Tuesday, December 23, 2014

Five Tips To Help CMOs Improve Social Media ROI in 2015

The coming year will be a watershed one for social media marketing, I predict, and not in a positive way. A topic that was only whispered about in private conversations early in the year is now being openly discussed: For many brands, earned media and content marketing are not delivering results in line with the investments. Some claim our metrics and strategies must mature, but it is getting harder to ignore the limitations of marketing in the social channel. So unavoidable is this discussion that even at the Social Media Today Social Shake-Up, a confab of social elite, a speaker asked from the main stage, "In a year, will any of you produce a deck with 'social' in its title?"

While social circles are buzzing with increasingly sober discussions of the channel's difficulties delivering marketing results, that conversation seems not to have reached the ears of the CMO quite yet. Mainstream marketing media, which was late to recognize the growing investment in social media marketing, is now tardy in covering the growing body of data demonstrating social's challenges as a marketing channel.

Adweek, continuing its trend of being impressed with engagement rather than results, recently featured an article on the "top Tumblr posts of 2014." These posts were not selected as "top" because they delivered any marketing ROI but because lots of people liked them, and thus Adweek has once again uncovered that deep marketing insight that people love inspirational quotes, hot models, animated GIFs and pets. (Shocking!) This is representative of the coverage that social media continues to receive from the marketing media--big numbers lead while investments bleed.

Since your CMO does not seem to be getting good advice to guide decisions on social investments, I'd like to offer up five tips to help him or her consider how to manage social media budgets and efforts in 2015:

  • Stop trying to make your brand interesting with tweets and posts; instead, give people a reason to talk about your brand in meaningful ways. The organic reach of brand content on Facebook is dying. Not dwindling; dying. The story is little different on other social networks. Brand engagement on Twitter is minuscule and, although engagement on Instagram is fine today, it is only a matter of time before Instagram goes the way of other social networks before it.

    By the end of 2015, the talk will be about zero reach in brands' organic social media marketing efforts, and it will become impossible to ignore that brand publishing is not and never was going to be the way to succeed in social media. The real social media strategy that has worked from the beginning is to get people talking with each other, not about brand content but about actual products and services. The reason is that people trust each other far more than they trust you and your brand.

    There are several ways to leverage peer-to-peer brand communications. Bring trusted consumer ratings and observations into your site, integrated on the pages where prospects consider your products and services, as USAA has done on product pages. Leverage trusted relationships to create connections between your brand and prospects, as Ameriprise does with its LinkedIn "Find an Advisor" feature. Encourage positive comments, not on Twitter where tweets are quickly lost in the void, but on the rating and review sites that people trust to help them make purchase decisions. In 2015, CMOs will be forced to realize that the key to social media success is not publishing content but getting people talking with each other about brands' products and services.
  • Stop trying to go viral; instead, use social media to solve consumer problems:  Viral posts get a lot of attention because everyone loves big numbers, but there is little evidence they drive brand value. KMart had the most viral brand video in 2013, but it didn't stop the retailer's continued slide. The same thing happened in 2014: This year's most viral brand campaign was the Ellen Oscar selfie, but despite Publicis CEO Maurice Levy's claim it delivered Samsung a billion dollars of value, Samsung's smartphone market share slipped 25% from Q3 2013 to Q3 2014. (Where viral campaigns tend to help is not with established brands but with up and comers such as HelloFlo and Wren, but even then, the one-in-a-million shot of achieving "viral' scale is so remote, the few success stories hardly suggest that viral marketing is a smart strategy.)

    Your marketing goal is not to go viral; it's not even to get engagement. Your marketing goal is to deliver demonstrable business results, and that means changing consumer behaviors and attitudes. Viral videos too often sacrifice brand impact for entertainment value, and that is a lousy trade to make.

    Rather than try to be funny, instead focus on solving consumer problems. Fifth Third Bank didn't make the waves that Samsung did, but its Reemploy campaign got unemployed mortgage borrowers back to work and delivered the brand the sort of "buzz" that encourages consideration. USAA partnered with the NFL for a Salute to Service campaign that increased appreciation for military service members, raised over $400,000 for military support organizations and generated considerable social media buzz with on-field events.
  • Stop saying "Content is King." Start focusing brand-building energies on the Customer Experience. First exercise: Other than brands whose product actually is content, name a brand you purchase regularly because of content it produces. Now list the brands to which you are loyal because their products or services furnish a great and consistent experience. How do those numbers compare?

    Here's another exercise: List brands you know that have achieved significant success in the past two decades years with content. Then, list the brands that came out of nowhere with little advertising or content but built World of Mouth based on their product or service experience. (Here's a list to get you started on the latter: Ebay, Amazon, Uber, Nest, Square, Flip Video, Google, Krispy Kreme, Zappos, Tesla, Facebook, Apple Store, Jawbone, Angry Birds, PayPal, Evernote, Dropbox and Warby Parker.)

    There you go--I have cured you of the need to ever again say "Content is king" in just two paragraphs. Content is not king--customer experience is king. Why do marketers keep repeating that tired and untrue phrase? Probably because content seems easy to do (just a hire a "brand journalist," whatever that is), is in their wheelhouse (they have been producing ads for decades, after all), and marketers generally control content but not the product and service experience. Well, it is long past time for that to change.

    Advertising and content are important, but nothing is more powerful than Customer Experience. This has always been the case, but in an age of transparency where media is splintering, mass media is slipping and consumers have greater control over communication channels, it is not content but Customer Experience that fills the top of the funnel. Marketers can no longer afford to ignore the high-impact product and service experiences being fashioned by others in the organization while they worry about less powerful ad impressions and social engagement. Smart marketers must turn inward and ensure that the brand experience is crafted end-to-end--not just what happens leading up to purchase but what happens afterwards--because that is where true brand building occurs.
  • Stop being lied to and start demanding better information. Who do you expect will tell the CMO the truth that social media marketing is widely failing to meet expectations? The professionals getting paychecks to produce content for social channels? The agency trying to maximize utilization of its storytellers and community managers? The authors whose books extolling the value of earned media launched their careers? A social media industry has been built to separate the CMO from his or her budget, which is why marketing leaders must seek out the real, unadulterated and unbiased data and insight about social media marketing.

    There is a lot of bad data and analysis out there, and even data from reliable sources can be twisted and misrepresented. For example, dozens of blog posts have mentioned that IBM's recent Black Friday white paper reported that Facebook traffic delivered an average of $109.94 per order over Thanksgiving weekend. That sounds important, but is it really without knowing the scale of orders delivered? IBM is suspiciously silent on that topic considering its 2013 study found that social media drove a mere 1% of purchases. While IBM may not be divulging social network traffic's share of purchases, Custora is. The company evaluated data from 100 US online retailers, 100 million online shoppers and over $40 billion in transaction revenue in the first two weeks of December. It found that social media (including Facebook, Twitter, Instagram, and Pinterest) drove just 2% of orders (down from 2.5% during the same period in 2013).

    The time has come for marketers to get more critical about the data and analysis they receive. If marketing leaders rely on incomplete, unreliable or misrepresented data to drive social media decisions, they have no one to blame but themselves for disappointing outcomes.
  • Your social media metrics suck, so change them. Social media has been Goodhart's Law in action: "When a measure becomes a target, it ceases to be a good measure."

    Likes, retweets and shares were briefly meaningful in the early days of social, when brands earned them solely by offering great products and services, but the second those social engagement metrics became goals rather than measures of success, everything changed. Brands started buying fans with contests, sweepstakes and giveaways. Community managers started gaming engagement with posts of puppies and "like-bait" images. Fan counts soared and engagement rose, but since these tactics were designed to yield positive social media metrics and not valuable business results, it all amounted to little for brands. Is it any wonder that the vast majority of CMOs have no quantitative idea if their social investments are paying off or not? (They're not.)

    If you have a social media scorecard with counts of likes, fans, retweets and pins, throw it out and demand better. Those metrics are easily manipulated and are not measures of business success. Marketing leaders need to focus on more important measures in 2015: Improvements in preference and purchase intent, enhanced share of wallet, beneficial social behaviors such as recommendations, and financial measures including repurchase, clicks and conversions. Those are not as easy to measure as likes and retweets, but the most valuable marketing metrics are rarely the easiest of obtain.
By the end of 2015, I believe we will be having a much different conversation about social media with substantially less focus on brand content and more about social products, social services and social good. If your CMO uses the five tips mentioned above, he or she can be ahead of the game and ensure the company is aligning its marketing budgets to the strategies most likely to deliver results that matter. Or, brands can keep running social sweepstakes, doing funny videos and begging for likes and shares, but I can promise those tactics will not get the job done for the Marketing department, and by the end of 2015, that will be impossible to hide.

Friday, December 5, 2014

Social Media Marketing: It's All Been Said Before

I find it difficult to get inspired to write about social media marketing any longer. Where others see ongoing brand difficulties in social media and claim "we're still learning," I see a marketing channel that is fully mature (and by some measures in decline).

As you review all of the inevitable blog posts this month that list 2014's top PR blunders and Social Media #Fail examples, ask yourself if these mistakes were ones caused by an exploration of untested strategies in a new medium or an inability to apply (or perhaps believe) the available data and lessons learned? I think you will find yourself agreeing with me--this year's crop of social media errors and disasters are no different than last year's--same causes, same mistakes, same outcomes. It's all been said before.

The same can be said for this year's success stories in social media. Thousands of brands ran social media promotions, shared content on social networks and maintained blogs and podcasts. How many can claim demonstrable success and offer repeatable examples for others to follow? And for the rare ones that can, did they get there with some wildly innovative strategy or by the same customer-focused, data-driven, omni-channel process that worked in social media in 2013 (and pretty much every other medium before that)? It's all been said before.

Some may argue that the rise of Instagram was a new and exciting development this year for brands, but is this really true? I mean, sure, your brand can chase the higher engagement presently available on Instagram, but by this time next year we will be talking about how paid media is pushing aside organic content and griping about the declining engagement rates on that platform, just as we are about Facebook today. It's all been said before.

If chasing weary, disinterested and distrusting consumers from one new social network to another sounds like effective marketing strategy, feel free to pursue it, but you will need to pardon me for not sharing in your enthusiasm. I aspire to be a brand and business builder, not an engagement hacker.

The news about the higher engagement rates on Instagram is hardly the only recent instance when I saw some newsworthy social media situation, considered sharing my perspective on my blog, and ultimately rejected the idea. The reason is that I can no longer find a way to cover this space without resorting to cutting and pasting words and messages I have already shared before. For example:

The secret to social media success (and failure) is no longer secret. Companies need to stop talking and start listening. They need to stop broadcasting and start responding. They need to stop posting to people and instead encourage people to start talking with each other. They need to stop promoting new products in social media and instead use social to collaborate when developing new products. They need to stop publishing content they hope people will share and instead give people product experiences consumers actually want to share. They need stop trying to be entertaining in social media and instead offer great customer care in the channel. They need to stop counting fans and tallying engagement and start creating advocates and measuring business value. And finally, brands need to stop positioning themselves as more caring, more transparent and more committed to the customer and instead be more caring, more transparent and more committed to the customer.

If you find yourself nodding your head with that last paragraph, take a moment to parse the first part of each sentence from the second. The first part describes marketing activities (broadcasting, promoting, publishing content, being entertaining, tallying engagement, positioning) while the second part describes activities outside of marketing (listening, responding, product development, customer service, earning advocacy, being better corporate citizens).  Therein lies my growing weariness with the topic of social media marketing--marketing is literally the least interesting thing brands can do in social media.

To me, that describes the big shift underway (both in the world and on my blog). Social media remains a powerful force reshaping our lives and companies, but that does not mean it is a powerful marketing tool. So, as I have in 2014, I will continue to focus on how customer experience drives great results (in social and elsewhere) and how social behaviors and technologies are reshaping consumption and business models in the collaborative economy. But whether some brand did a cute Vine or got 500 shares of its hilarious Instagram picture is no longer very interesting to me (and I am frankly unsure why it would be interesting to anyone else).

I said I hate to repeat myself, but here are a couple of things that bear repeating: Social media is not a megaphone for brands; it is a mirror. It does not give your brand "a voice"; it gives consumers a voice they can use to share their good and bad brand experiences. It does not allow you to fashion messages that change minds; it reflects what the brand is and does in a way that changes minds (or, more likely, not).

If you want better brand results in social media in 2015, do less marketing in the channel and find ways to treat your customers better. The brands that will succeed this coming year will not be the ones developing content and leveraging Instagram but the ones developing better relationships via product and services in consumers' real and digital worlds.

Friday, November 21, 2014

Why an Uber Decline May Be Good for the Emerging Collaborative Economy

Uber has been a poster child for the emerging sharing economy. While other collaborative economy startups like Airbnb and LendingClub have grown and garnered attention, they have yet to create the sort of impact within their verticals that Uber has in the livery business. In San Francisco, for example, Uber (with an assist from other ride-sharing startups) has already caused a 65% decline in taxicab trips and New York has seen a small but unheard of decline in the price of taxi medallions.

Given Uber's prominence in the early days of the collaborative economy, it may seem odd for me to suggest, but I believe a significant decline in Uber's business may be terrific for the long-term interests of the collective consumption movement. My reasoning is that the sharing economy is not simply about more collaborative products but more collaborative companies. Viewed through this lens, Uber simply has not earned its premiere status in this new business movement.

Uber's embarrassments have been many and frequent, such as:

All of these blunders occured before this week's embarrassing dustup over threats to dig up dirt against critical journalists and their families. Then, as if Uber's crap week needed icing on the clueless cake, the company's CEO, Travis Kalanick, compared his company's woes to those of the residents of Ferguson, MO.

Travis Kalanick (Photo Credit: Silicon Prairie News)
That Uber has a terrible corporate culture is in no doubt. Of course, what would you expect from a CEO that calls his company "Boob-er" for the way it helps him land dates. If the CEO at a traditional company said these sorts of things or presided over a fraction of Uber's PR stumbles, he or she would be shown the door immediately, but Kalanick seems to have nothing to fear, provided he keeps the billions rolling in for investors.  In fact, not only has the latest gaffe caused no apparent ruckus among investors about Kalanick's leadership, one investor--actor Ashton Kutcher--came to the executive team's defense, tweeting "What's so wrong about digging up dirt on shady journalist?"

If Uber's leaders and investors are unwilling to foster the sort of culture consumers want and expect, then perhaps it is time for consumer action. There is a small but growing trend among people deleting Uber from their smartphones. Comedian John Hodgman wrote a blog post saying "I just can't get into the car with those guys any more." Tech writer Nilofer Merchant is also deleting her Uber app. I have deleted mine, and you can too.

Yes, Uber is an astounding service, but is that really enough? Study after study validates consumers' growing desire for better companies--ones that act ethically, contribute to the community and treat both employees and customers better. This is made clear by a slew of research such as Edelman's Trust Barometer and Havas Meaningful Brands study.

We have the power to demand better leaders and companies. If we fail to act now--if we let our love of Uber's service blind us to its terrible and uncollaborative actions--that will only embolden and encourage VCs, startup leaders and others to accept aberrant leadership behaviors and build companies that respect nothing but profits. That is not the collaborative economy I want.

Some may suggest that an Uber failure would be a strike against the new sharing economy, but I believe the opposite is true. The collaborative economy is changing the world, but its progress will be hindered if we support companies that violate every tenet of the social era.

Cash may pay the bills, but trust is what drives the collaborative economy. Trust is the necessary ingredient to convert customers to new ways of consuming goods and to win the support of doubting regulators. Today, Uber's trust-killing antics are harming the entire sharing industry, raising suspicions about the kind of ethics and honesty that are driving crowd companies. At a time when Uber and other sharing economy companies should be winning hearts and minds, Uber's arrogance and mistakes are instead breeding suspicion at the Federal, state and local levels.

The best thing for the collective consumption movement would be for consumers to send a clear and unmistakable message to Uber and its peers. If enough of us act, we can shape the future of this emerging way of doing business. We can and should put the collaboration back into the collaborative economy and help Silicon Valley understand that we want more than better services; we want better companies.

Uber is not the only ride-sharing service around, and I urge you to consider exploring other options such as LyftSidecar and Curb. The next time you use a ride-sharing service, make sure it is one that has earned not just your business but your respect, as well.

(Added note: It seems advisable to point out that my opinions are my own. Moreover, let me state that I want ride sharing in general and Uber in specific to succeed. But on the trajectory it is going, I fear Uber will not only undermine its own success but harm other companies in the budding peer-to-peer economy. If deleting Uber now can bring about a change in its corporate culture and force Uber to be more collaborative, trustworthy and respectful, then I will gladly reinstall the app in the future and feel as if I have helped the company succeed in the long term.)

Sunday, October 12, 2014

The Snappening Blame Game: Protect Yourself and Your Family With Awareness and Action

VentureBeat featured an article entitled, "Who’s to blame for the ‘Snappening?’ You are." While I strongly disagree with the writer's use of the word "blame," I also believe there is nothing wrong with empowering people to take as much control as possible of their privacy and reputation. Those who strive to prevent others from being victimized are too often accused of "blaming the victim," but there is nothing incompatible with assigning blame to criminals while simultaneously helping people to become more informed and protect themselves and their family.

"The Snappening" is the hack and leak of hundreds of thousands of images that people intended to be seen (and immediately deleted) using the Snapchat application. It has been reported that many of these images are of minors. This hacking crime occurred at the same time hundreds of personal photos and videos of celebrities are being leaked, an event disgustingly given the cutesy name of "The Fappening."

Both are crimes, and all blame and legal responsibility rests with the hackers and those distributing the photos. Again, just so I am absolutely clear: The hackers and those distributing users' private photos and other information are wholly to blame ethically and legally. 

That said, there are steps you and your family can take to avoid becoming victims. Saying this does not alleviate hackers from their legal accountability should your family's data be unlawfully collected. All this acknowledges is that we live in an increasingly digital, social and mobile world, and it is vital we recognize and consider the risks associated with our devices, applications, privacy settings and actions.

Telling children not to get into cars with strangers does not blame the victim when tragic situations occur, but it does prevent other children from becoming victims. In the same way, urging our children to understand the risks of their digital, social and mobile actions does not increase their fault should a dreadful crime occur, but it will prevent other children from being victimized as is happening today. Blaming victims is disgusting and wrong; empowering people to avoid becoming victims is smart and caring.

In our digital, social and mobile era, here are some things you and your children must know so that risks can be reduced:

  • Consider the applications you use: Every application you allow on your phone or permit to access your data on social networks increases risk. Who created the app? How will they use your data? Will they protect your data? These are difficult but essential questions we must ask about each and every application that we allow to access our most personal data.

    While few of us possess the technical capability or time to answer these questions specifically, we can take some simple steps: Identify and evaluate the reputation and size of the application developer; consider the access requirements; and review the ratings in the App Store, Google Play and elsewhere.

    The risk posed by third-party apps seems to have contributed to the Snappening leak. Snapchat released a statement saying "Snapchat’s servers were never breached and were not the source of these leaks. Snapchatters were victimized by their use of third-party apps to send and receive Snaps, a practice that we expressly prohibit in our Terms of Use precisely because they compromise our users’ security." In other words, once you allow a third-party application to access and use your Snapchat data, there is nothing Snapchat can do to protect your privacy, and the same is true of other social networks and mobile platforms as well.

    Facebook's Privacy Checkup--stop
    griping Facebook makes privacy
    difficult and use it, already!
    Steps you can take today: Review the applications on your and your children's phones. Do you know and trust the developer of each application?  Do the same for the applications that you and your children have allowed to access Facebook data; to do so, visit Facebook in a browser, click the lock icon on the upper right corner and do a "Privacy Checkup" to review "Your Apps." You can do the same in Twitter--click on your profile image and select "Settings" and "Apps" to revoke access to applications you do not know and trust.

    These steps are vital to protect you and your family. To use a real-world metaphor, no amount of locks on your door can keep you secure from those you freely allow to access and use your home.
  • Consider the people to whom you connect:  If a stranger watched, snapped photos of or followed your family around, you would call the cops. Many people not only ignore that strangers do this online but welcome them to so, because this is what happens when you accept invitations from strangers on services such as Facebook and Foursquare.  The people with whom you connect can know where you are at every moment, see and save your family photos and know other information you may not wish shared.

    Parents, who have your children friended? Do they know them well? I will admit I am not a parent, and I understand issues of trust and privacy are sensitive ones with kids; nonetheless, the same parents who would never allow their kids to talk to strangers in the real world are often willfully ignorant of the strangers talking to and monitoring their children via social and mobile applications.

    Steps you can take today: Review your Facebook and Foursquare friends today, and do the same for your children. Do you know them well enough to give them access to your location, photos and personal communications? Many people seem to feel social pressure to accept and maintain "friend" connections on Facebook. My advice: Get over it. There's nothing wrong with rejecting or deleting a connection from someone you do not know well.  An ounce of prevention is worth a ton of cure when it comes to filtering your friend lists.

  • Consider your security settings: Every application and service you use permits you to set your preferred level of security and privacy. I choose to make most of my Facebook posts public, but I do so with awareness and consideration of what I post. My recommendation to most people is that they do NOT make their posts public by default, and as a rule, children should never do so.

    Nowadays, it is not simply the security settings of applications you must consider but also the settings built into your devices. Thanks to services such as iCloud, Dropbox and Google Drive, many mobile phone users automatically upload their photos and data into the cloud without even knowing. Of course, you can stop that from happening if you want, but then you may lose your photos and data in the event your phone is lost or dies. There is no simple answer to how you should set your or your children's security and privacy settings, but it is important we make informed decisions and take proactive action rather than having an unpleasant surprise later.

    Steps you can take today: First, review the security settings in your applications--who can see your data and what data can they see? As noted above, Facebook has made this much easier with its Privacy Checkup feature.

    Perhaps even more important is for you to use two-factor authentication. It is easy and only adds a smidgen of complexity. Apple has suggested that if the celebrities hacked in the Fappening had used two-factor authentication, their data would still be safe (although I find this a bit disingenuous since iCloud allowed unlimited signon attempts, permitting simple "brute force" attacks to be effective.) You can learn more about two-factor authentication on CNET, but Facebook's two-factor authentication is called "Login Approvals" (found under "Settings" and "Security") and it is easy to use.  You can also learn more about two-factor authentication available for Apple ID, Dropbox and Google.
  • Consider what you capture and share: This is, inevitably, the advice that causes people to start tossing around accusations of "blaming the victim." It seems some people mix up having the right to do something with whether it is wise to do that thing. The two are not the same.

    There is nothing wrong with suggesting people consider the risks associated with taking, storing or sharing nude selfies. Yes, you have a right to do so (if you are an adult). No, doing so does not in any way reduce others' culpability should they hack and share your nude selfies. But yes, taking nude selfies does, in fact, increase risk they could be accessed and distributed without your permission. So go ahead--strip down and snap away--just do so with knowledge it comes with risks: You can lose your phone, your iCloud account can be compromised and the people with whom you share may save and disseminate them further (even if you use Snapchat).

    Of course, the same is true of ANY data. You can legally post, share or store your social security and credit card number online. It is an insane and risky thing to do, but doing so does not alter the blame or criminal responsibility of anyone who uses that data to steal your identity. Once again, suggesting people consider the potential ramifications of their digital, social and mobile actions is not "blaming the victim" but a simple reminder that the best offense is a good defense when it comes to your personal data.

    Steps you can take today: Simply consider what you capture, store and save on your devices. Do you save your credit card numbers in Evernote? Do you have a photo of your social security card stored on your device (and backed up in the cloud)? Do you save passwords? These are somewhat obvious examples of actions that raise your risks, but there are less obvious ones:
    • He had a "family emergency,"
      posted this and lost his job
      Have you ever shared your "porn name," which includes the street on which you grew up? Have you posted your mother's maiden name as part of #TBT on Facebook or Instagram? Both are examples of information you use to recover your passwords and can be misused to gain access to your accounts and data.
    • Do you share when you and your family are traveling and announce to the world that your home is empty and unguarded?
    • Do you complain about your coworkers on social networks, an action that can cause you to (at worst) lose your job or (at best) lose relationships and reputation?
    • Do you "like" your bank, revealing to others where your financial accounts are maintained?
    • Do you use the same password on every site so that a single hack opens up all of your accounts and data to hackers? (And when is the last time you changed your passwords?)
    • Do you ever call in sick when you are not and then publicly share your leisure activities? (That's another good way to lose your job.)
    • Do you capture and disseminate (even privately) pictures of you and friends doing things that others (such as potential employers, significant others or family members) might judge?
    • Do you often use profanity or poor grammar in your Facebook or Twitter posts? Recruiters react negatively to profanity (65%), grammar and punctuation errors (61%) and references of alcohol use (47%).

Educating and empowering others to make smart decisions is not "blaming the victim" but an act of caring. We must always blame the perpetrators who hack and share our personal information, but empowering people to protect their data and privacy is simply the smart thing to do.

Tuesday, October 7, 2014

Stop Social Media Marketing

Today, I gave a keynote address at the PR + Social Media Summit in my hometown of Milwaukee. My presentation was entitled "Stop Social Media Marketing (Unless)," and I have embedded the deck at the end of this blog post.

I predict that many CMOs will diminish their support for social media, content and earned media marketing in the next year or two, and when they do, careers will be adversely impacted. If your career relies on Marketing Department support for content or social media marketing, now is the time to take stock of the trends and consider some actions to protect your career. It is possible that you work for the right sort of company for which social media is well aligned for Marketing Department expectations---that's the "Unless" part of the title--but, as you will see, I believe this is the exception and not the rule.

What is (and is not) Social Media Marketing?

Before we explore where social media marketing works and where it does not, let's first be clear that the definition of "social media marketing" does not include paid media on social networks. Go ahead and invest in advertising on Facebook and Twitter, just do not call it "social." The most popular forms of advertising on Facebook today are retargeting and custom audiences, neither of which are remotely social, and less than one in six ad dollars use social data.

I suggest a better definition of Social Media Marketing is this: Content authored or encouraged by the brand and shared by Word of Mouth that creates earned media and delivers on Marketing objectives. This definition excludes a couple of things, such as advertising (which is not social) and consumer content not coaxed by a marketing program (which is not marketing). It also excludes social media programs that fail to deliver on key marketing metrics, and therein is the problem for most brands.

The Earned Media Venn Diagram

A simple Venn diagram explains what works and what does not in Social Media Marketing. The first circle includes what your brand can say to move consumers closer. This does not mean retweets and likes--the fool's gold of social media marketing--but rather changes in consumer attitude or behavior such as greater awareness, consideration and purchase intent.

The second circle in the Venn diagram is what consumers want to hear from your brand. For years, we have acted as if consumers crave branded content, but the data on this clear; a 2014 Kentico study found that 68% of US consumers “mostly” or “always” ignore brand posts on every social network. The situation is much worse for some categories than others--a 2014 Scratch/Viacom study found that 71% of Millennials would rather go to the dentist than listen to what their banks are saying! If people would rather get a cavity filled than listen to your brand, it's a good bet your content and social media marketing faces a profound uphill challenge.

Where Social Media Marketing Works

Some brands have an overlap between these two circles of the Earned Media Venn Diagram; most do not. There are three types of companies that have this "magic intersection" between content that helps the brand and that consumers want:
  • Brands in select verticals:  Some categories have built-in consumer interest. For example, sports brands can easily post content that drives engagement and also increases demand for team attire and products. TV shows and movies have an easy time offering content fans will share that also increases ratings and box office receipts. Style brands are another example--in the same way that women eagerly purchase the September issue of Vogue with its 631(!) pages of ads, so too will style-conscious women pay attention to and share the latest pins and posts from their favorite fashion brands. Brands in select verticals enjoy a magic intersection between the content consumers want and the content that drives consideration and sales.
  • Brands with purpose:  Consumers may have little interest in what banks have to say, but that does not stop USAA from delivering great engagement and inbound traffic with its posts. This is because USAA has created a brand with a purpose that resonates with its audience. Another example is Chipotle, which has outperformed other brands in the restaurant industry by promoting its commitment to more locally- and organically-sourced ingredients. (Just last quarter, Chipotle delivered a same-store sales increase of 17% in a vertical where almost no brands are able to achieve half that.)
  • Brands with better products and services:  Of course, there is always the old-fashioned way of encouraging attention from consumers: Be better than the competition! Apple has no official company profile on either Facebook or Twitter, yet it still beats Samsung when it comes to building buzz. Both companies had product unveilings in early September (Samsung for the new Note and Apple for the iPhone 6), yet despite the fact Samsung has 2,350% more fans, followers and subscribers on Facebook, Twitter and YouTube, Apple still delivered far more Word of Mouth about their event and product. Apple does not need social profiles and content to drive WOM; it just needs to continue producing interesting, innovative products that get fans talking.
When brands have nothing to say: Example
of a brand exploiting a personal tragedy
to build its own brand engagement. 
Some companies can publish content that consumers want and delivers on marketing goals, but most brands simply do not have that same opportunity--they have no "magic intersection." This does not stop them from trying, of course, which is why so many brands stumble with unwelcome, heavy-handed, embarrassing, brand-damaging posts on Facebook and Twitter

We entered the social media era suggesting that brands with something to say could use social media to say it; instead, we today have brands with little to say that nonetheless post 4.3 times per day because some consultant told them this was a best practice. Desperate for attention and relevance, these companies continue to invest in content that is delivering neither the scale marketers need nor the content consumers want.

Ironically, even for the best companies, earned media may wither and die in the coming years. In just six months, organic reach on Facebook was halved, and many expect that zero organic reach will soon be the rule on the social network that collects 57% of all social visits. The organic reach game has gotten so tough that Coca-Cola, one of the strongest brands in the world, only earns engagement with 1 in 100,000 of its fans on Facebook. The situation on Twitter is no better; a recent Forrester report notes that the average engagement rate with brand posts on Twitter is just 0.03%--75% less than banner ad clickthough rates today!

Earned media could soon be a thing of the past. What happens to your social media marketing strategies if the content you create and post reaches no one?

A sketch made by Jennifer Torres during my presentation
at the PR + Social Media Summit. 

Social Media Marketing's Inability to Deliver Trust, Acquisition or Purchase Conversions

If the prospect of organic reach crumbling to nothing is not enough to worry about, social media marketing has a variety of other problems that marketers have been ignoring: 

If social media is so poorly equipped to deliver trust, traffic, acquisition and purchases--and is facing declining organic reach--why are marketers increasing their investment in the channel? These are, after all, the metrics that most marketers care about. In a 2013 study by Ascend2, both B2B and B2C marketers reported their top three most common performance metrics are website traffic, quantity of sales leads and conversions--goals against which social media does not deliver. Meanwhile, fewer than half of B2B and B2C marketers measure customer retention, awareness or reputation, which are metrics that align well to social media strategy.

But if social media is poorly matched to Marketing Department objectives, it remains a powerful opportunity for others in the enterprise who do not need to rely on reach and scale to deliver on their goals.  For example, The PR/Corporate Communications function can be successful if it uses social media to create relationships with a few dozen influencers, both traditional ones (journalists) and the new variety (bloggers). Product Development does not need to collaborate with tens of thousands of customers but can work collaboratively to develop new products and services with much smaller subsets of customers and vendors. And Customer Care can achieve success by answering the questions and complaints of a few hundred people in social channels. (Compare that to the average marketing campaign, which would be considered a dismal failure if it only engaged a few hundred people.)

Social Media Marketing on a Collision Course with C-Suite Expectations

For now, CMOs seem to have confidence in social media, but I believe this will change in the next year or two. Social media and content marketing is on a collision course with the C suite.

Recent research by the Fournaise Marketing Group, which was conducted with 1200 CEOs and CMOs, found that 80% of CEOs claim they have lost trust in their marketers. One of the reasons is that "74% of CEOs think Marketers focus too much on the latest marketing trends such as social media – but can rarely demonstrate how these trends will help them generate more business for the company."

This criticism is, sadly, entirely fair. In just-released data from the 2014 CMO Survey, derived from 351 top US marketers, a mere 15% of CMOs say they have proven the impact of social media quantitatively. Another 40% "have a good qualitative sense of the impact, but not a quantitative impact" and a whopping 45% have "not been able to show the impact yet." Despite this, CMOs expect to increase social media marketing spending 128% in the next five years. 

If you wonder why the tenure of CMOs is so short compared to the rest of the C-suite, the answer is right there. Less than one in six CMOs know if their social media investments are paying off, yet they still intend to rapidly double that investment!

I predict that increase will not happen. The falling organic reach, low acquisition, microscopic purchase conversion and inability to measure quantitative success will come crashing headlong into the growing pressure on the Marketing Department to demonstrate results. When this collision occurs, will you be the one holding the social media marketing bag? If your career depends on the success of social media or content marketing, now is the time to consider the data, trends and future.

How to Protect Your Social Media Marketing Career

For those in the social media marketing profession, I believe the time has come for a candid assessment. Protect your career by asking three questions:
  • Does your brand have a "magic intersection"? Are you in one of those categories--such as entertainment, sports and style--that has built-in consumer demand for branded content? Or has your company won high levels of loyalty and advocacy with its sense of purpose or by producing products and services that are leaps and bounds better than your competitors? If so, then social media marketing can be an effective channel for the Marketing Department, but if not, then ask...
  • Does your firm evaluate its Marketing spend based on reputation and loyalty? When marketing leaders furnish updates, do they lead with Net Promoter Score and measures of repurchase and reputation? Or do they lead with sales, conversions, acquisition and traffic data?  If the former, then social is well aligned to what the organization most cares about, but if it is the latter, then ask one last question....
  • Can you control the paid media budget for social? If you can control the ad budget and are really held more accountable for delivering paid media than earned media, then your job is secure (provided you are doing it well). If, however, the ad budget is controlled elsewhere and your job is dedicated solely to content and earned media, I would suggest you have career challenges ahead. It may time to consider one of three options:
    • Redirect: If your social media scorecard is full of non-marketing metrics such as likes, retweets and number of fans, then the time has come for you to lead a change. Do not wait until Marketing leadership begins to question how those useless social metrics tie to Marketing objectives; take the lead and start that conversation today. You may be able to change the conversation and redirect expectations toward the sorts of metrics on which social can realistically deliver.
    • Detour: It may be time to consider social media opportunities outside of the Marketing Department. While social may not deliver on typical marketing goals, it certainly aligns well to the needs and expectations of Public Relations, Customer Care, Product Development, Sales and others parts of the organization.
    • Exit: Or perhaps it is time to exit social media altogether and consider other career paths where your experience in customer-centricity and innovation can be of great value. In recent years, I have seen social media professionals successfully shift into new careers in Customer Experience, mobile and customer care, for example.

Of course, if your career is in social media marketing, you could choose the fourth option and bury your head into the sand. I hope you will not, because the data is consistent, the trends are in place and the questions about social media marketing effectiveness are only going to rise.

Below is my deck. I welcome your feedback, questions and challenges. 

Wednesday, October 1, 2014

RelayRides Growing, Evolving in Nascent Collaborative Transportation Category

The idea of borrowing a strangers’ car or taking a ride with an unfamiliar person would have seemed unimaginable just a few years ago. Today, many of us are doing this regularly via collaborative economy transportation services such as Zipcar, Uber, Lyft, Sidecar and RelayRides.

I have plenty of experience as a consumer of this new category of service, but I wanted to get a view from the inside of one of these companies. I had the chance to do an email interview with Steve Webb, Director of Community and Communications at RelayRides, and we covered topics ranging from rising competition to differentiation to risk protection to the future of car- and ride-sharing.

RelayRides is a bit like Zipcar but differs in a couple of key ways. Unlike Zipcar, RelayRides is not just a collective consumption model but is truly peer-to-peer. While Zipcar rents its own cars, RelayRides connects people who own cars with those who need transportation. Car owners can earn a bit of money from their automobile during periods it is idle, and those without cars can get access to their neighbors’ vehicles.

Another way RelayRides differs from Zipcar is that, although the company started as a competitor to Zipcar’s rent-by-the-hour business, RelayRides tweaked its business model last year to offer daily rather than hourly rentals. As a result, the company is now focusing more on airport rentals, where people arriving on trips may make arrangements to meet someone who is making their car available to rent. In San Francisco, RelayRides even operates its own parking lot where local residents may leave their car as they depart so that arriving travelers can rent it, thus saving car owners from parking fees and converting their unused car into cash.

The competition is heating up among transportation companies in the peer-to-peer economy. This is quite evident, as Uber and Lyft snipe at each other about unethical business practices and San Francisco reports the number of taxi rides has plummeted 65% in just 15 months.

In this crowded space, RelayRides competes by being “the only nationwide peer-to-peer car rental marketplace,” says Webb. “We are in 2,300 cities nationwide, including every major metro area besides NYC--we had to halt business there because of certain unique aspects of NY State insurance law.”  In one of many legal challenges to the P2P car- and ride-sharing industry, New York’s Department of Financial Services demanded that RelayRides suspend operations in the state until the company submits a business plan to the DFS that is consistent with state law.

RelayRides is striving to compete with others by making trust and safety a focus.  “If our members are not completely safe and protected, our marketplace doesn't work,” notes Webb. “This is why from the very beginning we have provided members with a $1 million insurance policy. Additionally, we have put great emphasis on pre-screening drivers to ensure only the best drivers are on the marketplace."

As with others in this space, RelayRides is growing.  “We have grown from being in just two cities and zero airports in 2012 to being in 2,300 cities and 300 airports this year.”  Its biggest challenge right now is awareness, notes Webb; “We will continue to raise awareness about the marketplace and continue to work on increasing customer delight.”

The benefits to car owners are evident, but I was surprised to hear how much money RelayRide owners are making. “Our average owner earned $360 last month, “ says Webb. He adds that renters are also enjoying benefits: “The average renter saves 35 percent versus traditional rental companies”

RelayRides is also proud of the benefits the company is bringing to the environment. According to Web, “We are helping to reduce people's carbon footprint--each shared car takes 13 off of the road, encourages more biking, walking and use of public transportation." The company recently produced an infographic to spread the word on RelayRide’s positive impact on the planet (see below).

The future will bring many changes, challenging traditional auto manufacturing and sales and changing the collaborative transportation market.  I speculate that self-driving cars may undermine many transportation companies in the decade or two to come, but Webb feels “It is impossible to speculate what these technologies changes will bring.” Whatever happens, Webb says that RelayRides “looks forward to innovation and feel strongly positioned to evolve with technology.”

Saturday, August 30, 2014

Learn From Firms That Transformed In The Internet Era To Prepare for the Collaborative Era

"Those who cannot remember the past are condemned to repeat it."
  - George Santayana

photo credit: Hampton Roads Partnership via photopin cc
In my last post about the Collaborative Economy, we examined the companies that made mistakes at the beginning of the Internet era in order to learn what organizations can do differently today, at the beginning of the collaborative era. Many large companies were too confident in their existing brand strength and business models, so they did not see the need to innovate until new consumer behaviors were already diminishing revenue and income streams. The result was the collapse of companies that were household names with long histories of growth and profitability.

My friend Brett King, founder of Moven, challenged me to repeat the exercise, this time studying firms that succeeded with Internet transformation rather than those that failed. It is in an excellent idea, since not all established organizations were impacted equally. Even in industries where many strong companies crumbled, a few bucked the trend. What did they do that kept them solvent while others failed, and how can we apply these lessons as the Collaborative Economy emerges and grows? Here are the three examples we will explore:

  • Source: Piotr CieĊ›lak
    Film and Photography: Kodak, the most powerful name in photography for many decades, died and emerged from Chapter 11 a different company dedicated to corporate digital imaging. Agfa-Gevaert spun off its consumer division in 2004, but less than a year later that company filed bankruptcy and today Agfa-Gevaert is entirely B2B. Of the three largest companies that were once known for film, only Fujifilm avoided collapse; its stock is down 10% in the past decade, a huge success versus the traditional competitors the company had at the start of the Internet era.
  • Bookstores: B. Dalton, Waldenbooks and Borders once operated more than 2,000 stores--all are gone. Today, Barnes & Noble is the only significant bookstore chain left in the US; it now owns two-thirds of the country's retail bookshelves. As with Fuji, B&N's success is relative--its stock is down 32% in the past decade and there is no assurance it will be around in five years--but it is worth considering how B&N managed to fail much more slowly than the competitors it had entering the Internet era.
  • Source: Daniel Oines
  • Electronics: Circuit City, CompUSA and hundreds of small computer and consumer electronics (CE) retailers are defunct, but Best Buy soldiers on in a subcategory that has been fundamentally altered by the Internet. NPD Group found that more than 27% of U.S. CE spending took place online last holiday quarter, and about 40% of U.S. shoppers say they have tested products in stores before buying them online; in fact, Best Buy is one of the top two stores for "showrooming." Despite the unique and profound challenges of tech retailing, Best Buy's stock is at almost the same price it was a decade ago.  

While many familiar companies vanished, Fuji, B&N and Best Buy have prospered (or at least survived). What can we learn from the way these companies adjusted to the Internet era? And how do we apply these lessons today, in the early years of the Collaborative era, another significant revolution in consumer purchasing and consumption habits?

Why Not Focus on the Successful Startups?

Before examining Fuji, B&N and Best Buy, it is worth explaining why we must look at these three companies--none of which have positive stock performance in the past ten years--instead of companies like Amazon, Ebay and Google, which have thrived. Too often, authors and bloggers hold up startups as examples for well-established companies to follow, but that naive approach is neither fair nor helpful.

VC investors have different expectations about
risk and return than do Fortune 500 shareholders.
Source: Amplifier Ventures
Startups operate with vastly different expectations than established firms, and the risk tolerance for Venture Capital (VC) investors is wildly divergent from that of Fortune 500 shareholders. Three out of four venture-backed firms fail, a survival percentage that no Fortune 500 company can emulate. Unlike VC investors, shareholders of public corporations do not reward expensive, high-risk investments that may (or may not) deliver fabulous profits years in the future.

For example, back in the early days of the Internet era, no leadership team at a Fortune 500 retailer would have been permitted to follow the lead of Amazon, which lost almost $3 billion between 1998 and 2002. With Amazon's stock down 90% and Pets.com and eToys dead, the shareholders of traditional retailers were not demanding or interested in a costly Amazon-like approach.

Just last year, despite a six-year 80% drop in its stock, JCPenney's board canned CEO Ron Johnson after only 17 months when his aggressive plan to resuscitate the retailer resulted in a net loss of $552 million. Even in 2013, with everyone wondering about JCPenney's ability to survive, its shareholders were still unwilling to accept any sort of high-risk business strategy!

Today, with the Collaborative Economy growing, established companies may look to startups like Airbnb, Uber, Lyft and Lending Club for ideas and partnerships, but this does not mean they can adopt the same strategies or risk appetite. As today's publicly held companies consider how to react to the Collaborative Economy, they should look to the lessons of Fuji, B&N and Best Buy--firms that entered the Internet era as reputable and successful corporations with millions of shareholders, not no-names backed by a handful of high-risk investors.

What did Barnes & Noble do differently than Borders? How did Fujifilm outlive Kodak? And why is Best Buy alive while Circuit City is buried and Radio Shack is the walking dead? These are lessons worth considering at the dawn of the Collaborative Economy era.

Barnes & Noble vs Borders

Barnes & Noble may not be a success story--its stock is down and the company closed more than half the 1500 stores it operated in 1999--but B&N is the lone survivor in book retailing. What caused B&N to fail slower than all of its competition? If you are expecting a mention of the Nook at this point, you are right but perhaps for the wrong reason. The Nook was B&N's attempt to compete with Amazon on Amazon's turf, and it has not been successful.

Launched in 2009 against the already established Amazon Kindle, the Nook received some early praise, with The Atlantic calling it a "Kindle killer" and Wired predicting Kindle owners would have "buyer's remorse." But the Nook could not compete against the Kindle e-reader, much less the slew of even more powerful tablets that soon came to market.

In the last four years, the Nook division has bled more than $1 billion. In fact, twenty years into the Internet era, B&N is being sustained by bricks and mortar and dragged down by its digital offerings--Nook's $475M loss in 2013FY almost equaled the $485M profit on bookstores. Nook's days are numbered, as B&N has announced it will spin off the plunging Nook business.

B&N deserves credit for trying this innovative route, but its Nook strategy was more focused on the company's past than consumers' future. B&N saw the Nook as a way to extend the bookstore model into mobile whereas others aggressively pursued the full potential of tablets as more than just a replacement for paper books. Amazon's Kindle started as an e-reader, but in 2011 Amazon followed Apple's lead with a fully functional tablet computing device, the Kindle Fire. B&N was not prepared for the constant demand for hardware innovation, and its device was left behind, a common problem that has tripped even companies with deep tech roots such as Dell, Compaq, Palm and Blackberry.

While digital hardware and distribution is not B&N's future, the company still perseveres where its competitors failed. Part of B&N's continued survival is simply due to the reduction in competition, since many people still like to sit in a quiet bookstore, enjoy a latte and leaf through a paper book. Why is B&N the last bookstore standing?

    Borders CDs on closeout. Source: OCWeekly.com
  • B&N positioned itself against the Internet rather than trying to beat it: Borders beefed up its DVD and CD merchandising just as digital delivery was growing, plus Borders stayed committed to its traditional strategy of providing a very wide breadth of book titles, even though this was not valued by customers. While Borders lost to streaming services and the "long tail" efficiency of online bookstores, B&N took a different approach. It fell back from music and movie offerings that were shifting online and kept its product line narrow. In addition, B&N found a niche that online competitors could not undermine as quickly: As general market bookstores were failing, stores on college campuses still thrived. B&N operates almost 700 college bookstores, and this segment continues to deliver around a quarter of the company's revenue.
  • B&N demonstrated a will to innovate and to bring new skills inside the organization: Borders shut down its ecommerce operations and turned it over Amazon, and this turned Border's website into a "a customer-harvesting vehicle for Amazon." B&N's online operations may not be making major contributions to the bottom line, but the company chose to invest in new capabilities rather than voluntarily give up skills, data and customers to the competition. And although Nook may not be a long-term success, B&N's e-reader product gave the company the sort of digital strategy that Wall Street wanted to see--in the six months following the Nook's announcement on October 10, 2009, B&N's stock was up 20%, outperforming the Dow Jones index by more than 50%.
  • B&N leadership made better decisions about core operations: It is not as sexy as talking about tablets and online stores, but B&N was simply better run than Borders with respect to basic management of finances and real estate. B&N was conservative with its finances while Borders opted for a very ill-advised 2005 stock buyback program; the buyback initially pleased Wall Street and boosted the company's shares, but it only hastened Borders demise by leaving it under-capitalized. In addition, the reason that B&N is today sustained by its bricks and mortar presence is that B&N "paid close attention to where it put its outlets," while Borders, "grasping for growth," picked "B locations." Despite (or maybe because of) strong online competition, the old adage "location, location, location" has helped B&N survive. 

Fujifilm vs. Kodak

In the early part of my career, there was no brand worthy of more respect than Kodak--the brand was about memories while the competition was merely about film. Kodak's towering brand delivered towering success; in the 70s, Kodak commanded 90% of film sales and 85% of camera sales in the U.S.

The world's first digital camera, made
by Kodak in 1975. It took and wrote
0.01 megapixel pics to a cassette tape.
So how does one of the world's strongest brands flame out so quickly? Everyone seems to believe that Kodak failed to adapt to digital photography with sufficient haste, but that is not really true. Kodak created the world's first digital camera in 1975, and it realized in the early 1980s that digital photography was inevitable. In fact, Kodak beat many of its competitors to market with a consumer digital camera, the DC series, which debuted in 1995.

Fuji has enjoyed more success, but not because it was an earlier adopter of digital cameras. Both firms halfheartedly got into digital cameras in the mid 90s, and neither company truly jumped into the business with both feet until 2001--Kodak with the EasyShare line and Fuji with the FinePix line. So why did Fuji do better than Kodak?

A big part of the answer has to do with corporate culture. "Kodak acted like a stereotypical change-resistant Japanese firm, while Fujifilm acted like a flexible American one," notes The Economist. Even Kodak's CEO would agree, noting "If I said it was raining, nobody would argue with me, even if it was sunny outside." Fuji's chief, Shigetaka Komori, also agrees: Kodak was so self-assured that it "never bothered to look over its shoulder at what was coming up from behind." Kodak was culturally incapable of seeing its problems and reacting as necessary, but how did Fuji escape a similar fate?

Best Buy vs Circuit City and Radio Shack

Best Buy is the Energizer Bunny of retailers. It staved off competition from Circuit City in the 90s. In 2002, its stock hit a new low when investors questioned its viability in the dot-com era, but Best Buy's shares lifted almost 400% in the four years thereafter as investors sorted out the dot-com bust. In 2012 fears of showrooming rose, and Best Buy's shares plunged to prices even lower than in 2002. Today, the company claims it has "killed showrooming" and its stock is up 175% from its 2012 low

Best Buy has outlasted Circuit City and hundreds of local and national competitors that sold TVs, computers, audio gear and mobile devices, and the company will soon lose another competitor as Radio Shack is on its last legs. What caused Best Buy to survive challenge after challenge while bricks-and-mortar competitors succumbed?

What This All Says About Preparing for the Collaborative Economy

Even though they are in very different verticals, the stories of Fuji, B&N and Best Buy share some lessons for firms as they consider how to innovate for the growing Collaborative Economy:

  • Get the Customer Experience right: The demand to compete on Customer Experience has never been greater. Consumers have more choice, can switch more easily, and can share perceptions of positive and negative experience more widely than ever before. Kodak was not slower than Fuji in launching digital cameras, but Fuji's products provided the experiences customers desired. Circuit City eviscerated its bricks-and-mortar experience, seeing its most experienced employees as costs, while Best Buy knows its employees are experience creators. Kodak's and Circuit City's strong, resilient brands offered no protection when their Customer Experience failed to meet consumers' changing expectations.

    Collaborative Economy Lesson:
    Today, Zipcar is a model of efficiency and ease with its online and mobile tools, while Enterprise CarShare's experience is absolutely terrible, requiring individuals to first set their state and "program" and then remember their member number before signing in. If Enterprise thinks this is good enough, it should consider the lessons of Kodak and Circuit City.
  • Position yourself against more nimble and lower-cost competition: Circuit City tried to take on online retailers at their own game while Best Buy positioned itself for future success in appliances. Borders tried to compete head-to-head with online stores with broad book and entertainment options while B&N focused on narrower in-demand offerings. These examples demonstrate that established companies must take a brutal look at their unique strengths vis-a-vis newer competitors and find ways to compete against, not with, those companies.

    Collaborative Economy Lesson:
    Hotel chains are currently slashing services in order to lower margins and increase profitability; this is short-term thinking that will hurt hotels in the future. Room service and daily housekeeping are features Airbnb cannot offer, and cutting those services only puts hotels on the same competitive playing field with their new competitors. Hotels do not need fewer services but more value-added services that differentiate hotels from collaborative lodging companies; for example, Airbnb is exploring experience packages, but hotels are much better prepared to offer these at scale since they have many guests staying one place rather than scattered over wide areas.
  • Diversify!  Current business philosophy demands companies narrow focus on core strengths and diversify everything else. There is value in this, but what happens when a company's narrow specialty is destroyed by innovative new offerings? Circuit City spun off Carmax and Kodak divested itself of Eastman Chemical, leaving both firms dangerously dependent on business models that would soon be threatened by Internet startups. Compare that Fuji, which today offers broad products and services to diversified B2B and B2C marketplaces, or B&N, which continues to get value from college bookstores long after bookstores disappeared from most malls.

    Collaborative Economy Lesson: 
    Financial services firms with narrow offerings must consider expansion options. Certain categories of financial services will be more challenged than others by the growth of collaborative and mobile models; for example, traditional auto insurance will decline as more people careshare, and the adoption of non-traditional peer-to-peer and mobile money management and transfer services will challenge core banking offerings. Now is the time for finserv firms to consider non-traditional products that align to their brand promise of helping consumers obtain, secure and grow assets and income.
  • Don't just partner; build! Kodak did not win by partnering with vendors on kiosks, nor did Borders succeed by giving up its online business to Amazon. Both Fuji and B&N prospered by developing new skills versus outsourcing them.

    Collaborative Economy Lesson: 
    Allowing an unknown startup to build its business while leveraging the strength of your existing brand may be collaborative, but perhaps not smart. Take, for example, the idea of a drugstore chain partnering with a local driver/delivery service (such as Walgreens partnering with TaskRabbit). In the short run, it provides the drugstore chain with an easy and risk-free way to add delivery service for customers, but what are the long-term consequences? If home delivery is the future, the drugstore should work on building its own capabilities. And once the driver/delivery service has obtained new customers thanks to the strength of the drugstore brand, why wouldn't it consider delivery of toiletries, cosmetics and OTC medications from lower-priced retailers? Not all partnerships are bad, of course, but established companies must carefully weigh the short-term gain against the risk of building a new competitor's skills, customer base and future growth potential.
  • Accept short-term pain for long-term financial gain: It is easy for traditional companies in stable categories to deliver steady growth of the top and bottom lines, but all this changes when the marketplace is upended. In many ways, when consumer habits and expectations begin to change significantly and rapidly, it turns every player--even traditional ones--into startups, and this means that future growth and survival may demand lower earnings today.

    We can see short-term, quarterly thinking in the actions of the companies that failed and long-term patience in the ones that succeeded. Kodak repeatedly abandoned products and shifted strategies trying to recover short-term profitability while Fuji reduced current profits to secure future return. Borders deserted its unprofitable online presence while B&N adopted digital strategies and built online skills. And Circuit City tried to maximize current profits by dumping experienced employees, leaving it unable to compete in the future.

    Collaborative Economy Lesson: It can be a bitter pill to swallow for companies accustomed to stable and growing earnings, but if the Collaborative Economy is altering the playing field in your industry, leadership focus must shift from maintaining constant earnings to securing the future of the company. As we saw with JCPenney, today's shareholders may care more for next quarter's earnings than the future survival of the company, but great leaders will not destroy today's strong brands in order to please shareholders who trade company shares in milliseconds.

    At the beginning this blog post, I said it was naive to compare established companies to startups, and now I am being purposefully naive, as well. I am suggesting that corporate leaders in verticals where the Collaborative Economy is growing put the company's intermediate- and long-term interests ahead of shareholders'. This has been done before: Apple's Tim Cook told shareholders “If you want me to do things only for ROI reasons, you should get out of this stock.” And, as we saw with Fuji, its CEO opted for decisions that were "damaging" to the firm's short-term profitability in order to secure long-term viability.

    It takes a strong CEO to lead the company in a way that does not maximize today's shareholder equity, but times of change require strong leadership. No one looks back at the leaders of Kodak, Circuit City and Borders with admiration for maintaining profitability as long as possible while driving the brands into the ground. The leaders that will be lauded in the future will be the ones that can make decisions that enhance 2020's annual report and not just next quarter's 10-Q. 

A free ebook in progress, being created one blog post at a time: