Wednesday, July 30, 2008

The Importance of Scale

I'm struggling through a busy patch at the moment so posting has been light recently. My wife and I are gearing up for our move to San Fran later in the year (we currently live in NY), so there is a lot of stuff to sort out - not least of which is shifting a cat 3000 miles.

So I am taking a moment to post about something that I have been increasingly coming across - the importance of understanding 'scale'.

And by 'scale' I mean things that scale on some type of exponential curve. The Long Tail describes the scaling process inherent in the aggregation of markets for certain types of goods. The ubiquitous 80/20 rule describes the typical scaling of customer revenue. And in Clay Shirky's book, Here Comes Everybody, he points out that in social interactions, these Power Laws (as they are called) are everywhere. This is a Power Law:

While Power Laws have been written about extensively, I don't think they are well understood. Mostly because, as human beings, we live in a very linear world. We're not good at understanding things that scale exponentially. Power Laws are all about extreme scaling. Mostly though feedback and multiplier effects.

A good example of this mis-understanding is the Sprint campaign that was widely criticized on blogs and social media sites. One of the criticisms leveled at it was the auto-response email you received if you tried to email the CEO (who gave out his address at the end of the TV clip). It's a fair criticism. A personal appeal from the CEO doesn't feel very personal if you get a canned response back. But it's not surprising. On the graph above, Sprint occupies a position near the steep part of the curve. It has millions of customers. The CEO can't have a conversation with each one of them.

I heard people comment that Sprint should have just hired more people to respond. And that if smaller companies can do it, why can't they? Customer numbers follow a power law - the more customers you have, the more you get, the more you spend on getting more, etc. Social media tactics - two-way conversations, dealing with customers as individuals, having tailored conversations, etc. - don't work as you climb that curve. They can't. You can't add resource to deal with those conversations at the same rate as you acquire customers because you can't add resource exponentially and stay in business.

A lot of Social Media pundits talk about the 2-way nature of conversation these days not understanding that what works for a 100 person outfit is not going to work for a company ten times larger with 1000x the customers because of the way customer numbers and resource scale. Joseph Jaffe's Delta Skelta debacle is a good example. As is the Target example.

In Jaffe's case, he's right to want to claim compensation for what happened to him, but wrong for thinking Delta can somehow treat him differently on the merits of his individual issue. He's probably one of a few 1000 people they need to deal with on a weekly basis. A simple policy for his situation is the most efficient way to deal with it. A full-blooded, tailored conversation for his individual needs is not. The fact that he got a direct response from Delta is more a reflection of his standing in the blogging community than his value to them as a customer.

Now I'm not saying that having a canned email or a standard policy letter is 'good' - in the sense that it is the best type of customer interaction. It's not. All I'm saying is that it's a realistic response to this issue of scale.

Shirky makes this same point when talking about weblogs in his book:

As is normal in a power law distribution, most writers have few readers. Such readers and writers can all pay similar amounts of attention to one another, forming relatively tight conversational clusters... As the audience grows larger, into the hundreds, the tight pattern of 'everyone connected to everyone' becomes impossible to support - conversation is still possible, but it is in a community that is much more loosely woven... Once writers start getting more attention than they can return, they are forced into a width versus depth trade-off.
Essentially, as reader numbers scale exponentially, the blog writer has no hope of increasing their 'attention resource' in a similar way. You can't add attention exponentially. You don't have enough of it to start with!

The Sprint CEO knew this before he set out. There was no way he could have a conversation with everyone who saw that ad. Hence the canned email. And to be honest, he was silly to try. He held out the promise of such an interaction knowing he could never deliver. That's not a great tactic.

Companies like Sprint and Delta and other large entities that exist on the steep part of that curve need to get away from this notion that they can profitably sustain 2-way conversations with their customer base. Companies that exist further down the curve absolutely need to keep those conversations going.

Where 'scale' starts to be an issue, other types of strategies need to be employed. Social media holds out huge promise for self-sustaining group collaboration by customers - initiated by companies. Company as enabler makes much more sense than company as sounding-board.

Sounding-boards are only good to rant at. There is no future in being a sounding-board.

Digg this
Sphere: Related Content

Monday, July 21, 2008

The Point

I am about half way through Clay Shirky's new book, Here Comes Everybody. I had read some initial critical reviews (which I can't find the link to anymore), but I think they were misguided. It's a fascinating book about the way we organize ourselves and how the Internet has changed 'organizing'.

I'll look to write a review after I have finished it (hopefully soon), but I thought I would make a quick post about The Point.

The Point is a website for organizing group action. It's the purest form of 'Internet Organization' I have come across and is a shining example of the central tenet of Shirky's argument - it's not so much that the Internet 'brings us all closer', it's that it removes the inherent 'cost' of organizing.

There is an important lesson for Social Media in there. It's not about interrupting people's conversations or even being a part of them (brands have no purpose or right to inject themselves into private conversations), it is about using Social Media tools to mobilize (organize) customers who share your brand as a common interest.

What you organize them around is up to you - but the options are limitless and the cost negligible.

That is the real power of Social Media.

Digg this
Sphere: Related Content

Thursday, July 17, 2008

Visualizations as Metaphors II

I wrote a post a while back about using visualizations as metaphors. Seth Godin recently posted about how useful he found pie-charts when compared to your average bar chart. He got a lot of flak for this as most visualization experts will tell you the opposite - that bar charts are a far superior visualization tool.

I believe Seth's point was similar to the one I was making in my first post - that sometimes a purposely overt graphic (such as a single pie with one large piece sticking out) is the best way to make a point. You could structure it as a metaphor, or it could be a simple exaggeration. Some political 'data spin' maybe?

The reason Seth thinks like this is because he is a Marketer. Marketers spend their lives (inside and outside their company) trying to convince people of things. To a marketer, a presentation that presents just the facts is pointless. Facts without an argument that in some way enhances the Marketer's agenda is a waste of time.

This is a good thing. You're paying your Marketing people to have a point of view.

To many data visualization experts though (and scientists), facts are these pure things that need to be wrapped in cotton wool and protected from opinion and false hypothesizing. Hence their dismay at the misleading pie-chart segment size error in displaying quantitative information.

The gulf here, between Marketing and most data visualization experts and BI (Business Intelligence) people, is about the size of Texas.

But you need both points of view. Marketers who get paralyzed by facts tend to do a poor job. I know too some people that will sound strange, but we're not talking about denying the existence of gravity, we're talking about challenging or changing perceived norms. If you get too caught up in why x number of people don't do y, you are never going to try and figure out how to make y work.

Likewise, show me a company run by data visualization experts. No more commentary necessary.

What you really need is a mix of both mentalities. You need enough understanding of numbers and graphs to know when to break the rules. And enough respect to know when not to.

I think Seth has a pretty good balance.

Digg this
Sphere: Related Content

Wednesday, July 16, 2008

Why Social Media isn't a strategy

Gareth over at Brand New posted a short musing on why we need to concentrate on building Social Brands rather than executing Social Media campaigns.

I agree. And I've said it before, Social Media is not a call to inundate the web's social channels with advertising, it's a call to change the way you do business.

Why? Because the Web has changed/is changing the way people work and play. It's not simply another media medium.

Your brand/company exists in two places these days - its physical existence (where you work, the employees, the products, the infrastructure) and its digital existence (its website, search engine presence, online conversations about its products/services, customer complaints and compliments, etc.) . The digital presences needs as much care and thought as the physical one.

Imagine if a customer tried to contact you in the 'real world' and you had never thought to put in a phone line or build a door to your front office? We take these things for granted in the physical world - it's laughable to think of a company without a phone system, or indeed a front entrance!

Why do we NOT take them for granted in the digital world? Why do all companies not have blogs? Why won't some respond to online conversation? Why is it difficult to find the email address of the CEO? Why do they ignore customers trying to have fun with their brand or product?

Why? Because they are not paying enough attention to their digital presence. Not managing it properly. Not investing in it. And not using any of the tools consumers are using to help them navigate this new frontier.

As long as 'digital media' is relegated to a subset of Marketing and 'Social Media' a subset again, this will remain the norm.

Social Media is not a strategy, it's a call to manage your digital presence with as much care and thought as your physical one.

Digg this
Sphere: Related Content

Friday, July 11, 2008

Bryan Appleyard's interview with The Black Swan Author

Bryan Appleyard (author of Understanding the Present) has interviewed Nassim Nicholas Taleb (author of the Black Swan) for his Sunday Times article. You can read the interview here.

Of all the books I've read in the past 20 years, I'd have to say that both of these authors have left the most lasting impressions. To see Appleyard interview Taleb is a real pleasure.

Both authors go against the grain of common thinking about science, mathmatics and ultimately how we view our own world. It's about time a lot of that thinking was shook up.

I highly recommend reading the interview.

Here are Taleb's top life-tips (from the Appleyard interview):

1 Scepticism is effortful and costly. It is better to be sceptical about matters of large consequences, and be imperfect, foolish and human in the small and the aesthetic.

2 Go to parties. You can’t even start to know what you may find on the envelope of serendipity. If you suffer from agoraphobia, send colleagues.

3 It’s not a good idea to take a forecast from someone wearing a tie. If possible, tease people who take themselves and their knowledge too seriously.

4 Wear your best for your execution and stand dignified. Your last recourse against randomness is how you act — if you can’t control outcomes, you can control the elegance of your behaviour. You will always have the last word.

5 Don’t disturb complicated systems that have been around for a very long time. We don’t understand their logic. Don’t pollute the planet. Leave it the way we found it, regardless of scientific ‘evidence’.

6 Learn to fail with pride — and do so fast and cleanly. Maximise trial and error — by mastering the error part.

7 Avoid losers. If you hear someone use the words ‘impossible’, ‘never’, ‘too difficult’ too often, drop him or her from your social network. Never take ‘no’ for an answer (conversely, take most ‘yeses’ as ‘most probably’).

8 Don’t read newspapers for the news (just for the gossip and, of course, profiles of authors). The best filter to know if the news matters is if you hear it in cafes, restaurants... or (again) parties.

9 Hard work will get you a professorship or a BMW. You need both work and luck for a Booker, a Nobel or a private jet.

10 Answer e-mails from junior people before more senior ones. Junior people have further to go and tend to remember who slighted them.

Digg this
Sphere: Related Content

Tuesday, July 8, 2008

The Pirate's Dilema

Sean over at CrapHammer (got to love that blog name!), posted a link to a short video promoting the new book The Pirates Dilemma, by Matt Mason. Here is the video.

It definitely looks like it would be worth a read. It's hard to argue that youth culture hasn't/isn't changing the media landscape. Whole institutions are crumbling because of it (read traditional media outlets).

What struck me watching the video though was why the attention on pirate culture now - as the video goes into some depth to explain it as a common historical trend? It comes down to music (and potentially movie) piracy. And it's an economic argument. Never in the history of media has the means to reproduce and share it been so easy and ubiquitous.

So does that make everyone a pirate? Or are some of us sort of free-loading pirates? More akin to looters running through upturned cars than pirates who seek riches and fame plying their trade?

I think there is a distinction there. Subtle, but important. And I know people who fit into both camps.

I think I am off to buy the book... or steal it if possible :)

Digg this
Sphere: Related Content

Monday, July 7, 2008

Microsoft marketing success story

You don't rarely come across examples of Microsoft's marketing prowess, so when you do, it's blog-worthy (at least to me).

I was looking around for the latest information on Windows Server 2008 and came across this. (if you click it might ask you to install Silverlight - this is MS's latest web technology, similar to Flash but based on the .NET architecture so it's pretty powerful).

If you can't get to the link or can't see it for some reason (probably making the whole thing a failure in your eyes), MS has taken 'personification' to a new level. The page is a cool animation of a robot called 'IT 24/7'. It has links to information and videos about Windows Server 2008.

The brilliance is all in the imagery. Windows Server 2008 is all about lean, tough, easy to use, server software. The robot 'personifies' all of these traits. If you watch the videos it's like an aerobics instructor on steroids. Running, jumping, 'doing fitness classes in its downtime'. Its standing position on the load page looks like it is about to jump through the screen. It epitomizes 'action'.

The targeting is spot on. Most IT guys play video games. Microsoft also has huge equity in this space with the Halo franchise. In fact, some of the load screens for the Silverlight page could almost be mistaken for Master Chief.

The message is clear. Everything is done on message. Information is easy to get to and most of the major topics regarding server software seem to be covered. They don't waste time with 'content' for content's sake. It's like the anti 'gorilla' spot. Yet both seem to work.

Overall, one of these rare occasions where it all just seems to click. It works for the audience, works for the brand and is both entertaining, informative and memorable. All the things it needs to be.

'Pragmatically creative' is how I would describe it - I am beginning to love that term.

However, I haven't signed up for anything or found other ways that make it obvious how you can participate - other than the standard 'download this desktop background'. So they get 10/10 for creative execution and strategy, but the jury's out on the conversation/social media aspects of the campaign.

I couldn't find 24/7s Facebook page - even though it's kind of an obvious move.

Digg this
Sphere: Related Content

Friday, July 4, 2008

New Long Tail Debate

If you read this blog a lot (ad thank you for those of you who do!), you know that I have been following the work of Chris Anderson for a while - his Long Tail theory and the newer Free movement.

Chris recently posted a rebuttal to a Harvard Business Review article by Aniti Elberse criticizing some aspects of the Long Tail theory. Anti is a Professor of Marketing at Harvard Business School.

The debate boils down to the fact that Elberse's analysis of new data found that the Long Tail is increasingly flat (i.e populated by less and less popular titles as inventory grows) and that consumers, even consumers in the Long Tail, prefer the 'hits' more (the popular stuff).

Both to of these findings seem pretty obvious to me. Online retailers are always going to keep adding inventory as long as inventory costs are close, if not at, zero. And consumers will always tend to gravitate to popular titles - at some point. Popularity is multiplicative. The more popular something becomes, the more popular it becomes.

However, I believe she misses the point of the original Long Tail argument when she says that these results undermine the importance of the Long Tail as a business phenomenon.

The Long Tail is an observation of optimal product portfolios for two very different delivery mechanism. The two things that make the Long Tail work are close to zero inventory costs and a system for recommending and searching content. Both of these facts predict her findings. More inventory is inevitable, and with recommendations still playing a big role, popular products are very likely to remain popular.

Anderson's theory was never about the death of the 'hit'. It was about the rise of the 'tail'. These things aren't mutually exclusive.

Digg this
Sphere: Related Content