This is not really a set of predictions, those are around at this time of the year aplenty. Rather it is a mix of the things I am thinking about, the trends I see underlaying the performance of both the public and private sectors, and the performance of marketing and strategy in these changing contexts.
It is pretty easy to make predictions, get a few right, and you become seen as a ‘guru’ but few remember the many you got wrong, so I am not going to try this year.
Are monopolies OK?
Facebook and Google between them control 75% of the global digital ad spend, not a monopoly, but certainly a global duopoly. Currently around 40% of advertising spending is digital,(depending on whose numbers you use) and the lack of transparency and accountability is huge. The rock was kicked over by Procter & Gambles Mark Pritchard in a presentation to the IAB in January 2017, and the roaches are still scuttling from the light. There has been movement for the better as Colgate, and several other major advertisers followed the lead of P&G and slashed their digital ad budgets until their suppliers could/would supply data that supported their claims. However, advertising is only a slice of the cake.
Facebook as a ‘community’ holds unprecedented power, with the attendant opportunity for morally challenging situations to arise, something Mark Zuckerberg acknowledged in his 2018 letter, and needs to be addressed.
Amazon continues its march to world retail dominance, (so long as you ignore Ali Baba which is more an exchange platform rather than a retailer) and the retailers we are all familiar with are racing to the wall. Amazon bought Whole Foods for $13.7billion, cash, on August 28 and the next day, the Amazon share price jumped $15.6 billion. In other words, Amazon got paid $1.9 billion to buy Whole Foods and got a distribution base into the bargain as well as a whole swag of quality relationships with produce suppliers, and a great brand. At the same time, the share prices of Walmart, Target and other major retailers took a bath in the wake of the purchase. On top of Amazon as a retailer, we have Amazon providing an unprecedented breadth of services from Amazon Web Services, to a vast array of web tools, to space exploration, to demonstrating newspapers can still work with the turnaround of the Washington Post.
Google copped a €2.4 Billion fine in June 2017 for anti-competitive behaviour as it used its dominant position in search to give itself the edge in price comparisons, from which it may take a cut when the product has been advertised using AdWords. While Google is disputing the ruling, the evidence seems pretty clear, and in any event, the fine is only a few weeks profit, so is easily afforded.
As a new year resolution, Mark Zuckerberg has pledged to clean up Facebook. This guy is really smart, he has built the biggest communication platform in history, and in the process made billions for himself and a relatively few others, but I cannot help wondering if the juggernaut can be turned around by anything other than regulatory intervention, without which there is no incentive to turn the tap off. History would suggest differently, and perhaps the impending IPO of Snapchat will put a dent in the flow of Facebooks ‘automatic’ ad revenue. By automatic I mean hands off, they give you the tools to micro focus on segments, a great capability easily manipulated as demonstrated by both the Trump campaign and the Russians.
The apparent lack of ‘moral governance’, of the new digital behemoths that are now 5 of the 10 biggest companies in the world, Google, Facebook, Amazon, Tencent (still unknown to many) and Alibaba, all of which were just start-ups in 2000, will encourage regulators to try and throw a rope around their activities. However, if history repeats itself, they will be replaced at the top of the pile by companies we have not yet heard of inside 25 years. The corporate life of a major enterprise seems to be reversing Moore’s law, and increasingly diminishing every couple of years. This reality creates great challenges, as well as opportunities.
We will figure out how to use data
We are awash with data, the vast majority of it currently unused. Consider the opportunities to use the data currently around, in all sorts of applications from SME’s collecting and leveraging data on their customers to Governments digitising medical records, activity, and diagnoses to improve the productivity of the investments they are making by reducing waste, and improving the delivery of health outcomes for patients. On top of that we have the emergence of ‘Blockchain’ technologies, with the attendant hype and bubble. However, it seems to me that the applications of this technology are both wide and deep, but require a wholesale change in the manner in which our private and public institutions work, and that will not happen in a hurry. Or will it?
There are some pretty scary implications in all this, as well as the benefits to be gained.
The final frontier: Attention.
The greatest challenge in marketing is the fight for attention, and it is becoming a more challenging, expensive, and bitter fight by the day.
The so called panacea, ‘Inbound marketing’ can and does work, but needs to be built on a solid foundation of marketing strategies directed at specific customers who will value what you have to offer above all else. Otherwise, the leads you to spend money to generate via inbound campaigns are going to be largely useless, as the conversion rate will be low. The name of the game is to get to those whose attention is valuable to you, and generally, these people at the top of the corporate food chain are very selective about to whom and when they give their attention. I think we are almost at a tipping point where the personal contacts of yesteryear are becoming as important as any inbound activity, with the caveat that the digital stuff out there offers fantastic resources to do research to select out those who may be of value to you and then find them in a highly personalised way, if not in person.
Account based blather.
So called ‘Account Based Marketing’ became a buzzword over the last year or two, with all sorts of automated solutions vendors breathlessly declaring it the saviour. This will become recognised as the bullshit that it is, a tactic to flog software, not a solution to the basic challenge of marketing, to find, engage, service and retain customers. It is not new, it is as old as selling, but those with a ‘shiny new tool’ to sell act as if they had discovered the holy grail. Define your target customer as closely as possible, ensure the exact alignment with your value proposition, research their company as well as the individuals as much as possible, and turn the on-paper prospect into a warm lead. It has always been so, and slowly marketers will come to realise that software is no substitute for creative and informed thinking and strategy development.
Brand building will again be seen as the key to sustainable success.
In a commoditised and connected world where information is freely available, brands are struggling to maintain their role as an assurance of value, just as consumers need it the most.
Building a brand has always been challenging, time consuming, risky, and expensive, but the return was there when successful. In a world of sameness, the return is still there when successful, but the task of building a brand has become geometrically harder. This will not go away, but there is light in the tunnel. The tools available enable very tight marketing, customer and value source definition to be done, enabling brands to be built that are relevant to a very specific group of people, and therefore able to deliver value to them that is sufficiently unique to act as insulation from the general competitive milieu. Niche brands will become the go. In truth they always were, even the biggest brands occupied some sort of segment rather than the whole breadth of any market. Even Microsoft, as the US Department of Justice was seeking to break it up to destroy the ‘Monopoly’ position it was seen to hold, was not the only option at the time.
The brand building skills of the ‘old guard’ will come back into fashion, simply because they are more relevant and effective than ever when armed with the digital tools. The generations of so called marketers who can use only the tools without understanding the principals behind their use, will struggle.
Given brands can be targeted, the message must necessarily be unambiguous and specifically relevant to the receiver. It makes it necessary for marketers to make very clear choices about who they will target, and with what, as generic offers have no weight. The greater the degree of personalisation and specification the more likely it will be received favourably, by the few who really want it.
Marketing in the boardroom
Increasingly marketing will be seen as a profession, requiring not just the creative and collaborative skills of the past, but also deep technical and management skills.
Investment in marketing technology is accelerating at a huge rate, driven by the competitive pressures that come from the increasing productivity coming from marketing automation. Therefore the marketing personnel will increasingly be responsible for huge IT investments that determine the effectiveness of the strategic choices that are made. Marketers need to be qualified to make those choices, and more importantly, need to have the credibility in the boardroom necessary to gain the support for the allocation of the limited resources available, and to prepare the business case underpinning the choices. Those businesses without marketing in the boardroom will fall progressively behind their competitors.
The time for marketers to step into the top jobs has never been better, the ability to focus an enterprise on customer outcomes which are then reflected in the financial results will become the mark of successful leaders who shape enterprises for commercial sustainability.
Time frames will continue to compress.
Time frames for everything from long term R&D as in the pharma industry to the local start-up and political actions are being radically compressed, and this will not change, just get faster. If you are unable to keep up by changing at least as quickly as a those around you, the abyss is just down the road.
20th Century institutions are not able to cope.
Anyone can now start a business with a laptop and a few dollars, and physical location is becoming increasingly irrelevant. This is leading to a whole new structure of internationalised competition and governance, self and part time employment, multiple jobs and career paths. Our institutions were simply not designed to accommodate the pace and breadth of change, no matter how much we may not like that reality.
The future of creativity in an increasingly automated world
What is the future of creativity, which takes time, energy, imagination, and does cost, in an increasingly automated and short term world? Does the volume of ordinary ideas required to keep the ‘content machines’ turning outweigh the few big ideas? This is not just marketing, our lives are increasingly programmed, often without us realising, e.g. the Facebook algorithms that deliver to our feeds the ads, and stuff that the algorithms ‘think’ we might respond to, this is just telling us more of what we already think, removing the need and urge to think, to make leaps of logic, and see a different perspective.
It seems to me that we are pretty good at seeing what is coming from within our narrow domain, but very poor at seeing what is coming from outside, which is where most change comes from, and where creativity has the opportunity to deliver real leverage. Most of the great blunders thrown around reflect this reality, while the companies concerned continued to be successful within their own boundaries. Edison’s failure to recognise the benefits of AC over his baby of DC, Thomas Watsons declaration that there is a market for only 5 computers, Bill Gates initially missing the internet (then, remarkably turning Microsoft on a dime) Steve Ballmer dismissing the first iPhone, IBM missing the shift to personal computers, Xerox not commercialising any of the stuff they invented in PARC, (except laser printers which were right in their playground of document reproduction), that now underpin much of the tech we use every day, and many others. These are obvious with hindsight, but when you think about the context of the missed opportunities, each came from outside the essential expertise that had delivered initial success. The lesson is that creativity is more essential than ever, it is the source of innovation and change but usually only obvious with the benefit of hindsight.
The public vs private world
We are demanding more of our public sector, schools, hospitals, teachers, and all the services we take for granted, but we are also demanding we pay less. Partly this is a response to the waste we all see in the public sector, but there is a longer term trend at play that will focus attention on the really challenging problems associated with the revenue side of public budgets, rather than just the expenditure. Large corporations with an international footprint can select their tax domicile to minimise tax, and the releases of the ‘Panama Papers‘ and the more recent Paradise Papers have at least lifted the rock a bit so we can see a few of the roaches running for cover, but it is the tip of the iceberg. With the US corporate tax rate dropping to 21%, we (in Australia) will have to adjust to changed flows of US capital, one of the underpinnings of the Australian economy, potentially drying up while politicians argue about our corporate tax rates, and how reducing them is giving back to the rich at the expense of the poor. The reality is that the pie is getting smaller. Then we have the movement in the economy from PAYE employees to contractors and small businesses with the attendant tax benefits. The impacts of all this will be an increase in the heat of the political debate, with a geometric increase in the bullshit that gets served up, when what we really need is some genuine leadership that is prepared and able to articulate the core issues driving these trends, and execute sensible strategies to start the process of addressing them.
Are we at the tipping point?
To end with, this is a question that will continue to bother me, as the implications to the management of both private and public institutions, and the rules to which they are supposedly accountable, are profound:
Are we reaching a tipping point in a range of tech enabled areas? Artificial intelligence, Augmented Reality, Virtual Reality, Autonomous everything, new generations of quantum and neuromorphic computing, and most particularly renewable energy. All are being rapidly developed, or already being incorporated into our daily lives without us really seeing it, after 100 years of science fiction. It seems to me that the revolution that took place 100 years ago as electricity revolutionised our lives, is about to be repeated, but from a different direction. we will be confronted by the change from disruption to collaboration, and I do not think most of us are ready for it.
Ray Kurzweils observation (I think it was Ray) that ‘The future comes very slowly, then all at once‘, seems to be coming true.
What do you think?
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