt a similar approach in your organization. Create a mandate for experimentation and tweaking. Embrace failure and make it clear there’s no repercussions for it. Find ways to reward all tweaking, good and bad. Separate the judging of winners and losers from the motivation to try in the first place. In nature, we have the comfort of having, at a minimum, years or even generations in between the initial tweak and the ultimate determination of success or failure. We don’t have the same luxury of time in our corporations, but we can build organizational buffer zones between the initiation of tweaking and the judgement of effectiveness.

Don’t Make the Same Mistake Twice

I said above there’s no blueprint for evolution. Actually, that’s not entirely true. There is a blueprint. The difference is, the blueprint is not planned out in advance. It’s created “on the fly” through constant tweaking and then passed on for further rounds of tweaking. When it is passed on for more tweaking, at least in some species, half the blueprint is arbitrarily thrown away and then remaining half is “mashed up” with another blueprint, just to see what might happen. If there is a time in evolution where there is an opportunity for what would be a tweak that would represent a relative “leap forward”, it’s during these mash ups. I’m speaking, of course, about DNA and sexual reproduction. The point, however, evolutions successes and failures are tallied in our DNA, reducing the odds of making the same mistakes over and over. Success is, over time, coded into the DNA that’s passed on.

Organizations need corporate DNA. They need a way to tally success and failure and save it for further reference. Here is where we have an advantage over evolution. Evolution has no intelligent agent to review all the DNA prior to a mutation or a reproductive combination to make sure that this particular genetic tweak hasn’t been tried before. We do. Once we embed our history of success or failure in some form of corporate DNA, whether it’s procedures, documented process, product specs or corporate culture, we have the luxury of being able to review prior to future tweaks, keeping us from making the same tweak over and over again.

Our Environment

The final element that dictates our Rate of Tweaking is the environment we’re in. In nature, environmental factors have a direct correlations with the ROT.  The pace of evolution has been found to pick up dramatically in environments that require rapid adaptation. Here, we can learn a lesson in corporate survival from Galapagonian finches.

Peter and Rosemary Grant have spent a good part of their lives since 1973 on a tiny speck of volcanic rock in the Galapagos called Daphne Major. They’ve spent that time catching and measuring birds and recording their diets. The payoff is that they’ve seen evolution happen before their eyes. In 1977, a severe drought on Daphne Major forever changed the nature of food available there. The vegetation withered and the seeds of that vegetation, the primary source of food for the native population of finches, became much scarcer. The softer seeds were quickly eaten by the finches, which left only the harder seeds. Finches typically didn’t have beaks powerful enough to crack these seeds. On Daphne Major, nature was going to be an incredibly harsh judge of tweaking.

When our environment becomes adverse, as on Daphne Major, it’s not the initial rate of tweaking that changes. Evolutionary changes happen at random. What happens is the pace at which the losers are winnowed from the winners picks up dramatically. The Grants found that on Daphne Major, the finches with less powerful beaks died off in a generation, quickly altering the nature of the Galapagonian finch population.

The lesson we can learn here is that adverse environments force a harsher judgement of tweaking. While that might seem like a drawback, it actually speeds up evolution. For example, the adoption of digital marketing has been accelerated because of the adverse economic conditions over the past two years.

The Tweaking Reading List

If you approach corporate management from a Darwinian perspective, you’ll find evidence of the success of the approach in all of the best books, from Drucker to Peters to Collins. But three books in particular have focused on the benefits of evolutionary tweaking:

Dealing with Darwin – Geoffrey Moore

The author of Crossing the Chasm tackles the question: How do great companies retain their appetite for innovation throughout their life cycle? The evidence shows that start ups, by their nature, realize the importance of constant tweaking but the Rate of Tweaking drops dramatically as companies mature. Moore shows how to fight this tendency.

Survival is Not Enough, Why Smart Companies Abandon Worry and Embrace Change – Seth Godin

Godin directly applies the logic of evolutionary biology to the corporate arena, borrowing from notables including Richard Dawkins, Jared Diamond and others. This is one of the lesser known of Godin’s works, and that’s a shame.

Do It Wrong Quickly – Mike Moran

My friend Mr. Moran does a great job of applying the benefits of tweaking to digital marketing, a niche where the pace of change has accelerated so dramatically, winners and losers are determined in a fraction of the time typical in the offline world. Call digital the Daphne Major of marketing.

Marketers: Shift Your Paradigms

First published December 3, 2009 in Mediapost’s Search Insider

I think I know what I want to do with the rest of my life. I want to shift paradigms.

Now that I’m older and arguably wiser, people sometimes ask me for that “one piece of advice.” Usually, it involves stepping into someone else’s perspective and seeing things from their viewpoint. With each year that passes, I find myself doing that more and more, leading me to dole out that piece of advice more frequently.

You see, there is no truth or ultimate reality. There is only our perception of it. We have a lens we see the world through.  And everyone else has his or her own lens.  Paradigm shifts happen when we suddenly see reality through another lens, and the best way I’ve found to do that is to try to understand what another person’s view of reality looks like.

In one of his books, Stephen Covey tells a story of a ride home in a New York subway. In the same car was a father with his two children. The children were running wild through the car, jumping on seats, jostling other passengers and fighting with each other. The father sat oblivious to the actions of his children, staring straight into space.

Suddenly, Covey could take it no longer. Someone had to rein these children in and the father didn’t seem to be doing anything. The reality through Covey’s lens was that the father’s obvious lack of parental discipline had resulted in two rude, ill-mannered children. Finally, he could take it no longer. He moved over to the father and said, “Your children seem a little rambunctious.” The father looked at the children, then, turned to Covey, “I guess they are. I’m sorry. We just came from the hospital. Their mother passed away this morning.”  Needless to say, Covey’s paradigm shifted in an instant.

The Paradigm of the Marketer

Most of the problems I see in marketing result from the fact that marketers see the world one way and their prospects see the world another way.  We have two different paradigms. And marketers have a difficult time putting their lens away long enough to try the view through their prospect’s lens.

About a year ago, at the Search Insider Summit (I’m actually at it again as I write this) I saw this clearly in a session on mobile advertising strategies. From the audience, which was made up entirely of marketers, there was frustration that the carriers wouldn’t allow targeting of mobile users through their account information. “You have all the information, why don’t you allow us to use it to target our messages?” was the cry from more than one frustrated marketer. I asked for a show of hands of all who thought, as marketers, that this would be a good move on the part of the mobile providers. Every hand shot up.

“Okay, as mobile users, who still wants to have ads targeted to you by your personal information.” Several hands suddenly wavered, hit by the force of shifting paradigms. Many went down. Others dipped noticeably as their owners realized their own hypocrisy. Suddenly, they were seeing the world as a customer, not as a marketer.

Analyzing campaign data and crunching numbers is not the way to shift a paradigm. Our personal lenses are stubborn things. It’s very difficult to swap them for another.  The best way carries the fancy title “ethnography” but it simply means “writing about people”. Ethnography, a branch of anthropology, seeks to understand people by observing them “where they live”, in the full context of their lives. In this setting, one gets further removed from your reality and more embedded in theirs, making paradigm shifts easier. I don’t think we, as marketers, spend enough time in the lives of our customers. And unfortunately, the Internet and the flood of data available is only making the problem worse.

The Survey Says…

Here’s my last analogy. I’m a huge “West Wing fan,” and I recently watched an episode from season two where President Bartlet’s staff was polling five red states on their attitudes towards gun control.  Not surprisingly, the percentage approving came up short of expectations. Josh Lyman, a White House staffer, was disappointed and frustrated.  “That’s it!” he said, “We have to dial down our gun control rhetoric.”

The pollster, played by Marlee Matlin, responded, “I think you have to dial it up.”

“That’s not what the data says,” Josh said.

“How do you know what the data says?” said the pollster. “The data says whatever you want it to. It depends on how you ask the question, what they had for breakfast and whether a gun control lobbyist pissed them off yesterday.”

Data tends to reinforce paradigms, not shift them. It’s the understanding that comes from personal contact that shifts paradigm. It’s sitting beside an apparently delinquent father and learning that he just lost his spouse.

Predicting Innovation

innovationSmallIsaac Asimov once said “The most exciting phrase to hear in science, the one that heralds new discoveries, is not Eureka! (I found it!) but rather, “hmm…. that’s funny….”. Based on a 30 year study across 300 product categories and 225 countries, the phrase might actually be “Hmmm…. that’s what I thought.”

A new whitepaper from Phillip Roos from GFK sums up 30 years of findings started by product guru Robert McMath. The paper deserves a deeper dive – (which will be coming in some form or another) but I’ll try to share the highlights with you at least:

The Chord of Familiarity – Great innovation builds on what comes before it. This lines up with something I have long believed – there is no such thing as revolutionary innovation, just a series of incremental evolutionary innovations that at some point reaches a tipping point and appears to be revolutionary. I’ve used the iPhone as an example before.

Great Innovation does not require people to make radical changes in beliefs or behavior – Again, with incremental innovation, the market must understand the innovation and relate it to something they’re used to. The iPhone made smartphones smarter, more fun and more useful. It didn’t require us to make a great leap of understanding (unlike Apple’s ill fated Newton, which was too far ahead of it’s time).

Consumer Needs evolve in predictable ways – Innovation tends to mirror a natural evolution in consumer needs.

Innovation “news” that addresses consumer needs gets adopted in predictable ways – Smaller players generally lead the way (as they naturally are more innovative), as competition picks up others build on the original innovation (witness what’s currently happening in mobile technology with Android, the Palm Pre and others) and then finally we reach the tipping point of mass adoption (we’re getting very close to this cusp with mobile technology).

Roos also shares some drivers of winning innovation:

Business Dynamics – Supporting innovation with strong business practices and process. A.G. Lafley built a culture of innovation at the core of P&G. 3M, Apple and Google are other corporate cultures that have injected systemically into their core.

Consumer Dynamics and Insights – It’s essential for innovative companies to consistently maintain the customer’s perspective and approach product development from this frame of reference. Again, Apple is brilliant at this, due in no small part to Steve Jobs amazing intuition about what Apple’s customers want. Intuit and P&G have robust customer insight programs that bring them to where the customer works and lives, outside of the market research lab.

Creativity and Design – Innovation specialists tend to be creative and design enthusiasts. They typically have a great ethnography process that keeps them squarely aligned with their customers and then excellent design teams that can translate this understanding into innovative products….

BUT

Roos says even if you do all these things well, it may still not be enough. Apple gets check points beside each of these prerequisites, but they still turn out clunkers. In the end, innovation in product design is a bit of a crap shoot and the trick is to stack the odds in your favor. Innovative technology, even if it’s superbly designed, is a failure if no one uses it. And it’s this last point that Roos says is critical. You have to understand the patterns of innovation adoption. You have to find the right place on Everett Roger’s Technology Diffusion curve. And it’s here where the same patterns have emerged with successful innovations over the past decades. Here are the steps Roos recommends:

To understand the patterns, you have to understand the drivers of the product category. Historically, why have customers come to this category. This will boil down to some primary human drivers: safety, convenience, gratification, productivity & well being/wellness. These needs don’t change. They represent the first wave. Example: The telephone introduced instant voice communication, offering convenience, gratification and safety. It wasn’t an “out of the blue” innovation, as it built on the consumers understanding of telegraph communication.

The second wave is when innovation allows these drivers to be satisfied in new and better ways.Typically, innovation is fragmented at this step. Single innovations drive forward one aspect of the product and yields a temporary competitive advantage. Example: The introduction of the mobile phone took all the drivers satisfied by the telephone and suddenly unanchored it. We could take those advantages with us anywhere.

The third wave is fusion of the drivers. Single point innovation is no longer enough. We want the advantages to merge into a more holistic experience. Example: The SmartPhone. Mobile voice communication was now supplemented by texting, web access, digital cameras and PDA functionality.

The fourth wave is where secondary needs come it. We extend the functionality of the innovation. Example: The mobile device, and the iPhone in particular, is suddenly become core to our lives. It ceases to be a single purpose product and becomes a personal platform. Computers have also gone to this level.

The fifth wave is addressing new targets in new occasions. Taking the innovation and extending it into all parts of our lives. Example: The iPhone becomes a GPS device. It becomes a shopping assistant.

All too often, I think we regard innovation as something magical and mysterious. Innovation is something predictable and replicable. It can be planned for, encouraged and fostered.