Mark Neely's Blog – 3rd Horizon

McKinsey has issued a report outlining the results of global C-level executive survey on readiness/preparedness for digital business.

Three strategic priorities for business are:

1. Big data/analytics – 25% of companies reported this was in the Top 3 corp priorities. A further 26% said it was in the Top 10.
2. Digital marketing (inc. social media) – 25% of companies reported this was in the Top 3 corp priorities. A further 27% said it was in the Top 10.
3. New delivery platforms (cloud, mobile etc.). – 18% of companies reported this was in the Top 3 corp priorities. A further 23% said it was in the Top 10.

These technologies are increasingly seen as offensive strategic weapons rather than defensive moves – almost 30% of companies indicated they were looking to adopt these technologies to build new business opportunities or tap new sources of revenue/profit.

To back this move, 25% of companies reported they would spend 3% or more of their total cost base on digital business initiatives in 2012.

Despite this level of investment, only about 1/3 of companies report they believe they are spending enough to build out these capabilities.

What key challenges do organisations report in embracing and adopting these technologies?

- Organisational structure not designed to take advantage of priorities – 52% of respondents reported this challenge
- Lack of technology infrastructure and IT systems – 51%
- Lack of quality data – 46%
- Lack of internal leadership – 45%
- Difficulty finding functional talent – 43%
- Business processes were insufficiently reworked to take advantage of opportunities – 42%
- Lack of senior management interest or desire to change current practices – 40%
- Difficulty finding technical talent – 31%

For access to the report, see https://www.mckinseyquarterly.com/Business_Technology/BT_Strategy/Minding_your_digital_business_McKinsey_Global_Survey_results_2975

EMC has just released a white paper (which it sponsored, but which was developed by IDC) titled The Diverse and Exploding Digital Universe.

The white paper provides some eye-opening and thought provoking data points about our increasingly cluttered digital environs.

Some key data points from the report:

• The digital universe in 2007 — at 2.25 x 1021 bits (281 exabytes or 281 billion gigabytes) — was 10% bigger than initially thought.
  The resizing comes as a result of faster growth in cameras, digital TV shipments, and better understanding of information
  replication.
• By 2011, the digital universe will be 10 times the size it was in 2006.

More concerning is the notion that each user has a ‘digital shadow’:

Of that portion of the digital universe created by individuals, less than half can be accounted for by user activities — pictures taken, phone calls made, emails sent — while the rest constitutes a digital “shadow” — surveillance photos, Web search histories, financial transaction journals, mailing lists, and so on.

It’s a brief report (16 pages) and well worth reviewing.

Several academics recently published an interesting paper with a wicked title: Chameleons bake bigger pies and take bigger pieces: Strategic behavioral mimicry facilitates negotiation outcomes (available as a PDF).

The paper concerns two experiments they undertook to investigate the effectiveness of mimicry. It has long been believed that, in business and social contexts, when you mimic the postures and gestures of the person with whom you are speaking, it improves the process of building rapport and trust, which leads to more effective interpersonal interactions, with positive overall effects on negotiations.

From the abstract:

Two experiments investigated the hypothesis that strategic behavioral mimicry can facilitate negotiation outcomes. Study 1 used an
employment negotiation with multiple issues, and demonstrated that strategic behavioral mimicry facilitated outcomes at both the individual
and dyadic levels: Negotiators who mimicked the mannerisms of their opponents both secured better individual outcomes, and
their dyads as a whole also performed better when mimicking occurred compared to when it did not. Thus, mimickers created more value
and then claimed most of that additional value for themselves, though not at the expense of their opponents. In Study 2, mimicry facilitated
negotiators’ ability to uncover underlying compatible interests and increased the likelihood of obtaining a deal in a negotiation
where a prima facie solution was not possible. Results from Study 2 also demonstrated that interpersonal trust mediated the relationship
between mimicry and deal-making. Implications for our understanding of negotiation dynamics and interpersonal coordination are
discussed.

In my experience, mimicry does indeed work – but only when it is not obvious!

As the authors noted:

It is important to point out that across both studies, none of the participants who were mimicked noticed that their opponents were copying their behaviors, suggesting that the effects of being mimicked occurred automatically and unconsciously.

The flip side is that if the participants who were mimicked realised what was occurring, it may have had a negative impact; that is, it may have made them mistrust the person/process, for fear of being manipulated.

Steve Rubel has an interesting opinion piece in Advertising Age: As Technology Develops, So Does Role of Geek Marketers.

His basic premise is that, given the increasing technification (yes, it is a word) of a range of consumer products, marketing types are often out of their depth, because marketers and technologists speak a different language:

With CEOs demanding accountability and time spent online climbing, chief marketing officers are on a push to embed technology into every facet of their strategy. But marketers and technologists are not exactly two peas in a pod. They speak different languages. Marketers like GRPs (gross ratings points). Geeks like APIs (application protocol interfaces). Dilbert mercifully pokes at these differences. It’s all very Mars and Venus.

The solution, for Rubel, is the development of a new breed of marketers – geek marketers:

Enter Geek Marketers. These cross-trained specialists are fluent in both worlds and bridge them. They are marketers by trade, yet they also have a hard-core interest in technology and social anthropology. As curious individuals, they are constantly studying how digital advances are changing our culture and media. Armed with these insights, they regularly apply them in a marketing context by working closely with brand teams to codify new best practices.

I think Rubel has got this completely wrong. Marketing is marketing. It does not, and should not matter whether you are selling a ‘bleeding edge’ gadget or a potato. The marketing process is precisely the same.

The objective of marketing is very simply articulated as this: to sell more things, to more people, more often, for more margin.

There is, of course, an array of processes, inputs, knowledge and expertise that must be pulled together in a coherent and consistent fashion to achieve this, but that fundamental process does not alter just because you are selling something that has LEDs, or silicon chips or requires software.

Understanding the market, what it wants and how to give it to them (or, more accurately, how to lead consumers to conclude that what they want is what you have) is what marketers do. They either understand the how’s and why’s of marketing, or they should be doing something else.

Marketers do not need to walk in the shoes of their customers, nor do they need to share the same passions as their customers. They do, however, need to understand the market, their product, their customers, how that product is perceived by their customers, and what motivates their purchasing behaviour. They also need to be able to synthesise all that understanding to create a compelling story for each different consumer segments they are seeking to target.

Marketing has never been about a love of, or deep technical expertise in the product, or even the ability to fluently speak ‘producteze’ (ok, I made that one up). You don’t need to be a car enthusiast to market cars effectively. You do not need to be a globetrotter to market travel products effectively. You don’t need to be a surgeon to market hospitals or health insurance effectively.

You most certainly don’t need to be a geek to market technology effectively. You just need to be a marketer who understands – and is good at – your job.

In a recent post, I discussed the dramatic disparities in the market capitalisation of PepsiCo and The Coca-Cola Company, as a result of the different market strategies adopted by the two companies.

A good colleague, Bob Houk, had a different take:

Mark:

First, I’m not sure your premise is correct, at least as far as Pepsi/Coke are concerned.

If the moves into other categories were what caused the market cap change between 1998-2005, then they were a long time coming — the Frito-Lay acquisition took place in the early eighties, I believe (maybe earlier), and Quaker/Gatorade was also long prior to the period mentioned. They were part of an overall broadening of the company that included other moves that worked out less well (e.g., acquisition of several fast-food chains that were later dumped). If this was done with an eye to the changing beverage tastes of the public, then Pepsi was very far-sighted and patient.

Another case of redefining one’s mission in order to grow, though, was the convenience store business. They grew in large part by making themselves into gas stations (it’s hard to remember now that early c-stores did NOT sell gas). When I did some consulting for Circle K (#2 in the US market at the time) in the early eighties, the first thing I learned was that gas was 1/3 their sales (ans beer 1/3 the balance — a scary combination). Southland (7-11), their rival, became the #1 gas retailer in the country.

The change left them vulnerable, though, because the gas companies eventually responded by turning their service bays into c-stores, and over-saturating the market. Circle K and Southland both suffered badly and were later acquired by other companies.

Bob

I think we’re both (largely) in agreement. In my response to Bob, I wrote:

I do not believe that PepsiCo moved into chips or non-cola drinks with “an eye to the changing beverage tastes of the public”. Rather, they (I believe) realised that, after more than a century of head-to-head competition against Coca-Cola, they were probably a tad narrow in their definition of the market they were competing in.

If you harken back, there were times when Coca-Cola sales reps were forbidden to utter the Pepsi brand, and vice versa, such was the intense rivalry between the companies. They could not discuss or reference the other company in their corporate pow-wows or off-sites.

Given the corporate  culture, the rivalry, and the profits inherent in going head-to-head against each other in the ‘Cola Wars’, it would have been very easy for either/both Boards to continue their detente against one another – through product iteration (blueberry cola anyone?), price wars, product portion strategies, channel cannibalisation etc.

But the PepsiCo Board sat back and (I believe) asked itself: “With our resources, our brand position, our consumer + market insight, is this the best we can do? What market do we truly compete in?”.

They answered that question in a manner wholly different to the way Coca-Cola did. As a result, they saw their true market environment as being more than just cola flavoured drinks. They realised the ‘share of wallet’ that they were competing for was more than just fizzy sugar, and they diversified accordingly, and reaped the benefits.

The  move into fast food (Tri-Con) was, I believe, more about buying better distribution for their cola product than furthering their strategy of expanding/deepening their wallet-share.

Now the example you cite re: c-stores is a classic one – companies that develop strategy in a vacuum. Most companies either devise market strategy without considering how their immediate competitors will react (rookie mistake). Nearly all companies devise market strategy without understanding that their business/market is part of a ‘commercial ecosystem’, and as such other companies beyond their traditional competitors will react (ergo gas stations responding to soda sellers).

Personally I wonder whether the Cola Wars need have lasted as long if either company truly understood ’3rd Horizon strategy’.

This is a topic dear to my heart, so I welcome other/new opinions.