CMO Mondays: Snapchat files for IPO

snapchat-logo

Last week, Snapchat’s parent company, Snap Inc., filed paperwork for an IPO, with an expected valuation of $25 billion or more. In 2014, Snapchat introduced advertising into the platform. In 2015, it generated $60 million in revenue from that advertising, and, in 2016, it expects to exceed its target of $350 million in revenue. Snapchat is targeting $1 billion in revenue in 2017.

Snapchat reports 150 million users daily and 235 million users monthly, including 41% of 18- to 34-year-olds in the U.S., according to Nielsen. Snapchat shows strong signs of being a healthy business. With continued user and revenue growth, Snapchat will be a hot company for several years to come – even with the new scrutiny of the public markets.

snapchat-monthly-active-users

But, long-term, Snapchat could face a similar issue as Twitter: being a company that offers only a niche audience advertisers. Unlike Google and Facebook that offer a large and broad range of audiences to advertisers, Snapchat caters mainly to younger Millennials and Generation Z audiences. Facebook touts ~1.71 billion monthly users – approximately 25% of the world’s population. By comparison, Twitter has ~313 million monthly users. Twitter has struggled in recent years to win over investors – primarily because it is compared to Facebook. Twitter has only ~18% of the monthly users that Facebook has. And, Twitter has been criticized for its slowing user and revenue growth while being unprofitable. Twitter’s stock price has dropped from $69 per share at its peak in January 2014 to $18.79 today.

trouble-at-twitter

 

While we can expect that Snapchat will continue to grow its user base at a nice rate for the foreseeable future, as it captures more of share the 34-year-old and under audience, the real test will come when Snapchat can no longer rely on that audience for user growth. It will need to stay relevant to the new young audiences entering their teens and twenties, while expanding its relevancy to older audiences. And, it will need to do this while achieving profitability. Otherwise, in a few years, we could be seeing Snapchat face similar issues that Twitter has faced in recent years.

Welcome to the Post-Capitalist Society

welcome-to-the-post-capitalist-society

“In 2000, President Bill Clinton said in his last State of the Union address: ‘America will lead the world toward shared peace and prosperity and the far frontiers of science and technology.’ His economic team trumpeted ‘the ferment of rapid technological change‘ as one of the U.S. economy’s ‘principal engines’ of growth.”

I read an article in the Wall Street Journal entitled “The Great Unraveling | America’s Dazzling Tech Boom Has a Downside: Not Enough Jobs” by Jon Hilsenrath and Bob Davis. The premise is that the technology industry has not lived up to its promise of job creation – particularly since the year 2000. And, that this disappointment has led to political outsiders like Donald Trump and Bernie Sanders gaining momentum in this presidential race.

The article goes on to list some interesting facts and statistics:

“Google’s Alphabet Inc. and Facebook Inc. had at the end of last year a total of 74,505 employees, about one-third fewer than Microsoft Corp. even though their combined stock-market value is twice as big. Photo-sharing service Instagram had 13 employees when it was acquired for $1 billion by Facebook in 2012…

…The five largest U.S.-based technology companies by stock-market value—Apple, Alphabet, Microsoft, Facebook and Oracle Corp. —are worth a combined $1.8 trillion today. That is 80% more than the five largest tech companies in 2000.

Today’s five giants have 22% fewer workers than their predecessors, or a total of 434,505 as of last year, compared with 556,523 at Cisco Systems Inc., Intel, IBM, Oracle and Microsoft in 2000.”

On the surface, yes, it looks like the technology industry has failed to meet its promise. The younger technology companies founded after the year 2000 are employing less and less people. The jobs of the Industrial Revolution are being replaced by robots and software, and this will only accelerate with the long awaited maturation of artificial intelligence / machine learning. Every business today is (or should be) a technology business in some capacity to take advantage of the operational efficiencies (i.e. cost savings) that technology can provide.

But, a closer look shows that it’s not the technology industry that failed us. It’s our rhetoric and education that failed us. We read the tea leaves wrong about the transformation that technology would bring because we looked at the past to predict the future.

The First Four Revolutions
As I’ve written about before, economist Carlota Perez taught us that every half century, society has a “big bang moment” – a technological breakthrough – that ushers in a new technological revolution.

5 Successive Technological Revolutions of the Last 250 Years

If you consider the five successive technological revolutions we’ve had, starting with the Industrial Revolution in 1771, each created more jobs than the previous. And, this would make sense. With each revolution, we built more and bigger things, and we did it by hand. Physical labor was the currency of capitalism.

6th Technological Revolution Around the Corner

Why the Fifth Revolution Is Different
But, three things changed all that in our current revolution: the Age of Information and Telecommunications, which saw its big bang moment in 1971 with the Intel microprocessor, and which is at its tale end.

  1. Moore’s Law: An observation in 1965 by Intel’s co-founder, Gordon Moore, states that the number of transistors per square inch on integrated circuits had doubled every year since their invention and would continue to for the foreseeable future. This has decreased the size of our computing devices while simultaneously increasing their processing power exponentially for fifty years. And, it is only now beginning to slow.
  2. The Internet: Have you heard of this thing? It’s pretty amazing. Throughout history, innovation has been driven primarily through physical locations. “Hot spots”, as they’re referred to in network science, were typically found where there was a concentration of people and ideas colliding. These hot spots have popped up throughout history from the coffee houses in the Age of Enlightenment to the Parisian salons of Modernism. Some of these hot spots have also been industry specific like Silicon Valley for tech, Los Angeles for film and TV, and New York for finance. The Internet (and the World Wide Web) distributed the hot spot, so that its not restricted to a centralized location. The hot spot became decentralized, and has led to innovations like Safecast, which I mentioned in yesterday’s blog post.
  3. Cloud Computing: Then, cloud computing came in and decentralized computing infrastructure. Suddenly, you didn’t need to buy or lease expensive on-premise servers to build software. You simply rent what you need – and only what you need – when you need it. The price of software development dropped exponentially. Not only do you save on hardware (server) costs, but you save by not needing expensive people that know how to service the hardware.

So, what does this all sum up to? Since the rise of capitalism and throughout the first four technological revolutions, capitalism created more jobs because the primary economic resources were physical assets: gold, land, ships, railroads, skyscrapers, cars, etc. and the labor that was needed to build and manage them. But, while the fifth revolution started this way, it is ending by headed in the opposite direction. The economic force of capitalism, combined with Moore’s Law, the Internet and cloud computing, is driving a reduced need for employees. Today, one can build a highly valuable business with exponentially lower (near $0) infrastructure, supply chain and employee costs. Every non-critical resource simply becomes dead weight.

Capitalism Has Hit Its Tipping Point.
Consider this observation that Tom Goodwin shared in a 2015 TechCrunch article entitled “The Battle for the Customer Interface”:

“Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. Something interesting is happening.”

something-interesting-is-happening

The Wall Street Journal article mentioned above highlights that Instagram had only 13 employees when it was acquired by Facebook for $1 billion in 2012, and WhatsApp had only 55 employees when it was acquired by Facebook for $19 billion in 2014.

The winners in the new capitalism are those that can create value with the least resources – including employees.

Why Our Rhetoric and Education Is Wrong
For longer than I can remember, political rhetoric around economic growth has been about job creation and good education to fill those jobs. This made sense given our history. But, what you see today is a frustration that those jobs aren’t being created – at least not in the technology industry. If anything tech is displacing those jobs.

In our new economy, employment looks more like a shorter long tail. As Chris Anderson, author of The Long Tail describes…

“The theory of the Long Tail is that our culture and economy is increasingly shifting away from a focus on a relatively small number of “hits” (mainstream products and markets) at the head of the demand curve and toward a huge number of niches in the tail. As the costs of production and distribution fall, especially online, there is now less need to lump products and consumers into one-size-fits-all containers. In an era without the constraints of physical shelf space and other bottlenecks of distribution, narrowly-targeted goods and services can be as economically attractive as mainstream fare.”

longtail

Anderson wrote his original article about the long tail in 2004, describing the effects of the Internet on commerce. iTunes and Amazon are prime examples in the music and CPG categories respectively. But, twelve years after the original article, we can now see that the same effects are happening to employment.  At the head of the tail are the largest employers – slow, lumbering legacy companies with immense overhead. Further down the head are the new class of technology companies – except that they are employing less people than their predecessors. They look more like a small, passionate and nimble tribe – with a minimal number of full-time employees supplemented by an army of flexible, contract workers (to whom you don’t have to provide expensive benefits). Consider companies like Uber, Lyft, Instacart, Luxe and Favor. Then, you get into the long tail. And, these are less so companies; more so, individuals that have learned to make a living through the digital economy. They’re building mobile apps for iOS and Android, creating subscription e-commerce businesses through Cratejoy, or selling craft goods on Etsy. They may even be content creators on YouTube, Instagram or podcasting. Indeed, the Wall Street Journal article highlights that “An Apple spokeswoman says it is ‘creating jobs in new industries like the App Economy.'”

Peter Drucker predicted such a change. In his book “Landmarks of Tomorrow”, he talked about the shift to the “post-capitalist society” where knowledge would become the primary economic resource over land, labor and financial assets. This gave rise to the concept of “knowledge workers” that is so common in management and consulting today. 

Where We Go from Here

“Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime.”

So, our rhetoric needs to shift away from “get an expensive education, so you can get a good job and have a nice, long career” to “learn to learn, so that you can create your own income and be self sufficient.” The United States was built on entrepreneurship – on life, liberty and the pursuit of happiness. If we want to prepare our people for the pursuit, don’t give them a skill and hand them a job; teach them the game of business and let them play.

Marketing Mondays: Instagram Stories

On August 2nd, Instagram introduced its new Instagram Stories feature. For brands that have been using SnapChat Stories, this product is almost a carbon copy with some differentiators. For those that have not yet explored SnapChat, I’ll explain a bit of the context behind both of these products.

Instagram Stories is a new feature in which users can share multiple photos and videos in a slideshow format (your “story”) without having to worry about over posting. Each story disappears after 24 hours and is not posted to your Instagram feed or profile grid. For Millennials and, even more so, for Gen Z, this feature provides the ephemeral nature of sharing that drew these younger audiences away from Facebook and toward SnapChat. And, for Instagram (and Facebook), this provides a feature that can (potentially) lock in its own users, preventing them from testing and moving over to SnapChat.

Why did Instagram copy SnapChat?
There are a limited, albeit large, number of potential users available in the world. The world’s population is ~7.4 billion people. China is the largest market with ~1.4 billion people, followed by India at ~1.3 billion people and then the U.S. with a mere ~324 million people. Meanwhile, there are ~3.6 billion internet users today, globally. Every social network, chat app and content publisher is vying for those users’ eyeballs and time, so they can sell ads to brands. The larger companies, such as Google and Facebook are investing heavily in bringing internet to the other ~4 billion people that don’t yet have access to the internet, so they can grow their reach and ability to sell ads.

As seen in the chart below, Facebook alone dominates in the number of users that it has captured with ~1.6 billion users globally, as of April 2016. But, when you add in its other properties – WhatsApp at 1 billion users, Facebook Messenger at 900 million users and Instagram at 400 million users – Facebook’s reach becomes even more astounding.

statistic_id272014_global-social-networks-ranked-by-number-of-users-2016

So, with this much reach, why would Facebook/Instagram copy the Stories feature from Snapchat? Because each platform captures a different audience segment. And, Facebook knows it needs to both guard its existing audience, and capture the next generation of young audiences that brands so aggressively covet. In fact, that’s why Facebook acquired Instagram for $1 billion in 2012 – to reach younger audiences. While Facebook started in 2004 as a closed network for college students to connect with “friends”, it quickly expanded as a platform for anyone to connect with close friends and family. Today, it is a catch all network to connect with anyone that you’ve ever met.

Younger audiences that recognized this trend, and wanted to capture and share their lives on a platform where their parents weren’t watching their every move, jumped over to Instagram. Instagram offered a simple, visual platform to publish selfies and other photos with beautiful filters, presenting an ideal – or even aspirational – image of users’ lives. And, the user’s profile settings could easily be set to private, so that only people whom the user accepts can follow the user and see her photos.

Facebook saw their young user base making this jump to Instagram, so they bought the platform – for a sum that only four years ago was considered mind-boggling, but, today, is considered a steal. As Ben Thompson writes in his post, The Audacity of Copying Well, Facebook and Instagram offer complementary use cases. Thus, instead of simply absorbing Instagram and its features into Facebook, Facebook had the foresight to understand that the best thing it could do with Instagram was let it live on as its own entity so not to alienate Instagram users, while integrating Facebook’s ad technology into the Instagram platform, offering brands the ability to target Instagram’s younger audiences.

The Snapchat generation (Gen Z), which came after the Millennials that grew up with Facebook, Twitter and Instagram, grew up with warnings from parents and broader society to be careful about what they post online. Photos, videos and statements can live on forever on these open platforms and be discovered with a simple Google or Facebook search. Enter Snapchat.

Founded in 2011, Snapchat offered an alternative to social networks as well as mobile text messaging, both of which kids’ parents had access to. Snapchat, after all, is a photo messaging app first and a social network second. Snapchat offered a private place in which to share photos that would disappear within 24 hours. The very nature of the platform, the value proposition, was to be ephemeral – to provide a refuge where young audiences could be their youthful selves without fearing future repercussions for actions and statements made today. Like Instagram before it, Snapchat saw droves of young users adopting the platform. And, in 2013, Facebook offered Snapchat $3 billion in cash to acquire the platform. But, in an amazing show of confidence, Snapchat founder, Evan Spiegel, turned down the offer with a long-term view of growing the business. Today, Snapchat has over 200 million users and growing and is valued at over $22 billion. No wonder people consider the $1 billion acquisition of Instagram a steal, given its user base of over 400 million people today.

In fall of 2013, Snapchat introduced Snapchat Stories, which has since become Snapchat’s power feature – the ability to create slideshows of your life through photos and videos. The experience is almost rough and clunky, giving the appearance and feel of being more “authentic” and real. It was around this time that Facebook, after its failed attempt at copying Snapchat features through a new app called Poke, decided to offer $3 billion to acquire the growing photo chat app. Ever since Snapchat turned down Facebook, Snapchat and Facebook/Instagram have increasingly competed over features to captivate their users’ attention. For example, in August 2014, Snapchat launched Live – a feature that allowed users to follow (and contribute to) live events. In January 2015, Snapchat launched Discover – a feature that enabled users to discover new Snapchat Stories and content from publishers and influencers. Later, in June 2015, Instagram launched a new Explore page enabling users to discover trending content and places based on its users engagement (similar to Snapchat Live). In September 2015, Snapchat acquired Looksery to power its new animated lenses feature, dubbed “Lenses”. And, in March 2016, Facebook acquired MSQRD, which offers similar imaging features. So, it was only a matter of time before Facebook attempted to copy Snapchat’s power feature. This time, though, it may work.

Should your brand use Instagram Stories or Snapchat Stories?
Instagram Stories already seem to be getting plenty of engagement. The stories appear on the top of your Instagram app and seamlessly integrate into the Instagram experience. I’ve been seeing a range of brands, influencers and regular users (friends that I follow) testing out Stories, and it’s a fun addition to my content feed. Given the head start that Facebook/Instagram have on Snapchat in developing their ad tech and revenue model, I can see Instagram Stories hitting a positive nerve with brands as a great way to elevate the content that they share on Instagram and, eventually, targeting new audiences with promoted Instagram Stories.

But, as usual with social media, there is no clear cut answer as to whether or not a brand should participate in Instagram Stories or Snapchat Stories.

A good place to start is comparing the core users for each of the platforms with the audiences your brand hopes to reach. Snapchat’s core users are 13 to 24-year-olds, falling squarely in the Gen Z bucket. Furthermore, 77% of college students use Snapchat. And, the platform touts ~100 million daily active users amongst its ~200 million total users. Meanwhile, Instagram’s core users capture both Gen Z and Millennials: 41% of its users are ages 16 to 24, and 35% of its users are ages 24 to 34. Instagram touts ~75 million daily active users amongst its ~400 million total users. Some fast math will tell you that Snapchat and Instagram likely capture a similar number of Gen Z users, while Instagram also gives a brand access to the Millennial audience that is growing in buying power.

So, if your brand’s target audience falls within these core user bases, then it’s time to experiment and test which platform proves to support your business goals.

How to use Instagram Stories
This video from 9TO5Mac provides an excellent tutorial on how to use Instagram Stories.

*BONUS: How to use SnapChat
Many people over the age of thirty find Snapchat daunting and intimidating. If you haven’t explored Snapchat yet, below are two must read blog posts from Mark Suster explaining the platform: how to use it and why it’s important.

Now get out there and experiment.

A Contrarian View on Innovation in Advertising & PR

Lifecycle of a Technological Revolution_today

With the revolution of media and technology disrupting the marketing industry, and business models altogether, marketers are trying to navigate through the storm. On the communications side, TV dollars are shifting to digital. But, digital ads aren’t nearly as effective nor transparent as we want them to be. The traditionally distinct and siloed roles of marketing communications (once upon at time, just known as ‘advertising’) and PR are converging.

Because of the advent of social media, and the frustration with traditional and digital advertising, marcomm is moving into earned media with influencer marketing, native advertising and more responsive campaigns and editorial content teams. Because of the rise of the new influencer – everyday people and celebrities using blogs, YouTube, Twitter, Vine, Instagram, SnapChat, Periscope and other platforms to create personal media companies – PR is expanding beyond traditional media relations and ‘the pitch’, and into influencer marketing, sponsored content and responsive editorial content teams as well. It’s a race to the middle where the lines are blurred. That’s why agencies and publishers are partnering to create wholly new content companies that service brands.

If we take a step back from the race, though, things haven’t changed much since 2009. The big three: Facebook, YouTube and Twitter had launched and matured as three distinct and valuable social communications platforms for users. Since then, other social platforms have launched – Foursquare (and Swarm), Instagram, Pinterest, Vine, SnapChat, Meerkat and Periscope being the most touted. But, each of these just feels like an iterative evolution of the discontinuous leaps that Facebook, Twitter and YouTube made. Platforms, and the content they enable, shifted to become more visual, shorter and ephemeral. When Meerkat and Periscope launched, didn’t it feel like they already existed? And, the fundamental rules for how to engage audiences on those platforms is the same; we must adhere to the Reciprocity Theory.

So, I actually take a contrarian point of view: innovation has slowed in media technology. We’re at the tail end of our current technological revolution’s lifecycle, moving past the discontinuous revolution and into the iterative evolution. While folks in the industry are making claims that: “Advertising is dead.” Or that, “Data will tell us what content to make, so we don’t need creatives anymore.” I’m claiming that we need creative more than ever. The discipline just needs to evolve too. As the roles of advertising and PR converge, storytelling becomes an even more critical discipline for marketing.

Just pushing the message through TV and radio and print and display ads is lazy creative and lazy advertising. Great creative has always been about great storytelling. Now we just tell that story across new media platforms/channels in partnership with the new social influencers and in partnership with our customers. Sometimes those influencers and customers are the same. Great creative (‘the story’) is the glue that holds the story together, wherever we’re telling it. It’s what inspires people to participate.

In the late 2000s in the entertainment industry, we began exploring transmedia storytelling. This is where we would develop a core story – characters and the world in which they lived. And, then we’d plan out those stories across media (books, graphic novels, movies, TV, web series). It was a shift away from the linear model of: writer publishes book –> studio buys book and makes movie –> network turns movie into TV series. Instead, we developed it all at the same time. They lived together as extensions, or chapters, of the same story instead of separately as different and distinct adaptations of the story. This style of storytelling became particularly popular in the fantasy/gaming/comics genres, as we could delve deep into the story of a world we were creating.

Now, in marketing, we have the opportunity to take the same approach. How do we create a core story – the story of our brand, which reflects the story of our customers and employees – and tell that story through new (and traditional) media platforms and people? Like a vision, the story we tell requires an intuitive leap of faith. It must inspire. It must create new possibilities. Is that so different from great advertising fifty years ago? Maybe. Maybe not. But, in an increasingly ephemeral world, wouldn’t it be nice to have some moments that impact and last?

The Purpose Economy, Part 5: Business Transformation

In Part 1 of this series, I discussed The Reciprocity Theory and introduced the need for brands to be purpose-driven. In Part 2, I discussed the foundational human behavior that underlies the purpose economy. In Part 3, I discussed what we can learn from technological revolutions. In Part 4, I discussed the socio-economic evolution that we’re seeing coming from this latest technological revolution. Here, in Part 5, I’ll discuss a framework and roadmap for business leaders to adapt and evolve their firm – particularly their marketing practices.

“Because the purpose of business is to create a customer, the business enterprise has two–and only two–basic functions: marketing and innovation.”

Peter Drucker, “the founder of modern management” once said, “Because the purpose of business is to create a customer, the business enterprise has two–and only two–basic functions: marketing and innovation.” Never before, is this statement so true. And, leaders are catching on.

CEOs now realize that the convergence of technology is creating new business models and disrupting their own. They understand that customers wield an inordinate amount of influence on their organizations. As a result the CMO is becoming more influential in the C-Suite. Strong CMOs are leading their teams to deliver exceptional, integrated customer experience and engagement, focusing on data analytics to gain a deeper understanding of their customers and designing rewarding experiences for those customers. And, they’re leveraging new technologies to help them with both.

Meanwhile, CIOs are coming out of the back office into the forefront. The best are putting their egos aside and recognizing that CMOs are driving technology needs and decisions more than ever. And, thus, those CIOs are partnering with their CMOs to enable the transformation to better customer insights and experience. Where there’s a gap between these two functions, the Chief Digital Officer has emerged, to deliver technological solutions and experiences for internal and external stakeholders.

C-Suite Shifting Focus

In this shifting landscape, I offer up a framework for transforming your marketing organization. Since the advent of digital media, the marketing organization has grown larger and more siloed as each new digital channel emerged: .com and e-commerce, e-marketing and CRM, digital ads, blogs and comments, forums and reviews, and social networks. Now, the path forward is to integrate those channels and experiences with critical disciplines in which the modern marketer is fluent: intelligence, storytelling, design and technology. And, these disciplines are directed by the company’s and marketing team’s purpose.

Critical Disciplines for Marketing & Innovation

Let’s start with design.

Design.

Recently, The Design Management Institute and Motiv Strategies released the 2014 Design Value Index where they looked at publicly traded companies that meet their criteria for a ‘design-led’ company. Only 17 companies met the criteria. These include obvious companies, such as Apple and Nike, as well as some companies you may not immediately recognize as being design-led, such as Coca-Cola, Disney and Starbucks. During the 10-year period between 2004 to 2014, these design-led firms grew 219% more than S&P 500 companies – a significant difference.

Design Value Index 2014_2

27 startups that were co-founded by designers have been acquired since 2010 by companies like Google, Facebook, Adobe, LinkedIn, Dropbox and Yahoo

Similarly, in the startup world, design-led firms are being recognized as providing greater value to customers and investors. 27 startups that were co-founded by designers have been acquired since 2010 by companies like Google, Facebook, Adobe, LinkedIn, Dropbox and Yahoo. And, five (20%) of the top cumulative-funded VC-backed ventures that have raised additional capital since 2013 have designer co-founders.*

Design thinking helps these firms elevate the experience with the brand by solving unmet needs for customers, refining the company’s strategy and market focus, integrating a consistent customer experience across every customer touchpoint, and delivering a WOW factor, as Zappos CEO, Tony Hseih would say.

Storytelling

The next discipline that organizations and marketers must become fluent in is storytelling. This is all to often overlooked by companies large and small. Over decades through the advent of radio, TV and digital media brands progressively moved towards one-way push messages through advertising. But, with the rise of social media, customers have regained power over the brands. They expect transparency and exceptional experiences. Advertising and all forms of marketing communications must go back to being more story-driven.

The focus on storytelling is an important distinction. Marketers have been buzzing around hallways and social networks and the speaking circuit touting the importance of content and “brand as publisher”. Yes, content is important. But, there is a lot of shit content out there. The distinction is content that tells great stories. That’s what makes the difference. And, there is actual science to prove that strong storytelling creates a stronger connection with your customers.

Through his research, neuroeconomist, Paul Zak, discovered what he dubs “The Moral Molecule”. Oxytocin is a neurochemical that is key to signaling trust and invoking a sense of empathy. It’s produced when we are trusted or shown a kindness. And, it motivates cooperation with others by enhancing the sense of empathy – our ability to experience others’ emotions. Research found that character-driven stories consistently cause oxytocin synthesis, and the amount of oxytocin released by the brain predicted how much people were willing to help others (e.g. donating money to a charity associated with the narrative). So, is it any wonder why the Ice Bucket Challenge went viral?

Research found that in order to motivate a desire to help others, a story must first sustain attention – an increasingly scarce resource in the brain – by developing tension during the narrative. If that tension resonates strongly enough with the audience, then they will come to share the emotions of the characters in the story, and, after the story ends, the audience is likely to continue mimicking the feelings and behaviors of those characters. This explains your feelings of dominance after you watch an action movie like James Bond or Mission Impossible where the lead character saves the world, or your desire to work out after watching the Spartans fight in the movie 300.

There are business implications to this. Storytelling enables your audience to better recall the key points in a presentation or speech, or in the brand’s content and advertising. “People are substantially more motivated by their organization’s transcendent purpose (how it improves lives) than by its transactional purpose (how it sells goods and services).” The former is effectively communicated through stories.

Zak’s quote below reflects nicely not only the value of storytelling, but also the alignment with the Reciprocity Theory and the movement towards a Purpose Economy.

If business is about service to others, then business itself is a virtue. You’re engaging in a virtuous activity by serving the needs of somebody else. When you do that, you’re serving the needs of your employees, of your customers, you will induce oxytocin release and they will want to reciprocate…In the old model: greed is good, the management technique is lead with fear. In the new model: empower individuals to be the best that they can be in an organization with purpose, you’re going to lead with love.

This value of telling the story of the company’s transcendent purpose is also seen through the research that Simon Sinek produced, illustrated in this TED Talk and in his book, Start with Why. Sinek looked at the language that leaders have used to decipher why some were successful and some weren’t. It came down to what he describes as The Golden Circle.

golden-circle

Most leaders and organizations talk about WHAT they do, and HOW they do it. Rarely do they speak about WHY they do it. The WHY is synonymous with the organization’s PURPOSE. Successful leaders and organizations lead with the WHY. Sinek references the Wright brothers, Apple and Martin Luther King, Jr. as examples of leaders who may have been less known or under-resourced than their competitors or peers, but yet they succeeded above all others in their respective fields. Each of these leaders led with stories about WHY they were doing what they were doing.

In the advertising space, there is also data that indicates the more creative a campaign the more value to the business. In this case creative is defined as award-winning, using data from The Gunn Report. Peter Field and the ThinkBox team ran a statistical analysis of the most creatively-awarded campaigns defined by The Gunn Report and the most effective campaigns, using data from IPA Databank. This analysis found that creatively-awarded campaigns have several key benefits: (1) Creatively awarded campaigns are 12x more efficient, and become more so over time. (2) The greater level of creativity, the greater level of effectiveness. (3) Creative campaigns are more reliable investments. (4) It is in the power of emotional response that brands really make huge progress. (5) Increasing the emotional response to a brand reduces its price sensitivity.

What do these creatively-awarded campaigns have in common? Great storytelling. These stories create an emotional response (produce oxytocin) in audiences that cause an affinity for the storyteller (the brand) and drive them to share the stories with others. More efficient, more effective, more reliable investments that reduce price sensitivity of the brand. Not a bad outcome.

Intelligence

Big data has been all the rage for the last several years. With the democratization of content publishing online (which we discussed in part 3 of this series), we now produce more information (content) every two days than we did from the dawn of civilization up until 2003. Two-thirds of the digital universe is content consumed and created by consumers.**

The advent of social media listening tools thus became an opportunity to gather all types of new insights about customers and other stakeholders. But, most organizations just became overwhelmed by the sea of “big data”. Back in 2008-2012 era, major brands were standing up listening centers and building their own dashboards to try to make sense of the data. I worked on one of these for a Fortune 20 company. They wanted our us to automate insights for marketers and other stakeholders across the organization because their stakeholders didn’t know how to derive insights from the data. I vehemently argued against pursuing this automation because (1) it removes accountability from your workforce and enables them to be dumber, and (2) technology can only do so much. The best case is a partnership between technology and humans: technology finds correlations and trends in the data, and humans intuitively translate those into meaningful insights.

This is an important distinction: a ‘finding’ vs. an ‘insight’. And, they often get confused. I often see analysts present findings as insights, and I believe this is because they do not have the experience or context of how that finding can be applied. A lack of experience executing can hinder the development of context needed to translate a finding into a meaningful insight. There is something else at work here too: a way of thinking that society has taken since Aristotle.

In “The Second Road of Thought”, Tony Golsby-Smith describes two thinking systems that Aristotle defined: (1) analytics, and (2) rhetoric. Analytics is driven by logic and lives in the domain ‘where things cannot be other than they are.’ This is a rigid approach to thinking and how most organizations are managed today. It lacks intuition. It lacks a leap of faith. It is how we diagnose what already exists – what happened in the past. But, rhetoric lives in the domain ‘where things can be other than they are’. This is how humans design alternative futures and invent new things.

In the finance world, this is what sets Warren Buffett and Berkshire Hathaway apart from the rest of the industry. Industry focuses mainly on financial statements and statistics to calculate risk and bet on the future. They measure the past as the leading indicator of how a company will perform in the future. On the other hand, Buffett places more weight on qualitative indicators such as the quality of executive team and that team’s willingness to invest cash bonuses back into the company. There is a level of intuition that goes into his investments.

In the marketing world, this is why the best marketers bridge the gap between science and art. Logic and intuition. Analytics and rhetoric. Big data only tells us so much. It provides findings, which give us logical next steps we can take based on what customers have done in the past. But, intuition tells us what those customers want in the future. Steve Jobs and Apple are the obvious example. Zappos did this in retail by focusing their culture and value proposition on customer service. Free shipping is actually considered a marketing expense at Zappos. Similarly, Rackspace shared this intuition and insight early on in the hosting space. IT professionals needed more support in managing their hosting needs than the industry provided, so Rackspace focused on customer service and created their Fanatical Support offering. And, Rackspace became a premiere hosting company with passionate customers. The best marketing campaigns are those that take a transcendent insight – an intuitive leap of faith about what their customers desire or feel or need – and captures that insight in a well-constructed story (as described above).

And, this is where design-thinking, intelligence, storytelling and technology converge and interact. Design-thinking enables us to derive those intuitive insights from big data. Design-thinking converts big data into intelligence. Storytelling helps us convert that intelligence into a meaningful artifact that induces oxytocin in customers, creating a sense of empathy and a lasting affinity for the brand. And, all of this can be supported (but not driven) by technology.

Technology can accelerate a transformation, but it cannot cause a transformation.

Technology

As we discussed in part 3 of this series, we are at the tail end of a technological revolution. We have seen a convergence of technologies enabling other, new technologies, and empowering entrepreneurs to reshape industries or create wholly new ones. As marketers, we must be diligent in deciding what technologies we need to enable our daily activities: what will automate arriving at findings, so we humans can spend less time crunching data and more time deriving insight? What will enable us to tell better stories? What will help us deliver remarkable experiences? This is priority number one for CMOs. But, is this any different than what the CEO should be thinking about in the context of the broader organization and its business model?

As we move toward the post-capitalist society that we discussed in part 4 of this series, where the key economic resource is knowledge (or intelligence), the best future we can design for humanity is a partnership with technology. Let technology automate as much as possible to eliminate wasteful time and effort from low-value, human activities. Then, we humans can spend our time on high value, transformative activities. As Jim Collins taught us, “Technology can accelerate a transformation, but it cannot cause a transformation.”

Every few hundred years throughout Western history, a sharp transformation has occurred…In a matter of decades, society altogether rearranges itself – its worldview, its basic values, its social and political structures, its arts, its key institutions. Fifty years later a new world exists. And the people born into that world cannot even imagine the world in which their grandparents lived and into which their own parents were born. Our age is such a period of transformation.

Peter Drucker anticipated this transformation to a post-capitalist society, described in the above quote, would be completed by the year 2020. If we believe in the timeline of technological revolutions that Carlotta Perez shared with us (described in part 3 of this series), then the big bang moment for the next technological revolution is just around the corner, scheduled around the year 2021. As much change as we’ve seen over the last fifty years, and particularly over the last decade, it’s hard to believe that change will only speed up. But, it will. We’re on the cusp of yet another transformative inflection point in humanity’s story.

As business leaders, we can learn a lot by studying the cycles of technological revolution to time the market with new products, services and business models. But, it’s equally as important to hone our capability to design the future, the universe that we want to live in, using the disciplines of design-thinking, storytelling, intelligence and technology described above.

I, for one, believe we’re moving towards The Purpose Economy, where technology and recent socio-economic shifts are enabling people to pursue more fulfilled lives – to be economically sustained independently or to work for more purpose-driven organizations with which they share a purpose. To focus on intrinsically valuable (knowledge-based) activities, and leave the grunt work to the machines. To transcend and achieve self-actualization.

This, at least, is the future that I’m designing. It’s the universe that I want to live in.

 

*Design and VC

**Internet Trends 2014