Know thyself

"The essence of leadership today is to make sure that the organization knows itself." -- Mort Meyerson

This statement by Perot confidant and former EDS Chief Executive Mort Meyerson is my advice for you in 2008. Not far from the platitudes “Know thyself” and “To thine own self be true”, Meyerson’s statement emphasizes the importance of a widely understood, and closely followed corporate Vision that drives a firm’s mission, principles, and strategic direction. An organization that knows itself knows how to spot opportunities, navigate troubled waters, and work together toward common goals. For individuals, it helps define roles and responsibilities, establishes their individual value to the organization, and builds the foundation for empowerment in decision-making.

To thine own company should each employee be true.

Brand In The Place That You Live

Courtesy of our friends at Woot!, blogging made easy. This entry was the easiest to write:

"Click here"

http://www.woot.com/Blog/BlogEntry.aspx?BlogEntryId=3458

A pie in the Facebook

Like so much in marketing communications, particularly events and public relations, it is often hard to see good efforts working. But you sure know bad efforts when you see them.

Specific to PR, with their widely publicized Beacon debacle, add the golden boys at Facebook to the legions of bad PR episodes, now along side the fake blogging shills for Wal-Mart, promotions for Cartoon Network, executives at Enron, and on-going messes for the Red Cross and FEMA.

Sayeth Josh Quittner at no less a source than Fortune: "What’s harming Facebook - perhaps to a terminal degree - is enormously bad PR. For a social media company, these folks don’t understand the first thing about communication; they have alienated the press by being arrogant, aloof and dishonest. " And still more from CNET: "The big question for users is whether there is anything Facebook can do to regain their trust."

I can't always define bad PR, but I know it when I see it.

The Trouble With ROMI

ROMI, or Return on Marketing Investment, is the stalwart of the accountability marketing movement, spurred on by the dozens of dashboard software products and services that promise not only to track the success of your marketing efforts, but change the very nature of the way marketing is viewed in the corporate environment.

Poppycock.

As I told an audience at a recent BMA luncheon at which I was the speaker, ROMI is a Red Herring. It provides a false sense of security to marketers who otherwise have abdicated their responsibility to learn the language and requirements of the finance team, and therefore, the organization generally. Here are the top three reasons that ROMI, while a good tool, is useless in creating real influence in the boardroom, and real impact on the bottomline:

1. ROMI is a metric, not an objective. Measuring click-thrus, phone calls, leads generated are all useful metrics that measure the effectiveness of tactics, not strategies. All too often marketers and professionals from other fields, for that matter, mistake their metrics as objectives. Objectives are far broader than a lead, and marketing needs to recognize the difference.
2. ROMI only measures one of the four Ps. We can debate the current relevance of the four Ps, but putting the debate aside for a moment; ROMI is targeted toward measuring Promotion only. What of Price (price cuts versus premium pricing strategies?), Placement (how to leverage distribution channels?), and Product (feeding customer and market research to effect product changes?). ROMI acknowledges none of that, yet if there was a single ‘P’ whose impact on sales was the most expendable, it would be Promotion… yet it retains the lion’s share of our attention as marketers.
3. ROMI metrics are created in a vacuum. They do not necessarily reflect the concerns of the executive team. The CFO is concerned with EBITDA, not PPC. He/she wants to know about your contribution to EPS, not the circulation of your industry’s leading trade publication. As compelling as some metrics are, finance types are often as guilty as engineers in the ‘not invented here’ mentality. They set the critical metrics, not you.

In the end, finance folks and executives are your customers, and like reaching customers, you need to speak to their needs, not your own.

80/20, myths, and choice

We often think of myths as ancient Greek folktales of Gods and warriors, or in a business seetting, platitudes like 'the customer is always right' (they aren't) and 'the check is in the mail (it isn't).

I built a personal philosophy in my early days using Pareto's Principle, otherwise known as 'the 80/20 rule', believing that it had a place in every fabric of the universe and would, one day, be a key part of the 'meaning of it all'.

Today however, that which was once seen and known is more and more a myth... technology has unwound Pareto, that which I once thought was the very fabric of being.

20% of buyers produce 80% of the profits
20% of staff produce 80% of the results
..and so forth.

Not so fast.

As much as the 80/20 rule has become a standard researchers at the MIT suggest that technology has diminished its influence. The book The Long Tail: Why the Future of Business is Selling Less of More by Chris Anderson suggests this as well. In fact, the book can be found on Amazon.com, where lesser-known titles are now producing 40% of Amazon.com’s revenue.

The long tail at Amazon has been described thusly: “Amazon sold more books today that didn’t sell at all yesterday than Amazon sold today of all the books that did sell yesterday.”

Read that twice. (The long tail refers to the infinite outlier in a standard bell curve.)

In a new MIT report, “Goodbye Pareto Principle, Hello Long Tail: The Effect of Search Costs on the Concentration of Product Sales”, researchers discovered that when comparing catalog to online sales in womens clothing, the 80/20 was only applying to mail order catalog sales. The 80/20 was moot online.

Of course, Pareto still has influence in the natural world: 20% of the trees will still grow 80% of the apples, and you'll still spend 80% of your time with 20% of your friends, but when it comes to the Laws of Choice, it’s changing the way we do business.

The Mouse That Roared

I was recently speaking with a friend who found himself in near panic as he looked around and saw his four employees hunkered down, planning the next great score, mastering the next great presentation, closing the next big deal.

He panicked because he had just received 'the call'. Megamega Company was moving into his market space. All was lost. Or was it? How could he compete when a larger firm was moving quickly into his territory, now finally seeing the opportunity in what they once dismissed as 'crumbs'? As we talked, five key themes emerged:

First, he needs to change his mind, and those of his team.

The competitor can talk big, but he can talk 'niche'. They can talk resources, he can talk service. Every negative a positive, every obstacle an opportunity.

Second, don't mistake the competition as the target.

As much as he needs to make his negatives into positives, it is more important to make certain he can deliver on the real needs of the customer. He mustn't focus on the competition, instead learn the sweet spot that will address the majority of the customer requirements, and then additionally convince them that they need something only he is selling. Don't sell against the competitor, sell the customer toward a solution.

Third, learn to love Inspector Gadget.

Technology is an area that levels the playing field, and in fact often tilts it in his favor because it is far easier for small companies to deploy new technologies than for larger established firms that are, like legacy telecommunications carriers, burdened with the sunk costs of legacy technologies or are required to resolve ROI in months - harder when deployment is made across thousands of employees. He needs to apply technology to create competitive advantage, lower response times, provide data faster and more accurately to his customers. He isn't small, he's nimble.

Fourth, sell. Simply fill that funnel. Do not let one opportunity define a quarter. I knew a salesperson who, with the blessing of his bosses, spent the better part of a year chasing a single Big Fish like some Ahab manaically pursuing Moby Dick. Ultimately, the story ended the same. He needs to be able to create his own luck, seek out new opportunities, so that he can choose the battles he is most likely to win.

Finally, he needs to remain singularly driven on the vision and mission of his company. Every business needs to follow a vision of what they will be in 1, 5, 10 years. This will help him keep his eye on the prize, choosing the right strategies and investing in the right tactics to get him there.

It's not the end. The entry of a big player into a nacsent market legitimizes the offering for all, and the small players, like my friend's company, still benefit from first-mover advantage.

And now for something completely different.

Unrelated to my usual marketing rants, here's a little something we may want to think about next time we reach for a bottle of water (credit Arthur Caplan, PhD):

1. Water bottles are of plastic or glass. Both are heavy and costs a bundle in oil to ship
2. About 2 million tons of plastic was used to make bottles for water last year (Plastic is a petroleum product)
3. In the U.S., billions of bottles a year get thrown out. Even if recycling, it costs bundles in gas to haul old bottles to recycling facilities
4. Bottled water is being promoted by global sugar water concerns and boutique outfits who are leveraging our thirst for purity to offset losses in soda
5. According to Beverage Marketing Corp., bottled water consumption has doubled in the US in the past decade. Americans now drink more water from bottles overall than any other nation. Note, however, that we are only tenth among the 'enlightened' nations of the world in drinking bottled water per capita, trailing Italy, Mexico, Spain, France, Germany and Switzerland

Okay, so you aren't a lefty enviromentalist and are far more pragmatic and rational than your left-coast Hollywood elite types who worship at Al Gore's pennyloafers. Then think of this: Why pay dollars per gallon for bottled water packaged with a cool logo when you can get pure tap water for pennies? This ain't Mexico City.

In other words, if you want to do something to really reduce global warming and cut down the earth’s pollution burden, or even lower our dependence on foreign oil, stop buying bottled water.

Apples from the tree of no knowledge

As if we needed further proof that today's communication tools make the idea that we, as the Corporation (capital 'c') control the information about our products and ourselves, take a look at this very recent spreading of a rumor, acceptance of it as fact, and rapid errata posting - all without the knowledge or involvement of the Corporation, in this case, Apple:

Monday afternoon Reuters ran with a story that quoted a report from a Taiwanese analyst for JP Morgan. In completing due diligence on the iPhone, the analyst discovered a patent application that (patent-happy) Apple filed in November 06 for a phone with a clickwheel. The analyst, faced with what he thought was a grand discovery, added information given him from 'unnamed sources' and issued a report to his clients and colleagues at JP Morgan. In it, he predicted that Apple would release a mini-iPhone by the end of 2007 and suggested strong sales numbers.

Trouble is, its all wrong. Completely unfounded. And it was picked up by Reuters, who ran with the story.

Day traders scored Apple shares and drove them higher, but by that afternoon, JP Morgan issued a second report by other analysts essentially discounting the first. "We believe a near-term launch would be unusual and highly risky."

So what to learn from all this? Once again, we marketers have little more than the appearance of control over market information and in many ways, even less over brand perception. We can dress it up, encourage it, steer it this way or that, but ultimately our brand belongs to the consumer, and they are prone to believe just about anything.

Expect to engage in brand stewardship, but to expect that you'll ever have brand ownership will just make you crazy.

The ying and the yang

I hear all the time that if the customer were simply a, well-informed, and b, rational, a sale would be easy. Well, I'm here to tell you that these represent the two ways to make the sale, and both can be leveraged through effective marketing communication.

If your offering is indeed the smart choice for your customer, then by all means, help your customer get smarter. Educative sales, or consultative sales are effective in this vein, where your marketing communications are targeted toward speaking opportunities, bylines, blogs, and high-profile media relations efforts. This appeals to the educated, rational value buyer. Yer all rational buuyers have a streak of irrationality, so...

If your offer requires a change in impression, assumption, habit; or if you need to compete not on utility and value but on fashion and emotion (irrational) then by all means appeal to the emotions of the buyer - even in a business to business space - to drive out considerations on a strictly formal qualitative form. "Nobody ever got fired by buying IBM" isn't a commonly understood mantra because itt is rational, it is the result of the emotion of fear on the part of the buyer. Tap into fear, lust, comfort, or any of the other 14 or so emotional triggers and fill a need - albeit an emotional one.

Embrace the rational and irrational buying signals as opportunities, not barriers.

Penny-Wise and Pound Foolish

A blog posting in MSNBC's Red Tape Chronicles notes the same issue I mentioned in an earlier post regarding a company's own judgement of their customer service:

http://redtape.msnbc.com/2007/05/ever_wonder_why.html

Back on January 24th, I posted thoughts on how companies misguide themselves into thinking their customer satisfaction rates are high by measuring the wrong things:

http://strategy180.blogspot.com/2007/01/of-metrics-and-meaning.html

In Bob Sullivan's blog, he notes that "nearly 6 in 10 respondents told researchers they were somewhat upset or extremely upset with the way their most recent customer service experience was handled, according to consulting firm Accenture." Yet, he goes on, the same survey shows that 75 percent of high-tech CEOs say their companies provide 'above average' customer care.

The reason for poor service is often cost, yet in the bottomline-oriented boardroom, what is lost on this reasoning is the real cost. We've all heard the adage that an unhappy customer tells nine friends, a happy one, two. Well, the figures are even more compelling. As Sullivan's blog points out, the consequences of poor service can be severe. Consumers who feel they've been badly treated are incredibly disloyal, as 81 percent said they'd purchase from a competitor next time... and even 'average' treatment isn't good enough -- only 27 percent of those consumers say they'll buy again from the same company. The actual cost of providing good customer service -- having a human being answer the phone, for example -- only costs between $10 and $30 per customer. Acquiring new customers is much more expensive. For example, direct broadcast satellite system firms like DirecTV spend on average about $600 to acquire customers, according to an Accenture spokesperson.

CEO: Change Encouragement Officer

Effective CEOs understand that in the same time incremental changes can be made organically, large-scale changes can be led. Incremental changes are ineffective, by the time they are completed, the market has already moved ahead.

Change is not an occasional effort necessary only when revenues slide or stockholders revolt.
Companies must reinvent themselves periodically to acheive the performance transformations to stay ahead of the second-raters. So who is responsible for this? The CEO is singularly critical to the effort, even more so than the executive team or the other managers who may sponsor the change effort?

While every company differs and every situation differs, the exact role of the CEO in each transformation is impacted the size, speed and nature of the change; the willingness of the organization to accept change; and the abilities of the CEO to encourage change.

Still, not every change effort is a complete crap shoot - experience - and research by no less than McKinsey - identify these critical functions for the CEO - Change Encouragement Officer:

• Making the change meaningful for the individual AND the organization. People will eagerly support causes they can believe in, so the impact of the communicating the objectives of the change is depends on the CEO’s ability to make the transformation personal.
  
• Act as if, that is, role-model desired mind-sets and behavior. Successful CEOs' actions encourage employees to support and practice the new types of behavior to bring about the change. Creating two sets of rules - one for executives and another for employees - not only undermines a change effort, but puts up obstacles to it. Strategy180 has viewed - from a distance fortunately - this very dynamic and can share it as a case study - contact us about it at inquiry@strategy180.com
  
• Building a strong and committed top team. To leverage the influence of top executives, CEOs must make tough decisions about who has the ability and motivation to make the journey.
  
• Get involved. There is no substitute for leaders rolling up their sleeves when significant financial and perceived value is in play.

Because everyone takes their cues from the top, the role of the CEO is unique. CEOs who are seen only as giving lip service to change will find everyone else doing the same.

Change isn't for every CEO. Only the best and the brightest can truly accept and execute these critical behaviors.

One Degree of Separation

Often the difference between success and failure is a matter of degrees. Change Leadership requires, in the best of circumstances, an enormous commitment and takes a huge effort on the part of management. Not to be overlooked is the individual commitment to change at all levels. Led from the top, every extra effort, every extra degree of commitment makes the difference.

At 211F degrees, water is very hot and you can make tea.
Add just one degree, water boils, and you can power a train with the steam.

The key to get the train moving is to lead an organization to not only provide that extra degree of effort and commitment, but to make cetain the effort is focused down the track in a common direction.

When Hell Freezes Over

For years, and with every successive generation, consumer goods goliath Proctor and Gamble has defended’ again and again, against allegations that their Tarot-styled corporate logo had satanic ties and that P&G profits were finding their way to satanic cults and other nefarious organizations. And the SEC thought Sarbanes Oxley was hard to police…

Well, in a recent and thoroughly excusable case of Goliath going against David, the consumer products giant recently won a $12.5 million judgement against several Amway distributors who, using outbound auto-diallers, used the rumor to bolster their own sales of detergents.

12.5 million dollars may not be big potatoes to Proctor and Gamble, but it is nice to know that a company of that size and bureaucracy tracks and prosecutes attacks on its brand instead of simply downplaying the impact of malicious attacks on their reputation.

Conditional Loyalty

In a report published recently in the Harvard Business Review, Karen Fraser reveals that customer loyalty may be more tenuous than previously believed. In a study that underscores consumers’ increased concern over ethical, environmental and related issues in corporate life, up to 8% of ‘satisfied’ customers expressed dissatisfaction with the company or product, or both.

This dissonance is powerful, and therefore word-of-mouth marketing efforts could be compromised. 44% of conflicted consumers speak about their concerns with others, of which 33% negatively portrayed the company or brand.

The silver lining? Uncovering these customers among new markets and competitors is a ready-made opportunity for companies that invest enough time and consideration in evaluating the market.

Change, accelerated

The pace of change continues to astound, as can be recognized by this presentation by Scott McLeod (runtime: 6 minutes): http://www.scottmcleod.org/didyouknow.wmv

A few highlights:

• There are more honors students in India than there are students in North America.
• By 2023, today's first graders will use a computer costing less than $1000 that has more computational power than the human brain.
• China will soon become the largest English speaking country in the world.
• One out of every eight couples married last year met online.
• If MySpace were a country, it'd be the 11th most populous in the world.
• More than 3000 books are published every day.

America's misplaced sense of outrage

Excerpts from an MSNBC article (http://www.msnbc.msn.com/id/17050378/), no comment from me is required. Though I'd love to comment, certainly, so I'll limit myself to adding emphasis, in bold:

The New York-based American Foundation for Suicide Prevention... wants GM to pull the ad from its Web site, try to get it off video-sharing Web sites such as YouTube and apologize.

The ad is the latest from the Super Bowl to come under fire. Earlier this week, a commercial for Snickers candy bars was benched after complaints that it was homophobic. And aspiring rapper Kevin Federline apologized after a restaurant trade group said it was insulted by an ad that stared him as a fast-food worker.

"I was completely outraged," said Miller... "GM is not being a responsible citizen by airing something that so closely imitates life."

Changing the Unchangeable

A fundamental resistance to change in an organization isn’t that unusual, in fact, every company of size has a number of employees who reject change as if it were central to their own job description. It’s in their DNA. In many ways, it is in the DNA in all of us.

Recently, Julie Roehm of Chrysler was hired – and more recently – fired from Wal-mart due in part – saucy allegations aside – of forcing change on an unwilling organization. Quoted in BusinessWeek, Roehm stated, “Wal-Mart, she says "would rather have had a painkiller [than] taken the vitamin of change." What has she learned? "The importance of culture. It can't be underestimated."

It seems odd to me that Ms. Roehm’s meteoric rise could have occurred without her critical understanding of this, but it happens to even the most successful executives in marketing or otherwise. Culture is not a ‘soft skill’ to be derided as a tree-hugger’s prerequisite in graduate management coursework. As Lou Gerstner Jr., the former head of IBM once stated, “Culture isn’t just one aspect of the game—it is the game.”

Here are a few rules for executives that find themselves in the same type of role that Roehm, and Gerstner before her, found themselves in: Changing an entrenched culture, particularly one set on self-destruction:

1. Get started
   Anyone who has worked with or for me for more than a few days knows my mantra – Progress over Perfection. While a BHAG (Big Hairy Audacious Goal, from Collins’ Built To Last) is a critical element of a successful change effort, any early success can do wonders for morale and the effort’s credibility. Importantly, it also limits the exposure of a certain mis-step.
   
2. Speed Trap
   At the outset, you need to gauge how quickly – or slowly, you’ll need to move. Often times this is influenced by certain outside objectives such as a turnaround effort, but it will also be determined by the ability of management to effect change on the departmental – and individual level. This doesn’t mean that change needs to be slowed – sometimes the need for change is understood by the rank and ile and if you move too slowly you could lose credibility.
   
3. Walk Softly.
   Announcing the change is coming is like using a drumline to announce the arrival of marines on the shore. Change is best accomplished not as a widely visible project but quietly integrated as a practice. Effective change is supported at the top but driven from the bottom, up. Change is difficult not only because it disrupts long-held patterns and ways of thought, but because it intimates that those patterns were, essentially, wrong. Otherwise change would not be necessary. While some would suggest that some people and companies just need a swift kick in the a*s, it isn’t as easy as all that. Telling employees that change is a’coming and they need to board the train or be run over is an unnecessary shot across the bow that will only serve to alienate the influential mid-managers a change agent needs to see the program successfully carried forward.
   
4. A Tip from Tip
   "All politics is local." That quote, from former Speaker of the House Tip O’Neill, can be effectively paraphrased by stating, “All Corporate Politics Are Departmental”. The relationships that matter in a change effort are the small, informal ones. As stated above, leadership support is critical but the mid-level management and other influencers are equally critical.

Of metrics and meaning

A few posts back, I commented on Corporate self-delusion in measuring customer satisfaction. Seth Godin makes the point in his blog regarding the importance not of measurement for measurement's sake, but measurement for knowledge's sake. Common metrics and the 'real thing' they are intended to measure:

• Good grades in school (the ability to solve problems in life)
• Lots of raw traffic to your blog (conversations among prospects who become fans or customers)
• Burning calories (feeling better and looking good)
• Clickthrough rate on ads (conversion rate to customers)
• High salary (long-term happiness)
• Class rank (actually learning something)
• Number of stock options (future prospects of your employer)
• This quarter's commission (reputation in the industry)
• Technorati rank (number of RSS subscribers)

I could add leads, visitors, reach, frequency, and a host of old black magic measurements to the list as well. And in addition to measuring the right thing, it is also important not to be blind to the subjective things as well. One does not trump the other.

http://sethgodin.typepad.com/seths_blog/2007/01/high_resolution.html

Stuck in the middle

The middle. The mean. The average. That’s where you are, with average efficiency and average margins. So what to do if you aspire to the low throughput high profit upper end – while leveraging the high efficiency, low margin lower end?

It is possible to make money in both ends of the market by simply creating two business models for the two ends of the market. Dividing the sales force is one example of this, but there are other considerations. In differentiating the markets, cost, quality, and delivery/responsiveness are all important. At the low end you’re working to fit specific needs. At the higher end, there are qualitative elements regarding service expectations.

Of course, to do this requires differentiation and awareness of the alternatives - both internally to your firm’s offerings as well as those of competitors. You can build awareness but long term success requires backing up these promises with real differentiation. And in case you just think you’ve had an ‘ah-ha’ moment, let me suggest that functional improvements are not enough either. Bit-rates and throughputs are no longer effective differentiators. Today, differentiation takes many forms. Complementary services. Strong consumer loyalty. Personalized service. A strong brand, in other words. At both ends of the value chain.

Start with the basics – ask consumers to understand what their needs are and what problems they experience. Observe their behaviors and analyze what it means to your offerings - You need to observe and find out by different means and then put the puzzle together yourself to discover what people really want to have. You have to figure out what people really want, even if they can’t yet express it. Organize cross-functional teams, including product management, sales, marketing, and support staff. This will aid the brand, inform product development, and add to the bottom line.

Out of the middle, toward the top.