Consciousness in the Cloud

As I fly from Seattle back to Chicago in the clouds, I marvel about what the Cloud has brought to us and how our lives have been transformed in a few short years.

It began with Hotmail and AOL Instant Messenger, and now we practically live in the  Cloud. Our communication is through the cloud. Our friendships are in the cloud. Our entertainment comes from the cloud. Our data is in the cloud. And so on.

Eventually, our Identity will be in the cloud. All our preferences and our personal information will be aggregated and stored in the cloud, perhaps managed by Identity Managers. We will delegate to them the responsibility of shopping and negotiating for us. We will allow access to our identity to merchants and service providers, just as we allow access to credit card information to merchants today.

Push this idea further, and we will create, in 10-20 years – our Digital Persona in the cloud. They will act, think and communicate like us. In fact, they WILL be us, or a close approximation. Imagine “downloading yourself” onto the cloud.  That will be the day – Consciousness in the Cloud! What a scary thought. Will the Cloud then become sentient? Will it be 1984 all over again?

In case you think this is all science fiction, keep in mind that Facebook is only 8 years old….

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In my consulting and speaking work with technology companies, I am frequently asked a question – how should you position a mass market software product that has thousands of features for a specific customer segment?  Consider products like Microsoft Office, Intuit’s Quicken or Adobe Photoshop.  These are gargantuan products that have evolved over decades and are marketed to a very broad set of customers.  These products have features galore and offer something for everybody.  Positioning these mass market products seems to fly in the face of a basic tenet in product positioning – that you must define the target audience precisely and as narrowly as possible, so that the benefits you offer are relevant to the audience.

In thinking about this problem, I found a useful analogy – think of these “do-all” products like a Swiss Army knife.  The classic Swiss Army knife is famous for being a “multi-tool” – it consists of a number of tools stowed inside the handle of the knife.  The number of tools can be dizzyingly large – one giant Swiss Army knife has 85 tools, costs $999 and holds the Guinness Book World Record for the largest number of tools in a single instrument.

Regardless of how many tools a multi-function knife has, customers will only use one at a time.  And most customers will use only a few of the tools.  So, while the knife may have lots of tools, there are only a few that are relevant to a specific customer, depending on the situation they are using the knife for.  So what they will end up doing is to stow away the tools they are not using, and only expose the relevant tool, one at a time.  The rest of the tools are there, just hidden away.

And so it is with a complex technology product like Microsoft Office.  It is like a giant Swiss army Knife in terms of the number of features and functions it performs.  But a specific customer segment will end up using a very small subset of these features. For instance, I am an academic and I also do a lot of public speaking. I use Microsoft Word to write academic articles and therefore I really like the bibliography and cross-referencing features in Word. And I use PowerPoint quite intensively to make presentations.  Within PowerPoint, I use SmartArt quite frequently as it allows me to communicate visual concepts elegantly. And I like the new “broadcast” feature in PowerPoint, which allows me to set up a quick-and-dirty remote presentation easily.  If I was a salesperson or a lawyer or a high school student or a bond trader, I might use Office very differently.  To continue the analogy, all customers use the same Swiss Army knife, but they expose a different set of tools.

So that’s how you should market these products – by highlighting the relevant functionality for each customer segment, while keeping the other stuff “stowed away” because it is not relevant to that customer segment.  The same product can therefore be positioned differently for different customer segments, by “dialing up” and “dialing down” the features and benefits that matter most to them.  And when you launch a new version of your product, you may “dial up” only what’s new, while not talking about the thousands of features that already exist.  For instance, when Intuit launched the 2009 version of its Quicken product, it highlighted the new capabilities for keeping track of your budget and for stretching your household dollars further, keeping in view the economic recession and the fact that many households were seeing a decline in their incomes and net worth.

But too often, I see technology companies sell the “whole knife”, as it were. The pitch – “look how many tools we have in our Giant Swiss Army knife”.  The fact is that this pitch will fall flat for most customers, because you are marketing “just in case” features instead of “just in time” features.  As a result, your positioning becomes fuzzy and sounds like motherhood and apple pie. 

So take a long hard look at your Swiss Army Knife, and stow away the tools that don’t matter when you are marketing your product.  Of course, there are two other options.  If you are Apple, you separate the tools (the apps) from the knife, and market the fact that people can pick their own tools to attach to the knife. And if you are a niche player like Amazon.om with its Kindle, you can argue that a dedicated knife or screwdriver will be more efficient and effective than a bulky Swiss Army Knife!

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I am so fortunate that I have found my passion professionally. Rather, it is my passion that found me as I muddled along in life like driftwood, swept by the current of social pressures and norms. I became an engineer and then went to business school because that’s what everyone did. Then I did my Ph.D. because that’s the only way you could come to the U.S. from India. I stumbled into teaching and into marketing.  Luckily, I was stumbling in the right direction.  Now I really enjoy what I do – examine the intersection of technology, marketing and innovation. And sit at the intersection of research, teaching and consulting.  Every time I’m in a classroom or speaking before and audience, its a huge high. I feel I’m getting paid to enjoy myself. That’s my groove, and it will last me for a while more until I figure out what’s next for me. Maybe in 3 years when I turn 50? I will see.

I talk to lots of students and ex-students as well as friends who ask me for advice on what do do with their careers and their lives. In some cases, I see them struggle to define their groove. If you don’t know your groove, you can meander along in life without much purpose or much passion. And you are always left with a gnawing feeling that there must be more, that something is missing.  I know. I’ve been there earlier in my life. It is frustrating to just do a job, and to just go to work for a paycheck.

So how do you find your groove? Do you have the luxury to experiment? Introspection helps. But so does being open to opportunities. And finally, recognizing when your passion calls, and following your passion.  I hope more of us find our groove.

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As companies think about how to get more for their marketing dollars, I believe they need to approach the problem systemically, by looking at the taxonomy of their marketing spend (people spend, program spend and infrastructure spend), and by identifying different “value levers” that can increase the efficiency and effectiveness of marketing.

I’ve come up with 7 Value Levers that I believe can help in this process:

1. Rationalization of Products and SKUs

2. Simplification of Roles and Deliverables

3. Automation of Processes and Operations

4. Digitization of Media and Campaigns

5. Consolidation of Agencies and Vendors

6. Co-creation with Customers and Partners

7. Centralization of Platforms and Databases

I will describe each of these value drivers in more detail in future posts. I’m currently thinking about how to put each of these ideas into action at large companies. Bottom line – improving marketing productivity is about more than improving ROI on marketing campaigns. It requires rethinking people, processes, systems and product portfolios.

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A fundamental tenet in marketing is that you should reward customer loyalty.  In fact, loyalty programs are an important pillar of competitive advantage and profits for airlines, hotels, credit cards and retailers.  The more you fly with an airline or the more nights you stay at a hotel, the better they treat you. This makes perfect sense.

But not in the telecom and utilities business, which has it all backwards.  They reward customer disloyalty and their customer loyalty programs are customer hostage-taking programs!  Let’s take a look at Comcast, a leading voice, data and video provider. They advertise their Starter XF Triple play bundle at an introductory rate for $99/month for the first 12 months. After 12 months, the monthly service charge jumps to $114.99 for months 13–24. After 24 months it jumps again to $129.99/month.  So if you stay with Comcast for more than 24 months, you are rewarded with a $30/month penalty for the rest of your life!  And the agreement comes with a handcuff of 24 months to ensure that you don’t run away.  No worries, though. After 24 months, you can switch to AT&T U-Verse, which has a similar introductory offer only for new customers. And then you can switch back to Comcast! Wireless carriers have similar asinine pricing plans that reward hopping and switching. So the Belief Project from U.S. Cellular, which actually rewards you with points for doing more business with them, comes as a breath of fresh air.

I wonder when people at telecom companies will figure out the difference between a loyal customer and a hostage. And I also wonder when they will figure out that rewarding customers for leaving you will increase churn, especially when many of your loyal customers are really hostages. When will we see “old customer discounts” from Comcast or AT&T?  I’m not holding my breath.

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Most companies spend an enormous amount of time and effort in seeking out best practices from their business or from companies they admire. Whenever I am asked to speak on a topic to a senior executive audience, they want to know about best practices they can learn from. While best practices are valuable, the single-minded focus on best practices misses an important insight – success is a lousy teacher compared with failure. We learn a lot from failure, because failure makes us more receptive to new ideas and failure is easier to diagnose than success. So, I suggest that companies should document, celebrate and reward failure by focusing on Famous Mistakes.

I define Famous Mistakes as high-profile failed initiatives in a company that taught the company valuable lessons about what doesn’t work. Note that the metric for evaluating the value of mistakes is the learning that came out of it. Consider a new product launch. Let’s say the product failed miserably in the marketplace because it was sold through the wrong channels or because it was rushed to the market without enough customer input during the development process. Such failed product launches can teach the company the importance of a well-thought out channel strategy or the power of a compelling value proposition. But we tend to bury our losers and we tend not to document failures or talk about them. How many case studies and books have you read on mistakes, failures and bloopers? When we bury our mistakes, we also bury the learning that came out of the mistakes. And in so doing, we condemn ourselves to repeating the mistakes!

So let’s understand failure and let’s tell stories about mistakes we made and what we learned from them. After all, I believe that failure is not about making mistakes. Failure is about not learning from your mistakes.

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Fundamentals are fundamentals for a reason. They don’t change. We tend to get carried away by newness, and assume that everything needs to change. As the French saying goes, “plus ça change, plus c’est la même chose” – the more things change, the more they stay the same. We tend to forget this. I remember the heady days of e-commerce and dotcoms where we believed that the laws of gravity and economics had been repealed – that assets and profits did not matter. Just visit the warehouses and data centers of Amazon.com to see how many bricks it takes to support the clicks! And we believed that “pure-plays” were the way to go. However, I tried to remind people that “customers don’t come in offline and online versions!”

And so it is today. In all the excitement about social media and digital marketing, I see fundamentals take a backseat yet again. The Second Digital Gold Rush is in full swing. Eyeballs are back as valuation metrics (Twitter and Facebook being two stellar examples). And while people are making real revenues this time (Groupon, for instance), I don’t believe these revenues are sustainable long enough to justify the valuations. Groupon’s valuation of north of $15 billion is hard to justify. Yes, they have stumbled upon a brilliant model to deliver customers to the door to merchants (and their new offering GroupnNow is a brilliant way to match demand and supply in real-time for providers with high fixed costs and demand volatility), but this too shall pass. Remember how excited we were about eBay as a radical new way of doing commerce (“Dynamic Commerce”)? People eventually got tired of chasing auctions, and now PayPal is the saving grace for eBay. Similarly, merchants and customers alike will discover that Groupon-like services end up selling services that customers don’t necessarily want at prices that merchants cannot really afford to acquire deal-loyal customers.

I was asked recently by an executive from a large technology company – “how do we do good digital marketing?” My response – “Do good marketing digitally!” Digital marketing is still marketing! True, social media has some unique characteristics, but it is still merely a tool and a means to an end. In executing a social media campaign, you still need objectives, a target audience, a creative value proposition and metrics. I continually remind people of this “back to basics” idea. I feel that while we should have our “head in the clouds of new possibilities”, we should also have our “feet on the ground of fundamentals”. After all, a person with his head in the clouds and his feet on the ground is a very tall person!

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I had posted earlier that I did not understand what need the Apple iPad really fills, and what use cases and scenarios it enables that are currently not possible. I had concluded that the iPad had no clear purpose and no clear position.

Well, I’m being forced to reconsider my thoughts for two reasons. First, as a marketing expert, I should have known the power of emotional appeal. Everyone who owns the iPad that I have talked to gushes about how “gorgeous” the device is and how much they love the experience. When pressed about WHY and WHERE they use the iPad that the couldn’t use their iPhone or their Mac or their iPod Touch, people aren’t clear. But it doesn’t matter. The user experience is so intuitive and the device is so damn sexy that people are willing to vote with their wallets. Most people admit they don’t need an iPad, but they absolutely WANT one. And as we all know, in a battler of heart over mind, the heart wins every time. After all, 3 million iPads have been sold and counting. The lesson – understand the power of emotion. Apple is a true master at “selling lust”.

The second reason relates to consumer behavior in relation to computers. Ten years ago, if you think about what people did on their computers, you realize that we spend a large percentage of our time creating content and very little time consuming content. After all, there wasn’t much content to consume. There was no youTube, no iTunes, no Pandora, no Facebook and so on. We did word processing, email, spreadsheets and presentations. All these applications required creation of content, and hence keyboards etc.

But now, things are quite different. We have become voracious consumers of content. If you measure the percentage of time that people, especially younger people, spend consuming content versus creating content, I bet you would find that the vast majority of the time, we are in consumption mode. Particularly with all the applications on the iPhone, we are playing games, reading stuff, networking wih friends, watching videos and so on. And that’s what the iPad is about – it is a fantastic content consumption device. Content consumption requires a great browser, great multimedia, great display, great sound and an intuitive user interface. Hence the value of the iPad. If all we do in creation mode is email, and that too, we spend more time reading emails than responding to them, then the iPad does 90% of what we need to do with a laptop, and with a far superior user experience. And this trend will continue. All this bodes very well for the iPad.

In summary, the iPad will usher in a new era of “consumption-optimized” devices and will prove to be a big success for Apple. I stand corrected!

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There’s a Turkish proverb that says – “No matter how far you have gone down the wrong road – turn back!”

That’s Microsoft for you in the mobile device business. For several years, I have voiced my frustrations to my friends in Redmond (disclaimer – I spend quite a bit of time with Microsoft on marketing capability development) about how Windows Mobile was trying to be “Windows on a mobile device” and failing miserably at it. For a simple reason. A mobile device is NOT a smaller computer that you carry around. It is a very different user experience and so it logically demands a very different user interface. I vowed that, as long as Microsoft kept the “Start” button and the menu bars that went with it on WinMo, I would never use a Windows Mobile device. You can keep putting lipstick on a pig, but it will remain a pig. The concept of seamless integration with your desktop and enterprise (Outlook, Office, etc.) was a great idea and a good differentiator for Microsoft, but that does not mean that you need to make your mobile device look like, act like and feel like your desktop! Windows Mobile was annoying, klutzy and slow. But most importantly for me, it was just the wrong user interface because it was trying to carry the legacy of Windows on to a mobile device. This legacy was like a ball and chain attached to a ballet dancer’s foot.

And we have seen this before. I teach a classic case on the Apple Powerbook dating back to 1994. In that case, Apple was just coming off the failure of the Portable project. The Apple Portable was designed to be a “no compromise” smaller desktop – it had an 8-hour battery life, active matrix display, powerful processor and a big hard drive. The only problem – it weighed 17 lbs! Apple had fallen into the trap of extrapolating ther “mental model” it developed about the ideal user experience from the Macintosh to the Portable. The problem -laptops are NOT smaller desktops. They are used in a variety of different scenarios and the user experience you create has to be quite different from a desktop. Microsoft (in my opinion) was also carrying around the mental model of “make Windows mobile” as opposed to “make a delightful mobile device experience”. Success can be a lousy teacher and legacy can stifle your creativity and shackle you.

So I am pleasantly surprised to see that Microsoft has finally broken free from its chains and has started from scratch to build Windows Phone 7 Series (to my friends at Microsoft – please also break free from the lousy brand naming legacy and call this thing something less verbose!!). Finally, it is a user experience that is built ground up with the user in mind as opposed to the Windows legacy in mind. The Tiles, the gorgeous graphics, the seamless music and video integration and the social networking features all make this a truly worthy competitor to the granddaddy of user experience – the iPhone. And what I like most is that Windows Phone 7 does not try to copy Apple. It goes in a different direction and it goes beyond in many ways. And like Apple, Microsoft is finally taking more responsibility for the end-to-end user experience, by being a lot more presriptive to the ODMs and OEMs about the “reference specs” that will guarantee a minimum quality of user experience. For too long, Microsoft has taken a cop-out by saying that “we don’t control the end-to-end experience like Apple does”. But in fact, it DOES have the power to dictate the user experience to its partners. I’m glad to see this happen, at least from the early indications.

There’s still many unknowns here. Will it all work as promised? Will the apps be anywhere close to the Apple iPhone ecosystem? What will the devices look like and how many OEMs/ODMs will sign on? How will carriers respond? Is it too late for Microsoft in this game?

But I do give a lot of credit to the folks behind this new version for admitting that they were on the wrong road, and that sunk costs are just that – sunk. This is a fresh start for Microsoft. The mobile device game just got more interesting and more competitive. The only certain winner – you and I. I can’t wait to get my hands on one of these. Anybody in the Mobile business listening?

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A few weeks ago, I gave a keynote speech to the global marketing team at Cisco Systems. In my talk, I made a provocative observation. I noted that Cisco has acquired several B2C (business-to-consumer) companies including Linksys and Pure Digital (makers of the elegant Flip camcorder). Further, Cisco has other interesting products like Internet phones that are relevant for consumers. Finally, John Chambers has identified the home market as the “next big frontier” for Cisco. But my contention was that Cisco still doesn’t “get” the consumer market. If they did, they would offer a simple universal home connectivity and storage solution that would store my media, route my video and voice traffic, run my telephones and videoconferencing in the home. And it would be available from Best Buy and installed “out of the box”. That’s not likely to happen soon. It will probably take a genetic mutation for Cisco to truly embrace the consumer market. For that matter, Apple is never going to become a big player in business markets either. They have “consumer DNA”, not “B2B DNA”.
As Geoffrey Moore has observed, there are two types of technology companies – companies that make “complex systems” and companies that make “high volume” products. IBM, Cisco, SAP and Oracle are in the first category while Apple, Sony, Intuit and Nokia are in the latter category. And never the twain shall meet. Efforts to transform B2B companies into B2C companies are almost never successful. Yes, there are some exceptions – HP and Microsoft possibly come to mind. But in general, you are either fish or fowl.
There is another dimension to the same problem. There are “product” companies and “services” companies. Product companies sell things while services companies offer services and solutions. For instance, IBM is a (primarily) services company while Motorola is a product company. Product companies that try to “cross the line” face serious challenges. Consider the Google NexusOne phone. Google is quickly finding out that selling a product is quite different from offering an online service. When people pay $529, they expect personal service. Knowledgebases don’t cut it. And when Intel got into the services business with Intel Online Services, it was a disaster as Intel wasn’t very good at the 7x24x365 mindset that services demand.
So why can’t leopards change their spots? It turns out that B2B markets don’t only differ from B2C markets in terms of products. They differ in the entire business system that is needed to design, develop, market, sell and support the products. The development process is different. The figures of merit in product development are different. The price points and margins are very different. The importance of target costing and price-volume analysis is different. The sales & distribution channels are different. The partner ecosystems are different. The branding approach is different. The differences are systemic – they are embedded in every aspect of how companies think, how they are organized, how they operate and who they hire. And even if the “consumer division” is held at arm’s length (as Cisco has done with Linksys and Microsoft has done with Xbox and Zune), there is a “dominant logic” in every company, and everyone knows who the real Brahmins are.
Why should leopards change their spots? They need to. A secular trend I observe is the consumerization of technology. The consumer market is becoming more important than ever before as technology products reach beyond the rarified atmosphere of enterprises and seep into the mass consciousness. Consider mobile devices. Time was that cellular phones and wireless email devices were predominantly used by businesses and professionals. Now, even the staid RIM is coming up with sexy consumer models like the Pearl and the Storm. And of course, Apple has completely changed the game with the iPhone. Other markets will follow the same logic – unified communications, networking, cloud services, to name a few. So the writing on the wall is clear. If you are a B2B company, you have to figure out how to “scale down” your offerings, first to the mid-market and Small Business segment and eventually to the consumer market.
But how? I think companies will be well-advised to study the few success stories – HP seems to pull it off well. So does Microsoft, to some extent. And Adobe. How they did it and what they do differently is the subject of another post someday. Meanwhile, B2B marketers, consider yourselves warned!

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