Ondrejka Sapient Mc2 09.16.09

multi channel technologies 2009 sapient executive summit cory ondrejka • [email protected] • http://ondrejka.net

or, how I learned to stop worrying and love change

90 minutes, 202 slides tech customers marketing change

story time

an interactive story in 6 parts • prologue • act 1: technology • act 2: customers • act 3: product development and marketing • act 4: change • epilogue

(interactive and fast)

prologue

or, “why the hell is a programmer talking to us about marketing?”

long ago (the stuff I can’t talk about)

• US Navy • Lockheed Martin

(I mention these to establish my non-hippy cred before talking about communities and collaboration)

recent history • arcade and video games • Second Life • Annenberg School for Communication, USC • EMI Music • consulting, advising, speaking

common themes

• creating products loved by customers • technology invention, development, deployment • cultural transformation • communication

“product”

all linked to creating something people will love

which is what marketing is

some assertions • marketing != buzz • marketing != promotion • marketing != communications

marketing isn’t any one thing, it is the entire process of understanding and influencing

marketing = product development

to a programmer product development is all about creating something customers will love to do that, you had better • understand your market and customers • be able to acquire/design/create products leveraging what you know • continuously improve products as a result of customer use and feedback

to a programmer marketer marketing

product development is all about creating something customers will love to do that, you had better • understand your market and customers • be able to acquire/design/create products leveraging what you know • continuously improve products as a result of customer use and feedback

sales promotion communications product creation

marketing

customers

market understanding customer needs analytics

and bringing agility to this cycle

product creation

marketing

customers

particularly when customers become a moving target

product creation

marketing

customers

act 1: technology

or, “but we were really good at this 10 years ago!”

something to keep in mind: is your company a technology company or one that needs to understands technology?

technology changes behavior and opportunity space

(usually by radically changing costs to do something)

3 trends that matter

• Moore’s Law • channel diversity • radical changes in cost structure

Moore’s Law

18-month doubling is more than you might expect

5-10 years means 3-6 doublings

so 8-64 times cheaper, faster, longer lasting

1-2 orders of magnitude

25x is hard to imagine

25x is hard to imagine 25x mips, same size

25x is hard to imagine 25x mips, same size

25x is hard to imagine 25x smaller, same perf

25x is hard to imagine

25x more storage is nearly a terrabyte 25x battery life is 8 months of standby, 8 continuous days of talking

leads directly to channel diversity all those mobile computers are connected and always available

also leads to radical cost reductions

25x cheaper is $10

more broadly, anything with a computational cost constraint, i.e. •storage •data transmission •CPU processing time

is getting much cheaper, much faster than you (probably) think practically free in many cases

driving additional trends

it is unlikely to ever be harder/more expensive than it is today...

• to move or store information • for customers to shape messages • for customers, partners, or competitors to create new channels

which takes the impact of Moore’s law far beyond IT: •media •biotech •customer service •market analysis

discussion who does (or should) understand and watch technology trends that will change your business?

brief aside to the music business

music industry in 60 seconds

revenues peaked in 2000, generally declined since

pre 2000

post 2000

direct result of Moore’s law driving decreased costs and increased connectivity this is a new world but change is hard to manage

CD revenues skyrocketing, new technology teams within major labels largely ignored (EMI Massive Attack album delivered via stream) Internet bubble pulls tech talent and knowledge away (David Bowie’s “Hours” via download from EMI) Revenues peak

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Napster Recession begins Revenues decline

iTunes Guitar Hero EMI goes DRM free Rock Band/iPhone Games as music drivers iTunes rich digital packages

CD revenues skyrocketing, new technology teams within major labels largely ignored (EMI Massive Attack album delivered via stream) Internet bubble pulls tech talent and knowledge away (David Bowie’s “Hours” via download from EMI) Revenues peak

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Napster Recession begins Revenues decline

iTunes Guitar Hero EMI goes DRM free Rock Band/iPhone Games as music drivers iTunes rich digital packages

gaps, especially during technological discontinuities, are very difficult to discover internally

both internal and external resources can help you find gaps (gaps in core IP/business should ultimately be filled internally)

discussion for your sector, who will first know if the rules change: customers, partners, or employees? who is responsible for capturing this knowledge? how will you collect it?

act 2: customers

or, “there seems to be someone at the gates...”

the two questions that matter

•where are your customers? •what are they doing?

(with some details)

where •buying? •discovering? •using? •talking about? •complaining? •finding competitors?

doing •what you think they are doing •what you want them to be doing •what they think they are doing •what they want to be doing •what they are really doing

thanks to technology trends, customers can be more engaged, connected, and powerful than ever before

and the impacts can be rapid and far-reaching

see, e.g. Spanish Presidential elections and SMS Iranian election and Twitter Apple and bloggers Whole Foods and bloggers

it gets even more interesting if your customers are also involved in production

and this applies to media as well

(I suspect you all know this story, but think it is illustrative)

(advertising)

image cc by:nc 2007 esther dyson

the gray lady

the gray lady

and some history

1851 101 pulitzers 1.5m circulation $4b advertising (1999)

versus Craig

and some free stuff

1995 0 pulitzers sf classifieds incorporated (1999)

this should be easy

Craig’s as threatening

and seal problems are easy to solve

so we’d expect

Craig

NYT

what really happened?

NYT

Craig

2008 #1 classified ad service 30 million ads/month

2008 advertising down 63%

and today “little interest in maximizing profits”

Despite $500m from nyt.com

please do not view this as history the next moment of creative destruction is coming

discussion how are motivated customers impacting your business?

customers are doing and telling you more

but a word of warning: both of the following statements are 100%, completely, incontrovertibly true

customers know exactly what they want customers don’t have a clue what they want

customers know exactly what they want customers don’t have a clue what they want

“know” and “want” could mean •they can tell you •they can show you •they are complaining •they are choosing a competitor •they are talking about your product on Facebook or Twitter

but it is very hard to know you want something when it’s an unknown or you’ve never had it before

discussion who is responsible for understanding what your customers want?

act 3: product development and marketing

or, “rawr, what are those big flaming rocks falling from the sky?”

nobody wants to be a dinosaur

(how many people still print out email?)

so, recall this diagram

product creation

marketing

customers

whether you call this product development or marketing, you’re doing the same thing product creation

marketing

customers

creating something that amazes your customers, generated demand, keeps them engaged, and differentiates you from your competition

and doing it with an engaged, active, changing customer

product creation

marketing

customers

which means you had better be able to detect the changes and respond quicker than competitors product creation

marketing

customers

first, kill all the silos

product creation

marketing

customers

if product developers need permission to see customer data or talk to marketing, you are introducing delays you can’t afford

product creation

marketing

customers

think about how to blend traditionally separate services

community management

customer support

marketing

(or mc marketing + mc commerce)

community management

customer support

marketing

expect that in a Twitter/Wikipedia/ Second Life world of radically declining costs and increased communication, you can do the impossible

negatively costed sales/support teams? crowdsourced product design? customer pr?

it’s just a matter of boundaries

product

sales

customers

product

sales

customers

edge of company?

it’s just a matter of boundaries

product

sales

customers

edge of company?

product

sales

edge of company?

customers

and if you don’t, your customers will

in second life, they do

a moment about second life

• a user-generated, virtual world • game-like technology but not a game • 3D, persistent web • significant scale

what happens when your community has the keys to the kingdom?

user generated content

• almost unheard of in 2000, now well demonstrated • in SL’s case, drove economic and customer growth • produced enormously beneficial/long-lasting press

evergreen pr

evergreen pr

evergreen pr

unexpected consequences

discussion

can your customers control your messaging/pr? do you want to allow it? do you have a choice?

reduced costs, increased capabilities lead to my favorite non-word “nichification”

“nichification” the act of creating multiple $0 billion markets from few multi-billion dollar markets

starts from “long tail”

this is usually a search and inventory discussion

especially in hit driven industries Hits

Everything else

but, the basic power-law curve applies elsewhere

long tail communities

sorted by size of community mass market

niche

or by targeting requirements untargeted

highly targeted

niche communities (due to lack of scale and need for targeting) are rarely well served

so in our Moore’s law world, what’s a niche to do?

they can serve themselves

fragmenting/ignoring the mass market along the way

to take advantage of these opportunities, you need to be agile

agile development come from the software world, but the ideas are broadly applicable

agile development means

• fail cheaply, fast, and publicly • regularly release to customers for feedback • build in testing and metrics

it’s all about staying out of the weeds, having the flexibility to try new things, and managing changing requirements

1 n

chance of building = the right piece of software

(where “n” is estimate time in weeks)

failure is a necessary part of an experimental culture

(nota bene: “experimental culture” does not mean “just try stuff”, experiments need expectations, reporting, and measured outcomes to avoid burning a lot of money)

and a willingness to be afraid of words like “expect”, “believe”

never been more opportunity to know

it also requires understanding the often uncomfortable difference between vanity metrics and those actually tied to the business

should Facebook friends matter to you? YouTube views? Twitter mentions? Google search count? average customer support wait time? revenues?

sexy, but maybe not important... should Facebook friends matter to you? YouTube views? Twitter mentions? Google search count? average customer support wait time? revenues?

(imho, social media alone not that interesting, social media + action very interesting)

should Facebook friends matter to you? YouTube views? Twitter mentions? Google search count? average customer support wait time? revenues?

especially important around ads recall problems visualizing orders of magnitude? ads run $0.01 cpm to $50 cpm that’s a 3 order of magnitude range!

similarly, beware of myths around “digital natives” (less generational than any of us expect)

but, if your customers are sharing behavior, make sure you know what you want them doing

the good (and bad) thing is that nearly every online/digital activity leaves some record are you ready for terabytes a week of data?

discussion who is allowed to experiment at your companies? (“allowed”?!) who owns experimentation? how is failure treated?

act 4: change

or, “we’re going to be just like Apple”

briefly, some companies that do it right

apple • < 10% of overall PC market, 91% of premium market • 70% of mp3 player market • largest music retailer in the world • rabid user community

pixar • 10 for 10 on major features • critical and financial success • every movie breaks new technology ground, but that technology is never what sells it • 4 Oscars

zappos • $0 - $1 billion in shoe sales in 10 years • focus on service as key differentiator, recognized fears blocking online shoe sales • understood where technology helped • use of service to augment sales, staffing, and generate marketing/PR • being acquired by Amazon for $1 billion

common elements • maniacal focus on products that delight • deep understanding of how to integrate marketing, buzz, support with product development • fearless

fearless is the hardest one

particularly when it comes to leadership

there is no description of cultural transformation that captures how difficult it is

at a guess, big change arrives every 7-10 years

problems with 10 years of latency • experts and stars build their reputation before the change but need to operate in the next • sometimes, experts are surfing a larger trend, and aren’t actually rockstars • or, the world is different, so expertise no longer applies

was this growth due to skill or an externalities?

does prior performance help you now?

driving transformation •focus on business goals •admit reality •communication •find internal leaders •embrace agility

discussion (this will seem like a non sequitur but it isn’t) how much time do your executives spend on email? on the phone? in meetings? (change management will make this worse)

epilogue

or, “the future ain’t what it used to be”

first, beware predictions of the future

it’s hard and we’re wired wrong

we predict linearly

reality is exponential

innovation creates exponentials

thus, we overestimate short-term change, underestimate long-term change

and our errors compound

actual error

predicted error

but we can be fairly sure computation, storage, and bandwidth trends will continue

so, expect engaged customers, more data about them, more diversity of channels, and the need for more agility

(diversity of channels means I don’t like portals, but that’s another talk)

second, allow technology to help you

if social networks are proliferating...

when top level domains expand...

when customers are using dozens of different blogging and microblogging services...

when you need to reach customers on the social networks they already use...

when you need to analyze multi-terabyte datasets in realtime...

third, address business needs, not TLAs

businesses never need CRM or CMS

never

businesses need to reach customers manage and publish information effectively communicate etc

decide on these good business needs first, then choose technology to solve them don’t pick the technology just ‘cause

beyond that, know where your IP needs to be be careful about building from scratch if you don’t need to

finally

build for change rather than chasing it

because change is accelerating

discussion any final questions or thoughts? cory ondrejka • [email protected] • http://ondrejka.net