How will AI impact most on marketing?

How will AI impact most on marketing?

Jan 23, 2023 | Change, Communication, Marketing

 

Considering my definition of marketing as being: ‘The identification, development, leveraging and defence of competitive advantage’ it makes sense to consider the impact of AI, as it is happening all around us. Largely unnoticed until the explosive birth of ChatGPT in November last year following the earlier release of Dall-E, the doomsayers are at work.

I am not a data scientist, my limit is writing a formula in Excel no longer than 3 factors, but you do not need to be a data scientist to think about this stuff.

AI learns from itself by iterating with the benefit of ‘digital hindsight’, the outcomes of the previous iterations built in. Think of a radiologist reading scans. In the course of a year they might read a thousand, each time learning from the experience of the previous readings. Over the course of a professional career of 25 years, they might read 25,000, then they retire, and the experience is lost. An AI system can read hundreds of thousands in a week, each building on the previous, looking for patterns, so millions over a couple of years. They can also take data from other sources and blend it into the analysis, and they never retire, so the experience is not lost, it compounds. Importantly however, it compounds based on what has happened, making visible what is already in the data. We have yet to build an algorithm that can be creative.

The ingredients necessary are just 4:

  • Input data,
  • Computing power,
  • Quantitative understanding of human behaviour (still evolving) and,
  • An AI system.

Successful Marketing uses all four, although to date in vastly different ways and to differing degrees. It requires an intimate understanding of customer behaviour and how your  behaviour and that of the customers  impacts others in the supply chain. This is almost ground zero for marketing success.

The combination of the recently released ChatGPT and its stablemate from OpenAI Dall-E will do for content creation in its broadest sense, what the digital camera did for photography. Suddenly everyone became a ‘photographer’, so who needed professionals? Slowly, the gap between even good amateurs and the professionals became clearer, the value added by the real pros, as distinct from the others became more obvious, and presented the clear choices that needed to be made.  A similar process will evolve with written and visual content. It has become very easy to produce stuff that will pass muster as OK, but is that good enough in a homogeneous world?

The combination of these tools and a professional will reduce the time taken to produce great work, so the costs will go down, and the quality will not suffer, but be enhanced. A great outcome for the few true professionals.

The downside will be felt by those who claim expertise, but do not genuinely have it. Their output of regurgitated marketing strategies, tactics and collateral material will resemble the thousands of templates already available, and be of little genuine competitive use.

 

Header cartoon credit: Tom Gauld in new Scientist

 

 

 

Why is the Liberal party so obsessed with Karansebes?

Why is the Liberal party so obsessed with Karansebes?

Jan 20, 2023 | Leadership, Strategy

 

Monty Python would struggle to come up with the tangled mess that is the Liberal party, nationally and in most states.

Nationally, retreating as contemplated by their leader to the right, seems self-defeating, especially while the ghost of the recent past hovers on the back bench. In WA, the next meeting on Monday is in the phone box on the corner of Hay and George streets, while in NSW the merits of a Hugo Boss designed dress uniform from 1938 is front page news.

Everywhere I look, it appears to be a re-run of the battle of Karansebes.

The ‘Battle of Karansebes‘ took place in 1788, in what is now Romania between the army of the Hapsburg empire, and itself.

In summary, a formation of Austrian Hussars was sent to reconnoitre the terrain and find the Ottoman army, the intended battle opposition. Instead, they found a bunch of Romanian gypsies who sold them some barrels of the local booze, which the Hussars took to be serious opposition, setting about the task of conquest.

Some time later, a platoon of Austrian infantry came upon them, and wanting to share in the spoils of war, a request that was vigorously opposed, leading to a drunken and chaotic shooting.

Somewhere into the chaos the main Austrian force thought the Ottomans were attacking, and opened fire on their own troops, then panicking, withdrew to try and restore a fighting stance.

2 days later, the Ottomans turned up and found nothing but the dead and wounded from the battle.

It seems to me to be a wonderful parallel for the war obviously going on in the liberal party. What can only be described as friendly fire adding mightily to the chaos after the destruction of the last election.

Header drawing: Battle of Karansebes, drawn in 1795 showing Ottoman forces advancing to Karansebes

 

 

A disturbing tale of two strategies

A disturbing tale of two strategies

Jan 17, 2023 | Governance, Strategy

Eddie Jones is back as the Wallabies coach, a week after being sacked by England rugby, despite a contract that took him past the world cup in France starting in September. Under Jones, England did very well from 2015 to 2021, having a 73% win record. A dismal 2022 season blew that number away. The English team failed to perform in 2022, so the coach must go.

Meanwhile, back in Rugby Australia headquarters, coach bingo was starting again. Incumbent Dave Rennie failed to call ‘Bingo’ last week, being edged out by none other than Jones, who had snuck back in through the side door.

Jones previously coached the Wallabies from 2001 to 2005, with considerable success on the field. However, it seems he lost the game in the boardroom, which is the one that really matters to the nincompoops who run the game, so he had to go. Then came a conga line: John Connolly, Robbie Deans, Ewen McKenzie, Michael Cheika, and finally, Dave Rennie. If we had the broken contract payouts of that lot, we could build a stadium!

By vivid contrast, we have the current Australian Open draw. It is full of Canadians. Who would have guessed 20 years ago, as Jones was being sacked for the first time, that snowbound Canada, a country with so few tennis courts most would not have recognised them as such, would emerge as a tennis powerhouse. In just 20 years they would have gone from a tennis-less country to one others are looking towards for inspiration.

Canada has several real chances at a win in Melbourne, the ranks include a winner of a grand slam (Bianca Andreescu US Open 2019) several slam runners-up, and more semi and quarter finalists than so called tennis powerhouses like Australia have in the draw, and are the current holders of the Davis Cup.

It is instructive to look at the differences.

The fact that they are entirely different sports is irrelevant. What is absolutely relevant is that Tennis Canada developed a strategy that they stuck to, adjusting tactically as necessary. The absolute objective was, and is, to be a top performing nation in the tennis competitions that matter, the Slams, Masters, Davis and Federation (now Billie Jean King) Cups.

Coaching has been a key part of the Canadian strategy, as has been the early identification of talent, and the focussing of very limited resources on nurturing that talent, commitment, and patience, all heading towards that shared and unambiguous objective.

Meanwhile, Australian rugby bounces from coach to coach, without any evident strategy. Talent identification is left to the few schools that still play rugby, there is little pathway from park rugby to the elite level, star players are not encouraged to play domestically as their value is not recognised in the pay packets, and we even dismiss Israel Folau, the greatest crowd puller since David Campese because he has an invisible friend who makes him say stupid things.

Failure of the Wallabies to perform consistently on the field is the outcome, not the cause of the current malaise, and will not be fixed by more of the same. We have changed coaches almost as often as my grandson has his diapers changed, and for the same reason. Surely it should have sunk in by now that the performance problems are not just coaching, they hide elsewhere?

It is the total lack of a strategy, thoughtfully implemented over an extended period that is to blame, not the coaches.

Rugby Australia could learn a lot from Tennis Canada.

Header photo courtesy Rugby World magazine. (it looks like Eddie is watching his back).

The ‘Frame problem’ and marketing

The ‘Frame problem’ and marketing

Jan 16, 2023 | Marketing, Strategy

 

At the intersection of the science of the brain and Artificial Intelligence, is something called ‘The Frame Problem’

This is a term used to describe the way we, subconsciously, sort the relevant from the irrelevant in any context, or ‘frame’.

It locates the inflection point between artificial intelligence, getting smarter by the day, and the sentient intelligence we humans can bring to bear without conscious effort.

Often, we just call it common sense.

For example, if we saw a 3-year-old child we did not know about to jump into a swimming pool, we would automatically try and stop them. By contrast, if we also saw the kids mother waiting a few feet away to catch them, we are unlikely to even register the fact that they are about to jump into the pool.

The resulting ‘frame’ which drives our response is different, although the scene our eyes ‘see’ is identical. It is the interpretation our subconscious makes that is entirely different. That difference is how our brains interpret the factual scene our eyes register on our retina.

Applying the ‘Frame’ to largely qualitative contexts when outcomes are variable, and derived from a host of drivers, frees up cognitive capacity to do other, more important things. In differing contexts or ‘frames’ the variables stimulate differing courses of action, as the value of experience and domain knowledge comes in.

You cannot learn this stuff from a book, as no book can adequately predict which set of variables will show up at any given time in differing contexts. That variability will have a profound influence on the resulting action we take.

For a marketer, understanding the ‘frame’ of their target customer or market will enable you to tweak the drivers that will lead to a desirable outcome. Equally, it will enable discrimination between drivers so that investment is not made in combinations of drivers and situations that will not suit the marketing objective.

The key question to ask yourself is: What did we miss?

 

 

 

Equity or loans: The entrepreneurs funding dilemma.

Equity or loans: The entrepreneurs funding dilemma.

Jan 12, 2023 | Governance, Innovation

Every start-up requires funding. A business plan, no matter how good, without cash for implementation will remain a dream.

Most start-ups get off the mark with investment of one sort or another by the ‘3 F’s’: Family, Friends and Fools, supplemented by savings from the aspiring entrepreneur.

At some point, after proof of concept when the aspiring entrepreneur needs more cash to fund the growth, or scaling of their now successful SME, they must seek alternative sources. The choices are simple: give equity in exchange for the funds, borrow them from some financial institution, or use a combination of both.

There are pros and cons to be considered for each path, the answer that best suits every instance will be different, and subject to all sorts of caveats and variables.

Pros for Loan funds.

      • The entrepreneur does not surrender any ownership and therefore control of the enterprise.
      • The entrepreneur gets to keep all the profits, assuming success. This assumes that the business is housed in a limited liability company, rather than on a personal basis, or even worse, a partnership.

Cons for Loan funds.

      • A start-up may (probably will) have trouble getting a loan at a commercially viable interest rate, as there is no or very little trading history. Cash is the ultimate commodity, and institutions only lend money when they are comfortable, they will get their money back, and/or the interest rate is such that the risk is deemed acceptable.
      • There is a debt that must be paid back with interest, irrespective of the success or failure of the enterprise. Interest however, is tax deductable, assuming there are profits that incur a tax liability.
      • A lender will often place restriction on how capital is to be used, require reporting, and demand privileges that do not add value to the enterprise.

Pros for Equity.

      • The entrepreneur does not have to pay back the capital, it is invested at the risk of the investor. The investor is absorbing the risk of failure into their equity calculations. If the business fails, they lose their money.
      • The absence of a schedule of repayments enables capital to be directed at the most productive uses
      • Those who provide equity are often in a position to offer more than just money. It is in their interests to leverage their networks and experience to benefit the enterprise in which they have invested. This advice can be of immense value, particularly to the young entrepreneur lacking the wisdom that comes with experience.

Cons for equity.

      • Equity is just another word for ownership. If you give some level of ownership to another party, that entitles them to a share of the profits as a function of their equity, when and if they emerge.
      • When the business is sold, acquired, or floated, the equity holders share in the proceeds, it is their opportunity to generate a return on their investment above the dividends received.
      • Equity also entitles a say in management, strategy, and management of the entity. This can be agreed, but there are regulations and accepted practice around the power of an equity holder, and in the case of a listed company, the regulations are enforced by the Corporations Act.
      • If an investors circumstances change, and they need their money out of the business, there is not usually a ready market that will value and buy that equity. This will cause considerable distraction to the management of the enterprise if it happens.

 

Raising funds is nothing more or less than a marketing project. The entrepreneur has a ‘product’ to sell, the future profitability and potential capital gain from the enterprise. The investor/lender has the funds necessary to crystallise the entrepreneurs dream.

Both lenders and investors require common information, which they use differently. For a lender, it is the reassurance that the loan including principal and interest will be repaid over the life of the loan. Whether that repayment comes from the cash flow of the business, or in the event of failure, sale of the assets against which the loan is secured is largely irrelevant.

In the case of equity, the driving consideration is the potential for capital gain at some point, after the payment of dividends. Both rely on cash flow forecasts from the enterprise.

Agreeing the level of equity that will be exchanged for the investment is a really challenging process. The financial interests of the entrepreneur and the potential investor are directly opposed. The question is how much a point of equity is worth in cash terms. In almost every case, the better prepared party to that negotiation will win. However, it should not be seen as a binary negotiation just about the cash, as there are other variables at work, such as the networks of the potential investor, which as noted above can have significant value.

This process also must place a value on the ideas, and time of the entrepreneur, without which there would be no potential investment.

In short, you need to find a mutually acceptable valuation of forecasts of future cash flow from the ideas and commitment of the entrepreneur, and the value of cash and other factors the potential equity holder brings to the table from which to agree an equity split.

Header cartoon credit: once again Scott Adams and his mate Dilbert understand the dilema